<PAGE>
As filed with the Securities and Exchange Commission on February __, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PROJECT ORANGE ASSOCIATES L.P.
PROJECT ORANGE CAPITAL CORP.
(Exact name of Registrant as specified in its charter)
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Delaware 4911 13-3472059
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Delaware 4911 16-1580601
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(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code number) Identification Number)
------------------------------------------
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c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
(315) 471-8111
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
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With a copy to:
Richard S. Scolaro, Esq. Nicolai J. Sarad, Esq.
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C. James T. Seery, Esq.
90 Presidential Plaza Piper Marbury Rudnick & Wolfe LLP
Syracuse, New York 13202-2200 1251 Avenue of the Americas
(315) 471-8111 New York, New York 10020-1104
(212) 835-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service for registrant)
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Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: []
If this form is filed to register additional securities for an offering pursuant
to Rule 362(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: []
---------------.
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: []
---------------.
CALCULATION OF REGISTRATION FEE
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===================================================================================================================
Amount Proposed Maximum Proposed Maximum
Title of Each Class of Securities To Be Offering Price Aggregate Offering Amount of
To Be Registered Registered Per Security Price(1) Registration Fee(1)
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10.5% Senior Secured Notes due 2007 68,000 $1,000.00 $68,000,000.00 $17,952.00
====================================================================================================================
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(1) Determined solely for the purposes of calculating the registration fee in
accordance with Rule 475(f)(2) promulgated under the Securities Act of 1933,
as amended.
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>
The information in this Prospectus is not complete and may be changed. We may
not sell these secuties until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to exchange these securities in any jurisdiction in which the offer or exchange
is not permitted.
PROSPECTUS
Subject to completion, dated February __, 2000
Project Orange Associates L.P.
Project Orange Capital Corp.
Exchange Offer
We are offering to issue our
10.5% Senior Secured Notes Series B due 2007
in exchange for our
10.5% Senior Secured Notes Series A due 2007
This Exchange Offer Will Expire At 5:00 P.M.
New York City Time on ________, 2000 Unless Extended
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The Exchange Offer:
. We will exchange all notes that noteholders properly tender and do not
withdraw before the expiration of the exchange offer.
. The terms of the new notes to be issued in the exchange are the same as the
old notes, except that the new notes will not be subject to transfer
restrictions.
. We believe that you will not recognize any income, gain or loss for U.S.
federal income tax purposes.
The Notes:
. Mature on September 15, 2007.
. Pay interest on March 15 and September 15 of each year, commencing March 15,
2000.
. Subject to some exceptions, will be secured by
. A perfected, first priority lien on the funds deposited in the accounts
which we have established under the Deposit and Disbursement Agreement;
. A perfected, first priority lien on substantially all of our assets,
including an assignment of all material contracts to which we are a party;
and
. A perfected, first priority pledge of our general and limited partnership
interests.
. We can redeem some or all of the notes at our option on at least 30 days'
notice at a "make-whole" premium.
. There will likely be no public market for the new notes.
This investment involves risk. See "Risk Factors" beginning on page 10.
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Neither the Securities and Exchange Commission nor any state securities
commission has determined whether this prospectus is truthful or complete. Nor
have they made, nor will they make, any determination as to whether anyone
should buy these securities. Any representation to the contrary is a criminal
offense.
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TABLE OF CONTENTS
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Page Page
Prospectus Summary.................................. 1 Summary Descriptions of the Principal
Risk Factors........................................ 10 Agreements Relating to the Project....................... 53
Forward-Looking Statements.......................... 18 Regulation................................................. 83
Use of Proceeds......................................19 The Exchange Offer......................................... 89
Capitalization...................................... 19 Description of Notes....................................... 97
Selected Historical and Pro Forma Financial Certain Federal Tax Consequences........................... 145
Data.............................................. 20 Plan of Distribution....................................... 149
Unaudited Pro Forma Condensed Financial Legal Matters.............................................. 149
Data.............................................. 22 Experts.................................................... 149
Management's Discussion and Analysis of............. Where You Can Find More Information........................ 149
Financial Condition and Results of Operations....... 27
Business............................................ 36
Management.......................................... 48 Index to Financial Statements.............................. F-1
Overview of the Independent Power Industry Exhibit A--Independent Engineer's Report
in New York....................................... 49
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In making an investment decision regarding the new notes, you must rely on
your own examination of our partnership and the terms of the offering, including
the merits and risks involved. The contents of this prospectus are not to be
considered as legal, business or tax advice. You should consult with your own
counsel, accountants and other advisors as to legal, tax, business, financial
and other related aspects of an investment in the notes.
You should not rely on any information not contained in this prospectus. We
have not authorized anyone to provide you with different information. We are
not making an offer of the notes in any state where the offer is not permitted.
You should not assume that the information contained in this prospectus is
accurate as of any date other than the date on the front cover of this
prospectus.
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PROSPECTUS SUMMARY
This summary does not contain all of the information that may be important to
you. We encourage you to read this entire prospectus, including the risk
factors, financial data and the accompanying notes, before making an investment
decision. References in this prospectus to "Funding L.P." mean Project Orange
Funding, L.P., a Delaware limited partnership. References to "Orange L.P." mean
Project Orange Associates L.P., a Delaware limited partnership. References to
"Capital Co." mean Project Orange Capital Corp., a Delaware corporation.
Funding L.P. was merged with and into Orange L.P. immediately following the
issuance of the old notes on December 6, 1999. Except for historical financial
information and unless otherwise indicated, all information presented below
relating to Orange L.P. gives effect to the consummation of the merger.
The Issuers
Orange L.P. and Capital Co. will issue the new notes. On December 6, 1999,
Funding L.P. and Capital Co. issued the old notes. Funding L.P. and Capital
Co. were formed on November 12 and November 10, 1999, respectively, for the sole
purpose of issuing the old notes. Funding L.P. merged into Orange L.P., which
succeeded to Funding L.P.'s obligations with respect to the old notes. Orange
L.P. is a Delaware limited partnership formed in 1988 for the purpose of
constructing, owning and operating the project.
The Project
The project includes an 80 megawatt natural gas-fired simple cycle
cogeneration facility located adjacent to the campus of Syracuse University in
Syracuse, New York and a 9.5 mile natural gas pipeline connecting the facility
to its fuel supply. The project commenced commercial operation in July 1992.
We believe the key elements of the project are as follows:
. Stable Revenue Stream. Orange L.P. and Niagara Mohawk Power Corporation, a
utility serving areas of central, northern and western New York, have entered
into contracts that are structured to provide Orange L.P. with a fixed annual
indexed schedule of prices for electricity and, consequently, a stable stream
of revenues through June 30, 2008.
. Prepaid Fuel Supply. As of September 30, 1999, the project had a remaining
prepaid supply of approximately 70.6 million MMBtu of natural gas which
Orange L.P. purchased in 1991 from Noranda Inc., which assigned its
obligations to Canadian Hunter Exploration Ltd. in December 1999. We expect
that the remaining quantity of prepaid natural gas will be sufficient to meet
the project's fuel requirements beyond the term of the notes.
. Asset Management by Niagara Mohawk Energy Marketing. Orange L.P. has recently
hired Niagara Mohawk Energy Marketing, Inc. to manage Orange L.P.'s business
operations and finances. Niagara Mohawk Energy Marketing has a thorough
understanding of the upstate New York energy market and experience in
managing natural gas-fired cogeneration facilities such as this project.
. Operation and Maintenance by GE International. General Electric
International, Inc. operates and performs all routine and major maintenance
on the project. Orange L.P. is a member in a lease engine support program
under which, if either of the project's gas turbine generators becomes
inoperable, General Electric will, within 72 hours of the outage, deliver and
install leased gas turbine equipment until the damaged gas turbine can either
be repaired or replaced.
. Long-Term Steam Contract with Syracuse University. The project supplies steam
to Syracuse University under a steam contract with a remaining stated term of
approximately 32 years. Orange L.P. operates the steam plant, which is a
steam generating boiler facility owned by Syracuse University and located
adjacent to the project, as an alternative source of steam generation under a
long-term operating agreement with Syracuse University.
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<PAGE>
. Beneficial Tax Arrangement. The project occupies an approximately one-acre
parcel of land leased from Syracuse University pursuant to a lease agreement
for a remaining stated term of approximately 32 years. As part of a
beneficial tax arrangement with the City of Syracuse, Orange L.P. has
assigned its rights under the ground lease to the City of Syracuse Industrial
Development Agency, or SIDA, which, in turn, has subleased the land and
leased the project to Orange L.P. under a long-term lease and sublease
agreement. As a result of this transfer, Orange L.P. makes payments instead
of taxes to the City of Syracuse at rates substantially lower than the local
tax rates.
In the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the section entitled "Business" we
summarize in detail the terms of each of the project's contractual arrangements
and the background of the entities that are counterparties to these contracts,
as well as the financial impact of each of these arrangements on the project.
Our executive offices are located c/o Scolaro, Shulman, Cohen, Lawler &
Burstein, P.C., 90 Presidential Plaza, Syracuse, New York 13202-2200. Our
telephone number is (315) 471-8111.
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<PAGE>
The Exchange Offer
On December 6, 1999, we completed an offering of $68.0 million aggregate
principal amount of our 10.5% Senior Secured Notes due 2007. We entered into a
registration rights agreement with the initial purchaser of these notes in which
we agreed to complete this exchange offer. You should read the discussion under
the headings "--The New Notes" on page 4 and "Description of Notes" on page 97
for more information about the new notes.
We believe that the new notes to be issued in the exchange offer may be
resold by you without compliance with the registration and prospectus delivery
provisions of the Securities Act, unless you are an affiliate of Orange L.P. or
Capital Co. or an underwriter or a broker dealer. You should read the
discussion under the heading "The Exchange Offer" on page 89 for further
information regarding the exchange offer and resale of the new notes.
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The Exchange Offer.............................. We are offering to exchange up to $68.0 million of new notes for up to $68.0
million of old notes. Old notes may only be exchanged in increments of $1,000.
The economic terms of the new notes are identical to the old notes. See "The
Exchange Offer" on page 89.
Tenders; Expiration Date;
Withdrawal...................................... The exchange offer will expire at 5:00 p.m. New York City time on __________,
2000, unless we extend it. If extended, the term "expiration date" will mean the
latest date and time to which the exchange offer is extended. If you decide to
exchange your old notes for new notes, you must acknowledge that you are not
engaging in, and do not intend to engage in, a distribution of the new notes. You
may withdraw your tender of old notes at any time before ________, 2000.
Conditions to the Exchange....................... We are not required to accept any old notes in exchange for new notes. We may
terminate or amend the exchange offer if we determine that the exchange offer
violates applicable law or any applicable interpretation of the SEC.
Tender Procedures - Beneficial Owners ........... If you wish to tender notes that are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee, you should contact the
registered holder promptly and instruct the registered holder to tender on your
behalf.
If you are a beneficial holder, you should follow the instructions received from
your broker or nominee with respect to tendering procedures and should contact
your broker or nominee directly.
Tender Procedures - Registered Holders
and DTC Participants............................. If you are a registered holder of notes and you wish to participate in the
exchange offer, you must complete, sign and date the letter of transmittal
delivered with this prospectus, or a facsimile thereof. If you are a participant
in The Depositary Trust Company and you wish to participate in the exchange
offer, you must instruct DTC to transmit to the exchange agent a message
indicating that you agree to be bound by the terms of the letter of transmittal.
You should mail or otherwise transmit the letter of transmittal or facsimile (or
DTC message), together with your old notes and any other required documentation
to U.S. Bank Trust National Association, as exchange agent.
Guaranteed Delivery Procedures................... If you are a registered holder of old notes and you wish to tender them, but they
are not immediately available or you cannot deliver them or the letter of
transmittal to the exchange agent prior to the
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expiration date, you must tender your old note according to special guaranteed
delivery procedures. For more details, see "The Exchange Offer" -- "Procedures
for Tendering--Registered Holders and DTC Participants--Registered Holders" on
page 92.
Federal Income Tax Consequences.................. We believe that the exchange of old notes in the exchange offer will not result
in any gain or loss to you for federal income tax purposes.
Exchange Agent................................... U.S. Bank Trust National Association is the exchange agent for the exchange
offer. Its address is 180 Fifth Street, St. Paul, Minnesota 55101, Attention:
Corporate Trust Services, Specialized Finance. Its telephone number is
(651) 244-1215.
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THE NEW NOTES
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Offered Securities............................... Up to $68,000,000 aggregate principal amount of 10.5% Senior Secured Notes Series
B due 2007 which have been registered under the Securities Act.
Maturity Date.................................... September 15, 2007.
Average Life..................................... The average life of the notes is [4.6 years].
Interest Payment Dates........................... We will pay interest on the new notes on March 15 and September 15 of each year,
beginning March 15, 2000.
Scheduled Principal Payments..................... We will pay the principal of the new notes in semi-annual installments,
commencing March 15, 2000, as follows:
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Scheduled Percentage of Principal
Payment Date Amount Payable
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March 15, 2000............................................................................. 3.25%
September 15, 2000......................................................................... 6.75%
March 15, 2001............................................................................. 4.25%
September 15, 2001......................................................................... 4.50%
March 15, 2002............................................................................. 4.50%
September 15, 2002......................................................................... 5.25%
March 15, 2003............................................................................. 5.25%
September 15, 2003......................................................................... 6.00%
March 15, 2004............................................................................. 6.00%
September 15, 2004......................................................................... 6.50%
March 15, 2005............................................................................. 7.00%
September 15, 2005......................................................................... 7.00%
March 15, 2006............................................................................. 8.00%
September 15, 2006......................................................................... 8.00%
March 15, 2007............................................................................. 8.75%
September 15, 2007......................................................................... 9.00%
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Collateral....................................... To secure the new notes we will, subject to some permitted exceptions, provide:
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. a perfected, first priority lien on the funds deposited in the accounts which
Orange L.P. established under the Deposit and Disbursement Agreement between
and Orange L.P. and U.S. Bank Trust National Association;
. a perfected, first priority lien on substantially all of Orange L.P.'s assets,
including an assignment of all of the contracts to which Orange L.P. is a
party; and
. a perfected, first priority pledge of Orange L.P.'s general and limited
partnership interests.
For more details, see "Description of Notes--Collateral" on page 99.
Ranking........................................ The new notes will rank senior in right of payment to all of our subordinated
indebtedness issued in the future, if any. The new notes will rank equally in
right of payment with our future senior borrowings, if any. For more details, see
"Description of Notes--Brief Description of the Notes" on page 97.
Recourse....................................... Our owners are not directly obligated under the new notes, but our owner's
partnership interests pledged as security for the new notes may be foreclosed
upon. Our owners are not obligated to contribute additional funds if monies
available to us are insufficient for the payment of debt service in respect of
the new notes.
Debt Service Reserve Account................... We established a debt service reserve account for the benefit of the holders of
the new notes under the Deposit and Disbursement Agreement. We funded the debt
service reserve account at the closing of the offering of the old notes by
depositing proceeds of the offering into that account which will be sufficient to
cover approximately one-half of the principal and interest scheduled to be paid
on the notes over the next twelve months. U.S. Bank Trust National Association,
as the depositary, will fund the debt service reserve account from time to time
from project revenues until amounts available to be paid in the debt service
reserve account equal the amount of principal and interest due on the new notes
on the next semi-annual scheduled payment date. We are entitled to deliver a
letter of credit instead of maintaining a cash balance to satisfy this
requirement. For more details, see "Description of Notes--Debt Service Reserve
Account" on page 109.
Capital Expenditure Reserve Account............ We established a capital expenditure reserve account for the benefit of the
holders of the new notes under the Deposit and Disbursement Agreement. We
initially funded the capital expenditure reserve account at the closing of the
offering of the old notes with $3.5 million to reserve for our obligation to
Syracuse University to refurbish, replace or extend the life of the existing
steam boilers. Upon the closing of the offering of the old notes, we requested
the Independent Engineer to recalculate the projections to include the cost of
the Syracuse University steam boiler life extension program. Any amounts in
excess of the discounted value of the estimated
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required capital expenditures based on those revised projections, may, subject to
the terms of the notes, be released from the capital expenditure reserve account.
For more details, see "Description of Notes--Capital Expenditure Reserve
Account," on page 110.
Optional Redemption............................ We may redeem the new notes at our option at any time and from time to time, in
whole or in part, upon not less than 30 nor more than 60 days' notice to each
holder of new notes. If we choose to redeem the new notes, the redemption price
will be the principal amount of the new notes being redeemed, plus accrued
interest through the date of redemption, plus a premium calculated to "make
whole" each holder of new notes to comparable U.S. Treasury securities plus 50
basis points. For more details, see "Description of Notes--Optional Redemption"
on page 105.
Mandatory Redemption........................... We will be required to redeem the new notes under specific circumstances, in
whole or in part, at a redemption price equal to the principal amount of the new
notes being redeemed plus accrued and unpaid interest to the redemption date. For
more details, see "Description of Notes--Mandatory Redemption" on page 105.
Change of Control.............................. If a change of control occurs, we will be required to make an offer to repurchase
the new notes, in whole or in part, at a price equal to 101% of the principal
amount of those notes then outstanding, plus any accrued and unpaid interest. For
more details, see "Description of Notes--Repurchase at the Option of Holders upon
Change of Control" on page 106.
Principal Covenants............................ The indenture contains restrictive covenants that limit our ability to:
. incur additional indebtedness;
. release funds from reserve accounts established under the Deposit and
Disbursement Agreement;
. create liens;
. sell assets;
. pay dividends or make distributions;
. enter into sale and lease-back transactions;
. enter into some types of transactions with affiliates;
. take actions with respect to the material agreements to which we are a party;
and
. enter into any transaction of merger or consolidation or change our form of
organization or our business.
For a more detailed description of these covenants, see "Description of Notes--
Certain Covenants" on page 114.
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Certain Accounts............................... In accordance with the Deposit and Disbursement Agreement, we established several
accounts, including:
. the revenue account;
. the principal account;
. the interest account;
. the debt service reserve account;
. the gas reserve account;
. the capital expenditure reserve account;
. the subordinated asset management fee account;
. the distribution account;
. the distribution suspense account;
. the loss proceeds account;
. the stipulation reserve account; and
. the redemption account.
We have limited rights to withdraw funds from these accounts in accordance with
the terms and conditions in the Deposit and Disbursement Agreement. For more
information regarding these accounts, see "Description of Notes--Flow of Funds."
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Risk Factors
The "Risk Factors" section, which begins on page 10, contains a discussion
of factors that you should consider in evaluating an investment in the new
notes.
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<PAGE>
Summary Selected Historical and Pro Forma Financial Data
The following table shows Orange L.P.'s summary selected historical and pro
forma financial data for the periods indicated. The summary selected historical
financial data for the nine months ended September 30, 1998 and 1999 was derived
from the unaudited financial statements of Orange L.P., which, in the opinion of
Orange L.P.'s management, have been prepared in a manner consistent with the
audited financial statements for the three years ended December 31, 1998.
Financial results for the nine months ended September 30, 1999 are not
necessarily indicative of results which may be expected for the full year. The
summary selected historical financial data for the three years ended December
31, 1998 are derived from the audited financial statements of Orange L.P. This
summary selected historical data is qualified in its entirety by the more
detailed information and financial statements, including the related notes,
included in this prospectus. You should read the summary selected historical
financial data in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in this prospectus.
Our unaudited summary pro forma financial data below are based on historical
financial statements of Orange L.P. as adjusted to give effect to the offering
of the old notes, the acquisition by G.A.S. Orange Associates, L.L.C., or GAS
Orange, of partnership interests in Orange L.P. and the merger of Funding L.P.
and Orange L.P. The pro forma income statement and other data for the year ended
December 31, 1998 and for the nine months ended September 30, 1999 give effect
to the offering, the acquisition and the merger as if they had occurred on
January 1, 1998 and January 1, 1999, respectively. The pro forma balance sheet
data as of September 30, 1999 have been derived as if the offering, the
acquisition and the merger occurred on and as of September 30, 1999. The pro
forma adjustments are based upon available information and upon assumptions that
management believes are reasonable under the circumstances. The pro forma
financial statements do not purport to represent what our actual results of
operations or actual financial position would have been if the offering, the
acquisition and the merger had occurred on those dates or to project our results
of operations or financial position for any future period or date. You should
read the following pro forma financial data in conjunction with the "Unaudited
Pro Forma Condensed Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and Orange L.P.'s financial
statements and the related notes, in each case included elsewhere in this
prospectus.
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Year Ended December 31 Nine Months Ended September 30
---------------------------------------------- ----------------------------------
1996 1997 1998(d) Pro 1998 1999 Pro
Forma(c) Forma(c)
1998 1999
Income Statement Data: (Dollars in thousands)
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Revenues
Energy revenues................................. $40,801 $37,304 $41,308 $41,308 $29,933 $28,949 $28,949
Steam revenues.................................. 3,322 3,194 2,693 2,693 1,932 2,104 2,104
Deferred amortization income.................... -- -- 7,666 7,666 3,833 11,500 11,500
------- ------- ------- ------- ------- ------- -------
Total revenues................................ 44,123 40,498 51,667 51,667 35,698 42,553 42,553
------- ------- ------- ------- ------- ------- -------
Operating Expenses
Operating and maintenance expenses.............. 19,276 17,595 18,095 18,145 13,470 8,490 8,528
Other operating expenses........................ 3,153 4,218 5,419 5,419 5,031 6,182 6,182
Depreciation.................................... 3,153 3,221 6,718 6,718 4,170 7,498 7,498
Amortizationswap contract....................... -- -- 4,382 4,382 2,191 7,022 7,022
Amortizationprepaid gas supply.................. 3,529 3,897 4,895 4,895 3,474 2,671 2,671
------- ------- ------- ------- ------- ------- -------
Total cost of operations...................... 29,260 28,931 39,509 39,559 28,336 31,865 31,901
------- ------- ------- ------- ------- ------- -------
Operating income................................ 14,863 11,567 12,158 12,108 7,362 10,690 10,652
------- ------- ------- ------- ------- ------- -------
Interest expense................................ 15,063 14,694 7,364 7,411 7,364 -- 5,558
Amortizationdebt issuance costs................. -- -- -- 997 -- -- 747
Interest income................................. (262) (438) (235) (235) (142) (180) (180)
Other (income)/expense.......................... -- -- -- 978 -- -- 733
------- ------- ------- ------- ------- ------- -------
Net income (loss)............................... $ 62 $(2,689) $ 5,029 $ 2,957 $ 140 $10,870 $ 3,794
======= ======= ======= ======= ======= ======= =======
Other Data:
EBITDA(a)....................................... $21,545 $18,685 $20,487 $20,437 $13,364 $16,381 $16,344
Capital expenditures............................ $ $ 40 $ 44 $ 44 $ 44 $ 437 $ 437
Ratio of earnings to fixed charges (b).......... 1.0x 0.8x 1.7x 1.4x 1.0x N/A 1.7x
</TABLE>
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As of December 31, As of September 30,
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Pro Forma
1996 1997 1998(d) 1998 1999 1999
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Balance Sheet Data:
Cash and cash equivalents....................... $ 5,149 $ 5,615 $ 6,683 $ 12,355 $ 5,138 $ 4,246
Restricted cash and cash equivalents............ 10,494 13,062 12,603 11,906 12,604 13,830
Property, plant & equipment, net................ 108,032 104,851 98,177 100,724 91,116 91,116
Total assets.................................... 202,498 199,582 257,940 269,039 238,593 247,084
Current liabilities............................. 11,104 14,558 29,369 31,567 39,664 34,875
Long-term debt.................................. 160,030 153,942 -- -- -- 61,200
Total liabilities............................... 180,566 180,339 241,434 249,656 221,116 277,577
Total partners' capital......................... $ 21,932 $ 19,243 $ 16,506 19,383 $ 17,427 $(30,493)
</TABLE>
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(a) EBITDA is defined as earnings before interest expense, depreciation, and
amortization expenses related to prepaid gas, the swap contract, and debt
issuance costs, and excluding deferred amortization income. EBITDA is
presented because we believe it is a widely accepted financial indicator of
an entity's ability to incur and service debt. You should not consider
EBITDA as an alternative to net income or operating income, as an indicator
of Orange L.P.'s operating performance or other operations or cash flow data
prepared in accordance with generally accepted accounting principles, or as
an alternative to cash flow as a measure of liquidity. Other entities may
calculate EBITDA differently and therefore EBITDA as determined by other
entities may not be comparable.
(b) The ratio of earnings to fixed charges is computed by dividing earnings
(net income/loss plus interest charges) by fixed charges. Fixed charges
include interest expense and amortization of capitalized expenses related
to indebtedness. The deficiency in earnings for the year ended December 31,
1997 was $2,689,000.
(c) The pro forma financial data for the year ended December 31, 1998 and the
nine-month period ended September 30, 1999 reflect interest expense using
a coupon of 10.5% and amortization of debt issuance costs as if the debt
were issued at the beginning of such respective periods.
(d) During 1998, Orange L.P. entered into the master restructuring agreement
with Niagara Mohawk, whereby its power purchase agreement was amended. See
"Summary Descriptions of the Principal Agreements Relating to the Project--
Amended Power Purchase Agreement" on page 53.
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RISK FACTORS
In addition to the other information set forth in this prospectus, you should
carefully consider the risks described below before deciding to exchange your
old notes for the new notes. These risks are not the only ones facing us.
Additional risks not presently known to us or that we presently consider to be
immaterial may also impair our operations and our ability to make payments to
you under the notes.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus. You should read "Forward-Looking Statements" on page 18 for more
information regarding these forward-looking statements.
The discussion in the "Risk Factors" refers to the indexed swap agreement,
the amended power purchase agreement, the steam contract, the steam plant
operating agreement, the gas purchase agreement, the firm gas transportation
contract, the operation and maintenance agreement and the asset management
agreement. These agreements are further identified in "Business -- Principal
Contracts and Contracting Parties" on page 37. In addition, we refer to the
ground lease and the lease and sublease agreement in "Risk Factors". The ground
lease is the lease agreement dated as of February 27, 1990 between Syracuse
University and Orange L.P. and the lease and sublease agreement is the lease and
sublease agreement dated as of April 5, 1991 between SIDA and Orange L.P.
Dependence Upon Operations of the Project and the Steam Plant--We may not be
able to make payments to you under the notes if we do not operate the project
and the steam plant successfully.
Our ability to make payments of principal, premium, if any, and interest on
the notes depends entirely on the successful operation of the project and the
steam plant. Operating the project and the steam plant involves, among other
things, general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. Changes in these factors could make
it more expensive for Orange L.P. to operate the project or the steam plant,
could require additional capital expenditures or could reduce certain benefits
currently available to us. In addition to the other risks identified in "Risk
Factors," a variety of other risks affect the project and the steam plant, some
of which are beyond Orange L.P.'s control, including:
. The project or the steam plant could perform below expected levels of output
or efficiency;
. The natural gas supply could be interrupted or unavailable;
. Operating costs could increase;
. Delivery of electricity to Niagara Mohawk or the New York Independent System
Operator could be disrupted;
. Environmental problems could arise which could lead to fines or a shutdown of
the project or the steam plant;
. Project units and equipment have broken down or failed in the past and could
break down or fail in the future and replacement parts may be difficult to
obtain;
. The operator of the project and the steam plant could suffer labor disputes;
. The government could change permit or governmental approval requirements;
. Third parties could fail to perform their contractual obligations to Orange
L.P.; and
. Catastrophic events, such as fires, earthquakes, explosions, floods, severe
storms or other occurrences, could affect the project, the steam plant,
Niagara Mohawk or other relevant third parties.
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No one can assure you that none of these events will happen or that we will
operate the project successfully to enable us to make payments under the notes
or that Orange L.P.'s financial condition or results of operations in the future
will match those of the past. For example, one of the project's turbines was out
of service from April 15 through June 21, 1999 due to the inability of GE Energy
Plant Operations, Inc., GE International's predecessor, to obtain a replacement
engine in a timely manner, even with the dedicated spare engine. A turbine was
also out of service from November 1 through November 6, 1999.
In addition, if the New York Independent System Operator market price of
electricity exceeds the fixed payment price under the indexed swap agreement
with Niagara Mohawk, and Orange L.P. is unable, by reason of equipment failure
or otherwise, to generate and sell sufficient electricity into the New York
Independent System Operator market to meet its floating payment obligation to
Niagara Mohawk under the indexed swap agreement (which causes Orange L.P. to
default on its payment obligation under the indexed swap agreement), then
Niagara Mohawk may terminate the indexed swap agreement. If Niagara Mohawk
terminated the indexed swap agreement, this would have a material adverse effect
on Orange L.P.'s revenues and could make us unable to make payments of
principal, premium, if any, and interest on the notes when due. See "Summary
Descriptions of the Principal Agreements to the Project--Amended Power Purchase
Agreement--Revenues Generated by Amended Power Purchase Agreement on page 59."
For additional information regarding recent shutdowns of the project resulting
from equipment failure, see "Exhibit A--Independent Engineer's Report."
Dependence Upon Performance by Third Parties--We may not be able to repay the
notes if unrelated third parties do not fulfill their commitments to us.
Our ability to make payments of principal, premium, if any, and interest on
the notes when due, may be materially and adversely affected by the performance
of third parties whom we do not control under commercial agreements to which
Orange L.P. is party. These third parties include, among others:
. Niagara Mohawk under the amended power purchase agreement;
. Syracuse University under the ground lease, the steam contract and the steam
plant operating agreement;
. Canadian Hunter or Union Pacific Resources, Inc., under the gas purchase
agreements;
. Tennessee Gas Pipeline Company under the firm gas transportation contract;
. GE International under the operation and maintenance agreement;
. Niagara Mohawk Energy Marketing under the asset management agreement; and
. Counterparties under agreements pursuant to which we may agree to sell
natural gas or electricity or purchase electricity.
We call these commercial agreements, together with the other documents and
agreements relating to the project, the project documents.
If any of these third parties:
. claim that there was a defect in proceedings with respect to the approval of
their project documents;
. claim that their project documents were not duly authorized by them;
. disavow their obligations under their project documents;
. fail to perform their contractual or other obligations; or
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. are excused from performing their obligations because we failed to perform
our obligations or because of governmental actions or other actions outside
of our or their control,
then, among other things, we may not be able to obtain alternate customers,
goods or services to cover any third party's non-performance of its obligations.
In particular, if Niagara Mohawk fails to fulfill its contractual obligations
under the amended power purchase agreement, or is excused from fulfilling its
contractual obligations because of governmental actions or other actions, our
revenues would significantly decrease and we would not be able to make payments
of principal, premium, if any, and interest on the notes when due.
In addition, failure to receive sufficient natural gas or any interruption in
the supply of natural gas would have a material adverse effect on the project,
including possibly giving Syracuse University a right to terminate the steam
contract, the steam plant operating agreement and the ground lease. Although we
believe adequate sources of natural gas would be available to the project if
Canadian Hunter, Union Pacific Resources or Tennessee Gas Pipeline Company
failed to satisfy their obligations to supply and transport natural gas to the
project, no assurance can be given that there will not be a disruption of supply
or that cost increases will not result.
Risks Arising from Regulation and Deregulation--If Orange L.P. and its customers
and suppliers are not able to comply with regulatory standards, the operations
of the project and the steam plant would be adversely affected.
Orange L.P., as well as its customers and suppliers, are required to comply
with many federal, state and local statutory and regulatory standards and to
maintain permits and governmental approvals required to operate the project and
the steam plant. Some of these permits and governmental approvals contain
specific conditions. We cannot assure you that:
. Orange L.P. and the operator will be able to operate the project and the
steam plant and perform under Orange L.P.'s contracts with third parties in
the future in accordance with applicable permits, governmental approvals,
conditions or regulations, or that the conditions contained in these permits
or governmental approvals will not change;
. Orange L.P.'s customers and suppliers will be able to perform under their
contracts with Orange L.P. in the future and in accordance with their
applicable permits, governmental approvals, conditions or regulations, or
that the conditions contained in these permits or governmental approvals will
not change; and
. changes in laws or regulations (including, but not limited to, taxes and
environmental laws) that may occur will not impose more stringent or
comprehensive requirements on the operation or maintenance of the project,
resulting in increased compliance costs, the need for additional capital
expenditures or the reduction of certain benefits currently available to the
project or the steam plant, or expose Orange L.P. to liabilities for previous
actions taken in compliance with laws in effect at the time or for actions
taken by or conditions caused by third parties.
Uncertainties Associated with Insurance--Insurance proceeds might not be enough
to satisfy our obligations under the notes in the event of a material loss.
Orange L.P. currently maintains property, business interruption, catastrophic
and general liability insurance for the project and the steam plant. If an
insurable loss occurs with respect to the project, the proceeds of property
insurance will be paid to the collateral agent to be held by the collateral
agent and will be applied as required under the indenture and the Deposit and
Disbursement Agreement. The collateral agent will apply proceeds of insurance
relating to the steam plant required under the steam plant operating agreement
with Syracuse University as provided in the steam plant operating agreement. We
cannot assure you that this insurance coverage will be available in the future
at commercially reasonable costs or terms or that the amounts for which the
project or the steam plant is or will be insured will cover all potential
losses.
Orange L.P. has title insurance policies in the amount of $68.0 million in
favor of the collateral agent with respect to the first mortgage on, among other
things, the interest of the City of Syracuse Industrial Development Agency,
which
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we call SIDA, under the ground lease and easement agreements and Orange L.P.'s
interest under the lease and sublease agreement. Primarily because of the nature
of the rights obtained from Syracuse University and SIDA, the insurance coverage
afforded by such policies may be narrower, and the exceptions to coverage may be
broader, than those which are commonly provided in transactions of this nature.
The title insurance policy includes affirmative assurance that all New York
mortgage and recording tax required to be paid with respect to the first
mortgage has been paid. In fact, no mortgage recording tax will be paid, because
the first mortgage will include SIDA as a mortgagor and will be recorded
pursuant to New York Tax Commission and Controller opinions to the effect that
mortgages similar to the first mortgage given by SIDA and similar industrial
development agencies are entitled to exemption from the mortgage recording tax.
If in fact mortgage recording tax is due with respect to the first mortgage and
is not paid, the first mortgage and the notes will not be able to be enforced
until the mortgage recording tax is paid. While failure to pay the mortgage
recording tax and certain other possible title losses will be covered by the
title insurance policy, no one can assure you that the title insurer or its
reinsurers will be able to satisfy any claims which may be made under the title
insurance policy, or that the coverage amounts would be sufficient to satisfy
amounts outstanding under the notes at any time.
Risks Relating to Exercise of Remedies--The collateral agent's ability to
foreclose on Orange L.P.'s assets may be limited by bankruptcy law and depends
on Orange L.P.'s being able to obtain the consents of third parties and on the
collateral agent's or any acquiror's being able to obtain new permits and
governmental approvals.
Certain assets comprising the collateral securing the notes require the
consent of third parties as a condition to their transfer or utilization upon or
following a foreclosure. No one can assure you that these third parties will
give their consent or cooperation when asked to facilitate a transfer of assets
or operating rights to the collateral agent or any other person upon or
following a foreclosure. Accordingly, although our obligations under the notes
will be secured by liens on all of Orange L.P.'s material rights and assets, the
collateral agent may not have the ability to foreclose upon all of these pledges
and liens without these consents or, following a foreclosure, to operate or
utilize such assets.
Some of the permits and governmental approvals that serve as collateral for
the notes are not transferable. Upon or following a foreclosure, the acquiror of
the project would have to apply for new permits and governmental approvals in
order to continue operation of the project and the steam plant. Any delays or
inability in obtaining such new permits or appeals could reduce the proceeds
available to the holders of notes in the event of a foreclosure.
The right of the collateral agent to repossess and dispose of the collateral
if an event of default occurs is likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy case were to be commenced by or
against us prior to the collateral agent's having repossessed and disposed of
the collateral. Under the federal bankruptcy code, a secured creditor such as
the collateral agent may be prohibited from repossessing or disposing of its
security from a debtor in a bankruptcy case, and any action allowed to be taken
by the collateral agent to recover its security may be significantly delayed.
During any such delay the value of the collateral may diminish. It is also
possible that Orange L.P. could seek to oppose any exercise of repossession
rights.
If a bankruptcy case is commenced by or against any party to the project
documents other than Orange L.P., all or part of the project documents also
could possibly be rejected pursuant to section 365 or section 1123 of the
federal bankruptcy code by such other parties or trustees appointed in such
bankruptcy cases and, therefore, not be specifically enforceable. If the lease
and sublease agreement is rejected in a bankruptcy case with respect to SIDA, or
the ground lease is rejected in a bankruptcy case with respect to Syracuse
University, under section 365(h) of the federal bankruptcy code, Orange L.P. may
be able to retain its rights under such leases (including rights such as those
relating to the amount and timing of payment of rent and other amounts payable
under the ground lease and any right of use, possession, quiet enjoyment,
subletting, assignment or hypothecation) that are appurtenant to the real
property covered by the ground lease for the balance of the term and any renewal
or extension term enforceable under non-bankruptcy law. While section 365(h)
rights exist under the current federal bankruptcy code, there can be no
assurance that section 365(h) will not be changed to Orange L.P.'s detriment, or
that Orange L.P. or the collateral agent as its assignee will be able to enforce
(pursuant to section 365(h)) all of Orange L.P.'s rights under the lease and
sublease agreement or the ground lease (including specifically Orange L.P.'s
right to purchase SIDA's interest in the project for one dollar).
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Orange L.P.'s ability to continue to operate and maintain possession of the
project as collateral for the holders of the notes depends upon the master lease
and the ground lease remaining in effect. If Syracuse University properly
terminates the ground lease, it has the right to take possession of the Project
and the premises without any obligation to pay the notes. If SIDA terminates the
lease and sublease agreement, SIDA has the right and obligation to convey its
interest in the project to Orange L.P. for one dollar, in which event the PILOT
Agreement would terminate. For a discussion of events which could result in the
termination of the ground lease or the lease and sublease agreement, see
"Summary Descriptions of the Principal Agreements Relating to the Project--
Ground Lease Arrangement--Events of Default; Termination of Ground Lease" on
page 63 and "--Ground Lease Arrangement-- Termination of Master Lease,
Reconveyance of the Project" on page 64. See also "--University Consent and
Agreement," on page 64 "--SIDA Consent and Agreement" on page 66 and "--PILOT
Consent and Agreement" on page 69 for a discussion of provisions mitigating
these termination risks, including provisions requiring Syracuse University,
SIDA and the City of Syracuse to offer the collateral agent a new ground lease,
lease and Sublease Agreement and PILOT Agreement, respectively.
New Management of the Project and the Steam Plant--The new managing partner may
not be able to manage the project and the steam plant effectively.
NCP Energy, Inc., a wholly owned subsidiary of GPU International, Inc., under
a management agreement with NCP Syracuse, Orange L.P.'s former general partner,
served as attorney-in-fact for Orange L.P. In that role, NCP Energy made most of
the day-to-day business decisions relating to the management of the project and
the steam plant since 1995. Niagara Mohawk Energy Marketing now serves as asset
manager of the project and the steam plant under an asset management agreement
and a related limited agency agreement, and GE International operates and
maintains the project and the steam plant under the operation and maintenance
agreement. If the project or the steam plant is not managed effectively, Orange
L.P.'s business, financial condition and results of operations could be
materially and adversely affected. See "Business--Operation and Maintenance" on
page 43 and "--Asset Management" on page 44.
Uncertainties of Estimates, Projections and Assumptions--Our estimates,
projections and assumptions could prove to be incorrect.
In connection with the issuance of the old notes, we prepared certain
estimates, projections and assumptions to approximate the revenue generation
capability of the project and the steam plant and the associated costs, and
provided them to the independent engineer. The independent engineer evaluated
the reasonableness of these projections in light of the technical operating
parameters of the project and steam plant, the operations and maintenance
budgets of the project and steam plant, and the related assumptions and
forecasts contained therein. The independent engineer based its evaluations on
its inspection and review of certain technical, environmental, economic and
regulatory aspects of the project and steam plant. The independent engineer's
report contains a discussion of the assumptions and forecasts used in preparing
the projections, which concern the operations and maintenance budgets of the
project and steam plant.
For purposes of preparing the projections, we made certain assumptions about
general business and economic conditions, such as real property and sales taxes
payable by Orange L.P. and other persons, and about numerous other material
contingencies and matters that are not within our control or the control of any
other person and the outcome of which we cannot predict with any expectation of
complete accuracy. We also made assumptions concerning operations and
maintenance costs under the operation and maintenance agreement. You should be
aware that assumptions are inherently subject to significant uncertainties, and
actual results will differ, perhaps materially, from those projected.
Accordingly, the projections are not necessarily indicative of future
performance, and we do not assume any responsibility for the accuracy of the
projections.
In particular, in preparing the projections, we have assumed that we will not
be required to incur any costs under provisions of the steam plant operating
agreement that make us responsible for rebuilding the steam boilers in the steam
plant and related apparatus and equipment when necessary. Under the terms of the
steam plant operating agreement, the replacement costs of the steam boilers are
assumed to be approximately $11.9 million. Although based on information
currently available to us we believe that the cost to rebuild or replace the
steam boilers is substantially less than this amount, we have not obtained any
formal bids or estimates from engineers. We deposited $3.5 million in the
capital expenditure reserve account. We have requested the Independent Engineer
to recalculate the projections to include the
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cost of the steam boiler life extension program, which we expect to be
substantially less than $3.5 million. Following the recalculation of the
projections, any amount in excess of the discounted value of the estimated
required capital expenditures for the steam boiler life extension program based
on the revised projections may, subject to the terms of the notes, be released
from the capital expenditure reserve account. We cannot assure you that the
actual cost of the steam boiler life extension program will equal the amount set
forth in the revised projections or that the life extension program will be
adequate to defer our obligation, if any, to rebuild the steam boilers beyond
the term of the notes. As a result, after release of the excess amounts from the
capital expenditure reserve account, we cannot assure you that the project will
generate sufficient cash to rebuild or replace the steam boilers and meet our
other obligations, including our obligations with respect to the notes. If we
defaulted on our obligation to rebuild or replace the steam boilers, Syracuse
University has the benefit of a guaranty of those obligations given by General
Electric Company. If Syracuse University were forced to call on this guaranty
and General Electric Company were forced to perform under it, General Electric
Company would have a subrogation claim against us for the amounts it spends to
discharge its obligations under the guaranty. We cannot assure you that we will
have the resources to pay the subrogation claim.
In order to provide for satisfaction of our obligation and the obligations of
G.A.S. Orange Partners, L.P., or GAS LP, or pursuant to a settlement with
Kronish, Lieb, Weiner & Hellman, former counsel to Adam Victor and GAS LP, the
controlling persons of Orange L.P., we have deposited $3.0 million in the
stipulation reserve account. We and GAS LP have agreed for the benefit of the
holders of the notes that we and GAS LP will honor these obligations, and we
believe that the amounts in the Stipulation Reserve Account together with other
cash distributable to our partners will be adequate to meet those obligations.
We cannot assure you, however, that this will be the case. See "Business--
Ownership of Orange L.P. Following Acquisition and Merger" on page 45.
We do not make any representation or warranty about the likely existence of
any particular future set of facts or circumstances, and you should not place
undue reliance on the projections or the independent engineer's report. If
actual results are less favorable than those shown or if the estimates and
assumptions used in formulating the projections prove to be incorrect, Orange
L.P.'s financial performance may be less favorable than that set forth in the
projections. As a consequence, our ability to make payments of principal,
premium, if any, and interest on the notes when due could be adversely affected.
We prepared the projections contained in the independent engineer's report
based on our present knowledge and assumptions. Deloitte & Touche LLP, the
independent auditors of Orange, L.P., has not examined, compiled or performed
any procedures with respect to the projections. Accordingly, Deloitte & Touche
LLP does not express any opinion or other form of assurance with respect to the
projections. Deloitte & Touche LLP's report included in this prospectus relates
solely to Orange L.P.'s historical financial information. That report does not
extend to the projections contained in the independent engineer's report.
Neither we nor the independent engineer intend to provide to the holders of the
notes any projections or to evaluate any projections other than the projections
set forth in the Independent engineer's report.
Risks that Transfers of the Proceeds of the Offering could be Deemed Fraudulent
Conveyances--A court could decide in connection with a bankruptcy proceeding
that transfers made in connection with the offering of the notes are fraudulent
conveyances.
Our payment to GAS Orange of a distribution of the proceeds from the sale of
the old notes may be subject to review under federal and state fraudulent
conveyance laws in a bankruptcy case involving, or a lawsuit commenced by or on
behalf of, our unpaid creditors. Under those laws, if a court were to find that
at the time the notes were issued, either (a) we had incurred the indebtedness
under the notes with the intent of delaying or defrauding creditors or (b) we
received less than reasonably equivalent value or fair consideration for the
notes and (i) were insolvent or rendered insolvent by reason of such
transaction; (ii) were engaged in a business or transaction for which the assets
remaining with us, constituted and unreasonably small capital; or (iii) intended
to incur, or believed that we would incur, debts that we would be unable to pay
when due, the court could subordinate the notes to our present or future
indebtedness, void the issuance of some or all of the debt under the notes,
direct the repayment of any amounts paid for the notes to us or to a fund for
the benefit of our creditors, or take other action which could be detrimental to
the holders of the notes.
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We believe that the indebtedness represented by the notes is being incurred
for proper purposes and in good faith and that we were and are solvent under the
standards described above and that we had, have and will have sufficient capital
for carrying on our business and were, are and will be able to pay our debts as
they mature. We cannot assure you, however, that a court would reach the same
conclusions.
Year 2000 Problems--Orange L.P. could be materially adversely affected by
unanticipated Year 2000 compliance problems.
Orange L.P. implemented a plan in 1999 to resolve the potential impact of the
Year 2000 issue on the processing of information in its computer systems and in
its control systems. As a result, at the end of 1999, the operations of Orange
L.P.'s computer and control systems were not disrupted on account of any Year
2000 compliance problems. No one can assure you, however, that Orange L.P. will
not experience material disruptions in its operations as a result of Year 2000
non-compliance problems that may occur in the future.
Orange L.P. has also worked with third parties, including Niagara Mohawk and
Syracuse University, to identify and assess the potential impact that this issue
may have on its relationship with these parties. If Niagara Mohawk fails to
fulfill its contractual obligations under the amended power purchase agreement
because it failed to resolve its own Year 2000 issues, or Syracuse University
fails to fulfill its contractual obligations under the Steam Contract or
otherwise because it failed to resolve its own Year 2000 issues, these
circumstances could have a material adverse effect on Orange L.P.'s revenues and
our ability to make payments under the notes. While Orange L.P. intends to
continue to work with Niagara Mohawk and other third parties to minimize any
potential remaining Year 2000 problems, no one can assure you that these issues
will be resolved to its satisfaction or that Orange L.P. will not experience a
material adverse effect to its operations from unanticipated Year 2000 issues or
problems, including failure to resolve Year 2000 issues in a timely manner, or
delays or changes in the estimated time of their compliance. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Issue" on page 34.
Financing a Change of Control Offer--We may not have the funds necessary to
finance a change of control offer which may be required under the indenture.
If a change of control event occurs, we will be required under the indenture
to offer to repurchase all outstanding notes. No one can assure you that we will
have sufficient funds at the time of a change of control to be able to make the
required repurchases of the notes. See "Description of Notes--Repurchase at the
Option of Holders upon a Change of Control" on page 106.
Risk Factors Relating to the Exchange Offer.
If you do not exchange your old notes in the exchange offer, you may not ever be
able to sell them.
It may be difficult for you to sell old notes that are not exchanged in the
exchange offer. Those notes may not be offered or sold unless they are
registered or there are exemptions from the registration requirements under the
Securities Act and applicable state securities laws.
If you do not tender your old notes or if we do not accept some of your old
notes, those notes will continue to be subject to the transfer and exchange
restrictions in:
. the indenture,
. the legend on the old notes, and
. the offering memorandum relating to the old notes.
The restrictions on transfer of the old notes arise because we issued the old
notes pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws. In general, you may only
offer or sell the old notes if they are registered under the Securities Act and
applicable state securities laws, or offered and sold
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pursuant to an exemption from such requirements. We do not intend to register
the old notes under the Securities Act. To the extent old notes are tendered and
accepted in the exchange offer, the trading market, if any, for the old notes
would be adversely affected.
You cannot be sure that an active trading market will develop for these notes.
The new notes are being offered to the holders of the old notes only. There
is no public market for the new notes. The new notes could trade at prices that
may be higher or lower than the initial offering price of the old notes. The
liquidity of the trading market in the new notes, and the market price quoted
for the new notes, may be adversely affected by changes in the overall market
for similar securities, existing interest rates and by our operating results.
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. All statements other
than statements of historical facts included in this prospectus regarding
industry prospects, our prospects and our financial position are forward-looking
statements. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, we cannot give you any assurance that
our expectations will prove to be correct. We have based these statements on our
beliefs, assumptions and expectations and on information currently available to
us. These forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause actual results,
performance or achievements to differ materially from the results, performance
or achievements expressed or implied by these statements. Forward-looking
statements are not guarantees of performance.
We have identified some of these risks, uncertainties and other important
factors in "Risk Factors," in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in the assumptions made by our
independent engineer in its report, a copy of which is included in this
prospectus. You should also consider, among others, the following important
factors:
. general economic and business conditions in the United States;
. changes in governmental regulations affecting Orange L.P., the project and
the United States electric power industry;
. general industry trends;
. changes to the competitive environment;
. power costs and resource availability;
. changes in business strategy, development plans or vendor relationships, or
in Orange L.P.'s relationship with Niagara Mohawk;
. availability, terms and deployment of capital; and
. availability of qualified personnel.
These forward-looking statements speak only as of the date of this
prospectus. We do not intend to publicly update or revise these forward-looking
statements to reflect events or circumstances after the date of this prospectus,
and we do not assume any responsibility to do so.
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USE OF PROCEEDS
We will not receive any proceeds from the exchange offer.
CAPITALIZATION
Funding L.P. was formed on November 12, 1999 and did not engage in any
operations before it merged with and into Orange L.P. on December 6, 1999.
Capital Co. was formed on November 10, 1999 and has not engaged in any
operations since its formation. The following table sets forth the historical
capitalization of Orange L.P. as of September 30, 1999 and on an adjusted basis
to give effect to the offering of the old notes, GAS Orange's acquisition of
partnership interests in Orange L.P. and the merger of Funding L.P. into Orange
L.P., as if they had occurred on September 30, 1999. The information set forth
below should be read in conjunction with Orange L.P.'s Unaudited Pro Forma
Condensed Financial Data, Orange L.P.'s historical financial statements and the
related notes, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in this prospectus.
PROJECT ORANGE ASSOCIATES, L.P.
<TABLE>
<CAPTION>
As of
September 30, 1999
------------------------------
(Dollars in thousands)
Actual As Adjusted
<S> <C> <C>
Unrestricted cash....................................................... $ 5,138 $ 4,246
Restricted cash......................................................... 12,604 13,830
======= ========
Senior secured notes.................................................... $ -- $ 68,000
Tax Distribution Note to NCP and SOP (a)................................ -- 293
------- --------
Total debt......................................................... $ -- $ 68,293
Partners' capital....................................................... 17,427 (30,493)
------- --------
Total capitalization............................................... $17,427 $ 37,800
======= ========
</TABLE>
__________
(a) Total debt includes the aggregate principal amount of notes to be issued to
each of NCP Syracuse and Syracuse Orange Partners pursuant to the
partnership interest purchase agreement in payment of the balance of their
respective tax liability for income of Orange L.P. allocated to them from
July 1, 1999 to December 6, 1999, the date of closing of the acquisition.
Pursuant to the partnership interest purchase agreement, an aggregate
distribution of $684,661 was paid to NCP Syracuse and Syracuse Orange
Partners on the closing date immediately prior to consummation of the
acquisition. The aggregate principal amount of these notes is currently
estimated to be $293,425 and will be payable at the time that NCP Syracuse
and Syracuse Orange Partners pay their respective tax liabilities. We cannot
assure you, however, that Orange L.P.'s obligations under these notes will
not be greater than currently estimated.
-19-
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table shows our selected historical and pro forma financial
data for the periods indicated. The selected financial data for the nine months
ended September 30, 1998 and 1999 was derived from our unaudited financial
statements, which, in our opinion, have been prepared in a manner consistent
with the audited financial statements for the five years ended December 31,
1998. Financial results for the nine months ended September 30, 1999 are not
necessarily indicative of results which may be expected for the full year. The
selected financial data for the five years ended December 31, 1998 are derived
from our audited financial statements. This selected data is qualified in its
entirety by the more detailed information and financial statements, including
the related notes, included in this prospectus. The selected financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in this prospectus.
Our unaudited summary pro forma financial data set forth below are based on
our historical financial statements as adjusted to give effect to the offering
of the old notes, GAS Orange's acquisition of partnership interests in Orange
L.P. and the merger of Funding L.P. with and into Orange L.P. The pro forma
income statement and other data for the year ended December 31, 1998 and for the
nine months ended September 30, 1999 give effect to the offering of the old
notes, the acquisition, and the merger as if they had occurred on January 1,
1998 and January 1, 1999, respectively. The pro forma balance sheet data as of
September 30, 1999 have been derived as if the offering of the old notes, the
acquisition and the merger occurred on and as of September 30, 1999. The pro
forma adjustments are based upon available information and upon assumptions that
management believes are reasonable under the circumstances. The pro forma
financial statements do not purport to represent what our actual results of
operations or actual financial position would have been if the offering of the
old notes, the acquisition and the merger had occurred on those dates or to
project our results of operations or financial position for any future period or
date. The following pro forma financial data should be read in conjunction with
the "Unaudited Pro Forma Condensed Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and our financial
statements and the related notes included in this prospectus.
-20-
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
<TABLE>
<CAPTION>
Year Ended December 31 Nine Months Ended
----------------------------------------- -----------------------------
September 30,
------------------------
Pro Pro
Forma(c) Forma(c)
1994 1995 1996 1997 1998(d) 1998 1998 1999 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Income Statement Data:
Revenues
Energy revenues........................ $40,364 $ 36,690 $40,801 $37,304 $41,308 $41,308 $29,933 $28,949 $28,949
Steam revenues......................... 3,634 2,986 3,322 3,194 2,693 2,693 1,932 2,104 2,104
Deferred amortization income........... -- -- -- -- 7,666 2,666 3,833 11,500 11,500
------- -------- ------- ------- ------- ------- ------- ------- -------
Total revenues....................... 43,998 39,676 44,123 40,498 51,667 51,667 35,698 42,553 42,553
------- -------- ------- ------- ------- ------- ------- ------- -------
Operating Expenses
Operating and maintenance expenses..... 23,800 18,466 19,276 17,595 18,095 18,145 13,470 8,490 8,528
Other operating expenses............... -- 2,837 3,153 4,218 5,419 5,419 5,031 6,182 6,182
Depreciation........................... 3,063 3,121 3,153 3,221 6,718 6,718 4,170 7,498 7,498
Amortizationswap contract.............. -- -- -- -- 4,382 4,382 2,191 7,622 7,022
Amortizationprepaid gas supply......... 2,385 2,659 3,529 3,897 4,895 4,895 3,474 2,671 2,671
------- -------- ------- ------- ------- ------- ------- ------- -------
Total cost of operations............. 29,248 27,583 29,260 28,931 39,509 39,559 28,336 31,863 31,901
------- -------- ------- ------- ------- ------- ------- ------- -------
Operating income....................... 14,750 12,093 14,863 11,567 12,158 12,108 7,362 10,690 10,652
------- -------- ------- ------- ------- ------- ------- ------- -------
Interest expense....................... 15,596 15,333 15,063 14,694 7,364 7,411 7,364 -- 5,558
Amortizationdebt issuance costs........ -- -- -- -- -- 997 -- -- 747
Interest income........................ (237) 294 (262) (438) (235) (235) (142) (180) (180)
Other (income)/expense................. -- -- -- -- -- 978 -- -- 734
------- ------- ------- ------- ------- ------- -------
Net income (loss)...................... ($609) ($2,946) $ 62 $(2,689 $ 5,029 $ 2,957 $ 140 $10,870 $ 3,794
======= ======== ======= ======= ======= ======= ======= ======= =======
Other Data:
EBITDA(a).............................. $20,198 $ 17,873 $21,545 $18,685 $20,487 $20,437 $13,364 $16,381 $16,344
Capital expenditures................... $ -- $ -- $ $ 40 $ 44 $ 44 $ 44 $ 437 $ 437
Ratio of earnings to fixed charges(b).. 1.0x 0.8x 1.0x 0.8x 1.7x 1.4x 1.0x N/A N/A
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of September 30,
---------------------------------------- -----------------------------
1994 1995 1996 1997 1998(d) 1998 1999 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Balance Sheet Data:
Cash and cash equivalents .............. $ 4,672 $ 1,314 $ 5,149 $ 5,615 $ 6,683 $ 12,355 $ 5,138 $ 4,246
Restricted cash and cash equivalents ... 5,948 8,130 10,494 13,062 12,603 11,906 12,604 13,830
Property, plant & equipment, net ....... 114,306 111,185 108,032 104,851 98,177 100,724 91,116 91,116
Total assets ........................... 212,609 202,322 202,498 199,582 257,940 269,039 238,593 247,084
Current liabilities .................... 8,363 9,254 11,104 14,558 29,369 31,567 39,664 34,875
Long-term debt ......................... 167,562 164,062 160,030 153,942 -- -- -- 61,200
Total liabilities ...................... 181,794 180,452 180,566 180,339 241,434 249,656 221,166 277,577
Total partners' capital ................ $ 30,815 $ 21,870 $ 21,932 $ 19,243 $ 16,506 $ 19,383 $ 17,427 $(30,493)
</TABLE>
_______________________
(a) EBITDA is defined as earnings before interest expense, depreciation, and
amortization expenses related to prepaid gas, the swap contract, and debt
issuance costs, and excluding deferred amortization income. EBITDA is
presented because we believe it is a widely accepted financial indicator of
an entity's ability to incur and service debt. You should not consider
EBITDA as an alternative to net income or operating income, as an indicator
of our operating performance or other operations or cash flow data prepared
in accordance with generally accepted accounting principles, or as an
alternative to cash flow as measure of liquidity. Other entities may
calculate EBITDA differently and therefore EBITDA as determined by other
entities may not be comparable.
(b) The ratio of earnings (net income/loss plus interest charges) to fixed
charges is computed by dividing earnings by fixed charges. Fixed charges
include interest expense and amortization of capitalized expenses related to
indebtedness. The deficiency in earnings for the year ended December 31,
1997 and 1995 was $2,689,000 and $3,534,000, respectively.
(c) The pro forma financial data for the year ended December 31, 1998 and the
nine-month period ended September 30, 1999 reflects interest expense
using a coupon of 10.5% and amortization of debt issuance costs as if the
debt were issued at the beginning of such respective periods.
(d) During 1998, we completed the master restructuring agreement with Niagara
Mohawk, which amended our power purchase agreement. See "Summary
Descriptions of the Principal Agreements Relating to the Project--Amended
Power Purchase Agreement."
-21-
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL DATA
The following unaudited pro forma condensed financial statements are based on
our historical financial statements, as adjusted to give effect to (i) the
offering of the old notes; (ii) GAS Orange's acquisition of partnership
interests in Orange L.P.; and (iii) the merger of Funding L.P. with and into
Orange L.P., assuming that these transactions occurred on the date of the
balance sheet and at the beginning of the periods with respect to which the
financial information is provided.
The pro forma financial statements and accompanying notes are derived from
and should be read in conjunction with our historical audited financial
statements and the related notes included in this prospectus. The pro forma
financial statements are presented for informational purposes only and do not
purport to represent what Orange L.P.'s financial position or results of
operations would actually have been if the offering of the old notes, the
acquisition and the merger, had occurred on the dates indicated, or to Orange
L.P.'s financial position or results of operations at any future date or for any
future period. However, the pro forma financial statements contain, in our
opinion, all adjustments necessary for a fair presentation.
-22-
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
Unaudited Pro Forma Statements of Operations
For Year Ended December 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
----------------------------------
As
Actual Adjustments Adjusted
<S> <C> <C> <C>
Income Statement Data:
Revenues
Energy revenues...................................................... $41,308 -- $41,308
Steam revenues....................................................... 2,693 -- 2,693
Deferred amortization income . 7,666 -- 7,666
------------ ------------ ------------
Total revenues................................................... 51,667 -- 51,667
------------ ------------ ------------
Operating Expenses
Operating and maintenance
expenses.......................................................... $18,095 50 (a) 18,145
Other operating expenses............................................. 5,419 -- 5,419
Depreciation......................................................... 6,718 -- 6,718
Amortization - Swap contract......................................... 4,382 -- 4,382
Amortization - Prepaid gas
supply............................................................ 4,895 -- 4,895
------------ ------------ ------------
Total cost of operations.......................................... 39,509 50 (a) 39,559
------------ ------------ ------------
Operating income..................................................... 12,158 (50) 12,108
------------ ------------ ------------
Interest expense..................................................... 7,364 47 (b) 7,411
Amortization -
debt issuance costs............................................... $-- 997 (c) 997
Interest income...................................................... (235) -- (235)
Other (income)/expense............................................... -- 978 (d) 978
------------ ----------- ------------
Net income (loss).................................................... $ 5,029 $2,072 $ 2,957
======= ========= =======
Other Data:
EBITDA............................................................... $20,487 -- $20,437
Capital expenditures................................................. $ 44 -- $ 44
Ratio of earnings to fixed charges N/A 1.4
</TABLE>
(a) Reflects the net additional amount of $50,000 owed to GE International in
respect of the membership fee for participating in the GE lease engine
program. The total membership fee is $350,000, from which the annual fee
of $300,000 paid by Orange L.P. to GE International under the Operation &
Maintenance agreement is deducted.
(b) Reflects the incremental estimated interest expense for the first twelve
months associated with the old notes assuming a coupon of 10.5%. Total
interest expense for the first 12 months is $7.4 million.
(c) Reflects amortization of debt issuance costs, including discount at
issuance associated with the offering of the old notes during the first
twelve months.
(d) Reflects the tax distribution amount representing the respective tax
liabilities for income of Orange L.P. allocated to NCP Syracuse and SOP
from July 1, 1999 to December 6, 1999.
-23-
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
Unaudited Pro Forma Statements of Operations
For Nine Months Ended September 30, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
--------------------------------------
As
Actual Adjustments Adjusted
<S> <C> <C> <C>
Income Statement Data:
Revenues
Energy revenues.................................................... $28,949 -- $28,949
Steam revenues..................................................... 2,104 -- 2,104
Deferred amortization income....................................... 11,500 -- 11,500
------- ----------- -------
Total revenues................................................. 42,553 -- 42,553
------- ----------- -------
Operating Expenses
Operating and maintenance
expenses......................................................... 8,490 38 (a) 8,528
Other operating expenses........................................... 6,182 -- 6,182
Depreciation....................................................... 7,498 -- 7,498
Amortization -- Swap contract...................................... 7,022 -- 7,022
Amortization -- Prepaid gas
supply.......................................................... 2,671 -- 2,671
----------- -------
Total cost of operations....................................... 31,863 38 31,901
------- ----------- -------
Operating income................................................... 10,690 (38) 10,652
------- ----------- -------
Interest expense................................................... $ -- 5,558 (b) 5,558
Amortization --
debt issuance costs................................................ 747 (c) 747
Interest income.................................................... (180) -- (180)
Other (income)/expense............................................. $ -- 733 (d) 733
------- ----------- -------
Net income (loss).................................................. $10,870 ($7,076) $ 3,794
======= =========== =======
Other Data:
EBITDA............................................................. $16,381 -- $16,344
Capital expenditures............................................... $ 437 -- $ 437
Ratio of earnings to fixed charges................................. N/A 1.7x
</TABLE>
(a) Reflects the net additional amount of $50,000 owed to GE International in
respect of the membership fee for participating in the GE lease engine
program. The total membership fee is $350,000, from which the annual fee
of $300,000 paid by Orange L.P. to G.E. International under the operations
and maintenance agreement is deducted.
(b) Reflects the estimated interest expense for the first nine months
associated with the old notes using a coupon of 10.5%.
(c) Reflects amortization of debt issuance costs, including discount at
issuance associated with the offering of the old notes for nine months.
(d) Reflects the tax distribution amount representing the respective tax
liabilities for income of Orange L.P. allocated to NCP Syracuse and SOP
from July 1, 1999 to December 6, 1999.
-24-
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
Unaudited Pro Forma Condensed Balance Sheet
As of September 30, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
--------------------------------------------------------------
As
Actual Adjustments Adjusted
Assets
Current Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents................................. $ 5,138 $46,735 (a) $47,627 (b) $ 4,246
Restricted cash and cash equivalents...................... 11,897 6,158 (c) -- 18,055
Accounts receivable....................................... 2,614 -- -- 2,614
Prepaid expenses and other assets......................... 408 350 (e) -- 758
-------- ------- ------- --------
Total Current Assets.................................... 20,057 53,243 47,627 25,673
-------- ------- ------- --------
Non Current Assets:
Restricted cash and cash equivalents...................... 707 6,950 (f) 11,882 (g) (4,225)
Indexed Swap Agreement.................................... 71,750 -- -- 71,750
Property, plant & equipment............................... 91,116 -- -- 91,116
Prepaid gas supply, net................................... 54,963 -- -- 54,963
Debt issuance costs....................................... -- 7,807 (h) -- 7,807
-------- ------- ------- --------
Total Non-Current Assets.................................. 218,536 14,757 11,882 221,411
-------- ------- ------- --------
Total Assets......................................... $238,593 $68,000 $59,509 $247,084
======== ======= ======= ========
Liabilities and Partners' Capital
Current Liabilities:
Accounts payable and accrued liabilities.................. $ 3,359 $ -- $ -- $ 3,359
Current portion of long-term debt......................... -- -- 6,800 (i) 6,800
Tax Note.................................................. -- -- 293 (d) 293
Deferred gas payments..................................... 11,882 11,882 (j) -- --
Deferred revenue -- Master Restructuring Agreement........ 24,423 -- -- 24,423
-------- ------- ------- --------
Total Current Liabilities................................. 39,664 11,882 7,093 34,875
-------- ------- ------- --------
Long-Term Liabilities:
Long-term debt.......................................... -- -- 61,200 (i) 61,200
Deferred revenue -- Master Restructuring Agreement........ 181,502 -- -- 181,502
-------- ------- ------- --------
Total Long-Term Liabilities.......................... 181,502 -- 61,200 242,702
-------- ------- ------- --------
Partners' capital......................................... 17,427 47,920 (b) (d) -- (30,493)
-------- ------- ------- --------
Total Liabilities and Partners' Capital................... $238,593 $59,802 $68,293 $247,084
======== ======= ======= ========
</TABLE>
(a) Reflects the gross proceeds of $68 million from the offering of the notes,
net of: (i) $6.65 million in transaction costs and other payments; (ii)
$6.2 million required to fund the debt service reserve account; (iii) $3.5
million required to fund the capital expenditure reserve account; (iv) $3
million required to fund the stipulation escrow account; (v) $450,000
representing 50% of the estimated amount of the casualty insurance claim
for property damages; and (vi) $350,000 reflecting the prepayment of fees
owed to the GE lease engine program pursuant to the terms of the notes.
(b) Reflects: (i) $46 million of distributions made to GAS Orange to fund its
obligation to acquire a 1% general partnership interest and an 89% limited
partnership interest in Orange L.P. pursuant to the partnership interest
purchase agreement; (ii) $684,661 of distributions made to NCP Syracuse and
Syracuse Orange Partners, representing 70% of the respective tax liability
for income of Orange L.P. allocated to NCP Syracuse and Syracuse Orange
Partners from July 1, 1999 to December 6, 1999 (Refer to footnote (d)
below); (iii) $942,000 of distributions made to
-25-
<PAGE>
NCP Syracuse and Syracuse Orange Partners representing certain adjustments
to the cash purchase price pursuant to the partnership interest purchase
agreement
(c) Reflects the $6.2 million required to fund the debt service reserve account
pursuant to the notes.
(d) Reflects the $978,087 of tax liability for income of Orange L.P. allocated
to NCP Syracuse and SOP from July 1, 1999 to December 6, 1999. This amount
is reduced from the partners' capital. As per the partnership interest
purchase agreement, 70% of this amount ($684,661) was paid in cash on the
date of closing, while the balance (approximately $293,425) will be paid
when the actual tax returns of these two entities are available. A tax
note will be issued to these two entities for this amount.
(e) Reflects the prepayment of fees owed to GE Industrial Aeroderivative
Engines Division with respect to the lease engine program pursuant to the
terms of the notes.
(f) Reflects the $3.5 million required to fund the capital expenditure reserve
account, $3 million required to fund the stipulation reserve account, and
$450,000 required to be reserved of the estimated amount of an insurance
claim payable to Orange L.P.
(g) Reflects the release and distribution at the closing of the offering of the
old notes of $11.9 million of cash held in escrow for the benefit of
Canadian Hunter pursuant to the gas purchase agreement. Funds are
comprised of the maximum deferred principal amount equal to $11.3 million
and $607,934 of deferred gas payments relating to the nine months ended
September 30, 1999. Refer to footnote (j) below.
(h) Reflects the establishment of capitalized transaction fees and expenses,
including $1.2 million of discount at issuance incurred in connection with
the offering of the old notes. The issuance costs will be amortized over
the life of the notes.
(i) Reflects the offering of $68.0 million of notes. The current portion of
long term debt relates to the two semi-annual principal payments due within
the next twelve months.
(j) The deferred gas payment liability reflects the maximum deferred payment
principal amount of $11,280,000 as per the gas purchase agreement. In
addition the amount includes accrued payments for the nine months ended
September 30, 1999 comprised of a $470,000 quarterly payment and accrued
interest of $133,000. This liability was extinguished upon the entire
proceeds of the deferred gas payments restricted cash account being paid
out to Canadian Hunter at the closing of the offering on the notes. Refer
to footnote (g) above.
-26-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis relates to the financial condition and
results of operations of Orange L.P. and should be read in conjunction with
"Selected Historical and Pro Forma Financial Data" and the audited historical
financial statements of Orange L.P., and the related notes, included in this
prospectus. Except for the historical financial information contained herein,
this prospectus contains certain forward-looking statements that involve risks
and uncertainties, such as statements of GAS Orange's plans, objectives,
expectations and intentions for Orange L.P. Orange L.P.'s actual financial
results could differ materially from those discussed. Issues that could cause or
influence differences include those discussed under the headings below as well
as those discussed under "Risk Factors."
General
Orange L.P. is a limited partnership formed for the purpose of constructing,
owning and operating the project. The project generates electricity for sale
pursuant to the amended power purchase agreement, which expires no later than
June 30, 2008. The project also sells steam to Syracuse University for its steam
distribution systems pursuant to a steam contract with a stated expiration date
in July 2032.
Principal Contracts
Master Restructuring Agreement. On June 30, 1998, Niagara Mohawk consummated
the master restructuring agreement under which 27 of its power purchase
agreements with independent power producers were terminated and amended and
restated, resulting in lump sum cash payments to those independent power
producers and/or new contracts with Niagara Mohawk. In connection with the
master restructuring agreement, Niagara Mohawk and Orange L.P. amended and
restated their existing power purchase agreement, replacing it with a power put
agreement and an indexed swap agreement, which each expire no later than June
30, 2008. We refer to these agreements together as the "amended power purchase
agreement." The right of Orange L.P. to put energy and capacity to Niagara
Mohawk terminates when the New York Independent System Operator is fully
established and functioning. The New York Independent System Operator began
operating on a trial basis on November 18, 1999. The power put agreement
envisions the creation of a New York Power Exchange in addition to the New York
Independent System Operator. A New York Power Exchange has not been implemented
to date, and we believe all its proposed functions are being performed at this
time by the New York Independent System Operator. For a more detailed discussion
of the New York Independent System Operator and Power Exchange System, see
"Overview of the Independent Power Industry in New York." In addition, Orange
L.P. received cash proceeds under the master restructuring agreement resulting
in a gain, which is included in "Deferred revenue--Master Restructuring
Agreement" on Orange L.P.'s balance sheet.
The Power Put Agreement. Orange L.P. currently has, under the power put
agreement with Niagara Mohawk, the right, but not the obligation, to sell up to
663,000 MWh plus 5% of energy and associated capacity to Niagara Mohawk
annually, subject to applicable monthly and hourly thresholds. Prior to November
18, 1999, the date of establishment of a competitive market for electricity and
creation of the New York Independent System Operator, the price per MWh for
electricity sold to Niagara Mohawk under the power put agreement is determined
by reference to a formula based on Niagara Mohawk's short-term avoided energy
and capacity costs as filed with the New York Public Service Commission under
the SC-6 tariff. Thereafter, the power put agreement provides that Orange L.P.
may sell energy and associated capacity to Niagara Mohawk at the then-applicable
New York Independent Operator System market price for energy or market capacity
price, if applicable. Once the New York Independent System Operator achieves
certain volumetric tests, Orange L.P.'s right to sell power to Niagara Mohawk
will terminate and Orange L.P. will have an unlimited right to sell energy and
associated capacity through the New York Independent System Operator. In
addition, at that time, Orange L.P. also will have the right to sell energy and
associated capacity outside the New York Independent System Operator on a
bilateral contract basis. See "Summary Descriptions of the Principal Agreements
Relating to the Project--Amended Power Purchase Agreement--Power Put Agreement."
Indexed Swap Agreement. The indexed swap agreement between Niagara Mohawk
and Orange L.P., which expires on June 30, 2008, serves as a financial hedge
against movements in the price of electricity. Under the indexed
-27-
<PAGE>
swap agreement, Niagara Mohawk is required to make certain monthly fixed
payments to Orange L.P. amounting to an indexed annual price per MWh ($54.62/MWh
for the current annual period ending June 30, 2000) multiplied by the applicable
notional quantity of electricity for each hourly interval during such month,
(which aggregates, on an annual basis, to 663,000 MWh). On each payment date,
such monthly fixed payment will be netted against a monthly floating payment
that Orange L.P. is obligated to pay to Niagara Mohawk. The monthly floating
payment under the indexed swap agreement was equal to the price for sales of
energy and associated capacity made to Niagara Mohawk under the power put
agreement, multiplied by the applicable notional quantity of energy and
associated capacity for each hourly interval during such month, until Orange
L.P.'s right to sell energy and associated capacity to Niagara Mohawk terminated
in November 1999. For all periods thereafter, the floating payment will equal
the New York Independent System Operator market price for sales of energy and,
if applicable, the market capacity price, multiplied by the notional quantity of
energy and associated capacity, as applicable, for each hourly interval during
such month. See "Summary Descriptions of the Principal Agreements Relating to
the Project--Amended Power Purchase Agreement--Indexed Swap Agreement."
The fair value of the indexed swap agreement on September 30, 1999 amounted
to $71.8 million and was included in indexed swap agreement in the balance
sheet of Orange L.P. as a long-term asset. The initial valuation of the indexed
swap agreement was derived using the discounted estimated cash flows related to
payments expected to be received by Orange L.P. A corresponding amount was
recorded in deferred revenues and is being recognized as income over the earlier
of a ten-year period or when certain rights between Orange L.P. and Niagara
Mohawk expire under the power put agreement.
The power put agreement and the indexed swap agreement have been structured
to provide Orange L.P. with a stable revenue stream through June 30, 2008
assuming the Project generates an annual quantity of electricity (consistent
with applicable monthly and hourly thresholds) at least equal to the notional
quantity. However, if, among other things, the price for sales of energy and
associated capacity to Niagara Mohawk or the New York Independent System
Operator market price of electricity, as applicable, exceeds the fixed payment
price under the indexed swap agreement with Niagara Mohawk (i.e. the net payment
under the indexed swap agreement with Niagara Mohawk inures to the benefit of
Niagara Mohawk) and Orange L.P. is unable, by reason of equipment failure or
otherwise, to generate and sell a sufficient quantity of electricity into the
New York Independent System Operator market to match its floating payment
obligation to Niagara Mohawk under the indexed swap agreement, (which causes
Orange L.P. to default on its payment obligation under the indexed swap
agreement) then Niagara Mohawk may terminate the indexed swap agreement, which
could have a material adverse effect on Orange L.P.'s revenues and could
materially and adversely affect our ability to make payments of principal,
premium, if any, and interest on the notes when due.
Gas Purchase Agreement. Under the Restated Gas Sale and Purchase Contract
dated March 18, 1991, between Orange L.P. and Canadian Hunter, which we refer to
as the gas purchase agreement, for a lump-sum payment of $88 million in 1991,
Orange L.P. purchased and prepaid in full for 120 million MMBtu of natural gas
for the Project. Under the gas purchase agreement, Orange L.P. may request a
maximum of 30,000 MMBtu of natural gas per day. The Project's average daily
consumption of natural gas from January 1, 1996 through December 31, 1998 was
18,936 MMBtu. As of September 30, 1999, approximately 70.6 million MMBtu of
natural gas remained available under the gas purchase agreement, which Orange
L.P. expects to be sufficient to meet the fuel requirements of the project
beyond the term of the notes, assuming heat rates and capacity factors
consistent with the project's historical experience. See "Summary Descriptions
of the Principal Agreements Relating to the Project--Gas Purchase Agreement."
Steam Contract. Under the Steam Contract, dated February 27, 1990 between
Syracuse University and Orange L.P., Orange L.P. has agreed to provide up to a
specified maximum quantity of steam to Syracuse University and several related
parties to meet their steam requirements for a term of 40 years. The steam
contract requires Syracuse University to accept delivery of and pay for minimum
quantities of steam. The steam contract has a remaining stated term of
approximately 32 years. Syracuse University is the sole and exclusive purchaser
of steam from the project. See "Summary Descriptions of the Principal
Agreements Relating to the Project--Steam Contract."
Steam Plant Operating Agreement. Orange L.P., for the term of the steam
contract, operates the steam plant pursuant to the Steam Plant Operating
Agreement. The steam plant operating agreement requires Orange L.P. to pay a
specified annual user charge to Syracuse University, which for the current year
and for each year during the term of the notes will be $1.25 million payable
annually.
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<PAGE>
Capacity Utilization
For purposes of consistency in financial presentation, the plant capacity
factor for the project is based on a nominal capacity amount of 80 MW.
Utilization of this capacity is based upon a number of factors and can be
expected to vary throughout the year under normal operating conditions.
The following table includes the operating capacity factor, capacity and
electricity production (in MWh) for the project:
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31 September 30
------------------------------- -----------------
1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C>
Operating Capacity Factor ............................ 92.41% 84.64% 92.71% 95.16 76.66
Average Capacity ..................................... 73.93 67.70 74.17 73.24 43.77
Energy Produced ...................................... 649,368 593,013 649,649 482,481 288,343
</TABLE>
- --------------------------------------
(a) The reduction in the operating capacity factor, average capacity and energy
produced for the nine months ended September 30, 1999 resulted from the
implementation, starting in January 1999, of an operating strategy to shut-
down the project during off-peak hours in order to minimize off-peak
generation. In addition, one of the project's turbines was out of service
from April 15 through June 21, 1999.
Results of Operations for the Nine Months Ended September 30, 1998 and the Nine
Months Ended September 30, 1999
Revenues
-------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30
----------------
1998 1999
<S> <C> <C>
(Dollars in thousands)
Electricity ................................................................................ $29,933 $28,949
Steam ...................................................................................... 1,932 2,104
Deferred amortization income ............................................................... 3,833 11,500
------- -------
Total Revenues .......................................................................... $35,698 $42,553
======= =======
</TABLE>
-------------------------------
Total revenues increased 19% to $42.6 million for the nine months ended
September 30, 1999 from $35.7 million for the nine months ended September 30,
1998. The increase was primarily due to the recognition of deferred revenue
based on the master restructuring agreement with Niagara Mohawk and the
amortization of deferred revenue from the Indexed Swap Agreement, amounting to
approximately $12 million for the nine month period ended September 30, 1999.
For more details, see Principal Contracts - Indexed Swap Agreement" The deferred
revenue represents a portion of the gain realized on proceeds received from the
restructuring of Orange L.P.'s Power Purchase Agreement with Niagara Mohawk.
Excluding the deferred amortization income from the master restructuring
agreement and the indexed swap agreement, total revenues decreased by
approximately 13%.
Revenues from electricity and steam generation decreased for the nine months
ended September 30, 1999 compared to the nine months ended September 30, 1998.
Revenues from electricity generation decreased 63% to $8.5 million for the nine
months ended September 30, 1999 from $22.9 million for the nine months ended
September 30, 1998 and revenues from steam generation increased 9% to $2.1
million for the nine months ended September 30, 1999. The
-29-
<PAGE>
reduction in electric generation revenues was partially offset by an increase in
indexed swap revenues. The significant reduction in electricity generation
revenues was due to the implementation of generator shut-downs during off-peak
hours which commenced in January 1999 and the lower pricing of electricity
associated with the implementation of the master restructuring agreement. In
addition, one of the project's turbines was out of service from April 15 through
June 21, 1999.
Operating Expenses
<TABLE>
<CAPTION>
Nine Months Ended
September 30
----------------
1998 1999
(Dollars in thousands)
<S> <C> <C>
Operating and maintenance expenses .......................................................... $18,501 $14,672
Depreciation.................................................................................. 4,170 7,498
Amortization of prepaid gas supply .......................................................... 3,474 2,671
Amortization of swap contract ............................................................... 2,191 7,022
------- -------
Total Operating Expenses...................................................................... $28,336 $31,863
======= =======
</TABLE>
Total operating expenses increased 13% to $31.9 million for the nine months
ended September 30, 1999 from $28.3 million for the nine months ended September
30, 1998. Operating and maintenance expenses declined 21% to $14.7 million for
the nine months ended September 30, 1999 from 18.5 million for the nine months
ended September 30, 1998 due to the decline related primarily to a reduction in
maintenance fees and expenses resulting from the amendment of the operating and
maintenance agreement in November of 1998. During 1999, depreciation and
amortization of the indexed swap agreement increased due to the recognition of
nine months of expense, compared to three months of such expense during the
comparative period in 1998.
In June 1998, Orange L.P.'s power purchase agreement with Niagara Mohawk was
restructured, and the remaining depreciable life of these capitalized costs was
reduced to 10 years to match the term of the amended agreement. Prior to the
restructuring of the power purchase agreement, capitalized costs were
depreciated over the term of the original power purchase agreement of 39.6
years. In July 1998, the Orange L.P. changed the basis of its amortization of
prepaid gas supply to a fixed per unit rate in conjunction with the
implementation of the master restructuring agreement and the power put
agreement. Prior to the effectiveness of the master restructuring agreement,
prepaid gas supply was amortized on increasing per unit amounts of expense
inherent in the negotiation of the gas purchase agreement. Also, in June 1998
Orange L.P. entered into the indexed swap agreement. During the nine months
ended September 1999, Orange L.P. recognized $7 million of swap contract
amortization expense compared to $2.2M for the nine months ended September 1998.
Interest Expense
<TABLE>
<CAPTION>
Nine Months Ended
September 30
------------------
1998 1999
(Dollars in thousands)
<S> <C> <C>
Total Interest Expense (Income) $7,222 $(180)
</TABLE>
The decline in total interest expense for the nine months ended September
30, 1999 from an expense of $7.2 million for the nine months ended September
30, 1998 was due to the repayment by Orange L.P. of all its then outstanding
long-term debt on June 30, 1998 with the cash proceeds received from Niagara
Mohawk under the terms of the master restructuring agreement.
-30-
<PAGE>
Net Income
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
(Dollars in thousands)
1998 1999
----- -------
<S> <C> <C>
Net Income (Loss).......................... $140 $10,870
</TABLE>
Net income increase to $10.9 million for the nine months ended September 30,
1999 as compared to $0.1 million during the nine months ended September 30,
1998, primarily due to increases in revenues in connection with the master
restructuring agreement and decreases in interest expense and operating and
maintenance expense.
Results of Operations for the Years Ended December 31, 1996, 1997 and 1998
The following discussion and analysis includes an explanation of the
significant changes in revenues and expenses when comparing results of
operations for each of 1998 to 1997 and 1997 to 1996.
Revenues
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1997 1998
(Dollars in thousands)
<S> <C> <C> <C>
Electricity .................................................................... $40,801 $37,304 $41,308
Steam .......................................................................... 3,322 3,194 2,693
Deferred amortization income ................................................... -- -- 7,666
------- ------- -------
Total Revenues .............................................................. $44,123 $40,498 $51,667
======= ======= =======
</TABLE>
Total revenues increased 27.6% to $51.7 million in 1998 from $40.5 million in
1997. The increase was primarily due to the recognition of deferred revenue on
the master restructuring agreement. This deferred revenue represents the gain
realized on proceeds received from the restructuring of Orange L.P.'s power
purchase arrangement with Niagara Mohawk. Excluding the deferred amortization
income, total revenues for 1998 increased approximately 8.6% over those for
1997.
Electricity revenues increased 10.7% to $41.3 million in 1998 from $37.3
million in 1997. This increase was principally due to the amortization of
deferred revenue from the indexed swap agreement, amounting to approximately
$4.3 million in 1998. Excluding the amortization of deferred revenue from the
indexed swap agreement, electricity revenues decreased approximately 1% in 1998
despite an increase in net output of electricity from 593,013 MWh in 1997 to
649,649 MWh in 1998, reflecting the lower pricing of electricity associated with
the implementation of the master restructuring agreement. Revenues from steam
delivery declined 15.7% to $2.7 million in 1998 from $3.2 million in 1997. This
decline in demand was principally due to unusually warm weather in New York
State associated with the El Nino weather pattern experienced during the early
months of 1998.
Total revenues declined 8.2% to $40.5 million in 1997 from $44.1 million in
1996. This decrease was attributed to declines in both net output of
electricity, which decreased from 649,368 MWh in 1996 to 593,013 MWh in 1997,
and steam delivery during 1997. Electricity revenues declined 8.6% to $37.3
million in 1997 from $40.8 million in 1996, principally due to a reduction in
power purchased by Niagara Mohawk during 1997. In addition, in 1996, electricity
sales included a reimbursement from Niagara Mohawk of approximately $2.1 million
for sales deemed to have exceeded the generation cap. There was no similar
reimbursement during 1997, contributing to the decline in electricity revenues.
-31-
<PAGE>
Steam revenues declined 3.9% from $3.3 million in 1996 due to reduced demand as
a result of a reduction in the average price per pound of steam.
Operating Expenses
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1997 1998
(Dollars in thousands)
<S> <C> <C> <C>
Operating and maintenance expenses ............................................. $22,578 $21,813 $23,514
Depreciation ................................................................... 3,153 3,221 6,718
Amortization of prepaid gas supply ............................................. 3,529 3,897 4,895
Amortization of swap contract .................................................. -- -- 4,382
------- ------- -------
Total Operating Expenses .................................................... $29,260 $28,931 $39,509
======= ======= =======
</TABLE>
Total operating expenses increased 36.6% to $39.5 million in 1998 from $28.9
million in 1997. This increase resulted primarily from the increase in
depreciation and amortization expenses due to changes in depreciable lives of
the project's assets implemented in conjunction with the signing of the master
restructuring agreement. Operating and maintenance expenses increased
approximately 7.8% to $23.5 million in 1998 from $21.8 million in 1997, largely
as a result of higher royalties and other variable expenses associated with the
increase in MWh produced by the project in 1998.
Total operating expenses declined by 1.1% to $28.9 million in 1997 from $29.3
million in 1996. Operating and maintenance expenses declined slightly to $21.8
million in 1997 from $22.6 million in 1996 due to a decrease in royalties and
other variable expenses associated with the decrease in MWh produced by the
project in 1997. Despite a decrease in total MWh of electricity produced in
1997, amortization of prepaid gas supply increased by approximately 10.4% to
$3.9 million in 1998 from $3.5 million in 1997 due to the increasing per unit
amounts applicable pursuant to the terms of the gas purchase agreement.
Interest Expense
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1996 1997 1998
(Dollars in thousands)
<S> <C> <C> <C>
Total Interest Expense ........................................................... $15,063 $14,694 $7,364
</TABLE>
Interest expense declined by 49.9% to $7.4 million in 1998 from $14.7 million
in 1997. This decrease was principally due to the repayment by Orange, L.P. on
June 30, 1998 of all of its then outstanding long-term debt with the cash
proceeds received from Niagara Mohawk under the master restructuring agreement.
Interest expense declined by 2.4% to $14.7 million in 1997 from $15.1 million
in 1996. This decrease was primarily due to reductions in the outstanding
balance of long-term debt as a result of scheduled repayments of principal in
accordance with the terms of Orange L.P.'s debt agreement.
Net Income
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1997 1998
(Dollars in thousands)
<S> <C> <C> <C>
Net Income (Loss) ............................................................... $62.0 $(2,689) $5,029
</TABLE>
Net income increased to $5.0 million in 1998 from a loss of $2.7 million in
1997. This increase was principally attributable to an increase in total
revenues of $11.2 million and a decrease in interest expense of $7.3 million
offset by an increase in operating expenses of $10.5 million.
-32-
<PAGE>
The decline in net income from $62,000 in 1996 to a loss of $2.7 million in
1997 resulted primarily from a reduction in the output of electricity and steam,
resulting in a $3.6 million reduction in total revenue, offset by a decrease in
total operating expenses and interest expense totaling $700,000.
Liquidity and Capital Resources
Orange L.P. derived substantially all of its cash flow from the sale of
electricity to Niagara Mohawk pursuant to its amended power Purchase agreement
and from the sale of steam to Syracuse University pursuant to the steam contract
for the years 1996 and 1997. During 1998, pursuant to the master restructuring
agreement, the power purchase agreement with Niagara Mohawk was renegotiated and
amended and restated as the power put agreement and indexed swap agreement.
Substantially all of Orange L.P.'s cash flow in 1998 was derived from the
proceeds received by Orange L.P. from Niagara Mohawk pursuant to the master
restructuring agreement. Orange L.P. has used its cash primarily to make
payments on its existing debt, to pay financing costs, and to make distributions
to its partners.
The following table sets forth a summary of Orange L.P.'s cash flows for the
years ended December 31, 1996, 1997 and 1998:
Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1997 1998
(Dollars in thousands)
<S> <C> <C> <C>
Net Cash Flows From Operating Activities ............................................. $ 7,341 $ 4,538 $ 7,489
Net Cash Flows From/(Used In) Investing Activities ................................... (6) (40) 178,932
Net Cash Flows Used In Financing Activities .......................................... (3,500) (4,032) (185,353)
------- ------- ---------
Net Change In Cash ................................................................... $ 3,835 $ 466 $ 1,068
======= ======= =========
</TABLE>
Orange L.P.'s net cash flows from operating activities increased 65.0% to
$7.5 million in 1998 from $4.5 million in 1997 principally due to the reduction
in Orange L.P.'s interest expense in 1998 following repayment by Orange L.P. of
its outstanding indebtedness on June 30, 1998. Cash flows from operating
activities decreased 38.2% to $4.5 million in 1997 from $7.3 million in 1996,
primarily due to a decrease in both electricity and steam revenues. In addition,
in 1996 Orange L.P. received a reimbursement from Niagara Mohawk of
approximately $2.1 million for sales deemed to exceed the generation cap in
1996, which did not recur in 1997.
Cash flows from investing activities increased from a loss of $40,000 in 1997
to a gain of $178.9 million in 1998. This increase was due to the receipt of
cash proceeds from Niagara Mohawk of approximately $180.3 million in connection
with the execution of the master restructuring agreement. This increase in cash
flows was offset in part by remittance of approximately $1.3 million of the
escrowed construction funds to the party responsible for the completion of some
elements of the project. Orange L.P. increased its use of cash in investing
activities by approximately $34,000 in 1997 compared to 1996 as a result of
increased expenditures on property and equipment.
Cash flows used in financing activities increased 4,497.0% to $185.4 million
in 1998 from $4.0 million in 1997, due to the repayment of all of Orange L.P.'s
outstanding long-term debt and payment of related financing costs in 1998 using
the proceeds received from Niagara Mohawk under the master restructuring
agreement. Included in the payment of related financing costs was approximately
$9.6 million of swap breakage costs incurred upon the termination of the
interest rate swap agreements executed in conjunction with the long-term debt
repayment prior to the scheduled termination dates. In addition, Orange L.P.
made a distribution in an aggregate amount of $7.8 million to its partners
during 1998. No similar distribution was made in either 1996 or 1997. Cash flows
used in financing activities increased 15.2% to $4.0 million in 1997 from $3.5
million in 1996, principally due to an increase in the amount of long-term debt
repaid in 1997 in accordance with the term of Orange L.P.'s long-term debt
agreement.
-33-
<PAGE>
Orange L.P. was entitled to defer payment of and hold a portion of the funds
owed to Canadian Hunter under the gas purchase agreement, for royalties,
operating costs and transportation costs. Pursuant to the terms of the gas
purchase agreement, these deferred amounts, totaling $470,000 per quarter to a
maximum of $11,280,000, were payable to Canadian Hunter, with interest earned on
the deferred amounts once the maximum deferred principal amount was reached.
Orange L.P. provided for a restricted cash account in an amount equal to the
outstanding deferred principal amount, plus interest earned on the funds. During
1998, the maximum deferred principal amount was reached, and Orange L.P. made
payments to Canadian Hunter totaling $3,130,024, which included $2,190,024 in
accrued interest. The entire proceeds of the restricted cash account, equal to
approximately $11.3 million, were paid to Canadian Hunter at the closing of the
offering of the old notes.
Orange L.P. has assumed all of Funding L.P.'s obligations with respect to
$68.0 million aggregate principal amount of the notes. GAS Orange, Funding
L.P.'s general partner, received a distribution of $46.9 million. GAS Orange
immediately paid this amount to NCP Syracuse and Syracuse Orange Partners to
acquire their partnership interests in Orange L.P. and to become a 1% general
partner and a 89% limited partner of Orange L.P. Orange L.P. funded the Capital
Expenditure Reserve Account established under the Deposit and Disbursement
Agreement with $3.5 million out of the proceeds of the offering of the old
notes. Orange L.P. used $6.2 million of the proceeds of the offering of the
original unregistered notes to fund a debt service reserve account established
under the Deposit and Disbursement Agreement. The remaining net proceeds of the
offering of the old notes were used to fund transaction costs related to the
offering of the notes and to pay or provide for certain of our obligations that
arose as a consequence of the offering of the old notes.
Financial Instruments
In 1998, Orange L.P. entered into foreign currency options which were based
on a contracted notional amount which totaled $5.9 million to reduce exposure to
exchange rate fluctuations relative to the production and transportation of fuel
received from Canadian Hunter. These options give Orange L.P. the right, but not
the obligation, to buy foreign currency at a specific price. Orange L.P.'s
exposure to loss from changes in the relative value of the currency is limited
to the amount paid for the options.
Orange L.P. used interest rate swap agreements as hedges to manage the
proportions of fixed versus floating rate debt. Differences between amounts paid
and received under interest rate swaps were recorded as adjustments to the
interest expense of the underlying debt. Orange L.P. does not hold or issue
financial instruments for trading purposes. The interest rate swap agreements,
which were based upon a contracted notional amount which totaled $160.0 million
at December 31, 1997 were terminated on June 30, 1998 as part of the repayment
of all of Orange L.P.'s outstanding indebtedness.
Orange L.P. also entered into the Indexed Swap Agreement to manage the price
of electricity, see "--Principal Contracts--Indexed Swap Agreement."
Year 2000 Issue
The "Year 2000 problem" arose because many existing computer programs use
only the last two digits to refer to a year. These computer programs do not
properly recognize a year that begins with "20" instead of the familiar "19."
Two key dates in this process are January 1, 2000 and February 29, 2000. If not
corrected, many computer applications could have failed or created erroneous
results. No Year 2000 problems have surfaced in connection with the project to
date, nevertheless, the extent of any remaining potential impact of the Year
2000 problem is not yet known.
Beginning in 1998, Orange L.P. implemented a comprehensive program to address
the potential impact of the Year 2000 issue. This program involved several
stages, including inventory and impact assessment, remediation, testing and
implementation. The inventory and impact assessment of the information
technology infrastructure, computer applications and computerized processes
embedded in certain operating equipment were completed, and the necessary
modifications have been remediated, tested and implemented. As a result, Orange
L.P. encountered no system problems on January 1, 2000.
-34-
<PAGE>
Orange L.P. depends substantially for its operating revenues on Niagara
Mohawk's and Syracuse University's purchases of electricity and steam,
respectively, generated by the project and the steam plant. With the creation of
the New York Independent System Operator, Orange L.P. is now also largely
dependent on the New York Independent System Operator, for its operating
revenues. While no problems were encountered regarding the arrival of January 1,
2000, if either Niagara Mohawk or Syracuse University fails to fulfill its
contractual obligations under the Power Put Agreement or Steam Contract, or the
New York Independent System Operator and Power Exchange is unable to properly
execute its functions because either entity has failed to resolve any of its own
remaining Year 2000 issues, this could have a material adverse effect on Orange
L.P.'s revenues and ability to make payments under the notes. Orange L.P. has
contacted Niagara Mohawk and Syracuse University and both report that their Year
2000 programs will be completed by December 31, 1999. Orange L.P. will continue
to communicate with Niagara Mohawk and Syracuse University in an effort to
minimize any potential risks relating to their Year 2000 compliance. However, at
this time it is not possible to guarantee that either party has resolved all of
its Year 2000 issues. The development of the New York Independent System
Operator occurred before the end of 1999, and no problems arose on January 1,
2000. Orange L.P., however, is currently unable to determine whether the New
York Independent System Operator will be Year 2000 compliant in all respects.
These entities and other related third-parties might fail to resolve their own
Year 2000 issues on a timely basis, or might experience delays or changes in the
estimated time it takes to fix these problems.
The total cost expended to date by Orange L.P. for the Year 2000 plan has
been approximately $140,000.
Contingency planning for Year 2000-induced events has received a high level
of attention from the various federal and state government agencies, regulatory
bodies, the electric utility industry and the management and staff of Orange
L.P. The management of Orange L.P. believes that reliable electric power
generation is too important to rely solely on a remediation program to assure
performance on critical date rollovers, therefore, contingency plans have been
developed and implemented. These contingency plans build on readiness and
emergency response plans already in place and add specific actions for
mitigation of possible Year 2000-induced events.
Management of Orange L.P. believes that it has an effective program in place
to adequately address any remaining Year 2000 issue in a timely manner.
Nevertheless, failure of third parties upon which Orange L.P.'s business relies
could result in disruption of Orange L.P.'s generation of revenues and payments
to third parties. Accordingly, the amount of potential liability and lost
revenue cannot be reasonably estimated at this time.
New Accounting Standards
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", also referred to as SFAS 133, which is
effective for financial statements for all fiscal quarters of fiscal years
beginning after June 15, 1999 (see below). SFAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires an entity to recognize all derivatives, within the scope of this
statement, as assets or liabilities on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If a derivative is a hedge, changes in fair value of the derivative will either
be offset against the change in fair value of the hedged assets, liability or
firm commitment through earnings or be recognized in other comprehensive income
until the hedged item is recognized in earnings, depending on the nature of the
hedge. The ineffective portion of the derivative's change in fair value will be
immediately recognized in earnings. Orange L.P. is currently evaluating the
impact of SFAS 133.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities, Deferral of the Effective Date of FASB
Statement No. 133," also referred to as SFAS 137, an amendment of the SFAS 133,
which defers the effective date of SFAS 133 for one year. SFAS 133 will now be
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. SFAS 137 also defers by one year the transition date regarding embedded
derivatives in SFAS 133.
-35-
<PAGE>
BUSINESS
Project Overview
Orange L.P. is a Delaware limited partnership formed in 1988 for the purpose
of constructing, owning and operating the project. The project consists of a
fully completed and operating 80 MW natural gas-fired simple cycle cogeneration
facility located adjacent to Syracuse University's campus in Syracuse, New York
and a 9.5 mile natural gas pipeline connecting the facility to its fuel supply.
The project commenced commercial operation in July 1992 and has maintained an
average availability factor since 1996 of 94.5%.
The key elements of the Project are the following:
. Stable Revenue Stream. Orange L.P. and Niagara Mohawk, a utility serving
areas of central, northern and western New York, which had $3.9 billion in
revenues in 1998, have entered into contracts that have been structured to
provide Orange L.P. with a fixed annual indexed schedule of prices for
electricity and, consequently, a stable stream of revenues, through June 30,
2008.
. Prepaid Fuel Supply. As of September 30, 1999, the project had a remaining
prepaid supply of approximately 70.6 million MMBtu of natural gas which
Orange L.P. purchased in 1991 under the gas purchase agreement with Canadian
Hunter, as successor by assignment from Noranda Inc. The remaining quantity
of prepaid natural gas is expected to be sufficient to meet the project's
fuel requirements beyond the term of the notes.
. Asset Management by Niagara Mohawk Energy Marketing. Orange L.P. has recently
contracted with Niagara Mohawk Energy Marketing to manage Orange L.P.'s
business operations and finances. Niagara Mohawk Energy Marketing has a
thorough understanding of the upstate New York energy market and has
experience in managing natural gas-fired cogeneration facilities such as
Orange L.P.'s.
. Operation and Maintenance by GE International. GE International, as successor
to GE Energy Plant Operations, operates and performs all routine and major
maintenance on the project. Orange L.P. has arranged to become a member in a
lease engine support program under which, if either of the project's gas
turbine generators becomes inoperable, General Electric Company will, within
72 hours of the relevant outage, deliver and install leased gas-turbine
equipment until such time as the damaged gas turbine can either be repaired
or replaced.
. Long-Term Steam Contract with Syracuse University. The project supplies steam
to Syracuse University under a steam contract with a remaining stated term of
approximately 32 years. Orange L.P. operates the steam plant as an
alternative source of steam generation under a long-term operating steam
plant agreement with Syracuse University.
. Beneficial Tax Arrangement. The project occupies land leased from Syracuse
University, which we refer to as the premises, pursuant to the ground lease
for a remaining stated term of approximately 32 years. As part of a
beneficial tax arrangement with the City of Syracuse, Orange L.P. has
assigned its rights under the Ground Lease to SIDA, which, in turn, has
subleased the premises and leased the Project to Orange L.P. under the lease
and sublease agreement. As a result of this transfer, Orange L.P. makes
payments in lieu of taxes to the City of Syracuse at rates substantially
lower than prevailing local tax rates.
Systems and Equipment
The project includes two General Electric LM-5000 PC STIG gas turbine driven
generators and two Deltak heat recovery steam generators, which use natural gas
as the fuel source. Natural gas is supplied to the project through its 9.5 mile
natural gas pipeline, which pipeline connects to a delivery point located on
Tennessee Gas Pipeline Company's main gas line near Syracuse. As of September
30, 1999, the project has a remaining prepaid supply of approximately 70.6
million MMBtu of natural gas which Orange L.P. purchased from Noranda Inc.,
Canadian Hunter's predecessor,
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<PAGE>
in 1991 and which we expect will be sufficient to meet the natural gas
requirements of the project beyond the term of the notes, assuming heat rates
and capacity factors are consistent with the project's historical experience.
Electrical power is generated by the project at 13,800 volts by two skid
mounted General Electric type LM-5000 PC STIG combustion gas turbine generators.
The project has two (one per generator) ABB step-up transformers which step up
the project's electrical power to 115Kv. Niagara Mohawk connects to the
substation through underground cabling routed from its Temple Substation,
located approximately two miles west of the project.
Exhaust gases exit the gas turbines and are ducted to the two heat recovery
steam generators. Each heat recovery steam generator is a 3 pressure level
boiler with individual pressure level steam drums and controls. The heat
recovery steam generators are natural circulation water-tube recovery units
designed to produce (i) dry, saturated, low pressure steam; (ii) superheated,
high pressure steam; and (iii) superheated, intermediate pressure steam. Each
heat recovery steam generator contains a feedwater heater (deaerator) to
increase the steam efficiency of the project. The project's steam system also
includes all steam piping and valves required throughout the project, including
the piping which connects to the steam plant. All steam piping is equipped with
necessary expansion loops and steam traps to provide high quality steam to all
systems.
Each heat recovery steam generator includes an emissions reduction catalyst
for reduction of carbon monoxide and emissions monitoring ports. Gases exiting
the heat recovery steam generators are ducted to two stacks which are
approximately 200 feet high.
The project also includes a water treatment system, which consists of all
equipment required to provide demineralized water for boiler feedwater and
chemical treatment for the heat recovery steam generators.
For a more complete discussion of the design of the project equipment and
systems and an assessment of their condition and performance, please see
"Exhibit A--Independent Engineer's Report."
Principal Contracts and Contracting Parties
Orange L.P.'s principal contracts and the related contracting parties are
summarized below.
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[CHART OF PRINCIPAL CONTRACTS AND RELATED CONTRACTING PARTIES]
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<PAGE>
Electricity Sales
Orange L.P. sells power pursuant to an amended power purchase agreement
consisting of a power put agreement and an indexed swap agreement, each with
Niagara Mohawk.
The Power Put Agreement
The power put agreement dated as of September 18, 1986 between Niagara Mohawk
and Orange L.P. provides Orange L.P. with the right, but not the obligation, to
sell up to 663,000 MWh plus 5% of energy and associated capacity to Niagara
Mohawk annually, subject to applicable monthly and hourly limits. Prior to
the establishment of a competitive market for electricity administered by the
New York Independent System Operator, the price per MWh for energy and
associated capacity sold to Niagara Mohawk under the power put agreement was
determined by reference to a formula based on Niagara Mohawk's short-term
avoided energy and associated capacity costs. For all periods after November 18,
1999, the date the New York Independent System Operator was implemented, the
power put agreement provides that Orange L.P. may sell energy and associated
capacity to Niagara Mohawk at the then-applicable market price for energy or
market capacity price, if applicable. Once the New York Independent System
Operator achieves specified volumetric tests, Orange L.P.'s right to sell power
to Niagara Mohawk will terminate. Orange L.P. has the right to sell energy and
associated capacity through the New York Independent System Operator, and to
sell energy and associated capacity outside the New York Independent System
Operator system on a bilateral contract basis, subject to Niagara Mohawk's right
of first refusal for a limited period of time. The New York Independent System
Operator system began operating on a trial basis during the second half of
November 1999. See "Summary Descriptions of the Principal Agreements Relating to
the Project--Amended Power Purchase Agreement--Power Put Agreement."
Indexed Swap Agreement
The indexed swap agreement between Niagara Mohawk and Orange L.P., which
expires on June 30, 2008, serves as a financial hedge against movements in the
price of electricity. Under the indexed swap agreement, Niagara Mohawk will be
required to make certain monthly fixed payments to Orange L.P. amounting to an
indexed annual price per MWh, which is $54.62/MWh for the current annual period
ending June 30, 2000 multiplied by the applicable notional quantity of
electricity for each hourly interval during that month, which aggregates, on an
annual basis, to 663,000 MWh, the notional quantity. On each payment date, the
monthly fixed payment will be netted against a monthly floating payment that
Orange L.P. is obligated to pay to Niagara Mohawk. The monthly floating payment
under the indexed swap agreement equaled the price for sales of energy and
associated capacity made to Niagara Mohawk under the power put agreement,
multiplied by the applicable notional quantity of energy and associated
capacity, for each hourly interval during that month, until Orange L.P.'s right
to sell energy and associated capacity to Niagara Mohawk terminates. For all
periods after that time, the floating payment will equal the New York
Independent System Operator market price for sales of energy and, if applicable,
the market capacity price multiplied by the notional quantity of energy and
associated capacity, as applicable, for each hourly interval during that month.
See "Summary Descriptions of the Principal Agreements Relating to the Project--
Amended Power Purchase Agreement--Indexed Swap Agreement."
Amended Power Purchase Agreement Supports a Stable Revenue Stream
The power put agreement and indexed swap agreement have been structured to
provide Orange L.P. with a stable revenue stream through June 30, 2008 assuming
the project generates an annual quantity of electricity, consistent with
applicable monthly and hourly limits at least equal to the notional
quantity. As illustrated in the table below, assuming Orange L.P. generates
energy and associated capacity in an amount at least equal to 663,000 MWh per
year, the notional quantity, revenues to Orange L.P. under the amended power
purchase agreement would be insensitive to the market price of electricity. If
the project generates less than this notional quantity of electricity in any
year or if the quantity of electricity generated in specified intervals falls
short of applicable hourly or monthly thresholds, revenues to Orange L.P. under
the amended power purchase agreement may be lower than those shown in the table
below.
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<PAGE>
Illustrative Revenue Streams at Different Market Prices for Electricity
<TABLE>
<CAPTION>
Indexed Swap Agreement
------------------------------------
Assumed Market
Annual Energy Price of Floating Payment Fixed Payment
Production Energy Energy Sales from Orange from Niagara Annual Revenue
(MWh)(1) ($/MWh)(2) Revenue(3) L.P.(4) Mohawk(5) to Orange L.P.(6)
<S> <C> <C> <C> <C> <C>
663,000 $10.00 $ 6,630,000 ($6,630,000) $36,213,060 $36,213,060
663,000 15.00 9,945,000 (9,945,000) 36,213,060 36,213,060
663,000 20.00 13,260,000 (13,260,000) 36,213,060 36,213,060
663,000 25.00 16,575,000 (16,575,000) 36,213,060 36,213,060
663,000 30.00 19,890,000 (19,890,000) 36,213,060 36,213,060
663,000 35.00 23,205,000 (23,205,000) 36,213,060 36,213,060
663,000 40.00 26,520,000 (26,520,000) 36,213,060 36,213,060
663,000 45.00 29,835,000 (29,835,000) 36,213,060 36,213,060
663,000 50.00 33,150,000 (33,150,000) 36,213,060 36,213,060
663,000 55.00 36,465,000 (36,465,000) 36,213,060 36,213,060
663,000 60.00 39,780,000 (39,780,000) 36,213,060 36,213,060
663,000 65.00 43,095,000 (43,095,000) 36,213,060 36,213,060
663,000 70.00 46,410,000 (46,410,000) 36,213,060 36,213,060
663,000 75.00 49,725,000 (49,725,000) 36,213,060 36,213,060
663,000 80.00 53,040,000 (53,040,000) 36,213,060 36,213,060
</TABLE>
___________________________
(1) Assumes the project generates 663,000 MWh, but there can be no assurance
that the project will do so.
(2) "Market Price" is defined as either (i) the applicable market price for
energy or market capacity price payable by Niagra Mohawk under the power put
agreement or (ii) the New York Independent System Operator market price,
whichever is applicable.
(3) Energy Sales Revenue is the market price multiplied by assumed annual energy
production.
(4) The floating payment from Orange L.P. under the indexed swap agreement is
the annual notional quantity multiplied by the market price.
(5) The fixed payment from Niagara Mohawk under the indexed swap agreement is
the annual notional quantity multiplied by the indexed fixed rate for the
annual contract year ending June 30, 2000 (or $54.62 per MWh).
(6) Annual Revenue to Orange L.P. is the sum of the energy sales revenue less
the floating payments from Orange L.P. plus the fixed payments from Niagara
Mohawk.
For additional information, see "Exhibit A--Independent Engineer's Report."
Niagara Mohawk Power Corporation
Niagara Mohawk is engaged in the purchase, transmission, distribution and
sale of electricity and the purchase, distribution, sale and transportation of
natural gas in New York State. Niagara Mohawk provides electric service to its
customers in areas of central, northern and western New York having a total
population of approximately 3.5 million, including the cities of Buffalo,
Syracuse, Albany, Utica, Schenectady, Niagara Falls, Watertown and Troy. Niagara
Mohawk sells, distributes and transports natural gas in areas of central,
northern and eastern New York contained within its electric service territory
having a total population of approximately 1.7 million. In 1998, Niagara Mohawk
had $3.9 billion in revenues and its senior unsecured debt is currently rated
"Baa3" by Moody's Investors Service and "BBB-" by Standard & Poor's Ratings
Services.
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<PAGE>
Fuel Supply Arrangements
Gas Purchase Agreement
Under the gas purchase agreement dated as of March 18, 1991 between Canadian
Hunter Exploration Ltd., as successor by assignment from Noranda Inc., and
Orange L.P., Orange L.P. purchased and prepaid in full for 120 million MMBtu of
natural gas for the Project. Under the Gas Purchase Agreement, Orange L.P. may
request a maximum of 30,000 MMBtu of natural gas per day. The Project's average
daily consumption of natural gas from January 1, 1996 through December 31, 1998
was 18,936 MMBtu. As of September 30, 1999, approximately 70.6 million MMBtu of
natural gas remained available under the Gas Purchase Agreement, which Orange
L.P. expects to be sufficient to meet the fuel requirements of the Project
beyond the term of the notes, assuming heat rates and capacity factors are
consistent with the Project's historical experience. Under the Gas Purchase
Agreement, Canadian Hunter is responsible for delivering the natural gas to an
interconnection between the pipeline facilities of TransCanada Pipelines and
Tennessee Gas Pipeline Company, located near Niagara Falls, New York. Effective
January 1, 2000 Union Pacific Resources assumed 41.667% of Canadian Hunter's gas
supply obligations under the Gas Purchase Agreement. See "Summary Descriptions
of the Principal Agreements Relating to the Project--Gas Purchase Agreement."
Canadian Hunter Exploration Ltd.
Canadian Hunter is an Alberta, Canada based company. Prior to December 31,
1998, Canadian Hunter was a wholly owned subsidiary of Noranda Inc. and acted as
agent for Noranda in connection with its oil and gas exploration, development
and production businesses. On December 31, 1998, Noranda spun off Canadian
Hunter into a separate public company. At December 31, 1998, Canadian Hunter
produced and sold an average of 288 million cubic feet per day of natural gas,
and 8,238 barrels per day of liquids from its nine major producing properties.
At December 31, 1998, Canadian Hunter's reserve base reached 927 billion cubic
feet equivalent of natural gas and liquids, with 79% of the reserves in the form
of natural gas. In 1998, Canadian Hunter had approximately CDN $266.0 million in
revenues.
Union Pacific Resources Inc.
Union Pacific Resources is a Canadian corporation which is a wholly owned
subsidiary of Union Pacific Resources Group Inc., a Utah corporation engaged
primarily in the exploration for and the development and production of natural
gas, natural gas liquids and crude oil in several major producing basins in the
United States, Canada, Guatemala, Venezuela and other international areas. In
March 1998, Union Pacific Resources Group and Union Pacific Resources acquired
Norcen Energy Resources Limited, a major Canadian oil and gas exploration and
production company with primary operations in western Canada, the Gulf of
Mexico, Guatemala and Venezuela. For the six months ended June 30, 1999, Union
Pacific Resources had operating revenues of $187.8 million and at June 30, 1999
had total assets of approximately $2.0 billion. Union Pacific Resources Group's
senior unsecured debt is currently rated "Baa3" by Moody's Investors Service and
"BBB-" by Standard & Poor's Ratings Services.
Sale of Natural Gas
Orange L.P. is entitled under the gas purchase agreement to attempt to
optimize the economic value of its annual entitlement of prepaid natural gas
from Canadian Hunter by electing either to consume the natural gas to generate
electricity and steam from the project or to sell its entitlement in that year
to third parties. Niagara Mohawk Energy Marketing, in its capacity as asset
manager for the project, continuously monitors electricity and natural gas
prices in order to determine when it would be economically advantageous for
Orange L.P. to either consume or sell its entitlement of prepaid natural gas in
any given period. Consistent with the terms of the notes, when Orange L.P.
elects to sell quantities of natural gas that it would have needed to consume by
generating electricity to meet its obligations to Niagara Mohawk under the
indexed swap agreement for such period, it uses the proceeds from such sale to
acquire an amount of electricity necessary to insure that it will be able to
meet such obligations. See "Description of Notes--Certain Covenants--
Prohibitions on Fundamental Changes."
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<PAGE>
Natural Gas Transportation Contracts
Pursuant to the Firm Gas Transportation Contract dated March 29, 1991 between
Orange L.P. and Tennessee Gas Pipeline Company, Tennessee Gas Pipeline Company
delivers the natural gas purchased from Canadian Hunter from Tennessee Gas
Pipeline Company's interconnection point with TransCanada Pipelines' pipeline at
Niagara Falls, New York to the project's natural gas pipeline at a delivery
point constructed and operated by Tennessee Gas Pipeline Company on Tennessee
Gas Pipeline Company's main natural gas line near Syracuse. The natural gas is
then delivered to the project via the project's natural gas pipeline. Orange
L.P. compensates Tennessee Gas Pipeline Company for these transportation
services based on standard rates established by the U.S. Federal Energy
Regulatory Commission, or FERC. Orange L.P. has also entered into an
interruptible gas transportation contract dated as of March 11, 1999 with
Tennessee Gas Pipeline Company, under which Tennessee Gas Pipeline Company
provides interruptible natural gas transportation services for up to an
additional 5,000 dekatherms of natural gas per day. See "Summary Descriptions of
the Principal Agreements Relating to the Project--Natural Gas Transportation
Contracts."
Tennessee Gas Pipeline Company
Tennessee Gas Pipeline Company is a wholly owned subsidiary of El Paso Energy
Corporation. The principal business of Tennessee Gas Pipeline Company consists
of the interstate transportation of natural gas. Tennessee Gas Pipeline
Company's primary asset is an interstate natural gas pipeline system known as
the Tennessee Gas Pipeline Company system, which consists of approximately
14,700 miles of pipeline with a design capacity of 5,512 MMcf/d. The Tennessee
Gas Pipeline Company system serves the northeast section of the U.S., including
the New York City and Boston metropolitan areas. At December 31, 1998, Tennessee
Gas Pipeline Company had a total assets of approximately $5.8 billion and
operating revenues for 1998 of $766 million. Tennessee Gas Pipeline Company's
senior unsecured debt is currently rated "Baa1" by Moody's Investors Service and
"BBB+" by Standard & Poor's Ratings Services.
Steam Sales
Steam Contract
Under the steam contract dated February 27 1990 between Syracuse University
and Orange L.P., Orange L.P. agreed to provide up to a specified maximum
quantity of steam to Syracuse University and several related parties to meet
their steam requirements for a term of 40 years. The steam contract requires
Syracuse University to accept delivery of and pay for certain minimum quantities
of steam. The steam contract has a remaining stated term of approximately 32
years. Under the steam contract, the steam may be provided by either the
project or the steam plant, which is operated by Orange L.P. Syracuse University
is the sole and exclusive purchaser of steam from the Project. See "Summary
Descriptions of the Principal Agreements Relating to the Project--Steam
Contract."
Steam Plant Operating Agreement
Pursuant to the steam plant operating agreement between Syracuse University
and Orange L.P., Orange L.P. operates and maintains the steam plant. The steam
plant operating agreement provides that, for the term of the steam contract,
Orange L.P. must maintain the steam plant in a state of readiness as an
alternate or supplemental source of steam should the supply of steam from the
project be interrupted. Orange L.P. pays an annual user charge to Syracuse
University for the right to use the steam plant. The annual user charge for the
current year and for each year during the term of the notes will be $1.25
million payable annually. See "Summary Descriptions of the Principal Agreements
Relating to the Project--Steam Plant Operating Agreement."
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<PAGE>
Syracuse University
Syracuse University is a private, coeducational institution located in
Syracuse, New York. Syracuse University was officially chartered in 1870 and has
a student body of approximately 18,300 full-time and part-time students in its
undergraduate and graduate degree programs. Syracuse University's senior
unsecured debt is currently rated "A1" by Moody's Investors Service and "A+" by
Standard & Poor's Ratings Services.
Operations and Maintenance
Pursuant to the operation and maintenance agreement dated March 1998 between
GE International, as successor to GE Energy Plant Operations, and Orange L.P.,
GE International will operate and perform all required routine and major
maintenance on the project, the steam plant, the project's natural gas pipeline,
the premises and certain rights of way related to the Project through April 1,
2008. In consideration for these services, Orange L.P. pays GE International
certain expenses and fees, including reimbursable expenses, a fired-hour fee, a
spare parts fee and an operating fee. The operating fee is an annual fee of
$350,000. Each of the operating fee, fired-hour fee, handling fee and spare
parts fee, are subject to escalation based on increases in the consumer price
index.
Orange L.P. arranged to become a member beyond the term of the notes in a
lease engine support program with General Electric Company, acting through GE
Industrial Aeroderivative Engines Division, or GE Industrial, which provides
that, if either of the project's gas turbine generators becomes inoperable, GE
Industrial will, within 72 hours of notification, deliver and install leased
gas-turbine equipment for the Project to utilize until such time as the damaged
gas turbine can either be repaired or replaced. The lease engine support program
imposes significant monetary penalties on GE Industrial if it fails to timely
perform its obligations. See "Summary Descriptions of the Principal Agreements
Relating to the Project--Operation and Maintenance Agreement."
GE International, Inc.
GE International is a Delaware corporation and a wholly owned subsidiary of
General Electric Company. GE International, as successor to GE Energy Plant
Operations, originally took over day-to-day operations and management of the
project in 1998, as assignee of Stewart & Stevenson Operations, Inc., the former
operator of the Project, following the acquisition by General Electric Company
of the gas turbine division of Stewart & Stevenson Services, Inc. Orange L.P.
entered into the current operation and maintenance agreement with GE Energy
Plant Operations in November 1998. At December 31, 1998, General Electric
Company had total assets of approximately $356.0 billion and total revenues for
1998 of approximately $100.5 billion. General Electric Company's senior
unsecured debt is currently rated "Aaa" by Moody's Investors Service and "AAA"
by Standard & Poor's Ratings Services.
Asset Management
Asset Management Agreement
Pursuant to the asset management agreement dated December 6, 1999 entered into
by Niagara Mohawk Energy Marketing and Orange L.P., Niagara Mohawk Energy
Marketing manages the business operations and finances of Orange L.P. Under the
asset management agreement, Niagara Mohawk Energy Marketing is paid a fixed
monthly fee of $22,750 per month, which amount will escalate pursuant to an
annual inflation adjustment beginning in January 2001. See "Summary Descriptions
of the Principal Agreements Relating to the Project--Asset Management
Agreement."
Niagara Mohawk Energy Marketing, Inc.
Niagara Mohawk Energy Marketing is a wholly owned subsidiary of Niagara Mohawk
Energy, Inc. and constitutes substantially all of Niagara Mohawk Energy's
assets. Niagara Mohawk Energy Marketing's primary business is the sale of energy
commodities at both the retail and wholesale levels, and the provision of
energy-related services to end-users,
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<PAGE>
generation asset owners and retail aggregators. Niagara Mohawk Energy
Marketing's wide range of generation asset management experience includes
providing asset management services for several New York independent power
producers who, similar to Orange L.P., participated in the master restructuring
agreement. Niagara Mohawk Energy Marketing's duties have included optimizing
operating and other cost-reduction strategies, overseeing and directing plant
operations and maintenance staff, energy marketing and accounting services,
portfolio management and accounting services, and related services. Niagara
Mohawk Energy Marketing's primary market area is the Northeast region, which
includes New York, Pennsylvania, Ohio, New England and eastern Canada. For the
year ended December 31, 1998, Niagara Mohawk Energy had total assets of $43
million and revenues for 1998 of $169 million, of which $165 million were
generated by Niagara Mohawk Energy Marketing.
Competition
Orange L.P. currently sells power generated by the Project pursuant to its
amended power purchase agreement with Niagara Mohawk, which has a remaining
stated term of approximately 8.4 years. Because of the terms of the amended
power purchase agreement, Orange L.P.'s revenues are not significantly affected
by competition from other sources of generation. If the amended power purchase
agreement were terminated prior to its stated expiration date in 2008, however,
we would likely face intense competition from generation companies and electric
power marketers throughout the region.
Insurance
The project and the steam plant will maintain, among others, the following
types of insurance:
. all risk property coverage with a limit of $90 million (for replacement
costs);
. earthquake and flood coverage with an annual aggregate limit of $50 million;
. business interruption insurance of $30 million;
. comprehensive general liability insurance with a limit of $1 million per
occurrence and $2 million in the aggregate per year;
. automobile liability insurance with a limit of $1 million per accident;
. umbrella excess liability insurance with a limit of $50 million;
. extra expense insurance of $3 million; and
. workers compensation insurance in accordance with New York State statutes. The
all risk property coverage and the flood and earthquake coverage are subject
to deductibles of $300,000 and $100,000, respectively, per loss and the
business interruption coverage has a 30-day average daily value deductible.
These policies were issued by domestic insurance carriers and syndicates rated
A or better with a size of XIII or greater.
Employees
Orange L.P. does not have any employees. All of the employees who operate and
maintain the project for GE International are currently employed by either GE
International or Granite Services, Inc, a wholly owned subsidiary of General
Electric Company. GE International and Granite Services have retained
substantially the same employees previously employed by Stewart & Stevenson
Services, Inc., the prior operator of the project. As of September 30, 1999, (i)
GE International employed four employees at the project who perform
administrative and technical functions and provide technical direction to
workers at the project and (ii) Granite Services employed 16 employees at the
project who perform primarily operation, maintenance and technical support
functions. Approximately 15% of the employees who currently work at the project
have been employed there since 1991.
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None of GE International's or Granite Services' employees are covered by any
collective bargaining agreement. We believe that GE International's and Granite
Services' employee relations are good.
Environmental Matters
Orange L.P. is subject to environmental laws and regulations at the federal,
state and local level in connection with its ownership and operation of the
project and its operation of the steam plant. These environmental laws and
regulations generally require that a wide variety of permits and governmental
approvals be obtained to operate an energy-producing facility. The project must
operate in compliance with the terms of these permits and approvals. If Orange
L.P. fails to operate the project in compliance with applicable laws, permits
and approvals, governmental agencies could levy fines or curtail operations.
Orange L.P. believes that the project is in substantial compliance in all
material respects with all environmental regulatory requirements applicable to
it, and Orange L.P. believes that maintaining substantial compliance with
current governmental requirements will not require a material increase in
capital expenditures or materially adversely affect Orange L.P.'s financial
condition or results of operations. It is possible, however, that future
developments, such as more stringent requirements of environmental laws and
enforcement policies thereunder, could affect capital and other costs at the
project and the manner in which Orange L.P. conducts its business. See
"Regulation--Environmental Regulation."
Litigation
There are presently two lawsuits pending to which Orange L.P. is a party. The
first case, David Soltau v. Project Orange Associates, L.P., relates to a slip
and fall accident that occurred on or about March 14, 1992 and was filed in the
Supreme Court of the State of New York, County of Onondaga, which we refer to as
the Soltau case. The original complaint in the Soltau case seeks $600,000 in
damages. Orange L.P. has denied liability in the Soltau case based on an
argument that it was under no duty to inspect the project site while the project
was under construction. An affidavit for motion to dismiss the Soltau case was
prepared on May 11, 1999 and filed with the court. The second case, Edward
Mosher v. Syracuse University; Syracuse University v. North Fork Enterprises and
Project Orange Associates, L.P., in which Orange L.P. is a third party
defendant, was filed in the Supreme Court of the State of New York, County of
Onondaga, which we refer to as the Mosher case. The Mosher case relates to a
slip and fall accident that occurred on or about November 20, 1992. North Fork
Enterprises, a co-third party defendant for whom Mr. Mosher worked when the
accident occurred, has agreed to assume the defense of the Mosher case and to
indemnify Orange L.P. thereunder.
Principal Sponsor
Adam H. Victor indirectly controls 100% of GAS LP and is a beneficiary of the
Victor Family Irrevocable Trust which has an 84% interest in GAS Orange. Gas
Orange has delegated limited authority to Adam Victor as its agent for the
purpose of reaching technical decisions on behalf of GAS Orange respecting the
activities of Niagara Mohawk Energy Marketing under the asset management
agreement and GE International under the operation and maintenance agreement.
Since 1979, Mr. Victor has been involved as the developer of the project and in
the negotiations relating to many of the project documents. He has continued to
be involved in Orange L.P. through his interest in GAS LP. Mr. Victor received a
Master of Business Administration from the Wharton School of Finance and a B.S.
from Cornell University.
Ownership of Orange L.P. Following the Acquisition and Merger
LOGO
[Ownership Chart of Orange L.P.]
_________________________
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(1) The other membership interests in GAS Orange are held by:
Douglas Corbett 12.5%
Richard S. Scolaro 2.0%
James Ryan 1.0%
Jeffrey M. Fetter 0.5%
Funding L.P. is a limited partnership organized under Delaware law. Capital
Co. is a Delaware corporation. Both of their offices are located at 90
Presidential Plaza, Syracuse, New York 13202-2200 and their telephone number is
(315) 471-8111.
Funding L.P. and Capital Co. were formed in November 1999 for the sole
purpose of issuing the original unregistered notes. After the original
unregistered notes were issued, Funding L.P. merged into Orange L.P. under the
agreement and plan of merger between Funding L.P. and Orange L.P. Orange L.P.
succeeded to Funding L.P.'s obligations with respect to the old notes.
GAS Orange, a Delaware limited liability company, acquired a 1% general
partnership interest in Orange L.P. from NCP Syracuse, and an 89% limited
partnership interest in Orange L.P. from Syracuse Orange Partners. Orange L.P.
now has two partners, GAS Orange and GAS LP. See "Summary Descriptions of the
Principal Agreements Relating to the Project--Purchase of Certain Partnership
Interests in Orange L.P."
Since the purchase in December 1999 by GAS Orange of NCP Syracuse's general
partnership interest in Orange L.P. and the merger of Funding L.P. with and into
Orange L.P., GAS Orange has acted as managing partner of Orange L.P., Niagara
Mohawk Energy Marketing has managed Orange L.P.'s business operations and
finances and GE International has continued to operate and maintain the project
and the steam plant under the operation and maintenance agreement. The GAS
Orange operating agreement provides that GAS Orange is managed by its members.
Generally, provided a quorum is present at any meeting of the members of GAS
Orange, the vote or written consent of members of GAS Orange holding not less
than a majority of the membership interests in GAS Orange will be the act of the
members. The sole other partner of Orange L.P. is GAS LP, which is both a
general partner and a limited partner.
On or about January 1995, GAS LP, some of its affiliates and Adam Victor
brought an action in New York against Syracuse Orange Partners, NCP Syracuse and
North Canadian Power Incorporated, a shareholder in NCP Syracuse, relating to a
disagreement as to (i) whether NCP Syracuse and Syracuse Orange Partners were
honoring the special rights of GAS LP, as developer general partner in Orange
L.P., to participate in partnership decision making and (ii) whether GAS LP was
receiving its fair share of partnership distributions derived from the revenues
received by Orange L.P. from various activities. In settlement documents,
including stipulations of discontinuance of actions in the appropriate courts,
dated on or about March 28, 1996, the parties agreed to release their claims
against each other. As part of the settlement, GAS LP agreed to relinquish its
special rights as the developer general partner in Orange L.P., and Orange L.P.
agreed to make a one-time payment to GAS LP. Since then, GAS LP has not
participated in the day-to-day management of Orange L.P.
A third party, Kronish, Lieb, Weiner & Hellman, former counsel to Adam
Victor and GAS LP, has a permanent cash flow interest in 25% of the partnership
distributions to which GAS LP is entitled under the Orange L.P. partnership
agreement. Kronish Lieb, however, has no equity or voting rights respecting GAS
LP or Orange L.P. Kronish Lieb obtained a carried cash flow interest of 12.5% of
certain net revenues Mr. Victor would receive from the project, together with
additional sums as part of a structured contingency fee arrangement as counsel
to Mr. Victor and GAS LP in 1987. In 1994, Mr. Victor and GAS LP, which was
originally the developer general partner of Orange L.P., were involved in an
arbitration proceeding respecting the interpretation of that arrangement and
Kronish Lieb's share of sums due to GAS LP as distributions on equity from
Orange L.P. That arbitration resulted in an award in favor of Kronish Lieb. Mr.
Victor and GAS LP immediately appealed the award and, concurrently with their
appeal, commenced a case under Chapter 11 of the federal bankruptcy code in the
U.S. Bankruptcy Court for the Southern District of New York on July 12, 1994.
Kronish Lieb contested the petitions. Subsequently, Kronish Lieb, Mr. Victor and
GAS LP settled all outstanding claims, and Mr. Victor and GAS LP withdrew their
respective bankruptcy cases as well as their appeal of the arbitration, pursuant
to a Stipulation dated November 14, 1994 and Order of the Bankruptcy Court dated
December 8, 1994, or the stipulation.
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Pursuant to the stipulation, Mr. Victor agreed to pay Kronish Lieb a fixed
sum, and agreed to increase Kronish Lieb's permanent cash flow interest to 25%
of the partnership distributions GAS LP is entitled to receive going forward.
Under the other terms of the stipulation, GAS LP or Adam Victor or the entities
through which Adam Victor indirectly holds an interest in GAS LP are not
permitted, without the consent of Kronish Lieb, to pledge or sell any or all of
their partnership interests in Orange L.P., amend the partnership agreement of
Orange L.P. or enter into any agreement or transaction with Orange L.P. or NCP
Syracuse, the effect of which would be to delay or diminish any benefit to be
received by Kronish Lieb under the Stipulation or otherwise adversely affect
Kronish Lieb. Mr. Victor and GAS LP have fulfilled their payment obligations in
favor of Kronish Lieb under the stipulation, except to the extent of Kronish
Lieb's continuing 25% cash flow interest in the partnership distributions GAS LP
is entitled to receive going forward. Pursuant to an Amendment, Release and
Covenant Not to Sue, or the covenant, dated April 5, 1991 among Kronish Lieb,
GAS LP, Adam Victor, Orange L.P. and others, Orange L.P. is authorized and
directed to pay Kronish Lieb all amounts which it is entitled to receive under
the Stipulation.
In order to provide that Kronish Lieb receives the amounts which it is
entitled to receive under the stipulation and the covenant, and to provide that
the other terms of the stipulation and the covenant are being complied with,
upon the closing of the offering of the old notes, Orange L.P. deposited $3.0
million into the stipulation reserve account created under the Deposit and
Disbursement Agreement. This amount represents Orange L.P.'s determination of
the maximum amount which should be needed either to pay or otherwise satisfy, by
way of a buy-out or other type of settlement, the obligations of GAS LP to
Kronish Lieb under the stipulation. At Orange L.P.'s request, the Collateral
Agent will transfer, free of the liens of the Collateral Documents, amounts in
the stipulation reserve account to an escrow account established and
administered in accordance with the covenant in the event of a dispute as to GAS
LP's obligations to make payments to Kronish Lieb under the stipulation.
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<PAGE>
MANAGEMENT
Directors and Executive Officers
The executive officers of GAS Orange, Orange L.P.'s general partner, are as
follows:
Name Age Position
---- --- --------
Adam H. Victor 47 President, Treasurer
Douglas Corbett 50 Vice President, Secretary
Richard S. Scolaro 62 Vice President, Assistant Secretary
The executive officers and directors of Capital Co. are as follows:
Name Age Position
---- --- --------
Adam H. Victor 47 President, Treasurer, Director
Douglas Corbett 50 Vice President, Secretary, Director
Richard S. Scolaro 62 Vice President, Assistant Secretary, Director
Adam H. Victor has served as a Director of Capital Co. and as President and
Treasurer of both GAS Orange and Capital Co. since their respective dates of
formation. Mr. Victor was involved with the development of the project and has
continued his involvement in Orange L.P. through his interest in GAS LP. GAS
Orange has delegated limited authority to Mr. Victor as its agent for the
purpose of reaching technical decisions on behalf of GAS Orange respecting the
activities of Niagara Mohawk Energy Marketing and GE International.
Douglas Corbett has served as a Director of Capital Co. and as Vice
President and Secretary of both GAS Orange and Capital Co. since their
respective dates of formation. Mr. Corbett, a business consultant and attorney,
has been a principal with Corbett & Schreck, P.C., a Houston, Texas-based law
firm since 1992.
Richard S. Scolaro has served as a Director of Capital Co. and as Vice
President and Assistant Secretary of both GAS Orange and Capital Co. since their
respective dates of formation. Since February 1979, Mr. Scolaro, an attorney,
has been a principal with Scolaro, Shulman, Cohen, Lawler & Burstein, P.C., a
Syracuse, New York-based law firm, which provides legal services to Orange L.P..
Mr. Scolaro is also a director of Charles W. Commack Associates, Inc., a member
of the NASD.
Director Compensation
Members of the Board of Directors of Capital Co. do not receive compensation
for services as a director.
Executive Compensation
For the year ended December 31, 1999, Adam H. Victor received a management fee
from Orange L.P. in the amount of $360,000. Other than Mr. Victor, no executive
officer of GAS Orange or Capital Co. received compensation of $100,000 or more
during the same period.
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OVERVIEW OF THE INDEPENDENT POWER INDUSTRY IN NEW YORK
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. As a result, numerous electric utilities
nationwide are in the process of divesting all or a portion of their electricity
generation business and many are expected to commence this process in the next
few years, as legislative and regulatory developments drive the industry to
disaggregate. The initiation of customer choice together with the loss of a
regulatory obligation to serve previously captive markets at regulated rates
either has or may lead to franchised utilities incurring stranded costs, to the
extent these utilities are unable to recover their individual revenue
requirements in the competitive market place.
The restructuring of the vertically integrated utility industry in New York
began in May 1996 as a result of a New York Public Service Commission order
requiring each investor-owned utility to file a restructuring plan. The New York
Public Service Commission order called for retail competition starting in 1998
and suggested the creation of an independent system operator to assume
operational control of the investor owned utilities transmission assets. In the
order, the New York Public Service Commission expressed a preference for the
divestiture of generation assets and indicated that it would allow the recovery
of prudent and verifiable stranded costs. Restructuring agreements for all of
New York State's investor-owned utilities have now been approved and are being
implemented. Retail access was implemented throughout New York State by year end
1999. Most New York investor-owned utilities are divesting their generating
assets and will become primarily distribution companies, likely resulting in
fragmentation in the ownership of New York State's generation assets and
increased competition for generation sales. It is possible that divestiture
could lead to the concentration of divested generation in the hands of a
relatively small number of new owners, which in turn could reduce competition.
However, we believe it is more likely than not that regulatory oversight will
prevent this concentration from occurring, and will maintain or increase
competitive pressures.
Historically, the New York Power Pool operated a centrally-dispatched pool to
minimize member production costs and to maintain statewide reliability. It also
coordinated the operation of the bulk power transmission facilities in the
state. The New York Power Pool system has become an independent system operator,
which now administers an open access transmission tariff and an independent
system operator services tariff which have been accepted by FERC, as modified by
minor changes to comply with FERC requirements. The New York Independent System
Operator commenced trial operations on November 18, 1999. The New York
Independent System Operator system originally envisioned the establishment of
three new entities, the New York Independent System Operator, the New York State
Reliability Council, or NYSRC, and the New York Power Exchange. The New York
Independent System Operator is a non-profit New York corporation under FERC's
jurisdiction. It will be governed by a board of directors comprised of
representatives from all market participants, including buyers of power, sellers
of power, consumer groups and transmission owners. 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 Independent System Operator. The New York Power Exchange was
envisioned to be the main power exchange 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 York Power Exchange has not
been implemented, its proposed functions are being handled instead by the New
York Independent System Operator. In a filing in December 1997 with the Federal
Energy Regulatory Commission, or FERC, the utilities that are members of the New
York Power Pool withdrew their original application to form the Power Exchange,
proposing instead that the functions envisioned for the Power Exchange be
offered by the Independent System Operator. It is unclear whether a power
exchange separate from the New York Independent System Operator ever will be
implemented. It is possible that other entities may form competing power
exchanges in the future.
The New York Power Pool member systems serve over 99% of New York State's
electric power requirements. Currently, its members are the investor owned
utilities in the state, the New York Power Authority, and the Long Island Power
Authority. In addition, over 5,000 MW of capacity is owned by independent power
producers, who sell the bulk of their output to investor-owned utilities under
long-term contracts. 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, or the PJM, to the south.
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<PAGE>
Transmission System Market. Transmission access will be available to all
market participants on an open access and non-discriminatory basis. The wheeling
party will pay the independent system operator a transmission service charge
that has three components, a transmission service charge, a transmission use
charge, and a New York Power Authority transmission access charge.
The transmission service charge is an hourly rate that recovers the embedded
fixed costs of the transmission system. The transmission service charge is
assessed on the basis of hourly metered loads for deliveries within the
independent system operator's control area (including purchases from the power
exchange, bilateral transactions, and imports) and on the basis of scheduled
deliveries for exports or through transactions. Transactions that are not
subject to this charge are the transmission provider's use of its own system to
provide bundled retail service to its native load customers, retail transmission
service pursuant to another tariff or rate schedule that explicitly provides for
other transmission charges, and wholesale wheeling agreements pursuant to
existing bilateral contracts that have been grandfathered by the parties. Loads
within the independent system operator control area will pay a single system
rate based on the costs of the transmission provider where the points of
delivery are located. Wheeling transactions that involve exports or through
system transactions will pay a transmission service charge based on the costs of
the transmission provider that owns the intertie which serves as the point of
delivery to an adjacent control area.
The second rate component, the transmission use charge, recovers any
congestion costs associated with the transaction and marginal losses. Customers
wishing to receive firm transmission service under bilateral transactions must
agree to pay transmission use charges. Congestion costs are based on constraints
on the optimum economic operation of the system. Parties can hedge their
exposure to congestion charges through transmission congestion contracts which
will be auctioned biannually. Marginal losses are the real power losses
associated with each additional megawatt-hour of consumption by load, or each
additional megawatt-hour transmitted under a bilateral transaction as measured
at the points of withdrawal.
The final rate component, the New York Power Authority transmission adjustment
charge, is assessed on all transactions and is intended to recover any shortfall
in New York Power Authority's revenue requirement that is not recovered in New
York Power Authority's transmission service charge. Unlike other investor owned
utility members of the independent system operator, New York Power Authority
does not operate a separate service area and most of its customers are located
in the service areas of other transmission providers.
FERC has set a number of issues concerning the transmission service charge and
marginal losses for hearing. Although the hearing did not impact the start date
for independent system operator operations, its outcome may materially impact
the costs of transmission service offered by the independent system operator.
For example, FERC has accepted the New York Power Authority transmission access
charge and the independent system operator's proposal to adopt the member
investor owned utilities existing revenue requirements as the basis for the
transmission service charge, but has set for hearing the reasonableness of
certain adjustments to the revenue requirements which have been proposed by the
independent system operator as a necessary part of the transition to independent
system operator operations. FERC has also accepted the independent system
operator's marginal losses proposal, but has set for hearing the clarity of the
method used to compute marginal losses and the information to be made available
to transmission customers to allow informed decision making.
New York Power Pool Wholesale Market. Generators may transact in the
centralized wholesale power exchange implemented by the New York Independent
System Operator, and may compete in distinct markets for energy, installed
capacity and ancillary services. Pricing is based upon market clearing prices
which are the prices at which sufficient electricity will be supplied to satisfy
all demand for which bids have been submitted. The generator is paid the market
clearing price, not its bid price, at the point it supplies energy to the system
and the purchaser paying the market clearing price at the point it receives
energy from the system.
Bilateral Energy Markets. Any generator in the state, including Orange L.P.,
subject to Niagara Mohawk's right of first refusal, so long as Niagara Mohawk
has such right, has the right to sell its output of energy to any wholesale
customer statewide including utilities, municipalities, and energy supply
companies. Generators can sell energy under bilateral contracts, with pricing
and other provisions determined by two-party negotiation. Customers that want to
engage in bilateral transactions must schedule either firm or non-firm
transmission service with the independent system operator.
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<PAGE>
Installed Capacity Market. An installed capacity market has been established
to ensure there is enough generation capacity to meet retail demand and
ancillary service requirements. Any load serving entity, 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. These
capacity commitments can be secured by the load serving entity through a
bilateral contract or through the New York Independent System Operator. 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
energy to the load serving entity with whom they have a contract. However, if
the load serving entity does not purchase energy from its supplier, the supplier
would be required to bid into the day-ahead energy market. If the supplier is
not selected in the day-ahead energy market, the supplier, for the next day,
will be free either to bid in the real-time market or to sell energy to any
customer, including an out-of-state customer.
Ancillary Services Market. The independent system operator will procure
various ancillary services required for reliability from generators as needed at
market rates. These services include operating reserves and regulation and
frequency response service. 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.
Baseload generation, including nuclear and coal, makes up 28% of the installed
capacity. Independent power producers, which are predominantly natural 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
peaking capacity. Even though the baseload facilities, nuclear and coal,
comprised 28% of the installed capacity, they produced 38% of the energy in
1997.
Net Capacity by Fuel Type in Net Generation by Fuel Type in
New York (1997) New York (1997)
Oil/Dual--fuel............... 41% Independent Power Producers..... 23%
Independent Power Producers.. 15 Nuclear......................... 20
Coal......................... 14 Conventional Hydro.............. 19
Nuclear...................... 14 Coal............................ 18
Conventional Hydro........... 12 Natural Gas..................... 13
Pumped Storage Hydro......... 3 Oil............................. 6
Natural Gas.................. 1 Pumped Storage Hydro............ 1
--- ---
100% 100%
Source: NEW YORK POWER POOL, Load and Capacity Data 1998.
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<PAGE>
Regions. New York State has regional transmission constraints which divide
the state's power market into two distinct regions. 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 Long Island
Power Authority, Keyspan, Inc, formerly Long Island Lighting Company,
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, Rochester Gas & Electric Corporation, New York
Power Authority and most of New York State Electric & Gas Corporation.
The western region is dominated by low cost baseload, nuclear and coal, and
hydro facilities which, together with must-run independent power producer
facilities, form 83% of installed capacity. The eastern region has a
predominance of peaking facilities which form 80% of its installed capacity.
Even though the western region has only 40% of New York Power Pool'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 5,000 MW by transmission limits and reliability
considerations. When this limit is reached, higher cost units in the New York
City area are dispatched even when lower cost units in the western region are
available.
Demand. In 1997, the New York Power Pool summer peak was 28,700 MW and
energy demand totaled 148,882 GWh. The statewide peak grew by an average of 2.8%
per year from 1992 to 1997, while energy demand grew by an average of 0.8%
annually during that same period. Current New York Power Pool forecasts predict
a continued capacity surplus until 2003, at which point new capacity will be
required in order to maintain system reserve margin requirements. There have
been recent announcements of new Projects from PG&E Generating Company and Sithe
Energies, Inc. which, if completed, will extend the forecasted capacity surplus
until beyond 2008.
Interconnection. Western and central New York are relatively unattractive
markets for the transmission of imported power due to low generation costs and
low on-peak energy prices relative to the area's adjacent markets, New England
Power Pool, PJM and eastern New York. On the export side, New England Power Pool
and PJM forecast higher demand growth for their markets. Also, the existing
transmission infrastructure permits us to access these neighboring markets,
subject to constraints imposed by capacity limitations and reliability
considerations.
PJM is a market characterized by high price volatility where peak hour pricing
is set by inefficient diesel-fired facilities. PJM forecasts peak demand to grow
1.0% per year over the next ten years and Projects that a capacity shortage will
occur by 2000. 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. New England Power Pool is currently experiencing capacity
shortfalls primarily due to nuclear outages and retirements. New capacity is
required in New England Power Pool to meet increasing demand, which is likely to
increase capacity prices in the near term. The New York Power Pool has transfer
capacity to New England Power Pool of 1,675 MW through two 345 KV
interconnections and transfer capacity to PJM of 725 MW.
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<PAGE>
SUMMARY DESCRIPTIONS OF THE PRINCIPAL AGREEMENTS
RELATING TO THE PROJECT
The following descriptions of the Amended Power Purchase Agreement, Steam
Contract, Steam Plant Operating Agreement, Ground Lease, Master Lease, PILOT
Agreement, Host Community Agreement, Gas Purchase Agreement, TransCanada
Pipelines Limited Firm Service Contract, Firm Gas Transportation Contract,
Interruptible Gas Transportation Contract, Tennessee Gas Pipeline Company Letter
of Credit, Operation and Maintenance Agreement, Asset Management Agreement,
Partnership Interest Purchase Agreement, and related consents and agreements,
which together we refer to as the Significant Project Contracts, do not describe
every detail of the agreements and are subject to, and are qualified in their
entirety by reference to the Significant Project Contracts. For definitions of
terms used but not defined in the descriptions of the Significant Project
Contracts below, see "Description of Notes--Certain Definitions."
Amended Power Purchase Agreement
At the time that it commenced commercial operations, the Project had
contracted to sell all of its output of electricity to Niagara Mohawk under a
long-term power purchase agreement. In May 1996, the New York Public Service
Commission called for a competitive market for electricity in the State of New
York and required each investor-owned utility, including Niagara Mohawk, to file
a restructuring plan. The New York Public Service Commission also suggested the
creation of an independent system operator to assume operational control of the
transmission assets of each investor-owned utility. Under the independent system
operator system instituted on November 18, 1999, the New York Independent System
Operator is facilitating competition in the power markets and operates the
actual day-ahead and real-time markets for installed capacity, energy and
ancillary services.
In connection with this New York Public Service Commission initiative to
develop a competitive market for electricity in the State of New York, Niagara
Mohawk entered into the Master Restructuring Agreement with 27 independent power
producers, including Orange L.P. The Master Restructuring Agreement amended and
restated Orange L.P.'s then existing power purchase agreement with Niagara
Mohawk, dividing it into a Power Put Agreement and Indexed Swap Agreement
described below.
Power Put Agreement
The Power Put Agreement became effective on June 30, 1998 upon the completion
of the restructuring contemplated by the Master Restructuring Agreement and,
except with respect to provisions relating to the power put option, remains in
effect for a period of ten years.
Power Put Option; Pricing. Under the Power Put Agreement, until the New York
Independent System Operator has achieved certain volumetric tests (the period
ending on such date being what we refer to as the Proxy-Market Price Period),
but in no event later than June 30, 2008, Orange L.P. has the right but not the
obligation, to sell to Niagara Mohawk (i) energy up to the contract quantities
of electricity in the table entitled "POWER PUT AGREEMENT--Contract Quantity"
below, including energy subject to an overgeneration amount of +5% of the
specified contract quantity, and (ii) capacity, which is subject to both
seasonal variation and degradation associated with the contract quantity of
electricity for the immediately succeeding month, in each case for each interval
during the preceding calendar month. The interval is one hour or other period of
time as determined under the Power Put Agreement. Niagara Mohawk is obligated
to take and pay for energy and capacity from the Project at the Proxy-Market
Price or the Market Price and, if applicable, the Market Capacity Price, as the
case may be. The Proxy-Market Price means (a) prior to the establishment of the
New York Independent System Operator, Niagara Mohawk's short-term avoided energy
and capacity costs as filed with the New York Public Service Commission under
the SC-6 tariff and (b) after the establishment of the New York Independent
System Operator, the Market Price and, if applicable, the Market Capacity Price.
The Market Price means the applicable day ahead locational-based market price
paid to sellers for energy, specified and published by the New York Independent
System Operator. The Market Capacity Price shall mean the regional market price
paid to sellers for capacity, which will be applicable only after the New York
Independent System Operator has been established and if there then exists a
market for capacity.
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The Power Put Agreement provides that Orange L.P. has the right to sell energy
and associated capacity to Niagara Mohawk for specified periods ranging from a
minimum of one hour to a maximum period of one month. Prior to the beginning of
each month, Orange L.P. must provide to Niagara Mohawk a schedule indicating the
projected deliveries of energy and associated capacity for that month. The
schedule may be updated by Orange L.P. on an hourly basis by providing notice of
the change no less than 30 minutes prior to the start of the hour in which the
change to the schedule is to be effective.
At the conclusion of the Proxy-Market Price Period, Orange L.P.'s right to
sell energy and associated capacity to Niagara Mohawk will terminate. Orange
L.P. will have the right to sell energy and associated capacity through the New
York Independent System Operator, and to sell energy and associated capacity
outside the New York Independent System Operator system on a bilateral contract
basis, subject to Niagara Mohawk's right of first refusal to purchase energy and
associated capacity. Niagara Mohawk's right of first refusal to purchase energy
and associated capacity terminates at the conclusion of the Proxy-Market Price
Period. The New York Independent System Operator system began operating on a
trial basis during the second half of November 1999.
POWER PUT AGREEMENT--Contract Quantity
<TABLE>
<CAPTION>
Monthly Contract Quantity (MWh/month)
Annual
Contract Contract
Year Quantity Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
2 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
3 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
4 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
5 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
6 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
7 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
8 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
9 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
10 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
</TABLE>
_________________________
The contract quantity of electricity for each Interval will not exceed 80 MWh
+ 5% (the "Interval Cap"); provided however, the aggregate contract quantity
of electricity that Orange L.P. will have the right to put to Niagara Mohawk
in each contract year under the Power Put Agreement will not exceed 663,000
MWh + 5%.
Right of First Refusal. Pursuant to the Power Put Agreement, until the New
York Independent System Operator is fully established and functioning and
achieves certain volumetric tests, Niagara Mohawk has a right of first refusal
to purchase the energy or capacity associated with the quantities covered under
the Power Put Agreement. Energy and associated capacity in excess of these
amounts of energy or associated capacity are not subject to the Power Put
Agreement and, at Orange L.P.'s option, may be sold to third parties without an
obligation to offer this excess energy and associated capacity to Niagara
Mohawk.
Delivery of Electricity. The Power Put Agreement requires that Orange L.P.
deliver electricity to Niagara Mohawk's system at specified approximate voltage
levels. Niagara Mohawk may suspend its acceptance of and obligation to pay for
electricity which Orange L.P. produces for periods of time when its transmission
system is temporarily physically unable to accept this electricity for reasons
of necessary maintenance, repair, system emergency, safety or similar actions.
Orange L.P. may shut down the operation of the Project or temporarily disconnect
it from Niagara Mohawk's system whenever and for any periods of time as may be
necessary for maintenance, safety or emergency reasons. Under the Power Put
Agreement, Orange L.P. must provide to Niagara Mohawk schedules of planned
maintenance requirements, including the number and duration of any planned
outages. At Orange L.P.'s option, Orange L.P. may reschedule deliveries of power
which are not made due to any suspension or shutdown, upon a mutually agreed
schedule.
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Force Majeure. If a force majeure event prevents either Niagara Mohawk or
Orange L.P. from carrying out, in whole or in part, its obligations other than
payments of amounts due under the Power Put Agreement, the Power Put Agreement
provides that, on notice to the other party, either party may suspend
performance of its obligations so far as the obligations are affected by the
force majeure event. At Orange L.P.'s option, it may reschedule deliveries of
power which are not made due to any force majeure event, upon a mutually
agreeable schedule.
Required Payments for Changes in Costs. On each date specified in the Power
Put Agreement, Orange L.P. and Niagara Mohawk are required to make payments
adjusting for changes in costs as compared to costs established under
contractual arrangements as of January 1, 1997, regarding the local distribution
system gas transportation and the electrical interconnection to which both
Orange L.P. and Niagara Mohawk are a party. To the extent the increase in the
cost of these items to Orange L.P. exceeds any decrease in the cost of these
items from Niagara Mohawk's contractual arrangements, then Niagara Mohawk makes
a payment to Orange L.P. To the extent there is a net decrease in the cost of
these items to Orange L.P., then Orange L.P. makes a payment to Niagara Mohawk
of this net decrease. In addition, Orange L.P. and Niagara Mohawk must make net
payments adjusting for changes in costs as compared to costs established under
contractual arrangements, as of January 1, 1997 attributable to changes in
federal, state or local laws, during the Priority-Market Price Period and any
later periods during which like adjustments in costs are recovered by any entity
that owns any of Niagara Mohawk's non-nuclear generating assets.
The contract prices under the Power Put Agreement do not specifically address
the charges for reactive power, voltage support services or line-losses. The
Power Put Agreement provides that Orange L.P. and Niagara Mohawk reimburse or
pay these charges in addition to the contract prices established under the Power
Put Agreement. If Niagara Mohawk's tariffs require Orange L.P. to pay Niagara
Mohawk for reactive power or line-losses during periods when Niagara Mohawk's
generating facilities are producing electricity, then Orange L.P. is entitled to
reimbursement by Niagara Mohawk in an amount equal to all reactive power charges
and/or line-loss charges or costs actually incurred by Orange L.P. during the
associated payment period. In addition, if, under any independent system
operator tariff, Orange L.P. is required to provide voltage support services, as
defined by the independent system operator tariff, Niagara Mohawk will pay to
Orange L.P. on each payment date any and all voltage support service payments
made by the independent system operator to Niagara Mohawk in the associated
payment period which are attributable to the voltage support services provided
by Orange L.P. Also, if the independent system operator charges Orange L.P. for
any line-losses, then Orange L.P. will be entitled to reimbursement by Niagara
Mohawk in an amount equal to all line-loss charges incurred by Orange L.P.
during the associated payment period.
Orange L.P. must provide Niagara Mohawk with a notice of any payment due
before the fifth business day of each calendar month, after netting amounts
owing. Niagara Mohawk must then provide, if applicable, a revised notice with
actual electricity prices and quantities, and the adjusted amounts may be paid
on the subsequent payment date without interest being applied. If, in good
faith, either Orange L.P. or Niagara Mohawk disputes any part of any notice or
payment obligation, a written explanation of the basis for the dispute must be
provided and the undisputed amount paid as required. If any underpayment or
overpayment is established, either through mutual agreement or settlement
reached according to the terms of the Power Put Agreement, the amount will be
paid along with interest.
Qualifying Facility Status. Under the Power Put Agreement, Orange L.P. has
the right, but not the obligation, in its sole discretion to maintain the
Project's status as a qualifying facility under federal and state law. As a
qualifying facility, Orange L.P. is not considered to be a "public utility" and
is exempt from most state and federal regulations applicable to public
utilities. The Power Put Agreement states that Niagara Mohawk's rights and
obligations, including without limitation, its obligation to pay for electricity
produced by Orange L.P. as set forth in the Power Put Agreement, continue as a
contractual right regardless of whether Orange L.P. maintains the Project's
qualifying facility status.
Indexed Swap Agreement
In connection with the Power Put Agreement, Orange L.P. entered into the
Indexed Swap Agreement with Niagara Mohawk, which serves as a financial hedge
against movements in the price of electricity and is not a contract for the
actual physical delivery or purchase of electricity. Unless terminated early as
provided in the Indexed Swap Agreement, the Indexed Swap Agreement will
terminate on June 30, 2008.
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Under the Indexed Swap Agreement, Niagara Mohawk is required to make monthly
fixed payments to Orange L.P. and Orange L.P. is required to make monthly
floating payments to Niagara Mohawk. On the monthly payment date these payments
will be netted against each other, with the party owing the greater amount
making a net payment to the other party.
Fixed Payments. The fixed payments are $54.62/MWh for the annual period
ending June 30, 2000, multiplied by the applicable notional quantity of
electricity to be delivered to Niagara Mohawk during the applicable interval as
the notional quantity is specified in the Indexed Swap Agreement. After the
period ending June 30, 2000, the fixed payments will be $53.84/MWh adjusted by
an index factor and increment, or the Indexed Contract Price, multiplied by the
applicable notional quantity. The notional quantities of electricity during the
Proxy Market Period and for the period after the Proxy Market Period are shown
in the tables below entitled "Contract Quantity Proxy Market Period (MWh/hr)"
and "Contract Quantity for Contract Years Following the Proxy Market Period
(MWh/hr)," respectively.
Floating Payments. The floating payments are (i) the Proxy-Market Price or
the Market Price, if applicable, multiplied by the applicable notional quantity
for each hourly interval and (ii) if applicable, the Market Capacity Price
multiplied by the weighted average capacity associated with the applicable
notional quantity.
Indexed Contract Price. The Indexed Contract Price is calculated pursuant to
the following formula:
ICP = CP * [(15% * (GC/GC\\o\\)) + (41% * (INF/INF\\o\\))] + CN
Where: ICP = The Indexed Contract Price.
CP = The Contract Price in the reference year (CP = $53.84/MWh).
GC = The average Niagara Border Spot Price for natural gas (delivered
to pipe as stated in U.S. dollars) published by Natural Gas Week in
its Canadian Price Report first issue of month.
GC\\o\\ = The average Niagara Border Spot Price for natural gas
(delivered to pipe as stated in U.S. dollars) published by Natural Gas
Week in its weekly Canadian Price Report for June 1998
INF = The Consumer Price Index--All Urban Consumers for New York--
Northern New Jersey--Long Island, All items, available on the first
day of the month from the US Department of Labor, Bureau of Labor
Statistics (base year = 1982-84 = 100).
INF\\o\\ = The Consumer Price Index--All Urban Consumers for New York-
-Northern New Jersey--Long Island, All items, available on the first
day of June 1998 from the US Department of Labor, Bureau of Labor
Statistics (base year = 1982-84 = 100).
CN = as indicated below in $/MWh:
Contract Year CN
1 n/a
2 n/a
3 23.56
4 23.99
5 24.67
6 25.28
7 25.93
8 26.77
9 27.42
10 27.70
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Hourly Contract Quantity Proxy-Market Period (MWh/hr)
<TABLE>
<CAPTION>
Annual Hourly Contract Quantity (MWh/hr)
Contract Contract
Contract Quantity Price
Year (MWh) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ($/MWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 53.84
2 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 54.62
3 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
4 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
5 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
6 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
7 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
8 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
9 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
10 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
</TABLE>
_________________________
For each Contract Year which is a leap year, the Contract Quantity for the
month of February will be adjusted by a factor of 28 divided by 29.
I = Indexed Contract Price
Hourly Contract Quantity for Contract Years Following the Proxy-Market Period
(MWh/hr)
<TABLE>
<CAPTION>
Hourly Contract Quantity (MWh/hr)
Annual
Contract Contract
Contract Quantity Price
Year (MWh) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ($/MWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 53.84
2 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 54.62
3 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
4 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
5 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
6 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
7 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
8 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
9 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
10 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
</TABLE>
_________________________
For each Contract Year which is a leap year, the Contract Quantity for the
month of February will be adjusted by a factor of 28 divided by 29.
I = Indexed Contract Price
Tax Adjustments. Orange L.P. entered into the Indexed Swap Agreement with
the expectation that neither Orange L.P. nor Niagara Mohawk would be required to
make any deduction or withholding for or on account of any tax from any payment
(except for certain interest payments) to be made by either Orange L.P. or
Niagara Mohawk under the Indexed Swap Agreement. In general, the Indexed Swap
Agreement provides that if either Orange L.P. or Niagara Mohawk is required to
make a deduction or withholding from a payment on account of a tax, the party
required to make the payment will be required to pay an additional amount to the
other party in an amount necessary to ensure that the net amount actually
received will equal the full amount the receiving party would have received had
no deduction or withholding been required, except in specified circumstances,
including situations involving actions commenced by the relevant taxing
authority or resulting from a change in tax law occurring after the execution
and delivery of the Indexed Swap Agreement.
Events of Default and Other Termination Events. The Indexed Swap Agreement
provides that specified events with applicable cure periods shall constitute
events of default, including:
. Orange L.P.'s or Niagara Mohawk's failure to pay when due any payment
required under the Indexed Swap Agreement or, and continuation of the failure
for a period of 3 local business days after notice from the other party;
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. Orange L.P.'s or Niagara Mohawk's failure to comply with or perform any
agreement or obligation to be complied with or performed in accordance with
the Indexed Swap Agreement, other than payment defaults described in (i) and
failures to provide notice or documentation, if the failure is not remedied
within 30 days after notice of the failure is given;
. any materially incorrect or misleading representation made by Orange L.P. or
Niagara Mohawk in the Indexed Swap Agreement;
. Orange L.P.'s default under hedging or related transactions involving Niagara
Mohawk or Niagara Mohawk's default under hedging or related transactions
involving Orange L.P.;
. Orange L.P.'s or Niagara Mohawk's filing for voluntary bankruptcy, making a
general assignment, arrangement or composition with or for the benefit of its
creditors, being adjudicated bankrupt and insolvent or involvement in
insolvency proceedings;
. a merger, amalgamation or consolidation of Orange L.P. or Niagara Mohawk with
another entity, if the resulting or surviving entity fails to assume all the
obligations of Orange L.P. or Niagara Mohawk, as applicable, under the
Indexed Swap Agreement;
. with respect to Orange L.P., the occurrence or existence of defaults under
debt instruments, individually or collectively, which amount in the aggregate
to at least $30 million and which have resulted in the acceleration of debt
or payment defaults; and
. with respect to Niagara Mohawk, defaults under debt instruments which amount
in the aggregate to the lesser of (A) $50 million or (B) 10% of the
shareholder equity in Niagara Mohawk, and which have resulted in the
acceleration of the debt or payment defaults of $50 million.
The Indexed Swap Agreement provides that specified events, with applicable
cure periods, will constitute termination events, including:
. any change in law or interpretation by any court, tribunal or regulatory
authority which makes it unlawful for either Orange L.P. or Niagara Mohawk to
perform its obligations under the Indexed Swap Agreement;
. actions taken by a taxing authority, or brought in a court of competent
jurisdiction or some types of changes in tax law;
. merger events resulting in specified tax payments or other effects, and
. any merger, amalgamation or consideration of Orange L.P. or Niagara Mohawk
with another entity in which the surviving or transferee entity has a
significantly weaker creditworthiness.
On the occurrence of any one or more events of default, either Orange L.P. or
Niagara Mohawk may, within twenty (20) days after the occurrence of the event or
events of default, give written notice of the default(s) and designate an early
termination date, except that termination will occur automatically upon the
occurrence of some insolvency events or the institution of proceedings relating
to those insolvency events.
On the occurrence of one or more termination events, if no transfer of
contractual obligations or agreement can be reached concerning the termination
event, the appropriate party may give written notice of and designate an early
termination date.
On the occurrence of an early termination event, the Indexed Swap Agreement
also provides for payment by either Orange L.P. or Niagara Mohawk, or
applicable. In the case of a termination resulting from an event of default, an
amount equal to the loss incurred by the non-defaulting party, or the Non-
Defaulting Party Termination Loss, shall be paid by the defaulting party to the
non-defaulting party if the Non-Defaulting Party Termination Loss is positive
and shall be paid by the non-defaulting party to the defaulting party if the
Non-Defaulting Party Termination Loss is
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negative. In the case of a termination resulting from a termination event, the
losses or benefits inuring to the two parties are shared equally.
Revenues Generated by Amended Power Purchase Agreement
Based on specified assumptions and conditions, the Amended Power Purchase
Agreement will result in a minimum net payment obligation from Niagara Mohawk to
Orange L.P. during the period ending June 30, 2008 of an amount equal to the
Fixed Payment under the Indexed Swap Agreement, multiplied by the applicable
notional quantity of electricity specified under the Indexed Swap Agreement.
Significant among the assumptions and conditions giving rise to this minimum
net payment obligation are the following:
. during the Proxy Market Price Period, Orange L.P. is able to generate and sell
to Niagara Mohawk under the Power Put Agreement electricity in an amount at
least equal to the notional quantity of electricity under the Indexed Swap
Agreement;
. during the period after the Proxy Market Price Period, Orange L.P. is able to
generate and sell into the New York Independent System Operator electricity in
an amount at least equal to the notional quantity of electricity under the
Indexed Swap Agreement and at a price at least equal to the floating payments
price applicable to payments required to be made by Orange L.P. to Niagara
Mohawk under the Indexed Swap Agreement;
. there are no cost adjustments permitted under the Power Put Agreement which
have the effect of reducing the price paid by Niagara Mohawk to Orange L.P.
for electricity generated and sold to Niagara Mohawk under the Power Put
Agreement;
. there are no cost or liability adjustments permitted under the Indexed Swap
Agreement which have the effect of increasing the floating payment paid by
Orange L.P. to Niagara Mohawk or decreasing the fixed payment paid by Niagara
Mohawk to Orange L.P. for the notional quantity of electricity under the
Indexed Swap Agreement; and
. the Indexed Swap Agreement is not terminated early because of the occurrence
of an event of default or other event giving rise to an early termination
under the Indexed Swap Agreement.
Orange L.P.'s ability to generate and sell a sufficient amount of electricity
to Niagara Mohawk or to the New York Independent System Operator, as applicable,
could be adversely affected by various circumstances, including equipment
failure or other operational difficulties, failure by third parties to perform
their contractual obligations to Orange L.P., regulatory changes or
unforeseeable circumstances beyond the control of Orange L.P. In addition,
Orange L.P.'s ability to generate and sell electricity also would be adversely
affected by Orange L.P.'s failure to perform its contractual obligations to
third parties. For example, Orange L.P.'s right to possess the Project under the
Ground Lease could be terminated if Orange L.P. fails to perform its obligations
under the Steam Contract, the Steam Plant Operating Agreement or the Ground
Lease.
Niagara Mohawk Consent
Niagara Mohawk has consented to Orange L.P.'s assignment of its interests
under the Amended Power Purchase Agreement to the Collateral Agent pursuant to
the Security Agreement and the other Collateral Documents as security for our
obligations under the notes and the indenture. Niagara Mohawk has agreed to
accept the Collateral Agent's performance of Orange L.P.'s obligations under the
Amended Power Purchase Agreement and, for so long as the Amended Power Purchase
Agreement has been assigned to the Collateral Agent or has been assumed by the
Collateral Agent, its designee(s) or assignee(s), will make all payments due to
Orange L.P. under the Amended Power Purchase Agreement directly to the
Collateral Agent, in accordance with the Collateral Agent's written
instructions. On a default or breach by Orange L.P. under the Amended Power
Purchase Agreement, Niagara Mohawk has agreed not to
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terminate the Amended Power Purchase Agreement without first providing the
Collateral Agent with written notice of the default or breach and providing the
Collateral Agent with (i) up to 30 days to cure a payment default or (ii) a
reasonable time as is necessary to cure a non-payment default so long as the
Collateral Agent has commenced to cure the default within 60 days after receipt
of the notice and thereafter diligently pursues the cure to completion. If the
Collateral Agent commences foreclosure proceedings to obtain possession of the
project, the Collateral Agent will be allowed a reasonable period to complete
the proceedings.
Steam Contract
Orange L.P. has entered into a Steam Contract with Syracuse University dated
as of February 27, 1990, as amended, pursuant to which Syracuse University
purchases and Orange L.P. supplies steam to Syracuse University. The remaining
stated term of the Steam Contract is approximately 32 years.
Steam Delivery Requirements. The Steam Contract requires that Orange L.P.
provide steam from the Project to Syracuse University in amounts necessary to
meet the steam requirements of Syracuse University and some of its ancillary
customers; provided, however, that Orange L.P. has no obligation to provide
steam at a rate in excess of 450,000 pounds per hour or more than a maximum
annual average of 230,000 pounds of steam per hour, or a total of 2,014,800,000
pounds during any 12-month period. Syracuse University must accept delivery of
or pay for a minimum quantity of steam equal to the lesser of (i) the minimum
amount required to maintain the project as a qualifying cogeneration facility
under the Public Utility Regulatory Policies Act of 1978, as amended, or PURPA,
and (ii) 60,000 pounds of steam per hour, or a total of 525,600,000 pounds in
any 12-month period. The minimum annual requirement may be reduced if the supply
of steam to Syracuse University is interrupted or discontinued and the
interruption or discontinuance is not the fault of Syracuse University.
Steam Purchase; Pricing. The Steam Contract provides that Syracuse
University is the sole and exclusive purchaser of steam from the Project.
Although the Steam Contract generally prohibits Orange L.P. from selling or
furnishing steam, power or energy to third parties without Syracuse University's
prior written consent, the Steam Contract expressly permits Orange L.P. to sell
electricity to Niagara Mohawk or other public utilities without Syracuse
University's consent. As discussed above, FERC regulates the New York
Independent System Operator as a public utility subject to FERC's jurisdiction.
The Steam Contract sets forth a base steam price until July 2008 of $4.27 per
thousand pounds of steam. The price is subject to adjustment on account of
increases or decreases in fuel and labor costs. The base price for steam will be
further adjusted beginning in July 2008 on the sixteenth anniversary of
operation of the Project. The Steam Contract further provides a pricing formula
for excess steam delivered to Syracuse University as well as a future adjustment
to the steam price in the event that an alternative fuel or technology would
reduce the cost at which Syracuse University could obtain its steam
requirements.
Defaults; Failure to Deliver Steam. In the event of a default by Orange
L.P., which includes events of bankruptcy or insolvency of Orange L.P. or
failure by Orange L.P. to deliver the required steam, Syracuse University may
require Orange L.P. to make other arrangements for the delivery of steam or may
make alternative arrangements for the delivery of such steam and, in either
event shall be entitled to receive reimbursement from Orange L.P. for amounts
paid to purchase or produce the steam in excess of the amounts it would pay
under the Steam Contract. Additionally, under some circumstances following a
default, Syracuse University may immediately assume operating control of the
Project as provided in the Steam Contract. However, the Steam Contract provides
that Orange L.P. will have no responsibility for any failure to supply steam to
Syracuse University that is caused, or materially contributed to, by the fault
of Syracuse University or by force majeure events, including acts of God,
strikes or interference through legal proceedings, state, federal or local laws
or regulations of any governmental authority.
Steam Plant Operating Agreement
In connection with the Steam Contract, Orange L.P. has entered into the 40-
year Steam Plant Operating Agreement with Syracuse University, dated as of
February 27, 1990, as amended, pursuant to which Orange L.P. is responsible for
operating and maintaining the Steam Plant. The Steam Plant Operating Agreement
provides that Orange L.P., at all times during the term thereof shall, with its
own work force and at its sole cost and expense, will operate
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and maintain the Steam Plant in a state of readiness to make available an
alternate or supplemental source of steam to Syracuse University and its
ancillary customers, at the pressures and temperature and meeting the other
requirements of the Steam Contract after the interruption of the required supply
of steam from the project. Unless sooner terminated in accordance with its
terms, the Steam Plant Operating Agreement will continue in effect for the term
of the Steam Contract.
User Charge. In consideration of Orange L.P.'s right to operate the Steam
Plant, Orange L.P. must make an annual user charge payment to Syracuse
University. The user charge payment is due each July, although Orange L.P. may
elect to make twelve equal monthly payments. The current annual user charge is
$1.25 million per year which amount shall increase at various intervals as shown
below.
Year Annual User Charge
Present-2007 $1,250,000
2008-2012 $1,350,000
2013-2022 $1,450,000
2023-2031 $1,550,000
2032 (Final payment) $1,550,000
Insurance; Indemnification. The Steam Plant Operating Agreement imposes an
obligation on Orange L.P. to maintain casualty and other insurance on the Steam
Plant throughout the term thereof. In addition, the Steam Plant Operating
Agreement imposes indemnification obligations on Syracuse University and Orange
L.P. in connection with claims asserted against each other with respect to the
Steam Plant, including specific limitations with respect to liabilities arising
with respect to the existence of certain hazardous substances or other
environmental conditions.
Damage to Steam Plant. In the event of damage or destruction by fire or
otherwise of the Steam Plant or any part of it, Orange L.P. shall notify
Syracuse University and shall restore, replace or rebuild the Steam Plant at
Orange L.P.'s sole cost and expense; provided, however, that if the insurance
proceeds are insufficient for such restoration, Orange L.P.'s obligation to
restore with funds other than insurance proceeds shall be subject to Syracuse
University's obligation to indemnify Orange L.P.
Eminent Domain. As described in the Steam Plant Operating Agreement, if all
or substantially all of the Steam Plant is taken by right of eminent domain, the
Steam Plant Operating Agreement will automatically terminate; provided, however,
that under certain circumstances, such as if the portion, if any, of the Project
remaining available to Orange L.P. is sufficient to enable Orange L.P. to comply
to a material extent with its obligations under the Steam Contract or if Orange
L.P. is required to replace the project in accordance with the Ground Lease,
Syracuse University may replace the Steam Plant or take other appropriate action
to enable Orange L.P. to comply with its obligations under the Steam Contract at
no additional cost to Orange L.P. Unless and until a replacement or other
alternate or supplemental source of steam is available to Orange L.P., Orange
L.P.'s obligations under the Steam Contract will be appropriately modified to
reflect, among other things, the actual steam generating capacities of the
Project as it then exists and the absence of a suitable or supplemental source
of steam.
Obligation to Rebuild Boilers. The Steam Plant Operating Agreement obligates
Orange L.P. to rebuild the boilers in the Steam Plant when they wear out. The
need to rebuild the boilers will either be agreed to by Syracuse University and
Orange L.P. or determined by a professional consultant selected by Syracuse
University and Orange L.P. Orange L.P. may replace a boiler with a package
boiler if such replacement is more economic than rebuilding the boiler. Orange
L.P. and Syracuse University have agreed that the current boiler replacement
costs for the boilers in the Steam Plant are $11.9 million, and that this amount
is to be redetermined every five years. Until the redetermination date, the
boiler replacement cost amount increases by 5% annually.
Defaults; Termination of Steam Plant Operating Agreement. The Steam Plant
Operating Agreement provides that specified events will constitute events of
default, including the following: Orange L.P.'s failure to pay user charges or
observe and perform any of the terms, covenants or conditions under the Steam
Plant Operating Agreement, bankruptcy, abandonment of the Steam Plant or
termination of the Steam Contract or the Ground Lease for any reason
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other than a default of Syracuse University. On or after any one or more events
of default, Syracuse University may, give written notice to Orange L.P. of the
default and state that the Steam Plant Operating Agreement will terminate on the
date specified in the notice. On termination of the Steam Plant Operating
Agreement, Orange L.P. must surrender use and possession of the Steam Plant to
Syracuse University and is liable to Syracuse University for damages for Orange
L.P.'s default.
Ground Lease Arrangement
Ground Lease. Orange L.P. has entered into the Ground Lease with Syracuse
University dated February 27, 1990, as amended, pursuant to which Syracuse
University leased to Orange L.P. the parcel of land (but specifically excluding
underground oil storage tanks) on which the project was constructed, which we
refer to as the premises. Under the Ground Lease Syracuse University also
provides an easement for a transmission line for natural gas and/or propane over
certain land owned by Syracuse University.
Assignment of Ground Lease. In connection with the issuance on April 5, 1991
by SIDA of its 1991 Taxable Industrial Development Revenue Bonds (Project Orange
Associates, L.P.), the proceeds of which were used by Orange L.P. to finance,
among other things, the development, acquisition and construction of the Project
and to obtain a prepaid supply of natural gas for the Project, Orange L.P.
assigned to SIDA Orange L.P.'s rights, title and interest in and to the premises
under the Ground Lease pursuant to an assignment of lease dated as of April 5,
1991.
Master Lease. At the same time Orange L.P. entered into the Master Lease
with SIDA, dated as of April 5, 1991 under which Orange L.P. (a) sublets from
SIDA the premises and easements which had been assigned to SIDA by Orange L.P.
and (b) leases from SIDA the Project, easements granted to SIDA by the City of
Syracuse and all personal property acquired by SIDA for use in connection with
the Project. The Master Lease incorporates all of the rights and obligations of
SIDA, and terms and provisions applicable under the Ground Lease to be Orange
L.P.'s rights and obligations and terms and provisions applicable, under the
Master Lease.
Modifications. The operation of provisions in the Ground Lease and Master
Lease have been modified by the University Consent and Agreement and the SIDA
Consent and Agreement. See "--University Consent and Agreement" and "--SIDA
Consent and Agreement."
Rent Payments. Under the Ground Lease, Orange L.P. is required to pay
Syracuse University nominal annual rent of one dollar for the premises. The
Ground Lease is intended to be a net lease with the effect that all costs,
expenses and obligations of every kind and nature whatsoever relating to the
Project or the premises shall be paid by Orange L.P. The Master Lease provides
for a nominal annual rent payment of one dollar payable in arrears on December
31 of each year.
Term. The term of the Ground Lease shall expire on the date the Steam
Contract expires, unless terminated earlier in accordance with the Ground Lease.
The term of the Master Lease will continue until the earlier of (i) the
termination of the Ground Lease, as it may be extended, or (ii) the termination
or expiration of the term of the PILOT Agreement.
Ownership. During the term of the Ground Lease and the Master Lease, the
project will be owned by SIDA. On the termination or expiration of the Master
Lease, Orange L.P. will purchase from SIDA, and SIDA will convey to Orange L.P.,
for a nominal fee of one dollar, SIDA's entire right, title and interest in the
Project and any improvements to the premises. On the expiration or earlier
termination of the Ground Lease, the Project and any improvements to the
premises will become the property of Syracuse University without any further
consideration by Syracuse University.
Maintenance and Repair. The Ground Lease and the Master Lease provide that
Orange L.P., at its sole cost and expense, must maintain and promptly repair the
premises and the project.
Insurance and Indemnification under the Ground Lease. The Ground Lease
contains indemnification provisions and insurance requirements virtually
identical to those set forth in the Steam Plant Operating Agreement.
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Insurance and Indemnification under the Master Lease. The Master Lease
incorporates the indemnification provisions and insurance requirements of the
Ground Lease into the Master Lease. In addition under the Master Lease, Orange
L.P. is required to indemnify and hold SIDA and its members, officers, agents
and employees harmless from all claims arising as a result of SIDA's undertaking
the project, including, liability for loss or damage to property or bodily
injury occasioned by any cause pertaining to the project, liability arising from
or expense incurred by SIDA's owning the Project, all taxes assessed against the
Project and any liability, loss, cost, damage or expense relating to violations
of federal, state or local statutes or regulations relating to hazardous
substances. The indemnification obligations will survive the termination of the
Master Lease and any conveyance of SIDA's interest in the Project to Orange L.P.
Damage, Destruction and Restoration. If all or part of the project is damaged
by fire or other casualty, Orange L.P. must restore the Project to its original
condition, at Orange L.P.'s sole cost, whether or not the insurance proceeds are
sufficient to do so. Insurance proceeds payable with respect to any damage or
destruction will be paid to the holder of a permitted mortgage (as defined
below) to be applied as required in the permitted mortgage and the applicable
Consent and Agreement.
Condemnation. In the event that all or substantially all of the premises is
taken by condemnation, the Ground Lease will be terminated and the net
condemnation proceeds will be distributed:
. first, to Syracuse University, to pay the value of the land taken;
. second, to the holder of any Permitted Mortgage, to pay the unpaid amounts
secured by the permitted mortgage;
. third, to Syracuse University, to pay any subordinated or deferred user
charges under the Steam Plant Operating Agreement; and
. fourth, to Syracuse University and Orange L.P. in proportion to the relevant
values of their interests in the Project and the Steam Plant.
If less than all or substantially all of the premises and the project and the
Steam Plant are taken, the Ground Lease will remain in effect and the net
condemnation proceeds after payment of the value of the land to Syracuse
University will be paid to Orange L.P., and Orange L.P. will restore the project
to the extent reasonably practicable, to its condition prior to the
condemnation. If the net condemnation proceeds exceed the cost of restoration,
the excess shall be distributed as provided above.
Right to Mortgage. The Ground Lease entitles Orange L.P. to mortgage its
leasehold interest in the premises to a lending institution so long as 100% of
the proceeds of the mortgage loan, or 95% of the proceeds of any refinancing of
any such mortgage loan, are designated for use in connection with the
construction, development, improvement, expansion, alteration, maintenance,
repair, replacement or operation of the project or the Steam Plant, or for costs
of the development of the project or the Steam Plant, including the
establishment of appropriate reserves and the payment of other financing costs,
or for the purchase or redemption of any economic interest in the Project. (Any
mortgage meeting this definition is referred to as a permitted mortgage.) A
permitted mortgage must fully amortize prior to the expiration of the Ground
Lease and must expressly recognize the rights of Syracuse University under the
Ground Lease and the Steam Contract. The Ground Lease permits the holder of a
permitted mortgage rights to cure any of Orange L.P.'s defaults prior to its
termination by Syracuse University.
Events of Default; Termination of Ground Lease. The Ground Lease provides
that certain specified events will constitute events of default, including the
following:
. Orange L.P.'s failure to pay rent when due and payable for a period of sixty
days after written notice from Syracuse University;
. Orange L.P.'s failure to observe and perform any of the terms, covenants,
conditions, limitations or agreements with regard to: punctual payment of
taxes and utility charges with respect to the project and the
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premises; compliance with all laws applicable to the project and the premises;
maintenance of required insurance; and Orange L.P.'s entry into a mortgage not
in the form of a permitted mortgage;
. Orange L.P.'s filing for voluntary bankruptcy or being adjudicated bankrupt
and insolvent;
. commencement against Orange L.P. of an action seeking involuntary bankruptcy
or appointment of a trustee without Orange L.P.'s consent or acquiescence;
. Orange L.P.'s abandonment of the Project and the premises;
. a final judgment against Orange L.P. for the payment of money in excess of
$100,000 which remains undischarged for a period of sixty days; and
. the termination of the Steam Contract for any reason other than the default
of Syracuse University.
. On the occurrence any one or more events of default, Syracuse University may
give written notice to Orange L.P. of the default and state that the Ground
Lease will terminate on the date specified in the notice. Under the
University Consent and Agreement, the Collateral Agent will receive notice of
and have an opportunity to cure any default. On termination of the Ground
Lease, Orange L.P. must surrender use and possession of the Project and the
premises to Syracuse University and is liable to Syracuse University for
damages for Orange L.P.'s default.
Termination of Master Lease; Reconveyance of the Project. SIDA may
terminate the Master Lease and reconvey and assign to Orange L.P. SIDA's entire
right, title and interest in the Project as provided in the PILOT Agreement
following the occurrence and continuation of an event of default under the
Ground Lease or the PILOT Agreement. SIDA may also exercise its right to
terminate the Master Lease following events of default or violations of statutes
or regulations relating to hazardous substances with respect to conditions at
the Project. Orange L.P. may exercise its option, in its sole discretion and at
any time, to terminate the Master Lease, by giving notice to SIDA. In the event
that either party terminates the Master Lease, Orange L.P. must make specified
payments, including all unpaid fees and expenses of SIDA incurred under the
Master Lease and mortgages related to the Project and all amounts due and
payable under the PILOT Agreement. On the termination or expiration of the
Master Lease, Orange L.P. must purchase from SIDA and SIDA will convey to Orange
L.P., for a nominal payment of one dollar, SIDA's entire right, title and
interest in the Project.
University Consent and Agreement
Consent to Assignment and Payment; Notices; Amendments. Syracuse University
has consented and agreed to Orange L.P.'s assignment of Orange L.P.'s interests
under the Ground Lease, the Steam Contract, the Steam Plant Operating Agreement
and some other agreements with Syracuse University to the Collateral Agent under
the Security Agreement and other Collateral Documents as security for our
obligations under the notes, the indenture and the other financing documents.
Syracuse University has also agreed that the Collateral Documents constitute a
permitted mortgage for purposes of these Syracuse University agreements.
Syracuse University has agreed to make all payments due to Orange L.P. under
the Syracuse University agreements directly to the Collateral Agent, in
accordance with the Collateral Agent's written instructions. Syracuse University
has also agreed to accept performance of Orange L.P.'s obligations under
Syracuse University agreements by the Collateral Agent, holders of the notes and
the Trustee or their respective designee(s). We refer to these parties
collectively as the Secured Parties .
Syracuse University has further agreed that neither the Collateral Agent nor
the Secured Parties nor any designee will be liable for the performance or
observance of any of Orange L.P.'s obligations or duties nor will any assignment
of Syracuse University agreements to the Collateral Agent, the Secured Parties
or a designee give rise to any duties or obligations; provided that if the
Collateral Agent, the Secured Parties or a designee exercise their rights with
respect to Syracuse University agreements or make any claims with respect to any
payments, deliveries or any obligations under
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Syracuse University agreements, the terms and conditions of Syracuse University
agreements relating to exercise of those rights or claims will apply.
Orange L.P. and Syracuse University have agreed not to amend, terminate,
waive or supplement any Syracuse University agreement without obtaining the
prior written consent of the Secured Parties .
Cure Rights. Syracuse University has agreed that the provisions of the
Steam Contract entitling it to assume operating control of the Project under
specific circumstances will not be construed or enforced so as to limit or
restrict the exercise of any rights or remedies available to the Collateral
Agent or the Secured Parties in their capacities as secured creditors under the
financing documents and the Collateral Documents, including their rights to take
possession of or obtain entry to the Project, to assume and exercise operating
control of the Project, and to foreclose on and sell and transfer Orange L.P.'s
interest in the Project and the Syracuse University agreements. In assuming or
exercising operating control, the Secured Parties and the Collateral Agent will
exclude or prevent Syracuse University from itself assuming or exercising
operating control of the Project. Syracuse University will, however, be entitled
to give written notice to the Collateral Agent of its intent to exercise its
right to terminate the Steam Contract if reimbursed as required within eight
months after the interruption of service. The Collateral Agent and the Secured
Parties must give written notice to Syracuse University of their intent to
exercise their rights and remedies under the Collateral Documents.
Syracuse University has agreed that it will exercise any rights it may have
to assume possession of or to operate the Project in accordance with Syracuse
University agreements and the Niagara Mohawk agreements and will not knowingly
operate the Project so that its net electrical output exceeds 75 MW.
Syracuse University has agreed that it will not terminate any Syracuse
University agreement without providing the Collateral Agent at least 120 days
prior written notice of its intent to terminate the agreement, and the
Collateral Agent or the Secured Parties have not cured the condition giving rise
to the right of termination within this 120 day period.
If possession of or obtaining entry to the Project is necessary to cure a
default or if the default is not susceptible of being cured by the Collateral
Agent or the Secured Parties , then Syracuse University will not be entitled to
terminate any Syracuse University agreement by reason of that default if and for
so long as the Collateral Agent or the Secured Parties diligently proceed to
obtain possession of or entry to the Project and diligently proceed to cure the
default.
The Collateral Agent and the Secured Parties may assign their rights and
interests and Orange L.P.'s rights and interests under the Syracuse University
agreements to any purchaser or transferee of the Project upon notice to Syracuse
University; provided the purchaser or transferee is reputable and solvent and
any assignment and assumption does not by its terms modify the provisions of the
Syracuse University agreements. Foreclosure of any Collateral Document, or any
sale thereunder, whether by judicial proceeding or any power of sale, or any
conveyance from Orange L.P. in lieu thereof, does not require the consent of
Syracuse University or constitute a breach of any Syracuse University agreement.
Insurance, Condemnation and Other Proceeds. Syracuse University has agreed
that the application of insurance and condemnation proceeds, proceeds from
surety bonds and similar obligations and proceeds from contract claims relating
to the Project, and decisions to sue on, compromise, settle or release any of
the foregoing will be made by the Collateral Agent under the Collateral
Documents. In the event of any damage to or destruction of the Project, the
Collateral Agent and the Secured Parties are required to consider in good faith
the application of any insurance proceeds for the rebuilding and reconstruction
as long as (i) no default or event of default is continuing under the indenture
and other financing documents which permits the acceleration of the maturity of
the notes, (ii) the aggregate proceeds and all other funds available for
rebuilding or reconstruction are sufficient to complete the same within a
reasonable time, and (iii) either (x) the conduct of the rebuilding or
reconstruction or the operation of the Project after completion of the
reconstruction are not likely in the reasonable judgment of the Collateral Agent
to give rise to a similar default or event of default or (y) the amount of
insurance proceeds required to effect the rebuilding or reconstruction does not
exceed the greater of (a) 35% of the replacement value of the Project or (b) the
replacement cost of one of the gas turbines in the Project.
Insolvency. In the event that any Syracuse University agreement is rejected
by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding
or terminates prior to the date it would otherwise expire, for any reason other
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than with the consent of the Collateral Agent, within 90 days after the
rejection or termination, the Collateral Agent, the Secured Parties or their
designee(s) may request Syracuse University to execute and deliver a new
Syracuse University agreement, on the same conditions, agreements, terms,
provisions and limitations as the original Syracuse University agreement in
effect on the date of termination.
In the event the Collateral Agent or the Secured Parties elect to perform
Orange L.P.'s obligations under any Syracuse University agreement or to enter
into a new Syracuse University agreement, the sole recourse of Syracuse
University will be to the Secured Parties' interests in the Project and the
Collateral.
Right of First Refusal. If an event of default occurs and is continuing and
the Secured Parties have determined to sell or otherwise dispose of all or any
part of the Collateral, then the Collateral Agent shall give notice to Syracuse
University. Within 45 days after notice from the Collateral Agent, Syracuse
University may offer to purchase and the Collateral Agent may agree to sell at a
price and on terms and conditions mutually acceptable, any or all of the Gas
Purchase Agreement and the other Collateral, instruments and money. Syracuse
University will: (i) purchase the Gas Purchase Agreement or such other
Collateral, "as is", "where is" and pay to the Collateral Agent for the benefit
of the Secured Parties the aggregate purchase price for the Gas Purchase
Agreement or the other Collateral, in cash and (ii) enter into any and all
reasonable documentation required.
Syracuse University has agreed that any lien, charge or encumbrance that it
has on or with respect to the Gas Purchase Agreement under the Syracuse
University agreements will be limited to an amount equal to any then due but
unpaid user charges plus interest and any accrued user charges plus any excess
steam payments plus interest then due and unpaid under the Steam Contract.
SIDA Consent and Agreement
SIDA has agreed to Orange L.P.'s assignment of its interests under the Master
Lease and the Lease Documents under the Security Agreement, the Indenture and
the First Mortgage. SIDA has consented to the First Mortgage and the Collateral
Documents and has agreed that the First Mortgage and other Collateral Documents
will be deemed to constitute a permitted mortgage as defined in the Ground
Lease. SIDA has agreed to several amendments to the Master Lease for the
purposes of the provisions of the Ground Lease that are incorporated by
reference in the Master Lease including the subordination of the Master Lease to
the Ground Lease.
Consent to Assignment and Payment; Amendments. SIDA has agreed to make all
payments due to Orange L.P. under the Lease Documents directly to the Collateral
Agent in accordance with the Collateral Agent's written instructions. SIDA has
agreed to accept performance of Orange L.P.'s obligations under the Lease
Documents by the Collateral Agent, the Secured Parties or their designee(s).
SIDA has agreed that neither the Collateral Agent nor the Secured Parties nor
a designee will be liable for the performance or observance of any of Orange
L.P.'s obligations or duties under the Lease Documents, nor will any assignment
of the Lease Documents to the Collateral Agent, the Secured Parties or a
designee give rise to any duties or obligations; provided that insofar as the
Collateral Agent, the Secured Parties or designee exercise their rights with
respect to the Lease Documents under the First Mortgage or other Collateral
Documents or make any claims with respect to any payments, deliveries or other
obligations under the Lease Documents the terms and conditions of the Lease
Documents relating to the exercise of those rights or claims will apply.
Orange L.P. and SIDA may not amend, surrender, terminate, waive, supplement
or otherwise modify any Lease Document, or consent to an amendment, without
obtaining the prior written consent of the Collateral Agent.
Cure Rights. SIDA has agreed that it will not terminate any lease-related
document to which it is a party unless it has given the Collateral Agent at
least 120 days prior written notice of its intent to terminate the lease
document and the Collateral Agent or the Secured Parties have not cured the
condition giving rise to the right of termination within the 120 days. If a
default under any of these lease documents requires taking possession of or
obtaining entry to the Project, or if the default is not susceptible of being
cured by the Collateral Agent or the Secured Parties , then SIDA will not be
entitled to terminate the lease document by reason of the default if and for so
long as the Collateral Agent or the
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Secured Parties diligently proceed to obtain possession of or entry to the
Project or upon obtaining possession diligently proceed to cure the default, if
the default is susceptible of being cured. Neither the Collateral Agent nor the
Secured Parties will be required to continue to proceed to obtain possession or
entry, or to continue in possession of the Project, if the default is cured.
The Collateral Agent and the Secured Parties may assign their rights and
interests, and, after foreclosure or by assignment in lieu of foreclosure,
Orange L.P.'s rights and interests under these lease documents, to any purchaser
or transferee of the Project, upon notice to SIDA; provided the purchaser or
transferee is reputable and solvent and the assignment and assumption does not
by its terms modify the provisions of these lease documents. Foreclosure of the
First Mortgage or any other Collateral Document, or any sale thereunder by the
Collateral Agent or any Secured Party, whether by judicial proceeding or any
power of sale, or any conveyance by Orange L.P. in lieu thereof, will not
require the consent of SIDA or constitute a breach of any of these lease
document.
If the Collateral Agent or the Secured Parties perform Orange L.P.'s
obligations under any lease document or enter into any new lease document, the
sole recourse of SIDA will be to the Secured Parties ' interests in the Project
and other Collateral.
In addition, SIDA will not exercise any remedy against Orange L.P. as a
secured creditor without providing the Collateral Agent with at least 30 days
prior written notice of its intent to exercise the remedy, nor will SIDA take
any similar action if Orange L.P. or the Collateral Agent provides SIDA with
additional security.
Insolvency. In the event that any lease document is rejected by a trustee
or debtor-in-possession in any bankruptcy or insolvency proceeding or terminates
prior to the date it would otherwise expire for any reason other than with the
consent of the Collateral Agent, within 90 days of the rejection or termination,
the Collateral Agent or the Secured Parties or their designee(s) may request
SIDA to execute and deliver a new lease document, which will contain the same
conditions, agreements, terms, provisions and limitations as the original lease
document as in effect on the date of termination.
Reconveyance Option. SIDA has agreed, and, under the agreements described
below, the City of Syracuse has consented, that in the event SIDA or Orange L.P.
has any right or obligation to convey and assign SIDA's interests in the
Project, a reconveyance option, pursuant to the Master Lease, the PILOT
Agreement or otherwise Orange L.P. and SIDA must obtain the prior written
consent of the Collateral Agent, and provide to the Collateral Agent any
instruments, documents, opinions of counsel and endorsements to the Collateral
Agent's title insurance policy as the Collateral Agent deems necessary. In
addition, SIDA has agreed to (i) grant liens and security interests pursuant to
the First Mortgage and other Collateral Documents to the Collateral Agent before
any reconveyance, if required by the Collateral Agent, at its option. If an
event of default or default under the Indenture is continuing, or if the
Collateral Agent has entered into or is entitled to a new Master Lease or a new
Ground Lease, at the option of the Collateral Agent, SIDA has agreed to reconvey
its interests in the Project under any reconveyance option directly to the
Collateral Agent or its designee(s). The City of Syracuse has consented to the
foregoing agreement by SIDA pursuant to the PILOT Consent and Agreement. In the
event that Orange L.P., acquires any or all of SIDA's interests in the Project
pursuant to the Master Lease or the PILOT Agreement or otherwise, then SIDA's
interests so transferred to Orange L.P., will be deemed to be mortgaged and
granted to the Collateral Agent as mortgagee under the First Mortgage to the
same extent as if originally set forth in the First Mortgage.
Bankruptcy. SIDA has assigned, transferred and set over to the Collateral
Agent SIDA's claims and rights to the payment of damages arising from any
rejection of any lease document by any party to any lease document pursuant to
the Federal bankruptcy code.
SIDA has agreed to obtain the Collateral Agent's prior consent, before
electing to treat any lease document as terminated under Section 365(h)(1) of
the federal bankruptcy code. If SIDA seeks to offset the amount of any damages
caused by the non-performance by any party against the rent or other charges
reserved in any lease document, SIDA will, prior to effecting the offset, notify
the Collateral Agent of its intention to do so, and the Collateral Agent shall
have 30 days after receipt of the notice from SIDA, to reasonably object to all
or any part of the offset and the Collateral Agent will have the right to bring
its objections to the attention of any court supervising the bankruptcy.
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If any action, proceeding, motion or notice is commenced or filed in respect
of the mortgaged property in connection with any case under the federal
bankruptcy code, the Collateral Agent may participate in the litigation. If an
event of default has occurred and is continuing, the Collateral Agent will have
the option of assuming the control of any litigation and SIDA will execute any
and all powers, authorizations, consents and other documents required by the
Collateral Agent. SIDA will, promptly after obtaining knowledge of the default,
notify the Collateral Agent of any and all filings by or against any party under
any lease document of a petition under the federal bankruptcy code.
SIDA has assigned and transferred to the Collateral Agent a non-exclusive
right to apply to the bankruptcy court under Section 365(d)(4) of the bankruptcy
code for an order extending the period during which any lease document may be
rejected or assumed.
Insurance, Condemnation and Other Proceeds. SIDA has agreed that the
application of insurance and condemnation proceeds, proceeds from surety bonds
and similar obligations and proceeds from contract damage claims relating to the
Project, and decisions to sue on, compromise, settle or release any of the
foregoing, other than any unassigned Rights, will be made by the Collateral
Agent pursuant to the Collateral Documents.
Liens. SIDA has agreed it will not assign or transfer, or mortgage, pledge,
grant a security interest in or otherwise encumber, directly or indirectly, by
operation of law or otherwise, its interest in or under any of the lease
documents, without the prior written consent of the Collateral Agent, except
pursuant to a reconveyance option, or a merger, consolidation or transfer of all
or substantially all of its assets with or to another industrial development
agency or similar governmental entity.
PILOT Agreement
Orange L.P. entered into a Payment in Lieu of Tax Agreement dated April 5,
1991, or the PILOT Agreement, with the City of Syracuse and SIDA, under which
Orange L.P. makes payments in lieu of real property taxes to the City of
Syracuse for approximately 20 years with respect to the portion of the Project
lying within the boundaries of the City of Syracuse.
Tax-Exempt Status of the Project. For so long as SIDA retains its interest
in the Project, the portion of the Project lying within the boundaries of the
City of Syracuse shall be assessed by the City of Syracuse as exempt upon its
tax assessment rolls.
Payment In Lieu of Taxes. In consideration of the Master Lease, the PILOT
Agreement requires Orange L.P. to pay to the City of Syracuse an annual payment
in lieu of real property taxes, referred to as the PILOT Amount. The PILOT
Amount fluctuates annually as a function of the change in the tax rate
applicable to the premises each year. The PILOT Amount is further adjusted based
on the electric rates and revenue that the Project generates from electricity
sales. The PILOT Amount is paid quarterly in equal installments. With respect to
each quarterly payment, the excess, if any, of that portion of the PILOT Amount
which is due in respect of that calendar quarter is subordinate to the monthly
debt service due under existing mortgage(s).
Events of Default. Events of default under the PILOT Agreement include:
(1) Orange L.P.'s failure to pay amounts due to the City of Syracuse on
any portion of amounts as required under the PILOT Agreement;
(2) Orange L.P.'s failure to observe and perform any other covenant,
condition or agreement as required under the PILOT Agreement and the
continuance of the failure for 30 days after receipt of written notice
from the City of Syracuse;
(3) any material false representation made by Orange L.P. or any entity on
Orange L.P.'s behalf in the PILOT Agreement;
(4) Orange L.P.'s compulsion to transfer, assign or terminate its
interests in the Project as a consequence of
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any default or event of default on our part under the instruments
governing the notes; and
(5) Orange L.P.'s filing for voluntary bankruptcy, filing of a petition
under any current or future bankruptcy code, statute or law or being
adjudicated bankrupt and insolvent.
Termination. The PILOT Agreement will terminate on the earlier of July 22,
2012, which is the twentieth anniversary of the date of substantial completion
of the Project, or upon termination of the Master Lease. In the event that the
maximum electrical output of the Project exceeds 80 MW, Orange L.P. and SIDA
both will have the right to terminate the PILOT Agreement upon thirty days
notice. The City of Syracuse and SIDA may terminate the PILOT Agreement on the
continuance of an event of default under the PILOT Agreement beyond applicable
notice and cure periods; however, a mortgagee will have a reasonable opportunity
to cure any of Orange L.P.'s defaults, except defaults relating to Orange L.P.'s
bankruptcy or insolvency. In addition, upon the continuance of an event of
default the City of Syracuse or SIDA may compel the reconveyance of the Project
to us, causing a termination of the PILOT Agreement; and upon the continuance of
an event of default relating to our bankruptcy or insolvency, the reconveyance
will be deemed to have occurred automatically. Under the SIDA Consent and
Agreement described above, SIDA has agreed, and the City of Syracuse has
consented that any reconveyance will not occur unless the Collateral Agent
consents to it. Under the PILOT Consent and Agreement described below, in the
event the existing PILOT Agreement is terminated by reason of the continuance of
an event of default relating to Orange L.P.'s bankruptcy or insolvency or
otherwise, other than the expiration of its term, without the consent of the
Secured Parties and Orange L.P., the Collateral Agent will have the right to
obtain a new PILOT Agreement on the same terms and conditions as the existing
PILOT Agreement.
The exercise of the rights of the Collateral Agent to consent to the
reconveyance of the Project or to obtain a new PILOT Agreement following
termination as a result of an event of default would under most circumstances
require that the event of default be cured.
Priority of PILOT Payments. Orange L.P. and the Collateral Agent have
agreed in the SIDA Consent and Agreement that the payments due under the PILOT
Agreement will be treated as being a lien on the Project superior in rank to the
liens under the First Mortgage and other Collateral Documents.
PILOT Consent and Agreement
Consent to Assignment. SIDA and the City of Syracuse have consented and
agreed to Orange L.P.'s assignment of its interests under the PILOT Agreement to
the Collateral Agent pursuant to the First Mortgage, the Security Agreement and
other Collateral Documents as security for our obligations under the notes, the
Indenture and the other financing documents.
Each of the City of Syracuse and SIDA has agreed to amendments to the PILOT
Agreement to ensure the terms and provisions refer to the Indenture and the
Collateral Documents and to extend the cure rights of the Secured Parties.
The City of Syracuse and SIDA have agreed that the Collateral Agent and the
Secured Parties will be entitled to exercise all rights and to cure any defaults
under the PILOT Agreement.
Cure Rights. The City of Syracuse and SIDA have agreed that if an event of
default is curable by the Collateral Agent or the Secured Parties but cannot
reasonably be cured by them within the 30-day period (or 15-day period for some
monetary defaults), the Collateral Agent, the Secured Parties or their
designee(s) will have a period of 120 days from the date of receipt of the
notice of the event of default. If possession of the Project is necessary to
cure the event of default, or if the event of default is not susceptible of
being cured by the Collateral Agent or the Secured Parties, then the City of
Syracuse and SIDA will not be entitled to terminate the PILOT Agreement or
exercise other remedies so long as the Collateral Agent, the Secured Parties or
their designee(s) proceed diligently to obtain possession of or entry to the
Project pursuant to the rights of the Collateral Agent or the Secured Parties
under their mortgage(s) and other security documents, and after obtaining
possession proceed diligently to cure the event of default, if it is susceptible
of being cured.
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Insolvency; Termination. If the PILOT Agreement is terminated by virtue of
Orange L.P.'s bankruptcy or insolvency or otherwise, other than by the
expiration of its term, without the Secured Parties' consent, the City of
Syracuse and SIDA have the obligation to execute and deliver a new payment in
lieu of taxes agreement on the same terms and conditions as the existing PILOT
Agreement. Within 90 days after the Collateral Agent receives notice of the
rejection or termination, the Collateral Agent, the Secured Parties , their
designees, successors or assigns may request the City of Syracuse and SIDA to
execute and deliver a new PILOT Agreement.
Host Community Agreement
Orange L.P. has also entered into a Host Community Agreement dated April 5,
1991 with the City of Syracuse and the Syracuse Housing Authority, a municipal
housing authority formed and operating pursuant to the Public Housing Law of the
State of New York. The Host Community Agreement required us, on the commencement
of construction of the Project, to make an initial payment to the Syracuse
Housing Authority of $100,000. The proceeds of that payment were to be used by
Syracuse Housing Authority to help fund the construction by Syracuse Housing
Authority of a multi-purpose community center in Syracuse. The center was never
constructed. The Host Community Agreement also provides that Orange L.P. must
make annual payments (a) to Syracuse Housing Authority for operation and
maintenance of the center for a period of 40 years and (b) to the City of
Syracuse for its general fund for a period of 20 years. In each case, the
initial annual amount is $10,000, which increases by five percent per year,
compounded yearly over the life of the payment obligation. Orange L.P. has not
been billed for and, accordingly, has not paid the annual payments to the
Syracuse Housing Authority or the City of Syracuse.
Gas Purchase Agreement
Under the Gas Purchase Agreement dated as of March 18, 1991 entered into by
Noranda and Orange L.P., which was assigned by Noranda to, and assumed by,
Canadian Hunter as of December 3, 1999, Orange L.P. purchased 120 million MMBtu
of natural gas for the Project. Orange L.P. did not purchase specific
identifiable reserves. Rather, Orange L.P. acquired the right to obtain
quantities of natural gas from Canadian Hunter as requested, subject to
contractual daily and annual limits. As of September 30, 1999, approximately
70.6 million MMBtu of gas remained available under the Gas Purchase Agreement,
which Orange L.P. expects to be sufficient to meet the fuel requirements of the
Project beyond the term of the notes, assuming heat rates and capacity factors
are consistent with the Project's historical experience.
Purchase of Gas; Quantity. The Gas Purchase Agreement provides that,
subject to its terms and conditions, Canadian Hunter shall make up to 30,000
MMBtu of natural gas per day available for sale and delivery to Orange L.P. at
the point of delivery. The point of delivery is an interconnection between the
pipeline facilities of TransCanada Pipelines and Tennessee Gas Pipeline Company
located near Niagara Falls, New York. In order to meet the obligation under the
Gas Purchase Agreement, Canadian Hunter may, at its option, purchase natural gas
from third parties. Except under specified circumstances, Orange L.P. may not
use in the Project natural gas purchased from any person other than Canadian
Hunter. Those circumstances include failure by Canadian Hunter to deliver the
quantity of natural gas nominated by Orange L.P., the occurrence of a force
majeure event preventing delivery of the natural gas from the point of delivery
to the Project or where the quantity of natural gas required by Orange L.P. for
consumption in the Project for any day exceeds specified amounts.
Payments; Pricing. In accordance with the Gas Purchase Agreement, Orange
L.P. made a lump-sum payment of $88 million to Noranda (Canadian Hunter's
predecessor) on April 30, 1991 to purchase the 120 million MMBtu of natural gas.
In addition to that payment, Orange L.P. is responsible for other payments,
including royalties, production costs and some transportation costs at the point
of delivery. Orange L.P. is also responsible for payments relating to the cost
of natural gas for compressor fuel necessary to transport the natural gas to be
sold and delivered under the Gas Purchase Agreement. Additionally, the Gas
Purchase Agreement provides that Orange L.P. and Canadian Hunter will each pay
half of any tax on the export of gas from Canada or the import of gas into the
United States; provided, however, that Canadian Hunter is responsible for all
sales and use taxes in Canada and Orange L.P. is responsible for all sales and
use taxes in the United States.
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Sales to Third Parties. The Gas Purchase Agreement provides that, subject
to some limitations, Orange L.P. may request and, upon request, Canadian Hunter
will use all reasonable efforts to sell to third parties quantities of natural
gas purchased by Orange L.P. Proceeds from sales to third parties by Canadian
Hunter, net of the sum of (a) 3% of the gross price obtained from the sale plus
(b) the amount of all taxes other than income taxes and transportation costs
paid by Canadian Hunter in connection with the sale, will be paid to Orange L.P.
Under some circumstances and subject to some limitations, Orange L.P. may
arrange for the delivery of purchased natural gas to one or more third parties.
Orange L.P. may also make arrangements with Canadian Hunter to deliver
quantities of purchased natural gas to third parties.
Transportation; Risk of Loss; Indemnification. Under the Gas Purchase
Agreement, Canadian Hunter is required to transport natural gas to the point of
delivery described above. The Gas Purchase Agreement states that title to and
risk of loss of all natural gas, other than compressor fuel, will pass from
Canadian Hunter to Orange L.P. at the point of delivery. Orange L.P. has
responsibility for transportation of the natural gas from the initial point of
delivery and, in connection therewith, entered into the Firm Gas Transportation
Contract and the Interruptible Gas Transportation Contract, as described below.
The Gas Purchase Agreement provides that Canadian Hunter will indemnify Orange
L.P. with respect to all suits, debts, damages, liabilities and expenses arising
out of claims of any or all persons to natural gas sold under the Gas Purchase
Agreement or other charges on gas which attach before title passes to Orange
L.P. Orange L.P. provides identical indemnification to Canadian Hunter with
respect to claims to natural gas sold under the Gas Purchase Agreement or other
charges on such gas which attach after title passes to Orange L.P.
Force Majeure; Failure to Deliver. The Gas Purchase Agreement provides that
the exercise of rights and performance of obligations, other than payment
obligations under the Gas Purchase Agreement, may be suspended due to an event
of force majeure. If Canadian Hunter can deliver required quantities of natural
gas to Orange L.P. from alternate sources, it may not suspend its delivery
obligations due to an event of force majeure. If, as a result of an event of
force majeure, Canadian Hunter fails to deliver natural gas that Orange L.P. has
requested in accordance with the Gas Purchase Agreement, Orange L.P. may obtain
natural gas from substitute suppliers and may be entitled to a refund of a
portion of the lump sum payment made to Canadian Hunter. If Orange L.P. cannot
take delivery of natural gas for periods of 150 days as a result of some events
of force majeure, including laws, regulation or court order (or 60 days for most
other events of force majeure), Orange L.P. may terminate the Gas Purchase
Agreement by delivering a notice of termination to Canadian Hunter in accordance
with the Gas Purchase Agreement. Following such termination of the Gas Purchase
Agreement by Orange L.P., Canadian Hunter is required to repay to Orange L.P.
the portion of the lump-sum payment described above corresponding to the unused
portion of the Maximum Entitlement.
Termination. Orange L.P. and Canadian Hunter also have some rights to
terminate the Gas Purchase Agreement if the other party defaults. The Gas
Purchase Agreement provides that if Canadian Hunter defaults in its obligation
to deliver requested quantities of natural gas, Orange L.P. may obtain
substitute supplies of natural gas and may discontinue some payments due or
chargeable until Canadian Hunter resumes performance thereunder. Following the
default, Canadian Hunter must promptly inform Orange L.P. of the reasons for the
default and the anticipated duration of the period of default and shall take all
steps necessary to resume full performance as soon as possible. Upon receipt of
the notice, Orange L.P. may notify Canadian Hunter of its intention to terminate
the Gas Purchase Agreement; provided, however, that the Gas Purchase Agreement
enables Canadian Hunter to avoid termination by remedying and removing the cause
of default within certain cure periods and indemnifying Orange L.P. for certain
incurred costs. If the Gas Purchase Agreement is terminated, Canadian Hunter
must repay the portion of the lump-sum payment corresponding to the unused
portion of the entitlement of natural gas, plus certain other amounts, including
a lump-sum payment equal to the present value of the excess, if any, of costs to
Orange L.P. to acquire a replacement supply of gas.
In the event that Orange L.P. fails for more than forty-five (45) days after
the due date to make certain payments due to Canadian Hunter, Canadian Hunter
may reduce the unconsumed portion of Orange L.P.'s entitlement of natural gas in
accordance with the Gas Purchase Agreement. Unless and until the unconsumed
portion of its entitlement of natural gas is reduced to zero, Canadian Hunter
may not suspend or interrupt deliveries of natural gas to Orange L.P. under the
Gas Purchase Agreement on account of Orange L.P.'s failure to make one of these
payments. If the unconsumed entitlement is reduced to zero because of the
reductions, Canadian Hunter may immediately suspend deliveries to Orange L.P. of
natural gas and may notify Orange L.P. of its intention to terminate the Gas
Purchase Agreement. If, within 90 days of receipt of the notice, Orange L.P. has
remedied its particular failure to make a payment and has reimbursed Canadian
Hunter for all other monies due under the Gas Purchase Agreement, the
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reduction in the unconsumed entitlement in respect of the particular failure
will be reversed and deemed not to have been made, the unconsumed entitlement
will be reinstated to that extent and the Gas Purchase Agreement will remain in
full force and effect.
Term. Subject to earlier termination in accordance with the terms thereof,
the Gas Purchase Agreement has a stated term of twenty (20) years from June
1992, the date of the initial delivery of natural gas thereunder. At the end of
such 20-year period, whether or not Orange L.P. has by actual sales and
deliveries and otherwise used its entire entitlement of natural gas (including
by way of sales to third parties), Orange L.P. will be deemed irrebuttably and
irrevocably to have forfeited all right and entitlement to such amounts of
natural gas.
Assignment of Obligations to Union Pacific Resources. Orange L.P., Canadian
Hunter and Union Pacific Resources agreed to replace the Gas Purchase Agreement
with two agreements, one between Canadian Hunter and Orange L.P., which we refer
to as the Canadian Hunter Supply Agreement, and the other between Union Pacific
Resources and Orange L.P., which we refer to as the Union Pacific Resources
Supply Agreement, effective as of January 1, 2000, subject to compliance with
the conditions below. Canadian Hunter will not have any liability under the
Union Pacific Resources Supply Agreement and Union Pacific Resources will not
have any liability under the Canadian Hunter Supply Agreement. The terms of the
Canadian Hunter Supply Agreement will, except to the extent required to reflect
the status of Canadian Hunter or Union Pacific Resources, as the case may be, as
obligor thereunder, be identical to the Gas Purchase Agreement, except that:
(1) the maximum daily quantity, unconsumed entitlement, maximum entitlement
and other quantities of natural gas to be supplied by Canadian Hunter and
purchased by Orange L.P. shall be 58.333% of the quantities set forth in
or determined pursuant to the Gas Purchase Agreement;
(2) there shall be no further deferral of payments as contemplated in Section
3.7 of the Gas Purchase Agreement; and
(3) the Canadian Hunter Supply Agreement shall be governed by the laws of the
Province of Alberta, Canada.
The terms of the Union Pacific Resources Supply Agreement will be identical
to the Canadian Hunter Supply Agreement, except that:
(1) the maximum daily quantity, unconsumed entitlement, maximum entitlement
and other quantities of natural gas to be supplied by Union Pacific
Resources and purchased by Orange L.P. shall be 41.667% of those
quantities set forth in the same clauses of the Gas Purchase Agreement;
and
(2) Canadian Hunter, as Union Pacific Resources' agent, will administer
nominations and transportation services applicable to supplies of natural
gas purchased by Orange L.P. from Union Pacific Resources, and accounting
and payments due from Orange L.P. to Union Pacific Resources.
Orange L.P., Canadian Hunter and Union Pacific Resources have agreed that the
unconsumed entitlement under the Gas Purchase Agreement was 70,236,028 MMBtu as
at October 1, 1999 and that if the Canadian Hunter Supply Agreement and Union
Pacific Resources Supply Agreement had been in force on that date, the
unconsumed entitlements thereunder would have been 40,970,782 MMBtu and
29,265,246 MMBtu, respectively.
Orange L.P., Canadian Hunter and Union Pacific Resources have also agreed
that it is their mutual intent that upon the effectiveness of the Canadian
Hunter Supply Agreement and the Union Pacific Resources Supply Agreement in
replacement of the Gas Purchase Agreement, Orange L.P. will be in the same
position, economic and otherwise, as it was in under the Gas Purchase Agreement
as in effect on the date of the offering of the original unregistered notes,
except that Union Pacific Resources and Canadian Hunter will have separate, and
not joint and several, liability. In addition, Orange L.P., Canadian Hunter and
Union Pacific Resources have agreed to cooperate fully to incorporate any other
changes to the Gas Purchase Agreement that they mutually determine to be
necessary and appropriate to realize this intent. On the date of this prospectus
Orange L.P., Canadian Hunter and Union Pacific Resources are in the process of
finalizing the split and Orange L.P. anticipates that the Canadian Hunter Supply
Agreement and the Union Pacific Resources Supply Agreement will be in effect by
February 28, 2000.
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To be sure that the two new gas supply agreements are enforceable and subject
to the security interests of the Collateral Agent, the following additional
actions shall be taken and documents will be delivered as conditions precedent
to the effectiveness of the Canadian Hunter Supply Agreement and the Union
Pacific Resources Supply Agreement:
(1) A consent and agreement from Union Pacific Resources in favor of the
Collateral Agent substantially in the form executed by Canadian Hunter in
connection with the closing of the offering of the original unregistered
notes, modified as appropriate for Union Pacific Resources;
(2) An opinion of Alberta counsel to Union Pacific Resources in customary
form as to the enforceability of the Union Pacific Resources Supply
Agreement against Union Pacific Resources and other customary matters,
addressed to said lenders;
(3) A revised consent and agreement from Canadian Hunter in favor of the
lenders, bringing forward the consent and agreement of Canadian Hunter;
(4) An updated opinion from Alberta counsel to Canadian Hunter, bringing
forward the opinion of Canadian Hunter's counsel;
(5) Orange L.P. shall have received evidence reasonably satisfactory to it
that firm gas transportation arrangements with TransCanada Pipelines
Limited shall be in place with respect to all deliveries to be made under
the Canadian Hunter Supply Agreement and the Union Pacific Resources
Supply Agreement at no additional cost to Orange L.P. over and above
Orange L.P.'s existing costs for such arrangement under the Gas Purchase
Agreement; and
(6) Orange L.P. shall submit to the U.S. Department of Energy an application
seeking an expedited approval of an amendment to Orange L.P.'s
authorization for the importation of natural gas, and shall have received
a binding order from the Department of Energy to such effect.
Canadian Hunter Consent and Agreement
Canadian Hunter has consented and agreed to Orange L.P.'s assignment of its
interest under the Gas Purchase Agreement to the Collateral Agent pursuant to
the Security Agreement and the other Collateral Documents as security for our
obligation under the notes, the Indenture and the other financing documents.
Union Pacific Resources will enter into a Consent Agreement substantially
similar to the Canadian Hunter Consent and Agreement.
Consent to Assignment and Payment; Notices; Amendments. Canadian Hunter has
agreed that the Collateral Agent will be entitled to exercise all rights and to
cure any of Orange L.P.'s defaults under the Gas Purchase Agreement and it will
accept the Collateral Agent's performance of Orange L.P.'s obligations under the
Gas Purchase Agreement upon receipt of written notice from the Collateral Agent.
Canadian Hunter has agreed to make all payments (if any) to be made by it under
the Gas Purchase Agreement directly to the Collateral Agent in accordance with
the Collateral Agent's written instructions.
Canadian Hunter has agreed it will not, without the prior written consent of
the Collateral Agent,
(1) cancel or terminate the Gas Purchase Agreement except as provided
therein nor consent to or accept any cancellation or termination thereof
by Orange L.P.,
(2) sell, assign or otherwise dispose (by operation of law or otherwise) of
any part of its interest in the Gas Purchase Agreement, or
(3) amend or modify the Gas Purchase Agreement in any material respect.
Canadian Hunter has also agreed to notify the Collateral Agent of each single
reduction of the unconsumed entitlement if the particular single reduction
exceeds 2 million MMBtu and of any such single reduction of the unconsumed
entitlement if the particular reduction, together with all previous reductions
aggregates more than 2 million MMBtu. Canadian Hunter's rights to suspend
deliveries of natural gas
(1) during any period when it is permitted to do so under the Gas Purchase
Agreement or
(2) if the unconsumed entitlement is reduced to zero, have not been affected
by Canadian Hunter's Consent and Agreement.
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Cure Rights. Canadian Hunter's rights to terminate the Gas Purchase
Agreement on account of any default or breach by Orange L.P. will not be
effective until
(1) if the default is the failure to pay money to Canadian Hunter under the
Contract, thirty (30) days from the date on which the default notice is
delivered to the Collateral Agent, or
(2) if the breach or default cannot be cured by the payment of money to
Canadian Hunter, after a reasonable period of time as is necessary to
cure the default, so long as the Collateral Agent has commenced to cure
the default within thirty (30) days from the date on which the default
notice is delivered to the Collateral Agent.
If possession of the Project is necessary to cure the breach or default, and the
Collateral Agent has commenced foreclosure proceedings, the Collateral Agent
will be allowed a reasonable time to complete such proceedings. Canadian Hunter
has consented to the transfer of Orange L.P.'s interest under the Gas Purchase
Agreement to the Collateral Agent, or a purchaser or grantee at a foreclosure
sale by judicial or non-judicial foreclosure and sale or by a conveyance by
Orange L.P. in lieu of foreclosure, and has agreed that upon such foreclosure,
sale or conveyance, it will recognize the Collateral Agent, or such other
purchaser or grantee, as the buyer under the Gas Purchase Agreement; provided
that the Collateral Agent, or any purchaser or grantee,
(1) has stockholders' equity of not less than U.S. $150 million,
(2) assumes and agrees to perform all of Orange L.P.'s obligations under the
Gas Purchase Agreement and
(3) is the owner of the Project.
Insolvency. If the Gas Purchase Agreement is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding, or terminated
for any reason other than a default which could have been but was not cured by
the Collateral Agent, the Collateral Agent may within 45 days of the rejection
or termination, request Canadian Hunter to execute and deliver a new agreement
on the same terms and conditions as the original Gas Purchase Agreement as in
effect on the date of termination.
If the Collateral Agent or its designee or assignee elects to perform Orange
L.P.'s obligations under the Gas Purchase Agreement or to enter into a new
agreement the sole recourse of Canadian Hunter in seeking the enforcement of
such obligations will only extend to such parties' interest in the Project.
Natural Gas Transportation Contracts
TransCanada Pipelines Firm Service Contract
Canadian Hunter and TransCanada Pipelines Limited, or TransCanada Pipelines,
entered into a Firm Service Contract dated as of October 11, 1990, which we
refer to as the TransCanada Pipelines Firm Service Contract, pursuant to which
TransCanada Pipelines provides transportation of natural gas from Alberta to an
interconnection point on the pipeline facilities of TransCanada Pipelines and
Tennessee Gas Pipeline Company.
Transportation. Subject to the provisions of the TransCanada Pipelines Firm
Service Contract and TransCanada Pipelines' gas transportation tariff,
TransCanada Pipelines provides firm transportation service for Canadian Hunter
in respect of a volume of natural gas which, in any one day, shall not exceed
566.66 thousand cubic meters.
Term. The TransCanada Pipelines Firm Service Contract has a stated term
which continues until October 31, 2005.
Collateral Assignment of TransCanada Pipelines Firm Service Contract.
Pursuant to a Collateral Assignment of the Firm Service Agreement dated as of
April 5, 1991, or Collateral Assignment of Firm Service Contract, Canadian
Hunter assigned its rights under the TransCanada Pipelines Firm Service Contract
to Orange L.P. The assignment was not an absolute assignment, but was made as
collateral security for the payment and performance of some obligations under
the Gas Purchase Agreement. Pursuant to the Collateral Assignment of Firm
Service Contract, Canadian Hunter and Orange L.P. agreed that Orange L.P. may at
its election and upon prior written notice to TransCanada Pipelines and Canadian
Hunter Exploration
(1) at any time after the termination of the Gas Purchase Agreement by Orange
L.P. pursuant to the Gas Purchase Agreement, exercise any and all rights
of Canadian Hunter under the TransCanada Pipelines Firm Service Contract
in accordance with its terms, or assign any and all such rights to any
person or entity to the extent permitted thereunder, and
(2) at any time after the occurrence of a default under the Gas Purchase
Agreement such that Orange L.P. is obtaining substitute supplies,
exercise any and all rights of Canadian Hunter under the TransCanada
Pipelines Firm Service Contract in accordance with its terms and, to the
same extent as if it were a party in the place of Canadian Hunter, for so
long as Orange L.P. is obtaining substitute supplies in respect of the
particular default.
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TransCanada Pipelines Consent and Agreement
Consent to Assignments and Payment; Notices; Amendments. TransCanada
Pipelines and Canadian Hunter have consented and agreed to Orange L.P.'s
assignment of its interests under the TransCanada Pipelines Firm Service
Contract to the Collateral Agent pursuant to the Security Agreement and other
Collateral Documents as security for our obligations under the notes, the
Indenture and the other financing documents.
Canadian Hunter and TransCanada Pipelines Limited have agreed that, upon
receipt of a written notice thereof, Orange L.P. or the Collateral Agent, may at
their election,
(1) at any time after the termination of the Gas Purchase Agreement,
exercise any and all rights of Canadian Hunter under the TransCanada
Pipelines Firm Service Contract in accordance with its terms, or assign
any and all such rights to any person or entity to the extent permitted
thereunder, and
(2) at any time after the occurrence of a default by Canadian Hunter under
the Gas Purchase Agreement such that Orange L.P. is obtaining substitute
supplies of natural gas, Orange L.P. or the Collateral Agent may exercise
Canadian Hunter's rights under the TransCanada Pipelines Firm Service
Contract in accordance with its terms and, to the same extent as if it
were a party in the place of Canadian Hunter, for so long as Orange L.P.
is obtaining substitute supplies in respect of the particular default.
In exercising Canadian Hunter's rights, Orange L.P. and the Collateral Agent
must satisfy certain financial assurance requirements and supply TransCanada
Pipelines with any information reasonably requested by it, including evidence
that Orange L.P. or the Collateral Agent have obtained necessary certificates,
permits, orders, licenses and authorizations from regulators or other
governmental agencies. Any assignment or re-assignment of the rights under the
TransCanada Pipelines Firm Service Contract including to Canadian Hunter under
the Collateral Assignment to Firm Service Contract will be subject to the prior
written consent of TransCanada Pipelines, and must satisfy certain pre-
conditions required by TransCanada Pipelines.
Canadian Hunter has agreed that TransCanada Pipelines may act in accordance
with the exercise of its rights by Orange L.P., the Collateral Agent, or any
assignee, and that TransCanada Pipelines will not be liable to Canadian Hunter
in connection therewith. The ability of Orange L.P. or the Collateral Agent to
exercise the rights or make an assignment are subject to some restrictions
contained in the Collateral Assignment of the Firm Service Contract. Any notice
to TransCanada Pipelines from the Collateral Agent, or an assignee thereof, will
be given priority by TransCanada Pipelines over any notice from Orange L.P., or
an assignee thereof, and Orange L.P. may exercise Canadian Hunter's rights only
for so long as TransCanada Pipelines has not received notice that the Collateral
Agent intends to exercise Canadian Hunter's rights.
TransCanada Pipelines has acknowledged that Canadian Hunter must obtain the
consent of Orange L.P. and the Collateral Agent for any amendment to the
TransCanada Pipelines Firm Service Contract, provided that Canadian Hunter must
ensure compliance with its agreement with Orange L.P. and the Collateral Agent,
that neither agreement shall prevent TransCanada Pipelines from proposing or
making any modification or amendment to TransCanada Pipelines' gas
transportation tariff and that neither agreement shall prevent TransCanada
Pipelines from making any modification or amendment of the TransCanada Pipelines
Firm Service Contract necessary to conform with the requirements of any
governmental or regulatory authority.
Cure Rights. TransCanada Pipelines will deliver to Orange L.P. and the
Collateral Agent a notice of any default or breach by Canadian Hunter under the
TransCanada Pipelines Firm Service Contract concurrently with the delivery of
any such notice to Canadian Hunter. Orange L.P. and the Collateral Agent will be
given the same time period allowed to Canadian Hunter to cure such default or
breach.
Firm Gas Transportation Contract
Orange L.P. has entered into the Firm Gas Transportation Contract with
Tennessee Gas Pipeline Company dated March 29, 1991, under which Tennessee Gas
Pipeline Company provides firm natural gas transportation service for the
natural gas purchased by Orange L.P. under the Gas Purchase Agreement.
Delivery and Receipt of Gas. The Firm Gas Transportation Contract provides
that Orange L.P. will cause delivery of natural gas to Tennessee Gas Pipeline
Company at a point of interconnection between Tennessee Gas Pipeline Company and
the facilities of TransCanada Pipelines at the point of receipt at the Niagara
River near Lewiston, New York, which point of receipt is the same as the point
of delivery under the Gas Purchase Agreement. Tennessee
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Gas Pipeline Company shall cause the delivery of natural gas to Orange L.P. at a
delivery point constructed and operated by Tennessee Gas Pipeline Company
located on Tennessee Gas Pipeline Company's main line near Syracuse, New York.
The quality specifications and standards for measurement for all gas received,
transported and delivered under the Firm Gas Transportation Contract are based
on Tennessee Gas Pipeline Company's FERC Gas Tariff.
Compensation; Ownership. Compensation for Tennessee Gas Pipeline Company's
transportation services is based on a rate schedule approved by FERC. Tennessee
Gas Pipeline Company reserves the right to make changes in the rate schedule
pursuant to the Firm Gas Transportation Contract, subject to FERC review and
adjustment. As set forth in the Firm Gas Transportation Contract, from the time
gas is caused to be delivered to Orange L.P. by Tennessee Gas Pipeline Company
at the point of receipt and prior to delivery of such gas at the point of
delivery, Tennessee Gas Pipeline Company has the unqualified right to commingle
such gas with other gas in its pipeline system and shall have the unqualified
right to treat such gas as its own.
Term; Termination. The stated 20-year term of the Firm Gas Transportation
Contract has 12.3 years remaining. Following the stated expiration date, the
Firm Gas Transportation Contract will continue from year to year thereafter,
provided that either Orange L.P. or Tennessee Gas Pipeline Company may elect to
terminate the Firm Gas Transportation Contract as of the end of the stated term
or any extended annual period by giving 12 months' prior written notice.
Tennessee Gas Pipeline Company's provision of transportation under the Firm Gas
Transportation Contract is subject to termination on 30 days' written notice at
the option and sole discretion of either Tennessee Gas Pipeline Company or
Orange L.P.
Interruptible Gas Transportation Contract
Orange L.P. also has entered into an Interruptible Gas Transportation
Contract with Tennessee Gas Pipeline Company dated as of November 11, 1999,
which replaces the original such agreement dated as of June 26, 1992, under
which Tennessee Gas Pipeline Company agrees to provide transportation, on an
interruptible basis, for up to 5,000 dekatherms of natural gas daily received at
the point of receipt, or interim points, and delivered to the point of delivery,
or interim points.
Transportation Rates. Under the Interruptible Gas Transportation Contract,
the compensation that Orange L.P. pays to Tennessee Gas Pipeline Company for
transportation services is in accordance with Tennessee Gas Pipeline Company's
Rate Schedule IT filed with FERC and the General Terms and Conditions of
Tennessee Gas Pipeline Company's FERC Gas Tariff.
Term. Tennessee Gas Pipeline Company's provision of transportation under
the Interruptible Gas Transportation Contract is subject to termination on 30
days' written notice at the option and sole discretion of either Tennessee Gas
Pipeline Company or Orange L.P. In addition, the Interruptible Gas
Transportation Contract will terminate automatically if Orange L.P. fails to pay
all of the amount of any bill for service rendered by Tennessee Gas Pipeline
Company thereunder when that amount is due, provided that Tennessee Gas Pipeline
Company gave notice to FERC and Orange L.P. prior to any such termination.
Tennessee Gas Pipeline Company Letter of Credit
Orange L.P. has entered into a Letter of Credit Drawing Agreement with
Tennessee Gas Pipeline Company dated as of March 29, 1991, under which Orange
L.P. agreed to provide an irrevocable letter of credit in favor of Tennessee Gas
Pipeline Company, from which Tennessee Gas Pipeline Company could make drawings
in the event that Orange L.P. failed to pay specified charges due and payable
under the Firm Gas Transportation Contract. Orange L.P. amended the Letter of
Credit Drawing Agreement on June 26, 1992 to permit drawings under the letter of
credit to pay charges that are due and payable under the Interruptible Gas
Transportation Agreement.
Pursuant to a Pledge and Security Agreement made by Orange L.P. to Citibank,
N.A. dated August 6, 1998, or the Citibank Pledge Agreement, Citibank has
provided an irrevocable letter of credit for the benefit of Tennessee Gas
Pipeline Company in the stated amount of $700,000. Orange L.P. deposited in a
special cash collateral account held by Citibank an amount equal to $700,000,
which amount is pledged and assigned to Citibank under the Citibank Pledge
Agreement to provide collateral for Citibank's letter of credit.
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Tennessee Gas Pipeline Company Consent and Agreement
Consent to Assignment and Payment; Notices; Amendments. Tennessee Gas
Pipeline Company has consented and agreed to Orange L.P.'s assignment of its
interests under the Tennessee Gas Pipeline Company natural gas transportation
contracts to the Collateral Agent pursuant to the Security Agreement and the
other Collateral Documents as security for our obligations under the notes, the
Indenture and the other financing documents.
Tennessee Gas Pipeline Company has agreed that the Collateral Agent will be
entitled to exercise all of Orange L.P.'s rights and to cure any of Orange
L.P.'s defaults under the natural gas transportation contracts and, it will
accept the Collateral Agent's performance of Orange L.P.'s obligations under the
natural gas transportation contracts upon receipt of written notice from the
Collateral Agent. Tennessee Gas Pipeline Company has agreed to make all payments
(if any) to be made by it under the natural gas transportation contracts
directly to the Collateral Agent in accordance with the Collateral Agent's
written instructions.
Tennessee Gas Pipeline Company will not, without using reasonable efforts to
obtain the prior written consent of the Collateral Agent,
(1) cancel or terminate any of the natural gas transportation contracts
except as provided therein, nor consent to or accept any cancellation or
termination thereof by Orange L.P.,
(2) sell, assign or otherwise dispose (by operation of law or otherwise) of
any part of its interest in the Tennessee Gas Pipeline Company agreements
except as provided therein or
(3) amend or modify the natural gas transportation contracts in any material
respect; provided that Tennessee Gas Pipeline Company may make any
modification or amendment to its gas tariff or the rates or charges
payable to Tennessee Gas Pipeline Company pursuant to such tariff or any
modification or amendment of the Tennessee Gas Pipeline Company
agreements necessary to conform with the requirements of any governmental
or regulatory authority.
Cure Rights. Tennessee Gas Pipeline Company will not terminate any of the
natural gas transportation contracts on account of any default or breach by us
thereunder without providing to the Collateral Agent
(1) if such default is the failure to pay amounts due and payable to
Tennessee Gas Pipeline Company, within 30 days from the date on which
written notice of default or breach is delivered to the Collateral Agent
or
(2) if such breach or default cannot be cured by the payment of money to
Tennessee Gas Pipeline Company, a reasonable time of not less than 90
days, necessary to cure such default, so long as the Collateral Agent or
its designee has commenced to cure the breach or default within 90 days
of receipt of the default notice.
If possession of the Project is necessary to cure a breach or default, and
the Collateral Agent has commenced foreclosure proceedings, the Collateral Agent
will be allowed a reasonable period to complete such proceedings. Tennessee Gas
Pipeline Company has consented to the transfer of Orange L.P.'s interest under
the natural gas transportation contracts to the Collateral Agent, or a purchaser
or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale
or by a conveyance by Orange L.P. in lieu of foreclosure and has agreed that
upon such foreclosure, sale or conveyance, it will recognize the Collateral
Agent or other purchaser or grantee as the buyer under the natural gas
transportation contracts.
Insolvency. If any of the natural gas transportation contracts is terminated
by virtue of being rejected by a trustee or debtor-in-possession in any
bankruptcy or insolvency proceeding and within 45 days of such rejection or
termination, the Collateral Agent or its successors or assigns may request
Tennessee Gas Pipeline Company to execute and deliver to the Collateral Agent
new agreements, which shall be on the same terms and conditions as the original
natural gas transportation contracts as in effect on the date of termination.
The Collateral Agent may assign all or part of its interest in the natural
gas transportation contracts to a person or entity to whom the Project is
transferred, provided the transferee assumes Orange L.P.'s obligations, or the
Collateral Agent, under the natural gas transportation contracts, including the
obligation to provide security as described in the Letter of Credit Drawing
Agreement, and has a financial capability at least equivalent to Orange L.P.'s
on the date of the offering of the old notes. In the event the Collateral Agent
or its designee or assignee elect to perform Orange L.P.'s obligations under the
natural gas transportation contracts or to enter into new contracts its sole
recourse in seeking the enforcement of such obligations shall be limited to such
parties' interest in the Project; provided, that any successors to Orange L.P.'s
interest under the natural gas transportation contracts or any new agreements
entered into, agree that the obligation to provide security under the Letter of
Credit Drawing Agreement shall remain in full force and effect.
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Operation and Maintenance Agreement
Orange L.P. has entered into the Operation and Maintenance Agreement with GE
International (as successor to GE Energy Plant Operations) dated as of November
1, 1998, under which GE International operates, maintains and repairs the
Facility. As used in the Operation and Maintenance Agreement, the term
"Facility" includes in substantial part, the Project, the Steam Plant, the
Project's natural gas pipeline, the premises and certain rights of way on land
across and through which this pipeline passes. Prior to the Operation and
Maintenance Agreement, GE Energy Plant Operations operated, maintained and
repaired the Project as assignee of Stewart & Stevenson Operations, Inc.
pursuant to a prior operation and maintenance agreement following the
acquisition by General Electric Company of the gas turbine division of Stewart &
Stevenson Services, Inc.
Operation and Routine Maintenance. Pursuant to the Operation and
Maintenance Agreement, GE International continuously operates the Facility and
performs all routine maintenance on a 24 hours/day, 7 days/week, 365 days/year
basis in accordance with instructions from Orange L.P.
Compensation. As provided in the Operation and Maintenance Agreement, in
consideration for performance by GE International of its obligations, Orange
L.P. pays GE International certain expenses and fees, including reimbursable
expenses, a fired-hour fee, a spare parts fee and an operating fee. The
reimbursable expenses, include among other things,
. all wages and salaries paid directly by GE International to its employees for
operating the Facility,
. training expenses,
. relocation expenses for relocation of employees to Syracuse, New York,
. direct costs and expenses incurred by GE International for the services of
subcontractors and consultants,
. all taxes (other than GE International's franchise taxes, state, local or
federal income taxes or any other taxes measured by GE International's
income) incurred by GE International under the Operation and Maintenance
Agreement and
. a fixed annual handling fee of $50,000 in consideration for labor and
services incurred by GE International in connection with its purchase of
parts and tools for the Facility.
Subject to some adjustments described in the Operation and Maintenance
Agreement, the fired-hour fee is an amount equal to the product of $88 and the
number of hours each gas turbine in the Project is operating. The spare parts
fee is an annual fee of $50,000 in consideration of GE International's
purchasing, delivering and maintaining the inventory of spare parts for the
Facility. The operating fee is an annual fee of $350,000 for operation and
maintenance of the Facility. As provided in the Operation and Maintenance
Agreement, each of the operation fee, fired-hour fee, handling fee, and spare
parts fee are subject to escalation based on increases in the consumer price
index.
GE Lease Engine Program. Orange L.P has entered into a LM-5000 Engine Lease
Agreement with GE Industrial. Under the Engine Lease Agreement, for a stated
term that will extend beyond the maturity of the notes, GE Industrial will
deliver an operable leased LM-5000 gas generator to the Project and qualified
technical direction for its installation and removal within 72 hours of
notification of a need for such unit from Orange L.P. If GE Industrial fails to
deliver a leased generator within such time frame, GE Industrial will, as Orange
L.P.'s sole and exclusive remedy therefor, be liable for significant hourly and
daily late delivery penalties, subject to a specified maximum liability per
occurrence. The Engine Lease Agreement provides that Orange L.P. will pay GE
Industrial an annual fee plus certain weekly use rate fees which are incurred
during any period after a lease unit is delivered to the Project.
Either party may terminate the Engine Lease Agreement if the other party has
committed a material breach thereof and the breach has not been remedied within
10 days of written notice of such breach. For purposes of the Lease Engine
Agreement, failure of Orange L.P. to make timely annual payment of the annual
fee and/or payment for the usage of a leased generator shall constitute a
material breach. Orange L.P. may cancel the Engine Lease Agreement at any time,
but will be liable, in addition to any then outstanding and unpaid amounts, for
payment of a portion of the unpaid annual
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fee for all remaining years in the stated term of the Engine Lease Agreement.
Finally, the parties may cancel the Engine Lease Agreement by mutual written
agreement without penalty to either party.
Term. The stated term of the Operation and Maintenance Agreement continues
until April 1, 2008, unless such date is either extended or the Operation and
Maintenance Agreement is terminated prior to such date. Orange L.P. may extend
the Operation and Maintenance Agreement for up to eight (8) additional years by
providing notice of such extension to GE International at any time prior to
January 1, 2008. At the end of the term of the Operation and Maintenance
Agreement, GE International is required to leave the Facility, or cause the
Facility to be left, in the same condition as on July 1, 1992, normal wear and
tear and any other degradation for which GE International is not responsible
excepted.
Events of Default; Termination. The Operation and Maintenance Agreement
provides that GE International may, by written notice to Orange L.P., terminate
the Operation and Maintenance Agreement immediately because of some events of
default by Orange L.P. These events of default include, among others,
(1) Orange L.P.'s failure to pay any amounts due to GE International or
perform any of its material obligations under the Operation and
Maintenance Agreement, which failure continues for 30 days after notice
from GE International of such failure, and
(2) bankruptcy or insolvency of Orange L.P.
The Operation and Maintenance Agreement also grants termination rights to
Orange L.P. if GE International defaults and fails to cure the default within
the applicable cure period. Events of default include, among others,
. failure by GE International to pay any amount due to Orange L.P. for 30 days
after notice from Orange L.P. of the failure,
. bankruptcy or insolvency of GE International,
. GE International's failure to deliver steam from the Facility in accordance
with the Steam Agreement for a period of 10 consecutive days or a total of 30
days in any operating year,
. GE International's taking any action or failing to take any reasonable action
which has a material adverse effect on the status of the Facility as a
qualifying facility and
. GE International taking any action or failing to take any reasonable action
which results in the breach of any significant Project contracts.
In addition to the foregoing termination rights, the Operation and
Maintenance Agreement provides that Orange L.P. may terminate the Operation and
Maintenance Agreement at any time in its sole discretion, without cause,
provided that Orange L.P. pays to GE International a termination fee.
Force Majeure. In the event that a force majeure results in the total
interruption of operation of the Project, the reduction of electric output of
the Project by 20 MW or more, or an increase in the heat rate of the Project by
25% or more, in any case for a period of 180 days or more, in accordance with
the Operation and Maintenance Agreement, then Orange L.P. may, with written
notice to GE International, suspend operation of the Facility and suspend
performance by both parties for the duration of such force majeure, during which
suspension, GE International shall have no continuing obligations with respect
to the Facility and Orange L.P. shall have no obligation to make payments or
carry out any other obligation to GE International.
GE International Consent and Agreement
Consent to Assignment and Payment; Notices; Amendments. GE International
has consented and agreed to Orange L.P.'s assignment of its interest under the
Operation and Maintenance Agreement to the Collateral Agent pursuant to the
Security Agreement and other Collateral Documents as security for our
obligations under the notes, the Indenture and the other financing documents.
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GE International has agreed that the Collateral Agent will be entitled to
exercise all rights and to cure any defaults by Orange L.P. under the Operation
and Maintenance Agreement. GE International has agreed to accept the Collateral
Agent's performance of our obligations under the Operation and Maintenance
Agreement upon receipt of a written notice from the Collateral Agent. GE
International has agreed to make all payments and in accordance with (if any) to
be made by it under the Operation and Maintenance Agreement directly to the
Collateral Agent upon receipt of the Collateral Agent's written instructions.
GE International will not, without the prior written consent of the
Collateral Agent,
. cancel or terminate the Operation and Maintenance Agreement except as
provided therein or consent to or accept any cancellation or termination
thereof by Orange L.P.,
. sell, assign or otherwise dispose (by operation of law or otherwise) of any
part of its interest in the Operation and Maintenance Agreement, or
. amend or modify the Operation and Maintenance Agreement in any material
respect.
GE International has waived its rights
. to terminate the Operation and Maintenance Agreement,
. to any equitable adjustment in the operating fee, fired-hour fee, per-hour
fee, or spare parts fee and to any other fee under the Operation and
Maintenance Agreement, and
. to any rights to reduce, extend the time for, or suspend its performance
thereunder, resulting from Orange L.P.'s failure to meet any of Orange L.P.'s
obligations under the Operation and Maintenance Agreement due as of the
closing date.
Cure Rights. GE International will not terminate the Operation and
Maintenance Agreement on account of any default or breach thereunder without
providing the Collateral Agent with
(1) if such default is the failure to pay amounts due and payable to GE
International, 45 days from the date on which written notice of default
or breach is received by the Collateral Agent to cure such default or
(2) if the breach or default cannot be cured by the payment of money to GE
International, a reasonable time necessary to cure such default, provided
the Collateral Agent has commenced to cure the default within 90 days of
receipt of the default notice and thereafter diligently pursues such cure
to completion and continues to perform any monetary obligations under the
Operation and Maintenance Agreement.
If possession of the Project is necessary to cure a breach or default, and the
Collateral Agent commenced foreclosure proceedings, the Collateral Agent will be
allowed a reasonable period to complete such proceedings. GE International has
consented to the transfer of Orange L.P.'s interest under the Operation and
Maintenance Agreement to the Collateral Agent or a purchaser or grantee at a
foreclosure sale by judicial or nonjudicial foreclosure and sale or by a
conveyance by Orange L.P. in lieu of foreclosure and has agreed that upon such
foreclosure, sale or conveyance, it will recognize the Collateral Agent or any
other purchaser or grantee as a party under the Operation and Maintenance
Agreement.
Insolvency. If the Operation and Maintenance Agreement is rejected by a
trustee or debtor-in-possession in any bankruptcy or insolvency proceeding, or
if the Operation and Maintenance Agreement is terminated for any reason other
than a default which could have been but was not cured by the Collateral Agent
and within 45 days after such rejection or termination, the Collateral Agent or
its successors or assigns may request GE International to execute and deliver to
the Collateral Agent a new agreement on the same terms and conditions as the
original Operation and Maintenance Agreement as in effect on the date of
termination.
The Collateral Agent may assign all or part of its interest in the Operation
and Maintenance Agreement or a new agreement to a person or entity to whom the
Project is transferred, if the transferee assumes the obligations of Orange
L.P., or the Collateral Agent, under the Operation and Maintenance Agreement and
has a financial capability at least equivalent to Orange L.P.'s on the closing
date. If the Collateral Agent elects to perform Orange L.P.'s obligations under
the Operation and Maintenance Agreement or to enter into a new operations and
maintenance agreement, the sole recourse of GE International in seeking the
enforcement of such obligations shall be limited to such party's interest in the
Project.
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Asset Management Agreement
Pursuant to an Asset Management Agreement between Niagara Mohawk Energy
Marketing and Orange L.P. dated December 6, 1999, Niagara Mohawk Energy
Marketing manages the business operations and finances of Orange L.P.
Asset Management Services. Pursuant to the Asset Management Agreement,
Niagara Mohawk Energy Marketing performs all routine accounting and related
functions for Orange L.P. and for the Project and related assets, including
rendering invoices, manufacturing accounts receivable and accounts payable, and
providing budgets and reports. In addition, Niagara Mohawk Energy Marketing
administers and monitors Orange L.P.'s performance under the Project documents,
negotiates, as required, new energy supply, purchase or transportation
agreements and tariffs, and makes recommendations regarding and, with Orange
L.P.'s consent, assist in the implementation of cost reduction or revenue
enhancement strategies.
We also entered into an energy services management agreement dated December
6, 1999 with Niagara Mohawk Energy Marketing, pursuant to which Niagara Mohawk
Energy Marketing provides energy management services to Orange L.P. and to the
Project and related assets.
Compensation. Niagara Mohawk Energy Marketing's compensation under the
Asset Management Agreement is $22,750 per month, which will escalate pursuant to
an annual inflation adjustment beginning January 1, 2001. In addition, Niagara
Mohawk Energy Marketing is entitled to payment of its actual costs, including
employee expenses and time related to extraordinary, unforeseen events.
Exculpation; Indemnity; Limitation of Remedies. The Asset Management
Agreement provides that Niagara Mohawk Energy Marketing will not be responsible
for any liability or damages associated with the ownership and/or operation of
the Project or related assets and that damage claims against Niagara Mohawk
Energy Marketing for any breach of its obligations under the Asset Management
Agreement will be limited to the amount of compensation paid to Niagara Mohawk
Energy Marketing under the Asset Management Agreement. Moreover, Orange L.P.
will indemnify and hold harmless Niagara Mohawk Energy Marketing and its
officers and employees for any claims or liabilities arising from or related to
Orange L.P.'s ownership or operation of the Project or related assets.
Termination. The Asset Management Agreement may be terminated by Orange
L.P. upon 60 days' prior notice to Niagara Mohawk Energy Marketing and may be
terminated by Niagara Mohawk Energy Marketing upon six months' prior notice to
Orange L.P.
Asset Management Consent and Agreement
Consent to Assignment and Payment; Notices; Amendments. Niagara Mohawk
Energy Marketing has consented and agreed to the assignment by Orange L.P. of
its interest under the Asset Management Agreement to the Collateral Agent
pursuant to the Security Agreement and the other Collateral Documents as
security for Orange L.P.'s obligations under the notes, the Indenture and the
other financing documents.
Niagara Mohawk Energy Marketing has agreed that the Collateral Agent will be
entitled to exercise all rights and to cure any defaults by Orange L.P. under
the Asset Management Agreement and will accept the Collateral Agent's
performance of Orange L.P.'s obligations under the Asset Management Agreement
upon receipt of a written notice from the Collateral Agent. Niagara Mohawk
Energy Marketing has agreed to make all payments, if any, to be made by it under
the Asset Management Agreement directly to the Collateral Agent in accordance
with the Collateral Agent's written instructions.
Niagara Mohawk Energy Marketing will not without the prior written consent of
the Collateral Agent
(1) cancel or terminate the Asset Management Agreement except as provided
therein and, with respect to any termination for default or breach by
Orange L.P., in accordance with the provisions described in "Cure Rights"
below, or consent to or accept any cancellation or termination thereof by
Orange L.P.,
(2) sell, assign, except as authorized under the Asset Management Agreement
with respect to assignments of the Asset Management Agreement to an
affiliate of Niagara Mohawk Energy Marketing or payments to a third party
agent for financing collateral purposes, or otherwise dispose
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(by operation of law or otherwise) of any part of its interest in the
Asset Management Agreement or
(3) amend or modify the Asset Management Agreement in any material respect.
Niagara Mohawk Energy Marketing has waived its rights to terminate the Asset
Management Agreement, to any equitable adjustment in its compensation due under
the Asset Management Agreement, and to any rights to reduce, extend the time for
or suspend its performance thereunder resulting from Orange L.P.'s failure to
meet any obligations under the Asset Management Agreement due as of the closing
date.
Cure Rights. Niagara Mohawk Energy Marketing will not terminate the Asset
Management Agreement on account of any default or breach by Orange L.P.
thereunder without providing the Collateral Agent with
(1) if the default is the failure to pay amounts due and payable to Niagara
Mohawk Energy Marketing, 45 days from the date on which written notice of
default or breach is received by the Collateral Agent to cure such
default or
(2) if the breach or default cannot be cured by the payment of money to
Niagara Mohawk Energy Marketing, a reasonable time necessary to cure the
default so long as the Collateral Agent has commenced to cure the default
within 90 days of its receipt of the default notice and either the
Collateral Agent or Niagara Mohawk Energy Marketing thereafter diligently
pursues such cure to completion and continues to perform any monetary
obligations under the Asset Management Agreement.
If possession of the Project is necessary to cure a breach or default, and the
Collateral Agent commenced foreclosure proceedings, the Collateral Agent will be
allowed a reasonable period to complete such proceedings. Niagara Mohawk Energy
Marketing has consented to the transfer of Orange L.P.'s interest under the
Asset Management Agreement to the Collateral Agent or a purchaser or grantee at
a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a
conveyance by Orange L.P. in lieu of foreclosure and has agreed that upon such
foreclosure, sale or conveyance, it will recognize the Collateral Agent or any
other purchaser or grantee as party under the Asset Management Agreement so long
as there are no uncured defaults.
Insolvency. If the Asset Management Agreement is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding, or if the Asset
Management Agreement is terminated for any reason other than a default which
could have been but was not cured by the Collateral Agent and within 45 days
after such rejection or termination, the Collateral Agent or its successors or
assigns may request Niagara Mohawk Energy Marketing to execute and deliver to
the Collateral Agent a new agreement on the same terms and conditions as the
original Asset Management Agreement as in effect on the date of termination.
The Collateral Agent may assign all or part of its interest in the Asset
Management Agreement or a new agreement to a person or entity to whom the
Project is transferred, if the transferee assumes the obligations of Orange
L.P., or the Collateral Agent, under the Asset Management Agreement and has a
financial capability at least equivalent to Orange L.P.'s on the closing date.
In the event the Collateral Agent or its designee or assign elect to perform
Orange L.P.'s obligations under the Asset Management Agreement or to enter into
a new agreement, the sole recourse of Niagara Mohawk Energy Marketing in seeking
the enforcement of such obligations shall be limited to such party's interest in
the Project.
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REGULATION
Energy Regulation
PURPA
The Public Utility Regulatory Policies Act of 1978, as amended, or PURPA,
provides an electric generating plant with rate and regulatory incentives and
exemptions if the plant is a "qualifying facility." There are two types of
qualifying facilities: small power qualifying facilities and cogeneration
qualifying facilities. The Project is a cogeneration qualifying facility. Under
PURPA, a power production facility is a cogeneration qualifying facility if no
more than 50 percent of the equity interest in the qualifying facility is owned
by an electric utility or electric utility holding company, and the qualifying
facility satisfies FERC's operating and efficiency standards on a calendar year
basis.
Under PURPA, qualifying facilities receive two primary benefits. First, PURPA
exempts qualifying facilities, such as the Project, from the definition of
"electric utility company" under the Public Utility Holding Company Act of 1935,
or PUHCA, most provisions of the Federal Power Act and certain state laws
relating to financial, organization and rate regulation of electric utilities.
Second, the regulations promulgated by FERC under PURPA require that
(1) electric utilities purchase electricity generated by qualifying
facilities, construction of which commenced on or after November 9, 1978,
at a rate based on the purchasing utility's full "avoided costs" and
(2) electric utilities sell supplementary, back-up, maintenance and
interruptible power to qualifying facilities on a just and reasonable and
nondiscriminatory basis.
FERC's regulations define "avoided costs" as the "incremental costs to an
electric utility of electric energy or capacity or both which, but for the
purchase from the qualifying facility or qualifying facilities, the utility
would generate itself or purchase from another source." Utilities may also
purchase power at prices other than avoided cost of energy pursuant to
negotiations as provided by FERC's regulations. As a qualifying facility, the
Project is also permitted to sell its excess output at negotiated rates.
Orange L.P. expects that the Project will continue to meet all of the
criteria required for certification as a qualifying facility under PURPA. If the
Project failed to meet such criteria, Orange L.P. may become subject to
regulation as a public utility company or its equivalent under PUHCA and the
Federal Power Act. Under Orange L.P.'s original power purchase agreement with
Niagara Mohawk, Orange L.P. warranted to Niagara Mohawk that it would maintain
the qualifying facility status of the Project throughout the term of the related
power purchase agreement. The Power Put Agreement, however, no longer requires
that Orange L.P. maintain the Project's qualifying facility status.
It is possible, however, that
(1) PURPA could be repealed or amendments to PURPA could be enacted that
substantially reduce the benefits currently afforded qualifying
facilities, or
(2) PURPA's requirements for the Project to maintain its status as a
qualifying facility could be made more burdensome.
Because the Power Put Agreement does not require Orange L.P. to maintain the
qualifying facility status of the Project, it is unlikely the repeal or
amendment of PURPA would materially affect Orange L.P.'s rights and obligations
under the Power Put Agreement. Moreover, Orange L.P. expects that if PURPA were
amended or repealed and this jeopardized Orange L.P.'s qualifying facility
status, it is likely Orange L.P. could obtain market-based pricing authority and
light handed regulatory treatment from FERC as discussed below under "PUHCA" and
the "Federal Power Act."
PUHCA
PUHCA 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," which is defined to include an
"electric utility company" or a "gas utility company," or a company that is a
"holding company" of a public utility company is subject to registration with
the SEC and to regulation under PUHCA, unless exempt by SEC rule, regulation or
order. An entity may also be deemed to be a holding company if the SEC
determines, after providing notice and an opportunity for a hearing, such entity
exercises a controlling influence over the management or policies of any public
utility or holding company as to make it necessary or appropriate in the public
interest or for the protection of investors or consumers that such entity be
regulated as a holding company. Unless an exemption is obtained, PUHCA
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requires registration for a holding company of a public utility company, and
requires a public utility holding company to limit its 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 its financing transactions.
As a qualifying facility, the Project is not considered to be an electric
utility company as defined in PUHCA, and investors in the Project would,
therefore, not be deemed to be public utility holding companies solely by virtue
of their investments in the Project.
The Energy Policy Act of 1992 contains amendments to PUHCA that may allow
Orange L.P. to operate the Project without becoming subject to PUHCA by becoming
an exempt wholesale generator in the event that the Project loses its status as
a qualifying facility. Under the Energy Policy Act, a company engaged
exclusively in the business of
(1) owning and/or operating one or more facilities used for the generation of
electric energy exclusively for sale at wholesale and
(2) selling electric energy at wholesale, may qualify as an exempt wholesale
generator and be exempted from PUHCA.
To obtain such an exemption, a company must apply to FERC for a determination of
eligibility, pursuant to implementing rules promulgated by FERC. Although this
would cause Orange L.P. to become subject to regulation by FERC as a public
utility under the Federal Power Act, it is reasonable to expect that under
FERC's current policy Orange L.P. would be able to obtain market-based pricing
authority which would likely include light-handed regulation such as exemptions
from FERC's accounting and cost-of-service filing requirements.
Federal Power Act
Under the Federal Power Act, FERC has exclusive rate-making jurisdiction over
wholesale sales of electricity and transmission in interstate commerce. These
rates may be based on a cost of service approach or may be determined through
competitive bidding or negotiation. If the Project were to lose its qualifying
facility status, the rates set forth in Orange L.P.'s Power Put Agreement would
have to be filed with FERC and would be subject to review by FERC under the
Federal Power Act. Under present FERC policy, Orange L.P. could request FERC to
grant it market-based pricing authority by showing that Orange L.P. lacks market
power in generation and transmission markets, does not control any other
barriers to entry by potential competitors, and has addressed potential concerns
regarding preferential dealing with franchised electric utility affiliates. FERC
would likely give favorable consideration to a request for market-based pricing
authority given the small size of the Project (80 MW), Orange L.P.'s lack of
control over transmission facilities (the New York Independent System Operator
will have operational control over such facilities), and the absence of
affiliation with fuel suppliers or franchised electric utilities. If FERC
granted Orange L.P.'s request, Orange L.P. would likely be required to file the
Power Put Agreement with FERC as a tariff, and FERC would likely accept it for
filing as a negotiated market-based contract. If FERC were to deny Orange L.P.
market based pricing authority, Orange L.P. would still be required to file the
Power Put Agreement as a tariff with FERC, and provide cost justification in
support of the rates charged under that agreement.
The Federal Power Act and FERC's regulations under the Federal Power Act
subject public utilities to various other requirements, including the filing of
cost of service information, accounting and record-keeping requirements; FERC
approval requirements applicable to activities such as selling, leasing or
otherwise disposing of facilities; FERC approval requirements for mergers,
consolidations, acquisitions and the issuance of securities; and certain
restrictions regarding affiliations of officers and directors. Some of these
requirements, however, are typically waived by FERC for public utilities with
market-based pricing authority. Accordingly, if the Project lost its qualifying
facility status, and if FERC granted Orange L.P. market based pricing authority
as discussed above, FERC would be likely to grant waivers of the cost of service
filing, accounting and reporting requirements, to pre-authorize issuances of
securities or assumptions of obligations, and authorize abbreviated reporting
requirements for interlocking officers and directors. FERC would be unlikely,
however, to waive the requirements for pre-authorization of mergers,
consolidations, or other acquisitions.
State Regulation
Power production facilities are also subject to regulation under the New York
State Public Service Law. However, if a power project cogenerates electricity
and thermal energy, or shaft horsepower, and does not produce power in
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excess of 80 MW, it may qualify as a "co-generation facility" under Section 2(2-
a) of the Public Service Law. A "co-generation facility" under Section 2(2-a) of
the Public Service Law is not an "electric corporation" under Section 2(13) of
the Public Service Law, and therefore is not subject to state regulation as a
public utility.
The New York courts have held that there is a distinction between a federal
qualifying facility and a New York co-generation facility. To date, however, the
New York Public Service Commission has not established any standards for New
York co-generation facilities similar to FERC's operating, efficiency, or other
standards for cogeneration and small power production qualifying facilities.
Thus a power project that cogenerates electricity and steam in New York can not
be sure it is a co-generation facility under the New York Public Service Law and
thus not an electric corporation under that statute. However, the New York
Public Service Commission has not to date challenged the status of a federal
cogeneration qualifying facility that is under 80 MW. As a net 80 MW power
project that is a federal qualifying facility, the Project is, in Orange L.P.'s
opinion, a co-generation facility under the New York Public Service Law. So long
as the Project maintains such status, it also will be exempt from regulation as
a steam corporation under the New York Public Service Law. Additionally,
pursuant to FERC's regulations, so long as the Project maintains its qualifying
facility status, it would not be subject to state laws relating to regulation of
rates or financial and organizational structure of electric utilities.
If the Project were found not to be a co-generation facility under state law,
Orange L.P. or the operator of the Project, or both, would be an electric
corporation under the New York Public Service Law and subject to regulation by
the New York Public Service Commission as a utility. Orange L.P. does not
believe, however, that such a finding would pose significant risks because the
Power Put Agreement no longer requires that the Project maintain co-generation
status under state law.
In any case, in that event Orange L.P. could petition the New York Public
Service Commission for an order declaring the Project to be a co-generation
facility and to obtain a "Certificate of Public Convenience and Necessity" from
the New York Public Service Commission. In the case of cogeneration facilities
over 80 MW seeking such a certificate, the New York Public Service Commission
has imposed a regime of "lightened regulation." Lightened regulation involves
submitting annual reports concerning sales to retail customers and any SEC
filings, together with certain limited additional filing requirements and New
York Public Service Commission review described in recent New York Public
Service Commission orders. Nonetheless, failure to maintain such status could
subject the Project to regulation as a utility under state law.
To the extent the Project is not operating to produce electricity, it meets
its thermal energy requirements under the Steam Contract either by operating
steam boilers at Syracuse University or by operating auxiliary boilers owned by
the Project. This operation is permitted under the Project's status as a
qualifying facility under PURPA and as a co-generation facility under New York
state law.
Environmental Regulation
Orange L.P.'s operations are subject to numerous federal, state, and local
laws and regulations governing the discharge of materials into the environment
or otherwise relating to environmental protection and restriction upon land use.
These laws and regulations primarily involve the generation, handling, storage,
transport, and disposal of hazardous substances, the emission or discharge of
air and water pollutants, the emission of noise from the facilities, and the
implementation of safety and health standards with respect to Orange L.P.'s
facilities or the public or environment in general. In addition, these laws and
regulations in many cases require Orange L.P. to secure permits and other
regulatory approvals with respect to its ongoing or planned projects, which
often triggers the need to comply with lengthy and complex permitting or
approval procedures, as well as imposing ongoing reporting and compliance
obligations. Modified or renewed permits and authorizations may be required for
any physical or operational changes to Orange L.P.'s facilities. Failure to
comply with these applicable laws and regulations, including any permits or
authorizations required thereunder, may result in the assessment of
administrative, civil and criminal penalties, imposition of cleanup costs and
liens, and, to a lesser extent, issuance of injunctions to limit or cease
operations. As discussed below, while Orange L.P. believes it is in substantial
compliance with applicable laws and regulations, Orange L.P. cannot assure you
that it will be able to obtain all necessary permits and approvals for proposed
projects or
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that compliance with new or changed environmental laws, regulations and policies
would not have a material adverse effect on its operations, financial condition,
or competitive position.
Federal Clean Air Act and Related Requirements
The Project and the Steam Plant are subject to the federal Clean Air Act, to
federal regulations implementing the Clean Air Act, and to state laws and
regulations dealing with air quality. These laws, and permits issued under them,
limit the emissions of certain pollutants, including nitrogen oxides, sulfur
dioxide, carbon monoxide and particulate matter from the Project and the Steam
Plant. In addition, the Project and the Steam Plant are required to obtain
federal and state permits and to operate according to the terms and conditions
of the permits. Should the Project or the Steam Plant make operational changes,
it may be necessary to amend the permits. If the Project or the Steam Plant were
to exceed limits on emissions or fail to fulfill permit conditions, it would be
subject to enforcement actions initiated by the state or federal government.
In June 1997, the Project and Syracuse University filed a joint application
for an operating permit under Title V of the Clean Air Act. The New York State
Department of Environmental Conservation, or NYDEC, has confirmed that such
Title V operating permit application was timely and complete, and it has
provided the Project and Syracuse University with a joint draft Title V permit.
NYDEC issued a certificate to operate to the Project which requires the
Project to monitor its emissions of carbon monoxide and nitrogen oxide, or NOx,
and to submit self-monitoring reports each quarter. In addition, the certificate
to operate requires the Project to submit on a quarterly basis the results of
tests assessing the performance of the emissions monitors. The Steam Plant is
not required to conduct similar monitoring because NYDEC has exempted the Steam
Plant from a regulatory requirement to monitor opacity. The Project's
certificate to operate also specifies that excess emissions may constitute
violations of the applicable emission limits if the excess emissions do not
occur during periods of startup, shutdown or malfunction and limits the
Project's emissions of noise. In 1998, the Project paid a modest penalty for
failing to report two NOx exceedances in the second quarter of 1997. In January
1999, the Project reported to NYDEC a NOx exceedance caused by a control
equipment malfunction. Also in 1999, the Project paid a modest penalty to NYDEC
for failing to submit a timely report.
Based upon current federal regulations, Orange L.P. believes that the Project
meets the requirements for exemption from the requirements of the Acid Rain
Program established under Title IV of the Clean Air Act, because the Project is
a qualifying facility certified by FERC. Orange L.P. believes that the Steam
Plant is exempt from Title IV because the Steam Plant does not generate
electricity.
New York is located within the northeast Ozone Transport Region, where all
areas are subject to regulation as areas that are not in attainment with the
National Ambient Air Quality Standard for ozone. Because New York has
promulgated regulations pursuant to a 1994 multi-state agreement to reduce
emissions of NOx, an ozone precursor, the Project is subject to state
requirements to limit NOx emissions, including NOx controls based on reasonably
available control technology, or NOx RACT, and the NOx Budget Program
regulations. The Project and the Steam Plant timely submitted a joint plan for
complying with the requirement to implement NOx controls based on NOx RACT.
According to the NOx RACT compliance plan and the Project's Title V operating
permit application, the Project uses steam injection to limit NOx emissions to
25 ppm dry, corrected to 15 percent oxygen. Compliance test results submitted to
NYDEC indicated that the four operating boilers at the Steam Plant that are
subject to NOx RACT emit NOx at or below the applicable emission rate in the NOx
RACT regulation. The Project has fulfilled its obligations under the
administrative sections in NOx Budget regulations, which took effect on May 1,
1999. The Project's 1999 NOx emissions were significantly below the Project's
NOx allocation for the year. The Steam Plant is not subject to the requirements
of the NOx Budget Program regulations because its boilers do not generate
electricity and because all of its operating boilers have heat input capacity
lower than the applicability threshold specified in the NOx Budget Program
regulations.
The 1994 multi-state agreement to which New York is a party contemplates
consideration of a third phase of emission reductions to go into effect in 2003.
Therefore, additional measures to limit NOx emissions may be necessary at that
time. In addition, the U.S. Environmental Protection Agency has promulgated a
rule that requires states to revise their regulations setting out how they will
attain the National Ambient Air Quality Standard for ozone. Depending upon
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the requirements in the state regulations responding to the Environmental
Protection Agency, the Project and the Steam Plant may be required to further
reduce their respective NOx emissions in order to comply with the new
regulations.
There is a substantial quantity of asbestos-containing material used for
insulation at the Steam Plant. The cost for total removal of the asbestos-
containing material was estimated at approximately $2 million in 1989. Because
most of the ACM is reportedly in an undamaged condition, Orange L.P. has
developed and implemented a procedure to inspect and repair or replace any
asbestos-containing material insulation that becomes damaged due to normal
operations or activities. Orange L.P. does not believe total replacement is
necessary or will be required by regulatory authorities.
Orange L.P. believes that the Project and the Steam Plant are in substantial
compliance with the applicable requirements under federal and state laws
relating to air quality.
Federal Clean Water Act and Related Requirements
Orange L.P.'s operations are subject to the federal Clean Water Act and
analogous state and local laws and regulations relating to the discharge of
pollutants to surface and groundwaters. The Clean Water Act and state laws also
establish requirements for municipally-owned sewage treatment plants, including
pretreatment requirements for industrial users of those plants. Local sewerage
authorities also have established regulations governing connections to and
discharges into their sewer systems and treatment plants. Pursuant to these laws
and regulations, Orange L.P. is required to obtain permits for the discharge of
its wastewater and to develop and implement a spill prevention, control and
countermeasure plan with respect to its handling and storage of oil.
In accordance with permits issued by the Onondaga County Department of
Drainage and Sanitation, Orange L.P. is authorized to discharge, within
specified limits, industrial wastewaters generated by the Project and the Steam
Plant to the Onondaga County's wastewater system. The Project's discharge permit
(#140) expires on November 2, 2001 and the Steam Plant's discharge permit (#125)
expires on July 1, 2001. Orange L.P. submits semi-annual self-monitoring reports
for both discharges. In recent years, Orange L.P. has paid several small
penalties to Onondaga County for pH excursions, primarily associated with
discharges that were not in compliance with Permit #125. Orange L.P. completed a
Project designed to correct these excursions in early 1999. Stormwater runoff
from the Steam Plant and the Project is discharged to an Onondaga County
combined sewer. Orange L.P. believes that the Project and the Steam Plant are in
substantial compliance with their respective wastewater discharge permits. As
required by federal regulations, Orange L.P. maintains a certified spill
prevention, control and countermeasure plan applicable to the Project and the
Steam Plant that was updated in November, 1997.
Federal Resource Conservation and Recovery Act and Related Requirements
Orange L.P. generates wastes, including occasionally hazardous wastes, that
are subject to the federal Resource Conservation and Recovery Act, or RCRA, and
New York's waste management laws and regulations. RCRA regulates the generation,
treatment, storage, handling, transportation, and disposal of hazardous and non-
hazardous wastes. Moreover, the Environmental Protection Agency and NYDEC have
limited the approved methods of disposal for certain hazardous and non-hazardous
wastes. In recent years, both the Project and the Steam Plant have been RCRA
small quantity generators. A recent assessment performed by Orange L.P.'s
environmental consultant noted several solid and hazardous waste management
compliance issues which Orange L.P. believes are easily corrected by altering
administrative practices and will not have a material adverse effect on it.
Comprehensive Environmental Response, Compensation and Liability Act and
Related Requirements
The Comprehensive Environmental Response, Compensation and Liability Act,
which we refer to as CERCLA or Superfund, and similar state laws, including the
New York State Superfund Program, impose liability, without regard to fault or
the legality of the original conduct, on certain classes of persons that are
considered to have contributed to the release of a "hazardous substance" into
the environment. These persons include the owner or operator of the disposal
site or sites where the release occurred and companies that transported,
disposed or arranged for the transport or disposal of hazardous substances found
at the site. Persons who are or were responsible for releases of hazardous
substances under CERCLA may be subject to joint and several liability for the
costs of cleanup of the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon
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for neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment. Orange L.P. does not believe that there are any pending or
imminent claims against it under CERCLA or similar state laws. A recent
inspection of the Project and Steam Plant sites by Orange L.P.'s environmental
consultant found no evidence of on-site contamination that could have an impact
to soil or groundwater.
New York Petroleum and Hazardous Substances Bulk Storage Facilities
Requirements
New York has established regulatory programs governing underground and
aboveground petroleum and hazardous substances bulk storage facilities. Certain
underground petroleum and hazardous substance bulk storage facilities are also
regulated under the Environmental Protection Agency's RCRA tank program. In some
respects, the federal requirements are more comprehensive and stringent than
NYDEC's regulations. In general, the state and federal requirements address
registration and permitting, operating practices, closure and reporting
obligations for various types of tanks and associated piping. NYDEC and the
Environmental Protection Agency have broad civil, administrative and criminal
enforcement authority for violations of statutory, regulatory and permit
requirements.
The Steam Plant has four 30,000-gallon underground fuel oil tanks and one
275-gallon aboveground diesel oil tank. Syracuse University owns all of the
tanks and Orange L.P. operates them. Orange L.P. also owns and operates a 7,000-
gallon aboveground fuel oil tank and a 7,000-gallon aboveground caustic tank and
operates a 1,500-gallon aboveground acid tank. In 1999 Orange L.P. made certain
capital improvements to retrofit the two acid and caustic tanks in order to
comply with new NYDEC chemical bulk storage requirements for secondary
containment or equivalent technology. As a result, Orange L.P. believes the
Project is in substantial compliance with these regulations. In all other
respects, Orange L.P. also believes it is in substantial compliance with all
federal and state requirements relating to the bulk storage of petroleum and
hazardous substances.
Prior to the construction of the Project and Orange L.P.'s operation of the
Steam Plant, Syracuse University removed, replaced and/or closed several bulk
fuel oil underground storage tanks on the Steam Plant site. At the time a
15,000-gallon underground storage tank was closed in 1988, Syracuse University
removed and disposed of approximately 100 cubic yards of petroleum-contaminated
soil and installed a groundwater well to recover residual free product from the
groundwater surface adjacent to the closed tank. In 1992, an environmental
consultant retained by Syracuse University reviewed the soil and groundwater
conditions at the site and concluded that no further remedial action was
required. Based on the location and historic nature of this petroleum release,
as well as the completed remediation, Orange L.P. believes that any requirement
for further action associated with the previously-identified soil and
groundwater contamination is remote.
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THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
Orange L.P. and Capital Co. (the "Issuers") are offering to issue their 10.5%
Senior Secured Notes Series B due 2007 (the "New Notes") in exchange for their
10.5% Senior Secured Notes Series A due 2007 (the "Old Notes") as described
herein (the "Exchange Offer").
The Old Notes were sold by Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser") on December 6, 1999 to a limited number of
institutional investors (the "Purchasers"). In connection with the sale of the
Old Notes, the Issuers and the Initial Purchaser entered into a Registration
Rights Agreement, dated December 6, 1999 (the "Registration Rights Agreement"),
which requires, among other things, the Issuers
(1) to register the Old Notes under the Securities Act, or
(2) to file with the SEC a registration statement under the Securities Act with
respect to the New Notes identical in all material respects to the Old
Notes and use their reasonable effort to cause that registration statement
to be declared effective under the Securities Act.
The Issuers are further obligated, upon the effectiveness of the registration
statement described in paragraph (2) above, to offer the holders of the Old
Notes the opportunity to exchange their Old Notes for a like principal amount of
New Notes which will be issued without a restrictive legend and may be reoffered
and resold by the holder without restrictions or limitations under the
Securities Act. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement of which this prospectus is a part. The
Exchange Offer is being made pursuant to the Registration Rights Agreement to
satisfy the Issuers' obligations under that agreement. The term "Holder" with
respect to the Exchange Offer means any person in whose name Old Notes are
registered on the Issuers' books or any other person who has obtained a properly
completed assignment from the registered holder. At the date of this prospectus,
the sole Holder of the Old Notes is The Depositary Trust Corporation, or DTC.
In participating in the Exchange Offer, a Holder is deemed to represent to
the Issuer, among other things, that
(1) the New Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the person receiving such New Notes,
whether or not such person is the Holder,
(2) neither the Holder nor any such other person is engaging in or intends to
engage in a distribution of such New Notes,
(3) neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
New Notes, and
(4) neither the Holder nor any such other person is an "affiliate" of the
Issuers, as defined in Rule 405 under the Securities Act.
Based on a previous interpretation by the staff of the SEC set forth in no-
action letters issued to third-parties, including "Exxon Capital Holdings
Corporation" (available May 13, 1988), "Morgan Stanley & Co. Incorporated"
(available June 5, 1991), "Mary Kay Cosmetics, Inc." (available June 5, 1991),
"Warnaco, Inc." (available October 11, 1991), and "K-III Communications Corp."
(available May 14, 1993), the Issuer believes that the New Notes issued pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by any Holder of such New Notes (other than any such Holder which is
an "affiliate" of the Issuers 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 Notes are acquired in
the ordinary course of such Holder's business and such Holder has no arrangement
or understanding with any person to participate in the distribution of such New
Notes. Any Holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes cannot rely on such
interpretation by the staff of the SEC and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Under no circumstances may this prospectus be
used
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for an offer to resell, resale or other retransfer of the New Notes. In the
event that the Issuers' belief is inaccurate, Holders of the New Notes who
transfer New Notes in violation of the prospectus delivery provisions of the
Securities Act without an exemption from registration thereunder may incur
liability thereunder. The Issuers do not assume or indemnify Holders against
such liability. The Exchange Offer is not being made to, nor will the Issuer
accept tenders for exchange from, Holders of Old Notes in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Issuers have not
entered into any arrangement or understanding with any person to distribute the
New Notes to be received in the Exchange Offer. See "Plan of Distribution," on
page 149.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus and
in the letters of transmittal, the Issuer will accept any and all Old Notes
properly tendered and not withdrawn prior to 5:00 p.m., New York time, on the
Expiration Date (defined below). The Issuer will issue $1,000 in principal
amount of the New Notes in exchange for each $1,000 in principal amount of
outstanding Old Notes surrendered in the Exchange Offer. However, Old Notes may
be tendered only in integral multiples of $1,000.
The form and terms of the New Notes will be the same as the form and terms of
the Old Notes except that the New Notes will be registered under the Securities
Act and hence will not be subject to restrictions on the transfer thereof. The
New Notes will evidence the same debt as the Old Notes. The New Notes will be
issued under and entitled to the benefits of the Indenture, which also
authorized the issuance of the Old Notes.
As of the date of this prospectus, $68,000,000 in aggregate principal amount
of the Old Notes is outstanding. This prospectus, together with the letter of
transmittal, is being sent to all registered Holders of the Old Notes.
The Issuers will be deemed to have accepted validly tendered Old Notes when,
as and if the Issuers have given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering Holders for the
purposes of receiving the New Notes from the Issuers.
Old Notes that are not tendered for exchange in the Exchange Offer will
remain outstanding and will be entitled to the rights and benefits such Holders
have under the Indenture. If any tendered Old Notes are not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth herein or otherwise, certificates for any such unaccepted Old Notes
will be returned, without expense, to the tendering Holder thereof as promptly
as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer 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 pursuant to the
Exchange Offer. The Issuers will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the Exchange Offer.
See "--Fees and Expenses," on page 95.
Expiration Date; Extensions; Amendments to the Exchange Offer
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
_______, 2000, unless the Issuers, in their sole discretion, extend the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent (defined below) of any extension by oral or written notice and will mail
to the registered Holders an announcement thereof, prior to 9:00 a.m., New York
City time, on the next business day after the then Expiration Date.
The Issuers reserves the right, in their sole discretion,
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(1) to delay accepting any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under
"--Conditions" shall not have been satisfied by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, or
(2) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptances, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered Holders. If the Exchange Offer is amended in a manner determined by
the Issuers to constitute a material change, the Issuer will promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered Holders of the Old Notes, and the Issuers will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
Holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
Without limiting the manner in which the Issuers may choose to make a public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Issuers will have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
Upon satisfaction or waiver of all the conditions to the Exchange Offer, the
Issuers will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. See "--Conditions to the Exchange Offer," below. For purposes of the
Exchange Offer, the Issuers will be deemed to have accepted properly tendered
Old Notes for exchange when, as and if the Issuers shall have given oral or
written notice thereof to the Exchange Agent.
In all cases, issuance of the New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of a properly completed and duly executed letter of
transmittal and all other required documents; provided, however, that the
Issuers reserve the absolute right to waive any defects or irregularities in the
tender or conditions of the Exchange Offer. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
Holder desires to exchange, then such unaccepted or non-exchanged Old Notes
evidencing the unaccepted portion, as appropriate, will be returned without
expense to the tendering Holder thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Conditions to the Exchange Offer
Notwithstanding any other term of the Exchange Offer, the Issuers will not be
required to exchange any Old Notes for any New Notes and may terminate the
Exchange Offer before the acceptance of any Old Notes for exchange, if:
(1) any action or proceeding is instituted or threatened in any court or by or
before any governmental agency with respect to the Exchange Offer which, in
the Issuers' reasonable judgment, might materially impair the ability of
the Issuer to proceed with the Exchange Offer; or
(2) any law, statute, rule or regulation is proposed, adopted or enacted, or
any existing law, statute, rule or regulation is to be interpreted by the
staff of the SEC, which, in the Issuers' reasonable judgment, might
materially impair the ability of the Issuer to proceed with the Exchange
Offer.
If the Issuers determine in their sole discretion that any of these
conditions are not satisfied, the Issuers may
(1) refuse to accept any Old Notes and return all tendered Old Notes to the
tendering Holders,
(2) extend the Exchange Offer and retain all Old Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of
Holders who tendered such Old Notes to withdraw their tendered Old Notes,
or
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(3) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Old Notes which have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the
Issuers will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and the
Issuers will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
Procedures for Tendering -- Registered Holders and DTC Participants
Registered Holders of Old Notes, as well as beneficial owners who are direct
participants in DTC, who desire to participate in the Exchange Offer should
follow the directions set forth below and in the letter of transmittal.
All other beneficial owners should follow the instructions received from
their broker or nominee and should contact their broker or nominee directly.
The instructions set forth below and in the letter of transmittal DO NOT APPLY
to such beneficial owners.
Registered Holders
To tender in the Exchange Offer, a Holder must complete, sign and date the
letter of transmittal, or facsimile thereof, have the signatures thereon
guaranteed if required by the letter of transmittal, and mail or otherwise
deliver such letter of transmittal or such facsimile to the Exchange Agent prior
to the Expiration Date. In addition, either
(1) certificates for such Old Notes must be received by the Exchange Agent
along with the letter of transmittal, or
(2) the Holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the letter of transmittal and other required
documents must be received by the Exchange Agent at the address set forth below
under "--Exchange Agent" prior to the Expiration Date.
The tender by a Holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such Holder and the Issuer in accordance
with the terms and subject to the conditions set forth herein and in the letter
of transmittal.
The method of delivery of Old Notes and the letter of transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder. Instead of delivery by mail, it is recommended that Holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date. No
letter of transmittal or Old Notes should be sent to the Issuers. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect the above transactions for such Holders.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered
(1) by a registered Holder who has not completed the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" on the letter of
transmittal, or
(2) for the account of an Eligible Institution (as defined below).
In the event that signatures on a letter of transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantor
must be a member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an
"Eligible Institution").
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If the letter of transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power signed by such registered Holder
as such registered Holder's name appears on such Old Notes.
If the letter of transmittal or any Old Notes or bond or stock 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
Issuers, evidence satisfactory to the Issuer of their authority to so act must
be submitted with the letter of transmittal.
Holders who wish to tender their Old Notes and
(1) whose Old Notes are not immediately available, or
(2) who cannot deliver their Old Notes, the letter of transmittal or any other
required documents to the Exchange Agent prior to the Expiration Date, may
effect a tender if:
(A) The tender is made through an Eligible Institution;
(B) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificates
number(s) of such Old Notes and the principal amount of Old Notes
tendered stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, the letter of transmittal (or facsimile
thereof) together with the certificate(s) representing the Old Notes
and any other documents required by the letter of transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(C) Such properly completed and executed letter of transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer and other documents
required by the letter of transmittal are received by the Exchange
Agent within three New York Stock Exchange trading days after the
Expiration Date.
Upon request to the Exchange Agent a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
DTC Participants
Any financial institution that is a participant in DTC's systems may make
book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into
the Exchange Agent's account at DTC in accordance with DTC's procedures for
transfer. Such delivery must be accompanied by either
(1) the letter of transmittal or facsimile thereof, with any required signature
guarantees, or
(2) an Agent's Message (as hereinafter defined),
and any other required documents, must, in any case, be transmitted to and
received by the Exchange Agent at the address set forth below under "--Exchange
Agent" on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with. The Exchange Agent will make a request
to establish an account with respect to the Old Notes at DTC for purposes of the
Exchange Offer within two business days after the date of this prospectus.
The term "Agent's Message" means a message, transmitted by DTC, received by
the Exchange Agent and forming part of a book-entry transfer where a tender is
initiated, which states that DTC has received an express
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acknowledgement from a participant tendering Old Notes that such participant has
received and agrees to be bound by the terms of the letter of transmittal and
that the Issuer may enforce such agreement against the participant.
Miscellaneous
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Issuers in their sole discretion, which determination
will be final and binding. The Issuers reserve the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Issuers' acceptance
of which would, in the opinion of counsel for the Issuers, be unlawful. The
Issuers also reserve the right to waive any defects, irregularities or
conditions of tender as to particular Old Notes. The Issuers' interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
the letter of transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Issuers shall determine. Although the
Issuers intend to notify Holders of defects or irregularities with respect to
tenders of Old Notes, none of the Issuers, the Exchange Agent, or any other
person shall incur any liability for failure to give such notification. Tenders
of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in the letter of
transmittal, as soon as practicable following the Expiration Date.
By tendering, each Holder or the person receiving the New Notes, as the case
may be, will be deemed to represent to the Issuers that, among other things, the
New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the Person receiving such New Notes, whether or
not such person is the Holder,
(1) neither the Holder nor any such other person is engaging in or intends to
engage in a distribution of such New Notes,
(2) neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
New Notes, and
(3) neither the Holder nor any such other Person is an "affiliate," as defined
in Rule 405 of the Securities Act, of the Issuer.
In all cases, issuance of New Notes that are accepted for exchange pursuant
to the Exchange Offer will be made only after timely receipt by the Exchange
Agent of certificates for such Old Notes or a timely Book-Entry Confirmation of
such Old Notes into the Exchange Agent's account at DTC, a properly completed
and duly executed letter of transmittal and all other required documents. If
any tendered Old Notes are not accepted for any reasons set forth in the terms
and conditions of the Exchange Offer or if Old Notes are submitted for a greater
principal amount than the Holder desires to exchange, such unaccepted or non-
exchanged Old Notes will be returned without expense to the tendering Holder
thereof (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at DTC pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with such DTC) as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Issuers reserve the right in their sole discretion to purchase or make
offers for any Old Notes that remain outstanding subsequent to the Expiration
Date or, as set forth above under " - Conditions," to terminate the Exchange
Offer and, to the extent permitted by applicable law, purchase Old Notes in the
open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers could differ from the terms of the Exchange Offer.
Withdrawal of Tenders of Old Notes
Except as otherwise provided herein, tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York time, on the Expiration Date.
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To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York time, on the
Expiration Date. Any such notice of withdrawal must
(1) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"),
(2) identify the Old Notes to be withdrawn (including the certificate number
or),
(3) be signed by the Holder in the same manner as the original signature on the
letter of transmittal by which such Old Notes have been tendered (including
any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Old Notes
register the transfer of such Old Notes in the name of the person
withdrawing the tender, and
(4) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. If Old Notes have been tendered
pursuant to book-entry transfer, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn Old
Notes, in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by any method of delivery described in this
paragraph.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Issuers, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
will be returned to the Holder thereof without cost to such Holder as soon as
practicable after withdrawal; and no New Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Properly
withdrawn Old Notes may be retendered by following one of the procedures above
under " - Procedures for Tendering" at any time prior to the Expiration Date.
Exchange Agent
U.S. Bank Trust National Association has been appointed as Exchange Agent of
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for Notice of Guaranteed Delivery with respect to the exchange of the
Old Notes should be directed to the Exchange Agent addressed as follows:
U.S. Bank Trust National Association
180 Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Services, Specialized Finance
By Telephone:
(651) 244-1215
By Facsimile:
(651) 244-1537
Fees and Expenses
The expenses of soliciting tenders will be paid by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopier, telephone or in person by officers and regular
employees of the Issuer and its affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers-dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay
the Exchange Agent reasonable and customary fees for their services and will
reimburse them for their reasonable out-of-pocket expenses in connection
therewith.
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The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers and are estimated in the aggregate to be approximately
[$100,000.] Such expenses include registration fees, fees and expenses of the
Exchange Agent, accounting and legal fees and printing costs, among others.
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of the Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes for principal amounts or number of shares not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of Old Notes tendered, or if
tendered the Old Notes are registered in the name of, any person other than the
person signing the letter of transmittal, or if a transfer tax is imposed for
any reason other than the exchange of the Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered Holder or any other person) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of such transfer taxes will
be billed to such tendering Holder.
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DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions."
The Issuers will issue the New Notes under an Indenture dated as of December
6, 1999 between the Issuers and U.S. Bank Trust National Association, as Trustee
and Collateral Agent. The terms of the New Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939. The agreements referred to under the caption "--
Collateral" define the terms of the security interests that will secure the
notes.
On December 6, 1999, concurrently with the issuance and sale of the Old
Notes, Funding L.P. merged with and into Orange L.P., with Orange L.P. as the
surviving partnership, pursuant to the Merger Agreement. As a condition to the
issuance of the Old Notes, Orange L.P. expressly assumed, and agreed to perform
and discharge, all of the obligations of Funding L.P. with respect to the Notes
and the Indenture.
Capital Co., our wholly-owned subsidiary incorporated in Delaware, is serving
as co-Issuer of the notes in order to facilitate the offering. We believe that
certain prospective purchasers of the New Notes may be restricted in their
ability to purchase debt securities of a limited partnership, such as Orange
L.P., unless such debt securities are jointly issued by a corporation. Capital
Co. was incorporated solely for the purpose of acting as co-Issuer of the notes.
The following description is a summary of the material provisions of the
Indenture, the Deposit and Disbursement Agreement, the Security Agreement, the
SIDA Security Agreement, the First Mortgage and the Pledge Agreements. It does
not restate those agreements in their entirety. We urge you to read the
Indenture, the Deposit and Disbursement Agreement, the Security Agreement, the
SIDA Security Agreement, the First Mortgage and the Pledge Agreements because
they, and not this description, define your rights as holders of the New Notes.
Copies of the Indenture and the other Financing Documents are available as set
forth below under "Additional Information." Certain defined terms used in this
description but not defined below under "-- Certain Definitions" have the
meanings assigned to them in the Indenture.
Brief Description of the Notes
The notes:
. are general obligations of the Issuers;
. are secured by:
(1) a perfected, first priority lien on, and security interest in, the
funds in the Accounts under the Deposit and Disbursement Agreement;
and
(2) a perfected, first priority lien on substantially all of the assets of
Orange L.P., including an assignment of all of the contracts, of
Orange L.P.; and
(3) a perfected, first priority pledge of the Equity Interests in Orange
L.P. held by GAS Orange, and to the extent not inconsistent with the
terms of the Stipulation for so long as it is in effect, the Equity
Interest of GAS LP in Orange L.P. and of the partners of GAS LP in GAS
LP.
. are pari passu in right of payment to all unsecured senior borrowings of the
Issuers.
The notes are payable solely from revenues generated by Orange L.P. and from
other funds that may be available from time to time in the Accounts held by the
Collateral Agent. The Issuers' obligations under the notes are non-recourse to
the direct and indirect current or former owners of the Issuers except for
recourse to those partners' ownership interests in Orange L.P. or GAS LP to the
extent such interests have been pledged to the Collateral Agent as security for
the notes. None of GAS Orange and GAS LP, which are collectively referred to as
the Partners, nor
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any of the direct or indirect current or former owners of the Partners or of the
Issuers, will be obligated to contribute additional funds if monies in the
Accounts are insufficient for the payment of debt service in respect of the
notes. So long as the notes are outstanding, distributions to the Partners from
the Distribution Account will constitute Restricted Payments under and as
defined in the Indenture.
Principal, Maturity and Interest
The Indenture provides for the issuance by the Issuers of up to $68.0 million
aggregate principal amount of notes in the offering. The Issuers will issue all
notes in denominations of $100,000 and integral multiples of $1,000 in excess
thereof. The notes will mature on September 15, 2007.
Interest on the notes will accrue at the rate of 10.5% per annum and will be
payable semi-annually in arrears on March 15 and September 15 of each year,
commencing March 15, 2000. The Issuers will make each interest payment to the
Holders of record of the notes on the immediately preceding March 1 and
September 1, as the case may be. Interest on the notes will accrue from the date
of original issuance or, if interest has already been paid, from the date it was
most recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Issuers will pay the principal of the notes in semi-annual installments,
commencing March 15, 2000, as follows:
Percentage of Principal
Schedule Payment Date Amount Payable
March 15, 2000............................ 3.25%
September 15, 2000........................ 6.75%
March 15, 2001............................ 4.25%
September 15, 2001........................ 4.50%
March 15, 2002............................ 4.50%
September 15, 2002........................ 5.25%
March 15, 2003............................ 5.25%
September 15, 2003........................ 6.00%
March 15, 2004............................ 6.00%
September 15, 2004........................ 6.50%
March 15, 2005............................ 7.00%
September 15, 2005........................ 7.00%
March 15, 2006............................ 8.00%
September 15, 2006........................ 8.00%
March 15, 2007............................ 8.75%
September 15, 2007........................ 9.00%
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Issuers, the Issuers
will pay all principal, premium, if any, and interest on that Holder's notes in
accordance with those instructions. Otherwise, the Issuers will make all
payments of principal, premium, if any, and interest on the notes at the office
or agency of the Paying Agent and Registrar within the City and State of New
York unless the Issuers elect to make interest payments by check mailed to the
Holders at their respective addresses set forth in the register of Holders.
Paying Agent and Registrar for the Notes
The Trustee will initially act as Paying Agent and Registrar. The Issuers may
change the Paying Agent or Registrar without prior notice to the Holders, and
either Issuer may act as Paying Agent or Registrar.
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Transfer and Exchange
A Holder may transfer or exchange New Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any note
selected for redemption. Also, the Issuers are not required to transfer or
exchange any note for a period of 15 days before a selection of notes to be
redeemed.
The Issuers and the Trustee will treat the registered Holder of a Note as the
owner of the Note for all purposes.
Collateral
The notes will, subject to certain permitted exceptions, be secured by:
(1) a perfected, first priority lien on the funds in the Accounts
established under the Deposit and Disbursement Agreement; and
(2) a perfected, first priority lien on and security interest in
substantially all of the assets of Orange L.P., including a mortgage
on the leasehold and subleasehold interest of Orange L.P. under the
Master Lease and an assignment of all of the contracts and personal
property of Orange L.P.; and
(3) a perfected, first priority pledge of the Equity Interests in Orange
L.P. held by GAS Orange, and to the extent not inconsistent with the
terms of the Stipulation for so long as it is in effect, the Equity
Interests of GAS LP in Orange L.P. and of the partners of GAS LP in
GAS LP.
The collateral does not include the Steam Plant (or insurance in respect
thereof) or any turbine and associated equipment leased from GEAID under the
lease engine support program.
Deposit and Disbursement Agreement
Orange L.P. entered into a deposit and disbursement agreement (as more
particularly defined in "Certain Definitions " below, the "Deposit and
Disbursement Agreement"). The Deposit and Disbursement Agreement grants to U.S.
Bank Trust National Association, in its capacity as collateral agent (in such
capacity, the "Collateral Agent") for the benefit of the Trustee, the Holders of
the notes and the other Secured Parties, a perfected, first priority lien on
the funds in the Accounts.
First Mortgage
SIDA and Orange L.P. entered into a mortgage and assignment of rents (as more
particularly defined in "Certain Definitions" below, the "First Mortgage"),
granting to the Collateral Agent for the benefit of the Holders of the notes and
other Secured Parties a first mortgage lien on, and security interest in, Orange
L.P.'s interest in the Mortgaged Property described therein, including SIDA's
(1) leasehold estate under the Ground Lease and Easement Lease in the
Leased premises and the Outside Easements,
(2) easement interest under the City Easement Agreements in the City
Easements,
(3) title to the improvements (including the Project) and equipment
located on the Leased Premises and the Easements, subject to Permitted
Liens, including certain Permitted Title Encumbrances; and including,
SIDA's and Orange L.P.'s
(4) subleasehold estate under the Master Lease in the Leased Premises and
the Outside Easements,
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(5) leasehold estate under the Master Lease in the City Easements,
(6) leasehold estate under the Master Lease in the improvements (including
the Project) and the equipment located on the Leased Premises and the
Easements and
(7) all Orange L.P.'s right, title and interest under the Master Lease,
subject to Permitted Liens, including certain Permitted Title
Encumbrances.
Lease Documents and Rents. The First Mortgage includes a lien upon,
security interest in, and present assignment of, the Lease Documents and the
rents, issues, profits, and proceeds by Orange L.P. and SIDA to the Collateral
Agent, subject to the right of Orange L.P. to collect the rents, issues, profits
and proceeds, until the occurrence and during the continuance of an Event of
Default.
Secured Obligations; Maximum Principal Amount of Secured Obligations. The
First Mortgage secures the payment and performance when due of all of Orange
L.P.'s obligations under the notes, the Indenture and the Collateral Documents.
However, the maximum principal amount of the Secured Obligations under the First
Mortgage will be limited to $68.0 million (the "Maximum Principal Amount"), plus
interest payable pursuant to the notes on the Maximum Principal Amount, premium
payable upon prepayment of notes in the Maximum Principal Amount and repayment
after default of amounts advanced for the payment of real estate taxes, payments
in lieu of taxes, charges and assessments, insurance premiums, costs of
collection, costs of enforcement and other amounts paid by the Collateral Agent,
provided that the Secured Obligations will not include interest on any unpaid
interest to the extent, if any, and the same would require the payment of
additional mortgage recording tax with respect thereto, unless such mortgage
recording tax is in fact paid. Orange L.P. agrees to pay any mortgage recording
tax that may be or become due with respect to the First Mortgage. The First
Mortgage expressly provided that the limitation on the Maximum Principal Amount
of the Secured Obligations secured under the Mortgage does not limit the amount
of the Secured Obligations secured under the Security Agreement or any other
Collateral Document.
Reconveyance Option. In the event Orange L.P. has any right or obligation
to acquire SIDA's interests pursuant to the Master Lease or the PILOT Agreement
(each a "Reconveyance Option"), Orange L.P. must obtain the prior written
consent of the Collateral Agent and provide to the Collateral Agent such
instruments, documents, opinions of counsel and endorsements to the Collateral
Agent's title insurance policy as the Collateral Agent requests before
exercising such right or fulfilling such obligation. If an Event of Default is
continuing, then at the option of the Collateral Agent, SIDA's interests being
reconveyed pursuant to any Reconveyance Option will be conveyed directly to the
Collateral Agent.
Bankruptcy. Orange L.P. has assigned, transferred and set over to the
Collateral Agent Orange L.P.'s claims and rights to the payment of damages
arising from the rejection of any of the Master Lease, the Ground Lease or the
Easement Agreements pursuant to the Federal Bankruptcy Code.
Orange L.P. has agreed to obtain the Collateral Agent's prior written consent
before electing to treat any of the Master Lease, the Ground Lease or the
Easement Agreements as terminated under Section 365(h)(1) of the Federal
Bankruptcy Code. If Orange L.P. seeks to offset the amount of any damages caused
by the non-performance by any party against the rent or other charges reserved
in any of the Master Lease, the Ground Lease or the Easement Agreements, Orange
L.P. will, prior to effecting such offset, notify the Collateral Agent of its
intention to do so, and the Collateral Agent will have 30 days after receipt of
such notice from Orange L.P. to object to all or any part of such offset and
bring its objection to the attention of any court supervising the bankruptcy of
such party.
If any action, proceeding, motion or notice shall be commenced or filed in
respect of the Mortgaged Property in connection with any case under the Federal
Bankruptcy Code, the Collateral Agent may participate in any such litigation. If
an Event of Default shall be continuing, the Collateral Agent will have the
option of assuming the control of any such litigation and Orange L.P. has agreed
to execute any and all powers, authorizations, consents and other documents
required by the Collateral Agent in connection therewith and pay all costs and
expenses incurred by the Collateral Agent in connection therewith. Orange L.P.
has agreed, promptly after obtaining knowledge thereof, to notify the Collateral
Agent of any and all filings by or against any party under any of the Master
Lease, the Ground Lease and or the Easement Agreements of a petition under the
Federal Bankruptcy Code.
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Orange L.P. has assigned and transferred to the Collateral Agent a non-
exclusive right to apply to the bankruptcy court under Section 365(d)(4) of the
Federal Bankruptcy Code for an order extending the period during which any of
the Master Lease, the Ground Lease and/or the Easement Agreements may be
rejected or assumed.
Remedies. Upon the occurrence and during the continuance of an Event of
Default:
(1) the Collateral Agent may (A) have a receiver appointed to collect the
rents, issues, profits, income and proceeds from and operate the Mortgaged
Property; (B) may enter upon the Mortgaged Property itself or by its agents
for such purposes; and (C) may collect the rents, issues, profits, income
and proceeds without such entry;
(2) the Collateral Agent may commence actions to foreclose the First Mortgage
or enforce the provisions thereof;
(3) the Collateral Agent may foreclose the First Mortgage by non-judicial power
of sale (and Orange L.P. and SIDA have agreed to waive any right granted
under Section 1421 of the New York Real Property Actions and Proceedings
Law to challenge the Collateral Agent's enforcement of the First Mortgage
by non-judicial power of sale);
(4) the Collateral Agent may exercise all of the rights of a "secured party"
under the New York Uniform Commercial Code;
(5) the Collateral Agent may cure defaults and pay and perform obligations of
Orange L.P. under the First Mortgage; and
(6) the Collateral Agent, the Trustee, the Holders and the other Secured
Parties may exercise any other rights and remedies available under the
Financing Document, at law and in equity.
Security Agreements
The Issuers and SIDA will each enter into a security agreement (the "Security
Agreement" and the "SIDA Security Agreement" respectively and, collectively, the
"Security Agreements") granting an assignment and a perfected, first priority
security interest in favor of the Collateral Agent for the benefit of the
Trustee, the Holders of the notes and the other Secured Parties of all of their
respective interests
(1) under each of the Project Documents to which it is a party and any other
agreement relating to the Project to which it is party and all amendments,
supplements and renewals thereto;
(2) to the insurance policies required to be maintained under the Financing
Documents;
(3) all Governmental Approvals;
(4) to all revenues derived from their respective ownership and operation of
the Project;
(5) to their assets, including their respective personal property and fixtures
(in the case of SIDA, to the extent relating to the Project);
(6) to the Accounts;
(7) to the Permitted Investments; and
(8) to the proceeds, if any, derived from any of (1) through (6).
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So long as no Event of Default has occurred and is continuing, and subject to
certain terms and conditions in the Indenture and the Collateral Documents, all
revenues actually received by Orange L.P. will be allocated to the appropriate
Accounts in the manner described under the caption "Flow of Funds."
Upon the occurrence and during the continuance of an Event of Default, the
Collateral Agent may:
(1) declare all amounts immediately due and payable under the Indenture and the
notes;
(2) proceed to protect and enforce the rights vested in it pursuant to the
respective Security Agreements;
(3) cause any action at law or suit in equity or other proceeding to be
instituted and prosecuted to collect or enforce any obligations or rights
under the Collateral;
(4) sell or otherwise dispose of the Collateral;
(5) perform any obligation of either the Issuers or SIDA under any Financing
Document;
(6) take possession of the Collateral;
(7) secure the appointment of a receiver; and
(8) exercise its rights as a "secured party" under the New York Uniform
Commercial Code.
Pledge Agreements
The Partners and the partners of GAS LP will enter into one or more pledge
agreements (each, a "Partner Pledge Agreement" and, collectively, the "Pledge
Agreements") providing for the perfected, first priority pledge to the
Collateral Agent for the benefit of the Trustee, the Holders and the other
Secured Parties of all of the respective partnership interests of each of GAS
Orange in Orange L.P., and to the extent not inconsistent with the terms of the
Stipulation for so long as it is in effect, the partnership interests of GAS LP
in Orange L.P. and of the partners of GAS LP in GAS LP. It is currently
contemplated that while the Stipulation is in effect, GAS LP will not pledge its
partnership interests in Orange L.P., but will agree not to pledge to any other
party its interest therein or its rights to receive distributions in respect
thereon.
These pledges will secure the payment and performance when due of all of
Orange L.P.'s Obligations under the notes and the other Financing Documents.
Cash payments (including, without limitation, distributions and dividends) made
by Orange L.P. to a pledgor in respect of such collateral which are permitted by
the Indenture and proceeds received by a pledgor from a sale of such collateral
which is permitted by the Indenture shall upon receipt by such pledgor be
released from the Lien created by the relevant Pledge Agreement.
So long as no Event of Default has occurred and is continuing, and subject to
certain terms and conditions in the Indenture and the Collateral Documents, all
revenues actually received by Orange L.P. will be allocated to the appropriate
Accounts in the manner described under the caption "Flow of Funds."
Upon the occurrence and during the continuance of an Event of Default
(subject, in the case of direct or indirect interests in Orange L.P. held
through GAS LP, to the requirements of the Stipulation):
(1) all rights of Orange L.P. and any pledgors to exercise any voting or other
consensual rights in respect of the pledged Collateral will cease. All of
these rights will become vested in the Collateral Agent acting at the
direction of the Trustee, which, to the extent permitted by law, will have
the sole right to exercise these voting and other consensual rights;
(2) the Trustee may sell or cause the Collateral Agent to sell the Collateral
or any part thereof for the benefit of the Secured Parties in accordance
with the terms of the Collateral Documents;
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(3) the Trustee may exercise or cause the Collateral Agent to exercise all or
any other rights and remedies that the Trustee, the Collateral Agent or the
other Secured Parties have under any of the Financing Documents, at law or
in equity; and
(4) the Trustee shall have all rights of a "secured party" under the New York
Uniform Commercial Code.
University Subordination Agreement
In 1991, as security for Orange L.P.'s performance under the Steam Contract,
the Steam Plant Operating Agreement and the Ground Lease, Orange L.P. entered
into
(1) a Mortgage and Security Agreement dated as of April 5, 1991 with SIDA and
Syracuse University pursuant to which Orange L.P. and SIDA granted to
Syracuse University a mortgage lien on, and a security interest in, the
Project in the maximum principal amount of twenty million dollars
($20,000,000) (the "University Facility Mortgage");
(2) a Mortgage and Security Agreement dated as of April 5, 1991 with SIDA and
Syracuse University pursuant to which Orange L.P. and SIDA granted to
Syracuse University a mortgage lien on, and a security interest in, the
Pipeline in the principal amount of ten million dollars ($10,000,000) to
secure Orange L.P.'s obligations relating to access to the Pipeline after
the termination or expiration of the Ground Lease (the "University Pipeline
Mortgage"); and
(3) two Security Agreements dated as of April 5, 1991 with SIDA and Syracuse
University pursuant to which we and SIDA granted a security interest in our
contracts and other assets relating to the Project (the "University
Security Agreements", together with the University Facility Mortgage and
the University Pipeline Mortgage are referred to as either the "University
Collateral Documents" or the "Subordinate Collateral Documents") in favor
of the Collateral Agent. Syracuse University does not have a security
interest in the Equity Interests in Orange L.P.
The Subordinate Collateral Documents are, by their terms, subordinate to any
Permitted Mortgage and certain unassigned rights of SIDA. In order to confirm
and effectuate the subordination of the Subordinate Collateral Documents to the
First Mortgage, the Security Agreement and the SIDA Security Agreement (the
"Senior Collateral Documents") securing Orange L.P.'s obligations under the
notes and other Financing Documents, Syracuse University, the Collateral Agent
and Orange L.P. will enter into a Subordination Agreement (the "University
Subordination Agreement") under which Syracuse University will acknowledge and
agree that
(1) the Senior Collateral Documents are and will remain a Permitted Mortgage
under the Steam Contract, the Steam Plant Operating Agreement and the
Ground Lease,
(2) the Subordinate Collateral Documents created or arising thereunder are and
will remain subject and subordinate in all respects to the Senior
Collateral Documents created or arising thereunder, notwithstanding the
times or order of the granting thereof, the times or order of recording
thereof, the property, rights or interests covered thereby or any other
fact or circumstance, and
(3) notwithstanding the union of the fee simple title and the leasehold estate
created under the Ground Lease or the merger of any other University
Document in Syracuse University either by purchase, foreclosure or
otherwise, the separation of the fee simple estate and the leasehold estate
in the Ground Lease and the separation of the parties' interests in the
other University Documents will be maintained and a merger will not take
place without the prior written consent of the Secured Parties ; provided,
however, that this will not limit or restrict in any manner the right of
Syracuse University to terminate the Ground Lease or the other University
Documents in accordance with their terms and the terms of the University
Consent and Agreement. While Syracuse University is not barred from
foreclosing upon its interests secured by the Subordinate Collateral
Documents, any such foreclosure would constitute an Event of Default under
the Senior Collateral Documents.
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Insurance and Condemnation Proceeds
The First Mortgage and the other Collateral Documents include a lien upon,
and security interest in, Orange L.P.'s and SIDA's interests in all insurance,
condemnation and other proceeds (including Loss Proceeds, Eminent Domain
Proceeds and Title Event Proceeds) with respect to the Project. Under the SIDA
Consent and Agreement, SIDA has agreed that all insurance and condemnation
proceeds with respect to the Project will be applied as provided in the First
Mortgage and other Collateral Documents. See "Summary Descriptions of the
Principal Agreements Relating to the Project--SIDA Consent and Agreement." Under
the University Consent and Agreement, Syracuse University will also agree that
all insurance and condemnation proceeds with respect to the Project will be
applied as provided in the First Mortgage and other Collateral Documents.
However, the Collateral Agent will agree with Syracuse University that, if the
Project is damaged or destroyed, the Collateral Agent and the Secured Parties
are required to consider in good faith the application of any insurance proceeds
and permit the application of such insurance proceeds for the rebuilding and
reconstruction of the Project as long as
(1) no Default or Event of Default is continuing under the Indenture and other
Financing Documents which permits the acceleration of the maturity of the
notes,
(2) the aggregate of such proceeds and all other funds available for such
rebuilding or reconstruction are sufficient to complete the same within a
reasonable time, and
(3) either (x) the conduct of such rebuilding or reconstruction or the
operation of the Project after completion thereof are not likely in the
reasonable judgment of the Collateral Agent to give rise to such a Default
or Event of Default or (y) the amount of such insurance proceeds required
to effect such rebuilding or reconstruction does not exceed the greater of
(A) 35% of the replacement value of the Project or
(B) the replacement cost of one of the gas turbines in the Project.
See "Summary Descriptions of the Principal Agreements Relating to the Project-
- -Ground Lease Arrangement--Insurance and Indemnification under the Ground
Lease," "--Insurance and Indemnification under the Master Lease," "--
Condemnation" and "University Consent and Agreement."
Proceeds of Collateral
All proceeds from any foreclosure or other remedies with respect to the
Collateral remaining after payment of the costs of such foreclosure or other
remedies received by the Collateral Agent or the Trustee will be deposited in
the Redemption Account or otherwise as provided in the Deposit and Disbursement
Agreement and the Indenture, to be distributed as provided in the Deposit and
Disbursement Agreement and the Indenture.
Exercise of Remedies
The Trustee will determine the circumstances and manner in which it or the
Collateral Agent will dispose of the Collateral, including whether to release
all or any portion of the Collateral from the Liens created by the Collateral
Documents and whether to foreclose on the Collateral following an Event of
Default. The Trustee will determine the circumstances and manner in which it,
the Collateral Agent and the other Secured Parties will exercise their other
rights and remedies under and with respect to the Financing Documents, at law or
in equity. Upon the full and final payment and performance of all Obligations in
respect of the notes and the Indenture, the notes will be canceled and the
Collateral Documents will terminate, or be assigned to any subsequent lender,
and the Collateral will be released.
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Optional Redemption
The notes will be redeemable at the option of the Issuers at any time and
from time to time, in whole or in part, upon not less than 30 nor more than 60
days notice to each Holder, at a redemption price equal to the Make-Whole Price.
"Make-Whole Price" means an amount equal to the greater of
(1) 100% of the principal amount of such notes and
(2) as determined by a Reference Treasury Dealer, the sum of the present values
of the remaining scheduled payments of principal and interest thereon
discounted to the date of redemption on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus
50 basis points,
plus, in each case, accrued and unpaid interest thereon to the Redemption Date.
Unless the Issuers default in payment of the redemption price, on and after the
Redemption Date, interest will cease to accrue on the notes or portions thereof
called for redemption.
Mandatory Redemption
The Issuers are required to redeem the notes as described below. The notes
are subject to mandatory redemption, in whole or in part, at a redemption price
equal to the principal amount of the notes being redeemed plus accrued and
unpaid interest to the redemption date, upon:
(1) the receipt of Loss Proceeds or Eminent Domain Proceeds by Orange L.P. if
Orange L.P. determines that:
(A) the Project cannot be rebuilt, repaired or restored to permit
operations on a commercially reasonable basis, or Orange L.P.
determines not to rebuild, repair or restore the Project, in which
case the amount of such Loss Proceeds or Eminent Domain Proceeds will
be available for a redemption, or
(B) only a portion of the Project is capable of being rebuilt, repaired or
restored, in which case, if excess proceeds exist after such rebuild,
repair or restoration, only the amount of the excess Loss Proceeds or
Eminent Domain Proceeds shall be made available for such redemption;
(2) the receipt by Orange L.P. of proceeds in connection with a Title Event, in
which case the amount of the Title Event Proceeds shall be made available
for a redemption, subject to reduction by the costs expended in connection
with collecting proceeds upon the occurrence of such Title Event, and any
additional reasonable costs or expenses that Orange L.P. will be subject to
as a result of the Title Event; and
(3) the receipt by Orange L.P. of payments arising from the occurrence of a
Contract Termination Event in which case the amount of all such payments
shall be made available for such redemption, subject to reduction, in the
case of a Contract Termination Event relating to the Gas Purchase
Agreement, by the costs expended in connection with obtaining a replacement
or substitute gas supply and funding the Gas Reserve Account.
Selection and Notice
If less than all of the notes are to be redeemed at any time, the Trustee
will select notes for redemption on a pro rata basis, provided that no notes of
$1,000 or less shall be redeemed in part. The Issuers will mail notices of
redemption by first class mail at least 30 but not more than 60 days before the
redemption date to each Holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any note is to be
redeemed in part only, the notice of redemption that relates to that note shall
state the portion of the principal amount of the note to be redeemed. A new note
in principal amount equal to the unredeemed portion of the partially redeemed
note will be
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issued in the name of the Holder of the partially redeemed note upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for redemption. Unless the Issuers default in payment of the
redemption price on and after the redemption date, interest ceases to accrue on
the notes or portions of the notes called for redemption.
Repurchase at the Option of Holders upon Change of Control
Upon the occurrence of a Change of Control, each Holder of notes will have
the right to require the Issuers to repurchase all or any part, equal to $1,000
or an integral multiple thereof, of such Holder's notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase (the "Change of
Control Payment"). Within ten days following any Change of Control, the Issuers
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Issuers will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful,
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer,
(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all notes or portions thereof so tendered and
(3) deliver or cause to be delivered to the Trustee the notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of notes or portions thereof being purchased by the Issuers.
The Paying Agent will promptly mail to each Holder of notes so tendered the
Change of Control Payment for such notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Issuers will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date. The Change of Control provisions
described above will be applicable whether or not any other provisions of the
Indenture are applicable. Except as described above with respect to a Change of
Control, the Indenture will not contain provisions that permit the Holders of
the notes to require that the Issuers repurchase or redeem the notes in the
event of a takeover, recapitalization or similar transaction. Finally, the
Issuers' ability to pay cash to the Holders of notes upon a repurchase may be
limited by the Issuers' then existing financial resources. See "Risk Factors--
Financing a Change of Control Offer."
The Issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Issuers and
purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Issuers. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of notes to require the Issuers to repurchase such notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of the Issuers to another Person or group may be uncertain.
Nature of Recourse on the Notes
All payments of principal, premium, if any, and interest on the notes will be
obligations solely of the Issuers. The Issuers' obligations to make those
payments will, subject to certain permitted exceptions, be secured by a
perfected, first priority lien on substantially all of the assets and contracts
of the Issuers, the ownership interests of the Partners and the Accounts held by
the Collateral Agent. The Issuers' obligations to make payments under the notes
will be non-
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recourse to the direct and indirect owners of the Issuers except, in the case of
the Partners, with respect solely to recourse to either of the Partner's
ownership interests in Orange L.P. pledged to the Collateral Agent as security
for the notes. Except for Orange L.P. and the Partners, solely to the extent
that each Partner has pledged its ownership interests in Orange L.P., neither
the equity owners of Orange L.P. nor any Affiliate, incorporator, officer,
director or employee thereof will guarantee the payment of the notes or has any
obligation with respect to the payment of the notes.
Flow of Funds
Deposit and Disbursement Agreement
Under the Deposit and Disbursement Agreement, the Trustee, on behalf of the
Secured Parties, will appoint the Collateral Agent as security agent for the
Secured Parties with respect to funds of Orange L.P. in which the Collateral
Agent has been granted a security interest. The Collateral Agent will hold,
invest and disburse funds in which the Collateral Agent, on behalf of the
Secured Parties, has been granted a security interest.
The Deposit and Disbursement Agreement Accounts
Orange L.P. will establish and create the following accounts (collectively,
the "Accounts") with the Collateral Agent and pledge these Accounts as security
for the benefit of the Collateral Agent acting on behalf of all the Secured
Parties :
(1) Revenue Account;
(2) Principal Account;
(3) Interest Account;
(4) Debt Service Reserve Account;
(5) Gas Reserve Account;
(6) Capital Expenditure Reserve Account;
(7) Subordinated Asset Management Fee Account;
(8) Distribution Account;
(9) Distribution Suspense Account;
(10) Loss Proceeds Account;
(11) Stipulation Reserve Account; and
(12) Redemption Account.
At the written request and direction of Orange L.P., the Collateral Agent
will invest all amounts deposited with the Collateral Agent in Permitted
Investments.
Revenue Account; Priority of Payments
All revenues or other proceeds actually received by Orange L.P. or otherwise
derived from the ownership or operation of the Project will be paid into the
Revenue Account. Orange L.P. will arrange for the direct payment of the revenues
into the Revenue Account, and neither Orange L.P. nor any Partner will have any
right of withdrawal from the Revenue Account except under the priority of
payments described below.
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The Revenue Account shall be funded from the following:
(1) all revenues and other proceeds actually received by Orange L.P.
(including payments under the Niagara Mohawk Agreements);
(2) to the extent amounts in any reserve accounts equal the required
balance, the income, if any, from the investment of funds in such
account; and
(3) other amounts as required to be transferred to the Revenue Account from
any other Account pursuant to the Deposit and Disbursement Agreement.
Upon receipt of a certificate from Orange L.P. (or its duly authorized agent
for such purposes) detailing the amounts to be paid, funds in the Revenue
Account shall be transferred via wire transfer by the Collateral Agent:
First, as and when required, to pay Operating and Maintenance Costs of Orange
L.P., provided that, if such cumulative Operating and Maintenance Costs in any
fiscal year either exceeds or falls short of the projected Operating and
Maintenance Costs in the applicable annual Operating Budget by more than 10%,
then no amounts may be withdrawn on behalf of Orange L.P. to pay non-budgeted
operating costs unless Orange L.P. certifies that (i) the additional non-
budgeted, or reduced under-budgeted, costs are reasonably designed to permit, or
shall not adversely affect the ability of, the Issuers to satisfy their
obligations in respect of the notes and maximize Orange L.P.'s revenue and net
income and (ii) the Independent Engineer certifies that the additional (or
reduced) cost is prudent and reasonable;
Second, on a monthly basis, to the Trustee and the Collateral Agent any
amounts then due and payable to each of them as fees, costs and expenses;
provided, however, that if funds in the Revenue Account are insufficient on any
date to make the payments specified in this paragraph Second, distribution of
funds shall be made ratably to the specified recipients based on the respective
amounts owed such recipients;
Third, on a monthly basis
(1) to the Interest Account an amount which, together with the amount then
in such account, equals all of the interest due or becoming due on the
notes on the next succeeding Interest Payment Date;
(2) to the Principal Account an amount which, together with the amount then
in such account, equals all of the principal and premium, if any, due
or becoming due on the notes on the next succeeding Principal Payment
Date;
(3) to a sub-account within the Principal Account an amount which, together
with the amounts then in such sub-account, equals all of the principal
due or becoming due on any Permitted Indebtedness other than the notes
within the succeeding six-month period; and
(4) to a sub-account within the Interest Account an amount which, together
with the amounts then in such sub-account, equals all of the interest
due or becoming due on any Permitted Indebtedness other than the notes
within the succeeding six-month period; provided, however, that if
monies in the Revenue Account are insufficient on any date to make the
transfers specified in this paragraph Third, distribution of monies
shall be made, first, ratably to the Accounts referred to in clauses
(1) and (2) of this paragraph Third based on the respective amounts
owed such Accounts and second, ratably to the Accounts referred to in
clauses (3) and (4) of this paragraph Third based on the respective
amounts owed such Accounts;
Fourth, on a monthly basis, to the Debt Service Reserve Account an amount as
necessary to fund the Debt Service Reserve Account so that the sum of the amount
available to be drawn under any Debt Service Reserve Letter of Credit plus the
balance in the Debt Service Reserve Account equals the Debt Service Reserve
Required Balance;
Fifth, on a monthly basis, to the Gas Reserve Account, an amount necessary to
cause the balance thereof to be equal to the Gas Reserve Required Balance;
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Sixth, on a monthly basis, to the Capital Expenditure Reserve Account, an
amount necessary to cause the balance thereof to be equal to the Capital
Expenditure Reserve Required Balance;
Seventh, on a monthly basis, to the Subordinated Asset Management Fee
Account, an amount necessary for the payment of Subordinated Asset Management
Fees then due and owing;
Eighth, on a monthly basis, any remaining amounts to the Distribution
Account; and
Ninth, any amounts in the Distribution Account which cannot be distributed
because of the failure to satisfy certain conditions to distributions, to the
Distribution Suspense Account.
Interest Account and Principal Account
Funds in the Interest Account and the Principal Account will be utilized to
make payments of interest, principal and premium, if any, on the notes and any
outstanding Permitted Indebtedness.
Debt Service Reserve Account
The Debt Service Reserve Account was funded with proceeds from the sale of
the original unregistered notes in an amount equal to the Debt Service Reserve
Required Balance. Orange L.P. may replace amounts in the Debt Service Reserve
Account with a Debt Service Reserve Letter of Credit having a stated amount
equal to the amount being withdrawn from the Debt Service Reserve Account. These
deposits, in conjunction with the Debt Service Reserve Letter of Credit, if any,
will be available in the event the Revenue Account, the Principal Account and
the Interest Account lack sufficient funds on a Payment Date to meet payments of
principal, premium, if any, and interest on the notes.
At any time that the sum of the amount available to be drawn under the Debt
Service Reserve Letter of Credit plus the amount then on deposit in the Debt
Service Reserve Account is less than the Debt Service Reserve Required Balance,
the Debt Service Reserve Account shall then accumulate cash deposits from, and
in the following order of priority:
(1) the Revenue Account, as provided above under "Revenue Account; Priority of
Payments;" and
(2) net interest, if any, earned on amounts deposited in the Debt Service
Reserve Account; and
(3) amounts then on deposit in the Subordinated Asset Management Fee Account;
until the sum of the amount available to be drawn under the Debt Service Reserve
Letter of Credit plus the amount then on deposit in the Debt Service Reserve
Account equals the Debt Service Reserve Required Balance. Once the Debt Service
Reserve Required Balance is reached, interest income, if any, in excess of such
amount shall be transferred to the Revenue Account.
Gas Reserve Account
The Gas Reserve Account will be funded in accordance with the provisions set
forth above under the caption "Flow of Funds--Revenue Account; Priority of
Payments" until the amount then on deposit in the Gas Reserve Account equals the
Gas Reserve Required Balance. Once the Gas Reserve Required Balance is reached,
interest income, if any, in excess of such amount will be transferred to the
Revenue Account.
The Gas Reserve Required Balance at any time will equal the Gas Reserve
Deficit at such time multiplied by the highest average "Niagara Border Spot
Price" for natural gas (delivered to pipe as stated in U.S. dollars) reported at
any time during the previous 12 months in the weekly Canadian Price Report
published by Natural Gas Week (on an MMBtu basis).
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The Gas Reserve Deficit at any time will equal:
(1) the amount of gas necessary, in the judgment of the Independent Engineer,
to operate the Project through the latest stated maturity date of the
notes, or September 15, 2007, so that electric output of the Project for
such period will average at least 663,000 MWh per year and Orange L.P.
can meet its obligations to deliver steam under the Steam Contract less;
(2) the sum of:
(A) the "Unconsumed Entitlement" (as such term is used in the Gas Purchase
Agreement) at such time plus
(B) the unconsumed quantity, at such time, of any natural gas (in addition
to the Unconsumed Entitlement), purchased and paid for by Orange L.P.
and as to which transportation pursuant to arrangements approved by the
Independent Engineer as being consistent with prudent industry practice
are in place plus
(C) the Btu equivalent of energy and associated capacity that Orange L.P.
has purchased the right to acquire in connection with permitted sales
of natural gas as described under the caption "Prohibition on
Fundamental Changes."
The Independent Engineer shall determine the Gas Reserve Deficit at least
annually in connection with the preparation and approval of the Operating Budget
prior to the end of each calendar year and in connection with each withdrawal of
funds from the Gas Reserve Account.
Capital Expenditure Reserve Account
The Capital Expenditure Reserve Account will be funded to the Capital
Expenditure Reserve Required Balance in accordance with the provisions set forth
above under the caption "Flow of Funds--Revenue Account; Priority of Payments"
and in accordance with the Operating Budget and schedules thereto approved by
the Independent Engineer prior to the end of each calendar year (and, in good
faith, so as to implement even monthly contributions) or with such variations
from such Operating Budget and schedules as Orange L.P. certifies to the Trustee
and the Collateral Agent are reasonable and necessary and in accordance with
prudent industry practice. Amounts on deposit in the Capital Expenditure Reserve
Account will be used for Capital Expenditures to be made in accordance with
prudent industry practice and as may be required pursuant to the terms of the
Indenture and the Deposit and Disbursement Agreement. Funds on deposit in the
Capital Expenditure Reserve Account in excess of the Capital Expenditure Reserve
Required Balance may be distributed to the partners of Orange L.P. or as Orange
L.P. will direct.
Subordinated Asset Management Fee Account
Funds in the Subordinated Asset Management Fee Account will be used for the
payment of Subordinated Asset Management Fees due and owing under Niagara Mohawk
Energy Marketing Agreement (subject to the subordination provisions applicable
to the payment of such amounts).
In addition, interest earned on funds in the Subordinated Asset Management
Fee Account will be transferred to the Debt Service Reserve Account under the
circumstances described in the second paragraph under the caption "--Debt
Service Reserve Account."
Distribution Account
The Distribution Account will receive funds transferred from the Revenue
Account after all other then required amounts have been paid as provided above
under "Revenue Account; Priority of Payments." Restricted Payments may be made
only from and to the extent funds are on deposit in the Distribution Account.
Such distributions will be made no more frequently than once every six months
and are subject to the prior satisfaction of the following conditions:
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(1) the amount then on deposit in the Principal Account will be equal to or
greater than the aggregate payments of principal and premium, if any, due
on the notes on the next succeeding Principal Payment Date and on other
Permitted Indebtedness within the succeeding six-month period, and the
amount then on deposit in the Interest Account shall be equal to or
greater than the aggregate payments of interest due on the notes on the
next succeeding Interest Payment Date and on other Permitted Indebtedness
within the succeeding six-month period;
(2) the amount available to be drawn under the Debt Service Reserve Letter of
Credit plus the amount on deposit in the Debt Service Reserve Account
equals or exceeds the Debt Service Reserve Required Balance, the amount on
deposit in the Gas Reserve Account equals or exceeds the Gas Reserve
Required Balance and the amount on deposit in the Capital Expenditure
Reserve Account equals or exceeds the Capital Expenditure Reserve Required
Balance;
(3) no Default or Event of Default has occurred and is continuing;
(4) the Debt Service Coverage Ratio for the most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such distribution is to be made
(or in the case of any proposed distribution date prior to the date on
which internal financial statements are available for a period of four
full fiscal quarters after the Original Closing Date, the Debt Service
Coverage Ratio for the period commencing on the Original Closing Date, and
ending on the last date of the most recently ended quarter for which
internal financial statements are available immediately preceding the date
on which such distribution is to be made) is equal to or greater than 1.35
to 1, in the opinion of the Independent Engineer and as certified by an
authorized officer of Orange L.P. or Niagara Mohawk Energy Marketing;
(5) the projected Debt Service Coverage Ratio for the next succeeding four
full fiscal quarters is equal to or greater than 1.35 to 1, in the opinion
of the Independent Engineer and as certified by an authorized officer of
Orange L.P. or Niagara Mohawk Energy Marketing;
(6) the amount then on deposit in the Revenue Account, after giving effect to
the payment of such distributions, is at least $1 million;
(7) either (i) the average of the "Market Price" (as defined in the Indexed
Swap Agreement) for the preceding six months is less than 80% of the then
applicable "Indexed Contract Price" (as so defined) or (ii) if the average
Market Price for such period equals or exceeds 80% of the then applicable
Indexed Contract Price, then the average operating availability for the
immediately preceding four fiscal quarters for which such information is
available and the projected operating availability for the next succeeding
four fiscal quarters are, in each case, at least 94.61% in the opinion of
the Independent Engineer and as certified by an authorized officer of
Orange L.P. or Niagara Mohawk Energy Marketing; and
(8) there are no pending or threatened actions or proceedings of any kind,
including actions or proceedings of or before any Governmental Authority,
that could, if determined adversely, have a Material Adverse Effect.
If the payment by Orange L.P. of, or the right of any partner of Orange L.P. to
receive any permitted distribution or other payment by Orange L.P. to any of its
Partners, is disputed pursuant to any pending or threatened legal proceeding,
the Collateral Agent shall have the right to deposit the disputed amount of such
distribution or payment in an interest bearing escrow account pending the final
resolution of such dispute.
Distribution Suspense Account
Funds in the Distribution Account which may not be distributed because of a
failure to satisfy any conditions to distributions will be transferred to the
Distribution Suspense Account. Funds in the Distribution Suspense Account may be
transferred back to the Distribution Account and distributed when
(1) all conditions to distribution are satisfied and
(2) no Default or Event of Default has occurred and is continuing.
If funds in the Revenue Account are not sufficient to
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pay any amounts which are due and payable and required to be paid
with proceeds of the Revenue Account, then funds in the Distribution Suspense
Account shall be transferred to the Revenue Account for distribution as
required.
Loss Proceeds Account
All Loss Proceeds and Eminent Domain Proceeds received by Orange L.P. shall
be deposited in the Loss Proceeds Account subject to disbursement for repair or
replacement of the assets affected, or otherwise, as follows:
The Collateral Agent will apply the amounts in the Loss Proceeds Account to
the payment, or reimbursement to the extent the same have been paid or satisfied
by Orange L.P., of
(1) the costs incurred by the Collateral Agent or the Trustee in connection
with any negotiation, action or proceeding to collect the Loss Proceeds
or Eminent Domain Proceeds in question; and
(2) the costs of repair or replacement of the Project or any part thereof
that has been affected due to an Event of Loss or Event of Eminent Domain
upon the Collateral Agent's receipt of a complete and properly executed
requisition from an authorized officer of Orange L.P. and approved by the
Independent Engineer;
provided, however, that no such approval of the Independent Engineer shall be
required if the repair or replacement in question is reasonably estimated by
Orange L.P. to cost less than $1.0 million.
If Orange L.P. determines that the Project is not capable of being rebuilt or
replaced to permit operation on a commercially reasonable basis, or determines
not to rebuild, repair or restore the Project (or if the Loss Proceeds and
Eminent Domain Proceeds, together with any other amounts available to Orange
L.P. for such rebuilding or replacement, are not sufficient to permit such
rebuilding or replacement), the Collateral Agent shall transfer the Loss
Proceeds and Eminent Domain Proceeds to the Redemption Account for application
in accordance with the Indenture and the Deposit and Disbursement Agreement. The
Collateral Agent shall transfer the Loss Proceeds and Eminent Domain Proceeds in
excess of the cost of repairing or replacing the Project to the Redemption
Account for application in accordance with the Indenture and the Deposit and
Disbursement Agreement. If Orange L.P. does not rebuild or replace the Project,
the Collateral Agent shall transfer the Loss Proceeds and Eminent Domain
Proceeds to the Redemption Account for application in accordance with the
Indenture and the Deposit and Disbursement Agreement. See "--Mandatory
Redemption."
All Title Event Proceeds received by Orange L.P. or the Collateral Agent, as
applicable, shall be deposited in the Loss Proceeds Account to the payment, or
reimbursement to Orange L.P. to the extent the same have been paid or satisfied
by Orange L.P., of
(1) the costs incurred by the Collateral Agent or the Trustee in connection
with any negotiation, action or proceeding to collect the Title Event
Proceeds in question; and
(2) to the cost of remedying such Title Event. Any Title Event Proceeds
related to the New York mortgage recording tax and any penalties and
interest thereon shall be used to pay such tax before being used for any
other purpose. Any Title Event Proceeds not so expended shall be
transferred to the Redemption Account for application in accordance with
the Indenture and the Deposit and Disbursement Agreement.
Stipulation Reserve Account
The Stipulation Reserve Account was funded on the Original Closing Date with
proceeds from the sale of the original unregistered notes in the amount of $3.0
million. Amounts on deposit to the Stipulation Reserve Account will be applied
at the direction of Orange L.P. to make payments to Kronish Lieb of amounts
which it is entitled to receive from time to time under the Stipulation or to
make provision for other payments to Kronish Lieb in respect of such amounts or
Kronish Lieb's entitlement thereto, including payments for the extinguishment of
Kronish Lieb's entitlement to payment of the amounts or the resolution of claims
relating thereto and payments into the escrow arrangement described in the
Covenant. If Orange L.P. provides a written certification to the Collateral
Agent to the effect that the likelihood is remote that all or any part of the
amount on deposit to the Stipulation Reserve Account will be required to make
payments to Kronish Lieb of amounts which it is entitled to receive from time to
time under the Stipulation or to make other payments to Kronish Lieb in respect
of such amounts or Kronish Lieb's entitlement thereto, or if Kronish Lieb has
consented in writing to the release of the amount on deposit in the Stipulation
Reserve Account, then the Collateral Agent will distribute all or any such
portion of the amounts on deposit to Orange L.P., or otherwise as directed by
Orange L.P.
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In addition, income earned on funds on deposit to the Stipulation Reserve
Account will be credited to the Stipulation Reserve Account.
Redemption Account
The Redemption Account will be funded from:
(1) certain proceeds received in connection with an Event of Loss, an Event of
Eminent Domain or a Title Event;
(2) certain proceeds realized in connection with a Contract Termination Event;
and
(3) proceeds received as a result of the foreclosure of the Collateral
following an Event of Default under the Indenture.
All proceeds received in connection with an Event of Loss, Event of Eminent
Domain or a Title Event will be deposited in the Loss Proceeds Account and
proceeds will be transferred to the Redemption Account if not used to repair or
replace the Project or remediate the title deficiency, as permitted under the
Indenture, and will be distributed to the Collateral Agent for distribution
after giving effect to the provisions of the Indenture, and the Deposit and
Disbursement Agreement with respect to such proceeds. See "--Mandatory
Redemption."
Investment of Monies
Amounts deposited in the Accounts under the Deposit and Disbursement
Agreement, at the written request and direction of Orange L.P., will be invested
by the Collateral Agent in Permitted Investments. The investments will generally
mature in such amounts and not later than such times as may be necessary to
provide monies when needed to make payments from such monies as provided in the
Deposit and Disbursement Agreement. Net interest or gain received, if any, from
such investments will be applied as provided in the Deposit and Disbursement
Agreement. Absent written instructions from Orange L.P., the Collateral Agent
will invest the amounts held in the accounts and funds under the Deposit and
Disbursement Agreement in Permitted Investments described in clause (1) of such
definition. So long as an outstanding balance remains in any of the Accounts
under the Deposit and Disbursement Agreement, the Collateral Agent will provide
Orange L.P. with monthly statements showing the amount of all receipts, the net
investment income or gain received and collected, all disbursements and the
amount then available in each of the Accounts.
Excluded Accounts
In addition to the Accounts, Orange L.P. may establish, fund and maintain
other accounts ("Excluded Accounts") with any bank, securities brokerage firm,
or financial institution, provided that the accounts are funded exclusively with
one or more of the following:
(1) funds contributed to Orange L.P. by any Partner,
(2) funds loaned to Orange L.P. that constitute Permitted Indebtedness,
(3) funds which have been properly released or otherwise properly paid to
Orange L.P. pursuant to the terms of the Deposit and Disbursement
Agreement,
(4) pending the release thereof, cash collateral subject to a lien
permitted by the Indenture, and/or
(5) any interest or other income earned on any of the Excluded Accounts.
All Excluded Accounts shall be free of any Liens and security interests in favor
of Orange L.P., the Collateral Agent and/or the Secured Parties and shall be
free of any and all operating restrictions and investment restrictions imposed
under the Indenture.
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Certain Covenants
Limitations on Indebtedness
The Issuers will not create, incur or suffer to exist any Indebtedness except
Permitted Indebtedness.
Limitations on Guarantees
The Issuers will not contingently or otherwise be or become liable in
connection with any guarantee, except for endorsements and similar obligations
in the ordinary course of business.
Liens
The Issuers will not directly or indirectly, create, incur, assume or suffer
to exist any Lien of any kind on any of their respective assets now owned or
hereafter acquired, except Permitted Liens or to the extent they may be
considered Liens, Permitted Title Encumbrances.
Restricted Payments
The Issuers shall not make any Restricted Payments except for payments
permitted under the Deposit and Disbursement Agreement as described under the
caption "Flow of Funds."
Investments
The Issuers shall not make any Investments, except
(1) Permitted Investments;
(2) Orange L.P.'s investment in Capital Co. existing on the Original
Closing Date;
(3) to the extent they constitute Investments:
(A) contracts to purchase natural gas described in clause (2)(B) of
the definition of "Gas Reserve Deficit"; and
(B) contracts to purchase energy and associated capacity required
to be entered into in connection with permitted sales of
natural gas; and
(4) pursuant to the Project Documents and the exercise of rights
thereunder permitted by the Indenture to the extent they constitute
Investments.
Sale and Lease-Back Transactions
The Issuers shall not enter into any Sale and Lease-Back Transactions.
Transactions with Affiliates
The Issuers will not make any payment to, or sell, lease, transfer or
otherwise dispose of any of their respective properties or assets to, or
purchase any property or assets from, or enter into or make any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(1) such Affiliate Transaction is on terms that are no less favorable to
the applicable Issuer than those that would have been obtained in a
comparable transaction by such Issuer with an unrelated Person and
(2) such Issuer delivers to the Trustee
(A) with respect to any Affiliate Transaction or any series of
related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, an Officers'
Certificate certifying that such Affiliate Transaction complies
with clause (1) above; and
(B) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $2.5 million, an opinion as to the fairness to such
Issuer of such Affiliate Transaction from a financial point of
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view issued by a nationally recognized expert in evaluating such
transactions;
provided that transactions expressly permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments," shall not
be deemed Affiliate Transactions.
Project Documents
Orange L.P. will
(1) pay all amounts payable under each of the Project Documents as and when
such amounts become due and payable,
(2) perform and observe in all material respects the covenants and
agreements contained in each of the Project Documents,
(3) enforce, defend and protect all of its material rights contained in any
of the Project Documents and
(4) take all reasonable and necessary actions to prevent the termination or
cancellation of any of the Project Documents (other than by performance)
unless
(A) Orange L.P. determines in good faith that such failure to perform,
observe, enforce, defend, protect or act under clause (2), (3) or
(4) is in the best interest of Orange L.P.,
(B) such failure would not have a Material Adverse Effect and
(C) Orange L.P. promptly gives the Trustee and the Collateral Agent
notice of the failure to so perform, observe, defend, protect or act
and the basis for such determination, if possible, not later than
five days prior to such failure, but in any event not later than
five days thereafter.
In addition, Orange L.P. will not
(1) breach any obligation under any Project Document to which it is a party
and fail to cure such breach within the applicable cure period provided
for in such Project Document (or, if no cure period is specified in such
Project Document, within 30 days of such breach),
(2) (A) amend, vary or waive, or consent to any amendment, variation or
waiver of, any terms of any of the Project Documents,
(B) release, surrender, cancel or terminate any rights or obligations,
or discharge any obligations (other than by performance), consent to
any release, surrender, cancellation, termination or discharge
(other than by performance), under any of the Project Documents or
(C) affirmatively consent to the assignment by any party to any Project
Document of such party's right or obligations under such Project
Document in each case without the consent of the Required Holders,
or
(3) assign, transfer or otherwise dispose of any of its rights in any of the
Project Documents unless, in each case
(A) Orange L.P. determines in good faith that such action is in the best
interests of Orange L.P.,
(B) such action would not have a Material Adverse Effect and
(C) Orange L.P. promptly gives the Trustee and the Collateral Agent
notice of such action and the basis for such determination, if
possible, not later than five days prior to such action, but in any
event not later than five days thereafter.
Prohibitions on Other Obligations or Assignments
The Issuers may not assign any of their rights or obligations under any
Financing Document or Material Project Document, and may not enter into
additional contracts if it would be reasonably expected to cause a Material
Adverse Effect and except otherwise only as contemplated under the Indenture,
including entering into contracts in connection with Permitted Investments.
Continued Operation of the Project
Orange L.P. will operate the Project at all times, except to the extent
prevented by scheduled or unscheduled maintenance in a manner consistent with
prudent industry practice for similar operations and, in any event, in a manner
so as to guarantee that Orange L.P.'s obligations to provide steam to Syracuse
University under the Steam Contract and
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to make payments to Niagara Mohawk under the Indexed Swap Agreement will be met
and, as consistent with prudent industry practice and in compliance with the
terms of the Project Documents so as to assure, to the extent reasonably
possible, the maximum generation of net revenue for the Project consistent with
the Project Documents. See "Summary Descriptions of the Principal Agreements
Relating to the Project."
Orange L.P. will renew, extend or replace the Operation and Maintenance
Agreement so that it remains in full force and effect at all times and shall
replace or consent to the replacement of the Operator if the Operator is not
operating the Project and the Steam Plant in accordance, in all material
respects, with the provisions of any of the Financing Documents, the Operation
and Maintenance Agreement, and the other Material Project Documents, upon
receipt of notice from Trustee to the effect that, in the opinion of the
Required Holders or the Independent Engineer, the Operator has failed to perform
any material obligations which are or may be performed on Orange L.P.'s behalf
by the Operator or has failed to perform its obligations under the Operation and
Maintenance Agreement; provided however, that the Operator may have 30 days from
Orange L.P.'s receipt of notice to cure said failure (or to establish to the
satisfaction of the Required Holders that a failure does not exist); provided,
further, that if such failure cannot be corrected within such 30 days, the
Required Holders will not unreasonably withhold their consent to an extension of
such time if corrective action is promptly instituted by the Operator within the
30-day period and thereafter diligently pursued until the failure is corrected
and such extension shall not in the judgment of the Required Holders have a
material adverse effect on the Holders' interests in the Project and the
Collateral. Notwithstanding the above, Orange L.P. will have no obligation to
terminate the Operation and Maintenance Agreement if such termination would
constitute a breach under the Operation and Maintenance Agreement. Orange L.P.
will not exercise its right under the Operation and Maintenance Agreement to
terminate the obligation of the Operator to perform major maintenance on the gas
turbine packages in return for the payment of the fired-hour fee without the
consent of the Required Holders. Orange L.P. shall also continue its membership
in the lease engine support program under which General Electric Company will
deliver and install substitute leased turbine equipment if either of the
Project's gas turbines become inoperative and need to be repaired or replaced.
Orange L.P. will renew, extend or replace the Asset Management Agreement so
that it remains in full force and effect at all times and shall replace or
consent to the replacement of Niagara Mohawk Energy Marketing if Niagara Mohawk
Energy Marketing is not managing the Project and the Steam Plant in accordance,
in all material respects, with the provisions of any of the Financing Documents,
the Asset Management Agreement, and the other Material Project Documents, upon
receipt of notice from Trustee to the effect that, in the opinion of the
Required Holders or the Independent Engineer, Niagara Mohawk Energy Marketing
has failed to perform any material obligations which are or may be performed on
Orange L.P.'s behalf by Niagara Mohawk Energy Marketing or has failed to perform
its obligations under the Asset Management Agreement; provided however, that
Niagara Mohawk Energy Marketing may have 30 days from Orange L.P.'s receipt of
notice to cure said failure (or to establish to the satisfaction of the Required
Holders that a failure does not exist); provided, further, that if the failure
cannot be corrected within such 30 days, the Required Holders will not
unreasonably withhold their consent to an extension of such time if corrective
action is promptly instituted by Niagara Mohawk Energy Marketing within the 30-
day period and thereafter diligently pursued until the failure is corrected and
the extension will not in the judgment of the Required Holders have a material
adverse effect on the Holders' interests in the Project and the Collateral.
Notwithstanding the above, Orange L.P. will have no obligation to terminate the
Asset Management Agreement if such termination would constitute a breach under
the Asset Management Agreement.
Prohibitions on Fundamental Changes
Except for the merger of Funding L.P. with and into Orange L.P. which occurred
on the Original Closing Date, Orange L.P. may not enter into any transaction of
merger or consolidation, change its form of organization or its business,
liquidate, wind-up or dissolve itself or discontinue its business. Orange L.P.
is also restricted from engaging in any business other than owning and operating
the Project and activities incidental thereto, issuing the notes, incurring
Permitted Indebtedness and performing its obligations under the Operative
Documents.
Orange L.P. may not lease (as lessor) or sell, transfer, assign, hypothecate,
pledge or otherwise dispose of any of its property or assets, except for
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(1) sales of obsolete, worn out or replaced property not used or useful in its
business, in each case for not less than fair market value,
(2) in the ordinary course of its business as contemplated by the Project
Documents,
(3) the sale of Permitted Investments, and
(4) sales of natural gas that are permitted.
In order for a sale of natural gas to be permitted, it must satisfy the
following conditions:
(1) after giving effect to such sale of natural gas, the aggregate quantity of
gas sold or consumed by the Project and the Steam Plant during any twelve
month period will not exceed the maximum displacement amount permitted to
be drawn under the Gas Purchase Agreement during the period plus such
additional amounts as would not cause the Gas Reserve Deficit to be
greater than zero;
(2) the sale of natural gas must satisfy the requirements of the Gas Purchase
Agreement and the other Project Documents and, after giving effect to such
sale, Orange L.P. will continue to be entitled to draw and/or have secured
supply and transportation rights to, natural gas sufficient for it to meet
its obligations under the Steam Contract;
(3) the purchase price for such natural gas must be payable in U.S. dollars on
a date certain and the purchaser must, in writing, agree to remit such
purchase price directly to the Revenue Account and consent to the
assignment by Orange L.P. of its rights under the natural gas purchase
agreement with such purchaser to the Collateral Agent;
(4) the purchaser of such natural gas must either itself have, or arrange for
its obligations to Orange L.P. to be secured by a letter of credit or
guaranty issued by an entity that has outstanding unsubordinated unsecured
long term debt that is rated Investment Grade, defined as "Baa3" and "BBB-
" by Moody's Investors Service and Standard & Poor's Ratings Services,
respectively, or certain other specific rating agencies, or in the
alternative, secure its payment obligations to Orange L.P. by depositing
cash or cash equivalents as collateral with the Collateral Agent in a
manner sufficient, as established by an opinion of counsel to create a
perfected security interest therein in favor of Orange L.P. and the
Collateral Agent as Orange L.P.'s assignee; and
(5) Orange L.P. will not sell any natural gas which it is entitled to draw
during any period when the notes remain outstanding unless all of the
following conditions are satisfied:
(A) Orange L.P. will not sell any entitlement that it has to draw natural
gas during on-peak hours (as defined in the Indexed Swap Agreement)
between June 15 and September 15 of any year;
(B) For any period for which Orange L.P. sells its entitlement to draw
natural gas, it will purchase the right (whether in a financial
transaction or transaction for physical delivery of energy and
associated capacity) to acquire an equivalent amount of energy and
associated capacity, on a Btu equivalent basis assuming an unadjusted
heat rate value equal to 10,000 Btu/kWh at the higher heating value in
2000, and as adjusted for 0.5% annual degradation on a going forward
basis, for a purchase price that is less than or equal to the net
proceeds payable to Orange L.P. from the sale of such natural gas;
(C) The energy and associated capacity that Orange L.P. has the right to
purchase must be deliverable during the same period during which the
natural gas sold was to be drawn so that Orange L.P. could acquire and
resell such energy and associated capacity through the New York
Independent System Operator or settle the financial transaction in such
a way as to generate revenues sufficient to pay Niagara Mohawk the
floating rate payment payable by Orange L.P. under the Indexed Swap
Agreement that corresponds to such period;
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(D) The payment terms with regard to the energy and associated capacity
that Orange L.P. has the right to purchase for any period must be such
that the proceeds of sale from the natural gas sold that corresponds to
such period will be available to pay when due the purchase price of, or
settle amounts for, such energy and associated capacity;
(E) In the case of a contract for the delivery of energy or associated
capacity, the seller of such energy and associated capacity to Orange
L.P. must agree to pay liquidated damages to Orange L.P. in the event
that the seller fails to deliver any energy and associated capacity
acquired by Orange L.P. in an amount at least equal to the amount that
Orange L.P. would have received if such energy and associated capacity
was delivered and sold by Orange L.P. through the New York Independent
System Operator net of net revenues (after costs of cover) Orange L.P.
receives from any cover transaction in replacement of such failed
deliveries of energy and associated capacity;
(F) The seller of such energy and associated capacity must agree in writing
to remit any such liquidated damages or other payments required to be
made by it to Orange L.P. directly to the Revenue Account and consent
to the assignment by Orange L.P. of its rights under the energy and
associated capacity purchase agreement to the Collateral Agent; and
(G) The seller of such energy and associated capacity must either itself
have, or arrange for its obligations to Orange L.P. to be secured by a
letter of credit or guaranty issued by an entity that has, outstanding
unsubordinated unsecured long term debt that is rated investment grade
by either Moody's Investors Service or Standard & Poor's Ratings
Services or, in the alternative, secure its payment obligations to
Orange L.P. by depositing cash or cash equivalents as collateral with
the Collateral Agent in a manner sufficient, as established by an
opinion of counsel, to create a perfected security interest therein in
favor of Orange L.P. and the Collateral Agent as Orange L.P.'s
assignee, such security to be in an amount adequate, in accordance with
then applicable industry standards, to protect Orange L.P. from risk of
counterparty default.
Additional Covenants
In addition to the covenants described above, the Indenture will also contain
covenants of the Issuers regarding:
(1) maintenance of existence;
(2) payment of taxes;
(3) maintenance of books and records;
(4) insurance;
(5) compliance with laws;
(6) maintenance of separate existence;
(7) delivery to the Trustee and the Rating Agencies of compliance certificate
and of notices of Events of Default;
(8) delivery to the Trustee and the Rating Agencies of unaudited quarterly
reports of the Issuers for the first three quarters of each fiscal year
containing condensed combined financial information and audited annual
reports of the Issuers,
(9) delivery to the Independent Engineer of a draft annual Operating Budget,
(10) maintenance of "qualifying facility" status under PURPA, so long as PURPA
shall remain in effect, or otherwise remain exempt from regulation under
the Federal Power Act and PUHCA (except as an
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"exempt wholesale generator" of electricity as defined in PUHCA), so long
as such laws shall remain in effect, such that none of the Holders shall
be deemed subject to, or not be exempt from, regulation under the Federal
Power Act or PUHCA solely as a result of holding the notes,
(11) compliance with their obligations under the Covenant, and
(12) delivery to the Trustee of all other information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act in order to permit
compliance by a Holder with Rule 144A in connection with the resale of the
notes.
Events of Default
Certain Events
The following events will constitute Events of Default under the Indenture:
(1) Failure to pay any principal, premium, if any, and interest or other
amounts owed on any Note when the same becomes due and payable, whether by
scheduled maturity or required prepayment or redemption or by acceleration
or otherwise, and such failure continues for five days or more following
the due date for payment; or
(2) Any representation or warranty made by either Issuer or any other Credit
Party in the Indenture or in any other Financing Document or any
representation, warranty or statement in any certificate, financial
statement or other document furnished to the Trustee or any other Person
by or on behalf of either Issuer or any other Credit Party proves to have
been untrue or misleading in any material respect as of the time made,
confirmed or furnished and the fact, event or circumstance that gave rise
to such inaccuracy has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect and that fact, event or circumstance
continues uncured for 30 or more days from the date Orange L.P. receives
notice thereof from the Trustee; provided that, if such Issuer or other
Credit Party commences and diligently pursues efforts to cure such fact,
event or circumstance within such 30-day period and delivers written
notice to the Trustee thereof, such Issuer may continue to effect such
cure, and such misrepresentation shall not be deemed an Event of Default
for an additional 60 days so long as such Issuer or other Credit Party is
diligently pursuing such cure; or
(3) (A) The Issuers fail to pay any Imposition as and when due and payable,
and such failure continues for fifteen days or more following the date
such payment becomes delinquent; or
(B) either Issuer fails to perform or observe in any material respect any
covenant, agreement or provision binding upon it contained in the
Indenture or any of the other Financing Documents regarding
maintenance of existence or restrictions on Indebtedness, Liens,
Restricted Payments, guarantees, Investments, Sale Lease-Back
Transactions, Affiliate Transactions, Project Documents, disposition
of assets, operation of the Project, fundamental changes, or nature of
business and such failure continues uncured for 30 or more days from
the date such Issuer receives notice thereof from the Trustee; or if
such Issuer fails to perform or observe any covenant, agreement or
provision binding upon it contained in any of the Project Documents
and such failure continues uncured for 30 or more days from the date
such Issuer receives notice thereof from the Trustee, provided that
the same does not constitute an event of default under the relevant
Project Document, or
(C) an event that then gives any Person the right to terminate or
materially adversely affect any of Orange L.P.'s rights under the
relevant Project Document; or
(D) if any event of default by Orange L.P. under any of the Project
Documents, or any event arises that in either case then gives any
Person, other than Orange L.P., the right to terminate or materially
adversely affects any of Orange L.P.'s rights under any of the Project
Documents, shall occur and be continuing; or
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(E) any event that then gives Syracuse University the right to foreclose
under any University Collateral Document; or
(F) the commencement and continuance of any action, suit or proceeding for
the foreclosure, including foreclosure by power of sale, of any lien on
a security interest in any Collateral, including any such foreclosure
under any University Collateral Document; or
(4) Either Issuer or any other Credit Party fails to perform or observe any
covenant, agreement or provision binding upon it contained in the
Indenture or any of the other Financing Documents, other than those
referred to in clauses (1) through (3) inclusive above and (5) through (7)
inclusive below, and such failure continues uncured for 30 or more days
from the date Orange L.P. receives notice thereof from the Trustee of such
failure; provided that if such Issuer or other Credit Party commences and
diligently pursues efforts to cure such default within such 30-day period,
such Issuer or other Credit Party may continue to effect such cure of the
default and such default will not be deemed an Event of Default for an
additional 90 days so long as such Issuer or other Credit Party is
diligently pursuing such cure; or
(5) Some events involving the bankruptcy, insolvency, receivership or
reorganization of either Issuer; or
(6) Any Collateral Document or any material provision thereof ceases to be in
full force and effect or there is a Material Adverse Effect on the Lien
purported to be granted in any Collateral Document such that it ceases to
be a valid and perfected Lien in favor of the Collateral Agent for the
benefit of the Secured Parties on the Collateral described therein with
the priority purported to be created thereby; provided, however, that
Orange L.P. shall have 10 days after Orange L.P. obtains actual knowledge
thereof to cure any such cessation, if curable, or to furnish to the
Collateral Agent all documents or instruments required to cure any such
cessation, if curable; or
(7) Any event of default under any Permitted Indebtedness of either Issuer
which results in Permitted Indebtedness in excess of $2.5 million becoming
due and payable prior to its stated maturity.
Control by Holders
The Holders of at least a majority in aggregate principal amount of the
outstanding notes (the "Required Holders") will have the right to direct the
time, place and method of conducting any proceeding for any right or remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee in the Indenture or the other Financing Documents. The Required Holders,
acting through the Trustee, will have the right to direct the time, place and
method for exercising any right or remedy available to the Collateral Agent
under the Collateral Documents.
Subject to the above paragraph, if an Event of Default has occurred and is
continuing and as a result thereof or in connection therewith or pursuant to an
acceleration of the notes arising therefrom, payments on the notes are not made
when due, the Trustee is required to enforce the Collateral Documents and the
rights of the Holders thereunder.
Enforcement of Remedies
If one or more Events of Default have occurred and are continuing, then:
(1) in the case of an Event of Default described in clause (5) above under
"Certain Events," the entire principal amount of the notes, all interest
accrued and unpaid thereon, and all premium and other amounts payable
under the notes, the Indenture and the other Financing Documents, if any,
will automatically become due and payable without presentment, demand,
protest or notice of any kind; or
(2) in the case of an Event of Default described in:
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(A) clause (1) above under "Certain Events," upon the direction of the
Holders of no less than 25% in aggregate principal amount of the
outstanding notes, the Trustee will, by notice to the Issuers, declare
the entire principal amount of the notes, all interest accrued and
unpaid thereon, and all premium and other amounts payable under the
notes, the Indenture and the other Financing Documents, if any, to be
due and payable, or
(B) clauses (2), (3), (4), (6) or (7) above under "Certain Events," upon
the direction of the Required Holders, the Trustee will, by notice to
the Issuers, declare the entire principal amount of the notes, all
interest accrued and unpaid thereon and all premium and other amounts
payable under the notes, the Indenture and the other Financing
Documents, if any, to be due and payable.
If an Event of Default occurs and is continuing and is known to the Trustee,
the Trustee will mail to each Holder notice of the Event of Default within 30
days after the occurrence thereof. Except in the case of an Event of Default in
payment of principal of or interest on any Note, the Trustee may withhold the
notice to the Holders if the Trustee in good faith determines that withholding
the notice is in the interest of the Holders.
If an Event of Default relating to failure to pay amounts owed on the notes
has occurred and is continuing, the Trustee may declare the principal amount of
the notes, all interest accrued and unpaid thereon, and all premium and other
amounts payable under the notes, the Indenture and the other Financing
Documents, if any, to be immediately due and payable notwithstanding the absence
of direction from Holders of at least 25% in aggregate principal amount of the
outstanding notes directing the Trustee to accelerate the maturity of the notes,
unless Holders of more than 75% in aggregate principal amount of the outstanding
notes direct the Trustee not to accelerate the maturity of such notes, if, in
the good faith exercise of its discretion, the Trustee determines that such
action is necessary to protect the interests of the Holders.
In addition, if one or more of the Events of Default referred to in clause
(2)(B) immediately above has occurred and is continuing, the Trustee may declare
the entire principal amount of the notes, all interest accrued and unpaid
thereon, and all premium and other amounts payable under the notes, the
Indenture and the other Financing Documents, if any, to be due and payable
notwithstanding the absence of direction from the Required Holders directing the
Trustee to accelerate the maturity of the notes unless the Required Holders
direct the Trustee not to accelerate the maturity of the notes, if in the good
faith exercise of its discretion the Trustee determines that such action is
necessary to protect the interests of the Holders.
If any Event of Default occurring by reason of any willful action or inaction
taken or not taken by or on behalf of the Issuers with the intention of avoiding
payment of the premium that the Issuers would have had to pay if the Issuers
then had elected to redeem the notes pursuant to the optional redemption
provisions of the Indenture, a premium equal to the then applicable Treasury
Rate shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the notes.
At any time after the principal of the notes has become due and payable upon a
declared acceleration, and before any judgment or decree for the payment of the
money so due, or any portion thereof, has been entered, the Holders of not less
than a majority in aggregate principal amount of the outstanding notes, by
written notice to the Issuers and the Trustee, shall rescind and annul such
declaration and its consequences if:
(1) there has been paid to or deposited with the Trustee a sum sufficient to
pay:
(A) all overdue interest on the notes,
(B) the principal of and premium, if any, on any notes that have become
due (including overdue principal) other than by such declaration of
acceleration and interest thereon at the respective rates provided in
the notes for overdue principal,
(C) to the extent that payment of such interest is lawful, interest upon
overdue interest at the respective rates provided in the notes for
overdue interest, and
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(D) all sums paid or advanced by the Trustee and the Collateral Agent and
the reasonable compensation, expenses, disbursements, and advances of
the Trustee and the Collateral Agent, and their agents and counsel, and
(E) all Events of Default, other than the nonpayment of the principal of
the notes that has become due solely by such acceleration, have been
cured or waived in accordance with the Indenture.
(2) If an Event of Default relating to failure to pay amounts owed on the
notes has occurred and is continuing and an acceleration has occurred, the
Trustee may (as the Holders of 25% in aggregate principal amount of the
outstanding notes may request) direct the Collateral Agent to foreclose
upon and take possession of all Collateral.
(3) If an Event of Default other than that referred to in clauses (2) above
has occurred and is continuing and an acceleration has occurred, the
Trustee may (as the Required Holders request), direct the Collateral Agent
to foreclose upon and take possession of all Collateral.
Application of Monies Collected by Trustee
Any monies collected or to be applied by the Trustee after an Event of Default
in respect of the notes will be applied in the following order from time to
time, on the date or dates fixed by the Trustee:
(1) first, to the payment of all amounts due to the Trustee or any predecessor
Trustee under the Indenture;
(2) second,
(A) in case the unpaid principal amount of the Outstanding notes
has not become due, to the payment of any overdue interest,
(B) in case a portion of the unpaid principal amount of the Outstanding
notes has become due, first, to the payment of accrued interest on all
Outstanding notes for overdue principal, premium, if any, and overdue
interest, and next to the payment of the overdue principal on all
notes or
(C) in case all the unpaid principal amount of all the Outstanding notes
has become due, first to the payment of the whole amount then due and
unpaid upon the Outstanding notes for principal, premium, if any, and
interest, together with interest for overdue principal, premium, if
any, and overdue interest; and
(3) third, in case the unpaid principal amount of all the Outstanding notes
has become due, and all of the outstanding principal, premium, if any,
interest and other amounts owed in connection with the notes have been
fully paid, any surplus then remaining will be paid to the Issuers, or to
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct;
provided that proceeds from the disposition of Collateral upon foreclosure shall
be applied first to amounts due and unpaid to SIDA under the PILOT Agreement.
Amendments and Supplements
The Issuers, the Trustee and the Collateral Agent may amend or supplement the
Indenture or execute a waiver without the consent of the Holders
(1) to add additional covenants of the Issuers, to surrender rights conferred
upon the Issuers, or to confer additional benefits upon the Holders,
(2) to increase the assets securing the Issuers' obligations under the
Indenture,
(3) to cure any ambiguity, defect or inconsistency,
(4) to comply with requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the Trust Indenture Act of 1939 or
(5) to reflect any amendments required by a Rating Agency in circumstances
where confirmation of the Ratings is required or permitted under the
Indenture.
The Indenture may be otherwise amended or supplemented by the Issuers, the
Trustee and the Collateral Agent with the consent of the Required Holders;
provided that no such amendment or supplement may, without the consent of all
Holders of notes, modify:
(1) the principal, premium and interest payable upon the notes,
(2) the dates on which interest or principal on any notes is paid,
(3) the dates of maturity of any notes, and
(4) the procedures for amendment by a supplemental Indenture.
Notwithstanding the foregoing, the provisions in the Indenture relating to a
Change of Control and the related definitions as used therein may be amended by
the Required Holders.
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Satisfaction and Discharge of the Indenture; Defeasance
The Issuers may terminate the Indenture by delivering all outstanding notes to
the Trustee for cancellation and by paying all other sums payable under the
Indenture.
Legal and covenant defeasance shall be permitted upon terms and conditions
customary for transactions of this nature.
Trustee
There will at all times be a Trustee under the Indenture, which shall be a
corporation having either (a) a combined capital and surplus of at least $500.0
million, or (b) having a combined capital and surplus of at least $100.0 million
and being a wholly owned subsidiary of a corporation having a combined capital
and surplus of at least $500.0 million in each case subject to supervision or
examination by a Federal or State or District of Columbia authority and having a
corporate trust office in New York, New York, to the extent there is such an
institution eligible and willing to serve. The Issuers jointly agree to
indemnify and hold harmless the Trustee in connection with the performance of
its duties under the Indenture, except for liability which results from the
negligence, bad faith or willful misconduct of the Trustee.
The Trustee may resign at any time by giving written notice thereof to the
Issuers. The Trustee may be removed at any time by act of the Required Holders,
delivered to the Trustee and to the Issuers. The Issuers shall give notice of
each resignation and removal of the Trustee and each appointment of a successor
Trustee to all Holders.
Book-Entry, Delivery and Form
The New Notes will initially be issued in the form of one or more registered
notes in global form without interest coupons registered in the name of DTC or
its nominee.
The global notes will be deposited upon issuance with the Trustee as custodian
for DTC in New York, New York, and registered in the name of DTC or its nominee,
in each case for credit to an account of a direct or indirect participant in DTC
as described below.
Except as set forth below, the global notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for notes
in certificated form except in the limited circumstances described below. See "-
- -Exchange of Book-Entry Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the global
notes will not be entitled to receive physical delivery of Certificated Notes
(as defined below).
Transfers of beneficial interests in the global notes are subject to the
applicable rules and procedures of DTC and its direct or indirect participants
(including, if applicable, those of Euroclear and Cedelbank), which may change
from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The New Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
Depositary Procedures
The following descriptions of the operations and procedures of DTC, Euroclear
and Cedelbank are provided solely as a matter of convenience. These operations
and procedures are solely within the control of the respective settlement
systems and are subject to changes by them from time to time. The Issuers take
no responsibility for these operations and procedures and urge investors to
contact the system or their participants directly to discuss these matters.
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DTC has advised the Issuers that DTC is a limited purpose trust company
created to hold securities for its participating organizations, or Participants,
and to facilitate the clearance and settlement of transactions in those
securities between Participants through electronic book-entry changes in
accounts of its Participants. The Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly, or
Indirect Participants. Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
DTC has also advised the Issuers that, pursuant to procedures established by
it, ownership of interests in the global notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the Participants) or by the Participants and the
Indirect Participants (with respect to other owners of beneficial interest in
the global notes).
Investors in the New Notes may hold their interests therein directly through
DTC, if they are Participants in such system, or indirectly through
organizations (including Euroclear and Cedelbank) which are Participants in such
system. All interests in a global note, including those held through Euroclear
or Cedelbank, may be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or Cedelbank may also be subject to the
procedures and requirements of such systems. The laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer beneficial interests in a
global note to such persons will be limited to that extent. Because DTC can act
only on behalf of Participants, which in turn act on behalf of Indirect
Participants and certain banks, the ability of a person having beneficial
interests in a global note to pledge such interests to persons or entities that
do not participate in the DTC system, or otherwise take actions in respect of
such interests, may be affected by the lack of a physical certificate evidencing
such interests.
Except as described below, owners of interests in the global notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
"Holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, and premium, if any, and interest on
a global note registered in the name of DTC or its nominee will be payable to
DTC in its capacity as the registered Holder under the Indenture. Under the
terms of the Indenture, the Issuers and the Trustee will treat the persons in
whose names the notes, including the global notes, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, none of the Issuers, the Trustee nor any
agent of the Issuers or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the global notes, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the global notes or
(ii) any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Issuers that its
current practice, upon receipt of any payment in respect of securities such as
the notes (including principal and interest), is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in the principal amount of beneficial
interest in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments by
the Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Issuers. None of the Issuers or
the Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the notes, and the Issuers and the Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedelbank participants,
interests in the global notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its Participants. See "--Same Day
Settlement and Payment."
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Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedelbank will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and
participants in Euroclear or Cedelbank, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or Cedelbank,
as the case may be, by its respective depositary; however, such cross-market
transactions will require delivery of instructions to Euroclear or Cedelbank, as
the case may be, by the counterparty in such system in accordance with the rules
and procedures and within the established deadlines (Brussels time) of such
system. Euroclear or Cedelbank, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the relevant global note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedelbank participants
may not deliver instructions directly to the depositories for Euroclear or
Cedelbank.
DTC has advised the Issuers that it will take any action permitted to be taken
by a Holder of notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global notes and only in respect
of such portion of the aggregate principal amount of the notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the notes, DTC reserves the right to exchange the
global notes for legended notes in certificated form, and to distribute such
notes to its Participants.
Although DTC, Euroclear and Cedelbank have agreed to the foregoing procedures
to facilitate transfers of interests in the global notes among Participants in
DTC, Euroclear and Cedelbank, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued at
any time. None of the Issuers or the Trustee or any of their respective agents
will have any responsibility for the performance by DTC, Euroclear or Cedelbank
or their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
A global note is exchangeable for definitive notes in registered certificated
form ("Certificated Notes") if:
(1) DTC (x) notifies the Issuers that it is unwilling or unable to continue
as depositary for the global notes and the Issuers thereupon fail to
appoint a successor depositary or (y) has ceased to be a clearing agency
registered under the Exchange Act,
(2) the Issuers, at their option, notify the Trustee in writing that they
elect to cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the notes. In addition, beneficial interests in
a global note may be exchanged for Certificated Notes upon request but
only upon prior written notice given to the Trustee by or on behalf of
DTC in accordance with the Indenture. In all cases, Certificated Notes
delivered in exchange for any global note or beneficial interests
therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures).
Exchange of Certificated Notes for Book-Entry Notes
Notes issued in certificated form may not be exchanged for beneficial
interests in any global note unless the transferor first delivers to the Trustee
a written certificate (in the form provided in the Indenture) to the effect that
such transfer will comply with the appropriate transfer restrictions, if any,
applicable to such notes.
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Same Day Settlement and Payment
The Indenture will require that payments in respect of the notes represented
by the global notes (including principal, premium, if any, and interest) be made
by wire transfer of immediately available funds to the accounts specified by the
global note Holder. With respect to notes in certificated form, the Issuers will
make all payments of principal, premium, if any, and interest by wire transfer
of immediately available funds to the accounts specified by the Holders thereof
or, if no such account is specified, by mailing a check to each such Holder's
registered address. The notes represented by the global notes are expected to be
eligible to trade in the Depositary Agent's Same-Day Funds Settlement System,
and any permitted secondary market trading activity in such notes will,
therefore, be required by the Depositary Agent to be settled in immediately
available funds. The Issuers expect that secondary trading in any certificated
notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedelbank participant purchasing an interest in a global note from a Participant
in DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedelbank participant, during the securities settlement processing
day (which must be a business day for Euroclear and Cedelbank) immediately
following the settlement date of DTC. DTC has advised the Issuers that cash
received in Euroclear or Cedelbank as a result of sales of interests in a global
note by or through a Euroclear or Cedelbank participant to a Participant in DTC
will be received with value on the settlement date of DTC but will be available
in the relevant Euroclear or Cedelbank cash account only as of the business day
for Euroclear or Cedelbank following DTC's settlement date.
Certain Definitions
Certain terms defined below are summaries of terms defined in, and are defined
more specifically in, the Project Documents and the Financing Documents. Such
summaries do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Project Documents
and the Financing Documents.
"Accounts" means the accounts established under and defined in the Deposit
and Disbursement Agreement.
"Additional Project Documents" means any contracts or agreements related to
the construction, testing, maintenance, management, repair, operation or use of
the Project or the Steam Plant entered into by Orange L.P. and any other Person
subsequent to the date of the Indenture.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Agency Agreement" means the Agency Agreement and Power of Attorney dated as
of April 5, 1991 between SIDA and Orange L.P.
"Asset Manager" means Niagara Mohawk Energy Marketing, Inc.
"Asset Manager Agreement" means the Asset Management Letter Agreement dated as
of December 6, 1999, between Orange L.P. and Niagara Mohawk Energy Marketing
pursuant to which Niagara Mohawk Energy Marketing agrees to manage the business
operations and finances of Orange L.P., including the administration of the
Project Documents and to seek to maximize the Project's revenues from the
Original Closing Date as the same may be supplemented or amended from time to
time and any energy services management agreement entered into in connection
therewith.
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"Asset Manager Consent and Agreement" means the Consent and Agreement dated as
of December 6, 1999 among Niagara Mohawk Energy Marketing, the Collateral Agent
and Orange L.P. relating to Niagara Mohawk Energy Marketing Agreement.
"Assumption Agreement" means the assumption agreement executed and delivered
by Orange L.P. to the Trustee on the Original Closing Date concurrently with the
consummation of the Merger.
"Boiler Guaranty" means the Guaranty Agreement of Century Contractors West,
Inc. in its capacity as construction contractor to the Project, and S&S Services
dated as of April 5, 1991 to Syracuse University guaranteeing certain
obligations of Orange L.P. under the Steam Plant Operating Agreement and assumed
by General Electric Company on February 2, 1998.
"Canadian Hunter" means Canadian Hunter Exploration Ltd., an Alberta, Canada
corporation.
"Canadian Hunter Agreements" means the Gas Purchase Agreement, the TransCanada
Agreement and the Collateral Assignment of the Firm Service Agreement.
"Canadian Hunter Consent and Agreement" means the Consent and Agreement dated
as of December 6, 1999 among Canadian Hunter, the Collateral Agent and Orange
L.P. relating to the Gas Purchase Agreement.
"Capital Expenditure Reserve Account" means the account of such name created
under and defined in the Deposit and Disbursement Agreement.
"Capital Expenditure Reserve Required Balance" means an amount equal to:
(1) the aggregate Capital Expenditures budgeted for the next succeeding
twelve-month period (A) as approved by the Independent Engineer and
delivered to the Trustee and the Collateral Agent at least annually and
(B) as adjusted by management and set forth in an Officers' Certificate
delivered to the Trustee and the Collateral Agent six months following
each budget approved by the Independent Engineer plus
(2) $3.5 million until such time as a life extension program for the Steam
Plant is approved by Orange L.P. and the Independent Engineer, at which
time the portion of the Capital Expenditures Reserve Required Balance
required by this clause (2) shall be reduced to an amount equal to the
discounted present value of the Capital Expenditures contemplated by the
approved life extension program for the Steam Plant (or, in the event of a
dispute between the two, the Required Capital Expenditure Reserve Balance
shall be reduced to the discounted present value of the Capital
Expenditures contemplated by the life extension program approved by the
Independent Engineer and then, if the net present value of the Capital
Expenditures contemplated by the life extension program approved by a
third party pursuant to expedited dispute resolution procedures set forth
in the Deposit and Disbursement Agreement, is lower, the Required Capital
Expenditure Reserve Balance shall be further reduced to such lower
amount).
"Capital Expenditures" means:
(1) labor, materials and other direct expenses for any major overhaul of or
major maintenance procedure for the Project or the Steam Plant (including
major maintenance such as turbine overhauls or the refurbishment or
replacement of the steam boilers) which requires significant disassembly
or shutdown of the Project or the Steam Plant pursuant to manufacturers'
guidelines or recommendations, engineering or operating considerations or
the requirements of any applicable legal requirement or any Project
Contracts; and
(2) any other expenses that are capitalized on the balance sheet and qualify
as capital expenditures of Orange L.P. in accordance with GAAP;
provided that:
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(A) the "Fired-Hour Fee" payable pursuant to Section 5.10 of the Operation
and Maintenance Agreement shall not constitute a "Capital Expenditure"
even if any portion thereof would be treated as a capital expenditure
of Orange L.P. in accordance with GAAP, and
(B) amounts expended by Orange L.P. pursuant to Section 7.01 of the Steam
Plant Operating Agreement to repair, overhaul, refurbish or replace the
Steam Plant shall be deemed to constitute "Capital Expenditures" to the
extent that they would be treated as capital expenditures of Orange
L.P. in accordance with GAAP if Orange L.P. owned the Steam Plant.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership or
membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets
of, the issuing Person.
"Cedelbank" means Cedelbank, societe anonyme.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the properties or
assets of Orange L.P. taken as a whole to any "person" (as that term is
used in Section 13(d)(3) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or dissolution of
Orange L.P.; or
(3) the first day following the Original Closing Date (and after giving effect
to the issuance of the notes and application of the proceeds thereof) on
which Permitted Holders cease to own, directly or indirectly, in the
aggregate (a) 50% or more of the total voting power of the Voting Stock of
Orange L.P. or (b) 85% or more of the total economic ownership interests
in Orange L.P.
"Change of Control Offer" shall have the meaning set forth under the caption
"Repurchase at the Option of Holders Upon Change of Control."
"Change of Control Payment" shall have the meaning set forth under the caption
"Repurchase at the Option of Holders Upon Change of Control."
"Change of Control Payment Date" shall have the meaning set forth under the
caption "Repurchase at the Option of Holders Upon Change of Control."
"City Easement Agreements" means the easements, licenses, rights of way,
passages and similar agreements described in Exhibit A-3 to the First Mortgage
and the City Easement Assignment and the improvements, appurtenances, fixtures
and additions now or hereafter thereon and relating thereto.
"City Easement Assignment" means the Assignment of Easements dated as of April
5, 1991 by Orange L.P., as assignor, to SIDA, as assignee, recorded in the
Clerk's Office on May 3, 1991.
"City Easements" means certain easements located within the City of Syracuse,
New York described in Exhibit A-2 to the First Mortgage granted by the City
Easement Agreements and assigned by the City Easement Assignment.
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"Clerk's Office" means the Office of the County Clerk of Onondaga County, New
York.
"Collateral" means all real and personal property interests which are subject
or are to become subject to the security interests or Liens granted by any of
the Collateral Documents. The definition of "Collateral" expressly excludes (a)
the Excluded Accounts, (b) the Steam Plant and any improvements, accessions and
additions thereto and (c) insurance proceeds relating to the Steam Plant.
"Collateral Agent" or "Agent" means U.S. Bank Trust National Association in
its capacity as collateral agent under the Collateral Documents and any
successor in such capacity.
"Collateral Assignment of the Firm Service Agreement" means the Collateral
Assignment of the Firm Service Agreement dated as of April 5, 1991 between
Canadian Hunter and Orange L.P.
"Collateral Documents" means, collectively, the Deposit and Disbursement
Agreement, the First Mortgage, the Security Agreement, the Pledge Agreements,
the SIDA Security Agreement, the Consents and any other document providing for
any lien, pledge, encumbrance, mortgage or security interest to secure the
payment and performance by SIDA and the Credit Parties of their respective
obligations under the Indenture, the notes and the Collateral Documents on (i)
any or all of the assets of Orange L.P., the ownership interests thereof or (ii)
the assets and contracts constituting or related to the Project.
"Comparable Treasury Issue" means the United States Treasury security selected
by a Reference Treasury Dealer as having a maturity comparable to the Remaining
Average Life of the notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining
Average Life of such notes.
"Comparable Treasury Price" means, with respect to any date of redemption,
(i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount)
on the third business day preceding such date of redemption, as set
forth in the daily statistical release (or any successor release)
published by the Federal Reserve Bank of New York and designated
"Composite 1:10 p.m. Quotations for U.S. Government Securities," or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations, or (B) if the Trustee obtains
fewer than three such Reference Treasury Dealer Quotations, the average
of all such Reference Treasury Dealer Quotations.
"Consent" means each of the Niagara Mohawk Energy Marketing Consent and
Agreement, the University Consent and Agreement, the University Subordination
Agreement, the SIDA Consent and Agreement, the PILOT Consent and Agreement, the
Niagara Mohawk Consent and Agreement, the Tennessee Gas Pipeline Company Consent
and Agreement, Canadian Hunter Consent and Agreement, TransCanada Consent and
Agreement, and the Operator Consent and Agreement.
"Contract Termination Event" means:
(i) the occurrence of an early termination event (whether by default or
otherwise) under the Indexed Swap Agreement with respect to which Niagara
Mohawk is required to make a termination payment under the Indexed Swap
Agreement to Orange L.P.; or
(ii) any event of force majeure under, or the termination of, the Gas
Purchase Agreement with respect to which Canadian Hunter is required to refund
or repay any portion of the lump-sum payment corresponding to the unused
portion of the Maximum Entitlement (as defined in the Gas Purchase Agreement).
"Credit Parties" means the Issuers, Orange L.P., each of the Partners and each
Affiliate of the Issuers, Orange L.P. or the Partners that is a party to any
Collateral Document.
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"Custodian" means, initially, the Trustee, and its successors and assigns or
any other custodian performing similar functions.
"Debt Service Coverage Ratio" means for any period, without duplication, the
ratio of:
(i) (A) the sum of all revenues (including interest and fee income, but
excluding any insurance proceeds and all other similar non-recurring receipts)
of Orange L.P. for such period, minus (B) the aggregate amount of Operating
and Maintenance Costs of Orange L.P. for such period, minus (C) all Capital
Expenditures during such period, to
(ii) the sum of (A) all principal, premium (if any) and interest payable
with respect to Permitted Indebtedness outstanding for such period, plus (B)
the aggregate amount of overdue principal, premium (if any) and interest
payments owed with respect to Permitted Indebtedness outstanding from previous
periods; all as determined on a cash basis in accordance with GAAP.
"Debt Service Reserve Account" means the account of such name created under
and defined in the Deposit and Disbursement Agreement.
"Debt Service Reserve Letter of Credit" one or more irrevocable, direct pay
letters of credit issued by a Debt Service Reserve LOC Provider in favor of the
Collateral Agent where the account party is not Orange L.P.
"Debt Service Reserve LOC Provider" means any commercial bank or financial
institution issuing the Debt Service Reserve Letter of Credit, which institution
shall be rated not less than A by S&P and A2 by Moody's.
"Debt Service Reserve Required Balance" means on the Original Closing Date,
$6.2 million and thereafter an amount equal to the aggregate amount of the
principal and interest due on the notes on the next succeeding semi-annual
scheduled Payment Date.
"Default" means an event or condition that, with the giving of notice, lapse
of time of failure to satisfy certain specified conditions, or any combination
thereof, would become an Event of Default.
"Default Rate" means 12.5% per annum.
"Deposit and Disbursement Agreement" means the Deposit and Disbursement
Agreement, dated as of December 6, 1999, between Orange L.P., the Trustee and
the Collateral Agent.
"Depositary Agent" means initially the Depository Trust Company as the
Depositary Agent with respect to the notes, and any and all successors thereto
appointed as depositary under the Indenture and the Deposit and Disbursement
Agreement and having become such pursuant to the applicable provisions of the
Indenture and the Deposit and Disbursement Agreement.
"Distribution Account" means the account of such name created under and
defined in the Deposit and Disbursement Agreement.
"Distribution Suspense Account" means the account of such name created under
and defined in the Deposit and Disbursement Agreement.
"Drawing Agreement" means the Letter of Credit Drawing Agreement dated as of
March 29, 1991, as amended, between Tennessee Gas Pipeline Company and Orange
L.P.
"DTC" means the Depository Trust Company.
"Easement Agreements" means the City Easement Agreements and the Outside
Easement Agreements.
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"Easements" means the City Easements and the Outside Easements.
"Eminent Domain Proceeds" means all amounts and proceeds (including
instruments) received by Orange L.P. in respect of any Event of Eminent Domain,
after deducting all reasonable expenses incurred in litigating, arbitrating,
compromising, settling or consenting to the settlement of any claims against the
appropriate Governmental Authority.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office,
as operator of the Euroclear system, or its successors.
"Event of Default" means the occurrence of an Event of Default under and as
defined in the Indenture.
"Event of Eminent Domain" means any compulsory transfer or taking or any
transfer under threat of compulsory transfer or taking of any material part of
the Collateral or the Project by any Governmental Authority.
"Event of Loss" means an event which causes all or a portion of the Project to
be damaged, destroyed or rendered unfit for normal use for any reason
whatsoever, other than an Event of Eminent Domain or a Title Event.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Excluded Accounts" has the meaning described above under "Excluded Accounts."
"Fair Value" when applied to any property means its fair value to Orange L.P.,
which may be determined without physical inspection by use of accounting and
other data maintained by, or available to, Orange L.P.; provided, that Orange
L.P. delivers an Officers' Certificate specifying the Fair Value of the relevant
assets and, in the event of a transaction in excess of $2.5 million, Orange L.P.
also delivers an opinion of a nationally recognized expert in the valuation of
such assets as to their Fair Value and that the transaction is fair to Orange
L.P.
"Final Maturity Date" means the latest stated maturity date of the notes or
September 15, 2007.
"Financing Documents" means, collectively, the Indenture, the Assumption
Agreement, the Purchase Agreement, Registration Rights Agreement, the Collateral
Documents and the notes.
"First Mortgage" means the Mortgage and Assignment of Rents (First Mortgage)
dated as of December 6, 1999 by SIDA and Orange L.P., as mortgagors, to the
Collateral Agent, as mortgagee, to be recorded in the Clerk's Office.
"Fuel Supply Agreements" means the Canadian Hunter Agreements, the Natural Gas
Transportation Agreements and any other agreements necessary for or entered into
in connection with the supply of fuel to the Project.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"GAS LP" means G.A.S. Orange Partners, L.P., a Delaware limited partnership.
"GAS Orange" means G.A.S. Orange Associates, LLC, a Delaware limited liability
company.
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"Gas Purchase Agreement" means (i) the Restated Gas Sale and Purchase
Agreement dated as of March 18, 1991, between Orange L.P. and Noranda, which was
assigned by Noranda to, and assumed by, Canadian Hunter pursuant to an
Assignment, Amendment and Release Agreement dated as of December 1, 1999 among
Noranda, Canadian Hunter and Orange, L.P. and (ii) the agreements between Orange
L.P. and Canadian Hunter and Union Pacific Resources, respectively, to be
entered into in replacement of the Restated Gas Sale and Purchase Agreement in
accordance with the terms of a letter agreement dated December 1, 1999 among
Orange L.P., Canadian Hunter and Union Pacific Resources as in effect on the
Original Closing Date.
"Gas Reserve Account" means the account of such name created under and defined
in the Deposit and Disbursement Agreement.
"Gas Reserve Required Balance" has the meaning set forth under the caption
"Gas Reserve Account."
"Gas Reserve Deficit" has the meaning set forth under the caption "Gas Reserve
Account."
"General Partner" means G.A.S. Orange Associates, LLC, in its capacity as
general partner of Orange L.P.
"Governmental Approvals" means all governmental approvals, authorizations,
consents, decrees, permits, waivers, privileges and filings with all
Governmental Authorities required to be obtained for the construction, operation
and maintenance of the Project.
"Governmental Authority" means the government of any federal, state, municipal
or other political subdivision in which the Project is located, and any other
government or political subdivision thereof exercising jurisdiction over the
Project or any party to any of the Project Documents, including all agencies and
instrumentalities of such governments and political subdivisions.
"Government Securities" means direct obligations of, or obligations,
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Ground Lease" means the Lease Agreement covering the Premises dated as of
February 27, 1990, between Syracuse University, as lessor, and Orange L.P., as
lessee a memorandum of which dated April 24, 1991 was recorded in the Clerk's
Office on May 23, 1991 in Book 3693 at Page 87, as amended by those three
amendatory letters dated May 1, 1990, June 22, 1990 and August 29, 1990, as
further amended by that certain Amendment to Lease dated as of December 31,
1990, as further amended by that certain Amendment to Lease dated as of December
16, 1992, as the lessee's interest thereunder was assigned by the Ground Lease
Assignment, and as amended and otherwise affected by the University Consent and
Agreement.
"Ground Lease Assignment" means Assignment of the Ground Lease dated as of
April 5, 1991 between Orange L.P., assignor, and SIDA, as assignee, recorded in
the Clerk's Office on May 3, 1991 in Book 3693 at Page 139.
"Holder" means as of any particular time, the Person in whose name a Note is
registered.
"Hot Tap Reimbursement Agreement" means the agreement relating to Installation
of a Hot Tap, Measurement and DAC, dated May 25, 1988, between Tennessee Gas
Pipeline Company and GAS Inc. as amended by that certain letter agreement, dated
August 11, 1988, and assigned to Orange L.P. by that certain Assignment and
Assumption Agreement dated November 30, 1990 between GAS Inc. and Orange L.P.
"Impositions" means all payments in lieu of taxes (including all payments due
under the PILOT Agreement), taxes (including real estate taxes and transfer,
sales and use taxes), assessments (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof but excluding any water or other utilities to the extent the same
are governed by a contract between Orange L.P. and the applicable service
provider), rates and charges, excises, levies, license fees, permit fees,
inspection fees and other authorization fees and other charges of any
governmental authority, in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen, of every character (including all
interest and penalties thereon), which at any time may be assessed, levied,
confirmed or imposed on or in respect of, or be a Lien upon the Project, any
occupancy, use or
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possession thereof, the rents, income, issues and profits therefrom, the
Obligations under the notes or the Financing Documents, but excluding income,
excess profits, franchise, capital stock, estate, inheritance, succession, gift
or similar taxes of any Secured Party, except to the extent that such taxes of
any Secured Party are imposed in whole or in part in lieu of, or as a substitute
for, any taxes which are or would otherwise be Impositions; all rent and other
amounts payable under the Ground Lease, the Master Lease, the Outside Easement
Lease and the Easement Agreements, and all other amounts payable under any of
the other Project Documents.
"Indebtedness" of any Person means, at any date, without duplication:
(1) all obligations of such Person for borrowed money;
(2) all obligations of such Person evidenced by notes, debentures, notes or
other similar instruments (excluding "deposit only" endorsements on checks
payable to the order of such Person);
(3) all obligations of such Person to pay the deferred purchase price of
property or services (except accounts payable and similar obligations
arising in the ordinary course of business shall not be included herein);
(4) all obligations of such Person as lessee under capital leases to the
extent required to be capitalized on the books of such Person in
accordance with GAAP; and
(5) all obligations of others of the type referred to in clause (1) through
(4) above guaranteed by such Person, whether or not secured by a lien or
other security interest on any asset of such Person.
"Indenture" means the Indenture dated as of December 6, 1999 between the
Issuers and U.S. Bank Trust National Association, as Trustee, pursuant to which
the Issuers are issuing the notes.
"Independent Engineer" means Stone & Webster or another nationally recognized
independent engineering firm with at least the same standing as Stone & Webster
in terms of size, experience and technical expertise with respect to assignments
of such nature and which has been retained as independent engineer by Orange
L.P.
"Independent Engineer's Base Case Projections" means the base case projections
prepared by the Independent Engineer and included in the Independent Engineer's
Report.
"Independent Engineer's Report" means the Independent Engineer's Report
prepared by Stone & Webster and attached to this Offering memorandum as Exhibit
A.
"Indexed Swap Agreement" means the ISDA Master Agreement and the related
Confirmation each dated June 30, 1998 between Niagara Mohawk and Orange L.P.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities Corporation.
"Insurance Consultant" means J&H Marsh & McLennan, Limited, or another
nationally recognized independent insurance consulting firm which is retained by
Orange L.P. to act as Insurance Consultant for the benefit of the Secured
Parties under the Indenture.
"Interest Account" means the account of such name created under and defined in
the Deposit and Disbursement Agreement.
"Interest Payment Date" means each March 15 and September 15, commencing March
15, 2000, and concluding on the Final Maturity Date.
"Investment" means, with respect to any Person, any investment by such Person
in other Persons (including Affiliates) in the form of direct or indirect loans
(including guarantees of Indebtedness or other obligations), advances (excluding
commission, travel and similar advances to employees made in the ordinary course
of business), or capital
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contributions, purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities and all other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"Issuers" means Project Orange Associates, L.P., a Delaware limited
partnership, as the survivor of the merger of Project Orange Funding, L.P. with
and into Project Orange Associates, L.P., and Project Orange Capital Corp., a
Delaware corporation.
"Lease Documents" means the Ground Lease, the Master Lease and any other lease
of property necessary or entered into in connection with the Project.
"Leased Premises" means the real property described in Exhibit A-1 to the
First Mortgage and the improvements, appurtenances, fixtures and additions now
or hereafter thereon or relating thereto.
"Lien" means any mortgage, pledge, hypothecation, assignment, mandatory
deposit arrangement with any Person owning Indebtedness of such Person,
encumbrance, lien (statutory or other), preference, priority or other security
agreement of any kind or nature whatsoever which has the substantial effect of
constituting a security interest, including, without limitation, any conditional
sale or other title retention agreement, any financing statement or similar
instrument under the Uniform Commercial Code or comparable law of any
jurisdiction, domestic or foreign.
"Loss Proceeds" means all net proceeds from an Event of Loss received by
Orange L.P., including insurance proceeds or other amounts actually received,
except proceeds or business interruption insurance, on account of an event which
causes all or any portion of the Project to be damaged, destroyed or rendered
unfit for normal use.
"Loss Proceeds Account" means the account of such name created under and
defined in the Deposit and Disbursement Agreement.
"Master Lease" means the Lease and Sublease Agreement dated as of April 5,
1991 between SIDA , as lessor, and Orange L.P., as lessee, a memorandum of which
dated as of April 5, 1991 was recorded in the Clerk's Office on May 3, 1991 in
Book 3693 at Page 149, as amended and otherwise affected by the SIDA Consent and
Agreement.
"Material Adverse Effect" means a material adverse effect on:
(1) the financial position or results of operations of the Issuers;
(2) the Collateral or the validity or priority of any of the Liens on the
Collateral under any of the Collateral Documents;
(3) the ability of the Issuers to pay any of their payment obligations or to
perform any of their other material obligations under the Indenture, the
notes or any of the other Financing Documents or under any of the Project
Documents to which they are a party;
(4) the ability of the Trustee or the Collateral Agent to enforce any of the
payment obligations of the Issuers, any of the other material obligations
of the Issuers or any of the material rights of the Trustee or the
Collateral Agent under the Indenture, the notes or any of the other
Financing Documents; or
(5) the ability of Orange L.P. to enforce any of its material rights under any
of the Project Documents.
"Material Project Documents" means the Niagara Mohawk Agreements, the
Partnership Agreement, the Drawing Agreement, the Natural Gas Transportation
Agreements, the Canadian Hunter Agreements, the Boiler Guaranty, the PILOT
Agreement, the Master Lease, Syracuse University Agreements, the Easement
Agreements, Niagara Mohawk Energy Marketing Agreement, the Consents and the
Operation and Maintenance Agreement.
"Moody's" means Moody's Investors Service, Inc., a corporation organized and
existing under the laws of the State of Delaware, its successors and assigns.
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"Mortgaged Property" is defined in the First Mortgage.
"Natural Gas Transportation Agreements" means the Tennessee Gas Pipeline
Company Interruptible Gas Transportation Agreement, the Tennessee Gas Pipeline
Company Firm Gas Transportation Agreement, the Drawing Agreement and the Hot Tap
Reimbursement Agreement.
"New Notes" shall have the same meaning set forth under the caption
"Registration Rights; Liquidated Damages."
"Niagara Mohawk" means the Niagara Mohawk Power Corporation, a New York
corporation.
"Niagara Mohawk Agreements" means the Power Put Agreement and the Indexed Swap
Agreement.
"Niagara Mohawk Consent and Agreement" means the Consent and Agreement dated
as of a date on or prior to the Original Closing Date, between Niagara Mohawk,
Orange L.P. and the Collateral Agent relating to the Niagara Mohawk Agreements.
"Noranda" means Noranda Inc., a corporation incorporated pursuant to the laws
of the Province of Ontario, Canada.
"Obligations" means all principal, interest, penalties, fees,
indemnifications, reimbursements, damages, premiums, liabilities and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Managing Member, the Managing
Partner, the Chief Operating Officer, the Chief Financial Officer, the
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-
President of such Person.
"Officers' Certificate" means a certificate signed on behalf of either Issuer
by Officers of such Issuer or the General Partner, one of whom must be the
principal executive officer or managing member, managing partner, principle
financial officer, the treasurer or principal accounting officer of such Issuer
or the General Partner.
"Operating and Maintenance Costs" means, for any periods, all amounts
disbursed by or on behalf of Orange L.P. for operation, maintenance (excluding
Capital Expenditures), administration, repair, or improvement of the Project,
including, without limitation, premiums on insurance policies, property and
other taxes, payments under the relevant Lease Documents and under agreements,
or options, to purchase energy and associated capacity in connection with
permitted sales of natural gas, operating and maintenance agreements, royalty
and other land use agreements and fees, expenses and any other payments required
under the Project Documents (excluding Subordinated Asset Management Fees).
"Operating Budget" means a budget of Operating and Maintenance Costs and
Capital Expenditures with respect to Orange L.P. and the Project for any given
fiscal year, or part thereof, prepared in good faith on the basis of estimated
requirements, showing such costs by category for such fiscal year and as
approved by the Independent Engineer.
"Operation and Maintenance Agreement" means the Cogeneration Facility
Operation and Maintenance Agreement dated as of November 1, 1998 between Orange
L.P. and Operator and any subsequent operation and maintenance agreement entered
into by Orange L.P. with the Operator having terms and conditions that are, in
the opinion of the Independent Engineer, reasonable and customary for agreements
of its type and which are consistent with prudent industry practice.
"Operative Documents" means the Financing Documents, the Project Documents and
any Additional Project Documents.
"Operator" means General Electric International, Inc., a Delaware corporation,
or such other Person with technical expertise and experience and industry
standing of at least that of General Electric International, Inc. as shall
replace General Electric International, Inc. as the operator of the Project
pursuant to the Operation and Maintenance Agreement.
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"Operator Consent and Agreement" means the Consent and Agreement dated as of a
date on or prior to the Original Closing Date among the Operator, the Collateral
Agent and Orange L.P. relating to the Operation and Maintenance Agreement.
"Orange L.P." means Project Orange Associates, L.P.
"Original Closing Date" means December 6, 1999.
"Outside Easement Agreements" means the easements, licenses, rights of way,
passages and similar agreements described in Exhibit A-5 to the First Mortgage,
the Outside Easement Assignments and the Outside Easement Lease.
"Outside Easement Assignments" means the Assignment and Assumption of
Easements dated as of April 5, 1991 by O'Brien and Geer, as assignor, to OBG
Technical Services, Inc., as assignee, recorded in the Clerk's Office on May 3,
1991 in Book 3693 at Page 9 and the Assignment and Assumption of Easements dated
as of April 5, 1991 by OBG Technical Services, Inc., as assignor, to Orange
L.P., as assignee, recorded in the Clerk's Office on May 3, 1991 in Book 3693 at
Page 15.
"Outside Easement Lease" means the Lease Agreement dated as of April 5, 1991
between Orange L.P., as lessor, and SIDA, as lessee, a memorandum of which dated
as of April 5, 1991 was recorded in the Clerk's Office on May 3, 1991 in Book
3693 at Page 143.
"Outside Easements" means certain easements located outside of the City of
Syracuse, New York described in Exhibit A-4 to the First Mortgage granted
pursuant to the Outside Easement Agreements, assigned to Orange L.P. by the
Outside Easement Assignments and leased by Orange L.P. to SIDA by the Outside
Easement Lease and the improvements, appurtenances, fixtures and additions now
or hereafter thereon and relating thereto.
"Outstanding Notes" means, as of the time in question, all notes authenticated
and delivered under the Indenture, except (i) notes theretofore canceled or
required to be canceled under the Indenture; (ii) notes for which provision for
payment shall have been made in accordance with the Indenture; and (iii) notes
in substitution for which other notes have been authenticated and delivered
pursuant to the Indenture.
"Partners" means, collectively, GAS Orange and GAS LP.
"Partnership Agreement " means the Second Amended and Restated Agreement of
Limited Partnership of Project Orange Associates, L.P., a Delaware limited
partnership, dated as of December 16, 1992 between the General Partner and the
Limited Partner.
"Partnership Interest Purchase Agreement" means the Partnership Interest
Purchase and Sale Agreement dated as of July 29, 1999, as amended, among GAS
Orange, as purchaser, and NCP Syracuse and Syracuse Orange Partners, as sellers.
"Payment Date" means any Interest Payment Date or Principal Payment Date.
"Permitted Holders" means Adam H. Victor, the Victor Family Irrevocable Trust
and their respective Permitted Transferees.
"Permitted Indebtedness" means:
(1) the notes;
(2) Indebtedness incurred to finance the making of capital improvements to
the Project required to maintain compliance with applicable law or
anticipated changes therein; provided that no such Indebtedness may be
incurred unless at the time of such incurrence
(A) no Default or Event of Default, has occurred and is continuing,
(B) the Independent Engineer confirms as reasonable a certification by
Orange L.P. (containing
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customary qualifications) that the proposed capital improvements are
reasonably expected to enable the Project to comply with applicable or
anticipated legal requirements,
(C) the calculations of Orange L.P. demonstrate that, after giving effect
to the incurrence of such Indebtedness, the projected Debt Service
Coverage Ratio of Orange L.P.
(i) for the next four consecutive fiscal quarters, commencing with the
quarter in which such Indebtedness is incurred, taken as one
annual period, and
(ii) for each subsequent fiscal year through the Final Maturity Date
(treated as a single accounting period), will be an average of not
less than 1.4 to 1 for the entire period and not less than 1.35 to
1 for any such fiscal year and
(D) each of the Rating Agencies confirms that the incurrence of such
Indebtedness will not result in a Rating Downgrade;
(3) Indebtedness in respect of any letter of credit under the Drawing
Agreement in an aggregate principal amount outstanding at no time in
excess of $700,000;
(4) Indebtedness incurred to finance the purchase price of tangible movable
assets which are not essential to the operation of the Project or the
Steam Plant and with an aggregate principal amount not in excess of
$500,000 at any time outstanding;
(5) promissory notes issued to NCP Syracuse and Syracuse Orange Partners
pursuant to Section 6.10(e) of the Partnership Interest Purchase
Agreement, i.e. the tax notes; and
(6) the Project Documents or any rights or obligations thereunder that may be
construed to be Indebtedness.
"Permitted Investments" means an Investment in any of the following:
(1) direct obligations of the Department of the Treasury of the United States
of America;
(2) obligations representing the full faith and credit of the United States of
America or of any of the following federal agencies: Export-Import Bank,
Farmers Home Administration, General Services Administration, U.S.
Maritime Administration, Small Business Administration, Government
National Mortgage Association (GNMA), U.S. Department of Housing & Urban
Development (PHA's) and Federal Housing Administration;
(3) obligations issued or fully guaranteed by any state of the United States
of America or any political subdivision of any such state or any public
instrumentality thereof and, at the time of the acquisition, having one of
the two highest ratings obtainable from either S&P or Moody's;
(4) certificates of deposit and Eurodollar time deposits, bankers' acceptances
and overnight bank deposits, in each case with any domestic or foreign
commercial bank having capital and surplus in excess of $250.0 million;
(5) notes, bonds, collateralized mortgage obligations or other evidences of
indebtedness rated "AAA" by S&P and "Aaa" by Moody's issued by the Federal
Home Loan Bank, the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation;
(6) commercial paper rated in any one of the two highest rating categories by
Moody's or S&P;
(7) investment agreements with banks (foreign and domestic), broker/dealers,
and other financial institutions rated at the time of bid in any one of
the three highest rating categories by Moody's and S&P;
(8) repurchase agreements with banks (foreign and domestic), broker/dealers,
and other financial institutions rated at the time of bid in anyone of the
three highest rating categories by Moody's and S&P, provided,
(A) collateral is limited to the securities specified in clauses (1)
through (5) above,
(B) the margin levels for collateral must be maintained at a minimum of
102% including principal and interest,
(C) the Collateral Agent shall have a first perfected security interest in
the collateral,
(D) the collateral will be delivered to a third party custodian,
designated by Orange L.P., acting for the benefit of the Collateral
Agent and all fees and expenses related to collateral custody will be
the responsibility of Orange L.P.,
(E) the collateral must have been or will be acquired at the market price
and marked to market weekly and collateral level shortfalls cured
within 24 hours,
(F) unlimited right of substitution of collateral is allowed provided that
substitution collateral must be
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permitted collateral substituted at a current market price and
substitution fees of the custodian shall be paid by Orange L.P.;
(9) asset-backed securities having the highest rating obtainable from either
S&P or Moody's;
(10) forward purchase agreements delivering securities specified in clauses
(1) and (6) above with banks (foreign and domestic), broker/dealers, and
other financial institutions maintaining a long-term rating on the day of
bid no lower than investment grade by both S&P and Moody's (such rating
may be at either the parent or subsidiary level); and
(11) money market funds rated "AAAm" or "AAAm-G" or better by S&P and other
financial funds investing exclusively in investments of the types
described in clauses (1) through this clause (11) of this definition.
"Permitted Liens" means, collectively:
(1) Liens to secure Indebtedness described in clause (2) or (4) of the
definition of Permitted Indebtedness on the assets financed with the
proceeds of such Indebtedness;
(2) Liens under Syracuse University Collateral Documents, provided the same
are subordinate to the Liens under the Collateral Documents;
(3) mechanic's, workmen's, materialmen's, supplier's, construction or other
like Liens arising in the ordinary course of business that, in each case,
have not become the subject of foreclosure or any other action or
proceeding and for which adequate reserves have been established under
generally accepted accounting principles;
(4) servitudes, easements, rights-of-way, restrictions, minor defects or
irregularities in title and such other encumbrances or charges against
real property or interests therein, which do not secure any monetary
obligation, and which are of a nature generally existing with respect to
property of a character similar in character and use to the property that
is subject thereto and which do not in individually or in the aggregate
with other Permitted Liens under this clause (4) or clauses (5) and (6)
below materially interfere with the use thereof in the business of Orange
L.P. or materially adversely affect the value thereof;
(5) other Liens incidental to the conduct of Orange L.P.'s business or the
ownership of properties and assets, which do not secure any monetary
obligation (other than vendor's liens for accounts payable with respect
to the acquisition of the property in question in the ordinary course of
business and liens for taxes, assessments or governmental charges which
are either not yet due or which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves are
established in accordance with GAAP), and which do not individually or in
the aggregate with other Permitted Liens under this clause (5) or clause
(4) above or clause (6) below materially interfere with the use thereof
in the business of Orange L.P. or materially adversely affect the value
thereof;
(6) the Permitted Title Encumbrances;
(7) Liens to secure the notes; and
(8) Liens on cash and Permitted Investments and securities entitlements with
respect thereto to secure Indebtedness described in clause (3) of the
definition of Permitted Indebtedness.
"Permitted Title Encumbrances" means
(1) the matters described as items 1-128, inclusive, in Schedule B, Section 2
of the Commitment for Title Insurance issued by the Title Insurance
Company dated August 25, 1999, and
(2) Syracuse University Mortgages and University Security Agreements,
provided that the same are subordinate to the First Mortgage pursuant to
Syracuse University Subordination Agreement.
"Permitted Transferees" shall mean with respect to any Person:
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(1) in the case of any Person who is a natural person, such individual's
spouse or children (natural or adopted), any trust for such individual's
benefit or the benefit of such individual's spouse or children (natural
or adopted), or any corporation or partnership in which the direct and
beneficial owner of all of the equity interest in such Person or such
individual's spouse or children (natural or adopted) or any trust for
the benefit of such persons;
(2) in the case of any Person who is a natural person, the heirs, executors,
administrators or personal representatives upon the death of such Person
or upon the incompetency or disability of such Person for purposes of
the protection and management of such individual's assets;
(3) in the case of any Person who is not a natural person (other than a
trust), any Affiliate of such Person and
(4) in the case of the Victor Family Irrevocable Trust, its beneficiaries on
the Original Closing Date.
"Person" means any individual, sole proprietorship, corporation, partnership,
joint venture, limited liability partnership, limited liability corporation,
trust, unincorporated association, institution, Governmental Authority or any
other entity.
"PILOT Agreement" means the Payment in Lieu of Tax Agreement dated as of April
5, 1991, among the City of Syracuse, Orange L.P. and SIDA, as amended and
otherwise affected by the PILOT Consent and Agreement.
"PILOT Consent and Agreement" means the Consent and Agreement dated as of a
date or prior to the Original Closing Date among Orange L.P., the City of
Syracuse, SIDA and the Collateral Agent for and on behalf of the Secured Parties
, relating to the PILOT Agreement, to be recorded in the Clerk's Office
"Pledge Agreements" means the Pledge and Security Agreements, each dated as of
December 6, 1999 from GAS Orange, GAS LP and the partners of GAS LP in favor of
the Collateral Agent and the Trustee.
"Power Put Agreement" means the Power Put Agreement dated as of September 19,
1986 between Niagara Mohawk and Orange L.P., as amended.
"Premises" means the Leased Premises and the Easements.
"Principal Account" means the Account of such name created under and defined
in the Deposit and Disbursement Agreement.
"Principal Payment Date" when used with respect to any Note means the date on
which all or a portion of the principal of such Note becomes due and payable as
provided therein or in the Indenture, whether on a scheduled date for payment of
principal at a Redemption Date, the Final Maturity Date, a date of declaration
of acceleration, or otherwise.
"Project" means an 80 MW (net) gas fired cogeneration power plant (including
the electric transmission line and the Project's natural gas pipeline) (but
excluding the Steam Plant and related facilities and improvements), together
with all buildings, structures or other improvements erected on the Leased
Premises and the Easements, all alterations thereto or replacements thereof, all
fixtures, attachments, appliances, equipment, machinery and other articles
attached thereto or used in connection therewith and all parts which may from
time to time be incorporated or installed in or attached thereto, all contracts
and agreements for the purchase or sale of commodities or other personal
property related thereto, all Lease Documents of real or personal property
related thereto, and all other real and tangible and intangible personal
property owned by Orange L.P. or SIDA and placed upon or used in connection with
the electric and steam generation plant, electric transmission line and Pipeline
built upon the Premises and the Easements.
"Project Documents" means the Material Project Documents, the Fuel Supply
Agreements, other Lease Documents and any other material agreement or document
relating to the development, construction or operation of the Project or the
Steam Plant.
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"Project Pipeline" means the gas pipeline and related facilities connecting
the Project to the Tennessee Gas Pipeline Company pipeline referred to in the
Natural Gas Transportation Agreements.
"Project Revenues" means all income and receipts of Orange L.P. derived from
the ownership or operation of the Project, including payments due Orange L.P.
under the Niagara Mohawk Agreements, the Canadian Hunter Agreements or the
Operation and Maintenance Agreement, proceeds of any business interruption or
other insurance, income derived from the sale or use of electric energy or steam
transmitted or distributed by the Project, together with any receipts derived
from the sale of natural gas and any other property pertaining to the Project or
incidental to the operation of the Project, all as determined in conformity with
cash accounting principles, the investment income on amounts in the Accounts
established under the Deposit and Disbursement Agreement, the proceeds of any
insurance or condemnation awards relating to the Project and proceeds from the
Collateral Documents, and any payments to Orange L.P. (to the extent not
included within other items listed in this definition) under the Master Lease,
but not including sums paid to Orange L.P. in satisfaction of a contractual
obligation to indemnify Orange L.P. for third party liability to the extent such
sums do not exceed the actual damage, loss or cost suffered by Orange L.P. in
connection therewith.
"Purchase Agreement" means the Purchase Agreement dated as of December 2, 1999
between the Issuers and the Initial Purchaser.
"Rating" means the rating of the notes by the Rating Agencies.
"Rating Agency" means any of Moody's and S&P.
"Rating Downgrade" means a lowering by either of the Rating Agencies of then
current credit ratings of the notes.
"Redemption Account" means the account of such name created under and defined
in the Deposit and Disbursement Agreement.
"Redemption Date" means the date on which the Issuers redeems or shall redeem
any notes in accordance with the Indenture.
"Reference Treasury Dealer" means any nationally recognized primary U.S.
government securities dealer in New York City selected by Orange L.P.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any date of redemption, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such date of redemption.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of December 6, 1999, by and between the Issuers and the
Initial Purchaser.
"Remaining Average Life" means, with respect to any notes, the principal of
which is to be redeemed (the "Called Principal"), the number of years
(calculated to the nearest one-twelfth year) obtained by dividing:
(1) such Called Principal into
(2) the sum of the products obtained by multiplying:
(a) the principal component of each Remaining Scheduled Payment (as defined
below) with respect to such Called Principal by
(b) the number of years (calculated to the nearest one-twelfth year) that
will elapse between the date on which such Called Principal is to be
redeemed (the "Settlement Date") and the scheduled due date of such
Remaining Scheduled Payment.
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For purposes of this definition, the term "Remaining Scheduled Payments" means,
with respect to the Called Principal of any Note, all payments of such Called
Principal and interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal were
made prior to its scheduled due date.
"Required Holders" means, at any time, Persons that at such time hold at least
a majority in aggregate principal amount of the outstanding notes.
"Responsible Officer" means, with respect to knowledge of any default under
the Indenture, the chief executive officer, president, managing member, managing
partner, chief financial officer, general counsel, principal accounting officer,
treasurer, or any vice president of either Issuer or the General Partner, as
applicable, or other officer who in the normal performance of his or her
operational duties would have knowledge of the subject matter relating to such
default.
"Restricted Payment" means, with respect to any Person:
(1) the declaration and payment of distributions or dividends, the issuance of
Equity Interests in such Person or any other payment in respect of any
Equity Interests made in cash, property, obligations or other notes; and
(2) the making of any Investment in, including any loans or advances to, any
Affiliate;
provided, however, that "Restricted Payment" shall not include
(A) payments under any of the Project Documents for services rendered or
(B) the payment of a distribution by Funding L.P. to GAS Orange on the
Original Closing Date with a portion of the net proceeds of the issuance
of the notes in an aggregate amount not to exceed $48.1 million or
(C) amounts paid from the Stipulation Reserve Account.
"Revenue Account" means the account of such name created under and defined in
the Deposit and Disbursement Agreement.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of the McGraw-Hill
Companies, Inc., a corporation organized and existing under the laws of the
State of New York, its successors and assigns.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by either Issuer of any real or tangible personal
property, which property has been or is to be sold or transferred by such Issuer
to such Person in contemplation of such leasing.
"SEC" means the United States Securities and Exchange Commission.
"Secured Parties " means the Holders, the Trustee and the Collateral Agent.
"Security Agreement" means the Security Agreement, dated as of December 6,
1999 between Orange L.P. and the Collateral Agent as Agent for the Secured
Parties.
"Senior Collateral Documents" means the First Mortgage, the Security
Agreement, and the SIDA Security Agreement.
"SIDA" means the City of Syracuse Industrial Development Authority, a public
benefit corporation of the State of New York.
"SIDA Consent and Agreement" means the Consent and Agreement dated as of a
date on or prior to the Original Closing Date among Orange L.P., SIDA and the
Collateral Agent for and on behalf of the Secured Parties, to be recorded in
the Clerk's Office.
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"SIDA Security Agreement" means the Security Agreement dated as of December 6,
1999 between SIDA and the Collateral Agent.
"Steam Contract" means the Steam Contract dated as of February, 27, 1990
between Orange L.P. and Syracuse University, as amended by those certain letter
agreements dated May 1, 1990, June 22, 1990, August 29, 1990, and an amendment
dated December 31, 1990.
"Steam Plant" means Syracuse University's existing steam generation facility
as more particularly defined in the Steam Contract.
"Steam Plant Operating Agreement" means the Steam Plant Operating Agreement
dated as of February 27, 1990, between Orange L.P. and Syracuse University, as
amended by the letter agreement dated May 1, 1990.
"Stipulation Reserve Account" means the account of such name created under and
defined in the Deposit and Disbursement Agreement.
"Subordinated Asset Management Fees" means fees and other amounts payable to
Niagara Mohawk Energy Marketing pursuant to the Asset Management Agreement and
Niagara Mohawk Energy Marketing Consent and Agreement.
"Subordinated Asset Management Fee Account" means the Account of such name
created under and defined in the Deposit and Disbursement Agreement.
"Subordinated Collateral Documents" means Syracuse University Collateral
Documents.
"Tennessee Gas Pipeline Company" means Tennessee Gas Pipeline Company, a
Delaware corporation.
"Tennessee Gas Pipeline Company Consent and Agreement" means the Consent and
Agreement dated as of a date on or prior to the Original Closing Date among
Tennessee Gas Pipeline Company, Orange L.P. and the Collateral Agent relating to
the Natural Gas Transportation Agreements.
"Tennessee Gas Pipeline Company Firm Gas Transportation Agreement" means that
certain Firm Natural Gas Transportation Agreement dated March 29, 1991 between
Orange L.P. and Tennessee Gas Pipeline Company.
"Tennessee Gas Pipeline Company Interruptible Gas Transportation Agreement"
means the certain Gas Transportation Agreement dated as of November 19, 1987
between Tennessee Gas Pipeline Company and Gas Alternative Systems, Inc., as
amended by that certain letter agreement dated as of October 4, 1988, and as
assigned by Gas Alternative Systems, Inc. to Orange L.P.
"Title Company" means Ticor Title Insurance Company.
"Title Event" means the existence of any defect of title or lien or
encumbrance on the Project (other than certain Permitted Liens) that entitles
the Collateral Agent to make a claim under the policy or policies of title
insurance issued to it pursuant to the Financing Documents or that entitles
Orange L.P. to make a claim under any policy or policies of title insurance held
by it.
"Title Event Proceeds" means all amounts and proceeds (including instruments)
received by the Collateral Agent or Orange L.P. in respect of any Title Event.
"TransCanada" means TransCanada Pipelines Limited, a Canadian corporation.
"TransCanada Agreement " means the Firm Service Contract, dated as of October
11, 1990, between TransCanada and Canadian Hunter.
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"TransCanada Consent and Agreement" means the Consent and Agreement dated as
of a date on or prior to the Original Closing Date among TransCanada, Canadian
Hunter, Orange L.P. and the Collateral Agent relating to the TransCanada
Agreement.
"Treasury Rate" means, with respect to any date of redemption, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such date of redemption.
"Trustee" means the party named as such above until a successor replaces it in
accordance with the applicable provisions of the Indenture and thereafter means
the successor serving hereunder.
"UCC" means the New York Uniform Commercial Code.
"University Agreements" means the Ground Lease, the Steam Contract, the Steam
Plant Operating Agreement, the University Easement Agreements, the University
Consent and Agreement and the University Security Agreements.
"University Collateral Documents" means the University Facility Mortgage, the
University Pipeline Mortgage and the University Security Agreements. The
University Collateral Documents will be subordinated to the First Mortgage, the
Security Agreement, the SIDA Security Agreement and the Pledge Agreements
pursuant to the University Subordination Agreement.
"University Consent and Agreement" means the Consent and Agreement dated as of
a date on or prior to the Original Closing Date, among Orange L.P., Syracuse
University and the Collateral Agent for and on behalf of the Secured Parties ,
relating to, among other things, the Ground Lease Agreement and the Steam
Contract, to be recorded in the Clerk's Office.
"University Easement Agreements" means the City Easement Agreement granted by
Syracuse University described in item 2 of Exhibit A-3 to the First Mortgage and
the Outside Easements granted by Syracuse University described in items 15 and
16 of Exhibit A-5 to the First Mortgage.
"University Facility Mortgage" means the Mortgage and Security Agreement (A),
dated as of April 5, 1991, recorded in the Clerk's Office on May 3, 1991 in Book
5857 at Page 221, as amended by the First Amendment of Mortgage and Security
Agreement (A), dated as of December 24, 1992, recorded in the Clerk's Office on
January 7, 1993 in Book 6731 at Page 254, given by SIDA and Orange L.P. to
Syracuse University relating to the Project and securing Orange L.P.'s
obligation to Syracuse University under the Steam Contract, the Steam Plant
Operating Agreement and the Ground Lease up to a maximum of $20,000,000
principal amount of such obligations.
"University Pipeline Mortgage" means the Mortgage and Security Agreement (B),
dated as of April 5, 1991, recorded in the Clerk's Office on May 3, 1991 in Book
5857 at Page 249, as amended by the First Amendment of Mortgage and Security
Agreement (B), dated as of December 24, 1992, recorded in the Clerk's Office on
January 7, 1993 in Book 6731 at Page 274, given by SIDA to Syracuse University
relating to the Pipeline and securing Orange L.P.'s obligations to Syracuse
University relating to access to the Pipeline upon termination of the Steam
Contract and the Steam Plant Operating Agreement up to a maximum of $10,000,000
principal amount of such obligations.
"University Security Agreements" means two Security Agreements dated as of
April 5, 1991 among Orange L.P., SIDA and Syracuse University and Orange L.P.
relating to the Orange L.P.'s supply contracts for natural gas and other fuel
and sale contracts for energy and associated capacity, steam and other power and
energy, Orange L.P.'s obligations to Syracuse University under the Steam
Contract, the Steam Plant Operating Agreement and the Ground Lease. There is no
limit on the principal amount of the obligations secured.
"University Subordination Agreement" means the Subordination Agreement dated
as of December 6, 1999 among Syracuse University, Orange L.P. and the Collateral
Agent.
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"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors or otherwise entitled to vote in the determination of the management
of such Person.
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CERTAIN FEDERAL TAX CONSEQUENCES
The following discussion of certain material United States federal income tax
consequences of the purchase, ownership and disposition of the notes is based
upon the advice of Piper Marbury Rudnick & Wolfe LLP. The discussion does not
cover all of the tax considerations that may be relevant to a decision to
purchase, own or dispose of the notes. Moreover, the discussion applies to you
only:
(1) if you purchased the old notes in their original offering at their "issue
price" as defined below, and
(2) if you hold your notes as capital assets, and
(3) if you are not are a dealer, financial institution, insurance company, tax-
exempt entity or other investor with special circumstances or subject to
special rules or treatment under federal income tax laws.
This discussion is based solely on United States federal tax laws and on
administrative and judicial interpretations of these laws, as of the date of
this prospectus, all of which are subject to change, possibly on a retroactive
basis. This discussion does not address any aspect of state, local or foreign
taxation.
You are urged to consult your own tax advisor as to the United States federal
income tax consequences to you of the purchase, ownership and disposition of the
notes as well as about the effect of any state, local or foreign tax laws.
Holders
This section applies to you if you are a U.S. Holder, i.e., you are, for
United States federal income tax purposes:
(1) a citizen or resident of the United States, or
(2) a corporation or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or
(3) an estate whose income is subject to United States federal income
taxation regardless of its source, or
(4) a trust over which a U.S. court is able to exercise primary
jurisdiction and as to which at least one United States person has
authority to control its substantial decisions.
Exchange of Old Notes for New Notes. An exchange of old notes for new notes
should not constitute a taxable event for federal income tax purposes. Rather,
the new notes should be treated as a continuation of the old notes in the hands
of a U.S. Holder. As a result, U.S. Holders who exchange their Old Notes for
New Notes should not recognize any income, gain or loss for federal income tax
purposes with respect to such exchange, and a U.S. Holder will have the same tax
basis and holding period in the New Notes as such U.S. Holder had in the old
notes.
Interest Income and Original Issue Discount. You will generally be subject
to United States federal income tax on any interest paid on the notes:
(1) when you receive it, if you are a cash method taxpayer (including
most individuals), or
(2) when it accrues, if you are an accrual method taxpayer.
Your interest income will be taxed at ordinary income rates.
In addition, U.S. Holders will be subject to special tax accounting rules
since the notes will have original issue discount for federal income tax
purposes. The amount of original issue discount on a note is the excess of its
"stated redemption price at maturity" (the sum of all principal payments to be
made on the note) over its "issue price." The "issue price" of each note will be
equal to the first price at which a substantial amount of the old notes was sold
for
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money (excluding sales to bond houses, brokers or similar persons acting as
underwriters, placement agents or wholesalers). Each Holder (whether a cash or
accrual method taxpayer) will be required to include in income such original
issue discount as its accrues, in advance of the receipt of cash attributable to
that income.
The amount of original issue discount includable in income by the initial
Holder of a note is the sum of the "daily portions" of original issue discount
with respect to the note for each day during the taxable year or portion of the
taxable year on which such Holder held such note ("accrued original issue
discount"). The daily portion is determined by allocating to each day in any
"accrual period" a ratable portion of the original issue discount allocable to
that accrual period. The accrual periods for a note will be periods that are
each selected by the Holder that are no longer than one year, provided that each
scheduled payment occurs either on the final day of an accrual period or on the
first day of an accrual period. The amount of original issue discount allocable
to any accrual period other than the initial short accrual period (if any) and
the final accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and properly adjusted for the
length of the accrual period) reduced by the amount of interest allocable to
that period. The amount of original issue discount allocable to the final
accrual period is the difference between the amount payable at maturity and the
adjusted issue price of the note at the beginning of the final accrual period.
The amount of original issue discount allocable to any initial short accrual
period may be computed under any reasonable method. The adjusted issue price of
the note at the start of any accrual period is equal to its issue price
increased by the original issue discount for all prior accrual periods and
reduced by any prior payments of principal amortized with respect to such note.
The Issuers are required to report the amount of original issue discount accrued
on notes held of record by persons other than corporations and other exempt
Holders, which may be based on accrual periods other than those chosen by the
Holder of the notes. The tax basis of a note in the hands of the Holder will be
increased by the amount of original issue discount on the note that is included
in the Holder's income pursuant to these rules, and will be decreased by the
amount of any payments of principal amortized with respect to the note.
Gain or Loss on Sale or Disposition. You will generally be subject to
federal income tax on any gain derived from the sale or other disposition of
your notes, including their redemption by us. The amount of your gain or loss
will be equal to the difference between the amount realized from the disposition
of the notes and your adjusted tax basis in the notes. Your gain or loss will be
a long-term capital gain or loss if you held your notes for more than one year
and a short-term capital gain or loss otherwise. If you sell your notes between
interest payment dates, a portion of the proceeds from the sale will reflect
accrued but unpaid interest and will be taxed at ordinary income rates if you
are a cash basis taxpayer.
Backup Withholding and Information Reporting. If you are an individual or a
noncorporate entity, you may be subject to backup withholding at a rate of 31%
on payments in respect of, and the proceeds of disposition of, the notes. Backup
withholding will apply only if you:
(1) fail to furnish your taxpayer identification number which, for an
individual, would be your Social Security number,
(2) furnish an incorrect taxpayer identification number,
(3) are notified by the Internal Revenue Service that you have failed
to properly report payments of interest and dividends, or
(4) fail to certify, under penalty of perjury, that you have furnished
a correct taxpayer identification number, on Form W-9 or a
substantially similar form and have not been notified by the
Internal Revenue Service that you are subject to backup withholding
for failure to report interest and dividend payments.
The amount of any backup withholding from a payment to you will be allowed as
a credit against your United States federal income tax liability and may entitle
you to a refund.
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Taxation of non-U.S. Holders
This section applies to you if you are a non-U.S. Holder, i.e., you are, for
United States federal income tax purposes:
(1) a nonresident alien individual, or
(2) a foreign corporation, or
(3) an estate whose income is not subject to United States federal
income taxation regardless of its source, or
(4) a trust over which a U.S. court is unable to exercise primary
jurisdiction or as to which no United States person has authority
to control its substantial decisions.
Interest Income. You will generally not be subject to United States
withholding tax on any payment of principal, original issue discount or interest
on the notes provided that:
(1) you do not own, actually or constructively, 10% or more of either
our capital or profits, and
(2) you are not a "controlled foreign corporation" related to us, and
(3) you are not a bank extending credit pursuant to the loan to us in
the ordinary course of your business, and
(4) you (or your agent) certify, under penalties of perjury, that you
are a beneficial owner of the notes and not a U.S. Holder and you
(or your agent) provide us or our paying agent with Form W-8 or
Form W-8BEN containing your name and address.
In addition, you will not be subject to the United States withholding tax on
any original issue discount or interest paid on the notes:
(1) if you hold the notes in connection with your U.S. trade or
business and you (or your agent) submit Form 4224 or Form W-8ECI,
or
(2) you are exempt under an applicable tax treaty and you (or your
agent) submit Form 1001, Form W-8 or Form W-8BEN (if you are
partially exempt, you will be subject to a U.S. withholding tax at
such reduced treaty rate).
Consult your tax advisor about the specific procedures for satisfying these
requirements and about the new procedures which may or could come into effect on
January 1, 2001. You will be subject to withholding if the paying agent knows
that a form you submitted to obtain exemption contains false information.
U.S. Trade or Business. If you hold the notes in connection with your trade
or business in the United States:
(1) you will be taxed on any interest income and original issue
discount and any gain from sale or disposition of the notes as if
you were a U.S. Holder, and
(2) if you are a corporation, you also may be subject to a "branch
profits tax" in the amount of 30% (subject to reduction by a tax
treaty) of your income from the notes.
Gain or Loss on Sale or Disposition. Generally, you will not be subject to
federal income tax on any gain derived from the sale or other disposition of
your notes, including their redemption by us unless:
(1) part of the gain represents accrued but unpaid interest, in which
case the rules for taxation of the interest
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apply;
(2) the gain is connected with your trade or business in the United
States, or
(3) you are otherwise a non-resident alien individual for federal
income tax purposes and you are present in the United States for
183 or more days during the year in which you dispose of the notes
(which results in your becoming a resident alien for federal income
tax purposes), or
(4) you are subject to tax under the law related to the taxation of
United States expatriates.
Estate Taxes. If you are an individual, the notes will not be subject to the
United States federal estate tax when you die, unless, at the time of your
death:
(1) payments on the notes were connected to a trade or business
conducted by you in the United States, or
(2) you owned 10% or more of the capital or profits interest in us.
Backup Withholding and Information Reporting. General information reporting
and backup withholding rules applicable to the U.S. Holders will not apply to
your receipt of payments of principal or interest on the notes if you provide
proper certifications which exempt you from paying a withholding tax on these
payments, as described above. However, the paying agent will report its payments
to you of interest on the notes to the IRS. You will be subject to backup
withholding if the paying agent knows that a form you submitted to obtain
exemption from withholding tax contains false information.
If you sell or dispose of your notes through a U.S. office of a broker, the
proceeds may be subject to backup withholding and information reporting if you
do not qualify for an exemption. Under current law, however, if you sell or
dispose of your notes through a foreign office of a broker, the proceeds will
not be subject to backup withholding but may be subject to information reporting
if the broker has certain connections to the United States. Consult your tax
advisor about a specific application of these rules to your particular
circumstances.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for old notes where such old
notes were acquired as a result of market-making activities or other trading
activities.
We will not receive any proceeds from any sale of new notes by broker-dealers.
New notes received by broker-dealers for their own account pursuant to the
exchange offer may be sold from time to time:
(1) in one or more transactions in the over-the-counter market,
(2) in negotiated transactions,
(3) through the writing of options on the exchange bonds, or
(4) a combination of such methods of resale.
(5) Such bonds may be sold:
(6) at market prices prevailing at the time of resale,
(7) at prices related to such prevailing market prices, or
(8) at 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 New Notes.
Any broker-dealer that resells New Notes 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 such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act. Any profit on any such
resale of exchange bonds and any commissions or concessions received by any of
them 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 expenses incident to the exchange offer other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the notes, including any broker-dealers, against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Piper Marbury Rudnick & Wolfe LLP, New York, New York, will provide us with an
opinion as to legal matters in connection with the notes offered by this
prospectus.
EXPERTS
The financial statements of Project Orange Associates, L.P. as of December 31,
1998 and 1997 and for each of the three years in the period ended December 31,
1998 included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm giving upon their authority
as experts in accounting and auditing.
Stone & Webster Management Consultants, Inc. has prepared the Independent
Engineer's Report dated December 2, 1999, included herein as Exhibit A. The
Independent Engineer's report was prepared in connection with the offering of
the Old Notes and has not been updated since then. The Independent Engineer's
Report should be read in its entirety for additional information about the
Project and the other matters addressed therein. In reaching its conclusions,
Stone & Webster Management Consultants, Inc. has utilized the sources of
information described in the Independent Engineer's Report and believes that the
use of such information is reasonable for the purposes of its Independent
Engineer's Report. We included the Independent Engineer's Report in this
prospectus in reliance upon the conclusions therein of the Independent Engineer
and upon such firm's experience in preparing independent engineer's reports for
similar projects.
WHERE YOU CAN FIND MORE INFORMATION
We will file annual, quarterly and special reports, and other information with
the SEC under the Exchange Act. You may read and copy any documents we file at
the following SEC public reference rooms:
<TABLE>
<CAPTION>
<S> <C> <C>
Judiciary Plaza 500 West Madison Street 7 World Trade Center
450 Fifth Street, N.W. 14th Floor Suite 1300
Rm. 1024 Chicago, Illinois 60661 New York, New York
Washington, D.C. 20549 10048
</TABLE>
You may obtain information on the operation of the public reference room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330. We will file information
electronically with the SEC. Our SEC filings are available from the SEC's
Internet Site at http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding issuers that file
electronically. You may read and copy our SEC filings and other information at
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the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act. This prospectus does not contain all of the information in the
registration statement. We have omitted parts of the registration statement as
permitted by the rules and regulations of the SEC. You may inspect and copy the
registration statement, including exhibits, at the SEC's public reference
facilities or Internet site. Our statements in this prospectus about the
contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.
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INDEX TO FINANCIAL STATEMENTS
PROJECT ORANGE ASSOCIATES, L.P.
Page
----
. Independent Auditors' Report ............................................ F-2
. Balance Sheets as of September 30, 1999, September 30, 1998 (unaudited)
and December 31, 1998 and 1997 .......................................... F-3
. Statements of Operations for the nine months ended September 30, 1999
and 1998 (unaudited) and for each of the three years ended
December 31, 1998 ....................................................... F-4
. Statements of Partners' Capital for each of the three ended December
31, 1998 and the nine months ended September 30, 1999 (unaudited) ....... F-5
. Statements of Cash Flows for the nine months ended September 30, 1999
and 1998 (unaudited) and for each of the three years ended
December 31, 1998 ....................................................... F-6
. Notes to Financial Statements ........................................... F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of Project Orange Associates, L.P.
We have audited the accompanying balance sheets of Project Orange Associates,
L.P. as of December 31, 1998 and 1997, and the related statements of operations,
partners' capital and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Project Orange Associates, L.P. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
August 16, 1999
(December 6, 1999 as to Note 14)
Parsippany, New Jersey
F-2
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
September 30, December 31,
------------------------------------ ---------------------------------
ASSETS 1999 1998 1998 1997
(Unaudited)
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents - unrestricted $ 5,138 $ 12,355 $ 6,683 $ 5,615
Escrowed construction funds - restricted - - - 1,217
Restricted cash and cash equivalents 11,897 - - -
Accounts receivable 2,614 3,034 3,389 3,651
Prepaid expenses 291 145 392 368
Other current assets 117 150 289 97
--------- --------- --------- --------
Total current assets 20,057 15,684 10,753 10,948
--------- --------- --------- --------
NONCURRENT ASSETS:
Restricted cash and cash equivalents 707 12,611 12,603 11,845
Swap contract 71,750 80,964 78,773 -
Property, plant and equipment, net 91,116 100,724 98,177 104,851
Prepaid gas supply, net 54,963 59,056 57,634 71,938
--------- --------- --------- --------
Total noncurrent assets 218,536 253,355 247,187 188,634
--------- --------- --------- --------
TOTAL ASSETS $ 238,593 $ 269,039 $ 257,940 $199,582
========= ========= ========= ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable trade $ 1,864 $ 5,046 $ 3,466 $ 5,474
Accrued liabilities 1,495 2,256 2,254 2,996
Deferred gas payments 11,882 616 - -
Current portion of long-term debt - - - 6,088
Deferred revenue - Master Restructuring
Agreement 24,423 23,649 23,649 -
--------- --------- --------- --------
Total current liabilities 39,664 31,567 29,369 14,558
--------- --------- --------- --------
LONG-TERM LIABILITIES:
Long-term debt - - - 153,942
Deferred gas payments - 11,280 11,280 11,839
Deferred revenue - Master Restructuring
Agreement 181,502 206,809 200,785 -
--------- --------- --------- --------
Total long-term liabilities 181,502 218,089 212,065 165,781
--------- --------- --------- --------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL 17,427 19,383 16,506 19,243
--------- --------- --------- --------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $ 238,593 $ 269,039 $ 257,940 $199,582
========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
STATEMENTS OF OPERATIONS
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Year Ended
September 30, December 31,
----------------------------- --------------------------------------------
1999 1998 1998 1997 1996
(Unaudited)
REVENUES:
<S> <C> <C> <C> <C> <C>
Electricity $28,949 $29,933 $41,308 $37,304 $40,801
Steam 2,104 1,932 2,693 3,194 3,322
Deferred amortization income 11,500 3,833 7,666 - -
--------- --------- --------- --------- ---------
Total revenues 42,553 35,698 51,667 40,498 44,123
--------- --------- --------- --------- ---------
OPERATING EXPENSES:
Operating and maintenance expenses 8,490 13,470 18,095 17,595 19,276
Other operating expenses 6,182 5,031 5,419 4,218 3,302
Depreciation 7,498 4,170 6,718 3,221 3,153
Amortization of swap contract 7,022 2,191 4,382 - -
Amortization of prepaid gas supply 2,671 3,474 4,895 3,897 3,529
--------- --------- --------- --------- ---------
Total operating expenses 31,863 28,336 39,509 28,931 29,260
--------- --------- --------- --------- ---------
OPERATING INCOME 10,690 7,362 12,158 11,567 14,863
--------- --------- --------- --------- ---------
Other income and expense:
Interest expense - 7,364 7,364 14,694 15,063
Interest income (180) (142) (235) (438) (262)
--------- --------- --------- --------- ---------
Total other income and expense (180) 7,222 7,129 14,256 14,801
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $10,870 $ 140 $ 5,029 $(2,689) $ 62
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996,
AND NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NCP
Syracuse GAS LP SOP Other Total
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 $ 247 $ 2,099 $22,372 $(2,848) $21,870
Distributions from NCP Energy
(Note 11) (27) (995) (1,826) 2,848 -
Net income 1 6 55 - 62
------- ------- ------- ------- -------
BALANCE, DECEMBER 31, 1996 221 1,110 20,601 - 21,932
Net loss (27) (269) (2,393) - (2,689)
------- ------- ------- ------- -------
BALANCE, DECEMBER 31, 1997 194 841 18,208 - 19,243
Net income 51 502 4,476 - 5,029
Distribution of capital (78) (2,059) (5,629) - (7,766)
------- ------- ------- ------- -------
BALANCE, DECEMBER 31, 1998 167 (716) 17,055 - 16,506
Net income 109 1,087 9,674.30 - 10,870
Distribution of earnings (67) (674) (6,000) - (6,741)
Distribution of capital (32) (321) (2,855) - (3,208)
------- ------- ------- ------- -------
BALANCE, SEPTEMBER 30, 1999 (UNAUDITED) $ 177 $ (624) $17,874 $ $17,427
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
---------------------------- ------------------------------------------
1999 1998 1998 1997 1996
(Unaudited)
OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net income (loss) $ 10,870 $ 140 $ 5,029 $ (2,689) $ 62
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation 7,498 4,170 6,718 3,221 3,153
Amortization of prepaid gas supply 2,671 3,474 4,895 3,897 3,529
Amortization of deferred gain (11,500) (3,833) (7,666) - -
Provision for doubtful accounts - - - - (3,451)
Provision for deferred gas liability 1,832 - - - -
Changes in assets and liabilities:
Decrease (increase) in escrowed
construction funds - 1,217 1,217 (161) (53)
Decrease (increase) in accounts receivable 775 580 262 (1,108) 2,860
Increase (decrease) in prepaid expenses 101 (482) (24) - (77)
(Decrease) increase in accounts
payable and accrued liabilities (2,361) (1,168) (2,750) 1,398 1,318
Deferred gas payments (1,216) - - - -
Other current assets 172 (20) (192) (20) -
------- ------- ------- ------- -------
Net cash provided by operating
activities 8,842 4,078 7,489 4,538 7,341
------- ------- ------- ------- -------
INVESTING ACTIVITIES:
Purchase of property and equipment (437) (44) (44) (40) -
Payment of deposits (1) (1,317) - (6)
Receipt of restructuring proceeds - 180,293 180,293 - -
------- ------- ------- ------- -------
Net cash (used for) provided by
investing activities (438) 180,249 178,932 (40) (6)
------- ------- ------- ------- -------
FINANCING ACTIVITIES:
Repayment of long-term debt (160,030) (160,030) (4,032) (3,500)
Payment of financing costs (17,557) (17,557) - -
Distribution to partners (9,949) - (7,766) - -
------- ------- ------- ------- -------
Net cash used for financing activities (9,949) (177,587) (185,353) (4,032) (3,500)
------- ------- ------- ------- -------
NET CHANGE IN UNRESTRICTED CASH
AND CASH EQUIVALENTS (1,545) 6,740 1,068 466 3,835
UNRESTRICTED CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD 6,683 5,615 5,615 5,149 1,314
------- ------- ------- ------- -------
UNRESTRICTED CASH AND
CASH EQUIVALENTS, END OF PERIOD $ 5,138 $ 12,355 $ 6,683 $ 5,615 $ 5,149
======== ======== ======= ======= =======
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 138 $ 7,701 $ 8,741 $ 14,176 $ 14,840
======== ======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. THE PARTNERSHIP
Project Orange Associates, L.P. is a Delaware limited partnership
(Partnership) between NCP Syracuse, Inc. (NCP Syracuse), Syracuse Orange
Partners, L.P. (SOP), and G.A.S. Orange Partners, L.P. (GAS LP). Pursuant to
the Second Amended and Restated Agreement of Limited Partnership dated
December 16, 1992 (Partnership Agreement), NCP Syracuse is the managing
general partner, and SOP and GAS LP are limited partners. NCP Energy, Inc.
(NCP Energy), a wholly owned subsidiary of GPU International, Inc. (GPUI),
which owns a limited partnership interest in SOP, manages the Partnership
under an agreement with NCP Syracuse. See Note 14 for information regarding
the sale of the NCP Syracuse and SOP partnership interests.
Pursuant to the Partnership Agreement, the distribution of available cash is
dependent upon the internal rate of return (IRR) generated by the
Partnership project assets and the level of available cash (tranche) in a
given year. The following table summarizes the sharing formulas:
<TABLE>
<CAPTION>
NCP
Syracuse SOP GAS LP
Prior to achieving 19% IRR:
<S> <C> <C> <C>
Within 20 years of term conversion date:
- up to tranche 1 1 % 89 % 10 %
- tranche 1 to tranche 2 1 % 19 % 80 %
- above tranche 2 1 % 49 % 50 %
After 20 years of term conversion date 1 % 89 % 10 %
After achieving 19% IRR:
Within 20 years of term conversion date 1 % 49 % 50 %
20 years after term conversion date 1 % 24 % 75 %
After achieving 20% IRR 1 % 24 % 75 %
</TABLE>
The principal asset of the Partnership is an 80 megawatt natural gas-fired
cogeneration plant located in Syracuse, New York (Facility) with a 9.5-mile
interconnecting natural gas pipeline from the Tennessee Gas Pipeline Company
(TGPL), which together constitute the project (Project). The Facility
generates electricity for sale to Niagara Mohawk Power Corporation (NIMO)
pursuant to a Power Put Agreement, which expires no later than 2008. The
Facility also sells steam to Syracuse University (University) for its steam
distribution systems pursuant to a Steam Sale Agreement, which expires in
July 2032. The Facility site is owned by and leased from the University
pursuant to a Lease Agreement, which expires in July 2032.
The Partnership and the University have also entered into an Operating
Agreement, which expires in July 2032, under which the Partnership operates,
as a back-up to the Facility, certain existing steam facilities owned by the
University. Pursuant to this agreement, the Partnership is required to pay a
specified annual user charge to the University of $1,250,000 beginning in
July 1998 and escalating to $1,550,000 during the last 10 years of the
agreement. The Partnership paid the initial annual user charge of $1,250,000
to the University in July 1998 in accordance with the terms of the
agreement.
F-7
<PAGE>
Gas required to operate the Facility is provided by Noranda Inc. (Noranda)
as the seller and Canadian Hunter Exploration, Ltd. (Canadian Hunter), as
the agent for the seller, pursuant to a Gas Sale and Purchase Agreement
which expires in July 2012 (see Note 9). The natural gas is transported by
Nova Corporation and TransCanada Pipeline Ltd. to an interconnect with the
TGPL system where the Partnership takes possession and transports the
natural gas through the 9.5-mile interconnecting pipeline. The Partnership
holds transportation space on the TGPL system pursuant to a Firm Natural
Gas Transportation Agreement (Firm Transportation Agreement) which expires
in July 2012.
During the formation and development of the Project and in the normal
course of its operations, the Partnership had various material
transactions with affiliates (see Note 12).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents - The Partnership classifies all short-term investments
with original maturities of three months or less as cash equivalents. Cash
equivalents consist of short-term investments in commercial paper.
Financial Instruments - In 1998, the Partnership entered into foreign
currency options to reduce exposure to exchange rate fluctuations relative
to the production and transportation of fuel received from Canadian
Hunter. These options give the Partnership the right, but not the
obligation, to buy foreign currency at a specific price. The Partnership's
exposure to loss from changes in the relative value of the currency is
limited to the amount paid for the options.
The Partnership entered into an Indexed Swap Agreement to manage the price
of electricity (see Note 4).
The Partnership used interest rate swaps as hedges to manage the
proportions of fixed versus floating rate debt. Differences between
amounts paid and received under interest rate swaps were recorded as
adjustments to the interest expense of the underlying debt. The
Partnership does not hold or issue financial instruments for trading
purposes.
Property, Plant and Equipment - All costs of developing and constructing
the Facility and the related pipeline were capitalized, including direct
construction costs, interest on funds advanced for construction, fees paid
to various parties for development of the project, costs associated with
obtaining the nonrecourse financing for the Project and costs of
negotiating contracts.
Capitalized costs are depreciated on a straight-line basis over 10 years
in conjunction with the Master Restructuring Agreement (MRA) and the Power
Put Agreement (see Note 4). Prior to the MRA, these costs were depreciated
on a straight-line basis over the estimated useful life which was
determined to be the life of the Power Put and Steam Sale Agreements
remaining at December 24, 1992 (39.6 years). Furniture and fixtures within
the Facility are depreciated on a straight-line basis over their estimated
useful life of five years.
Deferred Revenue - MRA - Deferred revenue on the MRA represents the
Indexed Swap Agreement and the gain on amounts received from the
restructuring of the Partnership's power purchase agreement with NIMO.
This deferred revenue is being recognized in income over the earlier of a
10-year period or when certain rights under the Power Put Agreement
F-8
<PAGE>
between the Partnership and NIMO expire, at which time the unamortized
deferred revenue will be recognized in income (see Note 4).
Revenue Recognition - The Partnership recognizes revenues when electricity
and steam are delivered under the terms of the related contracts.
Amortization of Prepaid Gas Supply - Prepaid gas supply is amortized using
a fixed per unit rate in conjunction with the MRA and Power Put Agreement.
Prior to the MRA, the Partnership was amortizing the prepaid gas supply
based on increasing per unit amounts of expense inherent in the
negotiation of the contract offset by decreasing amounts of expense.
Income Taxes - The Partnership is not considered a taxable entity for
Federal and state income tax purposes. Any taxable income or losses,
credits and certain other items, therefore, are reported by the partners
on their own tax returns in accordance with the Partnership Agreement.
Reclassifications - Certain amounts from the prior year financial
statements have been reclassified to conform with the current year
presentation.
3. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133), which was to be
effective for financial statements for all fiscal quarters of fiscal years
beginning after June 15, 1999 (see below). SFAS 133 establishes accounting
and reporting standards for derivative instruments and hedging activities.
It requires an entity to recognize all derivatives, within the scope of
this statement, as assets or liabilities on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value
through income. If a derivative is a hedge, changes in fair value of the
derivative will either be offset against the change in fair value of the
hedged assets, liability or firm commitment through earnings or be
recognized in other comprehensive income until the hedged item is
recognized in earnings, depending on the nature of the hedge. The
ineffective portion of the derivative's change in fair value will be
immediately recognized in earnings.
In June 1999, the FASB issued SFAS 137, Accounting for Derivative
Instruments and Hedging Activities, Deferral of the Effective Date of FASB
Statement No. 133, an amendment of the SFAS 133, which defers the
effective date of SFAS 133 for one year. SFAS 133 will now be effective
for all fiscal quarters of all fiscal years beginning after June 15, 2000.
SFAS 137 also defers by one year the transition date regarding embedded
derivatives in SFAS 133. The Partnership is currently evaluating the
impact of SFAS 133.
4. POWER PUT AND INDEXED SWAP AGREEMENTS
On June 30, 1998, NIMO consummated the MRA whereby substantially all of
its independent power producer (IPP) agreements were renegotiated
resulting in lump sum payments to the IPPs and/or new contracts with NIMO.
As a result of this transaction, NIMO and the Partnership amended the
existing power purchase agreement with a Power Put Agreement and an
Indexed Swap Agreement, each of which expire in June 2008. In addition,
the Partnership received cash proceeds as part of the restructuring
agreement resulting in a gain of $153,327,045, which is included in
deferred revenue - MRA. For the six-month period ended December 31, 1998,
the Partnership recorded amortization of
F-9
<PAGE>
deferred revenue in the amount of $7,666,352 relating to this deferred
gain and for the nine-month periods ended September 30, 1999 and 1998, the
Partnership recorded amortization of deferred revenue in the amount of
$11,499,528 (unaudited) and $3,833,176 (unaudited), respectively, relating
to this deferred gain.
The Power Put Agreement gives the Partnership the right, but not the
obligation, to put energy and capacity to NIMO at a proxy-market price up
to a specified contract quantity. In the event that the Partnership
chooses to sell energy and capacity to third parties, NIMO has the right
of first refusal to purchase such energy and capacity. Subsequent to the
establishment of a competitive market for electricity in New York State
(Power Exchange) on November 17, 1999 certain rights between the
Partnership and NIMO expire under the Power Put Agreement (see Note 13).
The Power Put Agreement provides that the Power Exchange must achieve
certain volumetric tests for a six-month period in order to establish a
competitive market price. Thereafter, the Partnership is expected to sell
electricity into the Power Exchange at the prevailing market price.
The Indexed Swap Agreement is a financial instrument under which the
Partnership pays NIMO market price and NIMO pays the Partnership a
contract price which is fixed for the first two years and subsequently
adjusted monthly according to an indexing formula for the remaining term.
The notional amount of the swap is based on the contracted quantity of
energy and capacity. The market price that the Partnership pays NIMO under
the Indexed Swap Agreement is equivalent to the market price that the
Partnership receives from either NIMO under the Power Put Agreement or a
third party for sales to the Power Exchange.
The fair value of the Indexed Swap Agreement on June 30, 1998, the date
the MRA was consummated, amounted to $83,154,934 and is included in Swap
contract in the balance sheet as a non-cash transaction. The initial
valuation was derived using the discounted estimated cash flows related to
payments expected to be received by the Partnership. A corresponding
amount was recorded in deferred revenue-MRA and will be recognized to
income over the earlier of a ten-year period or when certain rights
between the Partnership and NIMO expire under the Power Put Agreement. For
the year ended December 31, 1998 and the nine months ended September 30,
1999 and 1998, the Partnership recognized $4,382,190 and $7,022,853
(unaudited) and $2,191,095 (unaudited), respectively, of deferred revenue
and swap contract amortization expense. The fair value of the Indexed Swap
Agreement on September 30, 1999 and 1998 amounted to $71,749,891
(unaudited) and $80,963,839 (unaudited), respectively.
5. OPERATIONS AND MAINTENANCE AGREEMENT
In November 1998, the Partnership entered into an amended Operations and
Maintenance Agreement (O&M Agreement) with General Electric International,
Inc. Operations (GEI, formerly General Electric Energy Plant Operations)
which expires in April 2008. As a result of its acquisition of the gas
turbine division of Stewart & Stevenson Services, Inc. (SSSI), GEI assumed
the contractual obligations of Stewart & Stevenson Operations, Inc.
(SSOI), which operated the Facility for the Partnership pursuant to an O&M
Agreement that would have expired in July 2008. GEI and SSOI are related
parties through their affiliation with General Electric Business Asset
Funding and SSSI, which, in turn hold limited partnership interests in
SOP.
Under the terms of the O&M Agreement, GEI receives payment for all
expenses incurred related to the operation, maintenance and repair of the
Facility in addition to certain fixed fees. The Partnership has the option
for an extension of the O&M Agreement up to eight additional years from
the April 2008 expiration date. For the years ended December 31, 1998,
1997 and 1996, the Partnership recorded such expenses of $4,602,341,
$5,895,532 and $6,169,718, respectively. For the nine months ended
September 30, 1999 and 1998, the Partnership recorded such expenses of
$2,240,628 (unaudited) and $4,004,815 (unaudited), respectively, for such
services.
F-10
<PAGE>
The Partnership owed GEI $2,889,022 in payments related to amounts due
SSOI under the prior O&M Agreement, primarily for accumulated operational
bonuses. In order to settle this obligation, the Partnership made a one
time cash payment of $1,625,000 to GEI at the consummation of the new O&M
Agreement. The remaining $1,264,022 was recorded as a reduction in Other
operating expenses in the statement of operations for the year ended
December 31, 1998.
6. FOREIGN CURRENCY OPTIONS
On November 30, 1998, the Partnership purchased twelve monthly Canadian
dollar options to reduce its exposure to exchange rate fluctuations
between the Canadian dollar and the U.S. dollar based upon 75% of the
Partnership's estimated 1999 monthly fuel expense. The Partnership's
exposure to losses from changes in the relative value of the currency is
limited to the cost of the options, which was $150,000. The premium paid
was recorded in other current assets on the balance sheet and is being
expensed, net of any gains, at a specified amount each month during 1999.
No such options were outstanding in 1997. For the nine months ended
September 30, 1999, the Partnership recognized a net gain of $57,242
(unaudited) for such options, which was recorded as a reduction to fuel
expense.
7. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Partnership's financial instruments, and
the methods and assumptions used to estimate the fair value of each class
of financial instruments, include:
Cash, Cash Equivalents and Escrowed Construction Funds - The
carrying amount approximates fair value because of the short
maturity of those instruments.
Swap Contract - The fair value of the swap contract approximates the
carrying amount. The fair value represents estimated cash flows
discounted at 13% based on historical equity returns.
Long-term Debt -The fair value of the Partnership's long-term debt
as of December 31, 1997 is $162,341,000 and is estimated based on
the quoted market prices for the same or similar issues or on the
current rates offered to the Partnership for debt of the same
remaining maturities. No debt was outstanding at December 31, 1998
and September 30, 1999.
Foreign Currency Options - The fair value of the options are derived
by obtaining estimated market prices for each transaction from a
broker. As of December 31, 1998, the fair value of such options
approximates the carrying amount (see Note 6). As of September 30,
1999, the estimated fair value of the options approximates $81,000.
Interest Rate Swap Agreements - The fair value of interest rate swap
agreements entered into in connection with long-term debt at
December 31, 1997 is $8,280,000, and represents the estimated amount
the Partnership would have to pay to terminate the agreements.
F-11
<PAGE>
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment was comprised of the following:
<TABLE>
<CAPTION>
September 30, December 31,
------------------------------ -------------------------------
1999 1998 1998 1997
(Unaudited)
<S> <C> <C> <C> <C>
Development costs $21,674 $ 21,674 $21,674 $ 21,674
Facility construction costs 91,126 90,689 90,689 90,645
Pipeline construction costs 8,333 8,333 8,333 8,333
------- ------- ------- -------
121,133 120,696 120,696 120,652
Less accumulated depreciation (30,017) (19,972) (22,519) (15,801)
------- ------- ------- -------
$91,116 $100,724 $98,177 $104,851
======= ======== ======= ========
</TABLE>
9. PREPAID GAS SUPPLY
In accordance with the terms of the Gas Sale and Purchase Agreement
effective in 1991, the Partnership advanced $88 million to Noranda to
secure the estimated 120 million MMBtu of natural gas which will be
required to operate the Facility over the first 16 to 20 years.
The Partnership applied a portion of the proceeds from the MRA towards
reducing prepaid gas supply, net on the balance sheet at June 30, 1998.
In addition to the advancement of funds to prepay the gas supply, the
Partnership is obligated for the payment of royalties, operating costs (as
defined) and transportation costs. During the years ended December 31,
1998, 1997 and 1996, these costs totaled $10,233,683, $9,919,700 and
$10,209,500, respectively, of which approximately $942,785 and $975,600
are included in accrued liabilities as of December 31, 1998 and 1997,
respectively. For the nine months ended September 30, 1999 and 1998, these
costs totaled $6,466,925(unaudited) and $7,555,271 (unaudited),
respectively.
A portion of the funds owed to Noranda for royalties, operating
costs and transportation costs are deferred and held by the Partnership.
These deferred amounts total $470,000 per quarter to a maximum of
$11,280,000 and are payable to Noranda, with interest earned on
the deferred amounts. In 1998, the Partnership reached the $11,280,000
maximum deferred principal amount. Subject to the terms of the Gas Sales
and Purchase Agreement, the Partnership deposited funds in a deferral
account that approximates the total deferred amount to be paid to Noranda.
The funds deposited are included in noncurrent restricted cash in the
balance sheet (See Note 14).
For the years ended December 31, 1998 and 1997, the Partnership expensed
and deferred $2,580,243 and $2,397,293, respectively, under the terms of
the agreement, which included $700,243 and $517,293 in accrued interest,
respectively. Pursuant to the terms of the Gas Sale and Purchase
Agreement, the Partnership made payments in 1998 totaling $3,130,024,
which included $2,190,024 in accrued interest. There were no such payments
made in 1997 and 1996.
F-12
<PAGE>
For the nine months ended September 30, 1999 and 1998, the Partnership
expensed and deferred $1,832,177 (unaudited) and $1,950,844 (unaudited),
respectively, under the terms of the agreement, which included $422,127
(unaudited) and $540,844 (unaudited) in accrued interest, respectively.
Pursuant to the terms of the Gas Sale and Purchase Agreement for the nine
months ended September 30, 1999 and 1998, the Partnership made payments
totaling $1,215,395 (unaudited) and $1,884,136 (unaudited), which included
$275,395 (unaudited) and $1,884,136 (unaudited) in accrued interest,
respectively.
10. LONG-TERM DEBT
The Partnership entered into a Financing Agreement with the Algemene Bank
Nederland N.V., acting as agent for a group of lenders, to provide for the
construction financing for the Project with a 16-year term facility
totaling $175 million (the Term Loan) on December 24, 1992. The
Partnership also entered into three interest rate swap agreements to
manage the portions of fixed versus variable interest rate debt. All
obligations under the Financing Agreement were secured solely by the
assets of the Partnership.
On June 30, 1998, the Partnership repaid all outstanding borrowings and
accrued interest against the Term Loan using the cash proceeds from the
MRA. The Partnership incurred $9,612,299 in swap breakage costs when it
terminated the swap agreements in conjunction with the long-term debt
repayment prior to the scheduled termination dates.
Pursuant to the terms of the Financing Agreement, the Partnership was
required to fund a debt service reserve account if it did not satisfy
certain debt service covenants. As of December 31, 1997, the Partnership
had a debt service reserve account balance of $900,656, which was included
in Cash and cash equivalents - unrestricted on the balance sheet. As a
result of the long-term debt repayment, the Partnership is no longer
required to maintain these debt service covenants.
11. PARTNERS' CAPITAL
During 1995, the Partnership made distributions which amounted to
$2,848,000, which were held in restricted funds with NCP Energy, until the
resolution of the lawsuit with GAS LP. On March 28, 1996, a lawsuit was
settled and the partners received distributions as follows: $27,000 to NCP
Syracuse, $995,000 to GAS LP and $1,826,000 to SOP. No Partnership
distributions were made during 1997 and 1996.
12. RELATED PARTY TRANSACTIONS
The following summarizes the more significant related party transactions
not described elsewhere in the financial statements.
GPUI, which owns a limited partnership interest in SOP, was responsible
for the completion of certain elements of the Facility's construction not
completed at the time of Term Loan conversion. While there were funds in
escrow to cover these costs, GPUI was responsible for any deficiency and
entitled to any excess.
As of December 31, 1997, the excess funds in the escrow account, after
estimated future construction expenditures, totaled $1,059,000. In 1998,
the final outstanding items related to the Facility's construction were
completed, leaving excess funds in the construction escrow account
totaling $1,088,071, which were remitted to GPUI.
NCP Energy manages the Partnership, for which they receive quarterly
management fees and reimbursements. For the years ended December 31, 1998,
1997 and 1996, NCP Energy earned
F-13
<PAGE>
$978,399, $709,091 and $669,174, respectively, in management fees and
reimbursed costs. At December 31, 1998 and 1997, $90,763 and $89,133,
respectively, were included in accrued liabilities. For the nine months
ended September 30, 1999 and 1998, NCP Energy earned $663,362 and $733,027
(unaudited), respectively, in management fees and reimbursed costs.
In June 1998, the Partnership paid NCP Energy a restructuring fee of
$1,250,000 pursuant to the MRA. In addition, NCP Energy is to provide
additional services through 1999 for which they will receive an aggregate
amount, subject to Partnership approval, of $1,250,000. As of December 31,
1998, the Partnership approved the payment of $625,000 for such services,
of which $312,500 is included in accrued liabilities. For the year ended
December 31, 1998, the Partnership recorded a total of $1,875,000 for the
restructuring fee and services in other operating expenses in the
statement of operations. For the nine months ended September 30, 1999, the
Partnership recorded $625,000 (unaudited)for such services in other
operating expenses.
GAS LP receives a quarterly consulting fee of $75,000 subject to annual
escalation at the rate of inflation beginning in 1993. During the years
ended December 31, 1998, 1997 and 1996, consulting fees amounted to
$351,340, $345,032 and $333,936, respectively. As of December 31, 1998 and
1997, $87,836 and $86,258, respectively, are included in accrued
liabilities. For the nine months ended September 30, 1999 and 1998,
consulting fees amounted to $267,420(unaudited)and $263,504 (unaudited),
respectively, all of which were paid by the Partnership at September 30,
1999 and September 30, 1998, respectively.
13. COMMITMENTS AND CONTINGENCIES
Commitments and contingencies exist under agreements and operations in the
normal course of business, the total amount of which, in the opinion of
the Partners, is significant to the financial position of the Partnership.
These agreements are all inherent in the cogeneration business.
Letter of Credit - In August 1998, the Partnership issued a $700,000
letter of credit to TGPL, which can be drawn upon under the Firm
Transportation Agreement. The letter of credit, which must be renewed
annually, has been collateralized with a compensating cash account and is
included in Restricted cash and cash equivalents on the balance sheet. The
balance in the account at December 31, 1998 and September 30, 1999,
including interest, was $702,000 and $707,336, (unaudited) respectively.
Impairment of Assets - Subsequent to the establishment of the Power
Exchange, certain rights between the Partnership and NIMO expire under the
Power Put Agreement, at which time all deferred revenue from the MRA will
be recognized as income (see Note 4). This event will cause the
Partnership's plant to be subject to impairment, under Statement of
Financial Accounting Standards No. 121, Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of, thereby necessitating a
write-down, which would partially offset the gain recognition from the MRA
deferred revenue. The net effect on income is not presently determinable.
14. SUBSEQUENT EVENTS
On July 2, 1999, pursuant to the terms of the Gas Sale and Purchase
Agreement, the Partnership made a payment totaling $607,461 to Canadian
Hunter, which included $137,461 in accrued interest.
On July 29, 1999, NCP Syracuse and SOP entered into a Partnership
Interests Purchase and Sale Agreement to sell all of their respective
interests in the Partnership, together with all of the rights and
obligations under the Partnership
F-14
<PAGE>
Agreement, to G.A.S. Orange Associates, L.L.C. (G.A.S. Orange), a Delaware
limited liability company.
In November 1999, Project Orange Funding, L.P. (Funding L.P.), a Delaware
limited partnership, and Project Orange Capital Corp. (Capital), a Delaware
corporation and a wholly owned subsidiary of Funding L.P., were formed. Funding
L.P. and Capital were formed for the purpose of issuing $68,000,000 aggregate
principal amount of 10.5% Senior Secured Notes due 2007.
On December 6, 1999, concurrent with this issue of the Notes, the Partnership
made a distribution of $46,000,000 to G.A.S. Orange to acquire an aggregate 89%
limited partnership interest and a 1% general partnership interest in the
Partnership from NCP Syracuse and SOP pursuant to the Partnership Interests
Purchase and Sale Agreement, as amended. Upon consummation of the issuance of
the Notes and the acquisition, and pursuant to an Agreement of Merger between
the Partnership and Funding L.P., Funding L.P. was merged with and into the
Partnership. After giving effect to the issuance of the Notes, the acquisition
and the merger, the Partnership has two partners, GAS L.P. and G.A.S. Orange.
Upon the closing on the Notes, the Partnership made a cash payment to Canadian
Hunter, as successor to Noranda by assignment dated December 3, 1999, in the
amount of the deferred gas liability using the accumulated funds in the
restricted accounts. The liability that was extinguished amounted to
approximately $11,900,000.
******
F-15
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EXHIBIT A
INDEPENDENT TECHNICAL CONSULTANT'S REPORT
on the
PROJECT ORANGE
COGENERATION POWER PROJECT
December 2, 1999
[LOGO] Stone & Webster Management Consultants, Inc.
<PAGE>
[LETTERHEAD OF STONE & WEBSTER]
December 2, 1999
Donaldson, Lufkin & Jenrette G.A.S. Orange Partners LP
277 Park Avenue c/o MCM Securities Inc.
New York, New York 10172 One Rockefeller Plaza, Suite 2330
New York, New York 10020
G.A.S. Orange Associates LLC
630 1/st/ Avenue, Suite 30C
New York, New York 10016
INDEPENDENT TECHNICAL CONSULTANT'S REPORT
PROJECT ORANGE
We submitted our Independent Technical Consultants Report for the Project Orange
Associates, L.P. cogeneration facility, ("Project Orange") dated December 2,
1999 (the "Report") in connection with the joint issuance by Project Orange
Funding, L.P. and Project Orange Capital Corp. (collectively, the "Issuers") of
approximately U.S. $68,000,000 of Senior Secured Notes due 2007 (the "Notes") to
be purchased by Donaldson, Lufkin & Jenrette Securities Corporation (the
"Initial Purchaser") and resold pursuant to Rule 144A and Regulation S under the
Securities Act of 1933, as amended ("the Securities Act"). We understand that
the Report will be used by the Initial Purchaser, Project Orange Associates,
L.P. and G.A.S. Orange Associates, L.L.C. in evaluating certain engineering, and
economic aspects of Project Orange in connection with the purchase and resale of
the Notes by the Initial Purchaser. In addition, we understand that the Report
will be included as an appendix to the prospectus to be included as part of a
registration statement to be filed with the U.S. Securities and Exchange
Commission (the "SEC") in connection with the registration of the Notes under
the Securities Act in accordance with the terms of a registration rights
agreement to be entered into between the Issuers and the Initial Purchaser. We
consent to the Report being so used as so included as an appendix (i) to the
Offering Memorandum, and (ii) to the prospectus incorporated in the registration
statement to be filed with the SEC. It is understood that, regarding the use of
this report, the addressees of this letter are subject to the Stone & Webster
Management Consultants, Inc. terms and conditions of this assignment.
Sincerely,
STONE & WEBSTER MANAGEMENT CONSULTANTS, INC.
/s/ K.H. Applewhite, Jr.
K.H. Applewhite, Jr.
Vice President
<PAGE>
[LOGO STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
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 G.A.S. Orange Associates, L.L.C
and G.A.S. Orange Partners, L.P. (collectively, the "Sponsors"). Neither Stone &
Webster, nor the Sponsors nor any person acting in their behalf, (a) makes any
warranty, express or implied, with respect to the use of any information of
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 Project Orange
Associates', L.P. cogeneration facility, Project Orange, in no way serves to
transfer to Stone & Webster responsibility for the correctness and/or accuracy
of such information or modeling results.
ELECTRONIC MAIL NOTICE
Electronic 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.
i
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
SECTION 1. EXECUTIVE SUMMARY............................................... 1-1
1.1. Introduction....................................................... 1-1
1.2. Scope of Services.................................................. 1-2
1.3. Conclusions........................................................ 1-2
1.4. Condition Assessment............................................... 1-4
1.5. Performance........................................................ 1-5
1.6. Environmental...................................................... 1-5
1.7. Remaining Useful Life.............................................. 1-6
1.8. Operations and Maintenance......................................... 1-6
1.9. Financial Projections.............................................. 1-7
SECTION 2. PROJECT DESIGN DESCRIPTION...................................... 2-1
2.1. Site Description................................................... 2-1
2.2. Design Basis....................................................... 2-2
2.2.1. Electric Power Supply......................................... 2-2
2.2.2. Process Steam Supply.......................................... 2-2
2.2.3. Gas Fuel Supply............................................... 2-3
2.2.4. Steam Generation.............................................. 2-3
2.2.5. Recommendation................................................ 2-4
2.3. Performance........................................................ 2-4
2.4. Gas Turbine Generators............................................. 2-4
2.5. Heat Recovery Steam Generator...................................... 2-5
2.6. Balance of Plant Mechanical Systems................................ 2-5
2.6.1. Boiler Feedwater System....................................... 2-5
2.6.2. Steam System.................................................. 2-6
2.6.3. HRSG Blowdown Tank............................................ 2-6
2.6.4. Water Treatment System........................................ 2-6
2.6.5. Instrument and Plant Air System............................... 2-7
2.6.6. Raw Water System.............................................. 2-7
2.6.7. Plant Fuel System............................................. 2-7
2.6.8. Fire Water System............................................. 2-8
2.6.9. Waste Water System............................................ 2-8
2.6.10. Water/Glycol System......................................... 2-8
2.7. Electrical Systems............................................... 2-8
2.7.1. 115 kV Substation at the Project.............................. 2-8
2.7.2. Main Step-Up Transformers..................................... 2-9
2.7.3. Auxiliary Transformers........................................ 2-9
2.7.4. 13.8 kV Switchgear............................................ 2-10
2.7.5. 480 V Switchgear.............................................. 2-10
2.7.6. 480 V Motor Control Center.................................... 2-10
2.7.7. 4160 V Motor Control Center................................... 2-10
2.7.8. DC Battery Powered Battery System............................. 2-10
2.7.9. UPS System.................................................... 2-10
2.7.10. Grounding System............................................ 2-11
2.7.11. Communication System........................................ 2-11
2.7.12. Life Safety System.......................................... 2-11
2.7.13. Lighting System............................................. 2-11
</TABLE>
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TABLE OF CONTENTS
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<S> <C>
2.8. Controls and Instrumentation.................................. 2-11
2.9. Civil Design.................................................. 2-12
2.9.1. Drains..................................................... 2-13
2.9.2. Site Preparation........................................... 2-13
2.9.3. Paving..................................................... 2-13
2.9.4. Foundations................................................ 2-13
2.10. Heating, Ventilation and Air Conditioning..................... 2-13
2.11. Existing University Facilities................................ 2-14
SECTION 3. PROJECT CONDITION ASSESSMENT.................................. 3-1
3.1 The Project Overview.......................................... 3-1
3.1.1. Equipment Arrangement...................................... 3-1
3.1.2. Maintenance................................................ 3-1
3.1.3. Infrared Thermographic Assessment.......................... 3-1
3.1.4. Cyclic Operation........................................... 3-2
3.2 Condition Assessment.......................................... 3-2
3.2.1. Gas Turbine Generators..................................... 3-2
3.2.2. Heat Recovery Steam Generator.............................. 3-3
3.2.3. Boiler Feedwater System.................................... 3-3
3.2.4. Raw Water System........................................... 3-4
3.2.5. Water Treatment System..................................... 3-4
3.2.6. Instrument and Plant Air System............................ 3-4
3.2.7. Electrical Systems......................................... 3-4
3.2.8. Controls and Instrumentation............................... 3-5
3.2.9. Heating, Ventilating and Air Conditioning System........... 3-5
3.2.10. Existing Facilities...................................... 3-5
3.3 Life Extension Issues......................................... 3-5
SECTION 4. PROJECT PERFORMANCE........................................... 4-1
4.1. Basis Of Power Plant Heat Rates................................... 4-1
4.2. Heat Rate......................................................... 4-2
4.3. Power Output...................................................... 4-2
4.4. Availability...................................................... 4-2
SECTION 5. ENVIRONMENTAL REVIEW AND PERMITTING........................... 5-1
5.1. Permit Status .................................................... 5-1
5.2. Air Emissions .................................................... 5-2
5.3. Wastewater Discharge.............................................. 5-4
5.4. Site Contamination Issues......................................... 5-5
5.5. Other Environmental Issues........................................ 5-6
SECTION 6. OPERATION AND MAINTENANCE..................................... 6-1
6.1. Site Visit........................................................ 6-1
6.2. Asset Management Capabilities..................................... 6-2
6.3. O&M Capabilities.................................................. 6-2
6.4. Organizational Structure.......................................... 6-3
6.5. O&M Procedures.................................................... 6-3
6.6. Maintenance Management............................................ 6-3
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<TABLE>
<S> <C>
6.7. Conclusions................................................... 6-4
SECTION 7. PROJECT AGREEMENTS AND CONTRACTS.............................. 7-1
7.1. Power Put Agreement........................................... 7-1
7.2. The International Swap Dealer Association, Incorporated,
Master Agreement............................................ 7-3
7.3. Gas Sale and Purchase Agreement............................... 7-5
7.4. Steam Sales Agreement......................................... 7-5
7.5. Operations and Maintenance Agreement.......................... 7-6
SECTION 8. PROJECT ECONOMIC ANALYSIS..................................... 8-1
8.1. Overview...................................................... 8-1
8.2. Revenues...................................................... 8-2
8.3. Expenses...................................................... 8-4
8.3.1. Fuel...................................................... 8-5
8.3.2. Fuel Operating Cost and Royalty Cost...................... 8-6
8.3.3. Fuel Transportation Costs................................. 8-7
8.3.4. Operations, Maintenance, and Other Costs.................. 8-11
8.4. Sensitivity Cases............................................. 8-12
8.5. Coverage Ratios............................................... 8-13
</TABLE>
APPENDIX A - List of Documents Reviewed
EXHIBIT 1 - Base Case Financial Projections
iv
<PAGE>
[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
SECTION 1. EXECUTIVE SUMMARY
1.1. Introduction
Stone & Webster Management Consultants, Inc. and Stone & Webster Engineering
Corporation (collectively, "Stone & Webster") were retained by Project Orange
Associates, L.P. ("Orange LP") and G.A.S. Orange Associates, L.L.C. ("GAS
Orange"), collectively the "Sponsors," to provide an independent technical
assessment of the Orange LP gas fired cogeneration facility and its related
assets (the "Project") on behalf of Donaldson, Lufkin & Jenrette Securities
Corporation. Orange LP sells electrical power and capacity to Niagara Mohawk
Power Corporation ("Niagara Mohawk") and steam to Syracuse University (the
"University"). The Sponsors have indicated their intention to contract the
management of the business and operations of Orange LP to Niagara Mohawk Energy
Marketing, Inc. ("NMEM") and to continue contracting the operation and
maintenance of the Project to GE Contractual Services (formerly, GE Energy Plant
Operations, Inc. and herein "GECS"). Donaldson, Lufkin & Jenrette Securities
Corporation is the initial purchaser of the Senior Secured Notes due 2007 (the
"Notes"), the sale of which is anticipated to finance the purchase of the
majority partnership interests in Orange LP by GAS Orange (the "Sale
Transaction"). Stone & Webster recommends that the reviewer of this report read
this report in its entirety for a full understanding of the Project and the pro
forma financial projections contained herein ("Financial Projections").
This report includes Stone & Webster's independent technical assessment of the
Project 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 Project,
. projected availability, capacities, and heat rates of the units, and
. the expected useful lives of the units.
We also reviewed the Financial Projections, which incorporate the projected
electricity prices, dispatch rates, and fuel prices provided by the Sponsors
along with the projected operating costs of the units. The Financial
Projections calculate the debt service coverage ratios ("DSCR").
The power production facilities consist of two General Electric ("GE") LM5000 PC
steam injected gas turbines ("STIG") that have a combined rated capacity of 80
MW at International Standards Organization ("ISO") conditions of 59 degrees F
and 14.5 psia. Upon consummation of the Sale Transaction GAS Orange will have
complete operational control of these units. The Project is in good condition
overall as GECS appears to have performed all of the maintenance expected of an
operating company which abides by prudent industry practices.
The scope of this independent technical review included a design and equipment
assessment, operating history, projected performance, technical, logistical,
operations and maintenance ("O&M"), and environmental considerations. Stone &
Webster reviewed information provided by Orange LP and GECS, had meetings with
various parties, and visited the Project site. Stone & Webster reviewed the
technical and commercial assumptions and the calculation methodology of the
Financial Projections developed by the Sponsors as well as the projected
performance, revenues, and expenses. Using this model, Stone &
1-1
<PAGE>
Webster recommended sensitivity analyses to assess the impact of changes of
certain variables on the DSCR for the life of the Notes. 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 the Sponsors or (ii)
certain other assumptions described in detail in Section 8 of this report.
1.2. Scope of Services
This report provides a summary of our review and opinions for the Project
regarding the following:
. Condition of the Project Equipment
. Major Maintenance Programs
. Proposed Operating and Maintenance Plan and Budget
. Environmental Permits and Site Assessment Documents
. Financial Projections
Stone & Webster conducted this analysis and prepared the report using 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 only reviewed by Stone & Webster. We have no reason to believe that
these reports are anything but true and accurate. Our walk-through site visit
confirmed the reasonableness of the reports generated by others and addressed
issues with additional information that could be provided, but did not involve
any physical, metallurgical, or other laboratory type inspection and analysis of
equipment and materials at the Project. We have noted herein where such
inspection and analysis would be prudent in order to have a reasonable
probability of improving upon the reliability and availability targets assumed
in the Financial Projections. 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. Conclusions
Set forth below are the principal opinions which we have reached regarding the
review of the Project. 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 Project has operated at availabilities of 97-98 percent between 1996
and 1998. The Project has an average station availability between January
1996 and September 1999 of 94.47 percent including a prolonged outage which
occurred in the spring of 1999. Based on continued maintenance, planned
overhauls and participation in programs to maximize the availability of
spare lease gas turbine engines, it is reasonable to expect that the
Project will continue to operate at such availability levels. These
availability levels support the availability projections in the Financial
Projections.
1-2
<PAGE>
2. The historically demonstrated capacity factors of the Project are
reasonable estimates of the capability of the facilities. In recent years,
the capacity factor has been artificially lowered due to the facility not
being operated at full load during all periods it was available to run. If
the Project was operated at full load and did not encounter a spare engine
shortage, we believe it would have demonstrated a capacity factor of 93-
94%. With continued proper maintenance, planned overhauls and participation
in programs to guarantee within 72 hours access to spare gas turbine
engines on a lease basis, it is reasonable to expect that that 92.5 percent
capacity factor can be maintained over the period shown in the Financial
Projections.
3. The heat rates in the Financial Projections for the Project have been
developed based on historical information. With continued proper
maintenance and overhauls as reflected in the Financial Projections, it is
reasonable to expect that these heat rates can be maintained over the
period shown in the Financial Projections.
4. The Project's maintenance budget, which includes a fired hour fee to cover
overhauls, appears reasonable and adequate to support the conclusions
expressed above and to meet the Project's maintenance and performance
objectives, excluding any unforeseeable catastrophic failures near the end
of a unit's design life. These maintenance expenditure estimates are used
in the Financial Projections and compare favorably to similar power
projects.
5. Based on Stone & Webster's review, it appears there are no existing
conditions that would preclude the operation of the Project over the
periods contemplated in the Financial Projections. This assumes the
continuation of condition assessments, normal maintenance and addressing
the minor issues noted below under Condition Assessment.
6. The Project has all necessary permits in place. We have no reason to
believe that the Project will not be able to renew its permits as needed.
We believe the environmental reports commissioned by Orange LP were
prepared in accordance with good industry practice.
7. The ability to obtain replacement parts in a timely manner for the GE
LM5000 gas turbine may be a concern during the period covered by the
Financial Projections and should be carefully evaluated, but has been
addressed by the Sponsors using the best practice we are aware of for this
situation. GECS has represented that, in addition to the Project
participating in the LM5000 Lease Engine Program, they have currently
dedicated a spare engine between the Project and one additional project
that it operates in California.
8. The main control system for the Project, which has recently been upgraded
to current control interface technology for this type of plant,
additionally, represents to be Y2K compliant.
9. Stone & Webster believes NMEM is an experienced and qualified asset manager
with very relevant knowledge of the evolving upstate New York energy
market.
10. Stone & Webster believes GECS is well qualified to operate this plant.
Having parent company connections to GE and operating other similar
projects provides for an effective pooling of technology information and
other resources that provides a strong support base for responding to and
resolving issues related to this type of facility. In addition, GECS 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.
11. Under base case assumptions, the average DSCR is forecast to be 1.40 from
1999 through 2008. The
1-3
<PAGE>
minimum DSCR is 1.35 and occurs in 2001.
1.4. Condition Assessment
Stone & Webster conducted a walk-through site inspection of the Project on
September 16 & 17, 1999. In general, the Project has the appearance of a well-
maintained facility, equipment and materials appear properly maintained and
operated. During the visit, both of the gas turbines ("GT") were operating at
normal conditions at or near base load. The Project was producing high-pressure
("HP") steam for sale to the University and was producing approximately 80 MW of
power for sale to Niagara Mohawk. The maintenance and preventative maintenance
programs being carried out at the Project on a routine basis are typical for an
operator using prudent utility maintenance practices. Stone & Webster's review
has not discovered any major technical issues that seriously impair the
probability of the Project achieving the performance levels contemplated in the
Financial Projections. We have identified a few minor issues which we feel
should be addressed to improve the probability of maintaining availability
levels contemplated in the Financial Projections. The principal minor issues
are as follows:
1. Review and confirm the availability of spare parts and lease pool turbines
for the GE LM5000 gas turbine
2. Investigate the cause of the tube leaks in sections of the heat recovery
steam generator ("HRSG") that have resulted in minor heat transfer surface
sections of the HRSGs being by-passed, make an evaluation to understand the
failure mechanism, make a economic study of possible actions to fix or
leave as is and implement / document the recommendations
3. Review the boiler feed water pump selection and feedwater regulator valve
selection for proper application and sizing for the current and planned
system operation
4. Review the raw water supply system and consider the feasibility of
installing an auxiliary cooling water system
5. Review the ventilation system design for the main equipment building with
the intent of lowering indoor temperatures during the summer months
6. Review the adequacy of maintenance access platforms and make additions as
required to reduce the risk of injury to operations and maintenance
personnel
7. Plan, implement and / or document the life extension measures taken for the
existing University steam boilers
While Stone & Webster believes that Orange LP's preventative maintenance
practices are both prudent and proactive (including use of a spare engine which
is shared with another GECS managed project that uses one engine and
participating in the LM5000 Lease Pool Program), this does not fully mitigate
the possibility that both preventative measures may be inadequate to maintain
the projected availabilities as demonstrated by the forced outage of an engine
which occurred earlier in 1999.
Studies which should be considered to improve the operation and maintainability
of the Project, but which do not quantifiably influence either the plant
availability or the Financial Projections are items 2 through 7. Items 2
through 7 are not budgeted based on the current information Stone & Webster has
available, but each could likely be studied and firm recommendations made for
approximately $25,000 per item. Implementing a recommendation would naturally be
more costly and is difficult to estimate at this time.
1-4
<PAGE>
Preliminary and rough estimates for items 2, 3 and 4 could have each one costing
approximately $200,000 and items 5 & 6 could be approximately $100,000 each.
Item 7 could be approximately $50,000 and any estimate for implementation of
item 7 would require knowledge from the life extension study results.
1.5. 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. For the past ten months, the
Project has been dispatched at 80 MW during peak hours, 73 MW during off peak
hours Monday thorough Friday and zero MW on weekends when it was available to
run. The availability for the Project for 1996 through 1998 was 97-98 percent.
In 1999, the availability has declined due to an extended outage in the spring
of 1999 with the availability through September 1999 averaging 83 percent.
Based on the information reviewed, the average availability from January 1996 to
September 1999 is 94.5 percent. During the period from January 1996 to
September 1999, the Project has achieved capacity factors within 1 to 2
percentage points lower than the station availability when the plant is fully
dispatched. We have assumed that the projected capacity factor can be equal to
the availability, but not greater than the availability. In the Financial
Projections, the availability and capacity factor for the Project is projected
to be 92.5 percent, which approximates the net capacity factor for January 1996
through September 1999 and crediting the Project for the time when it was
available but not dispatched. We believe this projection is reasonable and
achievable given the historic availability levels achieved by the Project and
given that going forward the Project is to be a member of the LM5000 Lease
Engine Program. GECS is a capable operator and should achieve acceptable
results for the Project and NMEM, the new asset manager, should provide sound
oversight. We have conducted several sensitivities to the assumptions
underlying the base case Financial Projections, the results of which did not
materially impair the DSCR related to the new debt through the life of the
Notes. See Section 8 for detail.
1.6. Environmental
Stone & Webster reviewed the environmental permit conditions, compliance status,
site contamination issues and other pertinent environmental aspects of the
Project and the University steam generating boiler facility (the "Steam Plant").
This review was based upon a number of environmental documents that were
provided to Stone & Webster for this purpose. Stone & Webster also conducted
telephone interviews of plant personnel. However, Stone & Webster did not
receive copies of anticipated capital improvement or operating and maintenance
budgets for either of these facilities. In addition, Stone & Webster did not
conduct an environmental site reconnaissance or interview environmental
regulatory agency personnel. At this time, Stone & Webster does not believe
that additional site visits or agency personnel interviews are warranted.
The environmental permits reviewed by Stone & Webster are current and up to
date. The associated renewal applications have been submitted to the
appropriate authorities on a timely basis. Stone & Webster did not identify any
permit conditions that are unusual or unexpectedly onerous.
Stone & Webster reviewed emissions monitoring reports for 1997, 1998 and 1999
through August and determined that both the Project and the Steam Plant are
operating substantially in compliance with their air permit conditions; and that
there are no gross violations or pending compliance actions. Accordingly, Stone
& Webster believes that these facilities should be capable of operating in
compliance with their air permit conditions without constraint upon their normal
operating conditions through the year 2001. However, the Project may need to
reduce and/or offset its current NO\\x\\ emissions in 2002 based on existing
1-5
<PAGE>
statutory requirements. At this time, Orange LP believes that it would be more
cost effective to purchase NO\\x\\ emission credits than to retrofit the Project
with a selective catalytic reduction ("SCR") system. Stone & Webster has run a
sensitivity of the Financial Projections assuming Orange LP begins to purchase
NO\\x\\ emissions credits in 2002, the result of which did not materially impair
the DSCR related to the new debt through the life of the Notes. See Section 8
for greater detail.
Wastewater is discharged separately from each of these sites to a local publicly
owned treatment works ("POTW") that is operated by the Onondaga County
Department of Drainage and Sanitation ("OCDDS"). Stone & Webster reviewed
copies of the self-monitoring reports for each of these facilities. With the
exception of pH excursions at the Steam Plant, the self-monitoring reports
indicate that each of these facilities is operating in compliance with its
wastewater discharge permit limitations without constraint on normal operating
conditions. A new pH neutralization system was installed at the Steam Plant
during the first quarter of 1999. However, plant staff reports that this new
system is limited by flow rate. Accordingly, a revision of the new system was
designed and was submitted to management for funding approval. Stone & Webster
reviewed a synopsis and budgetary cost estimate (~$40,000) for the revised
design and found them to be reasonable.
The only major spill incidents reported for the Project and the Steam Plant were
associated with the underground storage tanks ("USTs") formerly used to store
fuel oil. However, this was appropriately addressed in 1992 when new USTs with
secondary containment and leak detection were installed, and all contaminated
soil associated with the former USTs was reported to be excavated and removed
from the site for disposal at an approved offsite facility.
Plant personnel report that all oil-filled equipment containing polychlorinated
biphenyls ("PCBs") have been removed from the site, and all station transformers
are labeled as PCB-free.
Both asbestos containing material ("ACM") and lead-based paint are known to be
present, particularly at the Steam Plant. A quarterly survey is conducted at
each facility to test for airborne levels of each of these substances and
workers are trained in the recognition and handling of these and other wastes.
Stone & Webster noted that noise propagation by the Project is limited by its
permit to 45 dBA at a distance of 600 feet. Orange LP provided Stone & Webster
with a noise measurement and survey report (c. 1994) that indicated that Orange
LP is able to comply with this requirement.
1.7. Remaining Useful Life
The newer cogeneration portions of the Project which were placed in service in
1992 have a projected remaining useful life beyond the life of the Notes and
Stone & Webster has no reason to believe that the Project will not be able to
renew its permits as required. Based on Stone & Webster's review, it appears
that there are no conditions that would preclude the continued operation of the
newer cogeneration portions of the Project over the periods shown in the
Financial Projections, assuming Orange LP aggressively continues proactive and
effective asset condition assessment and maintenance. The University boilers
that are being operated in a backup mode should under go a formal life extension
program to improve the probability of maintaining the availability levels
contemplated in the Financial Projections.
1.8. 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 the Project are reasonable. The capital costs are
1-6
<PAGE>
primarily addressed by the fixed and variable fee components provided for in the
O&M agreement. We believe the overall magnitude of the O&M costs allocated in
these fees are reasonable and include sufficient funds to perform O&M activities
during the term of the Financial Projections. They will also support the
projected performance levels of the facilities. The Sponsors have indicated
their intention to contract with NMEM for asset management of the Project. NMEM
is an experienced manager of generation assets with a unique understanding of
the upstate New York energy market. We believe Orange LP, with the advice of
NMEM and GECS, will demonstrate prudent judgement in deciding when to conduct
major inspections and maintenance and how to operate the Project. GECS has
extensive experience in the operation of power plants worldwide and currently
operates other plants that use the LM5000 gas turbine. This effective pooling of
technology information and resources related to this type of facility provides a
very strong support base for responding to and resolving problems for this type
of plant equipment. The staffing at this facility is good compared to like
facilities and the personnel we interviewed were knowledgeable in the operation
of the Project. GECS uses a combination of predictive and preventive maintenance
programs to monitor the condition of equipment such as: vibration reading for
major rotating equipment are monitored and trended to predict and plan
maintenance, thermography is used on electrical and mechanical equipment to spot
problems before equipment breaks or is damaged, and oil analysis is used to spot
bearing problems early. In summary, the Project has few maintenance problems and
appears to be a well managed facility.
1.9. Financial Projections
Orange LP has made revenue projections that include Indexed Swap payments from
Niagara Mohawk through June 2008. An availability and capacity factor of 92.5
percent are assumed for the Project. Accordingly, we believe a 92.5 percent
availability and capacity factor should be achievable based on our review of the
historical availability levels and the maintenance work accomplished by Orange
LP. The historical monthly availability factor from January 1996 to September
1999 averaged approximately 94.5 percent. The operating costs for the Project
are reasonable based on historical experience of the Project as well as other
projects with which we are familiar. It is our understanding that the gas
transportation costs are specific to the Project and based on historical
experience. The average DSCR for the base case is 1.40 with a minimum of 1.35.
For the sensitivities we considered, a reduction of the capacity factor to 85
percent had the most impact on the DSCR. The average DSCR for this scenario is
1.35 with a minimum of 1.29.
1-7
<PAGE>
[LOGO of Stone & Webster]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
SECTION 2. PROJECT DESIGN DESCRIPTION
Stone & Webster reviewed the documentation noted in Appendix A defining the
Project. This information was reviewed to assess the adequacy of the technical
design and ability of the Project to achieve the proposed performance
requirements. Specifically, our design review sought to confirm:
. fitness for purpose;
. conformance with industry standards; and
. level of redundancies in the design to support availability targets.
In general, with a few exceptions noted below, Stone & Webster found the design
of the Project to be conforming with industry standards based on GT technology
presently in use in the industry and with adequate redundancies to support the
availability assumptions used in the Financial Projections.
This section describes the principal components of the Project and the following
Project Condition Assessment section provides the findings of our review.
2.1. SITE DESCRIPTION
The Project was constructed, tested and accepted on property owned by the
University in Syracuse, New York. The Project is adjacent to the existing
University boilers bound by McBride, Taylor, Almond and Bort Streets. The
Project supplies power to the Niagara Mohawk grid and process steam to the
University steam distribution system. The Project began commercial operation on
July 21, 1992.
The Project is a simple cycle design with two GE LM5000 PC STIG generators and
two HRSGs with supplemental duct burner firing, all fueled by natural gas. The
ancillary equipment includes a distributed control system ("DCS"), feedwater
system, natural gas compressor, water treatment system, city and treated water
storage tanks and all required auxiliaries.
A major portion of the cogeneration facility is housed in the power island
building. This includes the GTs, the HRSGs, the boiler feedwater system
including boiler feed pumps, the compressed air system including air
compressors, water/steam analyzer and HRSG blowdown tank. A separate room
contains the fuel gas compressor, gas fuel filter/separator and the boiler fuel-
piping skid. This fuel gas compressor room is classified as Class I, Group D,
Division 2 per the National Electric Code while the remainder of the power
island building is unclassified. The control room which contains the DCS, GT
generator control panels, the fire alarm programmable logic controller ("PLC")
and other auxiliary control equipment is located on the second floor at the
south end of the power island building. This area also houses the Project
operation and maintenance personnel offices. The electrical room which contains
the switchgear, motor control centers and various other electrical apparatus is
located on the ground floor beneath the control room area. A separate battery
room is located in the southeast corner of the power island building.
The water treatment equipment is housed in a separate building on the southeast
corner of the Project and includes laboratory, demineralizer control system and
facilities for cleaning analyzing equipment.
These buildings are prefabricated metal construction. The control and electrical
rooms have one-hour
2-1
<PAGE>
minimum rated firewalls. The buildings have been provided with roll up doors for
maintenance and man doors are provided for fire ingress and egress. Emergency
showers have been provided where chemicals are used or stored.
Electrical power is generated at 13.8 kV and delivered to the Niagara Mohawk
grid at 115 kV through step-up transformers located in the substation on the
northeast end of the Project. The Project is interconnected with Niagara Mohawk
via the Project switchyard and through underground cabling routed from the
Temple Substation, approximately two miles west of the Project.
Access is provided into the Project from two entrances off Taylor Street, one
adjacent to the existing Riley Boiler Plant and the second is between the
electrical substation and the power island building. A third access is provided
off Bort Street next to the water treatment building for chemical deliveries.
2.2. DESIGN BASIS
2.2.1. Electric Power Supply
The original Power Purchase Agreement was based on the supply of 80 MW maximum
net output to Niagara Mohawk and was for a base loaded plant. The Power
Purchase Agreement has undergone revision and restatement through the
restructured Niagara Mohawk power purchase agreements discussed in Section 7 of
this report. Under this agreement, Orange LP has the option to put electrical
energy to Niagara Mohawk up to 630,000 MWh +5 percent per year. The operation
plan for January 1999 to September 1999 has been to deliver 80 MW +5 percent
during on peak hours, 73 MW during off peak hours Monday through Friday and then
shutdown both GT generators on the weekends. The existing University boilers
are operated on weekends to meet process steam demands. The original design
basis for the Project was to operate at a base load of 80 MW 24 hours a day,
year-round and supply HP steam in the summer and low-pressure ("LP") steam in
the winter and Stone & Webster understands from the Sponsors that this mode of
operation is planned to be resumed upon consummation of the Sale Transaction.
In general, the Project operating philosophy requires all power generated less
parasitic loads, to be sold to Niagara Mohawk. However, if both GTs are shut
down the commercial grid will back feed through the 115 kV substation providing
the necessary 4160 V and 480 V to maintain the Project. The existing University
boilers have black start capability via a diesel power generator and a 1000 kW
steam turbine generator, which will allow the supply of steam in emergencies.
2.2.2. Process Steam Supply
The Steam Supply Agreement allows for 60,000 to 450,000 lb/h of process steam to
the University. The process steam is supplied at 275 psig and 550(degrees)F
during the summer and is reduced to 100 psig and 550(degrees)F during the
winter. For periods where the GTs and HRSGs are not in operation, process steam
is supplied from the existing University boilers. Based on the Project operating
records, the actual winter process steam requirement averages 100,000 to 120,000
lb/h with maximum process steam requirement of 200,000 lb/h. The actual summer
process steam requirement averages 40,000 to 60,000 lb/h with maximum process
steam of 60,000 lb/h. Below are listed recent summer and winter week process
steam requirements.
2-2
<PAGE>
Process Steam Exported to the University
(Average Hourly lb/h)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Saturday Sunday Monday Tuesday Wednesday Thursday Friday
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Date 8/28/99 8/29/99 8/30/99 8/31/99 9/1/99 9/2/99 9/3/99
----------------------------------------------------------------------------------------
275 psig 43,906 49,984 46,659 45,026 42,946 43,774 43,644
----------------------------------------------------------------------------------------
100 psig 81,362 80,766 80,904 80,893 81,462 80,784 79,872
----------------------------------------------------------------------------------------
Total 125,268 130,750 127,563 125,919 124,408 124,558 123,513
----------------------------------------------------------------------------------------
Saturday Sunday Monday Tuesday Wednesday Thursday Friday
----------------------------------------------------------------------------------------
Date 1/31/99 2/1/99 1/25/99 1/26/99 1/27/99 1/28/99 1/29/99
----------------------------------------------------------------------------------------
100 psig min 127,750 107,500 93,125 104,000 96,250 124,625 101,000
----------------------------------------------------------------------------------------
100 psig max 169,750 184,500 151,000 143,500 145,250 176,250 147,000
----------------------------------------------------------------------------------------
100 psig avg 148,148 134,932 119,662 119,832 122,297 147,099 128,141
----------------------------------------------------------------------------------------
</TABLE>
2.2.3. Gas Fuel Supply
The daily take on the pre-purchased supply of gas is limited to up to 20,000
MMBtu (HHV) and the maximum yearly take is limited to 9 million MMBtu (HHV) as
discussed under the Fuel Supply Agreement in Section 7. The most currently
available unconsumed entitlement estimate is provided in Section 8 herein. The
Project daily take generally does not exceed 18,000 MMBtu (HHV) and the average
yearly draw is 7 million MMBtu (HHV) based on plant records. The yearly take
for 1998 was 6,332,000 MMBtu (HHV). The gas take for the first seven months of
1999 is approximately 36 percent less than for comparable months of 1998. The
reduction in consumption can be attributed to the GT #1 being out of service
from April 15, 1999 through June 21, 1999 and the shutting down of both GTs for
weekends. The operation of the backup gas compressor, due to low supply header
pressure, typically does not exceed 5 percent of the operating time. We would
expect gas consumption to increase in subsequent years as a result of GT #1
returning to service and reflecting the shift in operation strategy back to base
load. Stone & Webster understands from our review of the documentation provided
that Orange LP has prepaid for the supply of 120 million MMBtu through 2008.
The estimated amount of gas remaining in the entitlement is noted herein in
Section 8.
2.2.4. Steam Generation
Each of the HRSGs has the following performance characteristics. HP steam 675
PSIG at 575(degrees)F is used for NOx control, power augmentation in the gas
turbine and to augment process steam through pressure reduction. Intermediate
pressure ("IP") steam 275 psig @ 550(degrees)F is used for process steam and for
the deaerator. Heater pegging steam requirements and LP steam is supplied
directly to the deaerator.
2-3
<PAGE>
2.2.5. Recommendation
The HRSG economizers have experienced numerous leaks and the feedwater system
has had failures of three of the seven boiler feed pumps along with erosion of
feedwater control valves. Although plant performance does not appear to be
materially impaired by these issues, Stone & Webster recommends that (i) the
cause of the leaks in HRSG economizer be determined; (ii) that the feedwater
system equipment selection be confirmed; and (iii) an economic decision be made
and documented concerning the resolution of these issues. A study concerning
each of the above issues could cost approximately $25,000 each and a preliminary
and rough estimate of the cost associated with the implementation of the results
of the studies could cost approximately $400,000 depending on the findings and
recommendations from the studies. Some minor improved heat rate performance
would be expected related to using all of the economizer heat transfer surface
in the HRSG.
2.3. Performance
In reviewing the Project's monthly reports for years 1996, 1997, 1998 and 1999
(through July) it is noted that yearly plant capacity and unit availability have
been slowly decreasing and experienced a sharp decrease in the first seven
months of 1999. The primary reason for GT #1 loss of availability appears to be
the inability to find a replacement engine in a timely manner. GT #1 was out of
service from April 16, 1999 through June 21, 1999, awaiting a replacement.
Engine and engine 474-157, the original engine for GT #1, is presently being
overhauled following this failure event on April 16, 1999 after having
accumulated approximately 43,000 hours.
GT #2 had its overhauled engine 474-158 installed on February 12, 1999 replacing
LM5000 Lease Engine Program spare engine 474-200. Engine 474-158 had been
removed for a 50,000 hour overhaul on June 17, 1998. Even with the overhauled
engine, GT #2 availability was less than 90 percent for the first seven months
of operation in 1999 due to varying problems.
GE is no longer manufacturing new LM5000 gas turbines for sale and the
availability of LM5000 gas turbine engines and spare parts for the next 5 to 10
years should be documented, since GT availability will be greatly affected by
spare parts availability.
2.4. Gas Turbine Generators
There are two GE LM5000 PC STIG generators, packaged by Stewart & Stevenson,
included in the Project.
Each GT is a packaged, unitized system that is directly coupled to a 60 cycle,
3600 rpm, 13.8 kV generator. The unit is rated at 50 MW at unity power factor
and with 59 degrees F cooling air temperature. Each generator includes a
brushless excitation system suitable for Class I, Group D, Division 2 areas per
the National Electric Code. Neutral and line side cubicles with CT's, surge
protectors and lightning arrestors are provided.
The GTs and generators are provided with acoustic enclosures with internal
lighting and redundant ventilation systems. Multi-stage air inlet filtration
systems are provided as well as an inlet deicing coil. The package includes a
gas fuel inlet system, an electrohydraulic start system, separate lube oil
systems for the GT and generator, each with duplex lube oil filters, unit
mounted redundant shell and tube lube oil coolers, fire and gas detection and
Halon extinguishing system serving both turbine and generator compartment, and
an on-line Rochem cleaning system plus soak wash system.
2-4
<PAGE>
Unit control panels are provided by Stewart & Stevenson and include a Woodward
fuel management system, programmable microprocessor for sequencing, generator
metering, Bentley Nevada 7200 vibration monitoring, monitor annunciation of
alarms and shutdowns and RS-232 link for data logging through the DCS. This is
the standard Stewart & Stevenson package.
Auxiliary equipment includes a 24 V DC battery and charger assembly, steam
injection metering system and heaters for the lube oil systems.
2.5. Heat Recovery Steam Generator
The Project contains two supplementary natural gas fired Deltak HRSGs. Each HRSG
is a three pressure level, natural circulation water-tube steam generator. The
HP boiler is sized to generate 68,500 lb/h of superheated steam at 625 psig and
575 degrees F unfired at 46.9 degrees F ambient temperature and a maximum of
215,317 lb/h in a fired condition. The IP boiler will provide 28,500 lb/h of
superheated steam at 285 psig and 560 degrees F unfired at 46.9 degrees F
ambient temperature. In the fired condition, it will produce a maximum of 52,645
lb/h. The LP boiler will generate sufficient steam for deaeration of the
feedwater. The final flue gas outlet temperature should not exceed 315 degrees F
per the design requirements. Deltak is a proven supplier of HRSGs.
The HP steam is used for NO\\x\\ control, power augmentation and augments
process steam through pressure reduction. IP steam is used for process steam and
augments the deaerating heater pegging steam that is supplied from the LP boiler
directly to the deaerating heater.
Each HRSG includes all inlet ducting, HP and IP superheaters, HP and IP de-
superheaters, CO catalyst for 80 percent CO reduction, economizers, outlet
transition, and walkways and ladders required for operation and maintenance.
Each duct burner consists of eleven gas burner elements with a maximum total
design heat release of 194.0 million Btu/h (LHV). Included are flame scanners, a
free-standing piping rack for pilot piping and main gas piping, a flame safety
system and one scanner and observation port scanner cooling air blower. The
burner piping system is electrically classified for a Class I, Group D, Division
II area per the National Electric Code. When initially installed there were some
issues related to HRSG performance, which resulted in some additional heat
transfer surface being installed in the HRSGs. As built and/or as modified
design heat transfer data was not available in the design information for the
HRSGs for review, but plant operations personnel indicate acceptable performance
was obtained following the addition of the heat transfer surface.
2.6. Balance of Plant Mechanical Systems
2.6.1. Boiler Feedwater System
Deaerating Heater
- -----------------
There is a spray type deaerating heater, which is common for both HRSGs and is
mounted on top of the HRSGs. The deaerator is designed to reduce dissolved
oxygen to 0.005 ml per liter at all operating loads. This deaerator, being
common to both units, does not have a backup, which is not as reliable of a
configuration as having a deaerator for each HRSG, but is an acceptable practice
for non-rotating equipment with very few moving parts.
2-5
<PAGE>
Boiler Feed Pumps
- -----------------
The boiler feed system consists of four 1/3 capacity HP boiler feedwater pumps
and three 1/2 capacity IP/LP pumps. The HP boiler feedwater pumps are sized to
provide the flows required throughout the broad operating range of the HP boiler
which are from 68,500 lb/h in the unfired condition through 432,000 lb/h in the
fired condition. The fourth high-pressure pump is a common spare. The IP/LP
pumps supply boiler feedwater to both the IP and LP boilers. The third pump is a
common spare. This sparing philosophy is acceptable and should provide for
reliable operation and help the Project achieve expected performance. Stone &
Webster noted a minor issue related to equipment sizing in the Condition
Assessment section of this report, which should be addressed to improve
reliability of the Project. An estimated cost for this issue is noted above in
Section 2.2.5.
2.6.2. Steam System
The steam system includes all steam piping and valves required including the
piping tie-ins into the existing boiler plant. The process steam lines are
equipped with sales meters. The IP system is designed to take 275 psig steam
directly to process and with necessary headers and pressure reduction valves for
the alternate winter process supply of 100 psig.
2.6.3. HRSG Blowdown Tank
One common HRSG blowdown tank is provided for both HRSGs. The continuous
blowdown is cascaded. The high-pressure boiler blowdown is routed to the IP
boiler and the IP boiler blowdown is routed to the blowdown tank. The
intermittent blowdown for each boiler is also routed to the blowdown tank. Low
point drains for maintenance are routed around the blowdown tank to insure
complete draining during downtimes. The drain from the blowdown tank is routed
to the chemical waste sump for cooling and then pumped to the neutralization
tank and them discharged to the process drain. This would be slightly more
reliable with a blowdown tank for each HRSG, but is an acceptable practice for
non-rotating equipment with no moving parts, on a small foot print site.
2.6.4. Water Treatment System
The water treatment system includes all equipment required to provide
demineralized water for boiler feedwater and chemical treatment for the HRSGs.
Two 550 gpm demineralized trains each representing 50 percent of the station
needs/1/ have been provided with the following equipment: strong acid cation
units, forced draft decarbonator, strong base anion units, acid regeneration
system, caustic regeneration system, 7,000 gallon acid storage tank, 7,000
gallon caustic storage tank, neutralizer waste transfer pumps, neutralizer tank
mixer, PLC control system, instrumentation, interconnecting piping, and a RS-232
communications module to interface with the Project DCS system. If the
originally forecast steam demand was realized and there was a low percent of the
condensate returned, then this system would not have any reserve capacity, which
would not be a reliable operating situation. Considering the historical and
expected requirement for steam export and condensate return, this system
represents 200 percent reserve capacity, which makes this system reliable.
The chemical treatment system for the HRSGs consists of a phosphate feed system,
an oxygen scavenger
__________________
/1/ Based on the "Winter-Highest Steam Export" heat balance diagram- historical
steam export has only approached one third of this design capacity
2-6
<PAGE>
feed system, a neutralizer feed system and a sodium sulfite feed system. A
95,000 gallon neutralization tank is provided to neutralize the pH of
regeneration wastes and plant chemical wastes.
Three 50 percent capacity (one common spare) deaerator make-up pumps are
provided that take suction from the 360,000 gallon treated water tank where the
demineralized water is stored. The sizing of this tank would not be adequate if
the originally predicted water requirement was realized, considering the
historically demonstrated requirement the tank will provide approximately 21
hours of run time which is acceptable. These pumps provide make-up water to the
deaerator. The philosophy of a shared common spare pump is not unusual in this
industry.
2.6.5. Instrument and Plant Air System
Two 100 percent capacity rotary-screw instrument/plant air compressors have been
provided to supply pressurized air required for the instrumentation and plant
services. If pressure drops in the air piping header, the spare unit will
automatically start. The system includes two air receivers, two prefilters, one
dual-tower desiccant type, heatless air dryer, one afterfilter, controls for
automatic operation, acoustic enclosure, regulating system, oil system with
filters and coolers, and all required instrumentation.
2.6.6. Raw Water System
Raw water is supplied to the Project from the city water supply. This water is
utilized for raw water supply to the demineralizer system, to cooling water, and
for utility water. The water to be utilized for boiler feedwater is piped to the
50,000 gallon city water tank and then pumped by three 50 percent capacity (one
common spare) city water pumps to the demineralizer trains. There are no backup
systems for supply of water to the Project other than the city water system and
this city water tank will only supply about 50 minutes of run time at the
original design requirement or about 3 hours of run time at the present
historical demonstrated demand. The more important issue is that the supply of
cooling water is provided directly off of the city supply lines and if this
supply is lost the plant will loose cooling to the boiler feed pumps and to the
lubrication systems for the GT and the generators which will bring the plant
down fairly quickly on high temperature limits for these pieces of equipment.
2.6.7. Plant Fuel System
The Project's fuel is natural gas, supplied at a normal fuel supply pressure of
700 psig by a pipeline designed and installed by The O'Brien & Gere Companies.
An emergency back-up fuel gas compressor is provided to boost the fuel gas
supply pressure if it drops below 625 psig. The fuel gas compressor is a
packaged skid-mounted reciprocating compressor with a lubricating system,
suction scrubber, discharge filter, aftercooler, discharge coalescer, two
pulsation bottles, a control system, safety shutdowns, instrumentation and
interconnecting piping.
A 100 percent capacity filter/separator is provided to insure that the fuel to
the equipment is dry and clean. Regulators, fire safety shut-off valves, and
relief valves are supplied to insure that a safe system is provided.
Fuel gas pressure for the GTs is 675 psig +/- 25 psi. The HRSG burner system for
auxiliary fire uses 35 psig fuel. Take-offs are provided to supply 35 psig fuel
to the existing Riley boiler plant as an emergency back-up and for utility
requirements such as hot water heaters.
The Project fuel system is typical of other LM5000 PC STIG facilities with which
we are familiar.
2-7
<PAGE>
2.6.8. Fire Water System
Fire protection water is taken from the two city water main supply lines.
Hydrants, sprinklers and standpipes for fire hoses are provided throughout the
Project as required by local and national codes. A deluge system is provided for
the lube oil system on the GT generators and for the main step-up transformers.
Wet pipe systems (automatic with fusible sprinkler heads) have been provided for
the maintenance area, the battery room and the office area. The system is
designed to meet the maximum sprinkler water flow demand plus a hose stream
allowance. The firewater system is provided with a pressure switch to provide a
low-pressure signal and alarm in the control room through the Project DCS.
2.6.9. Waste Water System
Oily water drains are routed to the oily water sump, pumped to an oily water
separator via two 100 percent diaphragm pumps, and then discharged to the city
sewer. Wastes from the oily water separator are removed from the Project site
via storage drums.
Chemical drains are piped to the chemical waste sump, pumped to the
neutralization tank via two 100 percent sump pumps, and then discharged to the
city sewer.
2.6.10. Water/Glycol System
The anti-icing coil in the GT inlet air filter requires heated water/glycol for
heating the inlet air to the GTs during freezing conditions. Three 50 percent
each water/glycol pumps are utilized to pump the water/glycol mixture through a
heat exchanger utilizing steam as the heating medium. A water/glycol standpipe
is provided for mixing, and make-up for the closed loop system.
2.7. Electrical Systems
The electrical systems design, layout, and equipment are typical for a facility
of this type and size. The Project ties into the electrical system of Niagara
Mohawk at a substation known as Temple Street. This is a 115 kV substation which
ties into two other 115 kV substations in the Niagara Mohawk system (i.e., Ash
Street and Peat) via single-circuit 115 kV transmission lines. The Temple Street
substation is configured using a ring scheme, which should provide for a high
reliability of service and a great deal of flexibility of operation.
The following sections provide brief descriptions of the electrical systems
associated with the Project.
2.7.1. 115 kV Substation at the Project
The 115 kV substation at the Project is configured as a single-bus, single-
breaker scheme rated for 115 kV. One of the principal advantages of this
arrangement is its low cost. However, the scheme generally provides a relatively
low degree of service reliability, since a total and complete station outage can
occur in the event of a single breaker or bus failure (i.e., a single
contingency can cause a complete station shutdown). In addition, under the
existing bus arrangement, maintenance of essential substation equipment
generally cannot be performed without disturbing the operation of the station.
For instance, the substation must be de-energized in order to carry out bus
maintenance. Also, maintenance of the breakers that protect the interconnecting
circuits can only be performed after de-energizing their corresponding circuit.
In Stone & Webster's experience, however, these single-bus, single-breaker
arrangements are fairly typical of facilities such as this one. The Project has
experienced one event where a lightning arrestor failed on this bus resulting in
a 20 hour forced outage.
2-8
<PAGE>
The Project connects to the Temple Street substation via a 115 kV, 750 kcmil,
aluminum, underground cable. The interconnection point between the Project and
the Niagara Mohawk system is at the cable potheads in the substation at the
Project (the "Receiving Point"). Meters are provided to measure incoming power
for start-up and outgoing power for sales.
The current rating (or ampacity) of the 115 kV substation bus is 1200A
(amperes), which is adequate. The substation appears to be properly fitted with
standard lightning arresting equipment, measurement transformers, switchgear,
protective relaying and disconnection equipment, including four disconnect
switches, two SF\\6\\, 115 kV, 1200A circuit breakers for outdoor use. In
addition, there are nine 1200/5 multi-ratio CTs, three bushing-type current
transformers with transducers, and three lightning arrestors.
A relay building (prefabricated metal) is provided to house protective relays,
control switches, meters and indicating lights. Two digital electronic multi-
function meters for current, voltage, watts, VARs, power factors and frequency
have been included in the building and equipped with RS-232 and KYZ pulse
outputs. The building is insulated, heated, lighted and air conditioned, with
smoke and fire detection connected to the cogeneration plant fire detection
system. Additional space with a locking door is provided for Niagara Mohawk
equipment.
The substation area is provided with high pressure sodium type lights and a
chain link fence to protect the entire perimeter.
2.7.2. Main Step-Up Transformers
Two main step-up transformers are provided and installed in the substation at
the Project. Each transformer is separately connected via underground cables to
each GT driven generator. The cables from the generators to the transformers are
routed underground. The transformers take the 13.8 kV power produced by the
generators and provide 115 kV power to the utility. The transformer are oil
insulated units and are sized to carry the continuous maximum unit output, and
are rated at 30.2/40.3/50.4 MVA, OA/FA/FA 65 degrees C rise, 3 phase, 60 Hz. The
high voltage side is 450 kV BIL, WYE connected, with no-load tap changing
capability. The low voltage side is 110 kV BIL, delta connected. The impedance
based on OA rated capacity is 7.5 percent. The units include bushings, bushing
transformers, station class lightning arrestors, sudden pressure relays and
winding temperature indicators. The transformers appear to be appropriately
dimensioned for an installation of this size.
Transformer oil spill containment is provided for each transformer including
underground tanks and containment dikes. This is furnished in complete
compliance with all applicable New York State DEC and federal EPA regulations.
A deluge system for fire protection is provided with freeze protection and alarm
contacts for remote indication.
2.7.3. Auxiliary Transformers
Two 1500/2000 kVA, AA/FA, 13.8 kV-480 V, dry type cast coil transformers are
supplied to provide power to the 480 V plant auxiliary motors and other services
requiring 480 V. Primary fuses are included. Each unit is sized for 100 percent
capacity to insure reliability throughout the Project. The auxiliary
transformers are located adjacent to the power island building on the south
side. The cable from the auxiliary transformers runs via cable trays throughout
the Project.
In addition, one 1500/2000 kVA, AA/FA, 13.8 kV-4160 V, dry type cast coil
transformer is included to
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<PAGE>
supply power for the 4160 V emergency fuel gas compressor motor. One neutral
grounding resistor will be mounted on the unit and is rated at 600A, 2400 V line
to neutral, 10 second, with 300:5 CT. The unit is mounted in an outdoor
enclosure with one entrance bushing.
2.7.4. 13.8 kV Switchgear
The 13.8 kV switchgear consists of four sections of 15 kV metal clad switchgear
and three sections of 15 kV metal enclosure switches in one continuous indoor
lineup. All of the switchgear is located in the power island building in the
electrical room.
The switchgear includes two 3000A generator breaker assemblies, two 1200A feeder
breaker assemblies, and four sets of drawout PT equipment. Three 1200A
transformer feeder assemblies are included for the switches. The switchgear is
rated for 1000 MVA, with a maximum symmetrical interrupt capability of 48 kA
RMS. Relays, CT's, PT's, status lights and switches are included.
2.7.5. 480 V Switchgear
The 480 V switchgear consists of eight sections, with four 1600A power breakers,
three 3200A power breakers, twelve 1600:5 CT's, six 3000:5 CT's, six 4:1 PT's,
switches, indicating lights, bracing, and four bussed transition sections for
the 480 V MCCs. The transition buses are rated for 1600A.
2.7.6. 480 V Motor Control Center
The 480 V motor control centers (MCC) are connected by bus to the 480 V
switchgear. The four MCCs contain feed breakers, bus starter units, and relays,
as required to support the 480 V motors in the Project and spare capacity. All
of the motor control centers are located in the power island building in the
electrical room.
2.7.7. 4160 V Motor Control Center
The 4160 V MCC supports the emergency fuel gas compressor motor only. It is
rated at 250 MVA with a 1200A bus. The controller includes solid state
protective relaying.
2.7.8. DC Battery Powered Battery System
The 125 V DC battery system supports 125 V requirements for switchgear control,
substation control, emergency lighting, etc. The system has an energy storage
capacity of four hours and includes a lead calcium, solid state rectifier,
battery charger and redundant charger, and main DC distribution panels. Twenty-
four V DC battery systems are provided with the GTs to support 24 V DC loads
required for equipment in the gas turbine package.
2.7.9. UPS System
The uninterruptible power supply (UPS) system provides back-up power for the
distributed control system. The system includes a 150A, 208 V AC battery
charger, a 15 kVA inverter, a 30 minute battery system, a 225A battery
disconnect breaker (DC rated, 2 power, in NEMA 1 enclosure), a 225A AC
distribution panel with 225A main input breaker and bus, and a 15 kVA bypass
regulating transformer.
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<PAGE>
2.7.10. Grounding System
The main exterior plant-wide ground grid utilizes bare copper cable. Copper clad
steel ground rods are buried a minimum of 30 inches below finished grade. The
system is designed to limit step and touch potential under maximum line-to-
ground fault conditions and to limit overall ground grid potential rise to less
than as defined in IEEE-80. The grounding system is tied to the station fence
ground, the substation ground grid, and the building grounding system. The
building steel columns, stack, tanks, and other metallic structures are
connected directly to the main grid. Equipment is grounded per manufacturers'
instructions.
2.7.11. Communication System
The Project communication system consists of telephone service with outlets in
the control room, office areas, electrical switchgear room and water treatment
laboratory.
A facility paging and two-party communication system is supplied with amplifying
equipment, headset stations, line balancing equipment, speakers and master
control station. Individual stations are integrated with the telephone
equipment.
2.7.12. Life Safety System
Zone panels are provided for interface to the main control room. Each panel has
a minimum of three spare zones and is tied together using a multiplexing cable
system in rigid galvanized steel conduit. The system is Class A, fully
supervised.
Ionized smoke detectors are provided in break rooms, electrical signal closets,
electrical equipment rooms, control room, office area, locker area, maintenance
area, gas compressor area and laboratory area.
Spot type heat detectors are supplied at the main transformers, the auxiliary
transformers, and the lube oil/control oil tanks and pumps. Smoke detectors for
HVAC mechanical equipment are ionization type.
Manual pull stations and horns are located at all exit and egress locations.
Audio-visual stations are located adjacent to the exit doors and in personnel
areas to meet applicable code requirements. All remote stations are tied into
the life safety system.
2.7.13. Lighting System
Plant lighting consists of normal lighting and self-contained DC battery pack
emergency lights. Outside lighting is 400/1000 watt HP sodium fixtures mounted
on building structures and controlled from photocells.
Emergency lighting systems are provided for purposes of personnel egress and
continuation of critical activities during emergency conditions.
2.8. Controls and Instrumentation
Control for the Project is accomplished by a DCS implemented with microprocessor
controllers for the control and monitoring of the Project processors. The DCS
has been recently upgraded to an ABB/Bailey Symphony Conductor NT DCS operating
system, which among other enhancements is Y2K compliant. The DCS is located in
the environmentally controlled control room in the power island building. With
the
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<PAGE>
recent upgrade, Stone & Webster believes the DCS is representative of current
technology typically available for this type of facility.
The GTs, the generators, the duct burners, the fire monitoring system and the
demineralizer system have individual free standing control panels. Data logging
and some controls for this equipment are also handled through the DCS system.
Distributed Control System
- --------------------------
The system supports the following operator displays:
. Facility overview displays
. Graphic displays
. Alarming
. Digital input displays
. Analog indication
. Group displays
The system has the following printing and reporting capabilities:
. Alarm summaries
. Event summaries
. Operating summary reports on a periodic, demand, or event basis
. Any monitor graphics display printout
The system continuously monitors itself for failures and provides a diagnostic
display. Loop timing is available on-line with configuration data storage. The
system supports all control algorithms as required. The system is totally
redundant whereby any single failure of the following will alert the operator
while continuing to keep the process under uninterrupted automatic control from
the monitor:
. Power supply failure
. Controller/processor failure
. Highway or communications link failure including communications controllers
or data multiplexers
Interface hardware includes two operator consoles with monitor and keyboard, one
engineer's console with monitor and keyboard, two printers and one control panel
for mounting auxiliaries.
2.9. Civil Design
In general, the civil design appears typical and unremarkable for a facility of
this type.
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<PAGE>
2.9.1. Drains
A system of underground gravity drains is installed to remove all effluent and
spills from the site. Oily water waste and chemical wastes are treated before
discharge. The drains run separately to the combined city sanitary/storm sewer;
i.e. process, sanitary, and storm run-off drains will be run separately. A
wastewater discharge flume monitors process wastewater discharge flows.
2.9.2. Site Preparation
All undesirable soils and materials are represented to be removed from the site.
Grading and storm run-off provisions have been included. Fill soil is provided
and compacted in accordance with applicable codes and standards.
2.9.3. Paving
Access roads, ramps, unloading areas, driveways, and heavy equipment parking
stands have been paved with concrete conforming to HS-20 truck loading.
Automobile parking lots and light vehicle parking areas have been paved with
asphaltic concrete.
Areas of ground between transformers and switchgear, under piping support
arbors, in the substation and around pumps and tanks have been finished with
crushed stone and compacted to a six-inch depth.
2.9.4. Foundations
The GT generators, HRSGs, fuel gas compressor, stacks, and boiler feedwater pump
foundations are supported by concrete filled steel piles.
The power island building is supported by spread footings on timber piles.
The outdoor pumps, treated water tank, neutralization tanks, water treatment
building, step-up transformers, and dead end structure foundations supported by
mats. The city water tank is mounted on a ring wall foundation.
2.10. Heating, Ventilation and Air Conditioning
Stone & Webster believes the design requirements identified for the various
areas of the Project to be typical and reasonable for this type of facility and
for this location.
The following areas have filtration, heating, pressure ventilation, self-
contained packaged units with air-cooled condensers, thermostats for controlling
the area temperature between 60 degrees F and 85 degrees F, and humidification
and dehumidification systems:
. The second floor area of the power island building, which includes the
Project control room, offices, secretary's area, and restroom
. The first floor area of the power island building, which includes the
switchgear, relay panels, restrooms, and battery charger room
. The laboratory in the water treatment room
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<PAGE>
The following areas have filtration, pressure ventilation, redundant blowers,
and a pressure fail alarm system:
. Gas compressor room
The remaining areas of the power island building and water treatment building
have a specific number of air changes and space heaters to maintain a
temperature of 60 degrees F at the minimum design temperature.
The following are criteria utilized:
-------------------------------------------------------------------------
Area Design Condition
-------------------------------------------------------------------------
Control Room (Summer) 74degrees F + 2degrees F db
-
-------------------------------------------------------------------------
Laboratory (Winter) 72degrees F + 2degrees F db
-
-------------------------------------------------------------------------
Switchgear Room 60degrees F min. or Ambient
-------------------------------------------------------------------------
Water Treatment Building 68degrees F min. or Ambient
-------------------------------------------------------------------------
Offices 74degrees F + 4degrees F db
-
-------------------------------------------------------------------------
Main Equipment Building 15degrees F temperature rise (at
operating levels)
-------------------------------------------------------------------------
Restrooms In accordance with local codes
-------------------------------------------------------------------------
Battery Charger Room Not less than 15 air changes per hour
-------------------------------------------------------------------------
All Other Areas 3 to 5 air changes per hour
-------------------------------------------------------------------------
2.11. Existing University Facilities
As part of the operation and maintenance of the Project, certain existing
University facilities are operated and maintained to provide a backup steam
supply to supplement the GT/HRSG trains when they are out of service for
maintenance or shutdown per electric power sale requirements. These are
essentially the:
1) Riley boiler house, which consists of two Riley boilers each with a
capacity of 150,000 lb/h at 200 psig and 550 degrees F and are used in
winter to supply 100 psig process steam. These boilers were installed in
1951 and currently operate on either gas or oil.
2) Alco boiler house, which consists of two B&W boilers each with a capacity
of 100,000 lb/h at 300 psig and 550 degrees F and are used in summer to
supply 275 psig process steam. These boilers were installed in 1954 and
currently operate on either gas or oil.
Each of the above boilers are supplied with heating coils in the bottom drum to
maintain warm standby. The boiler houses are each equipped with boiler feed
pumps and deaerating heaters, which are interconnected so that either deaerating
heater can supply either boiler house. The boiler houses have a common softened
water system to provide makeup. Each boiler house has interconnection with the
power company at 13.8 kV. Four 30,000 gallon fuel oil storage tanks are
provided. The Alco boiler house contains a black start diesel generator that is
run weekly and a black start is performed yearly. The Riley boiler house has a
1000 kW 5 psig back pressure steam turbine generator for black start
capabilities.
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[LOGO OF STONE & WEBSTER]
Project Orange Associates. L.P.
- ------------------------------------------------------------------------
SECTION 3. PROJECT CONDITION ASSESSMENT
3.1. The Project Overview
Stone & Webster conducted a site visit, which consisted of a walk through
inspection lead by the Project operations manager. This allowed an opportunity
for Stone & Webster to get a general impression of the condition of the Project.
During the visit, Stone & Webster's intent was to do a visual type inspection of
all of the Project's major equipment. The inspection did not involve any
physical examination, nondestructive testing, or laboratory testing of any of
the equipment or materials on site. During our visit, both units were operating
under approximately full load conditions, no supplementary firing of the exhaust
gases in the HRSGs was being done during this time. The general condition of
the Project was excellent and no remarkable observations concerning general
house keeping, painting, and corrosion control were noted.
3.1.1. Equipment Arrangement
The site is relatively compact and some equipment is located in close proximity
to other equipment, allowing limited room for maintenance access. The GTs are
packaged on skids and were fully tested before their installation at this site.
The GT packages are opposite hand type layouts, which allowed both GT access
doors to face the outside walls of the turbine building to facilitate GT engine
exchange and maintenance.
3.1.2. Maintenance
The Project appears to be a well maintained facility where maintenance is
performed with careful attention to detail. No rusting equipment or missing
insulation material was observed during our visit. The overall site was
extremely clean and no debris of any sort was observed around the Project site,
inclusive of the inside of trenches. The Project maintenance personnel advised
that all scheduled maintenance is performed for all plant equipment and that the
Project monthly reports list all scheduled and unscheduled maintenance along
with plant operating performance data, export electric sales and process steam
sales. Preventive maintenance is represented to be conducted on all major
equipment according to predetermined and set schedules, which are based on
experience and manufacturers recommendations.
3.1.3. Infrared Thermographic Assessment
The Project has infrared thermographic electrical, mechanical, and heat
conservation inspections performed on a yearly basis for major plant systems,
equipment and piping to highlight and identify abnormal operating situations.
This is a highly desirable inspection in that the infrared inspection can point
out problem areas before failure. This type of inspection is noninvasive and
generally discovers problems that could go on for days, weeks, or months before
the item actually fails. The most recent infrared inspection was performed on
August 19 & 20, 1999 and the report addressed 10 items, which the testing firm
noted as requiring attention of a more immediate nature and others which could
be addressed in a more casual approach. A maintenance outage was scheduled for
September 24, 1999 for the repair of these items. This type of proactive
inspection of equipment is an excellent way to avoid serious damage to permanent
plant equipment and materials and improve overall plant availability, as
infrared imaging can detect problems not normally detectable by ordinary visual
observation techniques. The last two years reports were briefly reviewed. Some
similar type problems with similar equipment were noted, but it appeared that
all
3-1
<PAGE>
problems noted last year were not noted again this year implying that they were
addressed following this report last year. These types of issues are typical of
any facility and have no specific relationship to the type of GT or HRSG or any
other unique equipment at this facility.
3.1.4. Cyclic Operation
The Project was originally designed and operated as a base load plant and the
Sponsors have indicated that the current operating plan is to continue the
Project's original base loaded type of operation. The operating plan from
January 1999 until September 1999 had the GT and HRSG units reducing load
slightly every night and shutting down on weekends. The load reduction at night
was not particularly troubling, given that it did not involve more than the 10-
15 percent load reduction being done from January to September this year. The
shut down on weekends was a significant change in the operating mode and if this
were extended into a daily shut down situation, this change would be more
significant. The continued operation at base load, as is now anticipated,
should be acceptable and should result in availabilities generally in agreement
with those used in the Financial Projections and historically demonstrated at
the Project.
3.2. Condition Assessment
3.2.1. Gas Turbine Generators
As we understand the situation, GECS, as part of the support for their O&M
contract for the Project, has purchased a spare GE LM5000 gas turbine engine
(serial 474-117) which is presently dedicated to the support of the Project and
one other facility in Carson California which uses a single GE LM5000 gas
turbine and is water injected for NOx control.
Both of the original GTs engines have operated satisfactorily and have supported
a plant availability of at least 97 percent for years 1996, 1997 and 1998 though
the station availability has been slowly decreasing as would be expected as the
Project ages (see Figure 3.3-1). There was a sharp decrease in plant
availability for the first seven months of 1999 primarily since GT #1 was out of
service form April 16, 1999 through June 21, 1999 due to the unavailability of a
spare engine. When GT #1 came down the dedicated spare was in Carson California
and a replacement engine from the LM5000 Lease Engine Program was not available.
GT #1 (serial 474-157) operated for approximately 43,000 hours until April 16,
1999 when it was taken out of service due to a failure of a 5/th/ stage HP
compressor blade. The spare engine 474-117, which finished being overhauled in
January 1999, was not available back from Carson California until June 16, 1999
and then required minor hot section rework to reconfigure it for steam
injection. Following the reconfiguration the spare engine was installed in GT
#1 on June 21, 1999. Through November 8, 1999, this spare engine, 474-117, has
accumulated approximately 5,600 hours since it came back from overhaul in
January 1999 of which approximately 1,600 hours have been at the Project.
Engine 474-157, the original engine for GT #1 is presently scheduled to be back
to the Project on December 23, 1999. The spare engine, 474-117 had been
recently exhibiting higher than normal vibration levels, which on November 1,
1999 increased to the point where it was necessary to bring in a vibration
specialist and perform a trim balance on the this engine. This trim balance was
completed on November 7, 1999 and the unit has operated and restarted
satisfactorily with low vibration levels since that point in time.
GT #2 (serial 474-158) was shut down on June 17, 1998 for a 50,000 hour overhaul
(having accumulated approximately 48,000 hours) and lease engine 474-200 was
installed. Engine 474-158 was reinstalled February 12, 1999 and has accumulated
approximately 3,600 hours through November 8, 1999.
3-2
<PAGE>
Since GE is no longer manufacturing new LM5000 gas turbine engines for sale,
Stone & Webster recommends that it be documented through GE or others what the
availability of LM5000 gas turbine lease engines and spare parts is likely to
be, since plant and GT availability are greatly affected by lease engine and
spare parts availability. Stone & Webster recommends that the export steam uses
and surges be evaluated to determine if any system modifications or operations
modifications (including changing the amount of power augmentation steam into
the GT) may be possible to avoid venting steam during the spring and fall when
there is greater volatility in the steam load demand. With the exception of the
availability of spare engines and related engine spare parts noted above, Stone
& Webster did not observe or note a condition during its review which it
believes would significantly compromise the Project's ability to achieve its
performance projections identified in the Financial Projections. These items
noted, if appropriately addressed should not compromise the Project's ability to
achieve its performance projections identified in the Financial Projections.
3.2.2. Heat Recovery Steam Generator
The HRSGs have experienced a number of tube leaks, which have resulted in
portions of the heat transfer surface being operationally bypassed. Tube leaks
can typically be attributable to poor water chemistry control. The water
treatment system/program for HRSG and steam systems is well established and
maintained with daily reports provided by plant personnel and weekly summary
reports provided by Calgon Corporation. Calgon also performs yearly inspections
of the HRSGs, the most recent being May 18, 1999 for HRSG #1 and June 3, 1999
for HRSG #2. Both of those reports advise that the boiler waterside surfaces
were in excellent condition. The drum surfaces are reported to be well
passivated and in a deposit-free condition. In the reports, there were no
mechanical problems observed and the steam separators were noted clean and free
of any solids build-up indicating no apparent carry over problems. The
conditions reported observed are representative of a well-maintained water
treatment program by the Project operating personnel. As the water treatment
seems to be in order, Stone & Webster recommends that the cause of the tube
leaks be investigated and corrected in order to maintain and improve efficiency
and availability. Other than the above, Stone & Webster did not observe or note
a condition during its review which it believes would significantly compromise
the Project's ability to achieve its performance projections identified in the
Financial Projections. Without additional investigation and analysis, it is
difficult to quantify the impact of these leaks, but at first review, the choice
to isolate these heat transfer surfaces appears to make a relatively small
negative impact on the efficiency of the Project and will likely improve the
availability slightly, considering the present operating history.
3.2.3. Boiler Feedwater System
The feedwater system has exhibited failures of three of the seven boiler feed
pumps along with the erosion of the feedwater control valves. The feedwater
control valves have been replaced with smaller valves (4 inch replaced with 2
inch and the body material was upgraded to stainless steel). The present HP
boiler feed pumps are designed to deliver 1500 psig pressure with a minimum
operating pressure of 1000 psig. This pressure seems excessive for a boiler
delivering 625 psig steam. Stone & Webster recommends that the feedwater
systems and HRSGs be evaluated and proper selection of pump capacity and head be
confirmed to be suitable for the intended service conditions and the expected
variations. It is expected that two HP boiler feed pumps would meet normal
operating conditions (reduced head and increased flow) with the same or similar
footprint, but additional investigation and analysis would be required. With
the exception of the above, Stone & Webster did not observe or note a condition
during its review which it believes would significantly compromise the Project's
ability to achieve its performance projections identified in the Financial
Projections. Continued operation in the present condition, will likely result
in acceptable performance from the standpoint of the Financial Projections.
Modifications that are feasible and economically justified might result in a
minor improvement in plant efficiency and a reduced
3-3
<PAGE>
probability of feedwater pump and regulator control valve failures, which would
improve overall availability.
3.2.4. Raw Water System
The city water that is utilized for the water treatment system is first used as
cooling water prior to entering the city water tank. The city water is provided
normally from the south through 8" city water header UW-4300 and UW-4302. A
second, or emergency, alternate supply is provided from the north through line
6" UW-4319 tying into 8" line UW-4320. The loss of 8" line UW 4320 results in
no cooling water available for boiler feed pumps, gas compressor, turbine lube
oil coolers and other equipment, which will necessitate the shutdown of both
GT/HRSG trains. During the summer months (period of lower process steam flow)
this extra cooling water, which is not required by the water treatment system,
is diverted to the neutralizing tank for final discharge to the sewer. There
was a city water main break in February 1997 which resulted in sand and silt
deposits in the city water tank. The system has no means of pre-filtering the
normally clean raw city water. Stone & Webster recommends that the cooling
water and raw system supply be studied and evaluated to eliminate the
possibility of single failure events from shutting down the plant and to
eliminate the dumping of city water to the sewer which is both wasteful and
expensive.
Otherwise, Stone & Webster did not observe or note a condition related to the
raw water system during its review which it believes would significantly
compromise the Project's ability to achieve its performance projections
identified in the Financial Projections.
3.2.5. Water Treatment System
Provided that the historical demand for demineralized water does not increase,
Stone & Webster did not note any condition related to the water treatment system
during its review, which it believes would significantly compromise the
Project's ability to achieve its performance projections identified in the
Financial Projections.
3.2.6. Instrument and Plant Air System
With respect to the instrument and plant air system, Stone & Webster did not
observe any remarkable condition during its review.
3.2.7. Electrical Systems
Annually, the Project has an electrical preventative maintenance and testing
program on the high voltage electrical equipment that is conducted with the
assistance of H.M.T., Inc. (High Voltage Maintenance and Testing Services). The
latest testing was performed in June 1999 and their report dated August 17, 1999
listed six items that required attention/maintenance by the Project personnel
and will be accomplished during maintenance outages as required. This
inspection also included the electrical equipment in both the Riley and Alco
Boiler Houses that is maintained by GECS.
The DC batteries for the UPS system were replaced in 1998 with exide D batteries
and the DC batteries for electrical breaker controls are scheduled for
replacement in November 1999.
In general with respect to the electrical systems, Stone & Webster did not note
a remarkable condition during its review that it believes would significantly
compromise the Project's ability to achieve its performance projections
identified in the Financial Projections.
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<PAGE>
3.2.8. Controls and Instrumentation
The existing Bailey distributed control system has recently been replaced and
upgraded to ABB/Bailey Symphony Conductor NT DCS operating system including
upgraded graphics and appears to be functioning satisfactorily. Stone & Webster
believes the controls and instrumentation will support the Project in achieving
its performance projections identified in the Financial Projections.
3.2.9. Heating, Ventilating and Air Conditioning System
All systems in the office/control room area were operating satisfactorily.
However, for the main equipment building housing, the GT/HRSG/boiler feed pump
systems, the wall louvers were blocked off and the building had ambient
temperatures in excess of 108F on the day of our visit. Stone & Webster
recommends that the ventilation system for the main equipment building be
evaluated/modified to provide proper ventilation during both summer and winter
conditions. This would improve working conditions in this area from a health
and safety standpoint as well as provide a more tolerant environment for
electrical and instrumentation equipment located in this area.
Other than the ventilation of the main equipment building, Stone & Webster did
not note any condition with respect to the heating, ventilating and air
conditioning system during its review which it believes would significantly
compromise the Project's ability to achieve its performance projections
identified in the Financial Projections. This ventilation issue will not likely
require much capital to resolve and will not likely have any significant impact
on the Financial Projections.
3.2.10. Existing Facilities
The equipment and portions of the Riley and Alco Boiler Houses, which are
operated and maintained by GECS, appear to be well-maintained. Both of the
these complexes were constructed in the 1950s and were designed and laid out to
burn coal and there are still a number of pieces of equipment from that period
abandoned in place. Because of the original use of these buildings and the
additional amount of equipment required for burning coal there is more than
ample maintenance access for the equipment which is now required to burn natural
gas and oil. The boiler exterior furnace walls do not exhibit signs of
overheating or other differential expansion problems, which can sometimes be
found on these types of units. In general with respect to the existing Riley
and Alco Boiler House facilities, Stone & Webster did not observe or note any
condition during its review which it believes would significantly compromise the
Project's ability to achieve its performance projections identified in the
Financial Projections.
3.3. Life Extension Issues
There was no specific Life Extension Program report available for review by
Stone & Webster, but the Project appears to be well-maintained and has had some
upgrades of equipment/facilities in the new cogeneration portion as well as the
existing University facilities. Additionally, the boilers for both the Project
and the existing University facilities are inspected annually and have received
renewed operating permits on an ongoing basis. The cogeneration portion of the
Project which was constructed in the early 1990s, appears to be typical of
equipment being furnished at this time and, if properly maintained and operated
in accordance with its design requirements, can typically be expected to have a
design life of 20 years before one expects to start implementing formal life
extension programs. Funds for a formal life extension program for the existing
University facilities should be budgeted and planned for by this time, but the
results from such a program were not available. Stone & Webster recommends that
a life extension program be instituted for the existing University facilities to
improve the probability of achieving the availability levels in the Financial
Projections.
3-5
<PAGE>
Station Availability
[GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
Figure 3.3-1
<PAGE>
[LETTER HEAD OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
SECTION 4. PROJECT PERFORMANCE
The project's performance is a measure of the facility's ability to convert fuel
into useful thermal energy and electricity for sale. The efficiency of this
conversion process is dictated by the choices of the plant designer, the
thermodynamic principals involved in the cycle and to some degree by the
operation and maintenance practices employed at the Project. The hardware and
performance degrade with use. The rate and severity of degradation can be
influenced by operation and maintenance practices, type and cleanliness of fuel,
cleanliness of combustion air provided, cleanliness of NOx injection water or
steam, and many different, inherent, characteristics of the equipment. For a
new facility, we would review the mass and energy balance and equipment
specifications to see if we agreed with the predicted performance represented by
the designer. For an existing facility, we review historical data related to
performance and temper our opinion of a forecast of future performance to use in
the Financial Projections by observed plant physical conditions. Future
performance will depend upon proper operation and maintenance of the Project and
upon many variables beyond the control of Stone & Webster and, therefore may
vary from these projections. Based on the information reviewed and the above
assumptions, Stone & Webster believes the technical performance forecasts are
reasonable.
4.1. Basis of Power Plant Heat Rates
The thermal performance of a fossil power plant is typically represented by the
ratio of the heat input (based on the higher or lower heating value of the fuel)
to the net electrical output (on the low voltage side of the main transformers),
measured in British thermal units per kilowatt-hour ("Btu/kWh"). This ratio of
fuel heat input to electric power output is known as the "heat rate" and is
inversely proportional to the efficiency of the plant. The statement of a heat
rate for a plant must always include a reference noting whether it is based on
the lower or higher heating value of the fuel. The lower heating value ("LHV"),
or net heating value of the fuel is usually referenced by manufacturers of
equipment because this fuel heating value does not include the heat which cannot
be partially recovered by the equipment, and is lost in the form of water vapor.
The higher heating value ("HHV"), or gross heating value, on the other hand is
generally used by suppliers of fuel. This HHV of the fuel includes the heat,
which is lost in the form of water vapor. Typically power plants are most
efficient (a lower heat rate) the closer they are operated to their design basis
conditions, or near 100 percent of electrical output rating. When a power plant
is dispatched at lower loads the heat rate will increase because the efficiency
decreases. Therefore, for optimal thermal performance, power plants generally
need to operate at or near full load conditions. Gas turbine power plants'
efficiency varies with the air temperature entering their compressors, generally
becoming more efficient at cooler inlet air temperatures.
Cogeneration power plants expand the above definition somewhat because a portion
of the useful energy is exported as thermal energy, generally in the form of
steam. This exported thermal energy may be used for space conditioning. In the
discussion which follows two heat rate terms will be addressed. One will be the
overall plant heat rate without any credit for steam (thermal energy) leaving
the facility and the other will be adjusted to account for the thermal energy
that leaves the power plant. The adjusted heat rate value provides for some
comparison of plant performance with similar plants that do not cogenerate. The
unadjusted heat rate is used to predict the ongoing fuel requirement used in the
Financial Projections for the Project.
4-1
<PAGE>
4.2. Heat Rate
Stone & Webster reviewed the Project monthly operating reports from January 1996
to July 1999 and a summary table provided for the August & September 1999 report
which was in preparation at the time of our site visit and extracted the data
presented on the following tables on Figure 4-1. Stone & Webster believes that
the data used is the most accurate available from the Sponsors for the Project.
From August 1998 to August 1999, the power sales data is represented to be based
on Niagara Mohawk's power purchase records and for the earlier period, the power
sales data was based on the Project's power meters. Data from Niagara Mohawk's
power purchase records was not provided for the earlier period. There is some
variation between the two sets of data that should be explained. For eleven out
of these thirteen months where both sets of data are available, the variation is
less than one percent, but for two of these months, the variation reported is
11.2 percent for April 1999 and 17.5 percent for May 1999. Stone & Webster
generally considers the actual purchase records of the utility to be the most
accurate and would prefer to see these records for this entire period. We have
used the Project meter records where the Niagara Mohawk data has not been
provided to build the following tables that contain the historical Project heat
rates. Based on the data available, we believe these most recent 13 months of
data probably represent the best average heat rate to use in the pro forma.
This unadjusted average heat rate value is 9,351 Btu/kWh (LHV) or 10,370 Btu/kWh
(HHV). The heat rate also varies from summer to winter for this project with
the heat rate being higher during the winter months. This is due to
supplementary duct firing of the HRSG and / or firing of the auxiliary boilers
as required to satisfy the winter heating steam load.
The average adjusted heat rate value for this most recent 13 month period is
7,647 Btu/kWh (LHV), which implies an overall thermal efficiency of about 44
percent. This adjusted heat rate value provides some indication of how
efficiently the fuel is being used to generate electricity from the Project
while the Project is producing useful thermal energy for other purposes. While
this adjusted heat rate is not as good as the current GT combined cycle
technology allows, it is more efficient than any conventional re-heat /
regenerative Rankine thermal cycle power plant.
These heat rates are comparable with other GE LM5000 gas turbine facilities with
which we are familiar.
4.3. Power Output
The power output of each GT is approximately 40 MW and the monthly reports
indicate that the GTs can and do achieve rated capacity on a regular basis when
ambient air temperatures are not restricting the plants output. The power
output during the original performance test was approximately 40 MW for each GT,
but the heat rate was better at that time by approximately 7 percent. Recently,
the units have been restricted by the Sponsor's current asset manager to
operating at a reduced capacity during the off peak periods at night and have
been being shut down completely on the weekends. This change in operation was
represented to be made as a result of the economics involved in the present
utility restructuring process, which is underway in New York state. The
resulting historical capacity factors for the Project are as noted in Figure 4-1
for the periods for which data was provided. Going forward the new asset manger
plans to run the units at base load.
4.4. Availability
The availability of this project was in the high to mid 90 percent range over
the last few years (see Figure 4-1). From our review of the data available for
these types of units and the experience with other similar units which Stone &
Webster is familiar, these values are reasonable if not above average. The
availability does show some trend downward over the last few years and it is
likely this trend will or could increase as
4-2
<PAGE>
the Project ages and the availability of spare parts for the GE LM5000 gas
turbine engine becomes more competitive. The events noted in the Operations and
Maintenance section of this report are some indication of this already. Earlier
this year, the Project experienced an extended outage due to the non-
availability of a lease pool engine and the GECS shared spare engine. As we
understand this situation, GECS has dedicated a spare engine that it owns for
the Project and one additional facility they operate in California. Additionally
we understand that the Project is currently a participant in and will be a
member of the engine lease pool program as well, going forward, which Stone &
Webster considers to be a prudent practice for the Project. This current
dedicated spare engine for two GTs at the Project and for the additional GE
LM5000 facility operated by GECS is the best practice we are aware of for
dealing with this situation when it is coupled with being a member of the LM5000
Lease Engine Program.
4-3
<PAGE>
Project Orange Monthly
Steam and Power Sales
Fuel Input, Heat Rates, Net Capacity Factor, Station Availability
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Jan-96 Feb-96 Mar-96 Apr-96
Period Hours 744 696 744 720
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 102,052 93,396 84,852 57,998
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 57,168 48,600 58,392 54,360
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel input, Btu (LHV) 556,379,200,000 480,107,000,000 531,029,000,000 474,856,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 556,379 480,107 531,029 474,856
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 616,969 532,391 588,858 526,568
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 9,732 9,879 9,094 8,735
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 10,792 10,955 10,085 9,687
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) incomplete data incomplete data incomplete data incomplete data
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 96.05% 87.26% 98.10% 94.38%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 97.55% 88.08% 99.40% 95.99%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 96.05% 87.28% 98.10% 94.38%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 96.05% 87.28% 98.10% 94.38%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year May-96 Jun-96 Jul-96 Aug-96
Period Hours 744 720 744 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 40,586 30,272 29,867 31,252
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 58,752 55,800 56,520 57,312
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Total Fuel input, Btu (LHV) 495,005,000,000 471,421,000,000 476,428,000,000 482,964,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 495,005 471,421 476,428 482,964
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 548,911 522,759 528,311 535,559
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Heat Rate (unadjusted), Btu/kWh (LHV) 8,425 8,448 8,429 8,427
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,343 9,368 9,347 9,345
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) incomplete data incomplete data incomplete data incomplete data
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 98.71% 96.88% 94.96% 96.29%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 100.00% 98.48% 96.98% 96.74%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 98.71% 96.88% 94.96% 96.29%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 98.71% 96.88% 94.96% 96.29%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Sep-96 Oct-96 Nov-96 Dec-96
Period Hours 720 744 720 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 33,196 46,093 70,864 74,608
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 53,784 34,992 55,368 58,320
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Total Fuel input, Btu (LHV) 455,239,000,000 333,590,000,000 498,307,000,000 522,653,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 455,239 333,590 498,307 522,653
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Approx. Total Fuel Input, MMBtu (HHV) 504,815 369,918 552,573 579,570
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,464 9,533 9,000 8,962
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Heat Rate (unadjusted), Btu/kWh (HHV) 9,386 10,572 9,980 9,938
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,719 7,925 7,455 7,402
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 93.38% 58.79% 96.13% 97.98%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 99.21% 95.16% 98.38% 99.21%
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Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 97.40% 83.15% 96.68% 97.98%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 97.40% 83.15% 96.68% 97.98%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------ -------------------------------
1996 Avg. 1996 Total Steam
Monthly Net Cap. 92.41% Sold, k-lbs 695,036
Factor=
------------------------------ -------------------------------
1996 Avg. 1996 Total Fuel
Monthly Station 97.27% Input MMBtu 5,777,978
Availability= (LHV)
- -------------------------------------------------- ------------------------------ -------------------------------
The above data is derived from the station 1996 Avg. 1996 Total Fuel
monthly reports and the attached supporting Monthly Net Cap. Input MMBtu 6,407,200
detail sheets & Sale Invoices when available. Factor w/ credit 94.82% (HHV) Approx.
for Reserve
Hours as if
The HHV numbers are derived by adjusting all of operated=
the fuel gas LHV values by multiplying by 1.1089 ------------------------------ -------------------------------
and the fuel oil numbers are derived by adjusting 1996 Total Power 649,368
all of the fuel oil LHV values by multiplying by Sales, MW-h
1.06 to get an estimate of the HHV value for the -------------------------------
fuel and the above estimated Heat Rates based 1996 Average
on HHV of the fuel. Heat Rate 8,927
(unadjusted),
Btu/kWh (LHV)
-------------------------------
-------------------------------
Net Capacity Factor is actual generation divided 1996 Average
by period hours times 80 MW and Station Heat Rate 9,900
Availability is fired hours plus reserve hours (unadjusted),
divided by period hours Btu/kWh (HHV)
- -------------------------------------------------- -------------------------------
</TABLE>
Figure 4-1
Sheet 1 of 4
<PAGE>
Project Orange Monthly
Steam and Power Sales
Fuel Input, Heat Rates, Net Capacity Factor, Station Availability
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Jan-97 Feb-97 Mar-97 Apr-97
Period Hours 744 672 744 720
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 97,922 74,824 76,138 55,163
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 58,032 51,264 58,752 52,920
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel input, Btu (LHV) 548,907,000,000 474,066,000,000 530,870,256,000 465,573,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 548,907 474,066 530,870 465,573
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 608,683 525,692 588,682 516,274
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 9,459 9,248 9,036 8,798
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 10,489 10,255 10,020 9,756
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,447 7,567 7,481 7,544
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 97.50% 95.36% 98.71% 91.88%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 98.78% 99.06% 100.00% 93.25%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 97.50% 97.55% 98.71% 91.88%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 97.50% 97.55% 98.71% 91.88%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year May-97 Jun-97 Jul-97 Aug-97
Period Hours 744 720 744 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 39,686 28,299 31,659 30,675
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 50,976 55,262 53,886 50,031
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel input, Btu (LHV) 440,798,000,000 470,452,000,000 461,028,000,000 429,591,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 440,798 470,452 461,028 429,591
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 488,801 521,684 511,234 476,373
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,647 8,513 8,556 6,586
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,589 9,440 9,487 9,522
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,693 7,873 7,820 7,826
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 85.65% 95.94% 90.53% 84.06%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 92.28% 98.60% 99.40% 98.23%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 91.09% 95.94% 95.67% 95.05%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 91.09% 95.94% 95.67% 95.05%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Sep-97 Oct-97 Nov-97 Dec-97
Period Hours 720 744 720 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 33,726 50,424 68,101 81,075
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 34,905 31,105 37,227 58,653
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel input, Btu (LHV) 309,045,277,000 296,388,000,000 364,535,000,000 532,160,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 309,045 296,388 364,535 532,160
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 342,700 328,665 404,233 590,112
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,854 9,529 9,792 9,073
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,818 10,556 10,859 10,061
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,669 7,586 7,589 7,419
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 60.60% 52.26% 64.63% 98.54%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 99.72% 97.37% 100.00% 99.69%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 96.71% 94.61% 99.02% 98.54%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 96.71% 94.61% 99.02% 98.54%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------ -------------------------------
1997 Avg. 1997 Total Steam
Monthly Net Cap. 84.64% Sold, k-lbs 667,690
Factor=
------------------------------ -------------------------------
1997 Avg. 1997 Total Fuel
Monthly Station 98.03% Input MMBtu 5,323,414
Availability= (LHV)
- -------------------------------------------------- ------------------------------ -------------------------------
The above data is derived from the station 1997 Avg. 1997 Total Fuel
monthly reports and the attached supporting Monthly Net Cap. Input MMBtu 5,903,133
detail sheets & Sale Invoices when available. Factor w/ credit 96.02% (HHV) Approx.
for Reserve
Hours as if
The HHV numbers are derived by adjusting all of operated=
the fuel gas LHV values by multiplying by 1.1089 ------------------------------ -------------------------------
and the fuel oil numbers are derived by adjusting 1997 Total Power 593,013
all of the fuel oil LHV values by multiplying by Sales, MW-h
1.06 to get an estimate of the HHV value for the -------------------------------
fuel and the above estimated Heat Rates based 1997 Average
on HHV of the fuel. Heat Rate 9,007
(unadjusted),
Btu/kWh (LHV)
-------------------------------
Net Capacity Factor is actual generation divided 1997 Average
by period hours times 80 MW and Station Heat Rate 9,988
Availability is fired hours plus reserve hours (unadjusted),
divided by period hours Btu/kWh (HHV)
- -------------------------------------------------- -------------------------------
</TABLE>
Figure 4-1
Sheet 2 of 4
<PAGE>
Project Orange Monthly
Steam and Power Sales
Fuel Input, Heat Rates, Net Capacity Factor, Station Availability
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Jan-98 Feb-98 Mar-98 Apr-98
Period Hours 744 672 744 720
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: Per Stm Invoice Per Stm Invoice Per Stm Invoice Per Stm Invoice
Total Steam Sold (100# & 275#), k-lbs 85,175 74,621 71,440 46,646
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 58,103 52,059 57,994 56,371
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, Btu (LHV) 534,884,000,000 476,880,115,400 524,369,196,000 487,092,771,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 534,884 476,880 524,369 487,093
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 593,133 528,812 581,473 540,137
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 9,206 9,160 9,042 8,641
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 10,208 10,157 10,026 9,582
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,370 7,363 7,494 7,603
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 97.62% 96.84% 97.44% 97.87%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 98.77% 98.09% 99.58% 99.15%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 97.62% 97.02% 97.44% 97.87%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 97.62% 97.02% 97.44% 97.87%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year May-98 Jun-98 Jul-98 Aug-98
Period Hours 744 720 744 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: Per Stm Invoice Per Stm Invoice Per Stm Invoice Per Stm Invoice
Total Steam Sold (100# & 275#), k-lbs 31,899 28,800 29,787 30,050
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr Per NIMO
Net Power Sales, MW-h 48,042 43,198 57,178 57,651
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, Btu (LHV) 415,933,000,000 374,430,000,000 487,960,000,000 494,766,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 415,933 374,430 487,960 494,766
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 461,228 415,205 541,099 548,646
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,658 8,668 8,534 8,582
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,601 9,612 9,463 9,517
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,836 7,840 7,878 7,929
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 80.72% 75.00% 96.07% 96.86%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 92.24% 94.35% 99.50% 100.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 89.91% 91.25% 96.07% 96.86%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 89.91% 91.25% 96.07% 96.86%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Sep-98 Oct-98 Nov-98 Dec-98
Period Hours 720 744 720 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: Per Stm Invoice Per Stm Invoice Per Stm Invoice Per Stm Invoice
Total Steam Sold (100# & 275#), k-lbs 30,375 42,841 57,314 71,772
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: Per NIMO Per NIMO Per NIMO Per NIMO
Net Power Sales, MW-h 50,882 57,959 55,630 54,626
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, Btu (LHV) 434,920,000,000 496,441,000,000 483,770,000,000 499,202,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 434,920 496,441 483,770 499,202
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 482,283 550,503 536,453 553,565
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,548 8,565 8,696 9,139
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,479 9,498 9,643 10,134
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,799 7,658 7,487 7,543
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 88.34% 97.38% 96.58% 91.78%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 93.68% 98.44% 97.91% 91.94%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 93.03% 97.38% 96.58% 91.78%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 93.03% 97.38% 96.58% 91.78%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
--------------------------- -------------------------------
1998 Avg. 1998 Total Steam
Monthly Net Cap. 92.71% Sold, k-lbs 600,720
Factor=
--------------------------- -------------------------------
1998 Avg. 1998 Total Fuel
Monthly Station 96.97% Input MMBtu 5,710,648
Availability= (LHV)
- ------------------------------------------------- --------------------------- -------------------------------
The above data is derived from the station 1998 Avg. 1998 Total Fuel
monthly reports and the attached supporting Monthly Net Cap. Input MMBtu 6,332,538
detail sheets & Sale Invoices when available. Factor w/ credit 95.23% (HHV) Approx.
for Reserve
Hours as if
The HHV numbers are derived by adjusting all of operated=
the fuel gas LHV values by multiplying by 1.1089 --------------------------- -------------------------------
and the fuel oil numbers are derived by adjusting 1998 Total Power 649,694
all of the fuel oil LHV values by multiplying by Sales, MW-h
1.06 to get an estimate of the HHV value for the -------------------------------
fuel and the above estimated Heat Rates based
on HHV of the fuel.
Average Minimum Maximum
------------------------------------------------ --------------------------------
1996 thru 1998 1998 Average
Avg. Monthly 97.42% 88.08% 100.00% Heat Rate 8,787
Station (unadjusted),
Availability= Btu/kWh (LHV)
------------------------------------------------ --------------------------------
------------------------- -------------------------------
Net Capacity Factor is actual generation divided 1996 thru 1998 1998 Average
by period hours times 80 MW and Station Avg. Station 89.92% Heat Rate 9,743
Availability is fired hours plus reserve hours Monthly Net (unadjusted),
divided by period hours Capacity Factor= Btu/kWh (HHV)
- ------------------------------------------------ ------------------------- -------------------------------
</TABLE>
<PAGE>
Project Orange Monthly
Steam and Power Sales
Fuel Input, Heat Rates, Net Capacity Factor, Station Availability
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Month-Year Jan-99 Feb-99 Mar-99 Apr-99 May-99
Period Hours 744 672 744 720 744
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Data Source: Per Stm Invoice Per Stm Invoice Per Stm Invoice Per Stm Invoice Per Stm Invoice
Total Steam Sold (100# & 275#).k-lbs 100,956 77,869 83,143 50,190 36,173
- ----------------------------------------------------------------------------------------------------------------------------------
Data Source: Per NIMO Per NIMO Per NIMO Per NIMO Per NIMO
Net Power Sales, MW-h 48,958 34,609 36,536 27,513 13,526
- ----------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, Btu (LHV) 494,681,064,600 356,879,557,600 380,459,197,400 275,694,000,000 136,103,000,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 494,681 356,880 380,459 275,694 136,103
- ----------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 548,552 395,744 421,891 305,717 150,925
- ----------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 10,104 10,312 10,413 10,021 10,063
- ----------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 11,204 11,434 11,547 11,112 11,158
- ----------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,587 7,527 7,581 7,754 7,046
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 82.25% 64.38% 61.38% 47.76% 22.72%
- ----------------------------------------------------------------------------------------------------------------------------------
Station Availability 95.07% 94.89% 93.67% 67.68% 34.10%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve
Hours as Operated at full load) 90.84% 93.52% 92.31% 67.15% 37.97%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve
Hours as Operated at full load & GT#1
Apr-Jun 99 event as if it did not occur) 90.84% 93.52% 92.31% 90.34% 87.97%
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Month-Year Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99
Period Hours 720 744 744 720 744 720 744
- ----------------------------------------------------------------------------------------------------------------------------------
Data Source: Per Stm Invoice Per Stm Invoice Per Stm Invoice Proj. Org. Mtr
Total Steam Sold (100# & 275#).k-lbs 28,941 31,017 30,355 37,302
- ----------------------------------------------------------------------------------------------------------------------------------
Data Source: Per NIMO Per NIMO Per NIMO Proj. Org. Mtr
Net Power Sales, MW-h 24,660 35,330 36,654 32,488
- ----------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, Btu (LHV) 228,321,000,000 315,737,000,000 327,269,000,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 228,321 315,737 327,269
- ----------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 253,185 350,121 362,909
- ----------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 9,259 8,937 8,929
- ----------------------------------------------------------------------------------------------------------------------------------
Data is incomplete for September
Heat Rate (unadjusted), Btu/kWh (HHV) 10,267 9,910 9,901 1999 forward
- ----------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,767 7,833 7,901
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 42.81% 59.36% 61.58% 56.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Station Availability 64.03% 100.00% 100.00% 94.45%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve
Hours as Operated at full load) 62.22% 92.70% 95.67% 87.44%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve
Hours as Operated at full load & GT#1
Apr-Jun 99 event as if it did not occur) 94.00% 92.70% 95.67% 87.44%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
LHV HHV
----------------------------------------------------------------------
<S> <C> <C> <C>
Average Heat Rate (unadjusted), 9,351 10,370
Btu/kWh for Jul 1998 thru Aug 1999
- ----------------------------------------------------- ----------------------------------------------------------------------
The above data is derived from the station monthly
reports and the attached supporting detail sheets Average Heat Rate (adjusted),
& Sale Invoices when available. Btu/Wh (LHV) for Jul 1998 thru 7,647
Aug 1999
-----------------------------------------------------
The HHV numbers are derived by adjusting all of the
fuel gas LHV values by multiplying by 1.1089 and
the fuel oil numbers are derived by adjusting all
of the fuel oil LHV values by multiplying by 1.06
to get an estimate of the HHV value for the fuel
and the above estimated Heat Rates based on HHV of
the fuel.
-----------------------------------------------------
Jan 96-Sep 99 Avg. Monthly Net
Cap. Factor w/ credit for Reserve 92.28%
Hours as if operated=
-----------------------------------------------------
Net Capacity Factor is actual generation divided by -----------------------------------------------------
period hours times 80 MW and Station Availability Jan 96-Sep 99 Avg. Monthly Net
is fired hours plus reserved hours divided by period Cap. Factor w/credit for Reserve
hours. Hours as if operated and as if GT#1 94.62%
event April-June 99 did not occur=
- ----------------------------------------------------- -----------------------------------------------------
</TABLE>
<TABLE>
Totals Thru Sept.
- -------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
1999 Avg. 55.28% 1999 Total Steam 475,946
Monthly Net Cap. Sold, K-lbs
Factor=
- -------------------------------------------------- --------------------------------------------------
1999 Avg. 1999 Total Fuel
Monthly Station 81.18% input, MMBtu 2,515,144
Availability= (LHV)
- -------------------------------------------------- --------------------------------------------------
1999 Avg. Net
Monthly Cap. 1999 Total Fuel
Factor w/ credit 79.98% input, MMBtu 2,789.043
for Reserve (HHV) Approx.
Hours as if
operated=
- -------------------------------------------------- --------------------------------------------------
1999 Total Power
Sales, MW-h 290,273
--------------------------------------------------
- -------------------------------------------------- --------------------------------------------------
1996 thru Sep. 1999 Average
1999 Avg. 94.47% Heat Rate
Monthly Station (unadjusted), 9,755
Availability= Btu/kWh (LHV)
- -------------------------------------------------- --------------------------------------------------
- -------------------------------------------------- --------------------------------------------------
1996 thru Sep. 1999 Average
1999 Avg. Heat Rate 10,817
Monthly Station 83.02% (unadjusted)
Net Capacity Btu/kWh (HHV)
Factor=
- -------------------------------------------------- --------------------------------------------------
</TABLE>
Figure 4-1
Sheet 4 of 4
<PAGE>
[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
SECTION 5. ENVIRONMENTAL REVIEW AND PERMITTING
Stone & Webster reviewed the environmental permit conditions, compliance status,
site contamination issues and other pertinent environmental aspects of the
Project and the Steam Plant. This review was based upon a number of
environmental documents, which were provided to Stone & Webster for this
purpose. Stone & Webster also conducted telephone interviews of Project
personnel. However, Stone & Webster did not conduct an environmental site
reconnaissance or interview environmental regulatory agency personnel. At this
time, Stone & Webster does not believe additional site visits or agency
personnel interviews are warranted.
5.1. Permit Status
The Project and the Steam Plant facilities hold the following environmental
permits, applications and certificates:
. (Draft) Title V Application for the Project Orange Cogeneration Facility
and the Syracuse University Steam Station, submitted to the New York State
Department of Environmental Conservation ("NYSDEC") and the United States
Environmental Protection Agency ("USEPA") on March 28, 1997, issue pending,
expiration date pending.
. Certificate to Operate No. 7-3115-00204 for the SUSS, issued by the NYSDEC
on October 3, 1989, expiration date September 30, 1994.
. Certificate to Operate/PSD Permit No. 7-3115-00229/00003 for the Project,
issued by the NYSDEC on December 1, 1993, modified on July 12, 1994,
expiration date December 1, 1998.
. Industrial Wastewater Discharge Permit No. 125 for the Steam Plant, issued
by the Onondaga County Department of Drainage and Sanitation ("OCDDS") on
July 1, 1998, revised on January 20, 1999, expiration date July 1, 2001.
. Industrial Wastewater Discharge Permit No. 140 for the Project, issued by
the OCDDS on November 8, 1998, expiration date November 8, 2001.
. NYSDEC/USEPA Resource Conservation and Recovery Act ("RCRA") Hazardous
Waste Registration No. NY987016136. [Note: A copy of this registration was
not provided to Stone & Webster for our review and comment, although a copy
of the EPA's acknowledgement of said registration was.]
. Hazardous Substance Bulk Storage Registration Certificate No. 7-000152 for
Tank No. 001 at the Steam Plant, issued by the NYSDEC on April 29, 1999,
expiration date July 18, 2001. This permit covers the 1,500 gallon sulfuric
acid tank at the Steam Plant.
. Hazardous Substance Bulk Storage Registration Certificate No. 7-000230 for
Aboveground Storage Tank ("AST") Nos. T-100 and T-200 at the Project,
issued by the NYSDEC on February 27, 1998, expiration date April 29, 2000.
This permit covers the 7,000 gallon acid tank and the 7,000 gallon caustic
tank at the Project.
5-1
<PAGE>
. Petroleum Bulk Storage Registration Certificate No. 7-180602 for
Underground Storage Tank ("UST") Nos. 005 through 006 and AST No. 009 at
the Steam Plant, issued by the NYSDEC on July 8, 1997, expiration date June
18, 2002. This permit covers the 30,000 gallon USTs used to store No. 2
Fuel Oil at the Steam Plant, which is used as back-up fuel for the Steam
Plant, and the 275 gallon AST at the Steam Plant which was used to store
oil recovered from the subsurface oil recovery system.
. Permit No. 33127 for a gas transmission pipeline located at Route 173 in
Onondaga County, issued by the New York State Department of Transportation
("NYSDOT"), issued on November 1, 1993 and renewable annually, thereafter.
. Permit No. 33128 for a gas transmission pipeline located at Route 481 in
Onondaga County, issued by the NYSDOT on August 1, 1994 and renewable
annually, thereafter.
. Permit No. 33129 for a gas transmission pipeline located on the East Side
of Almond Street in Onondaga County, issued by the NYSDOT on August 1, 1994
and renewable annually, thereafter.
. Permit No. 33130 for a gas transmission pipeline located on the East Side
of Almond Street, the south side of Taylor Street, and Burt Street to
Jefferson Street in Onondaga County, issued by the NYSDOT on August 1, 1994
and renewable annually, thereafter.
. Permit No. 1276 for gas pipeline occupancy located at Sentinel Heights
Road, LaFayette Road and Rock Cut Road in Sentinel Heights in Onondaga
County, issued by the Onondaga County Department of Transportation
("OCDOT") on December 12, 1990 and renewable annually, thereafter
Comments specific to these permits are provided in the following sections.
5.2. Air Emissions
The Title V Permit was issued in draft form and has already undergone the 30-day
review period. As of August 3, 1999, the draft permit is undergoing review by
USEPA. Pending USEPA review, the permit will be approved and returned to the
NYSDEC for issuance. The Title V Permit will be a total site emission permit,
incorporating both the Project and the Steam Plant. This arrangement was
provided at the request of Syracuse University, with Orange LP managing the
permit. The Title V Permit, once issued, will render the two separate operating
permits previously issued for the Project and the Steam Plant null and void.
The operating permit for the Project expired on December 1, 1998. However, due
to the pending Title V Permit and the submittal of the Title V Permit
application, the Project is shielded and continues to operate under this permit.
The operating permit for the Steam Plant expired on September 30, 1994. However,
per agreement between the Project and the New York State Department of
Environmental Protection ("NYSDEP"), the permit was extended until May 15, 2001
or until the Title V Permit is issued, whichever occurs first, as represented to
be documented in a letter dated April 21, 1996 from George Danskin, Chief Permit
Administrator, NYSDEC.
Stone & Webster reviewed a copy of the draft Title V Permit Application and
noted that the heat input and emission limits specified therein were the same as
the inputs and limits specified in the NYSDEC operating permits for the GTs,
duct burners and boilers. In addition, Stone & Webster noted that the GTs, duct
burners and boilers are all permitted for operation 24 hours per day, 365 days
per year, although the boilers are technically identified as "back-up" units to
be used only when the GTs are out of service or during
5-2
<PAGE>
periods of high steam demand.
Although the issue of the Title V Permit Application submitted to Stone &
Webster is supposedly a "final" draft, Stone & Webster noted several minor
errors, which we assume will be corrected in the final permit. For instance, the
application states that both water injection and SCR are used on the GTs for the
control of NO\\x\\, whereas it is our understanding that steam injection is the
only control technology used for the control of NO\\x\\ on these units. The
addition of a SCR would add to any capital expenditure outlined in the Financial
Projections. In addition, none of the fuel oil storage tanks are listed.
Stone & Webster noted that the permits for these units limit the emission of
SO\\2\\ by limiting the concentration of sulfur in fuel oil to 2 percent by
weight. Stone & Webster reviewed an analysis of fuel oil for the Steam Plant and
noted that the sulfur content was 0.067 percent sulfur, which is well under the
limit.
Stone & Webster reviewed emissions monitoring reports for 1997, 1998 and 1999 to
date and determined that both the Project and the Steam Plant are operating
substantially in compliance with their air permit conditions and there are no
gross violations or pending compliance actions noted. Accordingly, Stone &
Webster believes that these facilities should be capable of continuing to
operate in compliance with their air permit conditions without constraint upon
their normal operating conditions through the year 2001. After the year 2001,
elements of the NO\\x\\ Budget Rule and the Acid Rain Program may affect current
operations as discussed below.
The Steam Plant is not subject to either the NO\\x\\ Budget Rule or Acid Rain
Program, because (i) its heat input rate is less than 250 MMBtu/h and (ii) it
does not generate electricity.
The Project is not currently subject to the Acid Rain Program, because (i) its
Power Purchase Agreement was signed prior to November 15, 1990 and (ii) it is a
"Qualifying Facility" ("QF") as defined by the Federal Power Act. A QF is a
facility that recovers a certain percentage of its heat input in the form of
"other services" (such as steam) and/or additional electrical generation
capacity (i.e., a combined cycle combustion turbine facility could be a QF,
whereas a simple cycle combustion turbine facility could not). If, for some
reason, the Project were to stop producing steam for sale to the University,
then the Project would lose its QF status. In that case, however, the Project
would still be exempt from the Acid Rain Regulatory Program, since its only fuel
is natural gas with a sulfur content less than 0.05 percent by weight.
However, the Project is subject to the NO\\x\\ Budget Rule program, which
addresses the production of NO\\x\\ (a precursor to the formation of atmospheric
ozone), during the ozone season, which runs from May 1 through September 30 of
each year. According to Orange LP environmental personnel, the Project's current
allocation of NO\\x\\ (600 tons per year) is equivalent to its permitted
potential to emit; i.e., the Project could run at 100 percent of its capacity
throughout the entire ozone season without exceeding its NO\\x\\ allocation.
This NO\\x\\ allocation is valid through December 31, 2001.
During 2001, the NYSDEC will decide how much NO\\x\\ the airshed can handle. If
this amount is less than the total amount allocated, then the NYSDEC will have
to reduce individual facility allocations in order to reduce the total amount of
NO\\x\\ to an amount which the NYSDEC believes the airshed can handle.
Theoretically, this reallocation will be based on how much NO\\x\\ each facility
emitted during 2001.
Information provided to Stone & Webster for 1996-1998 indicates that the Project
emitted approximately 300 tons per year or approximately one-half its
permitted/allocated limit for each of those years, while operating at greater
than 90 percent of its operating capacity. Accordingly, the NYSDEC could reduce
the
5-3
<PAGE>
Project's NO\\x\\ allocation for the year 2002 by as much as 50 percent without
significantly affecting the continued operation of the Project.
Stone & Webster does not anticipate that the NYSDEC would reduce the Project's
NO\\x\\ allocation significantly below 300 tons of NO\\x\\ per year. However,
Stone & Webster did consider a "worst case" scenario wherein the NYSDEC reduced
the Project's NO\\x\\ allocation to an amount equivalent to what a similar
facility equipped with selective catalytic reduction (SCR) emissions control
equipment would emit (i.e., approximately 100 tons of NO\\x\\ per year, or 200
tons of NO\\x\\ per year less than what the Project is currently emitting).
In the event of this "worst case" scenario, the Project would have to install
additional emissions control equipment (SCR) to reduce its NO\\x\\ generation
rate or purchase approximately 200 tons per year of NO\\x\\ emission reduction
credits ("ERCs") on the open market in order to sustain its current generation
rate.
The Project has estimated the installed cost of SCR at $4 million, plus annual
operating costs. Alternatively, the Project has estimated the cost of NO\\x\\
ERCs at $1,000 per ton per year), which would amount to an additional operating
cost of $200,000 (with no capital expenditures). Based on Stone & Webster's
experience on projects in this and other airsheds, this NO\\x\\ ERC cost appears
representative of current NO\\x\\ ERC costs. However, Stone & Webster notes that
the NO\\x\\ ERC market is very volatile at this time, and the cost of NO\\x\\
ERCs in the year 2002 is subject to considerable speculation.
At this time, the Project does not plan to install SCR or other additional
emission controls, because (i) it is not likely that significant NO\\x\\
reductions will be required and (ii) it would be more cost effective to purchase
NO\\x\\ emission reduction credits on an "as needed" basis than to retrofit the
facility with SCR.
5.3. Wastewater Discharge
Industrial Wastewater Discharge Permit No. 125 is the industrial wastewater
pretreatment permit for the Steam Plant. Wastewater is discharged from the site
to a local publicly owned treatment works ("POTW") that is operated by the
OCDDS. This permit is issued to the University and managed by Orange LP.
Industrial Wastewater Discharge Permit No. 140 is the industrial wastewater
pretreatment permit for the Project. Wastewater is discharge from the site to a
local POTW operated by the OCDDS. Stone & Webster reviewed copies of these
permits and found the discharge limitations and other permit conditions to be
reasonable and appropriate for the situation.
Stone & Webster reviewed copies of the self-monitoring reports for the Project.
These reports indicate that the Project is operating in compliance with its
wastewater discharge permit limitations without constraint on normal operating
conditions. However, there have been some permit exceedances (low pH) reported
for the Steam Plant. A compliance order was issued to the Steam Plant by the
OCDDS on May 30, 1997 concerning a low pH excursion caused by inadvertent
draining of a vessel to the sewer by a contractor. In response to this
violation, a "Slug Discharge Control Plan" was prepared and implemented for the
Steam Plant. Since that time, there have been other low pH excursions, although
none of these excursions resulted in violation notices. In response to these
excursions, a new pH neutralization system was installed during the first
quarter of 1999. However, the Project staff report that this new system is
limited by flow rate. Accordingly, a revision of the new system was designed and
was submitted to management for funding approval. The cost estimate for this
revision is approximately $40,000. Stone & Webster has reviewed a synopsis of
the revised design and finds it to be reasonable.
Stone & Webster also noted that a common Spill Prevention Control and
Countermeasure ("SPCC") Plan was compiled for both the Project and the Steam
Plant. A brief review of this plan indicates that it should
5-4
<PAGE>
be adequate for its intended purpose, although this plan is due for an update.
With the exception of pH, the self-monitoring reports indicate that the Steam
Plant is operating in compliance with its wastewater discharge permit
limitations without constraint on normal operating conditions.
5.4. Site Contamination Issues
Stone & Webster reviewed a number of environmental site assessments and
management audits for both the Project and the Steam Plant, most notably the
following:
. Environmental Liability Assessment of the Syracuse University Steam
Station, prepared for the Orange LP Project by The O'Brien & Gere
Companies, December 1989.
. Contaminated Soil Investigation and Remediation, Syracuse University Steam
Station, prepared for Syracuse University by Engineering-Science, June
1992.
The purpose of the O'Brien & Gere report was to document the potential presence
of any site contamination on the property proposed for the construction of the
Project. The purpose of the Engineering-Science report was to document the
remediation of soil contamination associated with a leaking underground storage
tank ("UST") at the Steam Plant.
According to the O'Brien & Gere report, the Alco Plant of the Steam Plant was
initially constructed in 1926. An addition to the Alco Plant was constructed in
the early 1960s, at approximately the same time that the Riley Plant of the
Steam Plant was constructed. Boilers at both the Alco and Riley Plants were
originally fired on coal with oil as back-up fuel, but were converted to gas
with oil as back-up fuel in the early 1970s. Records indicate that this area was
primarily residential for this entire period, with a few commercial operations
but no manufacturing or other heavy industry.
USTs were installed at the Steam Plant for the storage of fuel oil in the early
1950s, 1963 and 1970. All of these tanks were of carbon steel, single-wall
construction. These tanks were removed from service in 1986, 1987 and 1989. Four
new double-walled steel USTs were installed in 1989 to replace these tanks. The
new USTs are equipped with level and interstitial liquid detection systems that
alarm to the control room.
A passive subsurface oil recovery system was installed and put into operation in
1988. The site geology consists primarily of highly variable fill material
consisting of clay, silt, sand and medium gravel. Locally, groundwater typically
occurs under water table conditions at a depth of three to eight feet below land
surface, generally reflecting the topographic surface. Permeability of the soil
in the vicinity of the groundwater recovery system is considered low due to the
presence of clays and fine silts in the soil matrix. In addition, there are no
known groundwater wells used for drinking water purposes in the vicinity.
Several chemical substances are used during the normal course of operations at
both the Project and the Steam Plant. These chemicals are stored in ASTs or
drums. Designated locations have been established for the storage of full and
empty chemical containers. Management audit reports indicate that maintenance of
these areas is generally acceptable, with minor exceptions.
The only major spill incidents reported for the Project and the Steam Plant are
associated with the former USTs. As documented by the Engineering-Science
report, all contaminated soils associated with the former USTs were excavated
and removed from the site for disposal at an approved offsite facility.
5-5
<PAGE>
5.5. Other Environmental Issues
The Project personnel report that all oil-filled equipment containing PCBs have
been removed from the site. The O'Brien & Gere report notes that all station
transformers are labeled as PCB-free. The Project personnel and several of the
past environmental reports confirm that much of the insulating materials at the
Steam Plant are asbestos containing material ("ACM"), although a comprehensive
inventory of ACM has not been compiled. At this time, there are no plans for the
wholesale removal and replacement of ACM. Instead, a quarterly survey is
conducted to test for airborne asbestos and document the condition of all
insulating materials. Worker training in the recognition and handling of ACM is
also conducted. ACM is periodically removed on an "as exposed" basis, only.
Stone & Webster notes that this is a common, acceptable practice.
Lead-based paint is also known to be present, although a comprehensive inventory
for it has not been compiled, either. As with asbestos, a quarterly survey is
conducted to test for airborne lead, and workers are trained in the recognition
and handling of lead-based paint and other wastes. Lead-based paint is
periodically removed on an "as exposed" basis, only. Stone & Webster notes that
this is a common, acceptable practice.
Stone & Webster noted that noise propagation by the Project is limited by its
permit to 45 dBA at a distance of 600 feet. Orange LP provided Stone & Webster
with a noise measurement and survey report (c. 1994), which indicated that
Orange LP is able to comply with this requirement.
5-6
<PAGE>
[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
SECTION 6. OPERATION AND MAINTENANCE
6.1. Site Visit
Stone & Webster visited the Project plant on September 16 & 17, 1999. The
purpose of the brief visit was to observe the station in a normal operating mode
and to interview key station personnel. The Project equipment was operating
during both days and two of the existing plant 150 psig boilers were in hot
standby for immediate operation if required. The number 2 unit was operating
with the original GT and the number 1 unit was operating with the GE dedicated
spare engine while the original engine was out for a scheduled 50,000 hour
overhaul following a failure event which occurred on April 16, 1999 after having
accumulating approximately 43,000 hours. The Project and the University boilers
were visually inspected during a tour conducted by the Project plant manager.
The Project is very clean and has the appearance of a well-maintained facility.
The University boilers, despite the age of the plants, have few leaks and
minimal corrosion problems. In general, plant preservation is excellent. The
University boilers appeared to be in good condition despite over forty years of
operation. They did not appear to have been over stressed during previous coal
operation or recent alternate fuel operation. The Alco boilers control system is
upgraded to state of the art electronic controls. This system replaced a high
maintenance and less reliable pneumatic control system. The University boilers's
1000 kW steam turbine was not in use but was reported to be operable for a
station black start of the University boiler and steam systems. One of the Alco
350 psig boiler, steam turbine driven feed pumps was not operable, but the two
motor driven feed pumps which are operable are adequate for reliable operation.
The HRSGs did not appear to have any signs of thermal or mechanical distress or
visible hot spots. Thermography recently conducted identified two manhole access
covers that have hot gas leakage. This problem is minor and correction is
planned for the next outage. The HRSG associated vibration was low as compared
to similar plants. The HRSGs have had problems with failure of intermediate and
HP economizer tubes in the past. During this visit, the IP economizer tubes were
bypassed to prevent failure of high-pressure economizer tubes and as of our
visit, no final resolution was made on this problem. Piping and support systems
are, in general, designed to allow easy maintenance of most equipment. A new
neutralization system is installed in the existing facility to eliminate past
problems with pH exceedences. The new design has proved to be not adequate for
the volume of water that needs to be processed under all conditions. As a
result, an additional neutralization tank is planned to be added to resolve this
issue.
The HRSG feed pumps and feed water regulating valves have been susceptible to
erosion problems in the past years. The feed water regulating valves have been
replaced with stainless steel valves. This change is expected to eliminate the
valve erosion problem. The feed pumps, however, are likely to continue to be
high maintenance pumps. The pumps are apparently operating much nearer to their
minimum flow point was than was originally anticipated and as a result their
availability has been adversely affected.
Some areas of the Project in the HRSG building do not have adequate platforms
for safe operation and maintenance. For example, on the upper level, maintenance
of one HP boiler sight glass and the duct burner instrumentation is difficult
without exposing employees to the risk of falling. Operation and maintenance of
various valves in the middle and upper levels requires walking on piping
insulation with full body harness and lanyards and with a high fall risk.
Operation of valves on both GT steam injection skids is also a high fall risk
area. These concerns could add to the cost of insurance by the Project
underwriters.
The GT and generator compartments were clean as viewed through viewing windows.
The modules had a
6-1
<PAGE>
minimum of oil deposition, less than observed at several other facilities. The
GT vibration levels were well within normal vibration limits. The Project was
stable and alarm free during our visit. The lease engine was being operated at a
slightly reduced load due to it exhibiting a slightly elevated oil temperature
in one sump and the operators did not want to approach an alarm point on the
lease engine oil temperature. The engine performance of both machines appeared
to be good.
The various pumps and instrumentation in outside areas appeared to be in good
condition. The equipment appeared to have adequate insulation to minimize
potential freezing problems during severe weather.
The electrical equipment areas were very clean and dry. Key electrical relays
had been tested within the past year. The station transformers did not have any
visible oil leakage and the high voltage bushings were clean. The station
batteries were clean and well maintained. The DCS battery is new this year and
the station service batteries are scheduled for replacement in November 1999.
Appropriate maintenance appears to have been provided for this equipment
including replacement of older components. Stone & Webster believes that the
electrical equipment will provide service meeting the availability projections
in the Financial Projections.
The control room has a good overall layout that affords the operator a view of
all the necessary plant information. The Project has installed a new Y2K
compliant DCS. This is an excellent user-friendly system. A new continuous
emissions monitoring system has recently been installed to monitor both HRSG
stacks independently. This replaced a less reliable system that monitored both
stacks on an alternating basis.
6.2. Asset Management Capabilities
The Sponsors plan to engage NMEM for the overall asset management for the
Project. NMEM is a wholly owned subsidiary of Niagara Mohawk Energy, Inc. and
its primary businesses are the sale of energy commodities at both the retail and
wholesale levels, and the provision of energy related services to end-users,
generation asset owners and retail aggregators. NMEM and its employees possess a
wide range of generation asset management talent and experience that can be
effectively used to manage the Project successfully. The Sponsors and NMEM
should provide effective direction for GECS.
6.3. O&M Capabilities
GECS and the former Stewart & Stevenson Operations Inc., which was merged into
GECS have vast experience in the operation of many gas turbine power plants
worldwide. GECS currently operates three facilities which use the GE LM5000 gas
turbine engine and at these three facilities there are a total of four GE LM5000
gas turbine engines. The Project personnel have the advantage of this experience
for operational guidance and problem resolution. The Project also has immediate
access to a substantial inventory of spare parts located around the U.S, but as
stated previously the availability of parts specifically for the GE LM5000 gas
turbine should be investigated and reviewed more closely, due to this engine no
longer being in production at GE and the delay experienced earlier this year in
locating a spare engine. Currently, a dedicated spare engine for the Project and
one other facility in addition to participation in the LM5000 Lease Engine
Program is the best mitigation measure which Stone & Webster is aware of to
address this situation going forward. GECS through its parent company
affiliation has substantial resources to provide prompt specialized technical
support to resolve problems with the Project operation and maintenance should
special needs arise and should GECS reasonably believe these resources would
benefit the Project or should the Sponsors reasonably request such services.
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6.4. Organizational Structure
The staffing level of the Project is good compared to like facilities. In
addition to the eight plant operators, the Project normally has two Instrument &
Controls technicians and four plant mechanics. The Project is short one mechanic
as of the date of our site visit. One mechanic is trained on similar engines. No
pending reorganization of the staffing for the Project related to this
acquisition was identified to Stone & Webster or apparent from the review of the
documentation provided.
Two of the Project supervisors were interviewed during the visit and they were
both knowledgeable of the Project operation.
6.5. O&M Procedures
The Project operators are provided a combination of procedures, guidelines and
check lists for operation of the Project systems and overall plant operation.
The guidelines are short, user-friendly and adequate for operators familiar with
the operation of the various plant systems. The Project uses procedures from
vendor manuals for maintenance.
6.6. Maintenance Management
The Project has a full time maintenance manager responsible for maintenance
planning and scheduling, inventory control and spare parts procurement. The
Project uses a software program "GP Mate" for the scheduling of all preventative
and corrective maintenance. The program generates work orders for scheduled
corrective and preventative maintenance and provides a historical record of past
maintenance. The program is easy to use and well liked by the Project
maintenance manager. The system appears to be adequate and typical of current
computer based maintenance scheduling and tracking software tools. Provided this
tool or one similar to it is properly used to schedule and track the maintenance
of the Project, the maintenance management should be adequate for the Project to
support the availability targets anticipated in the Financial Projections.
The Project is using a combination of predictive and preventative maintenance.
The GT maintenance is based on engine time while other maintenance, such as
boiler inspections and protective relay testing is conducted annually.
Predictive maintenance is in place to monitor equipment vibration. This is
accomplished using an IRD 890 analyzer and associated software. The software is
valuable to define the cause of vibration and severity. The Project also has an
extensive oil analysis program. The Project is using thermography for early
identification of potential problems with electrical equipment and the HRSG
insulation. These types of activities are indicative of a well-maintained
facility and should enhance the probability of achieving the availability
targets forecasted in the Financial Projections.
The Project has conducted nondestructive testing of the HRSG, deaerator vessels,
feed piping and LP drum piping. This testing was started in 1995 to track wear
of key components most susceptible to corrosion and is considered by Stone &
Webster to be a proactive approach to maintenance which should support the
overall availability targets in the Financial Projections.
A formal life extension program has not been reported on the existing University
boiler vessels and piping but should be considered to improve the probability of
maintaining the availability targets in the Financial Projections.
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6.7. Conclusions
The Project's history on GT forced outages is good from October 1995 to April
1999. This is a key indication that attention to detail on the LM5000 PC STIG
has been a focus over the years. The forced outage hours are calculated by unit
and the HRSG tube leaks have contributed to the forced outage hours. The bypass
operation of the IP economizer tubes should provide reliable operation and
reduce the forced outage hours. This bypass operation does result in a small
increase in heat rate (the exact amount has not been determined in the data
provided). However, it was stated the economizer only has seven tubes. This
small number of tubes would make a change in heat rate difficult to determine.
The failure of the compressor blade on GT #1, engine 474-157, combined with the
inability of GECS to provide a lease engine has made 1999 a high forced outage
year. This compressor blade failure event is not uncommon to the fleet of LM5000
gas turbine engines. The root cause may never be determined. In the past, GE
engineering has stated that the most common causes are a fixed blade off
schedule (wrong angle) or foreign object damage. Considering the past success of
maintenance, attention to detail, and expertise on staff at the time makes both
general common causes unlikely. The best policy to mitigate the repair issues
related to the LM5000 gas turbine engines is the continued participation in the
LM5000 Lease Engine Program and continuing the shared access to the spare engine
owned by GECS for the Project and the other LM5000 gas turbine facility operated
by GECS. The fees for the continued participation in the LM5000 Lease Engine
Program are reflected in the Financial Projections.
It is recommended that the adequacy of platforms be reviewed and additions be
made to minimize the risk of operations and maintenance personnel to injury.
The Project plant manager has developed an excellent Y2K contingency plan for
the loss of all utility services. The plan will ensure the reliable continuation
of steam, vital to many facilities in the area.
In summary and excepting the minor items noted, the Project has few maintenance
problems and is a well managed facility that should support achieving the
availability targets used in the Financial Projections. The addition of NMEM as
the asset manager for the Project should provide experienced, high-level
oversight management to the overall operation of the Project.
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SECTION 7. PROJECT AGREEMENTS AND CONTRACTS
Stone & Webster reviewed the principal contracts and agreements associated with
this Project. These documents were reviewed from a technical standpoint to
assess the adequacy and reasonableness of their terms and conditions. To the
extent possible, they were compared to contracts and agreements for similar
projects. Adherence to industry standards and/or good engineering practices were
also assessed where appropriate. The technical review included a commercial and
economic prospective but did not address other non-technical matters such as
legal issues.
7.1. Power Put Agreement
The Power Put Agreement ("Put Agreement") reviewed by Stone & Webster is dated
April 30, 1998 and we understand was executed as of June 30, 1998. The Put
Agreement is effectively backdated to September 19, 1986, and replaces in its
entirety the previous agreements between Orange LP and Niagara Mohawk
(collectively, the "Parties").
The Put Agreement is a result of the Parties and several other independent power
producers ("IPPs") entering into a Master Restructuring Agreement dated July 9,
1997 ("MRA"), in which the IPPs agreed to amend, restate or terminate each of
their existing Power Purchase Agreements ("PPA") with Niagara Mohawk pursuant to
the MRA and the introduction of competition in the wholesale and retail
electricity markets in New York. The Parties agreed to amend and restate their
PPA so that it will consist only of the Put Agreement and the International Swap
Dealers Associates Inc. Master Agreement dated June 30, 1998 (the "Swap
Agreement") which the Parties entered into pursuant to the MRA. The Parties
further acknowledge that they desire to amend the Interconnection Agreement
between Niagra Mohawk and Orange LP dated January 13, 1999 (the "Interconnection
Agreement") in which Niagara Mohawk owns certain interconnection facilities that
are connected to Orange LP's plant, and that are owned and operated in
accordance with the Interconnection Agreement.
As of June 30, 1998, the existing PPA was amended and restated in its entirety
to consist of the Put Agreement and the Swap Agreement. The effective term of
the Put Agreement expires at the end of the Proxy Market Price/2/ period, or at
the end of ten contract years, whichever comes first. The effective term of the
Swap Agreement is through June 30, 2008 or nine months after the scheduled date
of maturity of the Notes.
Under the Put Agreement, Orange LP has the option to put electrical energy to
Niagara Mohawk up to a specified quantity, nominally 663,000 MWh +5 percent (the
"Notional Quantity"), and capacity annually, both subject to seasonal variations
and degradations as well as applicable monthly and hourly thresholds. Niagara
Mohawk is obligated to take-and-pay for all energy and capacity provided by
Orange LP at the Proxy Market Price or the Market Price, and, if applicable, the
Market Capacity Price. The energy and associated capacity in excess of the
Notional Quantity is not subject to the Put Agreement and Orange LP may sell
this excess energy to third parties without an obligation to offer such energy
and capacity to Niagara Mohawk. Orange LP can put energy and capacity to Niagara
Mohawk for periods ranging from a
______________
/2/ Capitalized terms used herein, but not defined herein are intended to have
the defined meaning ascribed to them by the documents to which they relate.
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minimum of one hour to a maximum period of one month. The Put Agreement outlines
the provision for notice by both Orange LP and Niagara Mohawk with respect to
approving all energy puts under this Put Agreement.
If Orange LP chooses not to exercise its right to put energy and capacity to
Niagara Mohawk, then Orange LP may sell energy and capacity associated with the
interval quantity or the contract quantity of electricity as set forth in
Attachment A of the Put Agreement to third parties, provided specifically with
respect to the contract quantity, the Project first offers to sell the energy
and capacity to Niagara Mohawk at the Proxy Market Price or the Market Price,
whichever is applicable, and the Market Capacity Price, if also applicable, and
Niagara Mohawk declines the opportunity to purchase both the energy and the
capacity. Applicable notice periods are again provided for Orange LP to notify
Niagara Mohawk such that Niagara Mohawk can re-notify Orange LP if they choose
not to exercise Niagara Mohawk's first right of refusal.
The Put Agreement hedges Orange LP against any increases or decreases in pricing
associated with the Notional Quantity. Changes in federal, state and local laws
are only effective during the Proxy Market Price Period, and any period
afterwards during which adjustments in costs are recovered by Niagara Mohawk for
its non-nuclear generating assets.
When exercising its option under the Put Agreement, Orange LP is obligated to
deliver electricity at approximately 115,000 volts, 60 hertz and 3 phase. The
electrical interconnection between Niagara Mohawk and Orange LP's plant must
meet the requirements of Niagara Mohawk Electric System Bulletin Number 756
dated December 1997, including the exceptions and clarifications, if applicable,
or the standards of the New York Independent System Operator and Power Exchange
("ISO/PE"). Orange LP must deliver the electricity to the delivery point which
is defined as the receiving point as set forth in the Interconnection Agreement.
Niagara Mohawk is obligated to accept and pay for the electricity put to it by
Orange LP, but may from time to time suspend, for reasons necessary to maintain
and repair its system and subject to certain limits, the delivery of that
electricity. If Niagara Mohawk asks Orange LP to disconnect from the system,
then Niagara Mohawk is obligated to pay any cost incurred with respect to that
disconnection and the reconnection. Also, all of the power deliveries which were
subject to this suspension may be rescheduled at the option of Orange LP. Orange
LP has the right to shut down the operation of its plant for any reason and for
any period whatsoever upon reasonable notice to Niagara Mohawk. Such
disconnection will be at the cost of Orange LP for the disconnection and
reconnection.
Electricity delivered by Orange LP will be measured by meters of a design
approved by the New York State Public Service Commission (the "Commission").
Those meters are located in the Project but will be installed, owned and
maintained by Niagara Mohawk. The cost of the meter and the installation are
paid for by Orange LP. In addition, Orange LP shall install, own and maintain
the portion of its interconnection to Niagara Mohawk's transmission system that
includes as a minimum the generator output leads, the generator step-up
transformer, and the 115 kV tap, together with the associated facilities. The
Interconnection Agreement shall remain in full force through the term of this
Put Agreement, unless the Parties terminate this Put Agreement.
Stone & Webster reviewed the technical portions of Force Majeure and believes
the obligations and responsibilities under those provisions are technically
reasonable and consistent with industry practice. Further we reviewed the
technical assumptions of the base case model and believe them to be technically
reasonable and similar to other projects with which we are familiar.
With regard to the evacuation of the electrical power from the Project, if
Niagara Mohawk determines it is
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necessary to retire or abandon its transmission system, which connects the
Project to the system, Niagara Mohawk will so notify Orange LP at least one year
in advance. Orange LP shall have the option of paying Niagara Mohawk for the
annual cost of maintenance of the transmission facilities, which are dedicated
explicitly to the output of the Project, or of providing an alternate
interconnection to Niagara Mohawk's transmission system. This alternative
interconnection facility may be satisfied by Orange LP purchasing Niagara
Mohawk's existing 115 kV facilities at the depreciated book cost or salvaged
value.
With respect to QF status, Niagara Mohawk has no right to question Orange LP's
status as a QF under state or federal law. Similarly, Orange LP has the right to
obtain and/or maintain its QF status under federal law. Niagara Mohawk's right
and obligation, including without limitation, its obligation to pay for
electricity shall continue as a matter of contractual right regardless of
whether or not Orange LP maintains its QF status. Any failure of Orange LP to
comply with applicable laws for QF status shall have no adverse impact on Orange
LP under this Put Agreement. If Orange LP chooses to qualify or perform as a
Exempt Wholesale Generator ("EWG") then Niagara Mohawk will cooperate and will
not take any action to oppose Orange LP's effort to obtain such appropriate
exemptions and approval, including Market Based Rate approval. Further, Orange
LP shall waive any statutory rights it may have under Section 66-c of NYPSL to
which Orange LP may demand a $.06 per kWh minimum power purchase rate from
Niagara Mohawk and any statutory right it may have under PURPA or NYPSL to
require Niagara Mohawk to enter into a PPA or otherwise to take the output of
Orange LP's plant. Niagara Mohawk agrees to act as the agent for Orange LP until
the end of the Proxy Market Price Period for the sale on up to a monthly basis
of Orange LP's plant capacity and energy to the New York Power Pool or any other
third party at no cost to Orange LP.
Orange LP also has the right to have Niagara Mohawk wheel some or all of the
output of the Project at Niagara Mohawk's duly filed transmission and
distribution tariffs and schedule.
Proxy Market Price means (i) prior to the establishment of the ISO/PE, Niagara
Mohawk's short term avoided and capacity cost at the transmission voltage level
of Orange LP's plant plus busbar and the location of the delivery point as
stated in its tariff approved by the Commission for the purchase of power from
PURPA qualifying facilities which tariff is currently designated as S.C.-6, as
the same may be in effect from time to time, or any successor tariff thereof or
such other price as may be agreed upon by Orange LP and Niagara Mohawk, and (ii)
on the first day of the month following the calendar month in which the ISO/PE
is established, the Market Price and, if applicable, the Market Capacity Price.
Further, the Proxy Market Price shall never be reduced or offset by any cost
that Niagara Mohawk may incur, including cost for ancillary services,
transmission services, or transition costs (or stranded costs).
7.2. The International Swap Dealer Association, Incorporated, Master Agreement
In the Swap Agreement reviewed by Stone & Webster, the Parties have entered
into, and/or committed to enter, several related and ancillary agreements that
are, or will be, governed by this Swap Agreement. The Swap Agreement includes
the letter agreements with the schedules and other documentation (formally
called "Confirmation") that are exchanged between the parties to confirm the
various transactions / agreements. The schedules include mechanisms for indexing
the Contract Price paid on an annual basis and other schedules that include the
contract quantity prior to the Proxy Market Period and contract quantities
provided for years following the Proxy Market Period.
The letter agreement between the Parties, Confirmation dated June 30, 1998,
confirms the term and the condition of the transaction between the respective
Parties. This Confirmation dated June 30, 1998 also presents the payment
obligation of the two Parties and further explains the Swap Agreement. Niagara
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Mohawk is obligated to pay Orange LP the sum of the accrued and unpaid Fixed
Payments from and including the Interval commencing at midnight immediately
preceding June 30, 1998, and Orange LP is obligated to pay Niagara Mohawk the
sum of the accrued and unpaid Floating Payments. Such payment obligations shall
be paid on a netting basis as governed by Section 2(c) of the Swap Agreement.
The Fixed Payment Obligation to be satisfied by Niagara Mohawk is defined as the
amount for each Interval equal to Niagara Mohawk's payment obligation for the
current Interval. The Niagara Mohawk payment obligation is further defined to
mean the amount equal to the product of the Notional Quantity of electricity
provided during the applicable Interval multiplied by the Contract Price or the
Indexed Contract Price applicable to such Interval. This Notional Quantity of
electricity is the sum of the contract quantity of electricity expressed in
megawatt hours for each hour or fraction of an hour for which Orange LP and
Niagara Mohawk are contractually committed. The Floating Payment to be paid by
Orange LP to Niagara Mohawk is equal to the sum of (i) the IPP Payment
Obligation for the current Interval and (ii) if applicable, the Market Capacity
Price in dollar per MW multiplied by the weighted average capacity associated
with the Notional Quantity of electricity for each Interval. The IPP Payment
Obligation is further defined as the amount equal to the product of the Notional
Quantity of electricity provided during the applicable Interval multiplied by
the Proxy Market Price, or the Market Price as the case may be applicable to
such Interval. The Market Price means for any Interval beginning on the first
day of the month following the calendar month in which the ISO/PE is enacted,
the day-ahead Locational Based Market Price ("LBMP") paid to Orange LP of energy
in the region located where the Project exists and is specified and published by
the ISO/PE. However, the Parties shall conduct good faith negotiations and
diligently endeavor to mutually determine whether to continue the pricing
referred to in Clause 1 of the definition of Proxy Market Price or mutually
agree upon additional period of time. The Proxy Market Price shall mean for any
interval (i) prior to and until the ISO/PE establishment, is Niagara Mohawk's
short-term avoided energy and capacity cost at the voltage level of the
Project's busbar as stated in Niagara Mohawk's tariff approved by the New York
Public Service Commission ("PSC") providing for the purchased power from PURPA
qualifying facilities which tariff is currently designated as S.C.-6, as the
same may be in effect from time-to-time or any successive tariff agreed upon
between Niagara Mohawk and Orange LP regardless of whether or not QF status is
maintained, (ii) after the ISO/PE establishment date, the Market Price, and if
applicable the Market Capacity Price upon which the parties have negotiated in
good faith. The Proxy Market Price shall not be reduced or offset by any cost
that Niagara Mohawk may incur including the cost for ancillary services,
transmission services or transition cost.
The Swap Agreement functions as a financial hedge against movements in the price
of electricity. Under the Swap Agreement, Niagara Mohawk will be required to
make certain monthly fixed payments to Orange LP amounting to an indexed annual
price per MWh ($54.62/MWh for the current annual period ending June 30, 2000)
multiplied by the applicable notional quantity of electricity for each hourly
interval during such month (which aggregates, on an annual basis, to the
Notional Quantity). On each payment date, such monthly fixed payment will be
netted against a monthly floating payment that Orange LP is obligated to pay to
Niagara Mohawk. The monthly floating payment under the Swap Agreement will equal
the price for sales of energy and capacity made to Niagara Mohawk under the Put
Agreement, multiplied by the applicable notional quantity of energy and the
capacity associated with such notional quantity, as applicable, for each hourly
interval during such month, until Orange LP's right to sell energy and capacity
to Niagara Mohawk terminates. After that time, the floating payment will equal
the ISO/PE market price for sales of energy and, if applicable, the market
capacity price multiplied by the applicable notional quantity of energy and the
capacity associated with such notional quantity, as applicable, for each hourly
interval during such month.
The Confirmation also reiterates that Niagara Mohawk has no contractual rights
to demand information from Orange LP with respect to Orange LP's status as a QF
under state and/or federal law. Niagara
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Mohawk further acknowledges that Orange LP is not required to maintain a
generating facility pursuant to the terms hereof for the performance of its
obligations hereunder with respect to QF statusing. Orange LP has the right but
not the obligation to maintain its QF status. As part of this agreement, Orange
LP waives any rights it may have under Section 66-c of NYPSL pursuant to which
Orange LP may demand a $.06 per kWh minimum power purchase rate from Niagara
Mohawk. The Project further waives its statutory rights to require Niagara
Mohawk to enter into a Power Purchase Contract to take the output of the Project
provided however, that until the end of the Proxy Market Price Period, Niagara
Mohawk agrees to act as agent for Orange LP to purchase and resell Orange LP's
capacity and energy to the New York Power Pool or any other third party. These
particular points are also consistent with those terms in the Power Put
Agreement outlined in Section 7.1 above.
In summary, the effect of the Swap Agreement is a nominally fixed price purchase
obligation on the part of Niagara Mohawk for the Notional Quantity of
electricity regardless of whether the Project operates at all. The combined
effect of the Put Agreement and the Swap Agreement is a nominally fixed price
obligation on the part of Niagara Mohawk for the Notional Quantity of
electricity that requires the Project to produce up to the Notional Quantity of
electricity to receive the full net revenues available at the nominally fixed
price.
7.3. Gas Sale and Purchase Agreement
Stone & Webster reviewed the Gas Sale and Purchase Agreement between Orange LP
and Noranda Inc. ("Noranda") with Canadian Hunter Exploration as Agent dated
March 18, 1991 (the "Gas Agreement"). The Gas Agreement provides for the
purchase of up to 120 million MMBtu of natural gas during the term of the Gas
Agreement, which is for 20 years from the initial delivery date. This quantity
is called the maximum entitlement. The Project can draw up to 9 million MMBtu
annually and is projected to average drawing about 7 million MMBtu per year
during the remaining term of the Gas Agreement. The remaining unconsumed
entitlement balance was approximately 71 million MMBtu as of July 1999.
The gas was paid for in a lump sum payment of $88 million dollars as part of the
original financing of the Project. In addition to the lump sum payment, Orange
LP pays an operating fee of $0.3226 per MMBtu delivered and measured into the
NOVA pipeline system through December 31, 1990 after this date for the first 15
years of the Gas Agreement, the operating fee is escalated with inflation in the
United States. In the 16/th/ year, the operating fee will be the higher of the
previously escalated operating fee or the actual costs incurred by Noranda in
producing, gathering and processing natural gas as determined by Noranda's
independent chartered accountant utilized by Noranda for its annual audit of its
financial statements in accordance with generally accepted accounting
principals. In addition to the operating fee, Orange LP also pays the Canadian
royalty on the gas. The royalty payment is discussed later in this report.
Orange LP is also responsible for the transportation costs of delivering the gas
to the Project. We believe the terms of the agreement are reasonable and are
advantageous to Orange LP.
7.4. Steam Sales Agreement
Stone & Webster reviewed the Steam Contract between the University and Orange
LP. The contract is dated February 21, 1990 and is fully executed as of May 3,
1990. The contract is for 40 years and provides for Orange LP to sell to the
University all of its steam requirements up to 450,000 pounds per hour of steam.
The Project pays the University a fee for the use of the University's existing
steam generation facilities. The fee is as follows:
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Anniversary Dates Annual Payment
----------------- --------------
First through fifth $1
Sixth through fifteenth $1,250,000
Sixteenth through twentieth $1,350,000
Twenty-first through thirtieth $1,450,000
Thirty-first through thirty-ninth $1,550,000
and a final payment of $1,550,000 on the first day of the last month preceding
the expiration of the term. If the commercial operation date did not occur by
the Commencement Date or July 1, 1992 (as revised in December 31, 1990), the
payment on the 20/th/ anniversary is to be increased by $104,167 for each month
the Project was late in achieving commercial operations. The existing plant is
to be used only as an alternate or supplemental source of steam.
The University pays Orange LP a base price for steam of $4.27 per thousand
pounds of steam which is adjusted annually for the cost of natural gas (70
percent of the adjustment) and labor (30 percent of the adjustment). This price
is for the first fifteen years of operation. Starting in year 2008, the
University pays Orange LP a base price of steam of $2.13 per thousand pounds of
steam, which has also been adjusted since the first year for changes in the
price of natural gas and labor. The contract is technically reasonable, but the
commercial terms could prove to be burdensome once the Swap Agreement has
reached the end of its term, which is past the term of the Notes.
7.5. Operations and Maintenance Agreement
Stone & Webster reviewed the Operation and Maintenance Agreement between Orange
LP and GECS dated November 1, 1998. The term of the agreement is through April
1, 2008 unless the agreement is extended or terminated as provided in the
agreement. The agreement is a continuation of the original agreement that Orange
LP had with GE who had assigned the O&M responsibilities to Stewart & Stevenson
Operations Inc. ("SSOI"). When GE bought the turbine division of Stewart &
Stevenson, SSOI was part of that sale. This agreement continues the previous
agreement because of the absorption of SSOI into GE. The agreement calls for
GECS to operate and maintain the Project and leave the Project in the same
condition as on July 1, 1992 except for normal wear and tear and other normal
degradation.
The agreement is typical of O&M agreements we have reviewed. The O&M agreement
provides that GECS shall submit an Annual Operating Plan and Annual Budget 180
days before the end of the current operating year for review and approval by
Orange LP each year and Monthly Reports within 15 days of the end of the each
month. GECS is reimbursed for these costs. Major maintenance of the LM5000 PC
STIG engines is charged at $88 per fired hour, which is paid to GECS. GECS is
then responsible for performing the scheduled overhaul maintenance of the
engines. GECS is paid an annual spare parts fee of $50,000 and an annual
operating fee of $350,000. These fees increase with inflation on an annual
basis. The Project participates in the LM5000 Lease Engine Program, which
guarantees delivery of a spare engine to the Project site within 72 hours of the
request. Failure to meet this requirement can result in credits up to the full
annual fee amount for participation in the LM5000 Lease Engine Program as shown
by the events in the spring of 1999. The O&M agreement is not incentive or
penalty based. We believe the agreement is reasonable and typical of these
agreements. GECS is a capable operator and has demonstrated experience with the
Project.
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[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
SECTION 8. PROJECT ECONOMIC ANALYSIS
8.1. Overview
The Financial Projections consist of a financial pro forma model prepared by the
Sponsors. 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, and debt amortization
schedule, have been provided by the Sponsors. The Sponsors also provided market
projections for electricity and natural gas. The Project has very little
exposure to market prices for electricity and natural gas, but the price of
natural gas is a minor part of the escalator in the Swap Agreement. In addition,
there is a very minor difference between the megawatt-hours sold under the Put
Agreement and the megawatt-hours swapped in Swap Agreement which in turn use the
market prices for electricity to calculate the dollar amounts involved in the
swap. This produces an almost negligible exposure to market electricity prices.
In the spreadsheet model used to create the Financial Projections, the prices
for electrical energy are input as nominal dollar projections. The O&M expenses
which are based historical information and the recently executed O&M agreement
are input as constant dollars and escalated with inflation, which is projected
at 3 percent. The results of the Financial Projections for the base case and the
sensitivity cases are included in Exhibit I of this Report. The projections are
for the last four months of year 1999 through the first six months 2008 which is
nine months past the term of the Notes and at which time the Project is assumed
to become a merchant plant. As noted above, the effective term of the Put
Agreement expires at the end of the Proxy Market Price period, or at the end of
ten contract years, whichever comes first. The effective term of the Swap
Agreement is through June 30, 2008 or nine months after the scheduled date of
maturity of the Notes.
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.
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
the Project. 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. The Sponsors provided the projections of market energy and natural gas
prices. Stone & Webster
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has not independently verified the methodology used by the Sponsors to
develop the price forecasts nor has it verified the accuracy of the
forecasts.
3. Stone & Webster has reviewed the O&M and capital budgets for the
electricity generating assets. We assume that the Sponsors 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.
We believe that the Sponsors' budget for O&M expenditures represent a
reasonable projection for the cost of operating and maintaining these units
through the term of the Financial Projections. The exchange rate assumed in
the pro forma is C$=US$0.67. We have not opined on the reasonableness of
this exchange rate forecast.
4. 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.
5. Stone & Webster has not evaluated the non-operating expenses projected by
the Sponsor. These expenses include property and other taxes, insurance,
and general and administrative expenses.
6. Stone & Webster has assumed the operator will employ qualified and
competent personnel who will operate and maintain the equipment in
accordance with the manufacturer's recommendations and good industry
practice.
7. The restructuring of the electric industry will not significantly impact
the projected revenues of the Project during the term of the Indexed Swap
Agreement.
8. The Project will operate as a base load facility as represented by the
Sponsors.
9. The Prices and operating costs used in the pro forma remain consistent with
historical experience and adjust for inflation at a rate of 3 percent per
year.
8.2. Revenues
The revenues in the Financial Projections consist primarily of sale of energy
under the Put Agreement and the Swap Agreement supplemented by the sale of steam
to the University. The revenues from steam are a function of the steam sales
price and the projected quantity of steam sold. We were provided the
documentation for calculating the current steam price and found it to be
consistent with the projections for the steam price. Similarly, the quantity of
steam sold is consistent with historical experience. The megawatt hours sold
under the Put Agreement are a function of the Project's availability and
capacity factor. The capacity factor used in the projections is 92.5 percent,
which is consistent with historical experience. Therefore, we believe the
revenue projections are reasonable. The revenues under each of the contracts are
provided below. In the tables which follow and unless noted otherwise, the
values in the 1999 column are for four months of the year and the values for
2008 column are for the first six months of that year.
8-2
<PAGE>
Table 8.2-1
Put Sales Projections
(Prices are $/MWh, revenues are nominal $000s)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
On-Peak, 89,005 260,878 260,878 260,878 261,901 263,947 261,901 260,878 260,878 131,974
MWh
- ------------------------------------------------------------------------------------------------------------------
On-Peak
Price $ 30.43 $ 32.41 $ 34.85 $ 33.94 $ 36.56 $ 36.79 $ 36.81 $ 36.81 $ 36.81 $ 36.81
- ------------------------------------------------------------------------------------------------------------------
Off-Peak,
MWh 124,958 381,013 379,259 379,259 378,236 377,944 378,236 379,259 379,259 187,218
- ------------------------------------------------------------------------------------------------------------------
Off-Peak
Price $ 22.38 $ 22.36 $ 23.70 $ 25.30 $ 25.30 $ 25.22 $ 26.23 $ 26.23 $ 26.23 $ 26.23
- ------------------------------------------------------------------------------------------------------------------
Total Put,
MWh 213,964 641,891 640,137 640,137 640,137 641,891 640,137 640,137 640,137 319,192
- ------------------------------------------------------------------------------------------------------------------
Put
Revenues $ 5,505 $ 16,975 $ 18,080 $ 18,449 $ 19,145 $ 18,864 $ 19,562 $ 19,551 $ 19,551 $ 9,769
- ------------------------------------------------------------------------------------------------------------------
Average Put
Price $ 25.73 $ 26.44 $ 28.24 $ 28.82 $ 29.91 $ 29.39 $ 30.56 $ 30.54 $ 30.54 $ 30.60
- ------------------------------------------------------------------------------------------------------------------
Floating
Swap Price $ 25.73 $ 26.44 $ 28.24 $ 28.82 $ 29.91 $ 29.39 $ 30.56 $ 30.54 $ 30.54 $ 30.60
- ------------------------------------------------------------------------------------------------------------------
Swap, MWh 221,000 663,000 663,000 663,000 663,000 663,000 663,000 663,000 663,000 663,000
- ------------------------------------------------------------------------------------------------------------------
Floating
Swap
Payment $ 5,686 $ 17,533 $ 18,726 $ 19,108 $ 19,828 $ 19,485 $ 20,260 $ 20,249 $ 20,249 $ 10,145
- ------------------------------------------------------------------------------------------------------------------
Indexed
Swap Price $ 54.23 $ 54.80 $ 56.51 $ 58.04 $ 59.70 $ 61.37 $ 63.19 $ 65.04 $ 66.64 $ 67.88
- ------------------------------------------------------------------------------------------------------------------
Indexed
Swap
Payment $ 11,985 $ 36,333 $ 37,464 $ 38,483 $ 39,582 $ 40,690 $ 41,895 $ 43,122 $ 44,185 $ 22,504
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
8-3
<PAGE>
Table 8.2-2
Steam Sales
(Steam Price in $/thousand pounds of steam,
Steam sold in thousands of pounds per year, steam revenue in nominal $000s)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Steam
Price $ 4.36 $ 4.39 $ 4.43 $ 4.47 $ 4.51 $ 4.55 $ 4.59 $ 4.63 $ 4.67 $ 2.31
- ------------------------------------------------------------------------------------------------------------------
Steam
Sold 202,302 639,385 639,385 639,385 639,385 639,385 639,385 639,385 639,385 639.385
- ------------------------------------------------------------------------------------------------------------------
Steam
Revenue $ 882 $ 2,809 $ 2,834 $ 2,859 $ 2,885 $ 2,910 $ 2,936 $ 2,962 $ 2,988 $ 739
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Table 8.2.1-3
The Project Revenues
(Nominal $000s)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Put Revenue $ 5,505 $16,975 $18,080 $18,449 $19,145 $18,864 $19,562 $19,551 $19,551 $ 9,769
- ------------------------------------------------------------------------------------------------------------------
Less
Floating
Swap
Payment -$ 5,686 -$17,533 -$18,726 -$19,108 -$19,828 -$19,485 -$20,260 -$20,249 -$20,249 -$10,145
- ------------------------------------------------------------------------------------------------------------------
Plus Fixed
Index Swap
Payment $11,985 $36,333 $37,464 $38,483 $39,582 $40,690 $41,895 $43,122 $44,185 $22,504
- ------------------------------------------------------------------------------------------------------------------
Plus Steam
Revenue $ 882 $ 2,809 $ 2,834 $ 2,859 $ 2,885 $ 2,910 $ 2,936 $ 2,962 $ 2,988 $ 739
- ------------------------------------------------------------------------------------------------------------------
Total
Revenue $12,685 $38,584 $39,653 $40,684 $41,782 $42,980 $44,132 $45,385 $46,475 $22,866
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
8.3. Expenses
The Financial Projections include the following expenses:
. Costs of purchasing and transporting fuel for the thermal power stations
. Fixed O&M costs
. Variable O&M costs including expenses associated with major maintenance
. Property and other taxes, insurance, and administrative expenses
8-4
<PAGE>
8.3.1. Fuel
The annual cost of the fuel consists of the operations fee and royalty payment
contained in the Gas Agreement as well as the transportation cost of delivering
the gas to the Project from western Canada. The cost of the fuel itself was paid
in the lump sum payment of $88 million that was part of the initial project
financing as described in our review of that agreement. It should be noted that
the percentage of fuel used in transportation is large, but we have been able to
confirm it is consistent with tariffs on TransCanada Pipeline ("TCPL") for
transporting fuel across Canada from Alberta to New York.
Table 8.3.1-1
Unconsumed Fuel Entitlement
(Thousand MMBtu (HHV))
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
B.O.Y.
Entitlement 71,995 66,848 59,664 52,464 45,229 37,957 30,629 23,284 15,902 8,484
- ------------------------------------------------------------------------------------------------------------------
Entitlement
Consumption 2383 7,184 7,200 7,236 7,272 7,328 7,345 7,382 7418 3,718
- ------------------------------------------------------------------------------------------------------------------
E.O.Y.
Entitlement 66,848 59,664 52,464 45,229 37,957 30,629 23,284 15,902 8,484 4,766
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Table 8.3.1-2
Gas Consumed in Transportation
(Thousand MMBtu (HHV))
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Entitlement
Consumption 7,148/1/ 7,184 7,200 7,236 7,272 7,328 7,345 7,382 7418 3,718
- ------------------------------------------------------------------------------------------------------------------
Burner Tip
Consumption 2,140 6,451 6,466 6,498 6,530 6,581 6,596 6,629 6,662 3,338
- ------------------------------------------------------------------------------------------------------------------
% of Fuel
Used in 10.2% 10.2% 10.2% 10.2% 10.2% 10.2% 10.2% 10.2% 10.2% 10.2%
Transport
- ------------------------------------------------------------------------------------------------------------------
Notes: 1. Number is for 12 months
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Gas consumed at the burner tip is a function of the heat rate of the GTs, gas
consumed in firing the duct burners and gas consumed in firing the existing
boilers. The heat rate projected in the pro forma includes the fuel consumed in
the duct burners of the HRSG as well as fuel consumed in firing the University
boilers when needed for base case steam production. We have reviewed the
historical experience of the Project and believe the heat rate projection is
reasonable. Base case heat rate is projected to increase 0.50 percent each year.
We believe this is conservative as the Project has been in operation for several
years and has already experienced the normal degradation that a new plant
experiences. These figures are consistent with
8-5
<PAGE>
historical experience and are expressed based on the higher heating value of the
fuel.
Table 8.3.1-3
Gas Consumed at the Burner Tip
(Million MMBtu (HHV) per year)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Plant Heat
Rate,
Btu/kWh 10,000 10,050 10,100 10,151 10,202 10,253 10,304 10,355 10,407 10,459
- ------------------------------------------------------------------------------------------------------------------
Generation,
MWh 213,964 641,891 640,137 640,137 640,137 641,891 640,137 640,137 640,137 319,192
- ------------------------------------------------------------------------------------------------------------------
Total Gas
Consumed 2,140 6,451 6,466 6,498 6,530 6,581 6,596 6,629 6,662 3,338
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
8.3.2. Fuel Operating Cost and Royalty Cost
The gas supply agreement with Canadian Hunter calls for the Project to pay
Canadian Hunter an operating cost payment for supplying the gas in addition to
the lump sum payment paid at the original financial closing. It also calls for
the Project to reimburse Canadian Hunter for the Canadian Royalty payments. We
were provided with invoices from Canadian Hunter showing the rate for the
operating cost as well the royalty charge. The rates shown on the invoices are
consistent with the projections used in the pro forma. The basis for calculating
the operating cost and the royalty cost are provided below:
8-6
<PAGE>
<TABLE>
<CAPTION>
Table 8.3.2-4
Fuel Operating Cost Charge and Fuel Royalty Charge
(Nominal $000s)
- ----------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receipt
Volume,- 2,383 7,184 7,200 7,236 7,272 7,328 7,345 7,382 7418 3,718
MMBtu
(HHV)
- ----------------------------------------------------------------------------------------------------------------
Operating
Cost Rate, $0.4053 $0.4175 $0.4300 $0.4429 $0.4562 $0.4699 $0.4840 $0.4985 $0.5134 $0.5288
$/MMBtu
- ----------------------------------------------------------------------------------------------------------------
Operating
Cost $966 $2,999 $3,096 $3,205 $3,317 $3,443 $3,555 $3,680 $3,809 $1,966
- ----------------------------------------------------------------------------------------------------------------
Royalty
Rate 0.2052 0.2052 0.2052 0.2052 0.2052 0.2052 0.2052 0.2052 0.2052 0.2052
- ----------------------------------------------------------------------------------------------------------------
Reference
Price, $71.52 $71.63 $73.78 $75.99 $78.27 $80.62 $83.04 $85.53 $88.10 $90.74
C$/10/3/m/3/
- ----------------------------------------------------------------------------------------------------------------
Receipt
Volume of 66,042 199,116 199,564 200,562 201,565 203,128 203,586 204,604 205,627 103,044
Gas, 10/3/m/3/
- ----------------------------------------------------------------------------------------------------------------
Royalty Fee,
C$000s C$969 C$2,927 C$3,022 C$3,128 C$3,238 C$3,361 C$3,469 C$3,591 C$3,718 C$1,919
- ----------------------------------------------------------------------------------------------------------------
Exchange
Rate, 0.670 0.670 0.670 0.670 0.670 0.670 0.670 0.670 0.670 0.670
US$/C$
- ----------------------------------------------------------------------------------------------------------------
Royalty Fee,
US$000s $649 $1,961 $2,025 $2,096 $2,169 $2,252 $2,325 $2,406 $2,491 $1,286
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
8.3.3. Fuel Transportation Costs
Fuel transportation represents over half of the operating expenses of the
Project. The vast majority of this cost is fixed and does not vary with the
volume of fuel actually transported to the Project. We were provided with the
invoices for the transportation of the fuel and reviewed the invoices from 1997,
1998, and 1999 through June 1999. The calculations in the pro forma are
consistent with the calculations in the invoices and the charge rates for
demand, pressure, and variable charges used in the pro forma are consistent with
historical experience.
NOVA pipeline uses an unusual method of applying the demand charge in that it
adds the firm delivery and receipt volumes of gas together to apply the demand
charge. The delivery volume is the volume of gas actually delivered to the end
of the pipeline while the receipt volume is what is delivered into the pipeline.
Since there is considerable fuel used in the transportation, the Delivery demand
volume is highest with Nova, slightly less with TransCanada Pipeline ("TCPL"),
and the lowest with Tennessee Gas Pipeline ("TGPL"). Both TCPL and TGPL use
conventional methods of calculating the demand charge by only using the delivery
demand volume. TCPL also charges for maintaining pressure level.
8-7
<PAGE>
LOGO OF STONE & WEBSTER
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table 8.3.3-1
NOVA Demand Charges
(C$=US$ 0.67)
- --------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Firm Service
Delivery &
and Receipt 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6
Volume,
10/3/m/3//day
- --------------------------------------------------------------------------------------------------------------------
Monthly
Demand
Charge x 12, $568 $1,758 $1,811 $1,864 $1,921 $1,979 $2,038 $2,099 $2,162 $2,227
C$
- --------------------------------------------------------------------------------------------------------------------
Demand Cost,
C$ $702 $2,170 $2,235 $2,302 $2,371 $2,442 $2,515 $2,591 $2,668 $1,367
- --------------------------------------------------------------------------------------------------------------------
Demand Cost,
US$ $471 $1,454 $1,498 $1,543 $1,589 $1,637 $1,686 $1,736 $1,788 $916
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Table 8.3.3-2
Annual Nova Variable Transportation Charges
(Nominal $000s)
- --------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receipt
Volume, 66,042 199,116 199,564 200,562 201,565 203,128 203,586 204,604 205,627 103,044
10/3/m/3/
- --------------------------------------------------------------------------------------------------------------------
Variable
Rate, $0.2300 $0.2369 $0.2440 $0.2513 $0.2589 $0.2666 $0.2746 $0.2829 $0.2914 $0.3001
C$/10/3/m/3/
- --------------------------------------------------------------------------------------------------------------------
Variable
Charge, C$ $15 $47 $49 $50 $52 $54 $56 $58 $60 $31
- --------------------------------------------------------------------------------------------------------------------
Variable
Charge, $10 $32 $33 $34 $35 $36 $38 $39 $40 $21
US$
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
8-8
<PAGE>
[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table 8.3.3-3
TransCanada Pipeline Demand Costs
(Nominal $000s)
- --------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Delivery
Demand, 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6
10/3/m/3//day
- --------------------------------------------------------------------------------------------------------------
Monthly
Demand
Charge x $4,175 $12,900 $13,288 $13,686 $14,096 $14,519 $14,954 $15,403 $15,865 $8,171
12, C$
- --------------------------------------------------------------------------------------------------------------
Demand
Cost, C$ $2,365 $7,309 $7,528 $7,754 $7,987 $8,227 $8,473 $8,728 $8,989 $4,604
- --------------------------------------------------------------------------------------------------------------
Demand
Cost, US$ $1,585 $4,897 $5,044 $5,195 $5,351 $5,512 $5,677 $5,848 $6,023 $3,085
- --------------------------------------------------------------------------------------------------------------
Fixed
Pressure
Demand, 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6
10/3/m/3//day
- --------------------------------------------------------------------------------------------------------------
Fixed
Pressure
Charge x12, $17.92 $55.44 $57.00 $58.80 $60.48 $62.40 $64.2 $66.12 $68.16 $35.10
C$/10/3/m/3/
- --------------------------------------------------------------------------------------------------------------
Fixed
Pressure $10 $31 $32 $33 $34 $35 $36 $38 $38 $20
Cost, C$
- --------------------------------------------------------------------------------------------------------------
Fixed
Pressure $7 $21 $22 $22 $23 $24 $24 $25 $26 $13
Cost, US$
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 8.3.3-4
TCPL Variable Transportation Charges
- ---------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receipt
Volume, 60,273 181,723 182,133 183,044 183,959 185,385 185,803 186,732 187,666 94,044
10/3/m/3/
- ---------------------------------------------------------------------------------------------------------------
Variable
Rate, $1.73 $1.79 $1.84 $1.89 $1.95 $2.01 $2.07 $2.13 $2.20 $2.26
C$/10/3/m/3/
- ---------------------------------------------------------------------------------------------------------------
Variable
Charge, $ 105 $ 325 $ 335 $ 347 $ 359 $ 373 $ 385 $ 398 $ 412 $ 213
C$
- ---------------------------------------------------------------------------------------------------------------
Variable
Charge, $ 70 $ 217 $ 224 $ 232 $ 241 $ 250 $ 258 $ 267 $ 276 $ 143
US$
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
8-9
<PAGE>
<TABLE>
<CAPTION>
Table 8.3.3-5
TGPL Demand Costs
(Nominal $000s)
- ---------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Delivery
Demand,
MMBtu 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
(HHV) /
Day
- ---------------------------------------------------------------------------------------------------------------
Monthly
Demand
Charge x $40.72 $125.88 $129.60 $133.56 $137.52 $141.60 $145.92 $150.24 $154.80 $79.68
12, US$
- ---------------------------------------------------------------------------------------------------------------
Demand
Cost, US$ $ 815 $ 2,517 $ 2,592 $ 2,670 $ 2,750 $ 2,833 $ 2,918 $ 3,005 $ 3,096 $ 1,585
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
8-10
<PAGE>
8.3.4. Operations, Maintenance, and Other Costs
The operations, maintenance, and other costs are based on the experience with
1999 year to date through August 31 actual expenditures. The O&M contract with
the Project was changed in November 1998 from a lump sum contract to a fee plus
reimbursable budget contract. This change in the contract has resulted in a
projected decrease in Plant Operations costs of nearly $2 million per year. Only
about half of this decrease is reflected in the projected budget so we believe
the costs are reasonable and may be somewhat conservative. We have no reason to
believe these costs will be substantially higher in the future from current
experience in 1999. The GE Fees, Overhaul, and directed starts accrual amount
includes the fired hour charges and lease engine charges as well as the annual
fees paid to GE for performing the plant O&M. The other items are self-
explanatory.
<TABLE>
<CAPTION>
Table 8.3.4-1
Projected Consolidated Costs
(Nominal $000s)
- ---------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GECS Fees,
Overhaul and $ 734 $2,297 $2,276 $2,304 $2,330 $2,361 $ 2,385 $ 2,414 $ 2,444 $1,323
Directed Starts
Accrual
- ----------------------------------------------------------------------------------------------------------------
Plant Salaries $ 578 $1,786 $1,840 $1,895 $1,952 $2,011 $ 2,071 $ 2,133 $ 2,197 $1,125
- ----------------------------------------------------------------------------------------------------------------
Operating
Expense 80 246 253 261 269 277 285 294 302 155
- ----------------------------------------------------------------------------------------------------------------
Plant Admin
Expense 14 42 44 45 46 48 49 51 52 27
- ----------------------------------------------------------------------------------------------------------------
Employee
Services 2 5 6 6 6 6 6 6 7 3
- ----------------------------------------------------------------------------------------------------------------
Maintenance
Materials 23 70 72 75 77 79 82 84 87 44
- ----------------------------------------------------------------------------------------------------------------
Other Plant
Repair 81 251 259 266 274 283 291 300 309 158
- ----------------------------------------------------------------------------------------------------------------
Utility and
Environmental 134 414 426 439 452 466 480 494 509 261
Expenses
- ----------------------------------------------------------------------------------------------------------------
Administrative
and Insurance 318 982 1,012 1,042 1,073 1,105 1,138 1,173 1,208 619
Expenses
- ----------------------------------------------------------------------------------------------------------------
Taxes 267 810 1,434 1,476 1,522 1,578 1,638 1,701 1,763 1,278
- ----------------------------------------------------------------------------------------------------------------
Syracuse Fee 417 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 622
- ----------------------------------------------------------------------------------------------------------------
Partnership
Expenses 128 395 407 419 432 445 458 472 486 249
- ----------------------------------------------------------------------------------------------------------------
Total $2,775 $8,510 $9,281 $9,479 $9,683 $9,908 $ 10,134 $10,371 $10,613 $5,772
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
8-11
<PAGE>
We have reviewed the above figures and believe they are reasonable. There is a
possibility the Project will have to start buying NO\\x\\ emission credits
starting in the year 2002. This potential expense is handled as a sensitivity to
the operating costs.
8.4. 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 - Reduce capacity factor to 85 percent
. Sensitivity 2 - O&M costs increased by 15 percent
. Sensitivity 3 - Heat rates increased by 3 percent (300 Btu/kWh)
. Sensitivity 4 - The Project has to purchase $200,000 of NO\\x\\ credits
starting in 2002
Projecting O&M costs has inherent uncertainty, but the Project has been
operating for several years and there is little risk in incurring a substantial
increase in O&M costs. Sensitivity 1 demonstrates the impact of a significant
increase in O&M costs. 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 2 illustrates the impact of increasing the heat
rate beyond what we would consider reasonable for any further degradation in
heat rate for each unit. Sensitivity 3 illustrates the impact on the Project if
it has to purchase NO\\x\\ credits starting in 2002 as part of the reduction in
emissions the EPA has planned for the region. 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.
8.5. Coverage Ratios
The DSCR's for the base case and each of the sensitivities are presented in
Table 8.5-1. The coverage ratios are calculated on a pre-tax basis. 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.
8-12
<PAGE>
<TABLE>
<CAPTION>
Table 8.5-1
Debt Service Coverage Ratios
-----------------------------------------------------------------
Minimum Average
Coverage Ratio Coverage Ratio
-----------------------------------------------------------------
<S> <C> <C>
Base Case 1.35 1.40
-----------------------------------------------------------------
Sensitivity 1:
Reduced Capacity Factor 1.29 1.35
-----------------------------------------------------------------
Sensitivity 2:
Increased O&M 1.31 1.36
-----------------------------------------------------------------
Sensitivity 3:
Increased Heat Rate 1.35 1.39
-----------------------------------------------------------------
Sensitivity 4:
Purchase NO\\x\\ Credits 1.35 1.39
-----------------------------------------------------------------
</TABLE>
8-13
<PAGE>
[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
APPENDIX A
LIST OF DOCUMENTS REVIEWED
<PAGE>
[LOGO OF STONE & WEBSTER]
Project Orange Association, L.P.
- --------------------------------------------------------------------------
APPENDIX A - LIST OF DOCUMENTS REVIEWED
- --------------------------------------------------------------------------------
Date Document
- --------------------------------------------------------------------------------
08/27/1999 Data Room List, Relevant Contract List & Working Group List
- --------------------------------------------------------------------------------
09/01/99 POA monthly operation reports 1999
- --------------------------------------------------------------------------------
09/01/99 Site Assessment
- --------------------------------------------------------------------------------
09/01/99 GPU International Biennial Safety and Environmental Assessments
- --------------------------------------------------------------------------------
09/01/99 SRA's Biennial Safety Assessment Report for the POA/SUSS facility
- --------------------------------------------------------------------------------
09/01/99 EI Environmental Audit
- --------------------------------------------------------------------------------
09/01/99 Overhead and Gantry Crane Inspections
- --------------------------------------------------------------------------------
09/01/99 Memo confirming Energy Initiatives Environmental and Safety
Regulatory Audit
- --------------------------------------------------------------------------------
09/01/99 Environmental and Safety Audit
- --------------------------------------------------------------------------------
09/01/99 Letter from NYSPSC regarding project audit
- --------------------------------------------------------------------------------
09/01/99 End of year closure to project associates cogeneration facility
record audit
- --------------------------------------------------------------------------------
09/01/99 Pipeline Audit Response
- --------------------------------------------------------------------------------
09/01/99 NY Public Service Commissions 1997 Audit of project High Pressure
Gas Pipeline
- --------------------------------------------------------------------------------
09/01/99 Tables 1 thru 8 summarizing results of a cylinder gas audit
- --------------------------------------------------------------------------------
09/01/99 Biennial Safety and Environmental assessment performed by S&RA at
the POA/SUSS facility from May 12 - 16, 1997
- --------------------------------------------------------------------------------
09/01/99 Final Environmental Impact Statement
- --------------------------------------------------------------------------------
09/01/99 Environmental Liability Assessment - Syracuse University Steam
Station
- --------------------------------------------------------------------------------
09/01/99 Contaminated soil investigation and remediation report
- --------------------------------------------------------------------------------
09/01/99 Outstanding Issues
- --------------------------------------------------------------------------------
09/01/99 Effectiveness questionnaire
- --------------------------------------------------------------------------------
09/01/99 FY 1999 Pipeline Safety Users Fee Assessment
- --------------------------------------------------------------------------------
09/01/99 Gas Transportation Line Permit #33127
- --------------------------------------------------------------------------------
09/01/99 Regulatory Assessment - Permitting Issues Galson Project No.
GQ-129
- --------------------------------------------------------------------------------
A-1
<PAGE>
Appendix A - List of Documents Reviewed
- --------------------------------------------------------------------------------
09/01/99 Hazardous Substance Report
- --------------------------------------------------------------------------------
09/01/99 Letter from lawyers transmitting documents
- --------------------------------------------------------------------------------
09/01/99 Operation and Maintenance Agreement dated 11/01/98
- --------------------------------------------------------------------------------
09/01/99 Environmental, Health and Safety Program Assessment
- --------------------------------------------------------------------------------
09/01/99 Plant Heat Rate & Capacity 1992 - 1993 contract year
- --------------------------------------------------------------------------------
09/01/99 MRA and related documents
- --------------------------------------------------------------------------------
09/01/99 Steam Contract Syracuse University 2-27-90
- --------------------------------------------------------------------------------
09/01/99 Letter 5-1-90 RE: Steam Contract, Op Agr and Lease Agr 2-27-
90
- --------------------------------------------------------------------------------
09/01/99 Letter 6-22-90 RE: Steam Contract and Lease Agr 2-27-90
- --------------------------------------------------------------------------------
09/01/99 Letter 8-29-90 RE: Ditto
- --------------------------------------------------------------------------------
09/01/99 Amendment to Steam Contract 12-31-90
- --------------------------------------------------------------------------------
09/01/99 Operating Agreement Syracuse University 2-27-90
- --------------------------------------------------------------------------------
09/01/99 Amendment to Operating Agreement 12-31-90
- --------------------------------------------------------------------------------
09/01/99 Assignmt Agrmt (Operating Agrmt) City of Syracuse Ind Dev
Agency 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Project Orange Associates exhibits and partnership meeting
notes
- --------------------------------------------------------------------------------
09/01/99 Taxable Income and Loss Revised vs Filed 3-13-98
- --------------------------------------------------------------------------------
09/01/99 Letter 3-12-99 RE: Tax Returns
- --------------------------------------------------------------------------------
09/01/99 Transmittal 3-12-98 RE: Taxable Income and Loss
- --------------------------------------------------------------------------------
09/01/99 Fax 2-11-98 RE: SOP Exhibits for Syracuse Orange Partners
Agrmt
- --------------------------------------------------------------------------------
09/01/99 Subcontract Agreemt 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Interconnection Agreemt 1-13-92
- --------------------------------------------------------------------------------
09/01/99 Agreement of Indemnity 2-10-93
- --------------------------------------------------------------------------------
09/01/99 Agreement of Indemnity 11-10-92
- --------------------------------------------------------------------------------
09/01/99 Letter 10-19-92 RE: Lease Agrmt 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
A-2
<PAGE>
Appendix A - List of Documents Reviewed
- --------------------------------------------------------------------------------
09/01/99 Supplemental Agreement 7-24-92 Syracuse University
- --------------------------------------------------------------------------------
09/01/99 Letter 10-19-92 RE: Lease Agrmt 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
09/01/99 Amendment to Lease Agreement 12-16-92 Syracuse University
- --------------------------------------------------------------------------------
09/01/99 Amendment to Operating Agreement 12-16-92
- --------------------------------------------------------------------------------
09/01/99 First Amendment of Mortgage and Security Agrmt 12-24-92 City of
Syracuse, Syracuse University
- --------------------------------------------------------------------------------
09/01/99 Security Agreement 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
09/01/99 Mortgage and Security Agreement 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
09/01/99 Security Agreement 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
09/01/99 Agreement 4-5-91 City of Syracuse and Housing Authority
- --------------------------------------------------------------------------------
09/01/99 Payment in Lieu of Tax Agreement 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Lease and Sublease Agreement 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Memorandum of Lease 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Real Property Transfer Gains Tax Affidavit Tax Return CR Line
Mortgage Certificate 4-4-91
- --------------------------------------------------------------------------------
09/01/99 Subordination Agreement 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Steam Contract Syracuse University 2-27-90
- --------------------------------------------------------------------------------
09/01/99 Lease Agreement Syracuse University Feb. 1990
- --------------------------------------------------------------------------------
09/01/99 Indemnification Agreement 6-30-98
- --------------------------------------------------------------------------------
09/01/99 Mortgage and Security Agreement 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
09/01/99 Fax 7-15-97, Letter 7-15-97 RE: Master Restructuring Agreement
7-9-97 Niagara Mohawk Power Corp.
- --------------------------------------------------------------------------------
09/01/99 POA Proforma Analysis 5-28-98
- --------------------------------------------------------------------------------
09/01/99 Miscellaneous Cost Information for Electric Equipment
- --------------------------------------------------------------------------------
09/11/99 POA Steam Station 1997 Fuel Use/Industrial Process Emission
Statement #DECID #7311500229.
- --------------------------------------------------------------------------------
A-3
<PAGE>
Appendix A - list of Documents Reviewed
- --------------------------------------------------------------------------------
09/11/99 POA Steam Station 1997 Fuel Use/Industrial Process Emission
Statement #DECID #7311500204.
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 1st Quarter 1998
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 2nd Quarter 1998
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 3rd Quarter 1998
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 4th Quarter 1998
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 1st Quarter 1999
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 2nd Quarter 1999
- --------------------------------------------------------------------------------
09/11/99 Revision to Industrial Wastewater Discharge Permit #125
- --------------------------------------------------------------------------------
09/11/99 POA, LP SMR 125 Dec. 1, 1997 - May 31, 1998
- --------------------------------------------------------------------------------
09/11/99 Notice of Accidental Discharge
- --------------------------------------------------------------------------------
09/11/99 Calibration Sheet/Inspection - Riley Sewer
- --------------------------------------------------------------------------------
09/11/99 POA, Permit No. 125, Semi-annual Self Monitoring Report (June 1,
1998 - Nov. 30, 1998)
- --------------------------------------------------------------------------------
09/11/99 POA, Permit No. 125, Semi-annual Self Monitoring Report (Dec. 1,
1998 - June 30, 1999)
- --------------------------------------------------------------------------------
09/11/99 1st Quarter 1998- SMR Permit #140 Semi-annual Self Monitoring
Report (Dec. 1, 1997 - Feb. 28, 1998).
- --------------------------------------------------------------------------------
09/11/99 3rd Quarter 1998- SMR Permit #140 Semi-annual Self Monitoring
Report (June 1, 1998 - Aug. 31, 1998).
- --------------------------------------------------------------------------------
09/11/99 4th Quarter 1998- SMR Permit #140 Semi-annual Self Monitoring
Report (Sept. 1, 1997 - Dec. 31, 1998).
- --------------------------------------------------------------------------------
09/11/99 Semi-Annual Self-Monitoring Report Permit #140 for the period of
Jan. 1, 1999 - June 30, 1999
- --------------------------------------------------------------------------------
09/11/99 Draft - Title V Application for the Project Orange Cogen.
Facility and the Syracuse Univ. Sys. (March 28, 1997).
- --------------------------------------------------------------------------------
09/11/99 Notice of Violation of "Onondaga County Rules and Regulations
Relating to the use of the Public Sewer System" and Industrial
Wastewater Discharge Permit #125
- --------------------------------------------------------------------------------
09/11/99 Permit No. 125, Notice of Accidental Discharge (June 16, 1999)
- --------------------------------------------------------------------------------
09/11/99 Response to the Compliance Order issued on June 4, 1997, Permit
No. 125.
- --------------------------------------------------------------------------------
A-4
<PAGE>
Appendix A - List of Documents Reviewed
- --------------------------------------------------------------------------------
09/11/99 Letter notifying of renewal of Permit #140 Industrial Wastewater
Permit
- --------------------------------------------------------------------------------
09/11/99 Hazardous Substance Bulk Storage Registration Certificates
- -------------------------------------------------------------------------------
09/11/99 Petroleum Bulk Storage Registration Certificate
- -------------------------------------------------------------------------------
09/11/99 Emergency and Hazardous Chemical Inventory
- -------------------------------------------------------------------------------
09/11/99 NYSDEC Certificate to Operate PSD Permit -Special Conditions-
Emission Point #00001, 00002
- -------------------------------------------------------------------------------
09/11/99 Oil Spill Prevention Control and Countermeasure (SPCC) Plan (Emergency
Response Plan)
- -------------------------------------------------------------------------------
09/11/99 Letter from C&S Tech. Solutions - modifications to be made to pH
Neutralization System to facilitate a flow rate of 60 gpm.
- -------------------------------------------------------------------------------
09/11/99 Invoice for Rental Permit
- -------------------------------------------------------------------------------
09/11/99 POA, LP SMR 140 March 1, 1998 - May 31, 1998
- -------------------------------------------------------------------------------
09/11/99 Lab Analysis Report - Hazardous Waste Manifest
- -------------------------------------------------------------------------------
09/11/99 Calibration Sheet/Inspection - Cogen Sewer
- -------------------------------------------------------------------------------
09/11/99 Instructions 1998 Emission Statement
- -------------------------------------------------------------------------------
09/11/99 Letter from NY State Dept. of Environmental Conservation rgdg. 1998
Emission Statement.
- -------------------------------------------------------------------------------
09/14/99 Process Flow Diagram Steam Balance Annual Average
- -------------------------------------------------------------------------------
09/22/09 CPS Gas Call Option Term Sheet
- -------------------------------------------------------------------------------
09/30/99 Project Orange Quarterly Financial Documents from DLJ - Indexed Swap
Payment, Power Put Monthly Statements, Invoices,
- -------------------------------------------------------------------------------
10/05/99 Project Orange Plant Performance Snapshots - 10/1/99
- -------------------------------------------------------------------------------
10/05/99 Endfield Failure Low Pressure Compressor Incident
- -------------------------------------------------------------------------------
10/07/99 Independent Technical Consultants Draft Report, dated 09/30/99
- -------------------------------------------------------------------------------
10/15/99 Asset Management Qualifications for Niagara Mohawk Energy Marketing,
Inc.
- -------------------------------------------------------------------------------
10/15/99 Noise measurement / sound evaluation issues
- -------------------------------------------------------------------------------
10/18/99 Application for Permit - for Water Mains, Gas Mains, Sewer Lines, etc.
- -------------------------------------------------------------------------------
A-5
<PAGE>
Appendix A - List of Documents Reviewed
- --------------------------------------------------------------------------------
10/18/99 Permits for use of County-Owned property
- --------------------------------------------------------------------------------
10/18/99 Permits for use of State-Owned property.
- --------------------------------------------------------------------------------
10/18/99 Fax from GPU - Environmental Issues Closure
- --------------------------------------------------------------------------------
10/18/99 Documentation from Orange on GE Plant Operations/Electrical Test
Report
- --------------------------------------------------------------------------------
10/20/99 Report Comments
- --------------------------------------------------------------------------------
10/22/99 Report Comments
- --------------------------------------------------------------------------------
10/22/99 Client List Asset Management and Related Services
- --------------------------------------------------------------------------------
11/05/99 Report Comments
- --------------------------------------------------------------------------------
11/08/99 Report Comments
- --------------------------------------------------------------------------------
11/08/99 Report Comments
- --------------------------------------------------------------------------------
11/08/99 POA Operating Summaries
- --------------------------------------------------------------------------------
11/09/99 POA - GE-EPO name change
- --------------------------------------------------------------------------------
11/09/99 Fax - Project Orange Weekly operation, maintenance and events
Report (Nov. 1-7)
- --------------------------------------------------------------------------------
11/09/99 Fax - Definitions
- --------------------------------------------------------------------------------
11/12/99 Report Comments
- --------------------------------------------------------------------------------
11/12/99 Report Comments
- --------------------------------------------------------------------------------
11/12/99 Report Comments
- --------------------------------------------------------------------------------
11/12/99 Report Comments for offering circular
- --------------------------------------------------------------------------------
11/13/99 Final report comments
- --------------------------------------------------------------------------------
11/15/99 POA Monthly Report - August 1999
- --------------------------------------------------------------------------------
11/15/99 POA Monthly Report - September 1999
- --------------------------------------------------------------------------------
11/15/99 Draft Offering Memorandum for review and comment
- --------------------------------------------------------------------------------
A-6
<PAGE>
[LETTERHEAD OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------
EXHIBIT 1
BASE CASE FINANCIAL PROJECTIONS
<PAGE>
<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE: Base
($ in thousands, expect price per MWH)
4 months ended Projected Fiscal Years Ending December 31,
----------------------------------------------------------------------------
12/31/99 2000 2001 2002 2003
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW)(2)................... 79.0 79.0 79.0 79.0 79.0
Availability (3)............................... 95.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4)................................... 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5).................. 10,000.0 10,050.0 10,100.3 10,150.8 10,201.5
Electricity Produced (MWh) (6)................. 213,963.6 641,890.8 640,137.0 640,137.0 640,137.0
Steam Throughput (1,000 lbs) (7)............... 202,302.0 639,385.1 638,385.1 639,385.1 639,385.1
Fuel Consumed (MMBtu) (8)...................... 2,139,636.0 6,451,002.5 6,465,543.7 6,497,871.5 6,530,360.8
Entitlement Used (MMBtu) (9)................... 2,382,594.0 7,183,520.9 7,199,713.3 7,235,711.8 7,271,890.4
Debt Offering Annual Interest Rate............. 10.50% 10.50% 10.50% 10.50% 10.50%
General Inflation.............................. 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CON$)....................... $0.67 $0.67 $0.67 $0.67 $0.67
On-Peak Electricity Pricing ($MWh) (10)........ $30.43 $32.41 $34.85 $33.94 $36.58
Off-Peak Electricity Pricing ($MWh)............ $22.38 $22.36 $23.70 $25.30 $25.30
Indexed Swap Price ($MWh) (11)................. $54.23 $54.80 $56.51 $58.04 $59.70
Steam Price ($/1,000 lbs) (12)................. $4.36 $4.39 $4.43 $4.47 $4.51
Power Put Contract
Energy Sales - On-Peak...................... $ 2,706.4 $ 8,455.0 $ 9.091.6 $ 8,854.2 $ 9,575.1
Energy Sales - Off-Peak..................... 2,796.6 8,519.5 8,988.4 9,595.3 9,569.4
Capacity Sales - On Peak.................... 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak................... 0.0 0.0 0.0 0.0 0.0
-----------------------------------------------------------------------
Total Power Put Payments (13).................. 5,505.0 16,974.5 18,080.0 18,449.4 19,144.5
Indexed Swap Contract
Floating (Payment).......................... (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2)
Floating (Payment): Capacity................ 0.0 0.0 0.0 0.0 0.0
-----------------------------------------------------------------------
Total Floating (Payments) (14)................. (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2)
Fixed Payment............................... 11,984.8 36,332.5 37,464.4 38,483.4 39,581.6
-----------------------------------------------------------------------
Total Indexed Swap Payment (15)................ 6,298.8 18,799.8 18,738.6 19,375.0 19,753.3
Steam Sales.................................... 881.5 2,809.3 2,834.2 2,859.2 2,884.5
Fuel Commodity Sales........................... 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales.................... 0.0 0.0 0.0 0.0 0.0
-----------------------------------------------------------------------
Total Revenues............................ $ 12,685.3 $ 38,583.6 $ 39,652.8 $ 40,683.7 $ 41,782.3
Commodity Expense (16)......................... ($1,592.8) ($4,892.9) ($5,053.1) ($5,232.7) ($5,418.7)
Firm Service Transportation Expense (17)....... (2,876.7) (6,889.1) (9,155.8) (9,430.5) (9,713.4)
Variable Fuel Expense (18)..................... (102.3) (317.8) (328.1) (339.6) (351.5)
-----------------------------------------------------------------------
Total Fuel Expenses....................... ($4,571.9) ($14,099.8) ($14,536.9) ($15,002.8) ($15,483.6)
GE Overhaul Accrual & Directed Starts (19)..... ($476.7) ($1,430.0) ($1,426.1) ($1,426.1) ($1,426.1)
GE Contractual Services Fees (20).............. (257.5) (827.4) (852.2) (877.8) (904.1)
Plant Operations (21).......................... (777.2) (2,401.4) (2,473.5) (2,547.7) (2,624.1)
Other O&M and Plant Utilities (22)............. (134.0) (413.9) (426.4) (439.1) (452.3)
Administrative (23)............................ (317.8) (982.1) (1,011.6) (1,041.9) (1,073.2)
Taxes (24)..................................... (266.9) (810.1) (1,434.4) (1,477.5) (1,521.8)
Syracuse University User Charge (25)........... (416.7) (1,250.0) (1,250.0) (1,250.0) (1,250.0)
-----------------------------------------------------------------------
Total O&M and Administrative Expenses...... ($2,646.7) ($8,115.0) ($8,874.2) ($9,060.1) ($9,251.6)
Partnership Fees (26).......................... (127.8) (394.9) (406.8) (419.0) (431.6)
-----------------------------------------------------------------------
Total Expenses.......................... ($7,346.4) ($22,60?.8) ($23,817.9) ($24,481.9) ($25,166.8)
Net Operating Cash Flow........................ $5,338.8 $15,873.8) $15,834.9 $16,201.8 $16,615.6
<CAPTION>
2004 2005 2006 2007 2008(1)
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW)(2)............... 79.0 79.0 79.0 79.0 79.0
Availability (3)........................... 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4)............................... 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5).............. 10,252.5 10,303.8 10,355.3 10,407.1 10,459.1
Electricity Produced (MWh) (6)............. 641,890.8 640,137.0 640,137.0 640.137.0 319,191.6
Steam Thoughput (1,000 lbs) (7)............ 639,385.1 839,385.1 639,385.1 639,385.1 319,692.6
Fuel Consumed (MMBtu) (8).................. 6,580,993.5 6,595,827.1 6,828,806.8 6,661,950.8 3,338,458.7
Entitlement Used (MMBtu)(9)................ 7,328,272.5 7,344,791.1 7,381,515.1 7,418,422.6 3,717,544.3
Debt Offering Annual Interest Rate......... 10.50% 10.50% 10.50% 10.50% 10.50%
General Inflation.......................... 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CON$)................... $0.67 $0.67 $0.67 $0.67 $0.67
On-Peak Electricity Pricing ($MWh) (10).... $36.79 $36.81 $36.81 $36.81 $36.81
Off-Peak Electricity Pricing ($MWh)........ $24.22 $26.23 $26.23 $26.23 $26.23
Indexed Swap Price ($MWh) (11)............. $61.37 $63.19 $65.04 $66.84 $67.88
Steam Price ($/1,000 lbs) (12)............. $4.55 $4.59 $4.63 $4.67 $2.31
Power Put Contract
Energy Sales - On-Peak................... $ 9,710.6 $9,640.6 $9,602.9 $9,602.9 $4,857.9
Energy Sales - Off-Peak.................. 9,153.8 9,921.1 9,948.0 9,948.0 4,910.7
Capacity Sales - On Peak................. 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak................ 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------
Total Power Put Payments (13).............. 18,864.4 19,561.7 19,550.9 19,550.9 9,768.7
Indexed Swap Contract
Floating (Payment)....................... (19,484.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Floating (Payment): Capacity............. 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------
Total Floating (Payments) (14)............. (19,484.8) (20,280.4) (20,249.2) (20,249.2) (10,145.4)
Fixed Payment............................ 40,690.0 41,895.3 43,122.0 44,185.0 22,503.5
--------------------------------------------------------------------------
Total Indexed Swap Payment (15)............ 21,205.2 21,634.9 22,872.8 23,935.9 12,358.1
Steam Sales................................ 2,910.0 2,935.7 2,961.7 2,987.9 738.7
Fuel Commodity Sales....................... 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales................ 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------
Total Revenues......................... $ 42,979.6 $44,132.4 $45,385.4 $46,474.6 $22,865.5
Commodity Expense (16)..................... ($5,626.6) ($5,810.5) ($6,016.8) ($6,230.4) ($3,216.9)
Firm Service Transportation Expense (17)... (10,004.8) (10,304.9) (10,614.1) (10,932.5) (5,599.0)
Variable Fuel Expense (18)................. (384.9) (376.7) (389.9) (403.6) (208.3)
Total Fuel Expenses.................... ($15,996.2) ($16,492.1) ($17,020.8) ($17,566.5) ($9,024.2)
GE Overhaul Accrual & Directed Starts (19). ($1,430.0) ($1,426.1) ($1,426.1) (1,426.1) ($711.1)
GE Contractual Services Fees (20).......... (931.3) (959.2) (988.0) (1,017.6) (521.2)
Plant Operations (21)...................... (2,702.8) (2,783.9) (2,867.4) (2,953.5) (1,512.6)
Other O&M and Plant Utilities (22)......... (465.9) (479.9) (494.3) (509.1) (260.7)
Administrative (23)........................ (1,105.4) (1,138.5) (1,172.7) (1,207.9) (618.6)
Taxes (24)................................. (1,577.7) (1,638.4) (1,700.7) (1,762.6) (1,277.6)
Syracuse University User Charge (25)....... (1,250.0) (1,250.0) (1,250.0) (1,250.0) (621.5)
----------------------------------------------------------------------------
Total O&M and Administrative Expenses... ($9,463.1) ($9,676.0) ($9,899.2) ($10,126.8) ($5,523.3)
Partnership Fees (26)...................... (444.5) (457.8) (471.6) (485.7) (248.8)
---------------------------------------------------------------------------
Total Expenses......................... ($25,903.8) ($26,625.9) ($27,391.5) ($28,178.?) ($14,7??.2)
Net Operating Cash Flow..................., $17,075.8 $17,506.5) $17,993.8) $18.295.7 $8,0??.3)
</TABLE>
E-1
<PAGE>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- --------------------------------------------------------------------------------
Cash Flow Waterfall & Distributable Cash CASE: Base
($ in thousands)
<TABLE>
<CAPTION>
4 months ended Projected Fiscal Years Ending December 31,
--------------------------------------------------------------------------
12/31/99 2000 2001 2002 2003 2004
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Operating Cash Flow............................... $5,338.8 $15,973.8 $15,834.9 $16,201.8 $16,615.6 $17,075.8
Interest Income (Security Accounts)................... 25.8 402.5 249.3 252.3 255.1 256.1
---------------------------------------------------------------------------
Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax (27).... 0.0 0.0 0.0 0.0 0.0 10.3
Fees & Other Partnership Expenses..................... 127.8 394.9 406.8 419.0 431.6 444.5
---------------------------------------------------------------------------
Cash Available for Debt Service....................... $5,492.4 $16,771.2 $16,491.8 $16,873.1 $17,302.2 $17,786.7
Withdrawals from Debt Service Reserve Account......... 0.0 46.2 0.0 0.0 0.0 0.0
Withdrawals from Working Capital Reserve Account...... 0.0 0.0 0.0 0.0 0.0 0.0
Withdrawals from Restricted Cash Deposit Account...... 0.0 4,364.6 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account. 0.0 0.0 0.0 0.0 0.0 0.0
Withdrawals from Escrow Reserve Account............... 0.0 450.0 0.0 0.0 0.0 0.0
Interest Payments..................................... 0.0 (5,516.6) (6,274.3) (5,640.6) (4,917.7) (4,087.7)
Principal Payments.................................... 0.0 (6,800.0) (5,950.0) (6,630.0) (7,650.0) (8,500.0)
----------------------------------------------------------------------------
Total Debt Service.................................... 0.0 (12,316.6) (12,224.3) (12,270.6) (12,567.7) (12,587.7)
Cash Available after Debt Service..................... 5,492.4 9,315.4 4,266.7 4,602.5 4,734.5 5,199.0
Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax......... 0.0 0.0 0.0 0.0 0.0 (10.3)
Fees & Other Partnership Expenses..................... (127.6) (349.9) (406.8) (419.0) (431.6) (444.5)
Deposits to Debt Service Reserve Account(DSRA)........ $0.0 $0.0 ($23.2) ($148.5) ($10.0) ($45.9)
Deposits to Working Capital Reserve Account(WCRA)..... (1,000.0) 0.0 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)..... (4,364.6) 0.0 0.0 0.0 0.0 0.0
------------------------------------------------------------------
Total Deposits to Security Accounts................... $5,364.6) 0.0 ($23.2) ($148.5) ($10.0) ($45.9)
Distributable Cash.................................... $0.0 $ 8,920.5 $ 3,836.8 $ 4.835.0 $ 4,293.8 $4,698.3
Cash Available for Debt Service....................... 5,492.4 16,771.2 16,491.0 16,873.1 17,302.2 17,786.7
Total Debt Service.................................... 0.0 12,316.6 12,224.3 12,270.6 12,567.7 12,587.7
Debt Service Coverage Ratio........................... NA 1.36x 1.35x 1.38x 1.38x 1.41x
-----------
Minimum Coverage Ratio..................... 1.35x
-----------
Average Coverage Ratio..................... 1.40x
-----------
Cash Available for Debt Service + RCDA................ 5,492.4 21,135.9 16,491.0 16,873.1 17,302.2 17,786.7
Total Debt Service.................................... 0.0 12,316.6 12,224.3 12,270.6 12,567.7 12,587.7
Debt Service Coverage Ratio........................... NA 1.72x 1.35x 1.38x 1.38x 1.41x
-----------
Minimum Coverage Ratio..................... 1.35x
-----------
Average Coverage Ratio..................... 1.45x
-----------
Cash Available for Debt Service + RCDA + DSRA......... 1,650.7 $27,294.2 $22,603.2 $23,008.4 $23,586.1 $24,080.5
Total Debt Service.................................... 0.0 12,316.6 12,224.3 12,270.8 12,567.7 12,587.7
Debt Service Coverage Ratio........................... NA 2.22x 1.85x 1.88x 1.88x 1.91x
-----------
Minimum Coverage Ratio..................... 1.85x
-----------
Average Coverage Ratio..................... 1.95x
-----------
-----------
Adjusted EBITDA/Interest Expense(28)....... 2.63x NA 3.04x 2.63x 2.99x 3.52x 4.35x
-----------
Total Debt/Adjusted EBITDA................. 4.06x NA 4.05x 3.71x 3.27x 2.81x 2.30x
-----------
<CAPTION>
---------------------------------------------------
2005 2006 2007 2008
---------------------------------------------------
<S> <C> <C> <C> <C>
Net Operating Cash Flow............................... $17,506.5 $17,993.9 $18.295.7 $8,069.3
Interest Income (Security Accounts)................... 259.7 262.8 149.0 17.5
---------------------------------------------------
Syracuse University User Charge....................... 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax (27).... 23.9 37.8 49.8 59.1
Fees & Other Partnership Expenses..................... 457.8 471.6 485.7 248.8
---------------------------------------------------
Cash Available for Debt Service....................... $18,248.0 $18,766.0 $18,980.2 $8,394.6
Withdrawals from Debt Service Reserve Account......... 0.0 0.0 6,512.5 0.0
Withdrawals from Working Capital Reserve Account...... 0.0 0.0 0.0 1,000.0
Withdrawals from Restricted Cash Deposit Account...... 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account. 0.0 0.0 3,500.0 0.0
Withdrawals from Escrow Reserve Account............... 0.0 0.0 3,000.0 0.0
Interest Payments..................................... (3,159.5) (2,124.2) (955.0) 0.0
Principal Payments.................................... (9,520.0) (10,880.0) (12,070.0) 0.0
---------------------------------------------------
Total Debt Service.................................... (12,679.5) (13,004.2) (13,025.0) 0.0
Cash Available after Debt Service..................... 5,568.5 5,761.9 18,967.7 9,394.6
Syracuse University User Charge....................... 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax......... (23.9) (37.8) (49.8) (59.0)
Fees & Other Partnership Expenses..................... (457.8) (471.6) (485.7) (248.8)
Deposit to Debt Service Reserve Account(DSRA)......... (162.3) ($10.4) $0.0 $0.0
Deposit to Working Capital Reserve Account(WCRA)...... 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)..... 0.0 0.0 0.0 0.0
---------------------------------------------------
Total Deposits to Security Accounts................... ($162.3) ($10.4) $0.0 $0.0
Distributable Cash.................................... $4,924.4 $5,242.1 $18.432.2 $9,068.8
Cash Available for Debt Service....................... 18,248.0 18,766.0 18,980.2 8,394.6
Total Debt Service.................................... 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio........................... 1.44x 1.44x 1.46x NA
-----------
Minimum Coverage Ratio..................... 1.35x
-----------
Average Coverage Ratio..................... 1.40x
-----------
Cash Available for Debt Service + RCDA................ 18,248.0 18,766.0 18,980.2 8,394.6
Total Debt Service.................................... 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio........................... 1.44x 1.44x 1.46x NA
-----------
Minimum Coverage Ratio..................... 1.35x
-----------
Average Coverage Ratio..................... 1.45x
-----------
Cash Available for Debt Service + RCDA + DSRA......... $24,587.7 $25,268.1 $25,492.7 $8,394.5
Total Debt Service.................................... 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio........................... 1.94x 1.94x 1.96x NA
-----------
Minimum Coverage Ratio..................... 1.85x
-----------
Average Coverage Ratio..................... 1.95x
-----------
-----------
Adjusted EBITDA/Interest Expense(28)....... 2.63x 5.78x 8.83x 19.88x NA
-----------
Total Debt/Adjusted EBITDA................. 4.06x 1.78x 1.22x 0.64x NA
-----------
</TABLE>
E-2
<PAGE>
BASE CASE FOOTNOTES
1) The Projected Operating Results and Financials are for the period from
September 1, 1999 through June 30, 2008, the date at which the Indexed Swap
Agreement and Power Put Agreement are terminated.
2) Net average capacity is based on historical operating information and
differs from nameplate capacity due to seasonal variations in operating
conditions.
3) Historical availability for the plant from January 1996 through September
1999 has been 94.5%. The 92.5% availability factor was determined to be a fair
and conservative estimate to be used on a going forward basis.
4) Plant capacity has averaged 92.3% from January 1996 through August 1999 as
adjusted for reserve hours in which the plant was either dispatched off
according to the cyclic operating plant instituted as of January 1999 or due to
Niagara Mohawk exercising the pre-Master Restructuring Agreement, Power Purchase
Agreement option of having the plant dispatched off. Niagara Mohawk no longer
has the option under the current Power Put and Indexed Swap contractual
arrangements.
5) The heat rate is based on historical operating data and degraded at a rate
of 0.5% per year. It is an all-in heat rate which includes fuel used in the duct
burners and the Syracuse boilers.
6) Projected electricity generation figures are based on net average capacity,
plant capacity, and a base load operating plan in which the plant runs whenever
it is available.
7) Steam throughput is directly correlated to Syracuse University steam demand
which has remained relatively constant. Throughput projections are based on
historical demand averages from January 1997 through August 1999. All steam
output is sold to Syracuse University and its ancillary users.
8) Fuel Consumed at the burner tip is a function of the heat rate and the
annual megawatt-hours
9) Entitlement consumption is a function of the fuel consumed at the burner tip
and the fuel consumed during transportation from Alberta to the site.
10) On-peak electricity pricing is based on estimates provided by the Sponsors.
The Sponsors represent that these figures were extracted from current Project
Orange Associates, L.P. estimates. A market study was not undertaken due to the
structure of the Power Put Agreement and Indexed Swap Agreement which hedge the
Project against changes in the market price of electricity provided that the
Project produces electricity.
11) The calculation of Indexed Swap Price is described in the review of that
agreement. The Indexed Swap price used in the pro forma for calendar years is a
weighted average of the contractual years.
12) Steam Price is described in the steam sales agreement. It is reduced in 2008
as described in the agreement.
13) Power Put Payments are based on the assumption that all of the electricity
produced is put to Niagara Mohawk according to the terms of the Power Put
Agreement prior to the establishment of the ISO/PE and purchased by market
buyers after the Power Put Agreement is terminated. Establishment of the ISO/PE,
under the terms of the Power Put Agreement requires that certain volumetric
trading levels be achieved. The Sponsor has assumed that establishment of the
ISO/PE and termination of the Power Put Agreement will occur on January 1, 2001.
This has no financial effect on the plant under the current operating
assumptions.
E-3
<PAGE>
BASE CASE FOOTNOTES
14) Indexed Swap Floating Payments are based on the on-peak market price times
the annual notion quantity times the percentage of total on-peak hours plus the
off-peak market price times the annual notion quantity times the percentage of
total off-peak hours. Annual on-peak and off-peak percentages are adjusted for
holidays and leap years.
15) Indexed Swap Fixed Payments are based on the calculated Indexed Swap times
the annual notional quantity stated in the Indexed Swap Agreement.
16) Commodity expense includes operating costs charged at the historical price
of US$ 0.4053/MMBtu times the total annual receipt volume into NOVA, and royalty
costs based on a historical Canadian Reference price times the applicable
Royalty Rate of 0.2052/1000 cubic meters times the total annual receipt volume
into NOVA converted into US$ at the assumed exchange rate. Commodity costs are
offset by Royalty Recovery Costs based on the total annual receipt volume into
NOVA times the historical recovery rate in US$.
17) Firm service transportation is provided by NOVA, TransCanada, and Tennessee
Gas Pipeline as described in this section. The rate charged is determined by the
relevant regulatory agencies in Canada and the United States.
18) Variable transportation expenses are described in this section of the
report.
19) GE overhaul accrual and directed starts fees are based on the fired hour fee
of $88 per hour. Directed start fees begin accumulating with the 56/th/ directed
start and are charged according to the provisions listed in the Operation and
Maintenance Agreement. According to the Sponsors' proposed operating plan, the
Project will be dispatched as a base load facility and will not incur any
directed start fees.
20) GE Contractual Services fees include a $350,000 operating fee, a $50,000
spare parts carrying fee, and a $50,000 handling fee as stated in the Operations
and Maintenance Agreement dated November 1, 1998. A $350,000 allotment for the
GE Industrial Aeroderivatives Lease Engine Program is also included starting in
2000 and is based on contract estimates provided by the Sponsors. Note that the
1999 figure is based on the current Operations and Maintenance Agreement fee of
$300,000 as escalated under contract terms. For the purposes of the projections
and according to the contractual arrangement, each of the figures is escalated
at inflation going forward.
21) Plant Operation figures are based on historical data from January 1996
through August 1999. Figures are projected forward at the assumed inflation
rate.
22) Other O&M and Plant Maintenance figures are based on historical data from
January 1996 through August 1999. Figures are projected forward at the assumed
inflation rate.
23) Administrative expenses include insurance expense, accounting, consulting,
engineering, legal fees, industry group dues, and additional fees. Insurance
expenses have been provided by the Sponsors according to contractual estimates
and preliminary arrangements with the Insurers. Legal fees differ from
historical averages due to Project Orange Associates' involvement in the MRA and
the revision of the original Power Purchase Agreement with Niagara Mohawk. All
other figures are based on historical data from January 1996 through August
1999. Figures are projected forward at the assumed inflation rate.
24) Taxes charged to the Project include payments in-lieu of taxes (PILOT),
property taxes, New York State Gross Receipt taxes, and New York State Gas
Import taxes, PILOT payments are calculated according to provisions listed in
the Payment in Lieu of Tax Agreement between The City of Syracuse, City of
Syracuse Industrial Development Agency, and Project Orange
E-4
<PAGE>
BASE CASE FOOTNOTES
Associates, L.P. dated April 5, 1991. Property taxes and New York State Gross
Receipts taxes are based on historical data from January 1996 through August
1999. New York State Gas Import taxes are currently passed through to Niagara
Mohawk according to the S.C.-6 pricing calculations. It is uncertain whether
these taxes will continue to be absorbed into market pricing after the
establishment of the ISO/PE. The New York State Gas Import tax projections are
based on estimates provided by the Sponsors. Note: Stone & Webster makes no
statement or representation regarding any and all tax calculations. All tax
projections and calculations are provided by the Sponsors.
25) The Syracuse University User Charge is related to the use of the Steam Plant
and facilities as listed in the Steam Contract between Project Orange
Associates, L.P. and Syracuse University dated February 27, 1990. The annual fee
charged for use of the facilities will be $1,250,000 through the term of the
projections.
26) Partnership fees include annual fees paid to Niagara Mohawk Energy
Marketing, Inc. as the asset manager for the Project. Additional fees include
bank service fees which are calculated based on historical data from January
1996 through August 1999. Figures are projected forward at the assumed inflation
rate.
27) The Incremental Tariff Rate of the PILOT agreement includes all incremental
amounts greater than the annual guaranteed amount as calculated by the Sponsors
and according to the PILOT agreement. This incremental amount is subordinated to
the Notes.
28) EBITDA is defined as Cash Available for Debit Service
E-5
<PAGE>
<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE: Availibility Reduced to 85% 12/2/99 1:51 PM
($ in thousands, except price per MWH)
4 Months ended Projected Fiscal Years Ending December 31,
12/31/99 2000 2001 2002 2003
================================================== ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)..................... 79.0 79.0 79.0 79.0 79.0
Availability (3).................................. 85.0% 85.0% 85.0% 85.0% 85.0%
Capacity (4)...................................... 85.0% 85.0% 85.0% 85.0% 85.0%
Heat Rate HHV (MMBtu/kWh) (5)..................... 10,000.0 10,050.0 10,100.3 10,150.3 10,201.5
Electricity Produced (MWH) (6).................... 196,615.2 589,845.6 588,234.0 588,234.0 588,234.0
Steam Throughout (1,000 lbs) (7).................. 202,302.0 639,385.1 639,385.1 639,385.1 639,385.1
Fuel Consumed (MMBtu) (8)......................... 1,966,152.0 5,927,948.3 5,941,310.5 5.971,017.0 6,000,872.1
Entitlement Used (MMBtu) (9)...................... 2,189,410.7 6,601,073.3 6,615,952.7 6,649,032.5 6,682,277.7
==================================================
Debt Offering Annual Interest Rate................ 10.50% 10.50% 10.50% 10.50% 10.50%
General Inflation................................. 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$).......................... $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh)(10)............ $ 30.43 $ 32.41 $ 34.85 $ 33.94 $ 36.56
Off-Peak Electricity Pricing ($MWh)............... $ 22.38 $ 22.36 $ 23.70 $ 25.30 $ 25.30
Indexed Swap Price ($MWh)(11)..................... $ 54.23 $ 54.80 $ 56.51 $ 58.04 $ 59.70
Steam Price ($/1,000lbs)(12)...................... $ 4.36 $ 4.39 $ 4.43 $ 4.47 $ 4.51
==================================================
Power Put Contract
Energy Sales - On Peak......................... $ 2,488.8 $ 7,769.5 $ 8,354.4 $ 8,136.3 $ 8,798.7
Energy Sales - Off-Peak........................ 2,569.8 7,828.7 8,259.7 8,817.3 8,793.5
Capacity Sales - On Peak....................... 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak...................... 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------
Total Power Put Payments (13)..................... 5,058.6 15,598.2 16,614.1 16,953.5 17,592.2
Indexed Swap Contract
Floating (payment)............................ (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2)
Floating (payment): Capacity.................. 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------
Total Floating (Payments) (14).................... (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2)
Fixed Payment................................. 11,984.8 36,332.5 37,464.4 38,483.4 39.581.6
----------------------------------------------------------------------------
Total Indexed Swap Payment (15)................... 6,298.8 18,799.8 18,738.6 19,375.0 19,753.3
Steam Sales....................................... 881.5 2,809.3 2,834.2 2,859.2 2,884.5
Fuel Commodity Sales.............................. 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release sales....................... 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------
Total Revenues............................... $ 12,238.9 $ 37,207.3 $ 38,196.5 $ 38,187.7 $ 40,230.1
==================================================
Commodity Expense (16)........................... ($1,463.7) $ 4,496.2) ($4,643.3) ($4,808.4) ($4,979.3)
Firm Service Transportation Expense (17).......... (2,876.7) (8,889.1) (9,155.8) (9,430.5) (9,713.4)
Variable Fuel Expense (18)........................ (94.0) (292.0) (301.5) (312.1) (323.0)
----------------------------------------------------------------------------
Total Fuel Expenses.......................... ($4,434.5) ($13,677.3) ($14,100.6) ($14,550.9) ($15,015.7)
==================================================
GE Overhaul Accrual & Directed starts (19)........ ($438.0) ($1,314.1) ($1,310.5) ($1,310.5) ($1,310.5)
GE Contractual Services Fees (20)................. (257.5) (827.4) (852.2) (877.8) (904.1)
Plant Operations (21)............................. (777.2) (2,401.4) (2,473.5) (2,547.7) (2,624.1)
Other O&M and Plant Utilities (22)................ (134.0) (413.9) (426.4) (439.1) (452.3)
Administrative (23)............................... (317.8) (982.1) (1,011.6) (1,041.9) (1,073.2)
Taxes (24)........................................ (266.9) (810.1) (1,434.4) (1,477.5) (1,521.8)
Syracuse University User Charge (25).............. (416.7) (1,250.0) (1,250.0) (1,250.0) (1,250.0)
----------------------------------------------------------------------------
Total O&M and Administrative Expenses........ ($2,608.1) ($7,999.1) ($8,758.5) ($8,944.5) ($9,136.0)
==================================================
Partnership Fees (26)............................. (127.8) (394.9) (406.8) (419.0) (431.6)
----------------------------------------------------------------------------
Total Expenses............................... ($7,170.3) ($22,071.3) ($23,265.9) ($23,914.4) ($24,583.3)
Net Operating Cash Flow........................... $ 5,068.6 $ 15,135.9 $ 14,926.9 $ 15,273.3 $ 15,848.8
<CAPTION>
2004 2005 2006 2007 2008(1)
================================================== -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)..................... 79.0 79.0 79.0 79.0 79.0
Availability (3).................................. 85.0% 85.0% 85.0% 85.0% 85.0%
Capacity (4)...................................... 85.0% 85.0% 85.0% 85.0% 85.0%
Heat Rate HHV (MMBtu/kWh) (5)..................... 10,252.5 10,303.8 10,355.3 10,407.1 10,459.1
Electricity Produced (MWH) (6).................... 589,845.6 588,234.0 588,234.0 588,234.0 293,311.2
Steam Throughout (1,000 lbs) (7).................. 639,385.1 639,385.1 639,385.1 639.385.1 319,692.6
Fuel Consumed (MMBtu) (8)......................... 6,047,399.4 6,061,030.8 6,091,336.0 6,121,792.7 3,067,772.9
Entitlement Used (MMBtu) (9)...................... 6,734,088.2 6,749,267.5 6,783,013.8 6,818,928.9 3,416,121.8
==================================================
Debt Offering Annunal Interest Rate............... 10.50% 10.50% 10.50% 10.50% 10.50%
General Inflation................................. 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$).......................... $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh)(10)............ $ 36.79 $ 36.81 $ 36.81 $ 36.81 $ 36.81
Off-Peak Electricity Pricing ($MWh)............... $ 24.22 $ 26.23 $ 26.23 $ 26.23 $ 26.23
Indexed Swap Price (SWWh) (11).................... $ 61.37 $ 63.19 $ 65.04 $ 66.64 $ 67.88
Steam Price ($/1,000 lbs) (12).................... $ 4.55 $ 4.59 $ 4.83 $ 4.67 $ 2.31
==================================================
Power Put Contract
Energy Sales - On Peak......................... $ 8,923.3 $ 8,858.9 $ 8,824.3 $ 8,824.3 $ 4,484.1
Energy Sales - Off Peak........................ 8,411.6 9,116.7 9,141.4 9,141.4 4,512.6
Capacity Sales - On Peak....................... 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak...................... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Power Put Payments (13)..................... 17,334.9 17,975.6 17,965.7 17,965.7 8,976.6
Indexed Swap Contract
Floating (payment)............................ (19,484.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Floating (payment): Capacity.................. 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Floating (Payments) (14).................... (19,484.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Fixed Payment................................. 40,690.0 41,895.3 43,122.0 44,185.0 22,503.5
---------------------------------------------------------------------------
Total Indexed Swap Payment (15)................... 21,205.2 21,634.9 22,872.8 23,935.9 12,358.1
Steam Sales....................................... 2,910.0 2,935.7 2,961.7 2,987.9 738.7
Fuel Commodity Sales.............................. 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release sales....................... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Revenues............................... $ 41,450.0 $ 42,546.3 $ 43,808.2 $ 44,889.4 $ 22,073.4
==================================================
Commodity Expense (16)............................ ($5,170.3) ($5,339.4) ($5,528.9 ($5,725,2) ($2,956.1)
Firm Service Transportation Expense (17).......... (10,004.8) (10,304.9) (10,614.1) (10,932.5) (5,599.0)
Variable Fuel Expense (18)........................ (335.3) (345.1) (358.3) (370.9) (191.4)
---------------------------------------------------------------------------
Total Fuel Expenses.......................... ($15,510.4) ($15,990.4) ($16,501.3) ($17,028.8) ($8,746.4)
==================================================
GE Overhaul Accrual & Directed starts (19)........ ($1,314.1) ($1,310.5) ($ 1,310.5) ($1,310.5) ($853.5)
GE Contractual Services Fees (20)................. (931.3) (959.2) (988.0) (1,017.6) (521.2)
Plant Operations (21)............................. (2,702.8) (2,783.9) (2,867.4) (2,953.5) (1,512.6)
Other O&M and Plant Utilities (22)................ (465.9) (479.9) (494.3) (509.1) (260.7)
Administrative (23)............................... (1,105.4) (1,138.5) (1,172.7) (1,207.9) (618.6)
Taxes (24)........................................ (1,577.7) (1,638.4) (1,700.7) (1,762.6) (1,277.6)
Syracuse University User Charge (25).............. (1,250.0) (1,250.0) (1,250.0) (1,250.0) (621.5)
---------------------------------------------------------------------------
Total O&M and Administrative Expenses........ ($9,347.2) ($9,560.4) ($9,783.5) ($10,011.1) ($5,465.6)
==================================================
Partnership Fees (26)............................. (444.5) (457.8) (471.6) (485.7) (248.8)
---------------------------------------------------------------------------
Total Expenses............................... ($25,302.1) ($26,098.6) ($26,756.4) ($27,525.4) ($14,460.8)
Net Operating Cash Flow........................... $ 16,148.0 $ 16,537.7 $ 17,043.8 $ 17,384.0 $ 7,612.6
</TABLE>
<PAGE>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- --------------------------------------------------------------------------------
Cash Flow Waterfall & Distributable Cash CASE: Availability Reduced to 85%
12/2/99 1:51PM
(in thousands)
<TABLE>
<CAPTION>
4 months ended Projected Fiscal Years Ending December 31,
12/31/99 2000 2001 2002 2003
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow............................... $5,068.6 $15,135.9 $14,920.9 $15,273.3 $15,64?.8
Interest Income (Security Accounts)................... 25.4 393.0 506.7 621.0 745.4
Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax (27).... 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses..................... 127.8 394.9 406.8 419.0 431.?
Cash Available for Debt Service....................... $5,221.8 $15,?23.? $15,834.3 $16,313.3 $1?,?23.7
Withdrawals from Debt Service Reserve Account......... 0.0 46.2 0.0 0.0 0.0
Withdrawals from Working Capital Reserve Account...... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Restricted Cash Deposit Account...... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account. 0.0 0.0 0.0 0.0 0.0
Withdrawals from Escrow Reserve Account............... 0.0 450.0 0.0 0.0 0.0
Interest Payments..................................... 0.0 (5,516.6) (6,274.3) (5,640.6) (4,917.7)
Principal Payments.................................... 0.0 (6,800.0) (5,950.0) (6,630.0) (7,650.0)
Total Debt Service.................................... 0.0 (12,316.6) (12,224.3) (12,270.6) (12,567.7)
Cash Available after Debt Service..................... 5,221.8 4,103.4 3,?10.1 4,042.7 4,258.0
Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax......... 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses..................... (127.8) (394.9) (406.8) (419.0) (431.6)
Deposit to Debt Service Reserve Account(DSRA)......... $0.0 $0.0 ($23.2) ($148.5) ($10.0)
Deposit to Working Capital Reserve Account(WCRA)...... (1,000.0) 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)..... (4,094.0) (3,258.5) (3,180.1) (3,475.2) (3,?14.5)
Total Deposits to Security Accounts................... ($5,094.0) ($3,258.5) ($3,203.3) ($3,623.7) ($3,824.5)
Distributable Cash.................................... $0.0 $450.0 $0.0 $0.0 $0.0
Cash Available for Debt Service....................... 5,221.8 15,923.9 15,834.3 16,313.3 16,823.7
Total Debt Service.................................... 0.0 12,316.6 12,224.3 12,270.6 12,567.7
Debt Service Coverage Ratio........................... NA 1.29x 1.30x 1.33x 1.34x
-----------
Minimum Coverage Ratio..................... 1.29x
-----------
Average Coverage Ratio..................... 1.35x
-----------
Cash Available for Debt Service + RCDA................ 5,221.8 20,017.9 23,186.8 26,845.9 30,831.5
Total Debt Service.................................... 0.0 12,31?.? 12,224.3 12,270.? 12,567.7
Debt Service Coverage Ratio........................... NA 1.63x 1.90x 2.19x 2.45x
-----------
Minimum Coverage Ratio..................... 1.36x
-----------
Average Coverage Ratio..................... 1.89x
-----------
Cash Available for Debt Service + RCDA + DSRA......... $11,380.1 $26,176.2 $29,299.0 $32,981.2 $37,115.3
Total Debt Service.................................... 0.0 12,316.6 12,224.3 12,270.5 12,567.7
Debt Service Coverage Ratio........................... NA 2.13x 2.40x 2.69x 2.95x
-----------
Minimum Coverage Ratio..................... 1.86x
-----------
Average Coverage Ratio..................... 2.39x
-----------
-----------
Adjusted EBITDA/Interest Expense(28)....... 2.52x NA 2.89x 2.52x 2.89x 3.42x
-----------
Total Debt/Adjusted EBITDA................. 4.27x NA 4.27x 3.87x 3.39x 2.89x
-----------
<CAPTION>
2004 2005 2006 2007 2008
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow............................... $16,148.0 $16,537.7 $17,043.8 $17,364.0 $7,612.6
Interest Income (Security Accounts)................... 879.9 259.7 262.8 149.0 17.5
Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax (27).... 10.3 23.9 37.8 49.8 59.1
Fees & Other Partnership Expenses..................... 444.5 457.8 471.6 485.7 248.8
Cash Available for Debt Service....................... $17,482.6 $17,279.2 $17,815.9 $18,048.5 $7,838.8
Withdrawals from Debt Service Reserve Account......... 0.0 0.0 0.0 6,512.5 0.0
Withdrawals from Working Capital Reserve Account...... 0.0 0.0 0.0 0.0 1,000.0
Withdrawals from Restricted Cash Deposit Account...... 17,822.3 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account. 0.0 0.0 0.0 3,500.0 0.0
Withdrawals from Escrow Reserve Account............... 0.0 0.0 0.0 3,000.0 0.0
Interest Payments..................................... (4,087.7) (3,159.5) (2,124.2) (955.0) 0.0
Principal Payments.................................... (8,500.0) (9,520.0) (10,880.0) (12,070.0) 0.0
Total Debt Service.................................... (12,587.7) (12,679.5) (13,004.2) (13,025.0) 0.0
Cash Available after Debt Service..................... 22,717.2 4,599.7 4,811.8 18,036.0 8,938.0
Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax......... (10.3) (23.9) (37.8) (49.8) (59.1)
Fees & Other Partnership Expenses..................... (444.5) (457.8) (471.6) (485.7) (248.8)
Deposit to Debt Service Reserve Account(DSRA)......... ($45.9) ($162.3) ($10.4) $0.0 $0.0
Deposit to Working Capital Reserve Account(WCRA)...... 0.0 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)..... 0.0) 0.0 0.0 0.0 0.0
Total Deposits to Security Accounts................... ($45.9) ($162.3) ($10.4) $0.0 $0.0
Distributable Cash.................................... $22,216.5 $3,955.6 $4,292.0 $17,500.5 $8,630.1
Cash Available for Debt Service....................... 17,482.6 17,279.2 17,815.9 18,048.5 7,938.0
Total Debt Service.................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio........................... 1.39x 1.36x 1.37x 1.39x NA
-----------
Minimum Coverage Ratio..................... 1.29x
-----------
Average Coverage Ratio..................... 1.35x
-----------
Cash Available for Debt Service + RCDA................ 35,304.9 17,279.2 17,815.9 18,048.5 7,938.0
Total Debt Service.................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio........................... 2.80x 1.36x 1.37x 1.39x NA
-----------
Minimum Coverage Ratio..................... 1.36x
-----------
Average Coverage Ratio..................... 1.89x
-----------
Cash Available for Debt Service + RCDA + DSRA......... $41,598.7 $23,618.9 $24,318.0 $24,5?1.0 $7,938.0
Total Debt Service.................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio........................... 3.30x 1.86x 1.87x 1.89x NA
-----------
Minimum Coverage Ratio..................... 1.86x
-----------
Average Coverage Ratio..................... 2.39x
-----------
-----------
Adjusted EBITDA/Interest Expense(28)....... 2.52x 4.28x 5.47x 8.39x 18.90x NA
-----------
Total Debt/Adjusted EBITDA................. 4.27x 2.34x 1.88x 1.29x 0.67x NA
-----------
</TABLE>
E-7
<PAGE>
AVAILABILITY AND CAPACITY FACTOR REDUCTION FOOTNOTES TO MODEL
All footnotes are the same as the Base Case Footnotes except the following:
3) Historical availability for the plant from January 1996 through
September 1999 has been 94.5%. The 92.5% availability factor was determined
to be a fair and conservative estimate to be used on a going forward basis.
In this sensitivity, the availability and capacity factors are reduced to
85.0%
4) Capacity Factor is reduced to 85.0% for this sensitivity. This reduces
the megawatt-hours sold under the Power Put Agreement as well as reducing
the commodity cost of the fuel and the variable transportation expense.
E-8
<PAGE>
<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE O&M Increased by 15%
($ in thousands, except price per MWh)
4 months ended| Projected Fiscal Years Ending December 31,
----------------------------------------------------------------------------------------
12/31/99| 2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Average Capacity (MW)(2).................. 79.0 79.0 79.0 79.0 79.0 79.0
Availability (3).............................. 92.5% 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4).................................. 92.5% 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)................. 10,000.0 10,050.0 10,100.3 10,150.8 10,201.5 10,252.5
Electricity Produced (MWh) (6)................ 213,953.6 641,890.8 640,137.0 640,137.0 640,137.0 641,890.8
Steam Throughput (1,000 lbs) (7).............. 202,302.0 639,385.1 639,385.1 639,385.1 639,385.1 639,385.1
Fuel Consumed (MMBtu) (8)..................... 2,139,636.0 6,451,002.5 6,465,543.7 6,497,871.5 6,530,360.8 6,580,993.5
Entitlement Used (MMBtu) (9).................. 2,382,594.0 7,183,520.9 7,199,713.3 7,235,711.8 7,271,890.4 7,328,272.5
Debt Offering Annual Interest Rate............ 10.50% 10.50% 10.50% 10.50% 10.50% 10.50%
General Inflation............................. 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$)...................... $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($/MWh) (10)...... $ 30.43 $ 32.41 $ 34.85 $ 33.94 $ 36.56 $ 36.79
Off-Peak Electricity Pricing ($/MWh).......... $ 22.38 $ 22.36 $ 23.70 $ 25.30 $ 25.30 $ 24.22
Indexed Swap Price ($/MWh) (11)............... $ 54.23 $ 54.80 $ 56.51 $ 58.04 $ 59.70 $ 61.37
Steam Price ($/1,000 lbs) (12)................ $ 4.36 $4.39 $ 4.43 $ 4.47 $ 4.51 $ 4.55
Power Put Contract
Energy Sales - On-Peak................... $ 2,708.4 $ 8,455.0 $ 9,091.6 $ 8,854.2 $ 9,575.1 $ 9,710.6
Energy Sales - Off-Peak.................. 2,796.6 8,519.5 8,988.4 9,595.3 9,569.4 9,153.8
Capacity Sales - On Peak................. 0.0 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak................ 0.0 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------------
Total Power Put Payments (13)................. 5,505.0 16,974.5 18,080.0 18,449.4 19,144.5 18,864.4
Indexed Swap Contract
Floating (Payment)....................... (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2) (19,484.8)
Floating (Payment): Capacity............. 0.0 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------------
Total Floating (Payments) (14)................ (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2) (19,484.8)
Fixed Payment............................ 11,984.8 36,332.5 37,464.4 38,483.4 39,581.6 40,690.0
-------------------------------------------------------------------------------------
Total Indexed Swap Payment (15)............... 8,298.8 18,799.8 18,738.6 19,375.0 19,753.3 21,205.2
Steam Sales................................... 881.5 2,809.3 2,834.2 2,859.2 2,884.5 2,910.0
Fuel Commodity Sales.......................... 0.0 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales................... 0.0 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------------
Total Revenues........................ $12,685.3 $38,583.6 $ 39,652.8 $40,683.7 $41,782.3 $42,979.6
Commodity Expense (16)........................ ($1,592.8) ($4,892.9) ($5,053.1) ($5,232.7) ($5,418.7) ($5,626.6)
Firm Service Transportation Expense (17)...... (2,876.7) (8.889.1) (9,155.8) (9,430.6) (9,713.4) (10,004.8)
Variable Fuel Expense (18).................... (102.3) (317.8) (328.1) (339.6) (351.5) (364.9)
-------------------------------------------------------------------------------------
Total Fuel Expenses................... ($4,571.9) ($14,099.8) ($14,536.9) ($15,002.8) ($15,483.6) ($15,996.2)
GE Overhaul Accrual & Directed Starts (19).... ($476.7) ($1,430.0) ($1,426.1) ($1,426.1) ($1,426.1) ($1,430.0)
GE Contractual Services Fees (20)............. (257.5) (827.4) (852.2) (877.8) (904.1) (931.3)
Plant Operations (21)......................... (777.2) (2,761.6) (2,844.5) (2,929.8) (3,017.7) (3,108.2)
Other O&N and Plant Utilities (22)............ (134.0) (476.0) (490.3) (505.0) (520.2) (535.8)
Administrative (23)........................... (317.8) (1,129.4) (1,163.3) (1,198.2) (1,234.1) (1,271.2)
Taxes (24).................................... (268.9) (833.7) (1,458.7) (1,502.5) (1,547.6) (1,604.3)
Syracuse University User Charge (25).......... (416.7) (1,250.0) (1,250.0) (1,250.0) (1,250.0) (1,250.0)
-------------------------------------------------------------------------------------
Total O&M and Administrative
Expenses............................. ($2,646.7) ($8,708.2) ($9,485.2) ($9,689.5) ($9,899.9) ($10,130.8)
Partnership Fees (26)......................... (127.8) (454.2) (467.8) (481.8) (496.3) (511.2)
-------------------------------------------------------------------------------------
Total Expenses........................ ($7,346.4) ($23,282.2) ($24,489.9) ($25,174.1) ($25,879.7) ($26,638.2)
Net Operating Cash Flow....................... $5,338.8 $15,321.4 $15,162.9 $15,509.6 $15,902.6 $16,341.4
<CAPTION>
Project Fiscal Years Ending December 31,
----------------------------------------------------------
2005 2006 2007 2008(1)
----------------------------------------------------------
<S> <C> <C> <C> <C>
Net Average Capacity (MW)(2).................. 79.0 79.0 79.0 79.0
Availability (3).............................. 92.5% 92.5% 92.5% 92.5%
Capacity (4).................................. 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)................. 10,303.8 10,355.3 10,407.1 10,459.1
Electricity Produced (MWh) (6)................ 640,137.0 640,137.0 640,137.0 319,191.6
Steam Throughput (1,000 lbs) (7).............. 639,385.1 639,385.1 639,385.1 319,692.6
Fuel Consumed (MMBtu) (8)..................... 6,595,827.7 6,628,806.8 6,661,950.8 3,338,458.7
Entitlement Used (MMBtu) (9).................. 7,344,791.1 7,381,515.1 7,418,422.6 3,717,544.3
Debt Offering Annual Interest Rate............ 10.50% 10.50% 10.50% 10.50%
General Inflation............................. 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$)...................... $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($/MWh) (10)...... $ 36.81 $ 36.81 $ 36.81 $ 36.81
Off-Peak Electricity Pricing ($/MWh).......... $ 26.23 $ 26.23 $ 26.23 $ 26.23
Indexed Swap Price ($/MWh) (11)............... $ 63.19 $ 65.04 $ 66.64 $ 67.88
Steam Price ($/1,000 lbs) (12)................ $ 4.59 $ 4.63 $ 4.67 $ 2.31
Power Put Contract
Energy Sales - On-Peak................... $ 9,640.6 $ 9,602.9 $ 9,602.9 $ 4,857.9
Energy Sales - Off-Peak.................. 9,921.1 9,948.0 9,948.0 4,910.7
Capacity Sales - On Peak................. 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak................ 0.0 0.0 0.0 0.0
-------------------------------------------------------
Total Power Put Payments (13)................. 19,561.7 19,550.9 19,550.9 9,768.7
Indexed Swap Contract
Floating (Payment)....................... (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Floating (Payment): Capacity............. 0.0 0.0 0.0 0.0
-------------------------------------------------------
Total Floating (Payments) (14)................ (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Fixed Payment............................ 41,895.3 43,122.0 44,185.0 22,503.5
-------------------------------------------------------
Total Indexed Swap Payment (15)............... 21,634.9 22,872.8 23,935.9 12,358.1
Steam Sales................................... 2,935.7 2,961.7 2,987.9 738.7
Fuel Commodity Sales.......................... 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales................... 0.0 0.0 0.0 0.0
-------------------------------------------------------
Total Revenues........................ $44,132.4 $45,385.4 $46,474.6 $22,865.5
Commodity Expense (16)........................ ($5,810.5) ($6,016.8) ($8,230.4) ($3,216.9)
Firm Service Transportation Expense (17)...... ($10,304.9) (10,614.1) (10,932.5) (5,599.0)
Variable Fuel Expense (18).................... (376.7) (389.9) (403.6) (208.3)
-------------------------------------------------------
Total Fuel Expenses................... ($16,492.1) ($17,020.8) ($17,566.5) ($9,024.2)
GE Overhaul Accrual & Directed Starts (19).... ($1,426.1) ($1,426.1) ($1,426.1) ($711.1)
GE Contractual Services Fees (20)............. (959.2) (988.0) (1,017.6) (521.2)
Plant Operations (21)......................... (3,201.5) (3,297.5) (3,396.5) (1,739.5)
Other O&N and Plant Utilities (22)............ (551.8) (568.4) (585.4) (299.8)
Administrative (23)........................... (1,309.3) (1,348.6) (1,389.0) (711.4)
Taxes (24).................................... (1,685.8) (728.9) (1,791.6) (1,292.5)
Syracuse University User Charge (25).......... (1,250.0) (1,250.0) (1,250.0) (621.5)
-------------------------------------------------------
Total O&M and Administrative
Expenses............................. ($10,363.7) ($10,607.5) ($10,856.3) ($5,896.9)
Partnership Fees (26)......................... (526.5) (542.3) (558.6) (286.1)
-------------------------------------------------------
Total Expenses........................ ($27,382.3) ($28,170.6) ($28,981.4) ($15,207.2)
Net Operating Cash Flow....................... $16,750.1 $17,214.8 $17,403.3 $7,658.3
</TABLE>
E-9
<PAGE>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- --------------------------------------------------------------------------------
Cash Flow Waterfall & Distributable Cash CASE: O&M Increased by 15%
($ in thousands)
<TABLE>
<CAPTION>
4 months ended Projected Fiscal Years Ending December 31,
------------------------------------------------------------------------
12/31/99 2000 2001 2002 2003
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow.................................... $5,338.8 $15,321.4 $15,162.9 $15,509.6 $15,902.6
Interest Income (Security Accounts)........................ 25.8 402.5 523.0 646.3 779.9
------------------------------------------------------------------------
Syracuse University User Charge............................ 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax (27).......... 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses.......................... 127.8 454.2 467.8 481.8 496.3
------------------------------------------------------------------------
Cash Available for Debt Service............................ $5,492.4 $16,178.0 $16,158.6 $16,637.7 $17,175.?
Withdrawals from Debt Service Reserve Account.............. 0.0 46.2 0.0 0.0 0.0
Withdrawals from Working Capital Reserve Account........... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Restricted Cash Deposit Account........... 0.0 0.0 0.0 0.0 14,993.2
Withdrawals from Capital Expenditures Reserve Account...... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Escrow Reserve Account.................... 0.0 450.0 0.0 0.0 0.0
Interest Payments.......................................... 0.0 (5,516.6) (6,274.3) (5,640.6) (4,917.7)
Principal Payments......................................... 0.0 (6,800.0) (5,950.0) (6,630.0) (7,650.0)
------------------------------------------------------------------------
Total Debt Service......................................... 0.0 (12,316.6) (12,224.3) (12,270.6) (12,567.7)
Cash Available after Debt Service.......................... 5,492.4 4,357.6 3,929.4 4,367.1 19,604.3
Syracuse University User Charge............................ 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax .............. 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses.......................... (127.8) (454.2) (467.8) (481.8) (496.3)
Deposits to Debt Service Reserve Account (DSRA)............ $0.0 $0.0 ($23.2) ($148.5) ($10.0)
Deposits to Working Capital Reserve Account (WCRA)......... (1,000.0) 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA).......... (4,364.6) (3,453.4) (3,438.4) (3,736.8) 0.0
------------------------------------------------------------------------
Total Deposits to Security Accounts........................ ($5,364.6) ($3,453.4) ($3,461.6) ($3,885.3) ($10.0)
Distributable Cash......................................... $ 0.0 $450.0 0.0 $ 0.0 $19,098.0
Cash Available for Debt Service............................ 5,492.4 16,178.0 16,153.6 16,637.7 17,178.8
Total Debt Service......................................... $0.0 12,316.6 12,224.3 12,270.6 12,567.7
Debt Service Coverage Ratio................................ NA 1.31x 1.32x 1.36x 1.37x
--------
Minimum Coverage Ratio............................. 1.31x
--------
Average Coverage Ratio............................. 1.36x
--------
Cash Available for Debt Service + RCDA..................... 5,492.4 20,542.6 23,971.7 27,894.2 32,171.9
Total Debt Service......................................... 0.0 12,316.6 12,224.3 12,270.6 12,567.7
Debt Service Coverage Ratio................................ NA 1.67x 1.96x 2.27x 2.56x
--------
Minimum Coverage Ratio............................. 1.36x
--------
Average Coverage Ratio............................. 1.75x
--------
Cash Available for Debt Service + RCDA + DSRA.............. $11,650.7 $26,701.0 $30,083.8 $34,029.5 $38,455.8
Total Debt Service......................................... 0.0 12,316.6 12,224.3 12,270.6 12,567.7
Debt Service Coverage Ratio................................ NA 2.17x 2.46x 2.77x 3.06x
--------
Minimum Coverage Ratio............................. 1.66x
--------
Average Coverage Ratio............................. 2.25x
--------
--------
Adjusted EBITDA/Interest Expense (28)............. 2.57x NA 2.93x 2.57x 2.95x 3.49x
--------
Total Debt/Adjusted EBITDA........................ 4.20x NA 4.20x 3.79x 3.32x 2.83x
--------
<CAPTION>
-------------------------------------------------------------------------------
2004 2005 2006 2007 2008
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow........................... $16,341.4 $16,750.1 $17,214.8 $17,493.3 $7,658.3
Interest Income (Security Accounts)............... 256.1 259.7 262.8 149.0 17.5
-------------------------------------------------------------------------------
Syracuse University User Charge................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax...... 10.3 23.9 37.8 49.8 59.1
Fees & Other Partnership Expenses................. 511.2 526.5 542.3 558.6 286.1
-------------------------------------------------------------------------------
Cash Available for Debt Service................... $17,119.8 $17,560.3 $18,057.7 $18,254.6 $8,821.8
Withdrawals from debt Service Reserve Account..... 0.0 0.0 0.0 6,512.5 0.0
Withdrawals from Working Capital Reserve Account.. 0.0 0.0 0.0 0.0 1000.0
Withdrawals from Restricted Cash Deposit Account.. 0.0 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account 0.0 0.0 0.0 3,500.0 0.0
Withdrawals from Escrow Reserve Account........... 0.0 0.0 0.0 3000.0 0.0
Interest Payments................................. (4,087.7) (3,159.5) (2,124.2) (955.0) 0.0
Principal Payments................................ (8,500.0) (9,520.0) (10,880.0) (12,070.0) 0.0
-------------------------------------------------------------------------------
Total Debt Service................................ (12,587.7) (12,679.5) (13,004.2) (13,025.0) 0.0
Cash Available after Debt Service................. 4,531.3 4,880.8 5,053.6 18,236.1 9,021.0
Syracuse University User Charge................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax...... (10.3) (23.9) (37.8) (49.8) (59.1)
Fees & Other Partnership Expenses................. (511.2) (526.5) (542.3) (558.6) (286.1)
Deposits to Debt Service Reserve Account (DSRA)... ($45.9) ($162.3) ($10.4) $0.0 $0.0
Deposits to Working Capital Reserve Account (WCRA) 0.0 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA). 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------
Total Deposits to Security Accounts............... ($45.9) ($162.3) ($10.4) $0.0 $0.0
Distributable Cash................................ $3,964.0 $4,166.0 $4,463.0 $17,629.7 $8,875.8
Cash available for Debt Service................... 17,119.0 17,560.3 18,057.7 18,250.6 8,021.0
Total Debt Service................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio....................... 1.36x 1.38x 1.39x 1.40x NA
--------
Minimum Coverage Ratio............................ 1.31x
--------
Average Coverage Ratio............................ 1.36x
--------
Cash Available for Debt Service + RCDA............ 17,119.0 17,560.3 18,057.7 18,250.6 8,021.0
Total Debt Service................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio....................... 1.36x 1.38x 1.39x 1.40x NA
--------
Minimum Coverage Ratio............................ 1.36x
--------
Average Coverage Ratio............................ 1.75x
--------
Cash Available for Debt Service + RCDA + DSRA..... $23,412.8 $23,900.0 $24,559.8 $24,763.1 $8,021.0
Total Debt Service................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio.......................
--------
Minimum Coverage Ratio............................ 1.66x
--------
Average Coverage Ratio............................ 2.25x 1.86x 1.88x 1.89x 1.90x NA
--------
--------
Adjusted EBITDA/Interest Expense (28)............. 2.57x 4.19x 5.56x 8.50x 19.11x NA
--------
Total Debt/Adjusted EBITDA........................ 4.20x 2.39x 1.85x 1.27x 0.56x NA
--------
</TABLE>
<PAGE>
PROJECT ORANGE ASSOCIATES L.P 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- --------------------------------------------------------------------------------
OPERATIONS AND MAINTENANCE INCREASED 15% FOOTNOTES TO MODEL
All footnotes are the same as the Base Case Footnotes except the following:
21, 22, 23, and 24) Variable Plant Operation figures are increased 15% over the
base case. Figures are projected forward at the assumed inflation rate.
E-11
<PAGE>
<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE: Heat Rate Increased by 300 Btu/kWh 12/2/99 1:52 PM
($ in thousands, except price per MWh)
4 months ended Projected Fiscal Years Ending December 31,
12/31/99 2000 2001 2002 2003
========================================== -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)............. 79.0 79.0 79.0 79.0 79.0
Availability (3).......................... 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4).............................. 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)............. 10,300.0 10,351.5 10,403.3 10,455.3 10,507.6
Electricity Produced (MWh) (6)............ 213,963.6 641,890.8 640,137.0 640,137.0 640,137.0
Steam Throughput (1,000lbs) (7)........... 202,302.0 639,385.1 639,385.1 639,385.1 639,385.1
Fuel Consumed (MMBtu) (8)................. 2,203,825.1 6,644,532.6 6,659,510.0 6,692,807.8 6,726,271.6
Entitlement Used (MMBtu) (9).............. 2,454,071.8 7,399,026.5 7,415,704.7 7,452,783.2 7,490,047.1
==========================================
Debt Offering Annual Interest Rate........ 10.50% 10.50% 10.50% 10.50% 10.50%
General inflation......................... 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$).................. $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh) (10)... $ 30.43 $ 32.41 $ 34.85 $ 33.94 $ 36.56
Off-Peak Electricity Pricing ($MWh)....... $ 22.38 $ 22.36 $ 23.70 $ 25.30 $ 25.30
Indexed Swap Price ($MWh) (11)............ $ 54.23 $ 54.80 $ 56.51 $ 58.04 $ 59.70
Steam Price ($/1,000 lbs) (12)............ $ 4.36 $ 4.39 $ 4.43 $ 4.47 $ 4.51
==========================================
Power Put Contract
Energy Sales - On-Peak............... $ 2,708.4 $ 8,455.0 $ 9,091.6 $ 8,854.2 $ 9,575.1
Energy Sales - Off-Peak.............. 2,796.6 8,519.5 8,988.4 9,595.3 9,569.4
Capacity Sales - On Peak............. 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak............ 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------------
Total Power Put Payments (13)............. 5,505.0 16,974.5 18,080.0 18,449.4 19,144.5
Indexed Swap Contract
Floating (Payment)................... (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,528.2)
Floating (Payment): Capacity......... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------------
Total Floating (Payments) (14)............ (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,528.2)
Fixed Payment........................ 11,984.8 36,332.5 37,464.4 38,483.4 39,581.6
---------------------------------------------------------------------------------
Total Indexed Swap Payment (15)........... 6,298.8 18,799.8 18,738.6 19,375.0 19,753.3
Steam Sales............................... 881.5 2,809.3 2,834.2 2,859.2 2,884.5
Fuel Commodity Sales...................... 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales............... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------------
Total Revenues....................... $ 12,685.3 $ 38,583.6 $ 39,652.8 $ 48,683.7 $ 41,782.3
==========================================
Commodity Expense (15).................... ($ 1,640.6) ($ 5,039.7) ($ 5,204.6) ($ 5,389.7) ($ 5,581.2)
Firm Service Transportation Expense (17).. (2,876.7) (8,889.1) 9,155.8) 9,430.5) (9,713.4)
Variable Fuel Expense (18)................ (105.4) (327.3) (337.9) (349.8) (362.1)
---------------------------------------------------------------------------------
Total Fuel Expenses.................. ($ 4,622.8) ($ 14,256.1) ($ 14,698.3) ($ 15,169.9) ($ 15,656.7)
==========================================
GE Overhead Accrual & Directed Starts (19) ($ 478.7) ($ 1,430.0) ($ 1,426.1) ($ 1,426.1) ($ 1,426.1)
GE Contractual Services Fees (20)......... (257.5) (827.4) (852.2) (877.8) (904.1)
Plant Operations (21)..................... (777.2) (2,401.4) (2,473.5) (2,547.7) (2,624.1)
Other O&M and Plant Utilities (22)........ (134.0) (413.9) (426.4) (439.1) (452.3)
Administrative (23)....................... (317.6) (962.1) (1,011.6) (1,041.9) (1,073.2)
Taxes (24)................................ (266.9) (810.1) (1,434.4) (1,477.5) (1,521.8)
Syracuse University User Charge (25)...... (416.7) (1,250.0) (1,250.0) (1,250.0) (1,250.0)
----------------------------------------------------------------------------------
Total O&M and Administrative Expenses ($ 2,646.7) ($ 8,115.0) ($ 8,874.2) ($ 9,060.1) ($ 9,251.6)
==========================================
Partnership Fees (26)..................... (127.8) (394.9) (406.8) (419.0) (431.6)
-----------------------------------------------------------------------------------
Total Expenses....................... ($ 7,387.3) ($ 22,786.1) ($ 23,979.3) ($ 24,649.0) ($ 25,330.9)
Net Operating Cash Flow................... $ 5,288.0 $ 15,817.5 $ 15,673.5 $ 16,034.6 $ 16,442.4
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE: Heat Rate Increased by 300 Btu/kWh 12/2/99 1:52 PM
($ in thousands, except price per MWh)
2004 2005 2006 2007 2008 (1)
========================================== -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)............. 79.0 79.0 79.0 79.0 79.0
Availability (3).......................... 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4).............................. 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)............. 10,586.1 10,612.9 10,666.0 10,719.3 10,772.9
Electricity Produced (MWh) (6)............ 641,890.8 640,137.0 640,137.0 640,137.0 319,191.6
Steam Throughput (1,000lbs) (7)........... 639,385.1 639,385.1 639,385.1 639,385.1 319,692.6
Fuel Consumed (MMBtu) (8)................. 6,778,423.3 6,793,702.5 6,827,671.0 6,851,809.4 3,438,612.5
Entitlement Used (MMBtu) (9).............. 7,548,120.6 7,565,134.8 7,602,960.5 7,640,975.3 3,829,070.7
==========================================
Debt Offering Annual Interest Rate........ 10.50% 10.50% 10.50% 10.50% 10.50%
General inflation......................... 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$).................. $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh) (10)... $ 36.79 $ 36.81 $ 36.81 $ 36.81 $ 36.81
Off-Peak Electricity Pricing ($MWh)....... $ 24.22 $ 26.23 $ 26.23 $ 26.23 $ 26.23
Indexed Swap Price ($MWh) (11)............ $ 61.37 $ 63.19 $ 65.04 $ 66.64 $ 67.88
Steam Price ($/1,000 lbs) (12)........... $ 4.55 $ 4.59 $ 4.63 $ 4.67 $ 2.31
==========================================
Power Put Contract
Energy Sales - On-Peak............... $ 9,710.6 $ 9,640.6 $ 9,602.9 $ 9,602.9 $ 4,857.9
Energy Sales - Off-Peak.............. 9,153.8 9,921.1 9,948.0 9,948.0 4,910.7
Capacity Sales - On Peak............. 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak............ 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------- --------------- ---------------
Total Power Put Payments (13)............. 18,864.4 19,561.7 19,550.9 19,550.9 9,768.7
Indexed Swap Contract
Floating (Payment)................... (19,484.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Floating (Payment): Capacity......... 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------- --------------- ---------------
Total Floating (Payments) (14)............ (19,484.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Fixed Payment........................ 40,690.0 41,895.3 43,122.0 44,185.0 22,503.5
---------------------------------------------------- --------------- ---------------
Total Indexed Swap Payment (15)........... 21,205.2 21,634.9 22,872.8 23,935.9 12,358.1
Steam Sales............................... 2,910.0 2,935.7 2,961.7 2,987.9 736.7
Fuel Commodity Sales...................... 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales............... 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------------
Total Revenues....................... $ 42,979.6 $ 44,132.4 $ 45,385.4 $ 45,474.6 $ 22,865.5
==========================================
Commodity Expense (15).................... ($ 5,795.4) ($ 5,984.8) ($ 6,197.3) ($ 6,417.3) ($ 3,313.4)
Firm Service Transportation Expense (17).. (10,004.8) (10,304.9) (10,614.1) (10,932.5) (5,590.0)
Variable Fuel Expense (18)................ (375.8) (388.0) (401.6) (415.7) (214.6)
-------------------------------------------------------------------------------------
Total Fuel Expenses.................. ($ 16,176.0) ($ 16,677.7) ($ 17,213.0) ($ 17,765.5) ($ 9,126.9)
==========================================
GE Overhead Accrual & Directed Starts (19) ($ 1,430.0) ($ 1,426.1) ($ 1,426.1) ($ 1,426.1) ($ 711.1)
GE Contractual Services Fees (20)......... (931.3) (959.2) (988.0) (1,017.6) (521.2)
Plant Operations (21)..................... (2,702.8) (2,783.9) (2,867.4) (2,953.5) (1,512.6)
Other O&M and Plant Utilities (22)........ (465.9) (479.9) (494.3) (509.1) (260.7)
Administrative (23)....................... (1,105.4) (1,138.5) (1,172.7) (1,207.9) (618.6)
Taxes (24)................................ (1,577.7) (1,638.4) (1,700.7) (1,762.6) (1,277.6)
Syracuse University User Charge (25)...... (1,250.0) (1,250.0) (1,250.0) (1,250.0) (621.5)
-------------------------------------------------------------------------------------
Total O&M and Administrative Expenses ($ 9,463.1) ($ 9,676.0) ($ 9,899.2) ($ 10,126.8) ($ 5,523.3)
==========================================
Partnership Fees (26)..................... (444.5) (457.8) (471.6) (485.7) (248.8)
-------------------------------------------------------------------------------------
Total Expenses....................... ($ 26,063.6) ($ 26,811.5) ($ 27,583.7) ($ 28,376.0) ($ 14,899.0)
Net Operating Cash Flow................... $ 16,896.0 $ 17,328.6 $ 17,801.7 $ 10,005.7 $ 7,066.5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Flow Waterfall & Distributable Cash CASE: Heat Rate Increased by 300 Btu/kWh 12/2/99 1:52 PM
($ in thousands)
4 months ended Projected Fiscal Years Ending December 31,
-----------------------------------------------------------------------
12/31/99 2000 2001 2002 2003
-----------------------------------------------------------------------
======================================================
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow................................... $ 5,288.0 $ 15,817.5 $ 15,673.5 $ 16.034.6 $ 16.442.4
Interest Income (Security Accounts)....................... 25.7 400.7 538.5 252.3 255.1
-----------------------------------------------------------------------
Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax (27)......... 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses......................... 127.8 394.9 406.8 419.0 431.6
-----------------------------------------------------------------------
Cash Available for Debt Service........................... $ 5,441.5 $ 16,613.1 $ 16,618.7 $ 16,705.9 $ 17,128.1
Withdrawals from Debt Service Reserve Account............. 0.0 46.2 0.0 0.0 0.0
Withdrawals from Working Capital Reserve Account.......... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Restricted Cash Deposit Account.......... 0.0 0.0 8,261.4 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account..... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Escrow Reserve Account................... 0.0 450.0 0.0 0.0 0.0
======================================================
Interest Payments......................................... 0.0 (5,516.6) (6,274.3) (5,640.6) (4,917.7)
Principal Payments........................................ 0.0 (6,800.0) (5,950.0) (6,630.0) (7,650.0)
-----------------------------------------------------------------------
Total Debt Service........................................ 0.0 (12,316.6) (12,224.3) (12,270.6) (12,567.7)
Cash Available after Debt Service......................... 5,441.5 4,792.7 12,655.9 4,435.3 4,561.4
Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax.............. 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses......................... (127.8) (394.9) (406.8) (419.0) (431.6)
======================================================
Deposits to Debt Service Reserve Account (DSRA)........... $0.0 $0.0 ($23.2) ($148.5) ($10.0)
Deposits to Working Capital Reserve Account (WCRA)........ (1,000.0) 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account (RCDA)........ (4,313.7) (3,947.8) 0.0 0.0 0.0
-----------------------------------------------------------------------
Total Deposits to Security Accounts....................... ($5,313.7) ($3,947.8) ($23.2) ($148.5) ($10.0)
Distributable Cash........................................ $0.0 $450.0 $12,226.0 $3,867.8 $4,119.9
======================================================
Cash Available for Debt Service........................... 5,441.5 16,613.1 16,618.7 16,705.9 17,129.1
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7
Debt Service Coverage Ratio............................... NA 1.35x 1.36x 1.36x 1.36x
------------
Minimum Coverage Ratio.................... 1.35x
------------
Average Coverage Ratio.................... 1.39x
------------
Cash Available for Debt Service + RCDA.................... 5,441.5 20,926.8 24,880.2 16,705.9 17,129.1
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7
Debt Service Coverage Ratio............................... NA 1.70x 2.04x 1.36x 1.36x
------------
Minimum Coverage Ratio.................... 1.36x
------------
Average Coverage Ratio.................... 1.52x
------------
Cash Available for Debt Service + RCDA + DSRA............. $11,599.8 $27,085.2 $30,992.3 $22,841.2 $23,412.9
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7
Debt Service Coverage Ratio............................... NA 2.20x 2.54x 1.86x 1.86x
------------
Minimum Coverage Ratio.................... 1.86x
------------
Average Coverage Ratio.................... 2.02x
------------
------------
Adjusted EBITDA/Interest Expense(28)...... 2.65x NA 3.01x 2.65x 2.96x 3.48x
------------
Total Debt/Adjusted EBITDA................ 4.09x NA 4.09x 3.68x 3.31x 2.84x
------------
<CAPTION>
-------------------------------------------------------------------
2004 2005 2006 2007 2008
-------------------------------------------------------------------
=======================================================
<S>.......................................................... <C> <C> <C> <C> <C>
Net Operating Cash Flow...................................... $ 16,896.0 $ 17,320.8 $ 17,801.7 $ 18,096.7 $ 7,966.5
Interest Income (Security Accounts).......................... 256.1 259.7 262.8 149.0 17.5
-------------------------------------------------------------------
Syracuse University User Charge.............................. 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax (27)............ 10.3 23.9 37.8 49.8 59.1
Fees & Other Partnership Expenses............................ 444.5 457.8 471.6 485.7 248.8
-------------------------------------------------------------------
Cash Available for Debt Service.............................. $ 17,696.9 $ 18,062.3 $ 18,573.8 $ 18,781.2 $ 8,291.9
Withdrawals from Debt Service Reserve Account................ 0.0 0.0 0.0 6,512.5 0.0
Withdrawals from Working Capital Reserve Account............. 0.0 0.0 0.0 0.0 1,000.0
Withdrawals from Restricted Cash Deposit Account............. 0.0 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account........ 0.0 0.0 0.0 3,600.0 0.0
Withdrawals from Escrow Reserve Account...................... 0.0 0.0 0.0 3,000.0 0.0
=======================================================
Interest Payments............................................ (4,087.7) (3,159.5) (2,124.2) (955.0) 0.0
Principal Payments........................................... (8,500.0) (9,520.0) (10,880.0) (12,070.0) 0.0
-------------------------------------------------------------------
Total Debt Service........................................... (12,587.7) (12,679.5) (13,004.2) (13,025.0) 0.0
Cash Available after Debt Service............................ 5,019.3 5,382.9 5,569.7 18,768.7 9,291.9
Syracuse University User Charge.............................. 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax................. (10.3) (23.9) (37.8) (49.8) (59.1)
Fees & Other Partnership Expenses............................ (444.5) (457.8) (471.6) (485.7) (248.8)
=======================================================
Deposits to Debt Service Reserve Account (DSRA).............. ($45.9) ($162.3) ($10.4) $0.0 $0.0
Deposits to Working Capital Reserve Account (WCRA)........... 0.0 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposits Account (RCDA).......... 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------
Total Deposits to Security Accounts.......................... ($45.9) ($162.3) ($10.4) $0.0 $0.0
Distributable Cash........................................... $4,518.5 $4,738.8 $5,049.9 $18,233.2 $8,984.0
=======================================================
Cash Available for Debt Service.............................. 17,606.9 18,062.3 18,573.8 16,781.2 8,291.9
Total Debt Service........................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio.................................. 1.40x 1.42x 1.43x 1.44x NA
-----------
Minimum Coverage Ratio.................... 1.35x
-----------
Average Coverage Ratio.................... 1.39x
-----------
Cash Available for Debt Service + RCDA....................... 17,606.9 18,062.3 18,573.8 18,781.2 8,291.9
Total Debt Service........................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio.................................. 1.40x 1.42x 1.43x 1.44x NA
-----------
Minimum Coverage Ratio.................... 1.36x
-----------
Average Coverage Ratio.................... 1.52x
-----------
Cash Available for Debt Service + RCDA + DSRA................ $23,900.7 $24,402.1 $25,075.9 $25,293.7 $8,291.9
Total Debt Service........................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio.................................. 1.90x 1.92x 1.93x 1.94x NA
-----------
Minimum Coverage Ratio.................... 1.86x
-----------
Average Coverage Ratio.................... 2.02x
-----------
-----------
Adjusted EBITDA/Interest Expense(28)...... 2.65x 4.31x 5.72x 8.74x 19.67x NA
-----------
Total Debt/Adjusted EBITDA................ 4.09x 2.33x 1.80x 1.24x 0.64x NA
-----------
</TABLE>
<PAGE>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR NOTES WITH REG. RIGHTS
- ---------------------------------------------------------------------------
HEAT RATE INCREASE FOOTNOTES TO MODEL
All footnotes are the same as the Base Case Footnotes except the following:
5) The heat rate is increased 300 btu/kWh over the base case. It is an all-in
heat rate which includes fuel used in the duct burners and the Syracuse boilers.
This increases the total commodity cost of the fuel and the variable
transportation cost, but does not cause the Project to consume all of the
pre-paid fuel entitlement.
E-14
<PAGE>
<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE: $200,000 of NOx Credits Purchased 12/2/99 1:45 PM
($ in thousands) accepted prices per MWH)
4 Months ended Project Fiscal Years Ending December 31,
12/31/99 2000 2001 2002 2003
================================================== ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)..................... 79.0 79.0 79.0 79.0 79.0
Availability (3).................................. 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4)...................................... 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)..................... 10,000.0 10,050.0 10,100.3 10,150.3 10,201.5
Electricity Produced (MWH) (6).................... 213,963.6 641,890.8 640,137.0 640,137.0 640,137.0
Steam Throughout (1,000 lbs) (7).................. 202,302.0 639,385.1 639,385.1 639,385.1 639,385.1
Fuel Consumed (MMBtu) (8)......................... 2,139,636.0 6,451,002.5 6,485,543.7 6,497,871.5 6,530,360.8
Entitlement Used (MMBtu) (9)...................... 2,382,594.0 7,183,520.9 7,199,713.3 7,235.711.8 7,271.890.4
==================================================
Debt Offering Annunal Interest Rate............... 10.50% 10.50% 10.50% 10.50% 10.50%
General Inflation................................. 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CON$).......................... $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh)(10)............ $ 30.43 $ 32.41 $ 34.85 $ 33.94 $ 36.56
Off-Peak Electricity Pricing ($MWh)............... $ 22.38 $ 22.36 $ 23.70 $ 25.30 $ 25.30
Indexed Swap Price ($MWh)(11)..................... $ 54.23 $ 54.80 $ 56.51 $ 58.04 $ 59.70
Steam Price ($/1,000lbs)(12)...................... $ 4.36 $ 4.39 $ 4.43 $ 4.47 $ 4.51
==================================================
Power Put Contract
Energy Sales - On Peak......................... $ 2,708.4 $ 8,455.0 $ 9,091.6 $ 8,854.2 $ 9,575.1
Energy Sales - Off Peak........................ 2,796.6 8,519.5 8,988.4 9,595.3 9,569.4
Capacity Sales - On Peak....................... 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak...................... 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------
Total Power Put Payments (13)..................... 5,505.0 16,974.5 18,080.0 18,449.4 19,144.5
Indexed Swap Contract
Floating (payment)............................ (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2)
Floating (payment): Capacity.................. 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------
Total Floating (Payments) (14).................... (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2)
Fixed Payment................................. 11,984.8 36,332.5 37,464.4 38,483.4 39.581.6
----------------------------------------------------------------------------
Total Indexed Swap Payment (15)................... 6,298.8 18,799.8 18,738.6 19,375.0 19,753.3
Steam Sales....................................... 881.5 2,809.3 2,834.2 2,859.2 2,884.5
Fuel Commodity Sales.............................. 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release sales....................... 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------
Total Revenues............................... $ 12,685.3 $ 38,583.6 $ 39,852.8 $ 40,683.7 $ 41,782.3
==================================================
Commodity Expense (16)........................... ($1,592.8) $ 4,892.9) ($5,053.1) ($5,232.7) ($5,418.7)
Firm Service Transportation Expense (17).......... (2,876.7) (8,889.1) (9,155.8) (9,430.5) (9,713.4)
Variable Fuel Expense (18)........................ (102.3) (317.8) (328.1) (339.6) (351.5)
----------------------------------------------------------------------------
Total Fuel Expenses.......................... ($4,571.9) ($14,099.8) ($14,536.9) ($15,002.8) ($15,483.6)
==================================================
GE Overhaul Accrual & Directed starts (19)........ ($476.7) ($1,430.0) ($1,426.1) ($1,426.1) ($1,426.1)
GE Contractual Services Fees (20)................. (257.5) (827.4) (852.2) (877.8) (904.1)
Plant Operations (21)............................. (772.2) (2,401.4) (2,473.5) (2,547.7) (2,624.1)
Other O&M and Plant Utilities (22)................ (134.0) (413.9) (426.4) (639.1) (658.3)
Administrative (23)............................... (317.8) (982.1) (1,011.6) (1,041.9) (1,073.2)
Taxes (24)........................................ (266.9) (810.1) (1,434.4) (1,477.5) (1,521.8)
Syracuse University User Charge (25).............. (416.7) (1,250.0) (1,250.0) (1,250.0) (1,250.0)
----------------------------------------------------------------------------
Total O&M and Administrative Expenses........ ($2,646.7) ($8,115.0) ($8,874.2) ($9,260.1) ($9,457.6)
==================================================
Partnership Fees (26)............................. (127.8) (394.9) (406.8) (419.0) (431.6)
----------------------------------------------------------------------------
Total Expenses............................... ($7,346.4) ($22,608.0) ($23,817.9) ($24,681.9) ($25,372.8)
Net Operating Cash Flow........................... $ 5,338.8 $ 15,973.8 $ 15,834.9 $ 16,001.8 $ 16,409.8
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE: $200,000 of NOx Credits Purchased 12/2/99 1:45 PM
($ in thousands) accepted prices per MWH)
2004 2005 2006 2007 2008(1)
================================================== -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)..................... 79.0 79.0 79.0 79.0 79.0
Availability (3).................................. 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4)...................................... 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)..................... 10,252.5 10,303.8 10,355.3 10,407.1 10,459.1
Electricity Produced (MWH) (6).................... 641,890.8 640,137.0 640,137.0 640,137.0 319,191.6
Steam Throughout (1,000 lbs) (7).................. 639,385.1 639,385.1 639,385.1 639.385.1 319,692.6
Fuel Consumed (MMBtu) (8)......................... 6,580,993.5 6,595,827.7 6,628,806.8 6,661,950.8 3,338,458.7
Entitlement Used (MMBtu) (9)...................... 7,328,272.5 7,344,791.1 7,381,515.1 7,418,422.6 3,717,544.3
==================================================
Debt Offering Annunal Interest Rate............... 10.50% 10.50% 10.50% 10.50% 10.50%
General Inflation................................. 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CON$).......................... $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh)(10)............ $ 36.79 $ 36.81 $ 36.81 $ 36.81 $ 36.81
Off-Peak Electricity Pricing ($MWh)............... $ 24.22 $ 26.23 $ 26.23 $ 26.23 $ 26.23
Indexed Swap Price (SWWh) (11).................... $ 61.37 $ 63.19 $ 65.04 $ 66.64 $ 87.88
Steam Price ($/1,000 lbs) (12).................... $ 4.55 $ 4.59 $ 4.83 $ 4.67 $ 2.31
==================================================
Power Put Contract
Energy Sales - On Peak......................... $ 9,710.6 $ 9,640.6 $ 9,602.9 $ 9,602.9 $ 4,857.9
Energy Sales - Off Peak........................ 9,153.8 9,921.1 9,948.0 9,948.0 4,910.7
Capacity Sales - On Peak....................... 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak...................... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Power Put Payments (13)..................... 18,864.4 19,561.7 19,550.9 19,550.9 9,768.7
Indexed Swap Contract
Floating (payment)............................ (19,448.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Floating (payment): Capacity.................. 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Floating (Payments) (14).................... (19,448.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Fixed Payment................................. 40,690.0 41,895.3 43,122.0 44,185.0 22,503.5
---------------------------------------------------------------------------
Total Indexed Swap Payment (15)................... 21,205.2 21,634.9 22,872.8 23,935.9 12,358.1
Steam Sales....................................... 2,910.0 2,935.7 2,961.7 2,987.9 738.7
Fuel Commodity Sales.............................. 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release sales....................... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Revenues............................... $ 42,979.6 $ 44,132.4 $ 45,385.4 $ 48,474.6 $ 22,885.5
==================================================
Commodity Expense (16)............................ ($5,626.6) ($5,810.5) ($6,016.8 ($6,230.4) ($3,216.9)
Firm Service Transportation Expense (17).......... (10,004.8) (10,304.9) (10,614.1) (10,932.5) (5,559.0)
Variable Fuel Expense (18)........................ (364.9) (376.7) (389.9) (403.8) (208.3)
---------------------------------------------------------------------------
Total Fuel Expenses.......................... ($15,996.2) ($16,492.1) ($17,020.8) ($17,566.5) ($9,024.2)
==================================================
GE Overhaul Accrual & Directed starts (19)........ ($1,430.0) ($1,426.1) ($ 1,426.1) ($1,426.1) ($711.1)
GE Contractual Services Fees (20)................. (931.3) (959.2) (988.0) (1,017.6) (521.2)
Plant Operations (21)............................. (2,702.8) (2,783.9) (2,867.4) (2,953.5) (1,512.6)
Other O&M and Plant Utilities (22)................ (678.1) (698.4) (719.4) (740.9) (379.5)
Administrative (23)............................... (1,105.4) (1,138.5) (1,172.7) (1,207.9) (618.6)
Taxes (24)........................................ (1,577.7) (1,638.4) (1,700.7) (1,762.6) (1,277.6)
Syracuse University User Charge (25).............. (1,250.0) (1,250.0) (1,250.0) (1,250.0) (621.5)
---------------------------------------------------------------------------
Total O&M and Administrative Expenses........ ($9,675.3) ($9,894.6) ($10,124.3) ($10,358.6) ($5,842.0)
==================================================
Partnership Fees (26)............................. (444.5) (457.8) (471.6) (485.7) (248.8)
---------------------------------------------------------------------------
Total Expenses............................... ($26,116.0) ($26,844.5) ($27,616.6) ($28,410.8) ($14,915.0)
Net Operating Cash Flow........................... $ 16,563.6 $ 17,287.9 $ 17,768.6 $ 18,043.8 $ 7,950.5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flow Waterfall & Distrubutable Cash CASE: $200,000 of NOx Credits Purchased 12/2/99 1:54 PM
($ in thousands)
4 months ended Projected Fiscal Years Ending December 31,
------------------------------------------------------------------------
12/31/99 2000 2001 2002 2003
------------------------------------------------------------------------
==========================================================
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow................................... $ 5,338.8 $ 15,973.8 $ 15,834.9 $ 16,001.8 $ 16,409.6
Interest Income (Security Accounts)....................... 25.8 402.5 249.3 252.3 255.1
------------------------------------------------------------------------
Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax(27).......... 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses......................... 127.8 394.9 406.8 419.0 431.6
------------------------------------------------------------------------
Cash Available for Debt Service........................... $ 5,492.4 $ 16,771.2 $ 16,491.0 $ 16,673.1 $ 17,096.2
Withdrawals from Debt Service Reserve Account............. 0.0 46.2 0.0 0.0 0.0
Withdrawals from Working Capital Reserve Account.......... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Restricted Cash Deposit Account.......... 0.0 4,364.6 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account..... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Escrow Reserve Account................... 0.0 450.0 0.0 0.0 0.0
==========================================================
Interest Payments......................................... 0.0 (5,516.6) (6,274.3) (5,640.6) (4,917.7)
Principal Payments........................................ 0.0 (6,800.0) (5,950.0) (6,630.0) (7,650.0)
------------------------------------------------------------------------
Total Debt Service........................................ 0.0 (12,316.6) (12,224.3) (12,270.6) (12,567.7)
Cash Available after Debt Service......................... 5,492.4 9,315.4 4,266.7 4,402.5 4,528.5
Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax.............. 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses......................... (127.8) (394.9) (406.8) (419.0) (431.6)
==========================================================
Deposits to Debt Service Reserve Account(DSRA)............ $ 0.0 $ 0.0 ($23.2) ($148.5) ($10.0)
Deposits to Working Capital Reserve Account(WCRA)......... (1,000.0) 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)......... (4,364.6) 0.0 0.0 0.0 0.0
------------------------------------------------------------------------
Total Deposits to Security Accounts....................... ($5,364.6) $0.0 ($23.2) ($148.5) ($10.0)
Distributable Cash........................................ $ 0.0 $ 8,920.5 $ 3,836.8 $ 3,835.0 $ 4,087.0
==========================================================
Cash Available for Debt Service........................... 5,492.4 16,771.2 16,491.0 16,673.1 17,096.2
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7
Debt Service Coverage Ratio............................... NA 1.36x 1.35x 1.36x 1.36x
--------------
Minimum Coverage Ratio...................... 1.35x
--------------
Average Coverage Ratio...................... 1.39x
--------------
Cash Available for Debt Service + RCDA.................... 5,492.4 21,135.9 16,491.0 16,673.1 17,096.2
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7
Debt Service Coverage Ratio............................... NA 1.72x 1.35x 1.36x 1.36x
--------------
Minimum Coverage Ratio...................... 1.35x
--------------
Average Coverage Ratio...................... 1.43x
--------------
Cash Available for Debt Service + RCDA + DSRA............. $ 11,650.7 $ 27,294.2 $ 22,603.2 $ 22,808.4 $ 23,380.1
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7
Debt Service Coverage Ratio............................... NA 2.22x 1.85x 1.86x 1.86x
--------------
Minimum Coverage Ratio...................... 1.85x
--------------
Average Coverage Ratio...................... 1.93x
--------------
--------------
Adjusted EBITDA / Interest Expense (28)..... 2.63x NA 3.04x 2.63x 2.96x 3.48x
--------------
Total Debt / Adjusted EBITDA................ 4.05x NA 4.05x 3.71x 3.31x 2.84x
--------------
<CAPTION>
==========================================================
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow................................... $ 16,863.6 $ 17,2?7.9 $ 17,768.8 $ 18,063.8 $ 7,950.5
Interest Income (Security Accounts)....................... 256.1 259.7 262.8 149.0 17.5
------------------------------------------------------------------------
Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax(27).......... 10.3 23.9 37.8 49.8 59.1
Fees & Other Partnership Expenses......................... 444.5 457.8 471.6 485.7 248.8
------------------------------------------------------------------------
Cash Available for Debt Service........................... $ 17,574.5 $ 18,029.4 $ 18,54?.9 $ ???????? $ ?,275.?
Withdrawals from Debt Service Reserve Accout.............. 0.0 0.0 0.0 6,512.5 0.0
Withdrawals from Working Capital Reserve Account.......... 0.0 0.0 0.0 0.0 1,000.0
Withdrawals from Restricted Cash Deposit Account.......... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account..... 0.0 0.0 0.0 3,500.0 0.0
Withdrawals from Escrow Reserve Account................... 0.0 0.0 0.0 3000.0 0.0
==========================================================
Interest Payments......................................... (4,087.7) (3,159.5) (2,124.2) (955.0) 0.0
Principal Payments........................................ (8,500.0) (9,520.0) (10,880.0) (12,070.0) 0.0
------------------------------------------------------------------------
Total Debt Service........................................ (12,587.7) (12,679.5) (13,004.2) (13,025.0) 0.0
Cash Available after Debt Service......................... 4,986.8 5,350.0 5,536.8 18,735.9 9,275.9
Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax.............. (10.3) (23.9) (37.8) (49.8) (59.1)
Fees & Other Partnership Expenses......................... (444.5) (457.8) (471.6) (485.7) (248.8)
==========================================================
Deposits to Debt Service Reserve Account(DSRA)............ ($45.9) ($162.3) ($10.4) $ 0.0 $ 0.0
Deposits to Working Capital Reserve Account(WCRA)......... 0.0 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)......... 0.0 0.0 0.0 0.0 0.0
------------------------------------------------------------------------
Total Deposits to Security Accounts....................... ($45.9) ($162.3) ($10.4) $ 0.0 $ 0.0
Distributable Cash........................................ $ ??????? $ 4,705.? $ 5,017.0 $ 18,200.3 $ ???????
==========================================================
Cash Available for Debt Service........................... 17,574.5 18,029.4 18,540.9 18,748.4 8,275.9
Total Debt Service........................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio............................... 1.40x 1.42x 1.43x 1.44x NA
--------------
Minimum Coverage Ratio...................... 1.35x
--------------
Average Coverage Ratio...................... 1.39x
--------------
Cash Available for Debt Service + RCDA.................... $ 17,574.5 18,029.4 18,540.9 18,748.4 8,275.9
Total Debt Service........................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio............................... 1.40x 1.42x 1.43x 1.44x NA
--------------
Minimum Coverage Ratio...................... 1.35x
--------------
Average Coverage Ratio...................... 1.43x
--------------
Cash Available for Debt Service + RCDA + DSRA............. $ 23,868.3 $ 24,369.1 $ 25,043.0 $ 25,260.8 $ 8,275.9
Total Debt Service........................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0
Debt Service Coverage Ratio............................... 1.90x 1.92x 1.93x 1.94x NA
--------------
Minimum Coverage Ratio...................... 1.85x
--------------
Average Coverage Ratio...................... 1.93x
--------------
--------------
Adjusted EBITDA / Interest Expense (28)..... 2.63x 4.30x 5.71x 8.73x 19.63x NA
--------------
Total Debt / Adjusted EBITDA................ 4.05x 2.33x 1.80x 1.24x 0.64x NA
--------------
</TABLE>
<PAGE>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------
$200,000 NOx CREDIT PURCHASES FOOTNOTES TO MODEL
All footnotes are the same as the Base Case Footnotes except the following:
22) $200,000 per year of NOx credit purchases is assumed beginning in 2001.
Other O&M and Plant Maintenance figures are based on historical data from
January 1996 through August 1999. Figures are projected forward at the assumed
inflation rate.
E-17
<PAGE>
______________, 2000
Project Orange Associates L.P.
Project Orange Capital Corp.
Exchange Offer
$68,000,000
10.5% Senior Secured Notes due 2007
_________________________________________________
PROSPECTUS
_________________________________________________
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell the notes or our
solicitation of your offer to buy the notes in any jurisdiction where that would
not be permitted or legal. Neither the delivery of this prospectus nor any sales
made hereunder after the date of this prospectus shall create an implication
that the information contained herein or the affairs of Project Orange
Associates L.P. or Project Orange Capital Corp. have not changed since the date
hereof.
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Project Orange Associates L.P.
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act
empowers a Delaware limited partnership to indemnify and hold harmless any
partner or other person from and against all claims and demands whatsoever.
The Second Amended and Restated Agreement of Limited Partnership of Project
Orange Associates, L.P. (the "Partnership Agreement") provides that the General
Partners shall be indemnified by the Partnership against any liability incurred
by any of them for any act or omission performed or omitted in good faith and
reasonably believed by the General Partner to be within the scope of authority
granted to it under the Partnership Agreement. Such liabilities include all
losses, claims, damages, expenses, judgments, fines, penalties, interest,
settlements and other amounts, provided that with respect to any criminal
proceeding, the indemnitee had no reasonable cause to believe its conduct was
unlawful. The holders of limited partnership interests are not personally liable
for indemnification.
Project Orange Capital Corp.
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine that despite the adjudication of liability, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue, or matter therein, he shall be indemnified against any expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that II-1 224
the corporation may purchase and maintain insurance on behalf of a director,
officer, employee or agent of the corporation against any liability asserted
against him or incurred by him in any such capacity or arising out of his status
as such whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
Section 102(b)(7) of the DGCL provides that a corporation in its original
certificate of incorporation or an amendment thereto validly approved by
stockholders may eliminate or limit personal liability of members of its board
of directors or governing body for breach of a director's fiduciary duty.
However, no such provision may eliminate or limit the liability of a director
for breaching his duty of loyalty, failing to act on good faith, engaging in
intentional misconduct
<PAGE>
or knowingly violating a law, paying a dividend or approving a stock repurchase
which was illegal or obtaining an improper personal benefit. A provision of this
type has no effect on the availability of equitable remedies, such as injunction
or rescission, for breach of fiduciary duty.
The Certificate of Incorporation of Project Orange Capital Corp. contains a
provision which limits the liability of the directors to the fullest extent
permitted by the DGCL. Specifically, Article IX of the Certificate of
Incorporation contains the following applicable provisions:
(a) No director of the Corporation shall have any personal liability
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director of the Corporation, except (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit.
(b) The Corporation shall indemnify any director or officer of the
Corporation and may indemnify any employee or agent of the Corporation who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(c) The Corporation shall indemnify any director or officer of the
Corporation and may indemnify any employee or agent of the Corporation who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
In addition, the Bylaws of Project Orange Capital Corp. (the "Bylaws"), in
substance, require the Corporation to indemnify each person who is or was a
director, officer, employee or agent of the Corporation to the full extent
permitted by the laws of the State of Delaware in the event such person is
involved in legal proceedings by reason of the fact that he is or was a
director, officer, employee or agent of the general partner, or is or was
serving at the general partner's request as a director, officer, employee or
agent of the general partner and its subsidiaries, another corporation,
partnership or other enterprise. The provisions of the Bylaws and Certificate
of Incorporation specifically provide that the indemnification rights,
respectively granted thereunder, are non-exclusive.
See Item 22 of this Registration Statement regarding the position of the
Securities and Exchange Commission on indemnification for liabilities arising
under the Securities Act.
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
1.1 Purchase Agreement dated December 2, 1999 among Project Orange Associates L.P. (as successor to
Project Orange Funding, L.P.), Project Orange Capital Corp. and Donaldson, Lufkin & Jenrette
Securities Corporation
2.1 Agreement and Plan of Merger of Project Orange Funding, L.P. into Project Orange Associates L.P.
dated December 6, 1999
2.2 Assumption Agreement dated December 6, 1999 of Project Orange Associates L.P.
3.1 Second Amended and Restated Agreement of Limited Partnership of Project Orange Associates L.P.
3.2 Certificate of Incorporation for Project Orange Capital Corp.
3.3 Bylaws of Project Orange Capital Corp.
3.4 First Amended and Restated Limited Liability Company Agreement for G.A.S. Orange Associates, L.L.C.
4.1 Indenture dated as of December 6, 1999 among Project Orange Associates L.P. (as successor to
Project Orange Funding, L.P.), Project Orange Capital Corp. and U.S. Bank Trust National
Association, as trustee, including the form of 10.5% Senior Secured Notes due 2007
4.2 A/B Exchange Registration Rights Agreement dated as of December 6, 1999 among Project Orange
Associates L.P. (as successor to Project Orange Funding, L.P.), Project Orange Capital Corp. and
Donaldson Lufkin & Jenrette Securities Corporation
4.3 Deposit and Disbursement Agreement dated as of December 6, 1999 between Project Orange Associates
L.P. (as successor to Project Orange Funding, L.P.) and U.S. Bank Trust National Association
4.4 Mortgage and Assignment of Rents (First Mortgage) dated as of December 6, 1999 by the City of
Syracuse Industrial Development Agency and Project Orange Associates L.P. to U.S. Bank Trust
National Association
4.5 Security Agreement dated as of December 6, 1999 between Project Orange Associates L.P. (as
successor to Project Orange Funding, L.P.) and U.S. Bank Trust National Association
4.6 Security Agreement dated as of December 6, 1999 between the City of Syracuse Industrial
Development Agency and U.S. Bank Trust National Association
4.7 Pledge and Security Agreement dated as of December 6, 1999 among G.A.S. Orange Partners, L.P.,
Project Orange Associates L.P. (as successor to Project Orange Funding, L.P.) and U.S. Bank Trust
National Association
4.8 Pledge and Security Agreement dated as of December 6, 1999 among G.A.S. Orange Associates, L.L.C.,
Project Orange Associates L.P. (as successor to Project Orange Funding, L.P.) and U.S. Bank Trust
National Association
4.9 Pledge and Security Agreement dated as of December 6, 1999 among A.V. Grantor Trust, G.A.S. Orange
Partners, L.P. and U.S. Bank Trust National Association
4.10 Pledge and Security Agreement dated as of December 6, 1999 among G.A.S. Orange Development, Inc.,
G.A.S. Orange Partners, L.P. and U.S. Bank Trust National Association
4.11 Letter of Transmittal
5.1* Opinion of Piper Marbury Rudnick & Wolfe LLP
10.1 Power Put Agreement dated September 18, 1986 between Project Orange Associates L.P. and Niagara
Mohawk Power Corporation
10.2 ISDA Master Agreement dated June 30, 1998 between Project Orange Associates L.P. and Niagara
Mohawk Power Corporation (with attached Schedule dated June 30, 1998)
10.3 Restated Gas Sale and Purchase Agreement dated as of March 18, 1991 between Project Orange Associates
L.P., Noranda Inc. and Canadian Hunter Exploration Ltd.
10.4 Three Party Letter Agreement dated December 6, 1999 among Project Orange Associates L.P., Canadian Hunter Exploration
Ltd. and Union Pacific Resources Inc.
</TABLE>
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.5 Firm Natural Gas Transportation Agreement dated March 29, 1991 between Project Orange Associates
L.P. & Tennessee Gas Pipeline Company
10.6 Gas Transportation Agreement (For use under Rate Schedule IT) dated November 11, 1999 between
Project Orange Associates L.P. and Tennessee Gas Pipeline Company
10.7 Steam Contract dated February 27, 1990 between Project Orange Associates L.P. and Syracuse
University
10.8 Operating Agreement dated February 27, 1990 between Project Orange Associates L.P. and Syracuse
University
10.9 Lease Agreement dated February 27, 1990 between Project Orange Associates L.P. and Syracuse
University
10.10 Lease and Sublease Agreement dated April 5, 1991 between the City of Syracuse Industrial
Development Agency and Project Orange Associates L.P.
10.11 Cogeneration Facility Operation and Maintenance Agreement dated November 1, 1998 between Project
Orange Associates L.P. and General Electric International, Inc. (as successor to GE Energy Plant
Operations, Inc.)
10.12 Payment in Lieu of Taxes Agreement dated April 5, 1991 between the City of Syracuse, the City of
Syracuse Industrial Development Agency and Project Orange Associates L.P.
10.13 Asset Management Letter Agreement dated December 6, 1999 between Niagara Mohawk Energy Marketing,
Inc. and Project Orange Associates L.P.
10.14 Marketing Letter Agreement dated December 6, 1999 between Niagara Mohawk Energy Marketing, Inc.
and Project Orange Associates L.P.
10.15 Host Community Agreement dated April 5, 1991 between Project Orange Associates L.P., the City of
Syracuse and the Syracuse Housing Authority
10.16 Consent and Agreement dated as of December 6, 1999 among Project Orange Associates L.P., Syracuse
University and U.S. Bank Trust National Association
10.17 Subordination Agreement dated as of December 6, 1999 among Project Orange Associates L.P.,
Syracuse University and U.S. Bank Trust National Association
10.18 Consent and Agreement dated as of December 6, 1999 among the City of Syracuse Industrial
Development Agency, Project Orange Associates L.P. and U.S. Bank Trust National Association
10.19 Consent and Agreement dated as of December 6, 1999 among the City of Syracuse, the City of
Syracuse Industrial Development Agency, Project Orange Associates L.P. and U.S. Bank Trust
National Association
10.20 Consent dated as of December 2, 1999 executed by Niagara Mohawk Power Corporation
10.21 Consent and Agreement (Cogeneration Facility Operation and Maintenance Agreement) dated as of
December 6, 1999 by General Electric International Inc.
10.22 Consent and Agreement (Restated Gas Sale and Purchase Agreement) dated December 6, 1999 by
Canadian Hunter Exploration Ltd.
10.23 Consent and Agreement (Interruptible Gas Transportation Agreement, Firm Gas Transportation
Agreement, Hot Tap Reimbursement Agreement and Letter of Credit Drawing Agreement) dated as of
December 6, 1999 by Tennessee Gas Pipeline Company
10.24 Consent and Agreement dated December 6, 1999 among TransCanada Pipelines Limited, Canadian Hunter
Exploration Ltd., Project Orange Associates L.P. and U.S. Bank Trust National Association
10.25 Consent and Agreement (Asset Management Agreement) dated as of December 6, 1999 by Niagara Mohawk
Energy Marketing, Inc.
10.26 Agency Agreement dated as of January 14, 2000 between Niagara Mohawk Energy Marketing, Inc.
and Project Orange Associates L.P.
23.1 Consent of Stone & Webster Management Consultants, Inc., Independent Engineer
23.2 Consent of Deloitte & Touche LLP, Independent Auditors
25.1 Form T-1 Statement of Eligibility of U.S. Bank Trust National Association to act as Trustee under
the Indenture
</TABLE>
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed
<PAGE>
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned Registrants hereby undertake:
1. To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 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;
2. 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;
3. To file, during any period in which offers or sales are being made, a post-
effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
4. That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
5. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Syracuse, State of New
York, on the 11th day of February, 2000.
PROJECT ORANGE ASSOCIATES L.P.
By: G.A.S. ORANGE ASSOCIATES, LLC,
its General Partner
By: /s/ Adam H. Victor
----------------------------------------
Adam H. Victor
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
under the heading "Signatures" constitutes and appoints Adam H. Victor and
Richard S. Scolaro, each as his true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any or all amendments including
post-effective amendments) and supplements to this Registration Statement and
any related Registration Statement filed pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and to perform each and every act and thing
requisite and necessary to be done in connection with the above premises, as
fully for all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam H. Victor
- -------------------------------------- President, Treasurer and Manager February 11, 2000
Adam H. Victor (Principal executive and financial
officer)
/s/ Douglas Corbett
- -------------------------------------- Vice President and Manager February 11, 2000
Douglas Corbett (Principal accounting officer)
/s/ Richard S. Scolaro
- -------------------------------------- Manager February 11, 2000
Richard S. Scolaro
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Syracuse, State of New
York, on the 11th day of February, 2000.
PROJECT ORANGE CAPITAL CORP.
By: /s/ Adam H. Victor
------------------------------------------
Adam H. Victor
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
under the heading "Signatures" constitutes and appoints Adam H. Victor and
Richard S. Scolaro, each as his true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any or all amendments including
post-effective amendments) and supplements to this Registration Statement and
any related Registration Statement filed pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and to perform each and every act and thing
requisite and necessary to be done in connection with the above premises, as
fully for all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam H. Victor
- -------------------------------------- President, Treasurer and Manager February 11, 2000
Adam H. Victor (Principal executive and financial
officer)
/s/ Douglas Corbett
- -------------------------------------- Vice President and Manager February 11, 2000
Douglas Corbett (Principal accounting officer)
/s/ Richard S. Scolaro
- -------------------------------------- Manager February 11, 2000
Richard S. Scolaro
</TABLE>
<PAGE>
EXHIBIT 1.1
EXECUTION COPY
PROJECT ORANGE FUNDING, L.P.
PROJECT ORANGE CAPITAL CORP.
$68,000,000
10.5% Senior Secured Notes due 2007
Purchase Agreement
December 2, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
$68,000,000
10.5% Senior Secured Notes due 2007
of
PROJECT ORANGE FUNDING, L.P.
PROJECT ORANGE CAPITAL CORP.
PURCHASE AGREEMENT
December 2, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Dear Sirs:
Project Orange Funding, L.P. ("Funding L.P."), a Delaware limited
partnership (together with its successors, including Project Orange Associates,
L.P. ("Orange L.P."), a Delaware limited partnership, as the survivor of the
merger of Funding L.P. with and into Orange, L.P. concurrently with the issuance
and sale of the Senior Secured Notes referred to below, "POA") and Project
Orange Capital Corp. ("Capital Co." and together as co-obligor with POA, the
"Issuers"), propose to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser") an aggregate of $68,000,000 in principal
amount of their 10.5% Senior Secured Notes due 2007 (the "Series A Notes"),
subject to the terms and conditions set forth herein. The Series A Notes are to
be issued pursuant to the provisions of an indenture (the "Indenture"), to be
dated as of the Closing Date (as defined below), among the Issuers and U.S. Bank
Trust National Association, as trustee (the "Trustee"). The Series A Notes and
the Series B Notes (as defined below) issuable in exchange therefor are
collectively referred to herein as the "Notes." Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Indenture.
On the Closing Date, concurrently with the issuance and sale of the Series
A Notes, Funding L.P. will merge (the "Merger") with and into Orange L.P. (with
Orange L.P. as the surviving partnership) pursuant to the Agreement and Plan of
2
<PAGE>
Merger dated as of the Closing Date (the "Merger Agreement") between Funding
L.P. and Orange L.P. It is a condition to the obligation of the Initial
Purchaser to purchase the Series A Notes under this Agreement, in addition to
the other conditions set forth in Section 9 of this Agreement, that the Initial
Purchaser shall have received an Assumption Agreement (the "Assumption
Agreement") in the form of Exhibit A hereto executed and delivered by Orange
L.P. wherein, inter alia, Orange, L.P. shall expressly assume, and agree to
perform and discharge, all of the obligations of Funding L.P. pursuant to this
Agreement.
1. Offering Memorandum. The Series A Notes will be offered and sold to
the Initial Purchaser pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). The
Issuers have prepared a preliminary offering memorandum, dated November 17, 1999
(the "Preliminary Offering Memorandum") and a final offering memorandum, dated
December 2, 1999 (the "Offering Memorandum"), relating to the Series A Notes.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THE SENIOR SECURED NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT: (A) SUCH SECURITY
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) (a) INSIDE THE
UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144(A)), (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A
3
<PAGE>
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR
(d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUERS SO
REQUEST), (2) TO THE ISSUERS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTION SET FORTH IN
(A) ABOVE."
2. Agreements to Sell and Purchase. On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to the terms
and conditions contained herein, the Issuers agree to issue and sell to the
Initial Purchaser, and the Initial Purchaser agrees to purchase from the
Issuers, an aggregate principal amount of $68,000,000 of Series A Notes due at a
purchase price equal to 95.203% of the principal amount thereof (the "Purchase
Price").
3. Terms of Offering. The Initial Purchaser has advised the Issuers that
the Initial Purchaser will make offers (the "Exempt Resales") of the Series A
Notes purchased hereunder on the terms set forth in the Offering Memorandum, as
amended or supplemented, solely to (i) persons whom the Initial Purchaser
reasonably believes to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBs"), and (ii) persons permitted to purchase the Series A
Notes in offshore transactions in reliance upon Regulation S under the Act
(each, a "Regulation S Purchaser") (such persons specified in clauses (i) and
(ii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchaser will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 98.299% of the principal amount thereof. Such price may be
changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will have
the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
the form of Exhibit B hereto, for so long as such Series A Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Issuers will
agree to file with the Securities and Exchange Commission (the "Commission")
under the circumstances set forth therein, (i) a registration statement under
the Act (the "Exchange Offer Registration Statement") relating to the Issuers'
10.5% Senior Secured Notes due 2007 (the "Series B Notes"), to be offered in
exchange for the Series A Notes (such offer to exchange being referred to as
4
<PAGE>
the "Exchange Offer") and (ii) a shelf registration statement pursuant to Rule
415 under the Act (the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, the "Registration Statements") relating
to the resale by certain holders of the Series A Notes and to use their best
efforts to cause such Registration Statements to be declared and remain
effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. This Agreement, the Indenture,
the Notes, the Registration Rights Agreement, the Assumption Agreement and the
Collateral Documents are hereinafter sometimes referred to collectively as the
"Financing Documents."
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for, the Series A
Notes shall be made at the offices of Davis Polk & Wardwell, New York, New
York or such other location as may be mutually acceptable to the Initial
Purchaser and the Issuers. Such delivery and payment shall be made at 9:00
a.m. New York City time, on December 6, 1999 or at such other time on the
same date or such other date as shall be agreed upon by the Initial
Purchaser and the Issuers in writing. The time and date of such delivery
and the payment for the Series A Notes are herein called the "Closing
Date."
(b) One or more of the Series A Notes in definitive global form,
registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Series A Notes (collectively, the "Global
Note"), shall be delivered by the Issuers to the Initial Purchaser (or as
the Initial Purchaser directs) in each case with any transfer taxes thereon
duly paid by the Issuers against payment by the Initial Purchaser of the
Purchase Price thereof by wire transfer in same day funds to the order of
the Issuers. The Global Note shall be made available to the Initial
Purchaser for inspection not later than 9:30 a.m., New York City time, on
the business day immediately preceding the Closing Date.
5. Agreements of the Issuers. The Issuers hereby agree with the Initial
Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if requested by the
Initial Purchaser, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Series A Notes for
offering or sale in any jurisdiction designated by the Initial Purchaser
pursuant to Section 5(e) hereof,
----
5
<PAGE>
or the initiation of any proceeding by any state securities commission or
any other federal or state regulatory authority for such purpose and (ii)
of the happening of any event during the period referred to in Section 5(c)
----
below that makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires any
additions to or changes in the Preliminary Offering Memorandum or the
Offering Memorandum in order to make the statements therein not misleading.
The Issuers shall use their best efforts to prevent the issuance of any
stop order or order suspending the qualification or exemption of any Series
A Notes under any state securities or Blue Sky laws and, if at any time any
state securities commission or other federal or state regulatory authority
shall issue an order suspending the qualification or exemption of any
Series A Notes under any state securities or Blue Sky laws, the Issuers
shall use their best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
(b) To furnish the Initial Purchaser and those persons identified by
the Initial Purchaser to the Issuers as many copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as the Initial Purchaser may reasonably request for
the time period specified in Section 5(c). Subject to the Initial
----
Purchaser's compliance with its representations and warranties and
agreements set forth in Section 7 hereof, the Issuers consent to the use of
-
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments and supplements thereto required pursuant hereto, by the Initial
Purchaser in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the Initial
Purchaser an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser, (i) not to make
any amendment or supplement to the Offering Memorandum of which the Initial
Purchaser shall not previously have been advised or to which the Initial
Purchaser shall reasonably object after being so advised and (ii) to
prepare promptly upon the Initial Purchaser's reasonable request, any
amendment or supplement to the Offering Memorandum which may be necessary
or advisable in connection with such Exempt Resales.
(d) If, during the period referred to in Section 5(c) above, any
----
event shall occur or condition shall exist as a result of which, in the
opinion of counsel to the Initial Purchaser, it becomes necessary to amend
or supplement the Offering Memorandum in order to make the statements
therein, in the light of the circumstances when such Offering Memorandum is
delivered to an Eligible
6
<PAGE>
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchaser, it is necessary to amend or supplement the Offering Memorandum
to comply with any applicable law, forthwith to prepare an appropriate
amendment or supplement to such Offering Memorandum so that the statements
therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such
Offering Memorandum will comply with applicable law, and to furnish to the
Initial Purchaser and such other persons as the Initial Purchaser may
designate such number of copies thereof as the Initial Purchaser may
reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchaser and
counsel to the Initial Purchaser in connection with the registration or
qualification of the Series A Notes for offer and sale to the Initial
Purchaser and pursuant to Exempt Resales under the securities or Blue Sky
laws of such jurisdictions as the Initial Purchaser may request and to
continue such registration or qualification in effect so long as required
for Exempt Resales and to file such consents to service of process or other
documents as may be necessary in order to effect such registration or
qualification; provided, however, that the Issuers shall not be required in
connection therewith to qualify as a foreign partnership or corporation, as
applicable, in any jurisdiction in which they are not now so qualified or
to take any action that would subject them to general consent to service of
process or taxation other than as to matters and transactions relating to
the Preliminary Offering Memorandum, the Offering Memorandum or Exempt
Resales, in any jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, to furnish to the Initial
Purchaser as soon as available copies of all reports or other
communications furnished by the Issuers to their security holders or
furnished to or filed with the Commission or any national securities
exchange on which any class of securities of either Issuer is listed and
such other publicly available information concerning either Issuer as the
Initial Purchaser may reasonably request.
(g) So long as any of the Series A Notes remain outstanding and
during any period in which the Issuers are not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to make available to any holder of Series A Notes in connection with
any sale thereof and any prospective purchaser of such Series A Notes from
such holder, the information ("Rule 144A Information") required by Rule
144A(d)(4) under the Act.
7
<PAGE>
(h) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of the obligations of the Issuers
under this Agreement, including: (i) the fees, disbursements and expenses
of counsel to the Issuers and accountants of the Issuers in connection with
the sale and delivery of the Series A Notes to the Initial Purchaser and
pursuant to Exempt Resales, and all other fees and expenses in connection
with the preparation, printing, filing and distribution of the Preliminary
Offering Memorandum, the Offering Memorandum and all amendments and
supplements to any of the foregoing (including financial statements),
including the mailing and delivering of copies thereof to the Initial
Purchaser and persons designated by it in the quantities specified herein,
(ii) all costs and expenses related to the transfer and delivery of the
Series A Notes to the Initial Purchaser and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase,
sale or delivery of the Series A Notes, (iv) all expenses in connection
with the registration or qualification of the Series A Notes for offer and
sale under the securities or Blue Sky laws of the several states and all
costs of printing or producing any preliminary and supplemental Blue Sky
memoranda in connection therewith (including the filing fees and fees and
disbursements of counsel for the Initial Purchaser in connection with such
registration or qualification and memoranda relating thereto), (v) the cost
of printing certificates representing the Series A Notes, (vi) all expenses
and listing fees in connection with the application for quotation of the
Series A Notes in the National Association of Securities Dealers, Inc.
("NASD") Automated Quotation System -- Private Offerings, Resales and
Trading Through Automated Linkages ("PORTAL"), (vii) the fees and expenses
of the Trustee and the Trustee's counsel in connection with the Indenture
and the Notes, (viii) the costs and charges of any transfer agent,
registrar and/or depositary (including DTC), (ix) any fees charged by
rating agencies for the rating of the Notes, (x) all costs and expenses of
the Exchange Offer and any Registration Statement, as set forth in the
Registration Rights Agreement, and (xi) and all other costs and expenses
incident to the performance of the obligations of the Issuers hereunder for
which provision is not otherwise made in this Section.
(i) To use their best efforts to effect the inclusion of the Series A
Notes in PORTAL and to maintain the listing of the Series A Notes on PORTAL
for so long as the Series A Notes are outstanding.
8
<PAGE>
(j) To obtain the approval of DTC for "book-entry" transfer of the
Notes, and to comply with all of its agreements set forth in the
representation letters of the Issuer to DTC relating to the approval of the
Notes by DTC for "book-entry" transfer.
(k) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of either Issuer or
any warrants, rights or options to purchase or otherwise acquire debt
securities of either Issuer substantially similar to the Notes (other than
the Notes), without the prior written consent of the Initial Purchaser.
(l) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchaser or
pursuant to Exempt Resales in a manner that would require the registration
of any such sale of the Series A Notes under the Act.
(m) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes.
(n) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes registered pursuant to the Act to be offered in
exchange for the Series A Notes and to comply with all applicable federal
and state securities laws in connection with the Exchange Offer.
(o) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(p) To use their best efforts to do and perform all things required
or necessary to be done and performed under this Agreement by them prior to
the Closing Date and to satisfy all conditions precedent to the delivery of
the Series A Notes.
(q) To use the net proceeds received by them from the sale of the
Series A Notes to the Initial Purchaser pursuant to this Agreement in the
manner specified in the Offering Memorandum under the caption "Use of
Proceeds".
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6. Representations, Warranties and Agreements of the Issuers. As of the
date hereof, the Issuers, jointly and severally, represent and warrant to, and
agree with, the Initial Purchaser that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum
do not, and any supplement or amendment to them will not, contain any
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 the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained in
this Section 6(a) shall not apply to statements in or omissions from the
----
Preliminary Offering Memorandum or the Offering Memorandum (or any
supplement or amendment thereto) based upon information relating to the
Initial Purchaser furnished to the Issuers in writing by the Initial
Purchaser expressly for use therein. No stop order preventing the use of
the Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.
(b) Funding L.P. is a Delaware limited partnership, Orange L.P. is a
Delaware limited partnership, each of Capital Co., is a Delaware
corporation, G.A.S. Development, Inc. ("GAS Development") is a New York
corporation and A.V. Grantor Trust ("AV Trust") is a grantor trust
established under New York law, G.A.S. Orange Partners, L.P. ("GAS LP"), is
a Delaware limited partnership, G.A.S. Orange Associates, L.L.C. ("GAS
Orange") is a Delaware limited liability company; and each of Funding L.P.,
Orange L.P., Capital Co., GAS LP, GAS Development, AV Trust and GAS Orange,
is duly organized and validly existing under the laws of the state of its
incorporation, organization or formation (as the case may be) and in good
standing under the laws of each state for which it is required to be in
good standing in connection with the transactions contemplated by the
Operative Documents, and has the full power and authority to carry on its
business as now conducted, to own or hold under lease its properties and to
enter into and perform its obligations under each Operative Document to
which it is or is to be a party. The sole partners of Orange L.P. are, and
immediately after giving effect to the Merger the sole partners of Orange
L.P. will be, GAS LP and GAS Orange. Funding L.P., Capital Co., Orange
L.P., GAS Orange, GAS LP, GAS Development and AV Trust are sometimes
referred to collectively herein as the "Credit Parties" and each
individually as a "Credit Party".
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<PAGE>
(c) Each Credit Party has duly authorized, executed and
delivered each Operative Document to which it is a party (or such
Operative Documents have been duly and validly assigned to such Credit
Party and such Credit Party has assumed the obligations thereunder),
and neither such Credit Party's execution and delivery thereof nor its
consummation of the transactions contemplated thereby nor its
compliance with the terms thereof (including, without limitation, the
consummation of the Merger, the issuance of the Notes and the creation
of the Liens) (i) does or will contravene the articles of
incorporation, bylaws or other organizational or governing documents
of such Credit Party, or any law, treaty, rule or regulation, any
requirement under an Authorization (as defined below), and any
determination of any arbitrator, court or government in each case
applicable to or binding upon such Credit Party or any of its
properties or to which such Credit Party or any of its property is
subject, (ii) does or will contravene or result in or require the
creation of any lien (other than Permitted Liens) upon any of its
property under, any agreement or instrument to which it is a party or
by which it or any of its properties may be bound or affected or (iii)
does or will require the consent or approval of any Person which has
not already been obtained.
(d) The Indenture has been duly authorized by each Issuer and,
on the Closing Date, will have been validly executed and delivered by
each Issuer. When the Indenture has been duly executed and delivered
by the Issuer, the Indenture will be a valid and binding agreement of
each Issuer, enforceable against each Issuer in accordance with its
terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Indenture will conform in all
material respects to the requirements of the Trust Indenture Act of
1939, as amended (the "TIA" or "Trust Indenture Act"), and the rules
and regulations of the Commission applicable to an indenture which is
qualified thereunder.
(e) The Series A Notes have been duly authorized for issuance
and sale by each Issuer to the Initial Purchaser and, on the Closing
Date, will have been validly executed and delivered by each Issuer.
When the Series A Notes have been issued, executed and authenticated
in accordance with the provisions of the Indenture and delivered to
and paid for by the Initial Purchaser in accordance with the terms of
this Agreement, the Series A Notes will be entitled to the benefits of
the Indenture and will be valid and binding obligations of each
Issuer, enforceable in accordance with their terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws
11
<PAGE>
affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability. On the Closing Date, the Series A
Notes will conform as to legal matters to the description thereof
contained in the Offering Memorandum.
(f) On the Closing Date, the Series B Notes will have been duly
authorized by each Issuer. When the Series B Notes are issued,
executed and authenticated in accordance with the terms of the
Exchange Offer and the Indenture, the Series B Notes will be entitled
to the benefits of the Indenture and will be the valid and binding
obligations of each Issuer, enforceable against each Issuer in
accordance with their terms, except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability. When the Series B Notes are
issued, authenticated and delivered, the Series B Notes will confirm
in all material respects to the description thereof contained in the
Offering Memorandum.
(g) Each Collateral Document has been duly authorized by each
Credit Party that is a party thereto and, on the Closing Date, will
have been validly executed and delivered by each such Credit Party.
When each Collateral Document has been duly executed and delivered by
each such Credit Party, such Collateral Document will constitute a
valid and binding agreement of each such Credit Party, enforceable
against each such Credit Party in accordance with its terms, except as
(i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
(ii) the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date,
each Collateral Document will conform in all material respects to the
description thereof in the Offering Memorandum.
(h) Each of the Project Documents to which any Credit Party is a
party has been duly authorized by such Credit Party and constitutes
the valid and binding agreement of such Credit Party, enforceable
against such Credit Party in accordance with its terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable
principles of general applicability. On the Closing Date, each Project
Document described in the Offering Memorandum will conform in all
material respects to the description thereof in the Offering
Memorandum.
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<PAGE>
(i) The Registration Rights Agreement has been duly authorized
by each Issuer and, on the Closing Date, will have been duly executed
and delivered by each Issuer. When the Registration Rights Agreement
has been duly executed and delivered, the Registration Rights
Agreement will be a valid and binding agreement of each Issuer
enforceable against each Issuer in accordance with its terms except as
(i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies
may be limited by equitable principles of general applicability. On
the Closing Date, the Registration Rights Agreement will conform as to
legal matters to the description thereof in the Offering Memorandum.
(j) No Credit Party has violated any federal, state or local law
or regulation relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), except
for such violations which, singly or in the aggregate, would not have
a Material Adverse Effect. There is no employee benefit plan
maintained by any Credit Party, or to which any Credit Party
contributes or has contributed or is or has been obligated to
contribute, and no Credit Party has or is expected to have any
liability, or is subject to and is expected to be subject to any Lien,
with respect to any employee benefit plan.
(k) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any Authorization (as defined
below), any related constraints on operating activities and any
potential liabilities to third parties) which would, singly or in the
aggregate, have a Material Adverse Effect.
(l) Each Credit Party has such permits, licenses, consents,
exemptions, franchises, authorizations and other approvals (each, an
"Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and all courts and other
tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except
where the failure to have any such Authorization or to make any such
filing or notice would not, singly or in the aggregate, have a
Material Adverse Effect. Each such Authorization is valid and in full
force and
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<PAGE>
effect and such Credit Party is in compliance with all the terms and
conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect
thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which
allows or, after notice or lapse of time or both, would allow,
revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any
other impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that
are burdensome to any Credit Party; except where such failure to be
valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction
would not, singly or in the aggregate, have a Material Adverse Effect.
(m) The accountants, Deloitte & Touche LLP, have issued their
report on the financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum and are independent
public accountants with respect to Orange L.P., as required by the Act
and the Exchange Act. The historical financial statements, together
with related notes, set forth in the Preliminary Offering Memorandum
and the Offering Memorandum comply as to form in all material respects
with the requirements applicable to registration statements on
Form S-1 under the Act.
(n) The historical financial statements, together with related
schedules and notes forming part of the Offering Memorandum (and any
amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial
position of Orange L.P. on the basis stated in the Offering Memorandum
at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as
disclosed therein; and the other financial and statistical information
and data set forth in the Offering Memorandum (and any amendment or
supplement thereto) are, in all material respects, accurately
presented and prepared on a basis consistent with such financial
statements and the books and records of Orange L.P.
(o) The pro forma financial statements included in the
Preliminary Offering Memorandum and the Offering Memorandum have been
prepared on a basis consistent with the historical financial
statements of Orange L.P. and give effect to assumptions used in the
preparation thereof on a reasonable basis and in good faith and
present fairly the historical and proposed transactions
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<PAGE>
contemplated by the Preliminary Offering Memorandum and the Offering
Memorandum; and such pro forma financial statements comply as to form
in all material respects with the requirements applicable to pro forma
financial statements included in registration statements on Form S-1
under the Act. The other pro forma financial and statistical
information and data included in the Offering Memorandum are, in all
material respects, accurately presented and prepared on a basis
consistent with the pro forma financial statements.
(p) No Credit Party is and, after giving effect to the offering
and sale of the Series A Notes and the application of the net proceeds
thereof as described in the Offering Memorandum, will be, an
"investment company," as such term is defined in the Investment
Company Act of 1940, as amended and no Credit Party will be subject
to, or not exempt from, regulation under the Public Utility Holding
Company Act of 1935 ("PUHCA") or the Federal Power Act ("FPA") except
as a "qualifying facility" under PURPA.
(q) There are no contracts, agreements or understandings between
any Credit Party and any person granting such person the right to
require any Credit Party to file a registration statement under the
Act with respect to any securities of either Issuer or to require
either Issuer to include such securities with the Notes registered
pursuant to any Registration Statement.
(r) No Credit Party nor any agent thereof acting on the behalf
of them has taken, and none of them will take, any action that might
cause this Agreement or the issuance or sale of the Series A Notes to
violate Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R.
Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
(s) No "nationally recognized statistical rating organization"
as such term is defined for purposes of Rule 436(g)(2) under the Act
(i) has imposed (or has informed either Issuer that it is considering
imposing) any condition (financial or otherwise) on either Issuer's
retaining any rating assigned to such Issuer or any securities of such
Issuer or (ii) has indicated to each Issuer that it is considering (A)
the downgrading, suspension, or withdrawal of, or any review for a
possible change that does not indicate the direction of the possible
change in, any rating so assigned or (B) any change in the outlook for
any rating of either Issuer or any securities of such Issuer.
(t) Since the respective dates as of which information is given
in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of
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<PAGE>
this Agreement), (i) there has not occurred any material adverse
change or any development involving a prospective material adverse
change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Issuers or GAS Orange, (ii)
there has not been any material adverse change or any development
involving a prospective material adverse change in the partnership
equity or capital stock or in the long-term debt of any Issuer or GAS
Orange and (iii) none of the Issuers or GAS Orange has incurred any
material liability or obligation, direct or contingent.
(u) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Act.
(v) Each Credit Party owns, possesses, or has the right to use,
or can acquire on reasonable terms, all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and
trade names ("intellectual property") currently employed by it in
connection with the business now operated by it except where the
failure to own or possess or otherwise be able to acquire such
intellectual property would not, singly or in the aggregate, have a
Material Adverse Effect; and no Credit Party has received any notice
of infringement of or conflict with asserted rights of others with
respect to any of such intellectual property which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect.
(w) POA is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are customary in the business in which it is engaged; and POA (i) has
not received notice from any insurer or agent of such insurer that
substantial capital improvements or other material expenditures will
have to be made in order to continue such insurance and (ii) has no
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers at a cost that would not have a
Material Adverse Effect. The insurance maintained by POA complies with
requirements of Section 4.09 of the Indenture and with the
requirements of the University Agreements and other Project Documents.
(x) POA maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii)
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<PAGE>
transactions are recorded as necessary to permit preparation of
financial statements to conformity with generally accepted accounting
principles and to maintain asset accountability in accordance with
industry practices; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and
(iv) the recorded assets are compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(y) All material tax returns required to be filed by each Credit
Party in any jurisdiction prior to the date hereof have been filed,
other than those filings subject to a valid extension or being
contested in good faith, and all material taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges due
pursuant to such returns or pursuant to any assessment received by any
Credit Party have been paid, other than those being contested in good
faith for which adequate reserves have been provided. Without limiting
the foregoing, NCP Syracuse, Inc. and Syracuse Orange Partners, L.P.,
as sellers (the "Sellers"), and GAS Orange, as purchaser, have filed
or have provided for the filing by the due date after the Closing Date
all transfer tax returns required to be filed with respect to the sale
and purchase of the Sellers' partnership interests in Orange L.P. and
have been paid or have provided for the payment by the due date after
the Closing Date all transfer taxes payable with respect to the sale
and purchase of the Sellers' partnership interests in Orange L.P.
(z) (i) The factual information provided by any Credit Party
to Stone & Webster Management Consultants, Inc. (the "Independent
Engineer"), in connection with the preparation of its report appearing
as Exhibit A to the Offering Memorandum (which factual information is
referenced in those reports), was true, correct and complete in all
material respects.
(ii) POA has prepared the projections included in the
report of the Independent Engineer (the "Base Case Projections")
and is responsible for developing the assumptions on which the
Base Case Project Projections are based; the Base Case Project
Projections (A) are, to the best of the Issuers' knowledge, based
on reasonable assumptions as to all legal and factual matters
(including Operation and Maintenance Costs until the Final
Maturity Date of the Notes) material to the estimates set forth
therein, and (B) are consistent with the provisions of the
Project Documents. In the reasonable opinion of the Issuers, the
textual material accompanying the Base Case Project Projections
discloses all information reasonably necessary for an
17
<PAGE>
understanding of the Base Case Project Projections, and does not
contain any material misstatements or omit any information which,
in conjunction with other information given, would be necessary
to make such information not materially misleading.
(iii) Each of (A) the Independent Engineer, the report of
which appears in the Offering Memorandum and which will deliver
the letter referred to in Section 9(x) hereof and (B) J&H Marsh &
McLennan, Limited, the report of which is referenced to in
Section 9(w) hereof and which will deliver the letter referred to
in Section 9(w) hereof, was, as of the date of such report and
is, as of the date hereof, "independent". The Independent
Engineer and J&H Marsh & McLennan, Limited (collectively the
"Independent Consultants"), as applicable, shall be considered
"independent" if since the date which was six months prior to the
date of the final Offering Memorandum, neither such Person nor
any Member of such Person (i) had, or was committed to acquire,
any direct material financial interest or material indirect
financial interest in any Credit Party or any Affiliate thereof
or (ii) was, or will be connected as a promoter, underwriter,
voting trustee, director, officer or employee of any Credit Party
or any Affiliate thereof. "Member" shall mean (a) all partners,
shareholders and other principals of the applicable Person, (b)
any professional employee involved in providing any professional
service to any Credit Party or any Affiliate thereof and (c) any
professional employee having managerial responsibilities and
located in an office of such Person which will participate in a
significant portion of the services to be performed by such
Person.
(aa) When the Series A Notes are issued and delivered pursuant
to this Agreement, the Series A Notes will not be of the same class
(within the meaning of Rule 144A under the Act) as any security of
either Issuer that is listed on a national securities exchange
registered under Section 6 of the Exchange Act or that is quoted in a
United States automated inter-dealer quotation system.
(bb) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by any Credit Party or
any of its representatives (other than the Initial Purchaser, as to
whom the Issuers make no representation) in connection with the offer
and sale of the Series A Notes contemplated hereby, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or
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<PAGE>
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Series A Notes
have been issued and sold by either Issuer or Orange L.P. within the
six-month period immediately prior to the date hereof.
(cc) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(dd) No Credit Party nor any of its affiliates or any person
acting on its behalf (other than the Initial Purchaser, as to whom the
Issuers make no representation) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S under the
Act ("Regulation S") with respect to the Series A Notes.
(ee) The Series A Notes offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions assuming the accuracy of the Initial Purchaser's
representations and warranties and agreements set forth in Section 7
-
hereof.
(ff) The sale of the Series A Notes pursuant to Regulation S is
not part of a plan or scheme to evade the registration provisions of
the Act assuming the accuracy of the Initial Purchaser's
representations and warranties and agreements set forth in Section 7
-
hereof.
(gg) No registration under the Act of the Series A Notes is
required for the sale of the Series A Notes to the Initial Purchaser
as contemplated hereby or for the Exempt Resales assuming the accuracy
of the Initial Purchaser's representations and warranties and
agreements set forth in Section 7 hereof.
-
(hh) Prior to the date hereof, no Credit Party nor any of its
Affiliates has taken any action which is designed to or which has
constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of either
Issuer in connection with the offering of the Series A Notes.
(ii) Neither of the Issuers nor GAS Orange has conducted any
business other than the business contemplated by the Operative
Documents to which it is a party and neither of the Issuers nor GAS
Orange has any outstanding debt or other material liabilities other
than (x) pursuant to the
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<PAGE>
Operative Documents to which it is a party, or (y) as otherwise
disclosed to the Initial Purchaser in the Offering Memorandum and
neither of the Issuers nor GAS Orange is a party to or bound by any
material contract other than the Operative Documents to which it is a
party.
(jj) None of the Credit Parties, the Trustees, the Collateral
Agent, the Initial Purchaser or any holder of a Note, or any Affiliate
of any of them will, solely as a result of the ownership, leasing or
operation of the Project, the sale of electricity therefrom or the
entering into any Operative Document or any transaction contemplated
hereby or thereby, be subject to, or not exempt from, regulation under
the FPA or PUHCA or under state laws and regulations respecting the
rates or the financial or organization regulation of electric
utilities, except as a "qualifying facility" under the Public Utility
Regulatory Policies Act of 1978 ("PURPA").
(kk) Capital Co. has no direct or indirect subsidiaries and,
except for Capital Co., Funding L.P. has no direct or indirect
Subsidiaries and neither Issuer is a general partner or a limited
partner in any general or limited partnership or a joint venturer in
any joint venture.
(ll) No Credit Party is in default under any material term of
any Project Document or any agreement relating to any obligation of
such Credit Party for or with respect to borrowed money, and to the
best of the Issuers' knowledge, no other party to any Project Document
is in default thereunder, in each case which default would have a
Material Adverse Effect.
(mm) No Default or Event of Default has occurred or is existing.
(nn) The chief executive office or chief place of business (as
each such term is used in Article 9 of the Uniform Commercial Code as
in effect in the State of New York (the "UCC") of each Issuer is 90
Presidential Plaza, Syracuse, New York 13209 and the place where the
Issuers keep the books of account and records with respect to the
Project is located at the foregoing address.
(oo) All Project Documents and Authorizations have been entered
into by or duly and validly assigned to the Project or Orange L.P.
free and clear of all Liens except Permitted Liens, and all necessary
Persons have duly consented to such assignment.
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<PAGE>
(pp) To the Issuers' knowledge, without requiring the Issuers to
perform any investigation with respect to the Asset Manager, Canadian
Hunter, UPR, the Operator, SIDA, TGPC, TransCanada or the University
(collectively the "Major Project Participants"), except as set forth in the
Offering Memorandum, there are no pending or threatened actions or
proceedings of any kind, including actions or proceedings of or before any
Governmental Authority, to which any Credit Party or any Major Project
Participant or the Project is a party or is subject, or by which any of
them or any of their properties or the Project are bound that, if adversely
determined to or against any Credit Party or any Major Project Participant
or the Project would have a material adverse effect on the Project, any
Credit Party's financial condition, business or operations, any Credit
Party or any other Major Project Participant to perform its obligations
under any Financing Document, nor, to the Issuers' knowledge, is there any
basis for any such action or proceeding.
(qq) (A) to the Issuers; knowledge, SIDA has (i) a good and valid
leasehold estate in the Leased Premises and the Outside Easements, (ii) a
good, valid and indefeasible easement interest in the City Easements and
(iii) a good, valid and indefeasable fee simple estate in the Improvements
and the Equipment located on the Leased Premises and the Easements, (B)
Orange L.P. has (i) good and valid subleasehold estate in the Leased
Premises and the Outside Easements, (ii) a good and valid leasehold estate
in the City Easements, and (iii) a good and valid estate in the
Improvements and Equipment located on the Leased Site and the Easements and
(C) or Orange L.P. has good and valid title to all of the other Collateral
relating to the Project and all of their other properties and assets (other
than properties or assets disposed of in the ordinary course of business),
in each case free and clear of all Liens, encumbrances or other exceptions
to title other than Permitted Liens. The Lien of the Collateral Documents
will constitute a valid and subsisting first priority lien of record on all
of the real property interests described therein and a first priority
perfected security interest in all the personal property interests
described therein, subject to no Liens, encumbrances or other exceptions to
title except Permitted Liens.
(rr) The Project qualifies as a "qualifying facility" under PURPA.
(ss) Neither the business nor the properties of any Credit Party or,
to the Issuers' knowledge, any of the Major Project Participants, are
affected by any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the
public enemy, or other casualty (whether or not governed by insurance),
materially and adversely
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<PAGE>
affecting the business or properties or the operation of any Credit Party
or, to the Issuers' knowledge, materially and adversely affecting the
ability of any such Major Project Participant to perform its obligations
under any Operative Document to which it is a party.
(tt) No filing, recording, refiling or rerecording other than those
listed on Exhibit C is necessary to perfect, publish notice of and maintain
the effectiveness and priority of the interest, title or Liens created by
the Collateral Documents, and on the Closing Date all such filings or
recordings (other than those that are required to be made only at a later
date, which are so indicated on Exhibit C) will have been made.
(uu) Upon completion of the recordings and filings listed in Exhibit C
to be made on or prior to the Closing Date, and after giving effect to the
issuance and sale of the Notes, (i) the Liens granted to the Collateral
Agent pursuant to the First Mortgage on such of the Mortgaged Property
described therein as constitutes real property under New York law (a)
constitute as to such Mortgaged Property valid mortgage liens and (b) are
superior and prior to the rights of all third Persons now existing or
hereafter arising whether by way of Mortgage, lien, security interest,
encumbrance, assignment or otherwise, except for Permitted Liens; and (ii)
the security interests granted to the Collateral Agent pursuant to the
Collateral Documents in the Collateral, including the security interest
granted pursuant to the First Mortgage in such of the Mortgaged Property
described therein as constitutes personal property under New York law, (a)
constitute as to personal property included in the Collateral and, with
respect to subsequently acquired personal property included in the
Collateral, will constitute, a perfected security interest under the UCC
and (b) are, and, with respect to such subsequently acquired property, will
be, as to Collateral perfected under the UCC, superior and prior to the
rights of all third Persons now existing or hereafter arising whether by
way of mortgage, lien, security interests, encumbrance, assignment or
otherwise, except for Permitted Liens. Except to the extent possession of
portions of the Collateral is required for perfection, all such action as
is necessary has been taken to establish and perfect the Collateral Agent's
rights in and to the Collateral, including any recording, filing,
registration, giving of notice or other similar action. The Collateral
Documents relating to the Collateral and the financing statements relating
thereto have been duly filed or recorded in each office and in each
jurisdiction where required in order to create and perfect the first lien
and security interest described above and all of such required places for
filing are set forth on Exhibit C.
22
<PAGE>
(vv) To the Issuers' knowledge, the representations and warranties of
the Credit Parties and the Major Project Participants contained in the
Operative Documents other than this Agreement are true and correct.
The Issuers acknowledge that the Initial Purchaser and, for purposes of the
opinions to be delivered to the Initial Purchaser pursuant to Section 9 hereof,
-
counsel to the Issuers and counsel to the Initial Purchaser will rely upon the
accuracy and truth of the foregoing representations and hereby consents to such
reliance.
7. Initial Purchaser's Representations and Warranties. The Initial
Purchaser represents and warrants to, and agrees with, the Issuers:
(a) The Initial Purchaser is a QIB with such knowledge and experience
in financial and business matters as is necessary in order to evaluate the
merits and risks of an investment in the Series A Notes.
(b) The Initial Purchaser (i) is not acquiring the Series A Notes
with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Act or the securities laws of any state of the United States or
any other applicable jurisdiction and (ii) will be reoffering and reselling
the Series A Notes only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A, and (y) in
offshore transactions in reliance upon Regulation S under the Act.
(c) The Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the Act)
has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of the Series A Notes
pursuant hereto, including, but not limited to, 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.
(d) The Initial Purchaser agrees that, in connection with Exempt
Resales, the Initial Purchaser will solicit offers to buy the Series A
Notes only from, and will offer to sell the Series A Notes only to,
Eligible Purchasers. The Initial Purchaser further agrees that it will
offer to sell the Series A Notes only to, and will solicit offers to buy
the Series A Notes only from (i) Eligible Purchasers that the Initial
Purchaser reasonably believes are QIBs, and (ii) Regulation S Purchasers,
in each case, that agree that (x) the Series A Notes
23
<PAGE>
purchased by them may be resold, pledged or otherwise transferred within
the time period referred to under Rule 144(k) (taking into account the
provisions of Rule 144(d) under the Act, if applicable) under the Act, as
in effect on the date of the transfer of such Series A Notes, only (A) to
the Issuers, (B) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Act, (C) in an offshore
transaction (as defined in Rule 902 under the Act) meeting the requirements
of Rule 904 of the Act, (D) in a transaction meeting the requirements of
Rule 144 under the Act, (E) to an Accredited Institution that, prior to
such transfer, furnishes the Trustee a signed letter containing certain
representations and agreements relating to the registration of transfer of
such Series A Note (the form of which is substantially the same as Annex A
to the Offering Memorandum) and, if such transfer is in respect of an
aggregate principal amount of Series A Notes less than $250,000, an opinion
of counsel acceptable to the Issuers that such transfer is in compliance
with the Act, (F) in accordance with another exemption from the
registration requirements of the Act (and based upon an opinion of counsel
acceptable to the Issuers) or (G) pursuant to an effective registration
statement and, in each case, in accordance with the applicable securities
laws of any state of the United States or any other applicable jurisdiction
and (y) they will deliver to each person to whom such Series A Notes or an
interest therein is transferred a notice substantially to the effect of the
foregoing.
(e) The Initial Purchaser and its Affiliates or any person acting on
its or their behalf have not engaged or will not engage in any directed
selling efforts within the meaning of Regulation S with respect to the
Series A Notes.
(f) The Series A Notes offered and sold by the Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered
and sold only in offshore transactions.
(g) The sale of the Series A Notes offered and sold by the Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan
or scheme to evade the registration provisions of the Act.
(h) The Initial Purchaser agrees that it has not offered or sold, and
will not offer or sell, the Series A Notes in the United States or to, or
for the benefit or account of, a U.S. Person (other than a distributor), in
each case, as defined in Rule 902 under the Act (i) as part of its
distribution at any time and (ii) otherwise until forty (40) days after the
later of the commencement of the offering of the Series A Notes pursuant
hereto and the Closing Date, other than
24
<PAGE>
in accordance with Regulation S of the Act or another exemption from the
registration requirements of the Act. The Initial Purchaser agrees that,
during such 40-day restricted period, it will not cause any advertisement
with respect to the Series A Notes (including any "tombstone"
advertisement) to be published in any newspaper or periodical or posted in
any public place and will not issue any circular relating to the Series A
Notes, except such advertisements as permitted by and include the
statements required by Regulation S.
(i) The Initial Purchaser agrees that, at or prior to confirmation of
a sale of Series A Notes by it to any distributor, dealer or person
receiving a selling concession, fee or other remuneration during the 40-day
restricted period referred to in Rule 903(c)(3) under the Act, it will send
to such distributor, dealer or person receiving a selling concession, fee
or other remuneration notice stating that such distributor, dealer or
person receiving a selling concession, fee or other remuneration is subject
to certain restrictions during such 40-day restricted period.
(j) The Initial Purchaser agrees that the Series A Notes offered and
sold in reliance on Regulation S will be represented upon issuance by a
global security that may not be exchanged for definitive securities until
the expiration of the 40-day restricted period referred to in Rule
903(c)(3) of the Act and only upon certification of beneficial ownership of
such Series A Notes by non-U.S. persons or U.S. persons who purchased such
Series A Notes in transactions that were exempt from the registration
requirements of the Act.
(k) The Initial Purchaser (i) has not offered or sold, and will not
offer or sell, in the United Kingdom, by means of any document, any Series
A Notes other than to persons whose ordinary business it is to buy or sell
shares or debentures, whether as principal or as agent (except in
circumstances which do not constitute an offer to the public within the
meaning of the Companies Act 1989 of Great Britain); (ii) has complied and
will comply with all applicable provisions of the Financial Services Act
1986 of the United Kingdom with respect to anything done by it in relation
to the Series A Notes in, from or otherwise involving the United Kingdom;
and (iii) has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the issue
of the Series A Notes to a person who is of a kind described in Article
9(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom the document may otherwise
lawfully be issued or passed on.
25
<PAGE>
The Initial Purchaser acknowledges that the Issuers and, for
purposes of the opinions to be delivered to the Initial Purchaser
pursuant to Section 9 hereof, counsel to the Issuers and counsel to
-
the Initial Purchaser will rely upon the accuracy and truth of the
foregoing representations and the Initial Purchaser hereby consents to
such reliance.
8. Indemnification. (a) The Issuers, jointly and severally, agree to
indemnify and hold harmless the Initial Purchaser, its directors, its
officers and each person, if any, who controls such Initial Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages, liabilities and
judgments (including, without limitation, any legal or other expenses
incurred in connection with investigating or defending any matter,
including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Offering
Memorandum (or any amendment or supplement thereto), the Preliminary
Offering Memorandum or any Rule 144A Information provided by either Issuer
to any holder or prospective purchaser of Series A Notes pursuant to
Section 5(g) 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, liabilities or judgments are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to the Initial Purchaser furnished in writing to the Issuers by
the Initial Purchaser; provided, however, that the foregoing indemnity
agreement with respect to the Preliminary Offering Memorandum shall not
inure to the benefit of any Initial Purchaser who failed to deliver an
Offering Memorandum, as then amended or supplemented (so long as the
Offering Memorandum and any such amendment or supplement was provided by
the Issuers to the Initial Purchaser in the requisite quantity and on a
timely basis to permit proper delivery on or prior to the Closing Date) to
the person asserting any losses, claims, damages, liabilities or judgements
caused by any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum, 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, if such material misstatement or omission or alleged material
misstatement or omission was cured in the Offering Memorandum, as so
amended or supplemented.
(b) The Initial Purchaser agrees to indemnify and hold harmless
the Issuers and each person, if any, who controls (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) the
Issuers, to the same extent as the foregoing indemnity from the
Issuers to the Initial Purchaser but only with reference to
information relating to the Initial Purchaser furnished in writing to
26
<PAGE>
the Issuers by the Initial Purchaser expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8
---- -
(b)(the "indemnified party"), the indemnified party shall promptly
---
notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party shall
assume the defense of such action, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of
all fees and expenses of such counsel, as incurred (except that in the
case of any action in respect of which indemnity may be sought
pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall
---- ----
not be required to assume the defense of such action pursuant to this
Section 8(c), but may employ separate counsel and participate in the
----
defense thereof, but the fees and expenses of such counsel, except as
provided below, shall be at the expense of the Initial Purchaser). Any
indemnified party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the
indemnified party unless (i) the employment of such counsel shall have
been specifically authorized in writing by the indemnifying party,
(ii) the indemnifying party shall have failed to assume the defense of
such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action
(including any impleaded parties) include both the indemnified party
and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying
party shall not have the right to assume the defense of such action on
behalf of the indemnified party). In any such case, the indemnifying
party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for all indemnified
parties and all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Donaldson,
Lufkin & Jenrette Securities Corporation, in the case of the parties
indemnified pursuant to Section 8(a), and by the Issuers, acting
----
jointly, in the case of parties indemnified pursuant to Section 8(b).
----
The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without
its written consent if the settlement is entered into more than twenty
27
<PAGE>
business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and
expenses of counsel (in any case where such fees and expenses are at
the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement
or compromise of, or consent to the entry of judgment with respect to,
any pending or threatened action in respect of which the indemnified
party is or could have been a party and indemnity or contribution may
be or could have been sought hereunder by the indemnified party,
unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on
claims that are or could have been the subject matter of such action
and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified
party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in
-
respect of any losses, claims, damages, liabilities or judgments
referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the
Issuers, on the one hand, and the Initial Purchaser on the other hand
from the offering of the Series A Notes 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 Issuers, on the one hand, and the Initial Purchaser, on
the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative
benefits received by the Issuers, on the one hand and the Initial
Purchaser, on the other hand, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Series A
Notes (after underwriting discounts and commissions, but before
deducting expenses) received by the Issuers, and the total discounts
and commissions received by the Initial Purchaser bear to the total
price to investors of the Series A Notes, in each case as set forth in
the table on the cover page of the Offering Memorandum. The relative
fault of the Issuers, on the one hand, and the Initial Purchaser, 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 supplied by the Issuer, on the one hand, or the
Initial Purchaser, on the other
28
<PAGE>
hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Issuers and the Initial Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were
----
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified
party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses,
claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, the Initial Purchaser shall not be
-
required to contribute any amount in excess of the amount by which the
total discounts and commissions received by the Initial Purchaser
exceeds the amount of any damages which the 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 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) 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.
9. Conditions of Initial Purchaser's Obligations. The obligation of
the Initial Purchaser to purchase the Series A Notes under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Issuers
contained in this Agreement shall be true and correct on the Closing
Date (both before and after giving effect to the consummation of the
Merger on that date) with the same force and effect as if made on and
as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any
notice have been given of any potential or intended downgrading,
suspension or withdrawal of, or of any review (or of any potential or
intended review) for a possible change that does not indicate the
direction of the possible change in, any rating of any
29
<PAGE>
Credit Party or any securities of any Credit Party (including, without
limitation, the placing of any of the foregoing ratings on credit
watch with negative or developing implications or under review with an
uncertain direction) by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2)
under the Act, (ii) there shall not have occurred any change, nor
shall any notice have been given of any potential or intended change,
in the outlook for any rating of any Credit Party or any securities of
any Credit Party by any such rating organization and (iii) no such
rating organization shall have given notice that it has assigned (or
is considering assigning) a lower rating to the Series A Notes than
that on which the Series A Notes were marketed.
(c) Since the respective dates as of which information is given
in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there shall not have
occurred any change or any development involving a prospective change
in the condition, financial or otherwise, or the earnings, business,
management or operations of any Credit Party, (ii) there shall not
have been any change or any development involving a prospective change
in the partnership interests, shareholders equity or in the long-term
debt of any Credit Party and (iii) no Credit Party shall have incurred
any liability or obligation, direct or contingent, the effect of
which, in any such case described in clause 9(c)(i), 9(c)(ii) or
------- --------
9(c)(iii), in your judgment, is material and adverse and, in your
---------
judgment, makes it impracticable to market the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum.
(d) You shall have received on the Closing Date a certificate
dated the Closing Date, signed by a Responsible Officer of Funding
L.P. and an authorized officer of Capital Co., confirming the matters
set forth in Sections 6(t), 9(a) and 9(b) and stating that the Issuers
---- ---- ----
have complied with all the agreements and satisfied all of the
conditions herein contained and required to be complied with or
satisfied on or prior to the Closing Date .
(e) You shall have received on the Closing Date an opinion dated
the Closing Date, of (i) Piper Marbury Rudnick & Wolfe LLP as to the
matters in the form of Exhibit D hereto, (ii) Scolaro, Shulman, Cohen,
Lawler & Burstein, P.C. in the form of Exhibit E hereto and (iii)
Hiscock & Barclay in the form of Exhibit F hereto.
30
<PAGE>
(f) The Initial Purchaser shall have received on the Closing Date an
opinion, dated the Closing Date, of Davis Polk & Wardwell, counsel for the
Initial Purchaser, in form and substance reasonably satisfactory to the
Initial Purchaser.
(g) The Initial Purchaser shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchaser from Deloitte & Touche LLP,
independent public accountants, containing the information and statements
of the type ordinarily included in accountants' "comfort letters" to the
Initial Purchaser with respect to the financial statements and certain
financial information contained in the Offering Memorandum.
(h) The Series A Notes shall have been approved by the NASD for
trading and duly listed in PORTAL.
(i) The Initial Purchaser shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into
by the Issuers and the Trustee and of the Assumption Agreement, which shall
have been entered into by Orange L.P.
(j) The Initial Purchaser shall have received a counterpart,
conformed as executed, of the Collateral Documents, each of which shall
have been entered into by the Credit Parties, the Collateral Agent and the
Trustee, to the extent each is named as party thereto.
(k) The Issuers shall have executed the Registration Rights Agreement
and the Initial Purchaser shall have received an original copy thereof,
duly executed by the Issuers.
(l) The Initial Purchaser shall have received evidence satisfactory
to it in its sole good faith discretion of the satisfaction (without
waiver) of all other conditions to the closing of the acquisition on the
Closing Date pursuant to the Partnership Interests Purchase and Sale
Agreement dated as of July 29, 1999, as amended by the First Amendment
dated as of November 17, 1999 (the "Partnership Interest Purchase
Agreement"), by and among GAS Orange and the Sellers, including the
effectiveness of the Merger concurrently with the issuance of the Series A
Notes, and that all transactions contemplated by the Operative Documents to
be consummated on the closing date of the acquisition
31
<PAGE>
will take place prior to or simultaneously with the transactions hereunder
contemplated to take place on the Closing Date.
(m) On or prior to the Closing Date, each of the Project Documents,
in the forms previously delivered to the Initial Purchaser or its counsel
and as they exist as executed versions as of the date of this Agreement or
in such forms as shall be satisfactory in form and substance to the Initial
Purchaser and its counsel, shall have been executed and delivered, shall
remain in full force and effect, no default shall have occurred thereunder,
all conditions precedent thereunder shall be satisfied and there shall not
have occurred any event of force majeure thereunder on the Closing Date.
(n) The Independent Engineer shall have consented to the references
to it in the Offering Memorandum and the use of the Independent Engineer's
Report (as defined in the Offering Memorandum) prepared by the Independent
Engineer and contained in Exhibit A to the Offering Memorandum; and since
the date of the Independent Engineer's Report, no event affecting the
Independent Engineer's Report or the matters referred to therein shall have
occurred (A) which shall make untrue or incorrect in any material respect,
as of the Closing Date, any information or statement contained in the
Independent Engineer's Report or in the Offering Memorandum relating to
matters referred to in the Independent Engineer's Report, or (B) which
shall not be reflected in the Offering Memorandum but should be reflected
therein in order to make the statements and information contained in the
Independent Engineer's Report, or in the Offering Memorandum relating to
matters in the Independent Engineer's Report, in light of the circumstances
under which they were made, not misleading, as evidenced by a certificate
satisfactory to the Initial Purchaser, of an authorized officer of the
Independent Engineer, dated as of the Closing Date.
(o) The Initial Purchaser shall have received a copy of one or more
resolutions or other authorizations of each Credit Party, certified by the
appropriate officers, member or general partner of each such entity as
being in full force and effect on the Closing Date, authorizing the
issuance and sale of the Series A Notes and transactions herein provided
and the execution, delivery and performance of this Agreement and the other
Operative Documents and any instruments or agreements required hereunder or
thereunder to which such Credit Party is a party.
(p) The Initial Purchaser shall have received a certificate from each
Credit Party, signed by the appropriate authorized officer, member or
general partner of such Credit Party and dated as of the Closing Date, as
to the
32
<PAGE>
incumbency of the individuals or Persons authorized to execute and deliver
this Agreement and the other Operative Documents and any instruments or
agreements required hereunder or thereunder to which such Credit Party is
party.
(q) The Initial Purchaser shall have received (i) copies of (A) the
Certificate of Limited Partnership and any Amendments to the Certificate of
Limited Partnership of Funding L.P., Orange L.P. and GAS L.P., certified by
the Delaware Secretary of State, (B) the Funding L.P. Partnership
Agreement, Orange L.P. Partnership Agreement and GAS L.P. Partnership
Agreement and any agreements filed in accordance with applicable state law,
in each case certified by an appropriate officer of a general partner of
each and (C) the trust agreement establishing the A.V. Trust; (ii) copies
certified by the appropriate Secretary of State of the Certificate of
Organization of GAS Orange and of the Certificate of Incorporation of GAS
Development and Capital Co.; (iii) a copy, certified by the Secretary or an
Assistant Secretary of GAS Orange, of the First Amended and Restated LLC
Agreement of GAS Orange; (iv) a copy, certified by the Secretary or the
Assistant Secretary of Capital Co. of the by-laws of GAS Development and
Capital Co.; (v) copies of (A) the assignments of partnership interest by
the Sellers of their partnership interests in Orange L.P., (B) the other
closing documents delivered in connection therewith pursuant to the
Partnership Interest Purchase Agreement, (C) the transfer tax returns filed
with respect thereto, in each case certified by an appropriate officer of
GAS Orange; and (vi) evidence satisfactory to the Initial Purchaser of the
filing of such transfer tax returns and the payment of all transfer taxes
payable with respect to the sale and purchase of the Sellers' partnership
interests in Orange L.P.
(r) The Initial Purchaser shall have received certificates issued by
the New York Secretary of State and the Delaware Secretary of State as to
the good standing of such Credit Party.
(s) All corporate, partnership and legal proceedings and all
instruments in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to the Initial
Purchaser, and Initial Purchaser shall have received all information and
copies of all documents, including records of corporate or partnership
proceedings and copies of any approval by any Governmental Authority
required in connection with any transaction herein contemplated, which the
Initial Purchaser may reasonably have requested in connection herewith,
such documents where appropriate to
33
<PAGE>
be certified by proper corporate, limited liability company, partnership or
Governmental Authorities.
(t) The Initial Purchaser shall have received executed originals of
each Financing Document and true and correct copies of each Project
Document and any supplements or amendments thereto, all of which shall be
in form and substance satisfactory to the Initial Purchaser, shall have
been duly authorized, executed and delivered by the parties thereto, and
all of which Project Documents shall be certified by the general partner of
Funding L.P. as of the Closing Date as being true, complete and correct and
in full force and effect, and deliver to the Initial Purchaser of such
evidence satisfactory to the Initial Purchaser and as is reasonably
requested by the Initial Purchaser that each Project Document is in full
force and effect and that no party to any Project Document is or, but for
the passage of time or giving of notice or both will be, in breach of any
material obligation thereunder which could reasonably be expected to have a
Material Adverse Effect and that all appropriate financing statements and
the First Mortgage were filed and/or recorded as required hereunder or by
law.
(u) The Initial Purchaser shall have received a schedule of
Authorizations required to lease and operate the Project, satisfactory in
form and substance to the Initial Purchaser, together with copies of each
Authorization listed on such schedule and a certificate of the general
partner of Funding L.P. certifying that all Authorizations have been duly
obtained or been assigned and are in full force and effect not subject to
any appeal or further proceeding or to any unsatisfied condition that may
allow material modification or revocation. The Authorizations shall not be
subject to any appeal, restriction, condition, limitation or other
provision that in the reasonable judgment of the Initial Purchaser, its
counsel or the Independent Engineer, materially and adversely affects the
construction and operation of the Project.
(v) Insurance complying with Section 4.09 of the Indenture shall be
in full force and effect and the Initial Purchaser shall have received (i)
a certificate from Orange L.P.'s insurance broker(s), dated as of the
Closing Date, addressed to the Collateral Agent and the Initial Purchaser
and identifying underwriters, type of insurance, insurance limits and
policy terms, listing the special provisions required as set forth in
Section 4.09 of the Indenture, describing the insurance obtained and
stating that such insurance is in full force and effect and that all
premiums then due thereon have been paid and (ii) certified copies of all
policies evidencing such insurance (or a binder,
34
<PAGE>
commitment or certificates signed by the insurer or a broker authorized
to bind the insurer).
(w) The Initial Purchaser shall have received the Insurance
Consultant's certificate in form and substance satisfactory to the Initial
Purchaser, addressed to the Initial Purchaser and dated as of the Closing
Date, with the Insurance Consultant's report, in form and substance
satisfactory to the Initial Purchaser, attached thereto.
(x) The Initial Purchaser shall have received the Independent
Engineer's certificate in form and substance satisfactory to the Initial
Purchaser, addressed to the Collateral Agent and the Initial Purchaser and
dated as of the Closing Date, with the Independent Engineer's report in
form and substance satisfactory to the Initial Purchaser, attached thereto.
(y) No action, proceeding or investigation shall have been instituted
or threatened, nor shall any order, judgment or decree have been issued or
proposed to be issued by any Governmental Authority that, solely as a
result of the construction, ownership, leasing or operation of the Project,
the sale of electricity or steam therefrom or the entering into of any
Operative Document or any transaction contemplated hereby or thereby, would
cause or deem any Credit Party or any Affiliate of any of them to be
subject to, or not exempt from, regulation under the FPA or PUHCA or under
state laws and regulations respecting the rates or the financial or
organizational regulation of electric utilities.
(z) All taxes, fees and other costs then due and payable in
connection with the execution, delivery, recordation and filing of the
Collateral Documents, UCC-1 financing statements and fixture filings shall
have been paid in full.
(aa) The Initial Purchaser shall have received a report for each of
the jurisdictions in which the UCC-1 financing statements, the fixture
filings and the First Mortgage are intended to be filed in respect of the
Collateral, showing that upon due filing or recondition (assuming such
filing or recondition occurred on such date), the security interests
created under such Collateral Documents will be prior to all other
financing statements, fixture filings, deeds of trust, mortgages or other
security documents in respect of the Collateral.
(bb) The Collateral Agent shall have received (x) with respect to the
Leased Premises, a survey of the Leased Premises by a licensed surveyor
35
<PAGE>
satisfactory to the Initial Purchaser, satisfactory in form and substance
to the Initial Purchaser, reasonably current and certified to the
Collateral Agent, the Secured Parties and the Title Company; and (y) with
respect to the Easements, (1) aerial photographs of the Easements, (2) as
built drawings of the Project Pipeline and (3) a certification letter by
O'Brien & Gere Engineers, Inc., satisfactory in form and substance to the
Initial Purchaser, reasonably current and certified to the Collateral
Agent, the Secured Parties and the Title Company; showing (i) as to the
Leased Premises, the location and dimensions thereof, and the improvements
thereon, the location of all means of access thereto; (ii) as to the
Easements, the location and dimensions thereof and of the Project Pipeline;
(iii) any encroachments from the Leased Premises extending to adjacent
property or from adjacent property onto the Leased Premises; and (iv)
whether the Leased Premises or any portion thereof is located in a special
earthquake or flood hazard zone.
(cc) The Collateral Agent shall have received a lender's A.L.T.A.
Policy of title insurance, together with such endorsements or affirmative
insurance not expressly described below as are required by the Initial
Purchaser (such policy, endorsements and affirmative insurance being
hereinafter referred to as the "Title Policy"), in the amount of
$68,000,000 with such reinsurance issued by such title companies as is
satisfactory to the Initial Purchaser, issued by the Title Company, with
the premium fully paid in form and substance satisfactory to the Initial
Purchaser, (or such other coverage as the Initial Purchaser shall accept
and approve together with such reinsurance issued by such title insurance
companies as are required by the Initial Purchaser under reinsurance
agreements as are satisfactory to the Initial Purchaser):
(i) insuring that SIDA is the owner of the leasehold estates in
the Leased Premises and the Outside Easements under respectively the
Ground Lease and the Outside Easement Lease, the owner of the easement
estates under the City Easements and the Owner of the Improvements
(including the Project Pipeline) located on the Leased Premises and
the Easements, in each case free and clear of all Liens, encumbrances
and other exceptions to title whatsoever, other than Permitted Liens;
(ii) insuring that POA is the owner of subleasehold estate in the
Leased Premises and the City Easements, the leasehold estate in the
Outside Easements and leasehold estate in the Improvements (including
the Project Pipeline) located on the Leased Premises and the
Easements, in each case under the Master Lease, and the owner
36
<PAGE>
easement estates under the Outside Easements, in each case free and
clear of all Liens, encumbrances or other exceptions to title
whatsoever, other than Permitted Liens;
(iii) insuring that the First Mortgage is a valid first Lien on
SIDA's title described in clause (i) above and POA's title described
in clause (ii) above, in each case free and clear of all Liens,
encumbrances and exceptions to title whatsoever, other than Permitted
Liens; and
(iv) containing endorsements or affirmative insurance (A) that
the correct amount of mortgage recording tax due with respect to the
First Mortgage has been paid; (B) against losses arising out of
encroachments on boundary or setback lines; (C) against existing
mechanics' materialmen's liens, subsequent mechanics' materialmen's
liens, and such other matters with respect to which the Initial
Purchaser may reasonably request coverage; (D) that the Leased
Premises and all of the Easements are contiguous from the Leased
Premises to TGPC's pipeline; (E) that the land described in the survey
furnished pursuant to Section 9(bb) is the same as the Leased Premises
described in the Title Policy; and (F) that there is access to and
from the Leased Premises and the adjacent streets.
10. Effectiveness of Agreement and Termination. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchaser by written notice to the Issuers if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the Initial
Purchaser's judgment, is material and adverse and, in the Initial Purchaser's
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of either Issuer on any exchange or in
the over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental
37
<PAGE>
authority which in your opinion materially and adversely affects, or will
materially and adversely affect, the business, prospects, financial condition or
results of operations of the Issuer, taken as a whole, (v) the declaration of a
banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in your opinion has a material
adverse effect on the financial markets in the United States.
11. Limitation of Liability. Notwithstanding anything to the contrary
contained in this Agreement no officer, director, manager, management committee,
employee, shareholder or partner of the Issuers nor any director, officer,
manager, management committee, employee, incorporator, shareholder, partner or
member of any partner of the Issuers or any Affiliate of any such party
(collectively, the "Nonrecourse Parties") shall be personally liable under this
Agreement for the payment of any sums or for the performance of any obligation
contained in, this Agreement. The Initial Purchaser agrees that its rights
shall be limited to proceeding against the Issuers, and that it shall have no
right to proceed against the Nonrecourse Parties for (a) the satisfaction of any
monetary obligation of, or enforcement of any monetary claim against, the
Issuers, or (b) the performance of any obligation, covenant or agreement arising
under this Agreement; provided that (a) the foregoing provisions of the Section
11 shall not constitute a waiver, release or discharge of any of the
indebtedness, or of any of the terms, covenants, conditions or provisions of
this Agreement and the same shall continue until fully paid, discharged,
observed or performed; (b) the foregoing provisions of this Section 11 shall
not limit or restrict the right of the Initial Purchaser to name either Issuer
or any other Person as a defendant in any action or suit for a judicial
foreclosure or for the exercise of any other remedy under or with respect to
this Agreement, or for injunction or specific performance, so long as no
judgment in the nature of a deficiency judgment shall be enforced against any
Nonrecourse Party, except as set forth in this Section 11; (c) the foregoing
provisions of the Section 11 shall not in any way limit or restrict any right or
remedy of the Initial Purchaser with respect to, and all of the Nonrecourse
Parties shall remain fully liable to the extent that they would otherwise be
liable for their own actions with respect to, (i) any liability any Person may
have arising under any applicable federal or state securities laws or (ii) any
fraud, negligence or willful misrepresentation, or misappropriation of any
revenues derived from the Project and the proceeds thereof; (d) the foregoing
provisions of this Section 11 shall not affect or diminish or constitute a
waiver, release or discharge of any specific written obligation, covenant, or
agreement in respect of the Project made by any of the Nonrecourse Parties or
any security granted by the Nonrecourse Parties as security for the obligations
of the Issuers; and (e) nothing contained herein shall limit the liability of
(i) any Person who is a party to any Project Document or has issued any
certificate or statement in connection therewith with respect to such liability
as may arise by reason of the terms and conditions of such
38
<PAGE>
Project Document, certificate or statement, or (ii) any Person rendering a legal
opinion, in each case under this clause (e) relating solely to such liability of
such Person as may arise under such referenced instrument, agreement or opinion.
12. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to either Issuer, to 90
Presidential Plaza, Syracuse, New York 13209, Attention: Adam H. Victor and
Richard S. Scolaro and (ii) if to the Initial Purchaser, Donaldson, Lufkin &
Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172,
Attention: Syndicate Department, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Issuers and the Initial Purchaser set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Series A
Notes, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, the Issuers, the Partners of Funding L.P. or Orange L.P., or any
person controlling the Issuers, (ii) acceptance of the Series A Notes and
payment for them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on behalf of
the Issuers as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Issuers agree to reimburse the
--
Initial Purchaser for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by it. Notwithstanding any termination of
this Agreement, the Issuers shall be, jointly and severally, liable for all
expenses which they have agreed to pay pursuant to Section 5(h) hereof. The
----
Issuers also agree, jointly and severally, to reimburse the Initial Purchaser
and its officers, directors and each person, if any, who controls the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act for any and all fees and expenses (including without limitation the
fees and expenses of counsel) incurred by it in connection with enforcing its
rights under this Agreement (including without limitation its rights under
Section 8).
-
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Issuers, the Initial Purchaser,
the Initial Purchaser's directors and officers, any controlling persons referred
to herein, the partners or control persons, as applicable, of the Issuers and
their respective successors and assigns, all as and to the extent provided in
this Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The
39
<PAGE>
term "successors and assigns" shall not include a purchaser of any of the Series
A Notes from the Initial Purchaser merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
40
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Issuer and the Initial Purchaser.
Very truly yours,
PROJECT ORANGE FUNDING, L.P.
By: G.A.S. Orange Associates, L.L.C., a
Delaware limited liability company,
its general partner
By: /s/ Adam Victor
____________________________________
Name: Adam Victor
Title: President
PROJECT ORANGE CAPITAL CORP.
By: /s/ Adam Victor
_____________________________________
Name: Adam Victor
Title: President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Gavin H. Wolfe
_________________________
Name: Gavin H. Wolfe
Title: Vice President
41
<PAGE>
EXHIBIT A
FORM OF ASSUMPTION AGREEMENT
Project Orange Associates, L.P. ("Orange L.P."), the surviving corporation
of the merger on the date hereof of Project Orange Funding, L.P. ("Funding
L.P.") with and into Orange L.P., hereby expressly assumes, and agrees to
perform and discharge, all of the obligations and liabilities of Funding L.P.
under the Indenture (the "Indenture") dated as of December 6, 1999 among Funding
L.P., Project Orange Capital Corp. ("Capital Co." and, together with Funding
L.P., the "Issuers") and U.S. Bank Trust National Association, in its capacity
as Trustee (the "Trustee") for the benefit of the holders from time to time of
the Issuers' $68 million aggregate principal amount of 10.5% Senior Secured
Notes due 2007 (the "Notes"), the Notes and the other Financing Documents
referred to in the Indenture, and expressly confirms the grant to U.S. Bank
Trust National Association, in its capacity as Collateral Agent (the "Collateral
Agent") under the Collateral Documents for the benefit of the Secured Parties of
the Liens on the existing and after-acquired assets of Orange L.P. pursuant to
the Collateral Documents, as more fully set forth therein. All references in the
Financing Documents (i) to Funding L.P. or the "Borrower" shall hereafter refer
to Orange L.P. and its successors and (ii) to the Issuers shall be to Capital
Co. and Orange L.P. and their respective successors. All capitalized terms used
but not otherwise defined herein shall have the meaning ascribed to them in the
Indenture.
IN WITNESS WHEREOF, Orange L.P. has caused its duly authorized officer to
execute and deliver this Assumption Agreement as of December 6, 1999,
simultaneously with the effectiveness of the Merger referred to in the
Indenture.
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Associates, L.L.C., a
Delaware limited liability company,
its general partner
By:
________________________________
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT C
FILING AND RECORDING INFORMATION
--------------------------------
UCC-1 Financing Statements. For each Debtor listed below, a UCC-1 Financing
- --------------------------
Statement in the relevant form attached to this EXHIBIT C must be filed in each
jurisdiction set forth opposite the name of such Debtor.
Debtor Jurisdiction
- ------ ------------
Project Orange Associates L.P. Secretary of State of New York
Secretary of State of Delaware
Onondaga County
New York County
Project Orange Associates L.P. Secretary of State of New York
(Re: First Mortgage) Secretary of State of Delaware
Onondaga County
New York County
G.A.S. Orange Partners, L.P. Secretary of State of New York
Secretary of State of Delaware
Onondaga County
New York County
City of Syracuse Industrial Secretary of State of New York
Development Agency Onondaga County
G.A.S. Development, Inc. Secretary of State of New York
Secretary of State of Delaware
Onondaga County
New York County
A.V. Grantor Trust Secretary of State of New York
Onondaga County
New York County
UCC-1 Fixture Filings. For each Debtor listed below, a UCC-1 Fixture Filing in
- ---------------------
the relevant form attached to this EXHIBIT C must be filed in each jurisdiction
set forth opposite the name of such Debtor.
<PAGE>
Debtor Jurisdiction
------ ------------
Project Orange Associates L.P. Secretary of State of New York
Onondaga County
City of Syracuse Industrial Secretary of State of New York
Development Agency Onondaga County
First Mortgage. To be recorded in the Onondaga County Clerk's Office
--------------
University Subordination Agreement. To be recorded in the Onondaga County
- ----------------------------------
Clerk's Office
University Consent and Agreement. To be recorded in the Onondaga County Clerk's
- --------------------------------
Office
SIDA Consent and Agreement. To be recorded in the Onondaga County Clerk's Office
- --------------------------
A-2
<PAGE>
EXHIBIT D
FORM OF OPINION OF
PIPER MARBURY RUDNICK & WOLFE LLP
<PAGE>
EXHIBIT E
FORM OF OPINION OF
SCOLARO, SHULMAN, COHEN, LAWLER & BURSTEIN, P.C.
<PAGE>
EXHIBIT F
FORM OF OPINION OF
HISCOCK & BARCLAY
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
OF
PROJECT ORANGE FUNDING, L.P.
(a Delaware limited partnership)
INTO
PROJECT ORANGE ASSOCIATES L.P.
(a Delaware limited partnership)
This Agreement and Plan of Merger (this "Agreement") is dated as of the 6th
day of December 1999, by and between Project Orange Funding, L.P., a Delaware
limited partnership ("Funding LP") and Project Orange Associates L.P., a
Delaware limited partnership ("Associates LP"). Funding LP and Associates LP
may be referred to individually as "Constituent Partnership" and collectively as
"Constituent Partnerships."
WHEREAS, each of Funding LP and Associates LP desire that Funding LP merge
with and into Associates LP;
WHEREAS, the Constituent Partnerships are duly organized under the laws of
the State of Delaware;
WHEREAS, Funding LP caused its Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware on November 12, 1999
and the partners of Funding LP entered into a Limited Partnership Agreement
dated as of November 12, 1999;
WHEREAS, as of the date hereof and immediately prior to the Merger, the
partners of Funding LP are as follows: (1) G.A.S. Orange Associates, L.L.C.
("GAS Orange Associates") as a 1% general partner and a 98% limited partner, and
(2) The Victor Family Irrevocable Trust ("Victor Trust") as a 1% limited
partner;
WHEREAS, Associates LP caused its Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware on May 23, 1988 and
the partners of Associates LP entered into a Second Amended and Restated
Agreement of Limited Partnership dated as of December 16, 1992 (the "Associates
LP Partnership Agreement");
WHEREAS, as of the date hereof and immediately prior to the Merger, the
partners of Associates LP are as follows: (1) GAS Orange Associates as a 1%
managing general partner and a 89% limited partner, and (2) G.A.S. Orange
Partners, L.P. as a 1% general partner and a 9% limited partner ("GAS Orange
Partners"); and
WHEREAS, immediately following the Merger, GAS Orange Associates shall own
a 1% interest as the managing general partner and a 89% limited partner in the
surviving partnership
-1-
<PAGE>
and GAS Orange Partners shall own a 1% interest as a general partner and a 9%
interest as a limited partner in the surviving partnership; and
WHEREAS, the General Partners of the Constituent Partnerships deem it
advisable and in the best interests of each of said limited partnerships and
their respective partners that Funding LP merge with and into Associates LP upon
the terms and conditions provided herein, and in accordance with the applicable
provisions of the laws of the State of Delaware (the "Merger").
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
MERGER
Section 1.1 Merger. In accordance with the provisions of this Agreement
------
and the Delaware Revised Uniform Limited Partnership Act (the "Delaware Act"),
Funding LP shall be merged with and into Associates LP and the separate
existence of Funding LP shall cease. Associates LP shall be the surviving
limited partnership in the Merger (hereinafter sometimes referred to as the
"Surviving Partnership"). The name of the Surviving Partnership shall be
Project Orange Associates L.P.
Section 1.2 Effective Date of Merger. The Merger shall become effective
------------------------
when the following actions have been completed:
(a) This Agreement has been duly approved by each of the
Constituent Partnerships as follows:
(i) by the general partners of each Constituent
Partnerships; and
(ii) by the limited partners who own more than fifty percent
(50%) of the then current percentage or other interest
in the profits of each Constituent Partnership; and
(b) An executed Certificate of Merger in substantially the form
attached hereto as Exhibit A and meeting the requirements of
the Delaware Act has been filed with the Secretary of State of
the State of Delaware.
The date and time when the Merger becomes effective, as aforesaid, is
herein called the "Effective Date." As of the Effective Date, the separate
existence of Project Orange Funding, L.P. shall cease and said partnership shall
be merged into Project Orange Associates L.P., the Surviving Partnership in
accordance with Section 17-211 of the Delaware Act.
Section 1.3 Effect of the Merger. As of the Effective Date, the Surviving
--------------------
Partnership shall succeed to, without other transfer, and shall possess and
enjoy, all the rights, privileges, immunities, powers and franchises both of a
public and private nature, and be subject to all the
-2-
<PAGE>
restrictions, disabilities and duties of each of the Constituent Partnerships,
and all the rights, privileges, immunities, powers and franchises of each of the
Constituent Partnerships, and all property, real, personal and mixed, and all
debts due to any of said Constituent Partnerships on whatever account, as well
as for all other things in action or belonging to each of said limited
partnerships, shall be vested in the Surviving Partnership; and all property,
rights, privileges, immunities, powers and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Partnership as they were of the respective Constituent Partnerships, and the
title to any real estate vested by deed or otherwise in an of said Constituent
Partnerships shall not revert or be in any way impaired by reason of the Merger;
provided, however, that all rights of creditors and all liens upon any property
of any of said Constituent Partnerships be preserved, unimpaired, limited in
lien to the property affected by such liens at the Effective Date, and all
debts, liabilities and duties of said Constituent Partnerships, respectively,
shall thenceforth attach to the Surviving Partnership and may be enforced
against it to the same extent as if said debts, liabilities and duties had been
incurred or contracted by the Surviving Partnership.
Section 1.4 Accounting. The assets and liabilities of the Constituent
----------
Partnerships as of the Effective Date, shall be taken up on the books of the
Surviving Partnership at the amounts at which they are carried at that time on
the books of the respective Constituent Partnerships. The amount of capital of
the Surviving Partnership after the Merger shall be equal to the sum of the
capital accounts of each of the Constituent Partnerships.
Section 1.5 Certificate of Limited Partnership. The Certificate of
----------------------------------
Limited Partnership of Associates LP as in effect immediately prior to the
Effective Date of the Merger, a copy of which is attached hereto as Exhibit B,
---------
will continue in full force and effect as the Certificate of the Surviving
Partnership.
Section 1.6 Cancellation of Funding LP. In accordance with Section 17-
--------------------------
211(f) of the Delaware Act, the Certificate of Merger filed with the Secretary
of State of the State of Delaware pursuant to Section 1.2(b) hereof shall be
deemed a certificate of cancellation of Funding LP.
Section 1.7 Agreement of Limited Partnership Agreement. The Associates LP
------------------------------------------
Partnership Agreement as in effect immediately prior to the Effective Date shall
be the partnership agreement of the Surviving Partnership until the same shall
be altered or amended in accordance with the provisions thereof.
Section 1.8 Partners. (a) After carrying into effect the Merger provided
--------
in this Agreement, the partnership interests of Associates LP shall be as
follows: (1) GAS Orange Associates as a 1% managing general partner and an 89%
limited partner, and (2) GAS Orange Partners as a 1% general partner and a 9%
limited partner.
(b) Upon the effectiveness of the Merger, for and in consideration of the
payment of $1.00, the Victor Trust's interest in Funding LP will be
extinguished.
-3-
<PAGE>
Section 1.9 Managing General Partner of Surviving Partnership. The
-------------------------------------------------
managing general partner of Associates LP, as of the Effective Date, shall be
the managing general partner of the Surviving Partner.
Section 1.10 Assumption of Obligations. From and after the Effective Date,
-------------------------
Associates LP shall pay, perform and discharge, in due course, as the same shall
become due for payment, performance or discharge, all payment and performance
obligations and related liabilities of Funding LP. As of the Effective Date,
Associates LP shall be bound by all covenants, stipulations and agreements of
Funding LP.
ARTICLE II
PROHIBITION AGAINST CERTAIN CORPORATE ACTS
From and after the date of this Agreement and prior to the Effective Date,
neither of the Constituent Partnerships will, without the prior written consent
of the other Constituent Partnership:
(a) Amend its certificate of limited partnership or its partnership
agreement; or
(b) Engage in any material activity or transaction, or incur any material
obligation by contract of otherwise, except in the ordinary course of business.
From and after the date of this Agreement and prior to the Effective Date,
Funding LP and Associates LP will use their best efforts to preserve their
business organizations, and to preserve the goodwill of their suppliers,
customers and others having business relations with either of them.
ARTICLE III
TERMINATION AND AMENDMENT
Section 3.1 Termination. This Agreement may be terminated or abandoned at
-----------
any time prior to the Effective Date, whether before or after approval of this
Agreement and the Merger by the partners of the Constituent Partnerships, by the
mutual consent of the Constituent Partnerships. In the event of the termination
of this Agreement, this Agreement shall forthwith become null and void.
Section 3.2 Amendment or Supplement. At any time before or after approval
-----------------------
of this Agreement by the partners of the Constituent Partnerships and prior to
the Effective Date, this Agreement may be amended or supplemented in writing by
the Constituent Partnerships with regard to any of the terms contained in this
Agreement, except that following approval by the partners of the Constituent
Partnerships there shall be no amendment or supplement that by law requires
further approval by such partners without such further approval by the partners
of the Constituent Partnerships.
-4-
<PAGE>
ARTICLE IV
TRANSFER OF ASSETS
To the extent permitted by law, from time to time, as and when requested by
the Surviving Partnership, its successors or assigns, each of the Constituent
Partnerships shall execute and deliver or cause to be executed and delivered all
such deeds and instruments and to take or cause to be taken such further actions
as the Surviving Partnership may deem necessary or desirable in order to vest in
and confirm to the Surviving Partnership title to and possession of any and all
property of each of the Constituent Partnerships acquired by reason of or as a
result of the Merger herein provided for, whether such property be personal or
real in nature, tangible or intangible, and otherwise to carry out the intent
and purposes hereof and the managing general partners of the subject Constituent
Partnerships are fully authorized in the name of the Surviving Partnership or
otherwise, to take any and all such action.
ARTICLE V
MISCELLANEOUS
Section 5.1 Further Assurances. Each of the Constituent Partnerships
------------------
shall, without further consideration, use reasonable efforts to execute and
deliver such additional documents and take such other action as the other party
may reasonably request to carry out the intent of this Agreement and the
transactions contemplated hereby.
Section 5.2 Successors and Assigns. This Agreement shall be binding upon
----------------------
the successors and assigns of the Constituent Partnerships.
Section 5.3 Assignment. The Constituent Partnerships shall not transfer
----------
or assign this Agreement, or any interest of the respective Constituent
Partnerships herein.
Section 5.4 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the Constituent Partnerships with respect to the transactions
contemplated herein and supersedes all prior agreements, understandings, letters
of intent, negotiations and discussions, whether oral or written, of the
Constituent Partnerships.
Section 5.5 Modification; Waiver. Any of the terms of conditions of this
--------------------
Agreement may be modified or waived at any time before the Effective Date by the
party which is, or the partners of which are, entitled to the benefit thereof
upon the authority of the managing general partner of such party, provided that
any such modification or waiver shall, in the judgment of the party making it,
not affect substantially or materially and adversely the benefits to such party
or its partners intended under this Agreement. No delay or failure on the part
of any party hereto in exercising any right, power or privilege under this
Agreement shall impair any such right, power or privilege or be construed as a
waiver of any default or any acquiescence therein. No supplement, modification,
extension, waiver or termination of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any
provision of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
-5-
<PAGE>
Section 5.6 Interpretation; References. Any use of the masculine,
--------------------------
feminine or neuter pronouns herein shall not be limiting, but shall be construed
as referring to persons of any gender, as the context may require. Any use of
the singular or plural form herein shall not be limiting, but shall be construed
as referring to either the plural or singular, as the context requires.
References to an "Article" or a "Section" are, unless otherwise specified, to an
Article or Section of this Agreement. The Article and Section headings of this
Agreement are for convenience of reference only and shall not be deemed to
modify, explain, restrict, alter or affect the meaning or interpretation of any
provision hereof.
Section 5.7 Severability. Any provision or part of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall, as to such
situation and such jurisdiction, be ineffective only to the extent of such
invalidity and shall not affect the enforceability of the remaining provisions
hereof or the validity or enforceability of any such provision in any other
situation or in any other jurisdiction.
Section 5.8 Governing Law. This Agreement shall be construed and enforced
-------------
in accordance with the laws of the State of Delaware, without regard to
principles of conflict of laws.
Section 5.9 Representations and Warranties. Each of the Constituent
------------------------------
Partnerships hereby represents and warrants to the other Constituent Partnership
that it is a duly organized and lawfully existing partnership in good standing
under the laws of the State of Delaware and is duly authorized, qualified and
licensed to carry on its business in such jurisdictions in the manner presently
conducted.
Section 5.10 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Merger, or have caused this Agreement and Plan of Merger to be duly
executed on their behalf, as of the day and year first above written.
PROJECT ORANGE ASSOCIATES L.P.
By: G.A.S. ORANGE ASSOCIATES, L.L.C.,
its General Partner
By: /s/ Adam H. Victor
_____________________________
Name: Adam H. Victor
Title: President
PROJECT ORANGE FUNDING, L.P.
By: G.A.S. ORANGE ASSOCIATES, L.L.C.,
its General Partner
By: /s/ Adam H. Victor
_____________________________
Name: Adam H. Victor
Title: President
-7-
<PAGE>
EXHIBIT A
CERTIFICATE OF MERGER
OF
PROJECT ORANGE FUNDING, L.P.
INTO
PROJECT ORANGE ASSOCIATES L.P.
To the Secretary of State
of Delaware
Project Orange Associates L.P., a limited partnership organized under the
Delaware Revised Uniform Limited Partnership Act, (the "Act") for the purpose of
merging with other business entities pursuant to Section 17-211 of the Act,
hereby certifies that:
1. The name and jurisdiction of formation or organization of
each of the domestic limited partnerships are:
NAME JURISDICTION
---- ------------
Project Orange Associates L.P. Delaware
Project Orange Funding, L.P. Delaware
2. An Agreement and Plan of Merger has been approved and
executed by each domestic limited partnership or other business entity
which is a constituent entity.
3. The name of the surviving domestic limited partnership is
Project Orange Associates L.P.
4. The merger shall be effective on the date of filing this
Certificate of Merger with the Secretary of State of the State of
Delaware.
5. The executed Agreement and Plan of Merger is on file at the
following at the principal place of business of the surviving domestic
limited partnership. The address of the principal place of business of
the surviving limited partnership is: 90 Presidential Plaza, Syracuse,
New York 13202-2200.
-8-
<PAGE>
6. A copy of the Agreement and Plan of Merger will be furnished
by the surviving domestic limited partnership, on request and without
cost, to any partner of any domestic limited partnership, or any
person holding an interest in any other business entity, which is a
constituent entity.
Signed on December 6, 1999.
PROJECT ORANGE ASSOCIATES L.P.
By: G.A.S. Orange Associates, L.L.C., its
General Partner
By: /s/ Adam H. Victor
----------------------------
Name: Adam H. Victor
--------------------------
Title: President
-9-
<PAGE>
EXHIBIT B
[CERTIFICATE OF LIMITED PARTNERSHIP OF
PROJECT ORANGE ASSOCIATES L.P. - TO BE ATTACHED]
-10-
<PAGE>
EXHIBIT 2.2
ASSUMPTION AGREEMENT
--------------------
Project Orange Associates, L.P. ("POA"), the surviving corporation of the
merger on the date hereof of Project Orange Funding, L.P. ("POF") with and into
POA, hereby expressly assumes, and agrees to perform and discharge, all of the
obligations and liabilities of POF under the Indenture (the "Indenture") dated
as of December 6, 1999 between POF and U.S. Bank Trust, National Association, in
its capacity as Trustee (the "Trustee") for the benefit of the holders from time
to time of POF's $68.0 million aggregate principal amount of 10.5% Senior
Secured Notes due 2007 (the "Notes"), the Notes and the other Financing
Documents referred to in the Indenture, and expressly confirms the grant to U.S.
Bank Trust, National Association, in its capacity as Collateral Agent (the
"Collateral Agent") under the Collateral Documents for the benefit of the
Secured Parties of the Liens on the existing and after-acquired assets of POA
pursuant to the Collateral Documents, as more fully set forth therein. All
references in the Financing Documents to POA shall hereafter refer to Project
Orange Associates, L.P. and its successors. All capitalized terms used but not
otherwise defined herein shall have the meaning ascribed to them in the
Indenture.
IN WITNESS WHEREOF, POA has caused its duly authorized officer to execute
and deliver this Assumption Agreement as of December 6, 1999, simultaneously
with the effectiveness of the Merger referred to in the Indenture.
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Associates, LLC, a
Delaware limited liability company,
its general partner
/s/ Douglas Corbett
By: __________________________________________
Name: Douglas Corbett
Title: Vice President
2
<PAGE>
Exhibit 3.1
EXECUTION COPY
--------------
Second Amended and Restated Agreement of Limited
Partnership
of
PROJECT ORANGE ASSOCIATES, L.P.
A Delaware Limited Partnership
Dated as of December 16, 1992
among
G.A.S. ORANGE PARTNERS, L.P.,
NCP SYRACUSE, INC.
and
SYRACUSE ORANGE PARTNERS, L.P.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I Definitions....................................................... 2
ARTICLE II General Provisions................................................ 15
2.1. Information....................................................... 15
2.2. Continuation of the Partnership................................... 15
2.3. Name.............................................................. 16
2.4. Purpose........................................................... 16
2.5. Place of Business................................................. 16
2.6. Partners' Name and Addresses...................................... 17
2.7. Title to Partnership Property..................................... 17
2.8. Registered Office and Registered Agent............................ 17
2.9. Organization Certificates......................................... 17
2.10. Duration of the Partnership....................................... 18
2.11. Development Fees.................................................. 18
2.12. Orange Partners' Fees............................................. 19
2.13. NCP Syracuse Fees................................................. 20
2.14. Fees Excluded from Flip Point Calculation......................... 21
2.15. Certain Obligations Assumed....................................... 21
ARTICLE III Capital of the Partnership........................................ 22
3.1. Capital Contributions to the Partnership.......................... 22
3.2. Loans by Partners................................................. 23
ARTICLE IV Management of the Partnership..................................... 24
4.1. Management........................................................ 24
4.2. Transactions with Related Parties; Fiduciary Duties, etc.......... 37
4.3. Right of Public to Rely on Authority of the Managing
General Partner................................................... 40
4.4. Liability of the General Partners; Indemnification of
Partners.......................................................... 41
4.5. Limitations on Limited Partners................................... 42
4.6. Rights of Partners................................................ 43
4.7. Liability of Limited Partners..................................... 43
4.8. Limitation of Liability........................................... 43
ARTICLE V Representations, Warranties and Covenants of the Partners......... 44
</TABLE>
(i)
<PAGE>
5.1. General Representations and Warranties........................44
5.2. Covenants of Partners.........................................45
5.3. Representations and Warranties of the Developer General
Partner......................................................45
5.4. Covenant of the Developer and General Partner.................47
5.5. Representations, Warranties and Covenants of the Managing
General Partner..............................................47
ARTICLE VI Capital Accounts, Distributions and Allocations...............48
6.1. Establishment of Capital Accounts.............................48
6.2. Distributions of Cash Items...................................50
6.3. Allocations of Tax Items......................................52
6.4. Recharacterization of Fees and Guaranteed Payments............55
6.5. Conformity with Treasury Regulations..........................55
6.6. Negative Capital Accounts.....................................57
6.7. Additional Reserves...........................................57
6.8. Pre-Operating Reserves........................................58
6.9. Application of Project Cost Excess and Certain Other Funds....58
ARTICLE VII Transfer of Partnership Interests; Removal of a General Partner;
Admission of Additional Partners.............................59
7.1. Substitution and Transfer of Certain Interests................59
7.2. Death, Bankruptcy or Dissolution of a Limited Partner.........63
7.3. Transfer of a General Partner's Interest......................63
7.4. Removal or Deemed Withdrawal of a General Partner.............66
ARTICLE VIII Dissolution and Liquidation...................................68
8.1. Events of Dissolution.........................................68
8.2. Priority on Liquidation.......................................69
8.3. Statements on Liquidation.....................................70
8.4. Return of Capital; Partition..................................70
ARTICLE IX Records and Accounting........................................70
9.1. Books and Records.............................................70
9.2. Required Reports to Partners..................................71
9.3. Partnership Bank Accounts.....................................72
9.4. Annual Tax Returns............................................72
9.5. Actions in Event of Audit.....................................73
9.6. Costs.........................................................74
ARTICLE X Miscellaneous..................................................
(ii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.1. Notices........................................................... 75
10.2. Power of Attorney................................................. 75
10.3. Amendment......................................................... 76
10.4. Partition......................................................... 77
10.5. No Waiver......................................................... 77
10.6. Entire Agreement.................................................. 78
10.7. Creditors......................................................... 78
10.8. Agreement in Counterparts......................................... 78
10.9. Captions.......................................................... 78
10.10. Successors and Assigns............................................ 78
10.11. Governing Law..................................................... 78
10.12. Equitable Remedies................................................ 79
10.13. Partial Invalidity................................................ 79
10.14. Consent to Jurisdiction, Venue and Service of Process............. 79
</TABLE>
Schedules
Schedule I Names and Addresses of General Partners and Limited Partners
Schedule II Capital Contributions
Schedule III Material Project Documents
(iii)
<PAGE>
Exhibits
--------
Exhibit A [Deleted]
Exhibit B Calculation of Flip Point
Exhibit C Boiler Expenses and Reserves
Exhibit D Tranche Thresholds
Exhibit E [Deleted]
Exhibit F List of Agreements and Permits
Exhibit G Legal Proceedings
Exhibit H List of Claims
Exhibit I Certain Information to be Distributed to Partners
(iv)
<PAGE>
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as
of December 16, 1991 by and among G.A.S. Orange Partners, L.P., a Delaware
limited partnership ("Orange Partners"); NCP Syracuse. Inc., a Delaware
corporation ("NCP Syracuse"); and Syracuse Orange Partners, L.P., a Delaware
limited partnership ("Syracuse Partners").
RECITALS:
WHEREAS, Project Orange Associates, L..P., a Delaware limited
partnership (the "Partnership") was formed on May 23, 1988 by the filing of a
certificate of limited partnership with the Secretary of State of the State of
Delaware;
WHEREAS, the Partnership was formed for the purpose of developing,
owning, constructing, and operating a gas-fired cogeneration facility to be
located near Syracuse University in Syracuse, New York (the "Project"),
consisting of: (i) an approximately 80 MW (net) cogeneration plant comprising
two natural gas fired General Electric LM 5000 turbine generator sets and
accompanying steam and condensate return facilities (the "Cogeneration
Facility") to be constructed on property leased from Syracuse University (the
"University") in Syracuse, New York; (ii) an existing steam generating plant to
be operated under contract with the University (the "Existing Plant"); (iii) a
120,000,000 MMBtu prepaid natural gas fuel supply; and (iv) a Project-owned
natural gas transmission pipeline (the "Project Pipeline");
WHEREAS, the then-partners of the Partnership amended and restated its
original Agreement of Limited Partnership pursuant to the First Amended and
Restated Agreement of Limited Partnership dated as of April 5, 1991;
WHEREAS, the Partners now desire to amend and restate the aforesaid
First Amended and Restated Agreement of Limited Partnership and to continue the
existence of the Partnership for the purposes herein described;
NOW, THEREFORE, the parties agree as follows:
-1-
<PAGE>
ARTICLE I
Definitions
-----------
As used herein, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
Act: The Delaware Revised Uniform Limited Partnership Act, as it may be
---
amended from time to time, and any successor to such act.
Acceptable Counsel: has the meaning set forth in Section 7.1(a) (iv).
------------------
Accountants: Deloitte & Touche or such other major and nationally
-----------
recognized firm of independent public accountants as the Managing General
Partner may designate.
Additional Reserves: any Partnership reserves which are funded after the
-------------------
Term Loan Date other than reserves which are required by the Financing
Agreement.
Adjusted Basis: at any time relevant herein, the Partnership's basis for
--------------
determining gain or loss from the sale or other disposition of any Partnership
asset (determined under Code section 1012 or other applicable sections of Code
Subchapters O, K, C and P), adjusted as provided in Code section 1016.
Affiliate: with respect to a specified Person, a Person who, directly or
---------
indirectly through one or more intermediaries, Controls, is Controlled by or is
under common Control with, the Person specified.
Affiliate Contract: has the meaning set forth in Section 4.2(b).
------------------
Agent: has the meaning set forth in the Financing Agreement, as it may be
-----
amended from time to time, or any Person performing similar functions under any
successor or subsequent agreement governing long term indebtedness of the
Partnership.
Agreement: this Second Amended and Restated Agreement of Limited
---------
Partnership, as it may be amended or restated from time to time.
Available Cash: with respect to any period commencing on or after the Term
--------------
Loan Date, the sum of cash applied to fund Additional Reserves during that
period; plus (ii) all other cash available to the Partnership at the end of that
period for distribution to the Partners after (a) payment of all debt service
and other expenses (including, without limitation, payments due on or with
respect to Partner Loans, Project Costs, operating and maintenance expenses,
general and administration expenses, insurance costs and expenses, Partnership
gross receipts and property taxes and all other Partnership expenses), (b)
satisfaction of liabilities as they become due, and (c) cash applied to fund
such reserves as are required by the Financing Agreement.
-2-
<PAGE>
Bankruptcy: with respect to the Partnership or a Partner therein, shall
----------
mean (a) an adjudication that the Partnership or such Partner is bankrupt or
insolvent, or the entry of an order for relief under the Federal Bankruptcy Code
or any other applicable bankruptcy or insolvency law, (b) its inability to pay
its debts as they mature, (c) the making by it of an assignment for the benefit
of creditors or the dissolution and winding up of its affairs, (d) the filing by
it of a petition in bankruptcy or a petition for relief under any section of the
Federal Bankruptcy Code or any other applicable bankruptcy or insolvency statute
or an answer by it to an involuntary petition filed against it admitting or
failing to deny the allegations of any such petition, (e) the commencement
against it of any proceedings under the Federal Bankruptcy Code (unless such
proceedings are stayed or dismissed within ninety (90) days from the date of
filing thereof), (f) the appointment of a trustee, conservator or receiver for
all or a substantial part of its assets (unless such appointment is vacated or
stayed within ninety (90) days from its effective date), or (g) with respect to
a Partner, the acquisition by a creditor of such Partner, or by any other party
acting on behalf of such creditor, of any rights with respect to such Partner's
partnership interest in the Partnership or a right to Partnership profits (other
than in accordance with any pledge agreement required by the Financing Agreement
or any subsequent financing arrangement of the Partnership), if such acquisition
shall continue for a period of 90 days.
Capacity Expansion: has the meaning assigned in Section 4.1(f) (v).
------------------
Capital Account: the account for each Partner on the books of the
---------------
Partnership created and maintained as provided in Section 6.1, with only one
Capital Account being maintained for any Person acting as both a General and a
Limited Partner.
Capital Contribution: with respect to any Partner, the amount of money and
--------------------
the Net Agreed Value of any property (other than money) contributed to the
Partnership pursuant to the terms of this Agreement with respect to that
Partner's Interest.
Carrying Value: as of the time of determination. (i) with respect to
--------------
Contributed Property, the Fair Market Value of such property on the date of
contribution reduced (but not below zero) by all depreciation, depletion, and
amortization charged to the Capital Accounts pursuant to Section 6.1(b) with
respect to such property and (ii) with respect to any other property, the
Adjusted. Basis of such property.
Code: the United States Internal Revenue Code of 1986, as amended from time
----
to time.
Consent: the written consent of a Person. When used as a verb, such term
-------
shall have a correlative meaning.
Construction Account: shall have the meaning specified in the Financing
--------------------
Agreement.
Construction Contract: the Amended and Restated Cogeneration Facility
----------------------
Turnkey Construction Contract dated as of April 5, 1991, between the Partnership
and Century Contractors West inc., as the same may be amended from time to time
in accordance with this Agreement.
-3-
<PAGE>
Construction Loan: has the meaning set forth in the Financing Agreement as
-----------------
in effect on the Initial Funding Date.
Consumer Price Index: The Consumer Price Index of the U.S. Department of
--------------------
Labor Bureau of Labor Statistics, All Urban Consumers, U.S. city average. All
Items, 1982-84=100, or, if such index is no longer published, a similar
mechanism for determining adjustments to prices to reflect general price changes
as agreed to by the General Partners.
Contingent Payments: has the meaning assigned in Section 2.11(b)
-------------------
Contributed Property: any property or other consideration (other than cash)
--------------------
contributed by a Partner to the Partnership, including property owned by the
Partnership as of the date of this Agreement.
Control: the possession. directly or indirectly of the power to direct or
-------
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise. A Person shall be
conclusively presumed to have Control of another Person if it is a general
partner of such other Person and such other Person is a partnership or a limited
partnership; provided, however, that Orange Partners shall not be deemed to be
in Control of the Partnership for purposes of this Agreement so long as NCP
Syracuse is the Managing General Partner.
Deferred Fees: any fees payable to the Developer General Partner pursuant
-------------
to the provisions of Section 2.11(a) or 2.12(a) which are deferred either in
accordance with such provisions or pursuant to the Financing Agreement and which
remain outstanding and unpaid.
Developer Entities: collectively, the Developer General Partner, G.A.S.
------------------
Orange Development, Inc. and the Partnership.
Developer General Partner: G.A.S. Orange Partners, L.P. in its capacity as
-------------------------
a General Partner.
DGP Adverse Effect: an impact which is reasonably likely to be adverse to
------------------
the interest of the Developer General Partner with respect to any of (i) the
amount of Project Cost Excess, (ii) the relative amounts or percentages of
Available Cash or Net Capital Receipts distributable as between the Investor
Group and the Developer General Partner in or with respect to any period, (iii)
the relative amounts or percentages of Profit or Loss allocable as between the
Investor Group and the Developer General Partner in or with respect to any
period, (iv) the date on which either Flip Point occurs, or (v) the likelihood
that the capacity of the Project to generate and sell electricity in excess of
80 Megawatts can be achieved.
Disability: death, adjudication of incompetency, Bankruptcy, or
----------
dissolution; "Disabled" means to be under a Disability.
Equity Backstop Amount: has the meaning set forth in the Financing
----------------------
Agreement as in effect on the Funding Date.
-4-
<PAGE>
Equity Funding Date: the date that NCP Syracuse, Syracuse Partners, or any
-------------------
guarantor of their respective obligations under that certain Funding Guaranty
for the benefit of the Agent and the Banks dated as of April 5, 1991 are
required to provide equity funds to be applied to the payment of Construction
Loans pursuant to Section 5.19(a) of the Financing Agreement.
Fair Market Value: the value of the particular asset or interest in
-----------------
question determined on the basis of an arm's-length transaction for cash between
an informed and willing seller (under no compulsion to sell) and an informed and
willing purchaser (under no compulsion- to purchase) taking into account, among
other things, the anticipated cash flow, taxable income and taxable loss
attributable to the asset or interest in question. If the Partners seeking to
determine such Fair Market Value cannot agree as to such value between or among
themselves, upon notice of any such Partner, such Partners shall meet to appoint
a mutually acceptable independent appraiser having recognized qualifications
necessary in order to make such determination and whose fees and expenses,
unless otherwise provided in this Agreement, shall be shared equally by the
Partners affected by such determination. If such Partners shall be unable to
agree on such an appraiser within 20 days of such notice, such value shall be
determined by a panel of three independent appraisers having such qualifications
selected on or prior to the 40th day of such notice, one of whom shall be
selected by the selling or transferring Partner or Partners, another of whom
shall be selected by the purchasing or acquiring Partner or Partners, and the
third of whom shall be selected by such other two appraisers or, if such other
two appraisers shall be unable to agree upon a third appraiser within 20 days of
their selection, by the American Arbitration Association or its successors. The
appraiser or appraisers appointed pursuant to the foregoing procedure shall be
instructed to determine such value within 45 days after such appointment and
such determination shall be final and binding upon the Partners. If three
appraisers shall be appointed, the determination of the appraiser that differs
most from the average of the other two appraisers shall be excluded, the
remaining two determinations shall be averaged and such average shall constitute
the determination of the appraisers. Unless otherwise provided in this
Agreement, in the case of a panel of three appraisers, the fees and expenses of
each of the two appraisers appointed by the Partners affected by such
determination shall be paid by such Partners and the fees and expenses of the
third appraiser shall be divided equally by or among all the Partners affected
by such determination, except that if such determination is being undertaken as
a result of a breach by under this Agreement, such breaching Partner shall pay
all such fees and expenses.
Fee Excess: means the excess, if any, of $2,870,000 over the amount paid to
----------
secure a full and complete release, in form and substance satisfactory to the
Agent, of the Partnership, any Affiliate (as defined in the Financing Agreement)
and the Project from liability for payment of fees pursuant to that certain
letter agreement between Gas Alternative Systems, Inc. and Donaldson, Lufkin &
Jennrette Securities Corporation, dated August 22, 1989.
Financing Agreement: the Financing Agreement, dated as of April 5, 1991, by
-------------------
and among the Partnership, each of the Banks (as defined in such Financing
Agreement), and Algemene Bank Nederland N.V., Cayman Islands Branch, as Agent
for such Banks, related to the Project, as amended, supplemented or otherwise
modified or replaced and in effect from time to time.
-5-
<PAGE>
Financing Documents: the "Financing Documents," as defined in the Financing
-------------------
Agreement.
First Flip Point: the first day on which the Investor Group has achieved a
----------------
19% after-tax internal rate of return calculated according to the rules and
methodology set forth in Exhibit B.
----------
First Restatement: has the meaning assigned in Section 5.3(a).
-----------------
Fiscal Year: the taxable year for Federal income tax purposes determined
-----------
under Section 706 of the Code and the ax Regulations promulgated thereunder.
Flip Points: collectively, the First Flip Point and the Second Flip Point.
-----------
Each of the First Flip Point and the Second Flip Point is referred to as a Flip
Point.
Gain or Loss on Disposition: the gain or loss for Federal income tax
---------------------------
purposes, arising from a sale, exchange or other taxable disposition of the
Project, or any material portion thereof (excluding, however, any gain or loss
from sales of services or property in the ordinary course of the business of the
Partnership),
Gas Sales Contract: the Restated Gas Sale and purchase Agreement-dated as
------------------
of March 18, 1991 between the partnership and Noranda Inc., as from time to time
amended and in force.
General Partner: any Person now or hereafter admitted as a general partner
---------------
in the Partnership.
Governmental Authority: any Federal, state, local or other body, whether
----------------------
administrative, legislative, executive or judicial, or any quasi-governmental
body, in any event having jurisdiction over the Project, a Partner or the
Partnership.
Governmental Requirements: requirements contained in any law, ordinance,
-------------------------
regulation, rule, order, writ, judgment, or direction promulgated by any
Governmental Authority.
Initial Funding Date: the date upon which the initial disbursement of
--------------------
Construction Loan funds is made under the Financing Agreement.
Interest: at any time, the interest of a Partner in the Partnership,
--------
including but not limited to its right to Partnership capital, allocations and
distributions.
Investor Group: Syracuse Partners and NCP Syracuse as a group.
--------------
Keep Requirement: has the meaning set forth in Section 5.5(b).
----------------
Labor Costs: the actual labor costs of NCP Employees for work performed on
-----------
the Project, calculated as set forth in Section 2.13(c).
-6-
<PAGE>
Limited Partner: any Person now or hereafter admitted as a limited partner
---------------
in the Partnership.
Loss: see definition of Profit or Loss.
----
Loss on Disposition: see definition of Gain or Loss on Disposition.
-------------------
Major Decisions: decisions concerning any of the matters described in
---------------
Sections 3.1(b), 4.1(d)(xviii), 4.1(f)(i)(A), 4.1(f)(i)(B), 4.1(f)(i)(C),
4.1(f)(i)(D), 4.1(f)(i)(E), 4.1(f)(ii), 4.1(f)(iii), 4.1(f)(iv), 4.1(f)(v),
4.1(f)(vi), 4.1(f)(vii), 4.1(f)(viii), 4.1(f)(ix), 4.2, and 10.3(b)
Majority in Interest of Limited Partners: at any time, Limited Partners
----------------------------------------
owning Interests which entitle them to more than 50% of a hypothetical
distribution of one dollar of Available Cash made at that time (taking into
account whether or not a Flip Point has occurred but otherwise assuming that the
aggregate prior distributions that year are at least $1.00 less than any Tranche
1 Threshold for that year).
Managing General Partner: NCP Syracuse, Inc or such other General Partner
------------------------
as shall be the Managing General Partner pursuant to this Agreement or as the
General Partners may designate from time to time to be the Managing General
Partner.
Material Project Documents: collectively,
--------------------------
(i) the documents listed in Schedule III
------------
(ii) any amendment, modification, or supplement thereto entered into by the
Partnership in accordance with the terms of this Agreement,
(iii) any agreement or document entered into or issued in substitution or
as a replacement for any of the documents listed on Schedule III, and
------------
(iv) any other document related to the Project which both General Partners
may agree to designate as a "Material Project Document" from time to time by
amending Schedule III hereto.
------------
Minimum Gain Attributable to Partner Nonrecourse Debt: with respect to any
-----------------------------------------------------
Partner Nonrecourse Debt, an amount equal to the increase, if any, in Minimum
Gain that would result if such Partner Nonrecourse Debt were treated as a
nonrecourse liability of the Partnership, as defined in Treasury Regulations (S)
1.704-1T(b) (4) (iv) (c)
Minimum Gain: shall have the meaning set forth in Treasury Regulations (S)
------------
l.704-1T(b) (4) (iv) (c).
NCP Employees: all persons employed by any of the NCP Officer Companies,
-------------
or any other corporation or entity that is beneficially 50% or more owned by any
of them, other than NCP Officers.
-7-
<PAGE>
NCP Officers: all persons who are officers or directors of any of the NCP
------------
Officer Companies.
NCP Officer Companies: NCP Syracuse, North Canadian Power Incorporated
-----------------------
and North Canadian Oils Limited.
Net Agreed Value: (i) in the case of cash, the amount thereof, (ii) in the
----------------
case of any Contributed Property, the Fair Market Value of such Contributed
Property at the time of contribution reduced by any indebtedness either assumed
by the Partnership upon such contribution or to which such Contributed Property
is subject when contributed and (iii) in the case of any property (other than
cash) distributed to a Partner, the Fair Market Value of such property at the
time of such distribution reduced by any indebtedness either assumed by such
Partner upon such distribution or to which such property is subject at the time
of distribution.
Net Capital Receipts: the proceeds of any sale, exchange or other
--------------------
disposition of the Project or any material portion thereof (excluding, however,
proceeds from sales of services or property in the ordinary course of the
business of the Partnership), the proceeds of any refinancing of any
indebtedness of the Partnership, or any insurance or condemnation proceeds, in
each instance less the amount of expenses incurred in connection therewith, any
obligations paid with the proceeds of any disposition of the Project or of any
refinanced debt, the cost of restoration and repair or replacement of any
property damaged by casualty or taken in condemnation, and the cost of
construction of any improvement for which such insurance or condemnation
proceeds are used.
Operative Documents: has the meaning set forth in the Financing Agreement
-------------------
as in effect on the
date hereof.
Partners: the General Partners and the Limited Partners collectively.
--------
"Partner" means any one of the Partners.
Partner Loans: any loan made by a Partner or an Affiliate of a Partner to
-------------
the Partnership.
Partner Pledge and Security Agreement: means a Pledge and Security
-------------------------------------
Agreement executed by a Partner pursuant to the requirements of the Financing
Agreement.
Partnership: Project Orange Associates, L.P. , the subject of this
-----------
Agreement.
Partner Nonrecourse Debt: shall have the meaning set forth in Treasury
------------------------
Regulations (S)1.704-1T(b)(4)(iv)(k)(4).
Person: any individual, firm, corporation, trust, partnership or other
------
entity.
Post-Flip Interest: the following interests of the Partners:
------------------
-8-
<PAGE>
(i) if the First Flip Point occurs before the Pro Forma End Date, then from
and after the occurrence of the First Flip Point and until the occurrence of the
Second Flip Point the Post-Flip Interests of the Partners will be:
Orange Partners (in its capacity as 1%
Developer General Partner)
Orange Partners (in its capacity as a Limited 49%
Partner)
NCP Syracuse 1%
Syracuse Partners 49%
(ii) if the First Flip Point occurs after the Pro Forma End Date, then from
and after the occurrence of the First Flip Point the Post-Flip Interests of the
Partners will be:
Orange Partners (in its capacity as 1%
Developer General Partner)
Orange Partners (in its capacity as a Limited 74%
Partner)
NCP Syracuse 1%
Syracuse Partners 24%
(iii) after the Second Flip Point occurs (regardless of when it occurs), the
Post-Flip Interests of the Partners will be:
Orange Partners (in its capacity as 1%
Developer General Partner)
Orange Partners (in its capacity as a Limited 74%
Partner)
NCP Syracuse 1%
Syracuse Partners 24%
Pre-Operating Reserves: means any reserves established by the Partnership
----------------------
or set aside in the Construction Account on or prior to the Term Loan Date,
including (i) the
-9-
<PAGE>
undisbursed portion of the Tenneco Letter of Credit (as defined in the Financing
Agreement), (ii) Construction Loan proceeds that may be diverted from
construction management fees due under Section 2.12(a) to reduce aggregate Net
Demand Charges (as provided in clause (i) of the definition of Project Costs),
or (iii) undisbursed Construction Loans to the extent held back for the payment
of the claim provided for in clause (t) of the definition of Project Costs, but
excluding the $1,000,000 working capital reserve required to be funded under the
Financing Agreement.
Problem: has the meaning set forth in Section 4.2(c) (i)
--------
Pro Forma End Date: the date twenty years after the Term Loan Date.
------------------
Profit or Loss: the income or loss of the Partnership for Federal income
----------------
tax purposes, other than Gain or Loss on Disposition.
Prohibited Transferees: has the meaning set forth in Section 7.1(a) (iii).
----------------------
Project: see the recitals to this Agreement.
-------
Project Budget: has the meaning set forth in the Financing Agreement, as
--------------
in force on the Initial Funding Date.
Project Cost Excess: the excess, if any, measured as of the Term. Loan
-------------------
Date, of Project Funds over the sum of (i) the $1,000,000 working capital
reserve required to be funded under the Financing Agreement plus (ii) Project
Costs other than the Contingent Payments and any Deferred Fees.
Project Costs: has the meaning assigned to that term in the Financing
-------------
Agreement.
Project Funds: means the sum of (i) $205,000,000 plus (ii) any Contractor
-------------
Delay Damages (as defined in the Financing Agreement) plus (iii) any Pipeline
Contractor Delay Damages (as defined in the Financing Agreement) plus (iv) any
Project Revenues (as defined in the Financing Agreement) earned (whether or not
received) prior to the Term Loan Date plus (v) all Additional Guarantor Funds
(as defined in the Financing Agreement) plus (vi) all other amounts received by
or accrued to the Partnership prior to the Term Loan Date.
Proposed Resolution: has the meaning set forth in Section 4.2(c) (iv).
-------------------
PUHCA: the Public Utility Holding Company Act of 1935 as it may be amended
-----
from time to time, and the rules and regulations promulgated thereunder by the
Securities and Exchange Commission.
PURPA: the Public Utility Regulatory Policies Act of 1978, as it may be
-----
amended from time to time, and the rules and regulations promulgated thereunder
by the Federal Energy Regulatory Commission.
-10-
<PAGE>
Recapture Income: any gain recognized upon the disposition of a Partnership
----------------
asset that is not capital gain because such gain represents the recapture (under
Section 1245 or Section 1250 of the Code or otherwise) of deductions previously
taken for Federal income tax purposes with respect to such asset.
Related Party: with respect to a specified Person, includes any Person (i)
-------------
who is an Affiliate of the specified Person, (ii) who directly or indirectly,
through one or more intermediaries, owns a 10 or greater equity interest in the
specified Person, (iii) in whom the specified Person directly or indirectly,
through one or more intermediaries, owns a 10% or greater equity interest,
and/or (iv) with respect to whom there is a third Person who directly or
indirectly, through one or more intermediaries, owns a 10% or greater equity
interest in such Person and in the specified Person.
Required Opinion: has the meaning set forth in Section 7.1(a) (iv).
----------------
Second Flip Point: the first day on which the Investor Group has achieved
-----------------
a 20% after-tax internal rate of return calculated according to the rules and
methodology set forth in Exhibit B.
---------
SOP Adverse Effect: an impact which is reasonably likely to result in a
------------------
change on a material basis in (i) the relative amounts or percentages of
Available Cash or Net Capital Receipts distributable as between SOP and the
other Partners in or with respect to any period, (ii) the relative amounts or
percentages of Profit or Loss allocable as between SOP and the other Partners in
or with respect to any period, or (iii) the date on which either Flip Point
occurs.
Steam Sale Agreement: has the meaning assigned in the Financing Agreement.
--------------------
Syracuse Investment: means Syracuse Investment, Inc., a Delaware
-------------------
corporation and a wholly-owned subsidiary of North Canadian Power Incorporated.
Tax Returns: (a) the annual Federal income tax return of the Partnership,
-----------
whether on Form 1065 or such other form as may hereafter be prescribed by the
Internal Revenue Service, and (b) any return or report which the Partnership is
required to file with the taxing authorities of any State or political
subdivision thereof.
Term Loan: has the meaning assigned in the Financing Agreement as in effect
---------
on the date hereof.
Term Loan Date: means the date that the Construction Loans are converted to
--------------
Term Loans.
Third Party Fees: all fees and expenses incurred by or on behalf of the
----------------
Partnership for third-party accounting, tax preparation and audit services and
third-party legal, consulting, other professional services and other services,
except fees and expenses incurred for services that the Managing General Partner
is required to provide in the performance of its responsibilities or the
discharge of its duties under this Agreement.
-11-
<PAGE>
Tranche 1 Threshold: for any particular fiscal year the number of dollars
-------------------
set forth opposite that year on Exhibit D in the column headed "Tranche 1
---------
Threshold."
Tranche 2 Amount: for any particular fiscal year, the number of dollars
----------------
set forth opposite that year on Exhibit D in the column headed "Tranche 2
---------
Amount."
Transfer: the sale, transfer, assignment, hypothecation, pledge or other
--------
disposition, and, when used as a verb, "Transfer" shall have a correlative
meaning.
Transferee: a Person who takes all or part of an Interest by means of a
----------
Transfer.
Transferor: a Person whose Interest is Transferred in whole or in part.
----------
Treasury Regulations: the regulations promulgated by the Department of the
--------------------
Treasury under the Code in effect from time to time.
Unrealized Gain Attributable to a Partnership Property: as of any date of
------------------------------------------------------
determination, the excess, if any, of the Fair Market Value of such property as
of such date of determination over the Carrying Value of such property as of
such date of determination.
Unrealized Loss Attributable to a Partnership Property: as of any date of
------------------------------------------------------
determination, the excess, if any, of the Carrying Value of such property as of
such date of determination over the Fair Market Value of such property as of
such date of determination.
ARTICLE II
General Provisions
------------------
2.1. Formation. The Partnership was formed as a Delaware limited
---------
partnership pursuant to the terms of the Act by filing a certificate of limited
partnership with the Secretary of State of the State of Delaware on May 23,
1988.
2.2. Continuation of the Partnership. The Partners agree to continue the
-------------------------------
Partnership as a limited partnership pursuant to the terms of the Act and this
Agreement. Upon execution hereof, and without any further action, NCP Syracuse
continues as a General Partner, Syracuse Partners continues as a Limited Partner
and Orange Partners continues as a General Partner and a Limited Partner. It is
the intent and purpose this Agreement that the Partnership be a limited
partnership meeting the definition of "partnership" contained in Section 7701 of
the Code and the regulations promulgated thereunder. All rights, liabilities and
obligations of the General Partners and the Limited Partners, both as among
themselves and as to Persons not parties to this Agreement, shall be as provided
in the Act, except as expressly provided herein. Notwithstanding the foregoing
provisions, the provisions of Section 3.1, or any other provision of this
Agreement, prior to the Initial Funding Date: (i) no Partner shall have (A) any
obligation to make a Capital Contribution to the Partnership, (B) any other
obligation to the Partnership or another Partner
-12-
<PAGE>
under any provision of this Agreement, or (C) any obligation to pay funds to the
Agent under the Financing Agreement and (ii) NCP Syracuse shall not take any
action in its capacity as Managing General Partner except with the prior
agreement of the Developer General Partner.
2.3. Name. The name of the Partnership is and shall be "Project Orange
----
Associates, L.P." The Managing General Partner shall execute and cause to be
filed on behalf of the Partnership such partnership or assumed or fictitious
name certificate or certificates as may from time to time be required by law to
be published or filed in connection with the continuation, qualification and
operation of the Partnership.
2.4. Purpose. The sole purpose of the Partnership shall be to develop,
-------
construct, own, operate, manage, lease and sell the Project and the properties
incidental thereto and to enter into such banking agreements, partnerships,
joint ventures, credit agreements, capital or equity contribution agreements,
assignments, pledges and security agreements and to undertake any and all other
acts and things, and to execute and deliver any and all other agreements,
instruments and documents, necessary, proper, convenient or advisable to carry
out such purpose, including without limitation: (i) to acquire by purchase,
lease or otherwise, any real or personal property; and (ii) to prepay in whole
or in part, refinance, restructure, recast, increase, renew, modify or extend
any loan as contemplated by this Agreement. The name and funds of the
Partnership shall be used only for Partnership purposes.
2.5. Place of Business. The principal place of business of the Partnership
-----------------
shall be at 520 East Taylor Street, Syracuse, New York 13202. The Managing
General Partner may, at any time and from time to time, change the location of
the Partnership's principal place of business, upon written notice of such
change to the Partners, and may establish such. additional place or places of
business of the Partnership as the Managing General Partner may from time to
time determine; provided, however, that the Managing General Partner shall not
(i) establish any Partnership office in any state other than New York State if
as a result of such action any of the partners or the Partnership will be
required to file tax returns or be subject to taxation in such other state, or
(ii) move the Partnership's principal place of business outside of New York
State.
2.6. Partners' Names and Addresses. The names and addresses of the
General Partners and Limited Partners are set forth on Schedule I attached
----------
hereto.
2.7. Title to Partnership Property. All property owned by the
-----------------------------
Partnership, whether real or personal, tangible or intangible, shall be deemed
owned by the Partnership as an entity, and no Partner, individually, shall have
any ownership of such property. The Partnership may hold any of its assets in
its own name or in the name of its nominee, which nominee may be one or more
individuals, corporations, partnerships, trusts or other entities.
2.8. Registered Office and Registered Agent. The address of the registered
--------------------------------------
office of the Partnership in the State of Delaware is 15 East North Street,
Dover, Delaware 19901. The registered agent for service of process in the State
of Delaware is United Corporate Services, Inc. The Managing General Partner may,
at any time and from time to time, change the location of such office or such
agent, upon written notice of such changes to the Partners, and upon filing
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<PAGE>
any necessary amendment to the Partnership's certificate of limited partnership
or taking any other action required by the Act.
2.9. Organization Certificates. The Managing General Partner shall cause
------------------------
to be executed and filed:
(a) all such amendments or supplements to the Partnership's certificate of
limited partnership required by the Act in connection with the transactions
described herein; and
(b) all such further certificates, notices, statements or other instruments
required by law for the formation, qualification or operation of a limited
partnership in all jurisdictions where the Partnership may elect to do business,
or otherwise necessary to carry out the purposes of this Agreement.
2.10. Duration of the Partnership. The Partnership shall continue until
---------------------------
December 31, 2040, unless sooner dissolved in accordance with the provisions of
this Agreement.
2.11. Development Fees. (a) The Partnership shall pay to Orange Partners a
----------------
development fee equal to the sum of: (i) the amount, if any, set forth as the
amount of such fee on the line designated "Developer's Fee" in the Project
Budget approved by the Agent as of the Initial Funding Date, payable on the
later of the Initial Funding Date or the date when Construction Loans under the
Financing Agreement cease to be limited to the Equity Backstop Amount; (ii) the
amount, if any, of the Fee Excess, payable as soon as permitted by Agent after
the determination of the Fee Excess; (iii) $700,000, payable from and to the
extent of funds available therefor in accordance with Section 6.9; and (iv) the
amount, if any, determined in clause (m) of the definition of Project Costs,
payable if and to the extent provided in such clause and Section 6.9.
(b) There are certain contingent development costs and fees which the
Partnership shall pay on the terms set forth herein, specifically, an amount
equal to 110 percent of the amount of any escalation payable to Century
Contractors West, Inc. pursuant to Section 4.3 of the Construction Contract (the
"Century Amount"), an amount equal to the excess of $3,508,000 over the Century
Amount to Orange Partners and Kronish, Lieb, Weiner & Hellman (to be divided
between them in such ratio as they may advise the Managing General Partner),
$242,000 to North Canadian Power Incorporated, and $250,000 to Entek Research,
Inc. (each individually, a "Contingent Payment," and collectively, the
"Contingent Payments"). If and to the extent funds not exceeding $4,000,000 are
available thereof or in accordance with Section 6.9, the Partnership shall pay
the Contingent Payments to Orange Partners, North Canadian Power Incorporated,
Kronish, Lieb, Weiner & Hellman, and Entek Research, Inc., to be divided among
them in proportion to the maximum amount of each such entity's Contingent
Payment.
(c) Any fees paid to a Partner pursuant to this Section 2.11 shall be
treated as payments made by the Partnership to the recipient thereof in its
capacity other than as a Partner within the meaning of Code Section 707(a).
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<PAGE>
2.12. Orange Partner Fees. (a) The Partnership shall pay to Orange
-------------------
Partners construction management fees the amount of $2,000,000, which shall be
paid in 20 consecutive installments of $100,000 per month, the first installment
of which shall be paid on the later of the Initial Funding Date or the date when
Construction Loans under the Financing Agreement cease to be limited to the
Equity Backstop Amount, with subsequent installments to be paid on the tenth day
of each calendar month thereafter until a total of 20 installments have been
paid; provided, however, that if the Term Loan Date occurs before all 20
installments have been paid, the Partnership shall pay to Orange Partners on the
Term Loan Date the amount of the unpaid installments; provided further, however,
that to the extent that any such fees are not paid to Orange Partners prior to
the Term Loan Date as provided for in clause (i) of the definition of Project
Costs, such unpaid portion of such fees shall be deferred and shall be payable
in accordance with Section 6.9.
(b) Orange Partners shall receive from the Partnership a consulting fee at
the rate of $75,000 per quarter, which shall begin to accrue on the Term Loan
Date, payable quarterly in arrears, beginning on the first day of the first
calendar quarter after the calendar quarter in which the Term Loan Date occurs,
continuing on the first day of each calendar quarter thereafter until the First
Flip Point occurs; provided, however, that as of January 1 of each year after
the year in which the Term Loan Date occurs, the quarterly consulting fee for
that year shall be equal to the greater of (i) the quarterly consulting fee in
effect for the immediately preceding calendar year, or (ii) the product of (x)
the quarterly consulting fee in effect during the calendar year in which the
Term Loan Date occurs multiplied by (y) the fraction having a numerator equal to
the Consumer Price Index as of December 31 of the immediately preceding calendar
year and a denominator equal to the Consumer Price Index as of December 31 of
the calendar year preceding the calendar year in which the Term Loan Date
occurs. To the extent that the Partnership does not have sufficient cash in any
calendar year to pay all of the fees due pursuant to Sections 2.12(b) and
2.13(b), such fees shall be paid pari passu from the cash available therefor and
---- -----
the unpaid portion shall be deferred without interest and paid pari passu before
---- -----
any distributions of Available Cash are made to the Partners.
2.13. NCP Syracuse Fees. (a) The Partnership shall pay to NCP Syracuse a
-----------------
construction management fee in the amount of $1,000,000, which shall be paid in
20 consecutive installments of $50,000 per month, the first installment of which
shall be paid on the later of the Initial Funding Date or the date when
Construction Loans under the Financing Agreement cease to be limited to the
Equity Backstop Amount, with subsequent installments to be paid on the tenth day
of each calendar month thereafter until a total of 20 installments have been
paid; provided, however, that if the Term Loan Date occurs before all 20
installments have been paid, the Partnership shall pay to NCP Syracuse on the
Term Loan Date the amount of the unpaid installments. The payment of the
construction management fee will cover all services provided and all out-of-
pocket expenses (other than Third Party Fees paid by NCP Syracuse on behalf of
the partnership) incurred by or on behalf of NCP Syracuse in the performance of
its responsibilities as Managing General Partner prior to the Term Loan Date.
(b) NCP Syracuse shall, so long as it remains the Managing General Partner,
receive from the Partnership a management fee at the rate of $77,500 per
quarter, which shall begin to
-15-
<PAGE>
accrue on the Term Loan Date, payable quarterly in arrears, beginning on the
first day of the first calendar quarter after the calendar quarter in which the
Term Loan Date occurs, and continuing on the first day of each calendar quarter
thereafter; provided, however, that as of January 2. of each year after the year
in which the Term Loan Date occurs, the quarterly management fee for that year
shall be equal to the greater of (i) the quarterly management fee in effect for
the immediately preceding calendar year, or (ii) the product of (x) the
quarterly management fee in effect during the calendar year in which the Term
Loan Date occurs multiplied by (y) the fraction having a numerator equal to the
Consumer Price Index as of December 31 of the immediately preceding calendar
year and a denominator equal to the Consumer Price Index as of December 31 of
the calendar year preceding the calendar year in which the Term Loan Date
occurs. To the extent that the Partnership does not have sufficient cash in any
calendar year to pay the entire fee due pursuant to Sections 2.12(b) and
2.13(b), such fees shall be paid pari passu from the cash available thereof or
---- -----
and the unpaid portion shall be deferred without interest and paid pari passu
before any distributions of Available Cash are made to the Partners. The payment
of the management fee will cover all services provided by NCP Officers and all
overhead costs of the NCP Officer Companies, but shall not include (i) Labor
Costs, (ii) direct out-of-pocket expenses incurred by or on behalf of NCP
Syracuse in the performance of its responsibilities as Managing General Partner
after the Term Loan Date or (iii) Third Party Fees paid on behalf of the
Partnership by NCP Syracuse.
(c) The Partnership shall reimburse NCP Syracuse for an amount equal to
220% of Labor Costs incurred after the Term Loan Date, 110% of the actual direct
out-of-pocket expenses (other than Third-Party Fees) incurred by or on behalf of
NCP Syracuse after the Term Loan Date, and 100% of Third Party Fees paid by NCP
Syracuse on behalf of the partnership for services rendered after the Term Loan
Date. For purposes of this paragraph, Labor Costs shall be computed as follows:
(i) each NCP Employee shall prepare time sheets no less frequently than twice
per month and will account for all of his or her time spent on all projects
including the Project; (ii) NCP Syracuse will divide the annual salary of each
NCP Employee that works on the Project by 2,080 hours to determine the hourly
rate of each such employee; (iii) for each NCP Employee that works on the
Project, NCP Syracuse will multiply the total number of hours worked by such
person each month on the Project by his or her hourly rate (as determined
pursuant to clause (ii) above) and (iv) the Labor Costs shall be the aggregate
of the amounts so computed for all such NCP Employees. Each month NCP Syracuse
shall provide the Developer General Partner with invoices or other reasonable
evidence of the payment and nature of all direct out-of-pocket expenses for
which NCP Syracuse receives reimbursement from the Partnership.
(d) All Partnership expenses (including Third-Party Fees) not required to
be borne by or reimbursed to NCP Syracuse pursuant to paragraph (c) of this
Section 2.13 shall be paid by the Partnership from Partnership funds.
(e) Any fees paid pursuant to this Section 2.13 shall be treated as
payments made by the Partnership to NCP Syracuse in its capacity other than as a
Partner within the meaning of Code Section 707(a).
-16-
<PAGE>
2.14. Fees Excluded from Flip Point Calculation. Notes paid pursuant to
-----------------------------------------
Section 2.11 or 2.13 shall be included in the calculation of the Flip Points.
2.15. Certain Obligations Assumed. The Partnership hereby assumes the
---------------------------
claims described in Exhibit H, to the extent not heretofore assumed.
---------
ARTICLE III
Capital of the Partnership
--------------------------
3.1. Capital Contributions to the Partnership. (a) At or prior to the date
----------------------------------------
hereof, Orange Partners has made a Capital Contribution of property described in
Schedule II hereto. The Net Agreed Value of this Capital Contribution is
- -----------
$3,333,333. On the Equity Funding Date, NCP Syracuse and Syracuse Partners shall
make an aggregate cash capital Contribution of $30,000,000, of which the Net
Agreed Value shall be $30,000,000; provided, however, that the Partners agree
that if and to the extent that NCP Syracuse, Syracuse Partners, the partners of
Syracuse Partners, North Canadian Power Incorporated or North Canadian Oils
Limited pay any of the funds required to be paid by the Partnership in repayment
of Construction Loans pursuant to Section 5.19(a) of the Financing Agreement
directly to the Agent and not through the Partnership, such payment shall be
treated for all purposes as having been made to the Partnership as a cash
Capital Contribution on behalf of NCP Syracuse and Syracuse Partners in full or
partial satisfaction (as the case may be) of the obligations of NCP Syracuse and
Syracuse Partners to make cash Capital Contributions as set forth in this
Section 3.1. If the funds required under Section 5.19(a) of the Financing
Agreement are paid directly to the Agent and the amount so paid is less than
$30,000,000, the difference shall be deposited in an Excluded Account (as
defined in the Financing Agreement) and said in accordance with Section 6.9.
(b) No Partner shall be required or permitted to make Capital Contributions
otherwise than pursuant to Section 3.1(a) without the Consent of all Partners.
(c) No Partner shall have the right to withdraw or reduce its Capital
Contribution except in accordance with this Agreement. Notwithstanding the
foregoing, Syracuse Partners may transfer all or any portion of its obligation
to make the Capital Contribution required in Section 3.1(a) in connection with
any Transfer of all or any portion of its Interest pursuant to Section 7.1. No
interest shall accrue on any Capital Contribution. No Partner shall have the
right to demand or receive property, other than cash, in return for its Capital
Contribution or have priority over any other Partner, either as to the return of
Capital Contributions or as to Profits or Losses or distributions, except as
specifically provided in this Agreement.
3.2. Loans by partners. (a) No Partner shall be required to lend any money
-----------------
to the Partnership.
(b) If the Partnership's funds are insufficient to meet its costs,
expenses, obligations, liabilities and charges, or to make any expenditure
authorized by this Agreement, upon request
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<PAGE>
made by the Managing General Partner that of the Partners, any Limited Partner
or General Partner may (but shall not be required to) advance such funds to the
Partnership. Each Partner agreeing to make a Partner Loan shall have the right,
but not the obligation, to participate in the total Partner Loan according to
the ratio that its interest in the Partnership bears to the interests in the
Partnership held by all Partners participating in the Partner Loan; for these-
purposes, before the First Flip Point, Orange Partners' interest in the
Partnership shall be deemed to be 10% (1% in its capacity as Developer General
Partner and 9% in its capacity as a Limited Partner), NCP Syracuse's interest
shall be deemed to be 1% and Syracuse Partners' interest shall be deemed to be
89%. All amounts so advanced shall take the form of a loan, which shall bear
interest at a variable rate (not in excess of the maximum rate allowed by law)
equal to the rate applicable to the Partnership's Term Loans from time to time
plus 5% per annum and be on terms and conditions substantially the same as if
such loan had been made by an unrelated third party to the Partnership, except
that no distributions shall be made to the Partners pursuant to Section 6.2(a),
(b), (c), (d) or (e) until all Partner Loans have been repaid in full.
(c) The proceeds of a Partner Loan shall not be added to, or otherwise
affect, the Capital Account of the Partner making, or whose Affiliate is making,
such loan.
(d) Prior to requesting any Limited Partner or General Partner to advance
funds to the Partnership as a Partner Loan, the Managing General Partner shall,
first, obtain the maximum amount of such required funds which are available to
the Partnership under the terms of the Financing Agreement and, second, use
reasonable efforts to obtain such required funds from an institutional investor
on terms and conditions more favorable to the Partnership than a Partner Loan.
(e) If any Partner Loan is outstanding, the Managing General Partner shall
use its best efforts to refinance such loans with an institutional investor on
terms and conditions more favorable to the Partnership than such Partner Loans.
(f) Unless both General Partners Consent, all Partnership borrowings,
including Partner Loans, shall be on terms without recourse to any Partner or
Affiliate of any Partner.
ARTICLE IV
Management of the Partnership
-----------------------------
4.1. Management. (a) Except as otherwise provided in this Agreement, the
----------
Managing General Partner shall have, in accordance with the Act and the
provisions of this Agreement, exclusive management and control of the business
of the partnership and all decisions regarding the management and affairs of the
Partnership shall be made by the Managing General Partner. Except as otherwise
provided in this Agreement, the General Partners shall have all the rights and
powers of general partners as provided in the Act and as otherwise provided by
law, and any action taken by the Managing General Partner, or when required by
the terms hereof by both
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General Partners, on behalf of the Partnership shall constitute the act of and
serve to bind the Partnership. Except as otherwise expressly provided herein,
the Developer General Partner shall not bind the Partnership without the prior
Consent of the Managing General Partner.
(b) Each of the General Partners shall devote such time to the Partnership
business as each shall reasonably deem to be necessary to accomplish its
respective obligations hereunder to supervise the Partnership business and
affairs in an efficient manner, but nothing contained in this Agreement shall
preclude the employment of any agent or other third party to operate and manage
all or any portion of the property, business or operations of the Partnership,
subject to the control of the Managing General Partner or, when required by the
terms hereof, by both General Partners. Nothing in this Agreement shall entitle
any General Partner to receive reimbursement or otherwise charge the Partnership
for such employment costs to the extent such agent or other third party is
performing activities for which such General Partner is entitled to receive a
fee pursuant to Section 2.12 or 2.13.
(c) Both General Partners shall participate in the Partnership as their
respective sole and exclusive functions, except that NCP Syracuse may also serve
as the General Partner of Syracuse Partners if and for so long as the functions
of Syracuse Partners are limited to (i) its participation as a Limited Partner
and (ii) its participation as a passive investor in one or more other investment
activities none of which exposes the Interests of NCP Syracuse or Syracuse
Partners to claims of creditors. Neither the Partnership nor any Partner shall
have any right by virtue of this Agreement or the Partnership relationship
created hereby in or to any other ventures or activities engaged in by any
Affiliate of any Partner or to the income or proceeds derived therefrom, another
pursuit of such ventures or activities by any Partner's Affiliate shall not be
deemed wrongful or improper: No Partner nor any Affiliate of a Partner shall be
obligated to present any particular investment opportunity to the Partnership.
unless related or potentially related to any expansion of the Project (which
such expansion shall be deemed a Partnership opportunity) even if such
opportunity is of a character which, if presented to the Partnership, could be
taken by the Partnership, and each of them shall have the right to take for its
own account (individually or otherwise) or to recommend to others any such
particular investment opportunity.
(d) In furtherance of the purposes of the Partnership as set forth in this
Agreement, but subject to subsections (e), (f) and (g) of this Section 4.1 and
any other limitations on the power or authority of the Managing General Partner
set forth elsewhere in this Agreement, the Managing General Partner is hereby
granted the right, power arid authority to do on behalf of the Partnership all
things which, in its sole and reasonable judgment, are necessary, proper or
desirable to carry out its duties and responsibilities hereunder, including, but
not limited to, the following:
(i) to borrow money and, as security therefor, to mortgage, pledge or
otherwise encumber any and all assets of the Partnership, including the rights
of the Partnership under any agreements;
(ii) to cause to be paid all amounts due and payable by the Partnership to
any Person and to collect all amounts due to the Partnership;
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(iii) to employ such agents, employees, managers, accountants, attorneys,
consultants and other Persons, as shall be necessary or appropriate to carry
out the business and affairs of the Partnership;
(iv) to pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend or compromise upon such terms as it may determine and upon
such evidence as it deems sufficient, any obligation, suit, liability, cause
of action or claim, including taxes, either in favor of or against the
Partnership;
(v) to pay any and all reasonable fees and to make any and all reasonable
expenditures which it deems necessary or appropriate in connection with the
management of the affairs of the Partnership, and to enforce all rights of the
Partnership; provided, however, that the Managing General Partner shall not
use Partnership funds to pay fees or expenses which are required to be borne
by the Managing General Partner under Section 2.13(b);
(vi) to permit and record an assignment by a Limited Partner, and to admit
an assignee of a Limited Partner as a substitute Limited Partner, pursuant to
and subject to the terms hereof;
(vii) to prosecute, protect and defend, or cause to be protected and
defended, all patents, patent rights, trade names, trademarks and service
marks, and all applications with respect thereto, which may be held by the
Partnership, to take all reasonable and necessary actions to protect the
secrecy of and the proprietary rights with respect to any trade secrets, know-
how, secret processes or other proprietary information and to prosecute and
defend all rights of the Partnership in connection therewith;
(viii) to enter into, execute, acknowledge and deliver any and all
contracts, agreements or other instruments necessary or appropriate to carry
on the business of the Partnership as set forth herein;
(ix) to prepare and file any and all tax returns that may be required by
applicable law, and to cause to be paid any and all taxes, charges and
assessments that may be levied, assessed or imposed upon the Partnership or
any of its assets;
(x) to establish and maintain reasonable reserves for the operating
expenses of the Partnership (including repair and restoration expenses for the
Existing Plant), and for repairs, maintenance, capital improvements required
by changes in environmental laws or other Governmental Requirements and
capital replacements, all consistent with good business practice in the steam
production and electric power generation businesses;
(xi) to establish and maintain one or more accounts for the Partnership in
such financial institutions as the Managing General Partner may from time to
time designate;
(xii) to prepare internal audits of the Partnership establish and maintain
accounting records, and make periodic distributions to the Partners in
accordance with the provisions of this Agreement;
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(xiii) to engage :n any kind of activity and to execute, perform and carry
out contracts of any kind necessary to, or in connection with or convenient or
incidental to, the accomplishment of the purposes of the Partnership, so long
as such activities and contracts may be lawfully carried on or performed by a
partnership under applicable law;
(xiv) to execute and deliver on behalf of the Partnership any documents
required to be executed and delivered by the Partnership pursuant to the
closing of the financing relating to the development, construction, ownership,
operation, management, lease and sale of the Project, including, but not
limited to, the Financing Agreement and all documents and certificates
required or otherwise necessary or convenient to be executed by the
Partnership in connection with the transactions contemplated thereby;
(xv) to apply for, file, prosecute, obtain, appeal, and challenge any
permit, approval, authorization, filing or consent issued by any Governmental
Authority, to otherwise communicate with any Governmental Authority, to
prosecute, protect and defend any such permit, approval, authorization, filing
or consent (including entering into any settlement or consent thereof or
thereto);
(xvi) to apply for, obtain, pay premiums upon maintain and otherwise
manage and administer all policies of insurance for the Partnership;
(xvii) to manage the supply and consumption of fuel under the terms of any
gas sales, purchase, and transportation agreements which the Partnership may
be party to from time to time; and
(xviii) to engage in any kind of activity and execute, perform and carry
out contracts of any kind necessary to, or in connection with or convenient or
incidental to, the expansion of the Project to enable it to produce and sell
more than 80 megawatts of power, if prudent to do so.
With respect to employment of attorneys, consultants and other
professionals for the Partnership, management of Project construction and
operation, designation of negotiation with suppliers, and relations with
Governmental Authorities, the Managing General Partner will, as appropriate,
consult with the Developer General Partner, from time to time, for the purpose
of obtaining the advice and counsel of the Developer General Partner; provided,
however, that the failure of the Managing General Partner to do so shall not
limit the rights and powers conferred upon the Managing General Partner herein.
The Managing General Partner shall, after such items are available,
promptly (and in any event within twenty (20) days) send to the Developer
General Partner and each Limited Partner copies of (i) all reports with respect
to Project construction or operations which are prepared pursuant to the
Financing Agreement or any other Material Project Document, (ii) all reports
with respect to Project construction, operations or finances sent by the
Managing General Partner, the Partnership or Syracuse Partners to partners in
Syracuse Partners, (iii) all internal management reports of the Managing General
Partner or the Partnership (that is, all reports prepared by or for the Board of
Directors, chief executive officer or chief financial officer of the
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Managing General Partner), (iv) all memoranda and reports prepared for or sent
to the Managing General Partner or the Partnership by outside professionals
retained by or on behalf of the Partnership including, without limitation,
accountants, lawyers and consultants), (v) all notices received or sent by the
Managing General Partner or the Partnership pursuant to any Material Project
Document or any other material agreement to which the Partnership is a party or
which affects the Project, (vi) all written agreements or amendments entered
into by or on behalf of the Partnership after the Initial Funding Date and (vii)
all materials described on Exhibit I attached hereto. The Managing General
Partner shall promptly notify the Developer General Partner of any material
disputes or problems arising in connection with any Material Project Documents
or with respect to the Project. The Managing General Partner shall provide each
Partner with access at any time during normal business hours to all books,
records, files and correspondence of the Partnership or pertaining to the
Project and with access to the Project and all, real and personal property
comprising the Project. In addition, the Managing General Partner shall arrange
for the Accountants and any other Partnership accountants, attorneys and
consultants to be available to speak to, and to respond to reasonable inquiries
from, any Partner, and shall provide each Partner with access to NCP Employees
(to the extent such employees are involved in the management of the Project) and
any employees of the Partnership to discuss any matters relating to the
Partnership or the Project.
(e) With respect to all of its obligations, powers and responsibilities
under this Agreement, the Managing 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 and other security instruments and agreements as it deems
proper, all on such terms and conditions as it deems proper but subject to the
limitations on the powers of the Managing General Partner contained in
subsections (d), (f) and (g) of this Section 4.1 and elsewhere in this
Agreement.
(f) Notwithstanding the other provisions of this Agreement, the Managing
General Partner shall not, without (l) the Consent to the specific act by the
Developer General Partner, which Consent shall not be unreasonably withheld (it
being agreed that the Developer General Partner's Consent shall not be deemed
unreasonably withheld if the Developer General Partner believes in good faith
that granting such Consent might have a DGP Adverse Effect) or delayed and (2)
prior to the First Flip Point, the Consent to the specific act (if such act is
an act described in Section 4.1(f)(i)(A)-(C) or 4.1(f)(iv)-(ix)) by Syracuse
Partners, which Consent shall not be unreasonably withheld (it being agreed that
Syracuse Partners' Consent shall not be deemed unreasonably withheld if Syracuse
Partners believes in good faith that granting such Consent might have an SOP
Adverse Effect) or delayed, have the authority to:
(i) take any of the following actions:
(A) except as permitted under Section 4.1(f)(i)(E), replace,
terminate, amend, modify, supplement, or exercise any option to prepay
any indebtedness arising under, or materially extend or materially
waive any provision or requirement under, any of the Material Project
Documents if such action will have a DGP Adverse Effect or SOP Adverse
Effect, as the case may be; provided,
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however, that the Managing General Partner shall not take any of the
actions described in this subclass (A), whether or not it would have a
DGP Adverse Effect or SOP Adverse Effect, as the case may be, without
giving the Developer General Partner or SOP, as the case may be,
reasonable prior written notice of such action to enable the Developer
General Partner or SOP, as the case may be, to consult with the
Managing General Partner with respect thereto;
(B) cause or permit the Partnership to incur indebtedness
(including any refinancing) other than: (I) indebtedness for money
borrowed pursuant to the Financing Agreement as in effect on the
Initial Funding Date including indebtedness incurred prior to the Term
Loan Date as contemplated in the Project Budget; (II) indebtedness
resulting from money borrowed for working capital necessary in the
reasonable discretion of the Managing General Partner in connection
with the operation of the Project so long as the aggregate outstanding
principal amount of such indebtedness does not exceed $2,000,000
(except that such limitation shall not apply to loans, the proceeds of
which are applied to finance capital improvements to the Project which
are required as the result of changes in applicable environmental laws
or Governmental Requirements) at any time; and (III) indebtedness for
any obligations incurred in the ordinary course of the Partnership's
business subsequent to the Term Loan Date which is not indebtedness
for money borrowed
(C) fund any reserves for the Partnership other than such reserves
as (I) are required under the Financing Agreement, (II) the Managing
General Partner determines to be reasonable, provided that the total
reserves funded pursuant to this clause shall not exceed Two Million
Dollars ($2,000,000) at any time (except that such limitation shall
not apply to reserves for capital improvements required as the result
of changes to applicable environmental laws or Governmental
Requirements if, after using reasonable efforts, the Managing General
Partner determines in good faith that the Partnership will be unable
to obtain financing for such improvements), (III) are earmarked for
boiler repair and/or replacement so long as the aggregate of the
amount expended (other than out of existing reserves established
specifically therefor) and/or reserved for such purposes during any
twelve month period after the Term Loan Date does not exceed the
amount provided therefor for that twelve month period on Exhibit C,
(IV) are permitted under Section 8.2 if the Partnership is then in the
process of liquidation, or (v) the General Partners may both from time
to time reasonably determine to be appropriate; provided, however,
that the Managing General Partner shall not fund any Additional
Reserves, other than reserves which are required under the Financing
Agreement, if and to the extent that after funding such reserves the
Partnership will not have sufficient Available Cash to make
distributions to each Partner during that fiscal year which at least
equal the product of (x) the maximum Federal income tax rate
applicable to individuals that year multiplied by (y) the amount of
Partnership taxable income allocable to that Partner that year;
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(D) exercise any right of the Partnership under the Financing
Agreement to reduce the amount of any type of loan commitment or loan
availability; or
(E) prior to the Term Loan Date, cause or permit the Partnership to
incur any obligation which is not provided for in the Project Budget
and which entails the payment of money in excess of $50,000 as to any
one item or $800,000 in the aggregate;
provided, however, that, notwithstanding the foregoing provisions, (1) if
within a reasonable time after the giving of the notice required under
Section 4.1(i) the Managing General Partner has not received the Consent of
the Developer General Partner to any proposed action which is required to
comply with the terms of, or to cure a material default under, any of the
Material Project Documents, or to comply with any Governmental Requirements
regarding the same (and any such action shall be conclusively presumed to
have been so required if the Managing General Partner shall have received
an opinion to such effect from reputable independent counsel), then the
Managing General Partner may take such proposed action upon notice to the
Developer General Partner that it is acting without the Consent, and over
the objections, if any, of the Developer General Partner in that particular
instance, but any similar future action will be subject to the Consent
requirement of this Section 4.1(f) (i) and (2) if within a reasonable time
after the giving of the notice required under Section 4.1(i) the Managing
General Partner has not received the Consent of Syracuse Partners to any
proposed action which is required to cure a material default under any of
the Material Project Documents, or to comply with any Governmental
Requirements (and any such. action shall be conclusively presumed to have
been so required if the Managing General Partner shall have received an
opinion to such effect from reputable independent counsel), then the
Managing General Partner may take such proposed action upon notice to
Syracuse Partners that it is acting without the Consent, and over the
objections, if any, of Syracuse Partners in that particular instance
(provided, that Syracuse Partners shall be. entitled to reasonably withhold
its Consent to the cure of a material default under any of the Material
Project Documents), but any similar future action will be subject to the
Consent requirement of this Section 4.1(f) (i);
(ii) Transfer the Project or any interest therein except in accordance with
the terms of this Agreement;
(iii) cause or permit the dissolution of the Partnership;
(iv) (A) cause or permit the sale of all or substantially all of the
Partnership's assets (unless to be replaced with assets to perform
substantially similar functions) or (B) prior to the First Flip Point,
Transfer any of the Partnership's material assets, other than (1) Transfers in
the ordinary course of business, (2) Transfers which, when taken together with
all other such Transfers in the previous 12 calendar months, aggregate less
than $250,000 and have no material adverse effect on the performance of the
Project, (3) Transfers of assets which, in the Managing General Partner's
reasonable judgment, are obsolete to the business of the
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Partnership, (4) Transfers of assets that are replaced by comparable assets of
materially equivalent value and utility that (X) have a value of less than
$1,000,000, (Y) are required, in the Managing General Partner's reasonable
judgment, to be replaced to comply with any Governmental Requirements, or (Z)
are, in the Managing General Partner's judgment, reasonably necessary
replacements or (5) any Transfer of the Project Pipeline (provided, that such
Transfer could not reasonably be expected to result in any DGP Adverse Effect
or any SOP Adverse Effect); or
(v) prior to the First Flip Point, make capital expenditures aggregating in
excess of $400,000 in any 12 calendar months or enter into any contracts
involving greater than $100,000 of expenditures per contract per year, in each
case that are not reflected in the pro forma financial statements delivered to
each of the Partners on the date hereof, other than (A) expenditures or
contract reasonably necessary to comply with Governmental Requirements, the
Financing Documents or the Project Documents (as defined in the Financing
Agreement), (B) expenditures reasonably required in the context of emergencies
or (C) expenditures reasonably required to expand the electrical generating
capacity of the Project by means of modifications or enhancements to existing
equipment in connection with obtaining an additional power sales agreement
providing for the sale of such capacity and energy (the "Capacity Expansion");
provided, however. that with respect to the Capacity Expansion, (X) the
Developer General Partner and Syracuse Partners each receives a report from
Brown & Root USA, Inc., or from such other engineering firm as shall be
reasonably selected by Syracuse Partners, which report shall be in form and
scope reasonably acceptable to the Developer General Partner and Syracuse
Partners and shall reach the conclusion that the Capacity Expansion is based
on good engineering practices and could not reasonably be expected to result
in a DGP Adverse Effect or an SOP Adverse Effect and (Y) the Managing General
Partner shall have caused to be provided to each of the Developer General
Partner and Syracuse Partners such other confirmation thereof as either of
them shall have reasonably requested as to the absence of a DGP Adverse Effect
or SOP Adverse Effect, respectively; and provided, further, that if either the
Developer General Partner or Syracuse Partners gives or is deemed to have
given its consent to the Capacity Expansion pursuant to this Agreement but
does not elect to participate in the financing of the Capacity Expansion, it
shall cooperate reasonably and in good faith with the other Partners to effect
such financing (including the admission of new Limited Partners, provided that
the relative voting and consent rights of each of the Developer General
Partner and Syracuse Partners hereunder in relation to the voting and consent
rights of the other Partners are not adversely affected) so long as such
financing could not reasonably be expected to result in a DGP Adverse Effect
or an SOP Adverse Effect;
(vi) Prior to the first Flip Point, make any elective filing (other than
routine filings in the ordinary course of business or filings mandated by
Governmental Requirements) with the Federal Energy Regulatory Commission, or
any successor thereto, with respect to the Project;
(vii) Prior to the First Flip Point, make any election under any of the
Material Project Documents. or take any action, to sell capacity or energy
produced by the Project in excess of 80MW (except in connection with the
Capacity Expansion);
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<PAGE>
(viii) Prior to the First Flip Point, elect not to defer payments to
Noranda, Inc. pursuant to Section 3.7 of the Gas Sales Contract; or
(ix) Prior to the First Flip Point. take any action which could
reasonably be expected to materially adversely affect the continued validity
of the Canadian export licenses required for the export from Canada of natural
gas to be supplied to the Project pursuant to the Fuel Supply Agreements (as
defined in the Financing Agreement).
(g) Notwithstanding the other provisions of this Agreement, no General
Partner shall, without the Consent to the specific act by the other General
Partner and a Majority in Interest of the Limited Partners (and in the case of
clauses (i), (ii). (iv), (v), (vi), (vii), (viii), (ix) and (x) below prior to
the First Flip Point, Syracuse Partners), have the authority to:
(i) perform any act in contravention of this Agreement;
(ii) perform any act which would make it impossible to carry on the
ordinary business of the Partnership;
(iii) confess a judgment against the Partnership or in the case of the
Managing General Partner, confess a judgment against itself if it would be
entitled to indemnification with respect thereto pursuant to Section 4.4
hereof or otherwise by operation of law, unless prior to or simultaneously
with confessing any such judgment the Managing General Partner waives in
writing any such right to indemnification;
(iv) possess Partnership property or assign its rights in specific
Partnership property, for other than a Partnership purpose;
(v) admit a Person as an additional or substitute General Partner,
except in accordance with the terms of this Agreement;
(vi) change the nature of the Partnership's business;
(vii) remove any General Partner, except in accordance with the terms of
this Agreement;
(viii) admit a Person as an additional or substitute Limited Partner,
except in accordance with the terms of this Agreement;
(ix) prior to the First Flip Point, take any action with respect to the
Partnership described in clauses (a) through (f) of the definition of
"Bankruptcy" herein (or consent thereto, as the case may be); or
(x) consolidate the Partnership with or merge the Partnership into any
other Person.
(h) On and after the Second Flip Point (or the First Flip Point if it
occurs after the Pro Forma End Date), all claims, disputes and other matters in
question (collectively, "disputes") between the General Partners arising out of,
or relating to, a Major Decision, shall be submitted
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to a meeting in person (or by telephone) of the President or Chief Executive
Officer of each General Partner (or in the case of the Developer General
Partner, of its general partner) or its designee who shall be an employee or
officer of such General Partner or its Affiliate. Such a meeting shall be held
within 30 days after request in a notice given by either General Partner to the
other. In the event that any such dispute is not resolved at the meeting
referred to in the preceding sentence, at the request of either party the
General Partners will agree to promptly meet with a mediator acceptable to both
General Partners for mediation with respect to such dispute. If such
disagreement is not resolved within 30 days after the meeting referred to in the
first sentence of this paragraph (i) or in any event 90 days following the
notice for such meeting (whether or not a mediator has been engaged), either
party may submit such dispute to binding arbitration, in which event such
dispute shall be settled by arbitration and such arbitration shall be conducted
on an expedited basis consistent with the commercial arbitration rules of the
American Arbitration Association (the "Rules"). Such arbitration shall be
effected by a panel of three arbitrators selected as hereinafter provided and
shall be conducted in New York, New York in accordance with the Rules existing
at the date thereof. The dispute shall be submitted to three arbitrators who are
listed on the commercial panel of the American Arbitration Association, one
arbitrator being selected by the Managing General Partner, one arbitrator being
selected by the Developer General Partner, and the third being selected by the
two arbitrators so selected. In the event that either General Partner, within 10
days after any notification of any demand for arbitration hereunder, shall not
have selected its arbitrator and given notice thereof to the other, such
arbitrator shall be selected by the American Arbitrator. Association. Judgment
may be entered on any decision rendered by the arbitrators in any Federal or
state court having jurisdiction. In the event that the arbitrators determine by
a majority vote that the claim or defense of either party in the arbitration was
meritless (that is, without justifiable merit), they .may, by majority vote,
require that the party at fault pay or reimburse the other party for any or all
of the following: (a) all fees and expenses of the arbitrators. (b) attorneys'
and experts' fees and expenses, and (c) any other reasonable out-of-pocket
expenses incurred by such other party in connection with the arbitration
proceeding.
(i) The Managing General Partner shall give the Developer General Partner
and Syracuse Partners as much advance notice as is practicable under the
circumstances before taking any action or making any determination involving a
Major Decision (except that the Managing General Partner shall give the
Developer General Partner and Syracuse Partners at least 30 days prior written
notice of any action proposed to be taken pursuant to Section 4.1(f), or such
lesser notice, the period of which is specified at the time of such notice, as
is reasonably determined by the Managing General Partner to be the maximum
available under the circumstances without significant potential risk to the
Partnership, it being further agreed that if the Developer General Partner or
Syracuse Partners (in those cases where the Consent of Syracuse Partners is
required pursuant to the terms hereof), as the case may be, does not advise the
Managing General Partner of its Consent to or disapproval of the proposed action
within such 30 day or specified lesser notice period, then the Developer General
Partner or Syracuse Partners, as the case may be, shall be deemed to have given
its Consent to the action set forth in the notice, but not to any similar act in
the future that is not specified in the notice); provided, however, that if the
Developer General Partner or Syracuse Partners (in those cases where the Consent
of Syracuse Partners is required pursuant to the terms hereof), as the case may
be, fails
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to respond to any notice within 30 days or such specified lesser notice period,
the Developer General Partner or Syracuse Partners, as the case may be, shall be
deemed to have given its Consent to the Major Decision proposed to be taken by
the Managing General Partner.
4.2. Transactions with Related Parties; Fiduciary Duties; Etc. (a) With
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respect to Partnership affairs, the General Partners shall always act as
fiduciaries for the benefit of the Partnership. No agreement between the
Partnership and any Partner or Related Party of a Partner shall be binding upon
the Partnership, and no General Partner shall have the authority to enter into
any such agreement on behalf of the Partnership, unless such Agreement is
Consented to by both General Partners (and, in the case of agreements between
the Partnership and the Managing General Partner or any Related Party thereof
prior to the First Flip Point, Consented to by Syracuse Partners). The General
Partners and Syracuse Partners hereby Consent to the Gas Sales Contract. Each
Partner acknowledges that Noranda Inc.. North Canadian Power North Incorporated,
Canadian Oils Limited, North Canadian Marketing Corporation and Canadian Hunter
Exploration Ltd. are each a Related Party of NCP Syracuse and Syracuse Partners.
(b) Notwithstanding anything in this Agreement to the contrary and subject
to the other provisions of this paragraph (b) and paragraphs (c) and (d) of this
Section 4.2, The Managing General Partner shall administer on behalf of the
Partnership any agreement approved by the Developer General Partner (and, when
required, Syracuse Partners) to which the Partnership and any Related Party of
the Managing General Partner are parties (an "Affiliate Contract"). The Managing
General Partner covenants and agrees that in dealing with its related Party with
respect to any matters concerning an Affiliate Contract, the Managing General
Partner shall conduct itself as if it were dealing on an arm's-length basis with
an unrelated third party and shall comply with the provisions of paragraphs (c)
and (d) of this Section 4.2.
(c) In the event of a dispute or a breach by any Party to an Affiliate
Contract or a force majeure event under an Affiliate Contract (other than an
event of Force Majeure under the Gas Sales Contract which is discussed in
paragraph (d) below), the Managing General Partner shall act only in accordance
with the following procedures, except as such procedures may be modified by
agreement of the General Partners in any applicable situation:
(i) The Managing General Partner shall provide the Developer General
Partner and, prior to the First Flip Point, Syracuse Partners with telephonic
or personal notice immediately, and in any event within two business days of
becoming aware of the dispute, breach or force majeure event (collectively,
the "Problem"), and written notice (the "AC Notice") detailing the Problem
within five business days of becoming aware of the Problem.
(ii) The Managing General Partner shall act diligently to resolve the
Problem within a period of time beginning on the date that the Managing
General Partner becomes aware of the Problem and ending on the day that is the
earlier to occur of (A) 30 days after the date of the AC Notice or (B) 10 days
prior to the date on which the Partnership is required to take any action or
exercise any option or right under the terms of the Affiliate Contract or
pursuant to applicable law in order to preserve such right or option, or such
later day as may be agreed to by the Developer General Partner and, prior to
the First Flip Point, Syracuse Partners.
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(iii) The Managing General Partner shall keep the Developer General
Partner and, prior to the First Flip Point, Syracuse Partners advised of the
status of the Problem and its efforts to resolve the Problem including all
meetings and the various resolutions proposed to resolve the Problem. If the
Agent participates in any of the meetings with the Related Party during the
period described in (ii) above, the Developer General Partner and, prior to
the First Flip Point, Syracuse Partners shall have the same right of
participation.
(iv) If the Managing General Partner has worked out a proposed resolution
(the "Proposed Resolution") to the Problem, the Managing General Partner shall
discuss such Proposed Resolution with the Developer General Partner, the Agent
and, prior to the First Flip Point, Syracuse Partners. The Managing General
Partner shall be required to secure the approval of the Developer General
Partner and, prior to the First Flip Point, Syracuse Partners to the Proposed
Resolution before implementing the Proposed Resolution, which approval shall
not be unreasonably withheld. If the Agent has approved the Proposed
Resolution (as required under the Financing Agreement or any successor or
subsequent such agreement defining the responsibilities of the Agent) and the
Proposed Resolution does not have a DGP Adverse Effect or SOP Adverse Effect,
as the case may be, the Developer General Partner and Syracuse Partners (to
the extent Syracuse Partners' approval is required) shall be deemed to have
approved the Proposed Resolution. If the Proposed Resolution does have a DGP
Adverse Effect or SOP Adverse Effect, as the case may be, the Developer
General Partner and, prior to the First Flip Point, Syracuse Partners shall be
entitled to conduct further discussions with the Agent of modification of the
Proposed Resolution, it being agreed that final approval of the Proposed
Resolution (as it may be modified) by the Agent shall be binding on the
Managing General Partner, the Developer General Partner and Syracuse Partners.
(v) If the Managing General Partner is not successful in working out a
Proposed Resolution within the period provided in clause (ii) above, the
Developer General Partner, the Agent and, prior to the First Flip Point,
Syracuse Partners (or the Developer General Partner .and, prior to the First
Flip Point, Syracuse Partners alone if there no longer is an Agent) shall have
the right in good faith jointly to work out the Problem and/or jointly to
enforce the rights and remedies available to the Partnership with respect to
the Affiliate Contract, including but not limited to, the right to retain
attorneys, at the Partnership's expense, to advise the Developer General
Partner and, prior to the First Flip Point, Syracuse Partners as to the
Partnership's rights under such contract, to commence and control the
prosecution of any lawsuit, arbitration or other action or proceeding in the
name and on behalf of the Partnership, to control the defense of any lawsuit
against the Partnership with respect to claims arising under such Affiliate
Contract, and to waive, extend, modify, amend, terminate or exercise any right
or other options of the Partnership which are the subject of such suit or
claim; provided, however, that the Developer General Partner and, prior to the
First Flip Point, Syracuse Partners shall act ~n a manner consistent with
their fiduciary duty to the other Partners notwithstanding the fact that any
particular course of action may have a DGP Adverse Effect or SOP Adverse
Effect, as the case may be; and provided, further, that the Developer General
Partner and, prior to the First Flip Point, Syracuse Partners shall keep the
Managing General Partner advised as to the progress of any actions taken by
the
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Developer General Partner and, prior to the First Flip Point, Syracuse
Partners and of the terms of any settlement to enable the Managing General
Partner to consult with the Developer General Partner and, prior to the First
Flip Point, Syracuse Partners regarding the actions and/or proposed
settlement.
(d) In the event of an event of Force Majeure under the Gas Sales Contract,
the Managing General Partner shall act only in accordance with the following
procedures, except as such procedures may be modified by agreement of the
General Partners and, prior to the First Flip Point, Syracuse Partner in any
applicable situation:
(i) The Managing General Partner shall provide the Developer General
Partner and, prior to the First Flip Point, Syracuse Partners with telephonic
or personal notice detailing the force majeure event (the "Event") immediately
and in any event within two business days of becoming aware of the Event and
written notice within five business days of becoming aware of the Event.
(ii) The Managing General Partner shall use its best efforts to devise a
course of action to deal with the Event. The Managing General Partner shall
set up a meeting with the Developer General Partner, the Agent and, prior to
the First Flip Point, Syracuse Partners to determine how to proceed. The
Managing General Partner and the Developer General Partner and, prior to the
First Flip Point, Syracuse Partners shall cooperate with one another and with
the Agent and shall follow the course of action approved by the Agent. If
there is no Agent, the Developer General Partner, the Managing General Partner
and, prior to the First Flip Point, Syracuse Partners shall endeavor in good
faith to agree upon a course of action. If they cannot agree within 10 days
after the giving of the written notice provided for in clause (i) above, they
shall submit the question to arbitration using the procedures set forth in
Section 4.1(h) (provided, that if such arbitration takes place prior to the
First Flip Point, then such arbitration shall be conducted before a single
arbitrator who shall determine, following an arbitration conducted in
accordance with the rules of the American Arbitration Association, how the
Partnership is to proceed), it being agreed that the arbitrators may take into
account the effect of any DGP Adverse Effect or SOP Adverse Effect, as the
case may be, and any other adverse effects of any proposed course of action in
determining how the Partnership is to proceed.
4.3. Right of Public to Rely on Authority of the Managing General Partner.
--------------------------------------------------------------------
No Person shall be required to determine the authority of the Managing General
Partner to undertake any act or execute any contract on behalf of the
Partnership, or to see to the application or distribution of revenues or
proceeds paid to the Managing General Partner as a representative of the
Partnership.
4.4. Liability of the General Partners; Indemnification of Partners. (a)
--------------------------------------------------------------
No General Partner or its Affiliates shall be liable to the Partnership or to
any Partner for any loss suffered by the Partnership or any Partner which arises
out of any action or inaction of any General Partner or its Affiliates if such
General Partner or its Affiliates, in good faith, determined that such course of
conduct was in the best interests of the partnership (and, in the case of any
affirmative action taken on behalf of the Partnership. the General Partner
reasonably believed such action to
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<PAGE>
be within the scope of the authority granted to it by this Agreement) and such
course of conduct did not constitute gross negligence, willful misconduct or
breach of fiduciary duty of the General Partner or its Affiliates or a material
breach of this Agreement by such General Partner; provided, however, that no
General partner shall be liable to any other Partner for any matter for `which
it has received the Consent of such other Partner. No General Partner shall be
liable to any Limited Partner or any beneficial owner of any Limited Partner for
any uninsured liability, loss or expense to the Partnership, including without
limitation reasonable attorneys' fees, litigation costs, settlement amounts and
judgments, attributable to the negligence or willful misconduct of the
contractor under the Construction Contract.
(b) The General Partners shall be indemnified by the Partnership against
any liability, loss or expense, including without limitation reasonable
attorney's fees, litigation costs, settlement amounts and judgments, incurred by
any of them for any act or omission to act performed or omitted in good faith
and reasonably believed by such General Partner to be within the scope of the
authority granted to it by this Agreement and in the best interests of the
Partnership unless it constituted gross negligence, willful misconduct or (in
the case of the Managing General Partner), breach of fiduciary duty of such
Partner or a material breach of this Agreement by the Managing General Partner.
Any indemnity under this Section 4.4(b) shall be paid from, and only to the
extent of, the assets of the Partnership, and no Partner shall have any personal
liability therefor. Notwithstanding the foregoing, however, in any situation
where an indefinable claim has been asserted against more than one Partner, all
such Partners shall use the services of the same firm of attorneys (which firm
shall be selected by the Managing General Partner, subject to the reasonable
approval of the other Partners against whom-such claim shall have been asserted)
in the defense against such claim, except to the extent of a conflict of
interest between such Partners on any issue related to the defense against such
claim.
(c)(i) Each partner shall indemnify the other Partners (including any other
General Partners) on an after-tax basis for any reduction in the other Partners'
benefits participation in the Partnership which is caused directly or indirectly
by the indemnifying Partner's gross negligence, willful misconduct or breach of
fiduciary duty or material breach of the Partnership Agreement; provided,
however, that no Partner shall be liable to any other Partner for any matter
which has received the Consent of such other Partner or for any loss caused by
such other Partner's own gross negligence or misconduct.
(ii) If the Indemnifying Partner and the Partners entitled to
indemnification under Section 4.4(c) (the "Indemnified Partners") agree to
settle the indemnity by means of a Transfer of a portion of the Indemnifying
Partner's (or a related General Partner's or Limited Partner's) Interest, the
transferring Partner shall further indemnify the Indemnified Partners from any
liabilities which may be associated with the transferred Interest which arose
prior to the date of the Transfer and were not disclosed as of the date of the
Transfer.
(d) Syracuse Partners shall be jointly and severally liable with NCP
Syracuse for any liability of NCP Syracuse to any other Partner pursuant to this
Section 4.4; provided, however, that the liability of Syracuse Partners for
actions of NCP Syracuse under this Section 4.4 shall be limited to such portion,
if any, of its Interest (including but not limited to its interest in
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<PAGE>
Partnership distributions) as is equal to the excess, if any, of (i) the greater
of (A) the aggregate percentage of distributions in the Partnership beneficially
held, directly or indirectly, by NCP Syracuse and its Affiliates (other than
Syracuse Partners) or (B) the amount of the Keep Requirement over (ii) the
portion of the amount of the Keep Requirement inuring to NCP Syracuse either
directly as Managing General Partner or through its direct interest in Syracuse
Partners.
4.5. Limitations on Limited Partners. No limited Partner shall, in its
-------------------------------
capacity as a Limited Partner: (a) be permitted to take part in the management
or control of the business or affairs of the Partnership; (b) have any voice in
the management or operation of any Partnership property; (c) have the authority
or power in its capacity as a Limited Partner to act as agent for or on behalf
of the Partnership or any other Partner, to do any act which would be binding on
the Partnership or any other Partner, or to incur any expenditures on behalf of
or with respect to the Partnership; or (d) hold itself out as having any status
other than that of a Limited Partner or as having rights, powers or privileges
other than those provided by law or this Agreement. The exercise by any Limited
Partner of any rights granted pursuant to any Direction of this Agreement shall
not be deemed to constitute management or control of the Partnership business or
otherwise violate the immediately foregoing sentence. Any Limited Partner who
acts in contravention of this Agreement and thereby causes itself to be deemed a
general partner for liability purposes shall under no circumstances be construed
as receiving a grant of power to act or authority to act in such capacity under
this or any other provision of this Agreement.
4.6. Rights of Partners. In addition to those rights provided by this
------------------
Agreement, the Partners have those rights provided to them by the Act (except as
otherwise provided herein) and all Partners shall have the right to:
(i) Have the Partnership books kept at the principal place of business of
the Managing General Partner at 1100 Town and Country Road, Suite 800, Orange,
California 92668 or, if the Managing General Partner so elects, at the
Partnership's principal place of business, and at all reasonable times to
inspect and copy any of them; and
(ii) Have on demand true and full information of all matters affecting
the Partnership, and a formal account of the Partnership's affairs whenever
circumstances render it just and reasonable.
4.7. Liability of Limited Partners. Except to the extent otherwise
-----------------------------
provided in Section 4.4 or Section 6.6, so long as it complies with the
provisions of Section 4.5, the liability of each Limited Partner for the losses,
debts and obligations of the Partnership shall be limited to such Limited
Partner's Capital Contribution and its share of any undistributed distributions;
provided, however, that under applicable partnership law, a Limited Partner may
be liable to the Partnership to the extent of previous distributions made to it
in the event that the Partnership does not have sufficient assets to discharge
its liabilities.
4.8. Limitation of Liability. Notwithstanding any other provision of this
-----------------------
Agreement or the Act, no General Partner and no Affiliate of any General
Partner, shall be liable to any Partner (including any General Partner) or the
Partnership for incidental, special or consequential
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<PAGE>
damages of any kind, whether a claim is based upon this Agreement, contract,
tort (including negligence), strict liability or other theory of law.
ARTICLE V
Representations, Warranties and Covenants of the Partners
---------------------------------------------------------
5.1. General Representations and Warranties. Each of the Partners
--------------------------------------
represents and warrants as of the date hereof, as follows:
(a) That it is a duly formed and validly existing corporation or limited
partnerships as the case may be, under the laws of the state of its
incorporation or formation, and that it is or will be duly qualified to operate
as a foreign corporation or limited partnership, as the case may be, in all
states requiring such qualification in order to own its assets and properties
and to carry on its business in the jurisdictions where it owns or leases or
will own or lease such assets or properties or carries on or will carry on such
business, except where the failure so to qualify would not have a material
adverse effect on the results of operations or financial condition of the
Partnership.
(b) The execution, delivery and performance by it of this Agreement (i)
have been duly authorized by all necessary corporate or partnership action, as
the case may be, (ii) do not contravene any material provision of any material
indenture, agreement or other instrument to which it is a party, or by which it
or any of its properties is bound, and (iii) do not and will not conflict with,
result in a breach of or constitute (with notice or lapse of time or both), a
default under any such indenture, agreement or other instrument.
(c) This Agreement has been duly authorized, executed and delivered by it
and constitutes the legal, valid and binding obligation of it, except insofar as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally or by moratorium laws
from time to time in effect or general equitable principles.
(d) The execution, delivery and performance by it of this Agreement do not
violate any provision of any Governmental Requirement or award presently in
effect having applicability to the Partnership or to it, except those the
violation of which would not have a material adverse effect on the Partnership
or on it.
(e) There are no actions, suits or proceedings pending or, to its
knowledge, threatened against it in any court or by or before any Governmental
Authority, or any arbitrator, in which there is a reasonable possibility of an
adverse decision which could materially and adversely affect its ability to
perform its obligations under this Agreement.
5.2. Covenants of Partners. Each of the Partners covenants and agrees with
---------------------
the Partnership and the other Partners for the term of this Agreement, as
follows:
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<PAGE>
(a) It shall forward to the General Partners a copy of any notice received
by it of any default under any agreement or instrument to which the Partnership
is a party or by which it is bound.
(b) It will not knowingly take any action that would cause the Partnership
to be treated for Federal income tax purposes other than as a partnership as
defined in Code section 7701(a)(2) as in effect on the date hereof.
(c) It has not taken and will not take any action that may adversely affect
the status of the Project as a qualifying cogeneration facility under PURPA, or
which may cause the Partnership or any Partner to be a "public utility holding
company" within the meaning of PUHCA.
5.3. Representations and Warranties of the Developer General Partner. The
---------------------------------------------------------------
Developer General Partner represents and warrants as of the date hereof, as
follows:
(a) The Developer General Partner (i) has all requisite power and authority
to own or hold under lease the property which it owns or holds under lease and
to transact the business it has transacted and proposes to transact and (ii) had
at the time of execution or issuance all requisite power and authority to enter
into and perform all the agreements listed in Exhibit F to which the Developer
---------
General Partner is a party and to obtain and comply with all of the permits
listed in Exhibit F which were issued to the Developer General Partner or the
---------
Partnership and to execute on behalf of the Partnership, in its capacity as a
general partner of the Partnership, all of the agreements listed in Exhibit F
---------
which were executed on behalf of the Partnership prior to the date on which the
First Amended and Restated Agreement of Limited Partnership dated as of April 5,
1991, was executed and delivered (the "First Restatement Date").
(b) Gas Orange Development, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
all requisite power and authority to own or hold under lease the property that
it purports to own or hold under lease, respectively, to transact the business
that it has transacted and proposes to transact and to execute on behalf of the
Developer General Partner all of the agreements listed in Exhibit F to which the
---------
Developer General Partner is a party and to execute on behalf of the Developer
General Partner, in its capacity as a general partner of the Partnership, all of
the agreements listed in Exhibit F which were executed by the Developer General
---------
Partner on or prior to the First Restatement Date on behalf of the Partnership.
(c) True and complete copies of every material agreement that existed as of
the First Restatement Date and which were required to be obtained or entered
into by the Partnership in order to close under the Financing Agreement and to
conduct its business that were known as of such date to the Developer Entities
have been provided to North Canadian Power Incorporated, directly or through its
consultant, PDC Consulting Partners. To the best of the knowledge of the
Developer General Partner, subject to prospective or pending proceedings or
applications disclosed in Exhibit M to the Financing Agreement, each of the
---------
Operative Documents to which any of the Developer Entities was a party as of
such date was in full force and effect as of such date, and no default existed
thereunder on the part of any party thereto. Except for the agreements disclosed
on Schedule III or Exhibit F and any agreements to which NCP Syracuse is
---------
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<PAGE>
a signatory (for itself or on behalf of the Partnership), no other material
agreements entered into by any of the Developer Entities on or prior to the
First Restatement Date will be binding upon or subject the Partnership to any
obligations after the Initial Funding Date or grant any Person an interest in
the Partnership.
(d) Except as disclosed on Exhibit G, there are no material actions, suits,
---------
investigations or proceedings pending or, to the knowledge of the Developer
Entities, threatened against or affecting any of the Developer Entities or any
property of the Partnership in any court or before any arbitrator of any kind or
before or by any Governmental Authority; and none of the Developer Entities is
in default with respect to any order of any court, arbitrator or Governmental
Authority. None of the Developer Entities is in violation of any statute or the
rule or regulation of any Governmental Authority affecting the Project, the
violation of which might materially and adversely affect the business.
operations or properties of the Partnership.
(e) As of the First Restatement Date, the Partnership was not liable for
any material debt or subject to any material claim of any sort other than debts
and claims that are listed on Exhibit H which have been or are hereby expressly
---------
assumed by the Partnership) or that exist or will arise under the agreements
listed on Exhibit F. The aggregate value of non-material debts and/or claims was
---------
not greater than $100,000.
(f) To the best of the knowledge of the Developer Entities, as of the First
Restatement Date they provided to North Canadian Power Incorporated, either
directly or through its consultant, PDC Consulting Partners, all material
information relating to the Project and in their possession which was requested
by an officer of North Canadian Power Incorporated or by PDC Consulting
Partners.
5.4. Covenant of the Developer General Partner. During the term of this
-----------------------------------------
Agreement, the Developer General Partner shall cooperate, as requested by NCP
Syracuse, in assisting the Partnership in procuring whatever permits need be
obtained after the Initial Funding Date in order to own, construct or operate
the Project and in securing the execution of any agreements which need to be
entered into by the Partnership after the Initial Funding Date in connection
with the Partnership's ownership, construction, operation or maintenance of the
Project.
5.5. Representations. Warranties and Covenants of the Managing General
-----------------------------------------------------------------
Partner. The Managing General Partner hereby represents and warrants as of the
- -------
date hereof, and covenants and agrees with the Partnership and the other
Partners for the term of this Agreement, as follows:
(a) NCP Syracuse is, and during the term of this Agreement shall continue
to be, (i) a wholly owned subsidiary of North Canadian Power Incorporated, a
California corporation, and (ii) together with Syracuse Investments, the sole
general partners of Syracuse Partners.
(b) NCP Syracuse currently owns, and during the term of this Agreement
shall continue at all times to own, directly and indirectly through its
ownership of an interest in Syracuse Partners, an interest in the distributions
of Available Cash of the Partnership own or would entitle it to receive,
directly or indirectly, a percentage of a hypothetical distribution of one
dollar of Available Cash made at that time (assuming that the aggregate prior
distributions
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<PAGE>
during the year in question are at least $1.00 less than the Tranche 1 Threshold
for such year) that is (x) not less than 9.9 percent or to the First Flip Point,
or (y), except as permitted by clause (z) below, not less than 5.9 percent after
the First Flip Point and so long as Orange Partners' exonerate Post-Flip
Interest is 50 percent or (z) not less than 3.4 percent after the Second Flip
Point (or the First Flip Point, if it occurs after the Pro Forma End Date) and
so long as Orange Partners' aggregate Post-Flip Interest is greater than 50
percent (the "Keep Requirement").
(c) NCP Syracuse was not aware as of the First Restatement Date of any
material information relating to the Project which was requested by North
Canadian Power Incorporated, either directly or through its consultant, PDC
Consulting Partners, and was not provided by the Developer Entities.
ARTICLE VI
Capital Accounts, Distributions and Allocations
-----------------------------------------------
6.1. Establishment of Capital Accounts. (a) A separate Capital Account
---------------------------------
shall be maintained for each Partner. The Capital Account of each Partner shall
be (x) increased by the amount of money contributed by that Partner (or treated
as contributed pursuant to Section 3.1(a)) to the Partnership and the Net Agreed
Value of any Contributed Property contributed to the Partnership by such Partner
plus all Profit and Gain on Disposition adjusted in accordance with Section
6.1(b) and allocated to the Partner in the same manner as provided in Section
6.3 (but without regard to Section 6.3(d)), 6.4 or 6.5 and all contributions
deemed made pursuant to this Agreement, and (y) decreased by the sum of (i) all
Loss and Loss on Disposition computed in accordance with Section 6.1(b) and
allocated to the Partner in the same. manner as provided in Section 6.3 (but
without regard to Section 6.3(d)), 6.4 or 6.5 and (ii) all cash and the Net
Agreed Value of any property distributed by the Partnership to such Partner
pursuant to Sections 6.2 and 8.2 and all distributions deemed made pursuant to
this Agreement. Notwithstanding anything to the contrary contained herein, the
Capital Account of a Partner shall be determined and maintained throughout the
full term of the Partnership in all events in accordance with the rules set
forth in Treasury Regulations (S) 1.704-1(b)(2)(iv) to the extent that any
provision of this Agreement is inconsistent with the requirements of Treasury
Regulations (S) 1.704-1(b)(2)(iv), such Treasury Regulations shall control. Any
reference in this Agreement to the Capital Account of a Partner shall be deemed
to refer to such Capital Account as the same may be credited or debited from
time to time as set forth above.
(b) For purposes of computing the amount of any item of income, gain, loss or
deduction to be reflected in Capital Accounts (including, without limitation,
all Profit, Loss, and Gain or Loss on Disposition), the determination,
recognition and classification of each such item shall be the same as its
determination, recognition and classification for Federal income tax purposes,
except that:
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<PAGE>
(i) Any deductions for depreciation, depletion or amortization
attributable to a Contributed Property shall be determined as if the Adjusted
Basis of such Partnership asset on the date it was acquired by the Partnership
was equal to the Carrying Value of such Partnership asset as of such date;
(ii) Any income, gain or loss attributable to the taxable disposition of
any Partnership asset shall be determined by the Partnership as if the Adjusted
Basis of such Partnership asset as of such date of disposition was equal to the
amount of the Carrying Value of such Partnership asset as of such date;
(iii) If the Managing General Partner determines to make any distribution to
a Partner in other than cash (including liquidating distributions pursuant to
Section 8.2), the Capital Account of each Partner, immediately prior to such
distribution, shall be appropriately adjusted upward or downward to reflect the
portion of any Unrealized Gain or Unrealized Loss attributable to the
distributed property that would be allocated to such Partner if the distributed
property were sold for its Fair Market Value on the date of the distribution in
a taxable disposition;
(iv) All fees and other expenses incurred by the Partnership to promote
the sale of (or to sell) an interest in the Partnership that can neither be
deducted nor amortized under Section 709 of the Code as treated as items of
deduction;and
(v) The computation of all items of income, gain, loss and deduction shall
be made without regard to any election under Section 754 of the Code which may
be made by the Partnership except to the extent required by Treasury Regulations
(S) 1.704-1(b)(2)(iv)(m)) and, as to those items described in Section 705
(a)(1)(B) or Section 705 (a)(2)(B) of the Code, without regard to the fact that
such items are not ineludible in gross income or are neither currently
deductible nor capitalizable for Federal income tax purposes.
(c) A transferee of a Partnership interest shall succeed to the Capital
Account attributable to the transferred interest, and there shall be no
adjustment to the Capital Accounts as a result of such Transfer except as
otherwise required under Treasury Regulations 1.704-1. However, if the Transfer
causes a termination of the Partnership under Section 708(b)(l)(B) of the Code,
Partnership property shall be deemed to have been distributed in liquidation of
the Partnership to the Partners existing immediately subsequent to the Transfer.
and recontributed by such Partners in reconstitution of the Partnership. Upon
such recontribution, the Partnership properties shall be treated as Contributed
Property and the Capital Accounts of the Partners in such reconstituted
Partnership shall be maintained in accordance with the principles of this
Article VI.
(d) The Managing General Partner shall, at the request of any Partner
benefited thereby, make the election provided for in Section 754 of the Code on
behalf of the Partnership with respect to any taxable year. In the event such
election is made, thereafter the Managing General Partner may, in its sole and
absolute discretion, seek to revoke any such election.
6.2. Distributions of Cash Items.
---------------------------
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<PAGE>
(a) Initial Distribution. On the Term Loan Date or as soon thereafter
--------------------
as funds are available, the Partnership shall pay to Orange Partners and
Kronish, Lieb, Weiner & Hellman, in such ratio as they may advise the Managing
General Partner, as additional development and legal fees the amount, if any, by
which (i) the Project Cost Excess exceeds (ii) the amount necessary to pay all
items of higher priority then outstanding in accordance with Section 6.9 .
(b) Before the Pro Forma End Date. Until the occurrence of the earlier of
-----------------------------
the Pro Forma End Date or the First Flip Point, Available Cash for each calendar
year shall be distributed, subject to the further provisions of this Section
6.2, as follows:
(i) 89% to Syracuse Partners, 1% to NCP Syracuse. 1% to Orange
Partners (in its capacity as Developer General Partner), and 9% to Orange
Partners (in its capacity as a Limited Partner) until an amount equal to the
Tranche 1 Threshold for that year has been distributed pursuant to this clause
(i);
(ii) Next, 19% to Syracuse Partners, 1% to NCP Syracuse, 1% to Orange
Partners (in its capacity as Developer General Partner), and 79% to Orange
Partners (in its capacity as a Limited Partner) until an amount equal to the
Tranche 2 Amount for that year has been distributed pursuant to this clause
(ii); and
(iii) Any remaining Available Cash for the year shall be distributed
49% to Syracuse Partners, 1% to Orange Partners (in its capacity as the
Developer General Partner), 1% to NCP Syracuse, and 49% to Orange Partners (in
its capacity as a Limited Partner).
(c) After the Pro Forma End Date if First Flip Point Not Achieved.
-------------------------------------------------------------
If the First Flip Point has not occurred prior to the Pro Forma End Date, then
for all calendar quarters beginning after the Pro Forma End Date, Available Cash
shall be distributed 89% to Syracuse Partners, 1% to NCP Syracuse, 1% to Orange
Partners (in its capacity as the Developer General Partner), and 9% to Orange
Partners (in its capacity as a limited Partner) until the occurrence of the
First Flip Point.
(d) After the First Flip Point. Notwithstanding paragraphs 6.2(b)
--------------------------
and 6.2(c), after sufficient allocations or distributions have been made to
reach the First Flip Point, Available Cash shall be distributed to the Partners
in proportion to their Post-Flip Interests, it being intended that (i) if on any
distribution date the Available Cash exceeds the amount needed to achieve the
First Flip Point, all cash distributed that day which exceeds the amount of cash
that must be distributed pursuant to the other applicable provisions of this
Section 6.2 in order to achieve the First Flip Point shall be distributed to the
Partners pursuant to this paragraph (d) in proportion to the Partners' then
applicable Post-Flip Interests, and (ii) if on any distribution date the
Available Cash exceeds the amount needed to achieve the Second Flip Point, all
cash distributed that day which exceeds the amount of cash that must be
distributed pursuant to this paragraph or any other applicable provisions of
this Section 6.2 in order to achieve the Second Flip Point shall be distributed
to the Partners pursuant to this paragraph (d) in proportion to the Partners'
Post-Flip Interests applicable after the achievement of the Second Flip Point.
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<PAGE>
(e) Determination of Available Cash. Available Cash shall be the determined
-------------------------------
by Managing General Partner as of the end of each calendar quarter and shall be
computed as if all expenses accrued as of the end of the period had been paid in
cash, and all income accrued as of the end of the period had been received in
cash. Available Cash as so determined shall, to the extent the cash is actually
available for distribution (and taking into account the provisions of Section
6.7(a)) be distributed at such times and in such amounts as the Managing General
Partner shall determine but not less often than annually, and if not otherwise
restricted by any Material Project Document, within 30 days after the close of
each fiscal quarter of the Partnership. Subject to the provisions of any
applicable agreement to which the Partnership is a party, Available Cash to the
extent of any Net Capital Receipts shall be distributed as soon as reasonably
practicable after such Net Capital Receipts arise.
(f) Adjustments to Distributions. Quarterly distributions pursuant to
----------------------------
paragraph 6.2(b) shall be made by the Partnership in proportion to each
Partner's share of the total distributions that are expected to be made pursuant
to paragraph 6.2(b) for the entire fiscal year, using appropriate and reasonable
assumptions made by the Managing General Partner concerning the Partnership's
financial results for the entire year. Any resulting overpayments or
underpayments will be adjusted in the next quarterly distribution, without
interest.
6.3. Allocations of Tax Items.
------------------------
(a) Special Allocations. For any fiscal year in which a distribution is
-------------------
made to any Partner pursuant to paragraphs 6.2(b)(ii), 6.2(b)(iii), 6.2(c),
6.2(d) or 6.7(d), an amount of gross revenues equal to the amount so distributed
shall be specially allocated to that Partner. The Partnership's construction
period interest expenses accrued prior to the Term Loan Date attributable to
financing the prepaid gas supply shall be specially allocated to the Limited
Partners in the ratio of 92.8% to Orange Partners and 7.2% to Syracuse Partners
until an aggregate of $3,333,333 of such expenses has been specially allocated
to Orange Partners pursuant to this paragraph (a)
(b) Profits. Profits, as calculated after appropriate increase or decrease
-------
for the special allocations of gross revenues and expenses provided for in
paragraph 6.3(a), shall be allocated as follows:
(i) for any fiscal year up to the fiscal year in which the First Flip Point
occurs, 89% to Syracuse-Partners, 1% to NCP Syracuse, 1% to Orange Partners (in
its capacity as Developer General Partner) and 9% to Orange Partners (in its
capacity as a Limited Partner); and
(ii) for each fiscal year beginning with the year in which the First Flip
Point occurs, Profits shall be allocated to the Partners (subject to Section
6.3(d) hereof) so that after the allocation of Profits for the year, the Capital
Account balances of the Partners (whether positive or negative) as of the end of
the year (determined after deducting any distributions which would be made other
than according to the Post-Flip Interests) shall be proportional to their
relative Post-Flip Interests. If the allocation required to be made pursuant to
the preceding sentence would not be sufficient to make the Capital Accounts
proportional to the Post-Flip Interests, Profits shall instead be allocated so
as to minimize the aggregate
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differences between, for each Partner, (A) the percentage that the Capital
Account balance of that Partner is of the total Capital Account balance of all
Partners, and (B) that Partner's Post-Flip Interest.
(c) Losses. Losses, as calculated after appropriate increase or decrease for
the special allocations of gross revenues and expenses provided for in paragraph
6.3(a), shall be allocated as follows:
(i) first, for any fiscal year up to the year in which the First Flip
Point occurs, 89% to Syracuse Partners, 1% to NCP Syracuse, 1% to Orange
Partners (in its capacity as Developer General Partner), and 9% to Orange
Partners (in its capacity as a Limited Partner);
(ii) for each fiscal year beginning with the year which the First Flip
Point occurs, Loss shall be allocated to the Partners (subject to paragraph
6.3(d) so that after the allocation of Loss for the year, the Capital Account
balances of the Partners (whether positive or negative) as of the end of the
year (determined as deducting any distributions which would be made other than
according to the Post-Flip Interests) shall be proportional to their relative
Post-Flip Interests. If the allocation required to be made pursuant to the
preceding sentence would not be sufficient to make the Capital Accounts
proportional to the Post-Flip Interests, Losses shall instead be allocated so
as to minimize the aggregate differences between, for each Partner, (A) the
percentage that the Capital Account balance of that Partner is of the total
Capital Account balance of all Partners, and (B) that Partner's Post-Flip
Interests. If at the time of any allocation of Losses pursuant to this clause
(ii) one or more Partners have positive Capital Account balances and one or
more Partners have negative Capital Account balances, Losses will first be
allocated to the Partners having positive Capital Account balances (and among
them in accordance with the preceding provisions of this clause (ii)) until
their Capital Account balances are reduced to zero.
(d) Contributed Property. In the case of a Contributed Property, item of
--------------------
gain, loss or deduction attributable thereto (including depreciation on, and
gain or loss with respect to the disposition of, the Contributed Property) shall
be allocated, for Federal income tax purposes, first, among the Partners in a
manner that takes into account the variation at the time of contribution between
the Carrying Value of such property and its Adjusted Basis (in accordance with
Section 704(c) of the Code) and second, any such remaining items shall be
allocated in accordance with Sections 6.3(b), 6.3(c), 6.3(e), 6.3(f) or 6.5, as
appropriate. Each Partner contributing Contributed Property to the Partnership
shall promptly advise the Partnership as to its Adjusted Basis in such
Contributed Property at the time of contribution to the Partnership.
(e) Gain on Disposition. Gain on Disposition shall be allocated first,
-------------------
toPartners in proportion to and to the extent of any deficit balances in their
respective Capital Accounts until all such Capital Accounts shall have been
restored to zero, and second, to the Partners in such amounts as shall cause
their Capital Account balances, prior to the distribution of Net Capital
Receipts, to be equal to the amounts that would be distributed to each Partner
if the Net Capital Receipts were distributed in accordance with the requirements
of Section 6.2(e).
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(f) Loss on Disposition. Loss on Disposition shall be allocated first, to
-------------------
the Partners in proportion to and to the extent of any positive balances in
their respective Capital Accounts until such Capital Accounts have been reduced
to zero, and second, to the General Partners in accordance with the requirements
of Section 6.3(c).
(g) Recapture Income. To the extent of any Recapture Income resulting from
----------------
sale or other taxable disposition of a Partnership asset, the amount of any gain
from such disposition allocated to each of the Partners pursuant to the above
provisions shall be deemed to be Recapture Income to the extent such Partner (or
a predecessor in interest) has been allocated or has claimed any deduction
directly or indirectly giving rise to the treatment of such gain as Recapture
Income.
(h) Interim Allocations. The Partnership shall make an interim closing of
-------------------
books for purposes of determining the allocations and distributions required
under this Article VI in the event of any Transfer of a Partnership interest
during a taxable year.
6.4. Recharacterization of Fees and Guaranteed Payments. Notwithstanding
--------------------------------------------------
the provisions of Section 6.3, if any fees, interest or other amounts paid or
payable to any General Partner or any of its Affiliates pursuant to this
Agreement are deducted by the Partnership in reliance on Sections 707(a) or
707(c) of the Code, and such fees, interest nor other amounts are disallowed as
deductions to the Partnership and are recharacterized as Partnership
distributions, then there shall be allocated to such General Partner, prior to
the allocations pursuant to Section 6.3, an amount of Partnership gross income
for the year in which such fees, interest or other amounts are treated as
Partnership contributions equal to such fees, interest or other amounts treated
as distributions.
6.5. Conformity with Treasury Regulations. (a) In accordance with and
pursuant to Treasury Regulations (S) 1.704-1T(b)(4)(iv)(e) and (h)(4), if there
is a net decrease in either the Partnership's Minimum Gain or Minimum Gain
Attributable to Partner Nonrecourse Debt or both during any taxable year, all
Partners (including each General Partner) with deficit Capital Account balances
at: the end of such year as determined immediately prior to the allocation of
Profit and Loss for such year) in excess of the amount they are obligated to
restore (or deemed obligated to restore under the Treasury Regulations) on a
liquidation of the Partnership or such Partner's interest in the Partnership
shall be allocated, before any other allocation is made of Partnership items for
such taxable year, items of income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such excess or, if greater, all Partners
(including each General Partner) shall be allocated, before any other allocation
is made of Partnership items for the taxable year, items of income and gain for
such year, and if necessary, subsequent years, in an amount equal to the portion
of such Partner's share of the net decrease in Minimum Gain or Minimum Gain
Attributable to Partner Nonrecourse Debt or both that is allocable to the
disposition of Partnership property subject to such debt, as determined pursuant
to Treasury Regulations (S) 1.704-1T(b)(4)(iv)(e)(2) and (h)(4) To the extent
that the Partnership shall have insufficient income and gain in any taxable year
to make the allocations required under this Section 6.5(a) in any year in which
there has been a net decrease both in Minimum Gain and in Minimum Gain
Attributable to Partner Nonrecourse Debt, any such insufficiency
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<PAGE>
shall be attributed, first, to the decrease in Minimum Gain Attributable to
Partner Nonrecourse Debt, and second, to the decrease in Minimum Gain.
(b) It is the intent of the parties to this Agreement that the chargeback
provisions provided herein satisfy the "allocation of nonrecourse deductions"
rules provided in Treasury Regulations (S)1.704-1T(b)(4)(iv). It is further
intended that the allocations under this. Article VI shall effect an allocation
for Federal income tax-purposes in a manner consistent with Sections 704(b) and
704(c) of the Code and comply with any limitations or restrictions therein. If
for any reason the allocations contained in this Agreement shall conflict with
the allocation rules under the Treasury Regulations promulgated under Section
704 of the Code, the Partners acknowledge that such Treasury Regulations shall
control, except that if the application of the Treasury Regulations would cause
distributions on liquidation to vary from what they would have been had all
distributions been made pursuant to the rules of Section 6.2, the Partnership
shall make special allocations of gross income, as promptly as possible,
calculated so as to cause the liquidating distributions, when made, to
correspond with the distributions required by Section 6.2.
6.6. Negative Capital Accounts. Notwithstanding anything to the
-------------------------
this contrary inAgreement including. without limitation, Sections 3.1(b), 4.4,
4.7 and 8.4, on a liquidation of the Partnership, each Partner shall be
obligated to pay to the Partnership (within the time frame prescribed under
Treasury Regulations (S)1.704-1(b)(2)(ii)(b)(3)) any deficit amount in its
Capital Account (such Account to be determine after the allocation of all items
provided for in this Article VI).
6.7. Additional Reserves. (a) If any cash must be contributed to fund
-------------------
an Additional Reserve, for the fiscal year in which the funding occurs the
Partners will be deemed to have received as distributions, and will be deemed to
have contributed to the Partnership, the amount funded, and such deemed
transactions shall be reflected in the Capital Accounts (by a reduction in the
Capital Accounts to reflect the distribution, and by a corresponding increase in
the Capital Accounts to reflect the contribution). Accordingly, the funding of
Additional Reserves shall have no impact on after-tax rates of return for
purposes of determining the occurrence of the Flip Points.
It is the intent of this provision that for purposes of determining the
amount distributable to each Partner for each year pursuant to Section 6.2, no
distinction shall be made between actual and deemed distributions, so that
Partners shall share in actual and deemed distributions for the same year in the
same ratio, and their relative rights of participation in actual and deemed
distributions shall be calculated based on the aggregate of all such
distributions.
(b) Each Additional Reserve shall be designated for a specific purpose and
funds in that reserve will be applied only for the specified purpose. As soon as
it reasonably appears to the Managing General Partner that a specific Additional
Reserve is overfunded or not needed for the purpose for which it was
established, it shall cause the excess funds in that Additional Reserve to be
distributed to the Partners.
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(c) Any distribution from a specific Additional Reserve, including earnings
thereon, (i) shall, except as required by paragraph (d) of this Section 6.7, be
distributed to the Partners in the proportion that they funded that specific
Additional Reserve in accordance with the requirements of paragraph (a) of this
Section 6.7, (ii) shall not be subject to the general rules of Sections 6.2, 6.3
and 6.5 and (iii) shall be taken into account in calculating the Flip Points
only when actually made.
(d) Earnings on each specific Additional Reserve shall be allocated to the
Partners as of the last day of each calendar quarter in the ratio of their
respective accredited interests in such reserve as of the last day of the
immediately preceding calendar year.
(e) Rules similar to the rules in this Section 6.7 applicable to Additional
Reserves shall apply to amounts (i) not distributed to the Partners but instead
used to make capital expenditures as to any item or related items exceeding
$100,000 or (ii) expended from Additional Reserves for capital expenditures.
Depreciation on, and the tax basis of, such capital expenditures shall be
allocated in the proportion that the Partners funded the expenditure (that is,
in the proportion they would have shared in any reserve applied for the purpose
if it had been distributed or in the average proportion they would have shared
in all distributions for the year if the funds, other than reserves, so applied
had been distributed).
6.8. Pre-Operating Reserves. Each Pre-Operating Reserve shall be
----------------------
established for the specific purpose designated by the Agent and funds in that
reserve shall be applied only for the specified purpose. Whenever and to the
extent that a specific Pre-Operating Reserve is overfunded or not needed for the
purpose for which it was established, the Managing General Partner shall cause
the excess funds in that Pre-Operating Reserve to be paid or distributed in the
priority provided in Section 6.9, but only if and to the extent permitted under
the terms of the Financing Agreement.
6.9. Application of Project Cost Excess and Certain Other Funds. Project
----------------------------------------------------------
Funds representing Project Cost Excess and Pre-Operating Reserves released by
Agent to the Partnership as contemplated by Section 7.1 of the Financing
Agreement shall be deposited in an Excluded Account (as defined in the Financing
Agreement) and applied promptly in the following order of priority: first, to
the payment of interest on and principal of any loans made by Partners to
satisfy obligations of the Partnership pursuant to Section 5.19 (b) of the
Financing Agreement; next to pay any Deferred Fees pursuant to Section 2.11(a);
next to pay any Deferred Fees Pursuant to Section 2.12(a); next to pay
Contingent Payments in accordance with Section 2.11(b); and any balance to the
Developer General Partner and Kronish, Lieb, Weiner & Hellman pursuant to
Section 6.2(a) to be divided between them in such ratio as they may advise the
Managing General Partner.
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ARTICLE VII
Transfer of Partnership Interests; Removal of a
General Partner: Admission of Additional Partners
-------------------------------------------------
7.1. Substitution and Transfer of Certain Interests.
----------------------------------------------
(a) Transfer of Interest of Limited Partner. Except for the pledge made
---------------------------------------
under a Partner Pledge and Security Agreement, a Limited Partner may not make a
voluntary Transfer of its interest unless:
(i) the Managing General Partner shall have previously consented to the
Transfer, such consent not to be unreasonably withheld or delayed;
(ii) the Transfer would not constitute a violation of or default under the
Financing Agreement;
(iii) the Transfer is not directly or indirectly to Niagara Mohawk Power
Corporation, Hydra-Co. Enterprises, Inc. or Energy Investor's Fund or to an
individual (collectively, the "Prohibited Transferees") unless the Developer
General Partner gives its Consent to such Transfer;
(iv) counsel selected by, or reasonably acceptable to, the Managing
General Partner ("Acceptable Counsel"), shall have rendered its opinion, in form
(and with assumptions) reasonably acceptable to the Managing General Partner,
that such Transfer (A) may be effected without registration under the Securities
Act of 1933, (B) would not require registration or qualification by the
Partnership with respect to the Transfer under, and would not result in a
violation of, any applicable state securities laws, (C) would not result in a
termination of the Partnership under the Code, (D) would not result in the
Partnership being treated as an association taxable as a corporation under the
Code, (E) would not result in the Partnership or any Affiliate of a Partner
becoming subject to regulation under PUHCA or becoming otherwise subject to
increased regulatory burdens, (F) would not resulting the Project ceasing to be
exempt from regulation as a result of changing its status as a "qualifying
facility" under PURPA, (G) would not constitute a violation of-or default under
the Financing Agreements and as to such other matters as are reasonably required
by the Managing General Partner based on the requirements of Material Project
Documents (such opinion being herein referred to as the "Required Opinion"); and
(v) in the case of a Transfer by Syracuse Partners. the Managing General
Partner's interest in distributions of Available Cash after such Transfer
(including its indirect interest in distributions of Available Cash through its
ownership of an interest in Syracuse Partners) would not be less than the Keep
Requirement.
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(b) Partnership Interest in Syracuse Partners. A partner in
-----------------------------------------
SyracusePartners may not make a voluntary Transfer of its interest in Syracuse
Partners unless:
(i) the Managing General Partner has given its Consent to the Transfer,
such Consent not to be unreasonably withheld or delayed (provided, that a
limited partner in Syracuse Partners shall not be required to obtain the Consent
of the Managing General Partner, in its capacity as general partner hereunder,
pursuant to this clause (i) in order to Transfer all or a portion of its limited
partner interest in Syracuse Partners (but the provisions of clauses (ii)
through (vi) shall remain applicable))
(ii) the Transfer would not constitute a violation of or default under
the Financing Agreement;
(iii) the Transfer is not directly or indirectly to any of the
Prohibited Transferees or the Developer General Partner has given its Consent to
such Transfer;
(iv) the Managing General Partner has received the Required Opinion from
Acceptable Counsel; (v) there are not more than 10 holders of beneficial
interests in Syracuse Partners other than the Managing General Partner; and
(vi) the Managing General Partner's percentage interest in distributions
of Available Cash after such Transfer (including its indirect interest in
distributions of Available Cash through its ownership of an interest to Syracuse
Partners) would not be less than the Keep Requirement.
(c) Adam H. Victor; Orange Development.
----------------------------------
(i) Adam H. Victor may not make a voluntary Transfer of stock of Orange
Development without the prior Consent of the Managing General Partner and, prior
to the First Flip Point, Syracuse Partners, which Consent may be withheld in the
sole and absolute discretion of the Managing General Partner and Syracuse
Partners, respectively; provided, that the Consent of Syracuse Partners shall
not be required (1) for any transfer of such stock to a member of Adam H.
Victor's immediate family (but such family member may not further transfer such
stock without Syracuse Partners' Consent prior to the First Flip Point) or to a
trust, the beneficiaries of which are Adam H. Victor, his estate and/or one or
more members of his immediate family or (2) if the partnership interest of
Orange Development in the Developer General Partner has been converted into a
limited partner interest in the Developer General Partner.
(ii) Adam H. Victor may not make a voluntary Transfer of the limited
partnership interest in the Developer General Partner owned by him or the
grantor trust (the "Trust") set up by him unless: (A) the Managing General
Partner has given its Consent to the Transfer, such Consent not to be
unreasonably delayed and only to be withheld if the Managing General Partner
determines that such Transfer is in violation of the Financing Agreement or the
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remaining conditions of this clause (ii); (B) the Transfer is not directly or
indirectly to one of the Prohibited Transferees or the Managing General Partner
gives its Consent to such Transfer; (C) the Managing General Partner has
received the Required Opinion from Acceptable Counsel; and (D) the combined
interests of Adam H. Victor and the Trust in Orange Partners equal or exceed 20
percent of the total partnership interests in Orange Partners.
(d) Other Beneficial Owners of Orange Partners .
------------------------------------------
(i) No other beneficial owner of a limited partnership interest in
Orange Partners may make a voluntary Transfer of such interest which would
constitute an Event of Default under the Financing Agreement. The Developer
General Partner agrees to cause a provision to the following effect to be
included at all times in the partnership agreement of each of Orange Partners
and Orange Partners, L.P., a Delaware limited partnership, so long as it is a
partner of Orange Partners: "Any voluntary transfer of a beneficial interest in
the partnership in violation of the Financing Agreement shall be null and void
and of no effect."
(e) Unless a Transferee of an Interest becomes a substituted Limited
Partner in accordance with the provisions of this Section 7.1(e), it shall not
be entitled to any of the rights granted to a Limited Partner hereunder, other
than the right to receive all or part of the share of the Profits, Losses, cash
distributions or returns of capital to which its assignor would otherwise be
entitled. A Transferee of the interest of a Limited Partner, or any portion
thereof, shall become a substituted Limited Partner entitled to all the rights
of a Limited Partner if, and only if:
(i) the Transferor indicates its intent to give the Transferee such
right subject to this Agreement;
(ii) both General Partners Consent to such substitution;
(iii) in the opinion of counsel acceptable to both General Partners,
such substitution would not result in the Partnership being treated as an
association taxable as a corporation under the Code;
(iv) the Transferee pays to the Partnership all costs and expenses
incurred in connection with such substitution, including specifically, without
limitation, costs incurred in amending the Partnership's then current
Certificate of Limited Partnership; and
(v) the Transferee executes and delivers such instruments, in form and
substance satisfactory to both General Partners as the General Partners may deem
necessary or desirable to effect such substitution and to confirm the agreement
of the assignee to be bound by all of the terms and provisions of this
Agreement.
(f) The partnership and the General Partners shall be entitled to treat
the record owner of any limited Partner Interest as the absolute owner thereof
in all respects, and shall incur no liability for distributions of cash or other
property made in good faith to such owner until such time as the assignment is
completed in accordance with the provisions of this Agreement and a
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written assignment of such Interest has been received and accepted by the
Managing General Partner and recorded on the books of the Partnership. In no
event shall any Interest in the Partnership or any portion thereof,
retransferred to a minor or incompetent, and any such attempted Transfer shall
be void and ineffectual and shall not bind the Partnership or the General
Partners.
7.2. Death, Bankruptcy or Dissolution of a Limited Partner. (a) The-
-----------------------------------------------------
Disability or legal incapacity of a Limited Partner shall not dissolve or
terminate the Partnership.
(b) If a Limited Partner who is an individual does not, by written
instrument, designate a Person to become a Transferee of his Partnership
interest upon his death or legal incapacity, then his personal representative
shall have all the rights of such former Limited Partner with respect to such
Partnership interest for the purpose of settling or managing his estate, and
such power as the decedent or incompetent possessed to Transfer his Partnership
interest to a Transferee and to join with such Transferee in making application
to substitute such Transferee as a substitute Limited Partner.
(c) Upon the Bankruptcy, dissolution or other cessation of existence of
a Limited Partner, an authorized representative of such former Limited Partner
shall have all the rights of a Partner for the purpose of effecting the orderly
winding up and disposition of the business of such Limited Partner and such
power as such Limited Partner possessed to designate a successor as a Transferee
of its Partnership interest and to join with such Transferee in making
application to substitute such Transferee as a Limited Partner.
7.3. Transfer of a General Partner's Interest.
----------------------------------------
(a) Except for the pledge made under a Partner Pledge and Security
Agreement, no General Partner may (i) voluntarilyTransfer all or any part of its
Interest (but nothing herein shall restrict a Transfer which is made
involuntarily or by operation of law), unless the other General Partner (and in
the case of the Developer General Partner, Syracuse Partners, provided that the
Consent of Syracuse Partners shall not be required if the Interest to be
Transferred shall have been converted into a Limited Partner interest in the
Partnership (and each of the Partners hereby agrees, if requested by the
Developer General Partner, to enter into such amendments hereto as may be
reasonably required to effect such conversion)) shall have Consented to such
Transfer, the granting or denying of such Consent being within the sole and
absolute discretion of such other General Partner (and Syracuse Partners, if
applicable), or (ii) permit a Transfer of all or any part of any direct or
indirect interest in such General Partner if the Transfer will result in a
violation of or default under the Financing Agreement or any other Material
Project Document.
(b) Subject to paragraph (a) of this Section 7.3, upon giving 120 days'
notice to the other Partners, the Developer General Partner (but not the
Managing General Partner) may voluntarily withdraw from the Partnership or
Transfer its Partnership interest, but only if:
(i) in the event that it is the sole General Partner, another Person has
agreed to serve as successor General Partner to such withdrawing or Transferring
General Partner and such
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succeeding Person has satisfied the terms and conditions set forth in paragraph
(c) of this Section 7.3;
(ii) such Transfer will not result in the Partnership or any Affiliate (A)
becoming subject to regulation under PUHCA, or (B) becoming otherwise subject to
increased regulatory burdens;
(iii) in the opinion of counsel acceptable to the remaining General Partner,
such withdrawal or Transfer will not result in the Partnership being treated as
an association taxable as a corporation under the Code;
(iv) such withdrawal or Transfer will not result in the Project's ceasing to
be a "qualifying cogeneration facility" as defined in PURPA; and
(v) such withdrawal or Transfer will not cause a violation of or default
under the Financing Agreement or any other Material Project Document.
(c) A Person shall be admitted as a successor General Partner only if the
following terms and conditions are satisfied:
(i) the admission of such Person shall have been Consented to by the other
General Partners and a Majority in Interest of Limited Partners, which Consent
may be withheld in the discretion of each General Partner but which shall not be
unreasonably withheld in the case of the Limited Partners unless the admission
of such successor General Partner pursuant to this Section 7.3(c) would result
in the Partnership having a General Partner whose admission to the Partnership
pursuant to another Section of this Agreement would have required the Consent of
a Majority in Interest of Limited Partners and the giving of such Consent
pursuant to such other Section would not have been subject to a "reasonableness"
standard thereunder);
(ii) such Person shall have accepted and agreed to be bound by all the terms
and provisions of this Agreement by executing a counterpart hereof and such
other documents or instruments as may be required or appropriate in order to
effect the admission of such Person as a General Partner;
(iii) a certificate evidencing the admission of such Person as a General
Partner shall have been filed for recordation in all places required by law;
(iv) if the successor General Partner is a corporation, it shall have
provided to the Partnership a certified copy of a resolution of its Board of
Directors authorizing it to become a General Partner and to execute and deliver
this Agreement and the documents or instruments referred to in clause (ii)
above;
(v) the Person shall have delivered a Required Opinion of Acceptable Counsel
which shall include an opinion of such counsel to the effect that such successor
General Partner
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possesses all requisite power and authority, corporate and otherwise, to be a
General Partner of the Partnership; and
(vi) where the provisions of Section 7.4(a) or (b) are relevant, the
provisions of Section 7.4 (c) have been satisfied.
(d) The Partnership shall be entitled to treat the record owner of any
general partner Interest as the absolute owner thereof in all respects, and
shall incur no liability for distributions of cash or other property made in
good faith to such owner until such time as the assignment is completed in
accordance with the provisions of this Agreement and a written assignment of
such Interest has been received and accepted by the Managing General Partner and
recorded on the books of the Partnership. In no event shall any Interest, or any
portion thereof, be Transferred to a minor or incompetent, and any such
attempted Transfer shall be void and ineffectual and shall not bind the
Partnership or the General Partners.
7.4. Removal or Deemed Withdrawal of a General Partner. (a) Removal
------------------------------------------------ -------
of General Partner for Cause. A General Partner may be removed upon the
- ----------------------------
Consent of any other General Partner, if the General Partner is found by a court
of competent jurisdiction to have committed any fraud, or is found by such court
to be guilty of any willful misconduct, in the management of the Partnership or
to have materially breached this Agreement or its fiduciary duty to any other
Partner in any material respect. Any such removal (A) shall be effective upon
notice by any remaining General Partner to all other Partners, or (B) may, at
the request of such remaining General Partner, be ordered by the court which
makes the finding for such removal or upon which such removal is based
(provided, that such removal shall not be effective until 60 days after each
Partner shall have been given notice of such removal) The right of a General
Partner to remove the other General Partner is in addition to and not in
limitation or substitution of any other rights, claims and remedies such General
Partner may have against the General Partner so removed for actions prompting
the removal. Any failure to or delay by such General Partner in removing the
other General Partner shall not in any way constitute a waiver of the rights
herein granted or limit or restrict any other rights available to such General
Partner.
(b) Deemed Withdrawal. Upon the occurrence with respect to a General
-----------------
Partner of an event (other than Bankruptcy) which under the Act causes the
dissolution of a limited partnership, such General Partner shall be deemed to
have offered its resignation as a General Partner, and unless all of the
remaining Partners shall otherwise Consent, such General Partner shall be deemed
to have withdrawn as a General Partner effective upon such Bankruptcy or other
event. In the event of (i) the Bankruptcy of Adam H. Victor, Orange Development
or the Developer General Partner or (ii) any Transfer by Adam E. Victor, Orange
Development, the Developer General Partner, or any beneficial owner of any of
the foregoing which constitutes an Event of Default under the Financing
Agreement, the Developer General Partner shall be deemed immediately to have
resigned and withdrawn as a General Partner, effective upon such Bankruptcy or
Transfer, as in case may be. If and when such Event of Default shall have been
cured and/or waived by the Agent and in the case of Bankruptcy, the Managing
General Partner shall have given Consent, the Developer General Partner shall be
reinstated as a General Partner. Upon the occurrence with respect to NCP
Syracuse or North Canadian Power Incorporated of a
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Bankruptcy or in the event of a breach of Section 5.5(b), NCP Syracuse shall be
deemed to have offered its resignation as a General Partner, and unless the
Developer General Partner shall otherwise Consent, NCP Syracuse shall be deemed
to have withdrawn as a General Partner effective upon such Bankruptcy.
(c) Conversion of General Partner's Interest. Upon the removal or deemed
----------------------------------------
withdrawal of a General Partner as a general partner of the Partnership pursuant
to paragraph (a) or (b) of this Section 7.4, such former General Partner's
Interest shall be forthwith converted into that of a Limited Partner, and such
former General Partner shall continue to share in Profits and Losses, Available
Cash and Net Capital Receipts the same proportions as if such former General
Partner had not been removed or withdrawn; provided, that in the case of the
removal of the Managing General Partner pursuant to paragraph (a) of this
Section 7.4 and the selection of a Person other than the Developer General
Partner as the Managing General Partner, a one percent (1%) Interest in the
Partnership shall be transferred by the former Managing General Partner to the
successor Managing General Partner, rather than being converted into a Limited
Partner Interest, in consideration for which transfer the former Managing
General Partner shall be paid by the successor Managing General Partner an
amount mutually agreed between them as being the Fair Market Value of each
Interest (or. if they are unable to agree on such Fair Market Value, such value
shall be determined pursuant to the appraisal procedure set forth in the
definition of "Fair Market Value"). If a conversion of the General Partner's
Interest to a Limited Partner's Interest occurs, upon the effects of the events
giving rise to such removal having been fully cured (in the case of the Managing
General Partner) or upon the effective date of such conversion (in the case of
the Developer General Partner), such former General Partner shall be entitled in
its capacity as a Limited Partner to participate in occasions which require the
Consent of all or some of the Limited Partners.
(d) Effect of Removal or Withdrawal. Except as otherwise provided in
-------------------------------
Section 7.4(a) or Section 7.4(b), in the event of the removal or withdrawal of a
General Partner for any reason whatsoever, the remaining General Partner shall
automatically, without any further action on the part of any Partner, become
fully vested with all of the rights, power and authority granted to both the
Managing General Partner and the Developer General Partner by Article IV and any
other provision of this Agreement (including, but not limited to, the power of
attorney granted in Section 10.2 hereof) to the same extent as if the remaining
General Partner were designated as both the Managing General Partner and the
Developer General Partner, except for purposes of any provision of this
Agreement which provides for the allocation of items of Partnership income or
expense or the distribution of Available Cash or Net Capital Receipts to the
withdrawing General Partner.
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ARTICLE VIII
Dissolution and Liquidation
---------------------------
8.1. Events of Dissolution.(a) The Partnership shall be dissolved upon the
---------------------
earliest to occur of the following:
(i) a date designated in writing by all of the General Partners and
Consented to by a Majority in Interest of the Limited Partners;
(ii) the sale or other disposition of all or substantially all of the
Partnership's assets, except that if non-cash consideration is received the
Partnership shall not dissolve until such consideration is converted into cash;
(iii) the incurring of (x) damage to or destruction of the Project to such an
extent that all of the General Partners shall determine that repair or
reconstruction thereof would not be feasible or would not be economically
advisable, or (y) the taking of the Project or a part thereof by any
Governmental Authority to such an extent that all of the General Partners shall
determine that the continuation of the business of the Partnership would not be
feasible or would not be economically prudent;
(iv) the sale or other disposition of the Project as the result of any
foreclosure of a lien or similar event;
(v) the Bankruptcy or withdrawal: of the sole remaining General Partner,
unless within ninety (90) days thereafter each of the remaining Partners Consent
to continue the Partnership and appoint a substitute General Partner; or
(vi) the expiration of the term of the Partnership pursuant to Section 2.10
of this Agreement.
(b) Dissolution of the Partnership shall be effective on the day on which
the event occurs giving rise to the dissolution, but the Partnership shall not
terminate until the Partnership's certificate of limited partnership shall have
been cancelled and the assets of the Partnership shall have been distributed as
provided herein. Notwithstanding the dissolution of the Partnership, prior to
the termination of the Partnership, as aforesaid, the business of the
Partnership and the affairs of the Partners, as such, shall continue to be
governed by this Agreement. Upon dissolution, the Managing General Partner shall
liquidate the assets of the Partnership, apply and distribute the proceeds
thereof as contemplated by this Agreement and cause the cancellation of the
Partnership's certificate of limited partnership.
8.2. Priority on Liquidation. The Managing General Partner shall to the
-----------------------
extent feasible, liquidate the assets of the Partnership as promptly as shall be
practicable. allowing reasonable time for the process of winding up and
liquidation so as to minimize the normal losses attendant upon a liquidation of
assets. The proceeds of such liquidation shall be applied
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first, to the payment of the matured debts and liabilities of the Partnership C
- -----
including principal and accrued interest on Partner Loans, and the costs and
expenses of dissolution and liquidation of the Partnership); second, to the
------
setting up of any reserves which the Managing General Partner may deem
reasonably necessary for contingent or unforeseen liabilities of the Partnership
(any such reserves shall be Additional Reserves and governed by Section 6.7);
and third, to the Partners in the manner provided for Available Cash pursuant to
-----
Sections 6.2 and 6.9 hereof.
8.3. Statements on Liquidation. The Managing General Partner shall
-------------------------
furnish each of the Partners with a statement which shall set forth the assets
and liabilities of the partnership as of the date of the dissolution and as of
the date of complete liquidation, the share of each Partner thereof, and a
reasonably detailed report of the manner or disposition of the assets of the
Partnership.
8.4. Return of Capital; Partition. No Partner shall have any right to
-------------------------
receive its Capital Contribution or any profit of the Partnership, or to obtain
a partition of assets of the Partnership, other than as provided in this
Agreement. The General Partners shall not be personally liable for the return of
the Capital Contributions of the Limited Partners, or any portion thereof, it
being expressly understood that any such return shall be made solely from
Partnership assets.
ARTICLE IX
Records and Accounting
----------------------
9.1. Books and Records. The Managing General Partner or a representative
-----------------
appointed by the Managing General Partner shall maintain or cause to be
maintained at the principal place of business of the Partnership referred to in
Section 2.5 or at the principal place of business of the Managing General
Partner, as provided in Section 4.6. full, correct and complete copies of this
Agreement and the Partnership's certificate of limited partnership and of all
amendments and supplements hereto and thereto, full, correct and complete copies
of each agreement between the Partnership and any General Partner or Related
Party of a General Partner, and each other material agreement of the
Partnership, and in each case copies of all amendments thereof and supplements
thereto, and full and accurate books of the Partnership showing all receipts and
expenditures, assets and liabilities, profits and losses, and all other books,
records and information required by the Act as necessary for recording the
Partnership's business and affairs, together with a current list of the full
name and last known business address of each Partner, and executed copies of all
powers of attorney pursuant to which the Partnership's certificate of limited
partnership or any certificate of amendment thereto has been executed, and
copies of the Partnership's Federal, state and local income tax returns and
reports, if any, for seven years. The Partnership's general ledger shall be
maintained on an accrual basis in accordance with generally accepted accounting
principles. Books and records shall be maintained until six years after the
termination and liquidation of the Partnership. Each Partner and its duly
authorized representative(s) shall have the right at such Partner's expense, at
all reasonable times during normal business hours and upon at least one day's
prior notice, to inspect and make copies of
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<PAGE>
extracts from all of the partnership's documents, books and records, including,
without limitation, all documents, books and records necessary to enable such
Partner to defend any tax audit or related proceeding.
9.2. Required Reports to Partners. The Managing General Partner shall-
---------------------------
prepare and furnish or cause to be-prepared and furnished to each of the
Partners the following reports and information provided, that in the case of
clause (e) below, so long as NCP Syracuse is Managing General Partner-and
managing general partner of Syracuse Partners and Metlife Capital Corporation is
a limited partner of Syracuse Partners, the Managing General Partner shall also
simultaneously furnish to Metlife Capital Corporation the information described
in clause (e))
(a) Within 45 days after the end of each of the first three fiscal
quarters of each Fiscal Year, an unaudited balance sheet as of the end of such
quarter, and unaudited statements of profit and loss, changes in Partners'
capital, and change in cash flows of the Partnership for the quarter then ended
and in the case of the second and third such quarters, for the Fiscal Year to
date, all prepared in accordance with generally accepted accounting principals;
(b) Within 90 days after the end of each Fiscal Year, audited financial
statements of the Partnership (which shall include a balance sheet at the end of
such year, statements of profit and loss, changes in Partners capital and change
:n cash flows of the Partnership for the year then ended, and a description of
any material transactions between the Managing General Partner or any of its
Affiliates and the Partnership (other than pursuant to the Gas Sales Contract)
not previously disclosed in writing) for such Fiscal Year prepared in accordance
with generally accepted accounting principles and accompanied by the
accountants' report on their examination of such financial statements;
(c) Within 90 days after the end of each Fiscal Year, Form K-l, or any
similar form as may be required by the Code or the Internal Revenue Service for
the preparation of the Partners' Federal income tax returns;
(d) Promptly upon receipt by the Managing General Partner of the same,
copies of any management reports prepared for the Partnership by the
Accountants;
(e) Within forty (40) days after the end of each month. (i) unaudited
statements of profit and loss for such month and an unaudited balance sheet as
of the end of such month and (ii) a summary of electrical output, steam
delivered, plant availability, fuel used and periods of curtailment or shutdown;
and
(f) Forthwith upon the request of any Partner, such other information
bearing on the financial condition and operations of the Partnership and the
status, condition and operations of the Project as such Partner may from time to
time reasonably request.
9.3. Partnership Bank Accounts. The Managing General Partner shall have
-------------------------
authority to open bank accounts and designate signatories with respect thereto
on behalf of the Partnership and may authorize an agent to open such bank
accounts as it shall deem necessary or desirable
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<PAGE>
for the management and conduct of the Partnership's business; provided, however,
that the funds of the Partnership shall not be commingled with any funds of any
Partner or of any other Person.
9.4. Annual Tax Returns. (a) The Managing General Partner is
------------------
designated the "Tax Matters Partner" for Federal income tax purposes pursuant to
Section 6231 of the Code with respect to all taxable years of the Partnership
and is authorized to do whatever is necessary to qualify as such. The Tax
Matters Partner shall cause the Accountants to prepare, and shall timely file,
or cause the timely filing of, all Tax Returns required by any Governmental
Authority.
(b) The Tax Matters Partner shall do all acts, make all elections, and take
whatever reasonable steps are required to maximize in the aggregate, the
Federal, state and local income tax advantages available to the Partnership
(provided that in the case of a tax reporting position, such position can be
supported by a "more likely than not" tax opinion of reputable tax counsel) and
shall defend all tax audits and litigation with respect thereto. The Tax Matters
Partner shall maintain the books, records and Tax Returns of the Partnership in
a manner consistent with the acts, elections and steps taken by the Partnership;
provided however, that a draft tax information return of the Partnership in the
form which the Tax Matters Partner proposes to file shall be delivered to the
other General Partner no later than 10 days prior to filing for its comment and
review, it being agreed that the Tax Matters Partner shall, consistent with its
oblations and responsibilities under this Agreement, make the final decision
regarding the filing of the return.
9.5. Actions in Event of Audit. Except as otherwise-provided herein, the
-------------------------
Managing General Partners's designation as the Tax Matters Partner pursuant to
Section 9.4(a) is effective only for the purpose of activities performed under
the Agreement pursuant to the provisions of the Code and any comparable
provision of state or local law and shall be subject to the following terms and
conditions:
(a) The Tax Matters Partner, as an authorized representative of the
Partnership, shall direct the defense of any claims made by federal, state or
local tax authorities ("Tax Authorities") to the extent that such claims relate
to the adjustment of Partnership items at the Partnership level. The Tax Matters
Partner shall (and in any event within ten (10) days after receipt) deliver to
each Partner a copy of all notices, communications, reports or writings of any
kind (including, without limitation, any notice of beginning of administrative
proceedings or any report explaining the reasons for a proposed adjustment)
received from the Tax Authorities relating to or potentially resulting in an
adjustment of Partnership items. The Tax Matters Partner shall consider in good
faith any suggestions made by any Partner or its counsel regarding the conduct
of any related administrative or judicial proceedings.
The Tax Matters Partner shall keep each Partner advised of all material
developments with respect to any proposed adjustment which come to its
attention, including, without limitation, the scheduling of all conferences with
the Tax Authorities. Each Partner shall be entitled, at its own expense, to
attend all meetings with the Tax Authorities and to review in advance (subject
to giving comments in response thereto to the Tax Matters Partner within such
period as the Tax Matters Partner may designate (but in no event less than five
(5) business days)), any material written information including, without
limitation, any pleadings, memoranda or similar items) to be submitted to the
Tax Authorities. addition to the right of a Partner to
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<PAGE>
attend any such meetings, a Partner may participate in such meeting subject to
such control and direction of the Tax Matters Partner as may be reasonable under
the circumstances taking into account, without limitation, the tax implications
to each Partner.
Without first obtaining the written consent of a Majority in Interest of
the Limited Partners, the Tax Matters Partner shall not, with respect to any
proposed adjustment of a Partnership item which materially and adversely affects
the Partners, (A) enter into a settlement agreement which purports to bind
Partners other than the Tax Matters Partner (including, without limitation, any
stipulation consenting to an entry of decision by the Tax Court) , or (B) enter
into an agreement or stipulation extending the statute of limitations.
(b) If notice of an administrative proceeding under Section 6223 of the
Code (or any comparable provision of state or local law) is received by a
Partner, such Partner shall notify the Tax Matters Partner of the treatment of
any Partnership item on the Partner's income tax return which is or may be
inconsistent with the treatment of that item on the Partnership return.
(c) No Partner shall enter into any settlement agreement with any taxing
authority with respect to any Partnership item unless and until such Partner
shall have first notified the Tax Matters Partner in writing of the proposed
agreement and its terms at least thirty (30) days prior to entering into such
settlement.
(d) The Tax Matters Partner or any Partner shall notify all Partners of
any intention to file a petition with the Tax Court for a redetermination of any
Partnership item within ten (10) days from the date of the Notice of Final
Partnership Administrative Adjustments.
9.6. Costs. The Partnership shall indemnify and reimburse the
-----
Tax Matters Partner for all Third Party Fees and other claims, liabilities,
losses and damages borne by the Tax Matters Partner, which were incurred in
connection with any of its duties under Sections 9.4 and 9.5, except to the
extent caused by the gross negligence or willful misconduct of the Tax Matters
Partner. The payment of expenses to which indemnification applies shall be
deemed an expense of the Partnership. Neither the Tax Matters Partner nor any
other Person (other than the partnership) shall have any obligation to provide
funds for any of the actions required by Sections 9.4 and 9.5. The taking of any
action and the incurring of any expense by the Tax Matters Partner in connection
with any such proceeding, except to the extent required by law, is a matter in
the reasonable discretion of the Tax Matters Partner.
ARTICLE X
Miscellaneous
-------------
10.2. Notices. Any and all notices, elections or demands permitted or
-------
required hereunder shall be in writing, signed by the Partner giving such
notice, election or demand and shall be delivered personally, or sent by
registered or certified mail, or by a nationally recognized courier service, to
the other Partner or Partners, at its address set forth in Schedule I or at
such other
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<PAGE>
address as may be supplied by written notice given in conformity with the terms
of this Section 2.0.1; provided, however, that copies of all notices to Orange
Partners shall also be sent in the same manner to Taub & Fasciana, P.C., 535
Fifth Avenue, New York, N.Y. 10017, Attention: Eric Honick, Esq., or to such
other firm or Person as Orange Partners may designate by written notice given in
conformity with this Section 10.1. The date of receipt shall be the effective
date of such notice. Any notice that a Partner demands inspection of the books
and records of the Partnership may be made to the address described above by
telecopy, telex or telegram.
10.2. Power of Attorney. (a) Each Limited Partner, including and
additional or substituted Limited Partner, by the execution of this Agreement or
any counterpart hereof, does hereby irrevocably constitute and appoint the
Managing General Partner (and Orange Partners in case of the withdrawal or
removal of NCP Syracuse as a General Partner pursuant to Section 7.4) and its
respective Presidents, Vice-Presidents, Secretaries and Treasurers (and, in the
event of a withdrawal of NCP Syracuse as a General Partner, the general partner
of the Developer General Partner, and such officers of the general partner of
the Developer General Partner), and each of them acting alone, in each case with
full power of substitution, his or its true and lawful agent and attorney-in-
fact, with full power and authority in his or its name, place and stead, to
make, execute, sign, acknowledge, swear to, deliver, file and record at the
appropriate public offices (i) such amendments to this Agreement and the
Partnership's certificates of limited partnership, as amended from time to time,
as are necessary to admit to the Partnership a substituted or additional Limited
Partner pursuant to Section 7.1, (ii) such documents and instruments as are
necessary to cancel the Partnership's certificate of limited partnership
pursuant to Section 8.1. (iii) all certificates and other instruments deemed
advisable by the Managing General Partner to permit the Partnership to become or
to continue as a limited partnership or partnership wherein the Limited Partners
have limited liability in the jurisdictions where the Partnership may be doing
business, and (iv) all fictitious or assumed name certificates required or
permitted to be filed on behalf of the Partnership. Each Limited Partner agrees
to execute and deliver, when requested by the Managing General Partner, such
documents and instruments as may be reasonably necessary or appropriate to carry
out the provisions of this Agreement or which are required by law to be filed on
behalf of the Partnership.
(b) The foregoing power of attorney is hereby declared to be irrevocable
and coupled with an interest, and it shall survive the Bankruptcy or legal
disability of any of the Partners to the fullest extent permitted by law and
extend to its successors and assigns, and shall survive the Transfer or
assignment of all or any part of the Interest of such Partner; provided,
however, that if any General Partner or any Limited Partner Transfers all or any
part of its respective Interest, the foregoing power of attorney of the
Transferor shall survive such Transfer as to the Interest or portion so
Transferred only until such time as the Transferee thereof shall have been
admitted to the Partnership as a Substitute Partner and all required documents
and instruments shall have been duly executed, filed and recorded to effect such
substitution.
10.3. Amendment. (a) Except for the amendments made in accordance with
---------
paragraph (b) of this Section 10.3, this Agreement may be amended only upon the
Consent of all General Partners (including Orange Partners, whether or not it
continues to serve as a General Partner) and a Majority in Interest of Limited
Partners.
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<PAGE>
(b) In addition to any amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the Managing General Partner,
with the Consent of the Developer General Partner, (i) to elect that the
Partnership be governed by any successor statute. of the State of Delaware
governing limited partnerships, or (ii) to substitute or admit any additional
limited partners to the extent allowed by this Agreement.
(c) Notwithstanding the foregoing Sections 10.3(a) and 10.3(b), no
amendment shall be adopted pursuant to this Section unless the adoption thereof
(A) is not adverse to the interests of the Limited Partners, (B) is consistent
with Article IV, (C) does not affect the method of distributions set forth in
Article VI, and (D) does not affect the limited liability of the Limited
Partners contemplated by Section 4.7 or the status of the Partnership as a
partnership for Federal income tax purposes. The power of attorney granted
pursuant to Section 10.2 may be used by the Managing General Partner to execute
on behalf of a Limited Partner any document evidencing or effecting an amendment
adopted in accordance with the terms of this Section 10.3.
10.4. Partition. The Partners hereby agree that no Partner nor any
---------
successor-in-interest to any Partner shall have the right while this Agreement
remains in effect to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property of the Partnership partitioned, and each Partner, on behalf of it, its
successors, representatives and assigns, hereby waives and forfeits any such
right arising out of statute or by operation of law to seek, bring or maintain
in any court an action for partition pertaining to the Partnership or any assets
of the Partnership. It is the intention of the Partners that during the term of
this Agreement, the rights of the Partners and their successors-in-interest, as
among themselves, shall be governed by the terms of this Agreement, and that the
right of any Partner or successor-in-interest to Transfer its interest in the
Partnership's properties shall be subject to the limitations and restrictions of
this Agreement. No Partner shall have the right to seek or have dissolution or
winding up of the Partnership by decree of court, if such dissolution or winding
up would constitute a violation or default under the Financing Agreement.
10.5. No Waiver. The failure of any Partner to insist upon strict
---------
performance of a covenant hereunder or of any obligation hereunder, irrespective
of the length of time for which such failure continues, shall not be a waiver of
such Partner's right to demand strict compliance in the future. No consent or
waiver, express or implied, to or of any breach or default in the performance of
any obligation hereunder; shall constitute a consent or waiver to or of any
other breach or default in the performance of the same or any other obligation
hereunder.
10.6. Entire Agreement. This Agreement Constitutes the full and
---------------
complete agreement of the parties hereto with respect to the subject matter
hereof.
10.7. Creditors. None of the provisions of this Agreement
---------
shall be forthe benefit of or enforceable by any creditor of any
Partner or of the Partnership.
10.8. Agreement in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts, and all counterparts so executed shall together
constitute one agreement binding on all parties hereto, notwithstanding that all
parties hereto are not signatories to the same counterpart.
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<PAGE>
10.9. Captions. Captions contained in this Agreement are inserted as a
--------
matter of convenience and in no way define, limit, extend or describe the scope
of this Agreement or the intent of any provision hereof.
10.10. Successors and Assigns. Subject to the restrictions on transfers
----------------------
set forth herein, all provisions of this Agreement shall be binding upon, inure
to the benefit of, and be enforceable by or against, the respective successors,
successors-in-title, heirs and assigns of the Partners, and each and every
successor-in-interest to any Partner, whether such successor acquires such
interest by way of Transfer, foreclosure, or by any other method, shall hold
such interest subject to all terms and provisions of this Agreement.
10.11. Governing Law. This Agreement and the rights and obligations of
-------------
the Partners hereunder shall be governed by the substantive laws of the State of
Delaware governing limited partnerships, and shall be interpreted and construed
in accordance with the laws of the State of New York.
10.12. Equitable Remedies. Each Partner agrees that in the event that any-
------------------
Partner breaches or threatens to breach any provision of this Agreement, each
General Partner and (in the case of obligations owed to Syracuse Partners or the
partnership) Syracuse Partners shall, in addition to any other remedies
available to it at law or in equity, have the right to obtain specific
performance or injunctive relief against such Partner (provided, that no Limited
Partner shall be entitled to obtain such specific performance or injunctive
relief against the Developer General Partner) without the necessity of proving
irreparable injury or the inadequacy of remedies at law or posting bond or other
security.
10.13. Partial Invalidity. If any term, provision, condition or
------------------
covenant of this Agreement that is not material or the application thereof to
any Person or circumstance shall, to any extent, be held invalid or
unenforceable, the remainder of this Agreement, or the application of such term,
provision, condition or covenant to any Person or circumstance other than those
as to whom or to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law. Notwithstanding the
foregoing, the parties agree that should any material portion or provision of
this Agreement be found to violate any law, order, rule or regulation, they will
fully cooperate to try to resolve any such matter and to preserve to the fullest
extent possible each of the rights and obligations of the respective parties
created by this Agreement.
10.14. Consent to Jurisdiction. Venue and Service of Process. Each
-----------------------------------------------------
Partner agrees that any action, suit or proceeding in respect of or arising out
of this Agreement may be initiated and prosecuted in the state or Federal
courts, as :the case may be, located in New York County, New York. Each Partner
consents to and submits to the exercise of jurisdiction over its person by any
such court in New York County, New York which has jurisdiction over the subject
matter, waives any objections to venue with respect to such court and any claim
of forum non conveniens, waives personal service and agrees that service
----- --- ----------
of process may be made by registered mail directed to such Partner at
its address set forth in this Agreement, as the same may be changed by notice in
accordance with Section 10.1. except as provided in paragraph (h)
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of Section 4.1, the Federal and state courts situated in the State of New York
shall have exclusive jurisdiction over all disputes arising under or with
respect to this Agreement.
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
duly executed by their respective officers duly authorized, as of the date first
above written.
GENERAL PARTNERS:
G.A.S. ORANGE PARTNERS, L.P.
By: G.A.S. Orange Development, Inc.,
its General Partner
/s/ Adam H. Victor
_________________________________
By: Adam H. Victor, President
NCP SYRACUSE, INC.
/s/ Donald D. McKechnie
_________________________________
By: Donald D. McKechnie, President
LIMITED PARTNERS: G.A.S. ORANGE PARTNERS, L.P.,
By: G.A.S. Orange Development, Inc.
its General Partner
/s/ Adam H. Victor
_________________________________
By: Adam H. Victor, President
SYRACUSE ORANGE PARTNERS, L.P.
By: NCP Syracuse, Inc., its General Partner
/s/ Donald D. McKechnie
_________________________________
By: Donald D. McKechnie, President
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Schedule I
Names and Addresses of
General Partners end Limited Partners
Names and Addresses
- -------------------
General Partners
- ----------------
G.A.S. Orange Partners, L.P.
c/o Gas Orange Deve1opment, Inc.
630 First Avenue, Suite 30-C
New York, NY 10016
Telecopy No.: (212) 725-0427 or if not working,
(212) 765-8943
NCP Syracuse, Inc.
c/o North Canadian Power Inc.
1100 Town and Country Road, Suite 800
Orange, California 92668
Telecopy No.: (714) 667-7825
Limited Partners
- ----------------
Syracuse Orange Partners, L.P.
c/o North Canadian Power Inc.
1100 Town and Country Road, Suite 800
Orange, California 92668
Telecopy No.: (714) 667-7825
G.A.S. Orange Partners, L.P.
c/o Gas Orange Development, Inc.
630 First Avenue, Suite 30-C
New York, NY 10016
Telecopy No.: (212) 725-0427 or if not working,
(212) 765-8943
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Schedule II
Capital Contributions
---------------------
The Developer General Partner has contributed the following assets and
rights to the capital of the Partnership:
The agreement; and permits listed on Schedule III and on Part I of Exhibit
M to the Financing Agreement, together with all other subsisting development and
operating rights and property, tangible or intangible, which it or any of its
partners or Adam H. Victor or Gas Alternative Systems, Inc. has at any time held
with respect to the Project.
The Net Agreed Value of the assets and rights contributed by the Developer
General Partner is set forth in section 3.1(a) of the Agreement.
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<PAGE>
Schedule III
Material Project Documents
--------------------------
a. Amended and Restated Cogeneration Facility Turnkey
construction Contract, dated as of April 5, 1991, between the Partnership and
Century Contractors West Inc., a; amended.
b. Agreement, dated as of September 19, 1986, between Gas
Alternative Systems, Inc. and Niagara Mohawk Power Corporation, as amended by an
amendment dated April 7, 1989, as assigned by Gas Alternative Systems, Inc. to
G.A.S. Orange Development, Inc. by an assignment dated April 6, 1988, and as
further assigned by G.A.S. Orange Development, Inc. to the Partnership by an
assignment dated November 30, 1990.
c. Steam Contract, dated as of February 27, 1990, between the
Partnership and Syracuse University, as amended by amendatory letters dated May
1, 1990, June 22, 1990 and August 29, 1990, and an amendment dated as of
December 31, 1990.
d. Operating Agreement, dated as of February 27, 1990, between
the Partnership and Syracuse University, as amended by an amendatory letter
dated May 1, 1990 and an amendment dated as of December 31, 1990.
e. 80 MW Facility Operation and Maintenance Agreement, dated as
of April 5, 1991, between Project Orange Associates, L.P. and Stewart &
Stevenson Operations, Inc.
f. Financing Documents.
g. Restated Gas Sales and Purchase Agreement, dated as of March
18, 1991, between the Partnership and Noranda, Inc.
h. Lease Agreement, dated as of February 27, 1990, between the
Partnership and Syracuse University, as amended by amendatory letters dated May
1, 1990, June 22, 1990, and August 29, 1990 and an amendment dated as of
December 31, 1990.
i. Payment in Lieu of Tax Agreement, dated as of April 5, 1991,
among the Partnership, the City of Syracuse, and the City of Syracuse Industrial
Development Agency.
j. Firm Natural Gas Transportation Agreement, dated March 29,
1991, between Tennessee Gas Pipeline Company and the Partnership.
k. Drawing Agreement, dated March 29, 1991, between Tennessee Gas
Pipeline Company and the Partnership.
l. Gas Pipeline Turnkey Construction Agreement, dated as of April
5, 1991, between the Partnership and OBG Technical Services, Inc.
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Exhibit A
[Deleted]
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<PAGE>
Exhibit B
Calculation of Flip Point
-------------------------
A "Flip Point" shall occur when, after the Term Loan Date, (a) the present
value, discounted on a quarterly basis to the Equity Funding Date at the
Applicable Quarterly Discount Rate (as defined below) of the aggregate of (i)
the quarterly Federal income tax and New York State franchise tax benefits
allocated to the Investor Group, and (ii) cash distributions to the Investor
Group (including all distributions pursuant to Article VI and/or Article VIII),
is equal to (b) the present value discounted to the Equity Funding Date as
provided above of (i) the Net Agreed Value of the Investor group's investment in
the capital of the Partnership pursuant to Section 3.1(a) of the Partnership
Agreement and (ii) the quarterly Federal income tax and New York State franchise
tax expenses allocated to or borne by the Investor Group attributable to its
Interests.
The Federal income tax benefit or expense will be calculated by applying an
assumed 34% corporate Federal income tax rate (regardless of what the actual
maximum corporate Federal income tax rate is for that year) to the share of
Partnership taxable income or loss allocable to the Investor Group for that
year, adjusted for New York State franchise taxes as applicable. All tax
allocations will be deemed to occur on the last day of each calendar quarter,
and each quarterly allocation will be equal to the Investor Group's allocable
share of one quarter of the annual amount.
For purposes of the First Flip Point, the "Applicable Quarterly Discount
Rate" shall mean the quarterly discount rate which, when compounded quarterly
for four quarters, equals the Investor Group's target annual after-tax return of
19%. For purposes of the Second Flip Point, the "Applicable Quarterly Discount
Rate" shall mean the quarterly discount rate which, when compounded quarterly
for four quarters, equals the Investor Group's target annual after-tax return of
20%.
Tax liabilities with respect to income recognized by the Investor Group in
the year in which a Flip-Point occurs as the result in the change in the
Investor Group's percentage interests in Partnership profits and losses, will be
included in the tax expense that is borne by the Investor Group per clause (b)
(ii) of the first paragraph of this Exhibit.
The receipt of fees paid pursuant to Sections 2.11 through 2.13 shall not
be taken into account in calculating the Flip Point.
The receipt of amounts paid pursuant to Section 6.2(a) shall not be taken
into account in calculating the Flip Point.
The payment to North Canadian Power Incorporated of $300,000 as specified
in Exhibit A to reimburse it for certain of its costs relating to the Project
shall not be taken into account in calculating the Flip Point.
-64-
<PAGE>
The receipt by any Partner of payment by the partnership of interest on.and
principal of any loans made by such Partner shall not be taken into account in
calculating the Flip Point.
The funding of Additional Reserves, as well as other reserves required
under the Financing Agreement, shall have no impact on the calculation of the
Flip Point, since the funds deposited to reserve accounts will be treated as if
distributed to the Partners and recontributed by them to the Partnership at the
same time.
-65-
<PAGE>
Exhibit C
Boiler Expenses and Reserves
----------------------------
Aggregate Amount of Expenses
Relevant 12- and Reserves for Boilers for
Month Period * that 12-Month Period
- -------------- ----------------------------
Any period ending $ -0-
prior to the Term 110,000
Loan Date 116,000
First 122,000
Second 128,000
Third 134,000
Fourth 141,000
Fifth 148,000
Sixth 155,000
Seventh 163,000
Eighth 171,000
Ninth 135,000
Tenth 141,000
Eleventh 148,000
Twelfth 156,000
Thirteenth 164 000
Fourteenth 172,000
Fifteenth 180,000
Sixteenth 190,000
Seventeenth 199,000
Eighteenth 209,000
Nineteenth
Twentieth
Twenty-First and
thereafter As agreed to by the
General Partners at that
time or as it shall
continue to escalate at
the same rate
* Refers to 12-month periods measured relative to the Term Loan Date
(commencing as of the first day of the first full calendar month after the Term
Loan Date). For example, "First" means the first 12-month period after the Term
Loan Date, "Second" means the second 12-month period following the Term Loan
Date, etc.
-66-
<PAGE>
Exhibit D
Tranche Thresholds
------------------
Year Tranche 1 Threshold Tranche 2 Amount
1992 $ * $ *
1993 2,916,000 224,000
1994 782,000 60,000
1995 248,000 19,000
1996 1,593,000 123,000
1997 4,450,000 342,000
1998 4,839,000 372,000
1999 5,480,000 422,000
2000 8,683,000 668,000
2001 11,030,000 848,000
2002 13,661,000 1,051,000
2003 12,937,000 995,000
2004 12,472,000 959,000
2005 15,755,000 1,212,000
2006 17,375,000 1,337,000
2007 18,931,000 1,456,000
2008 11,764,000 905,000
2009 14,089,000 1,084,000
2010 5,458,000 420,000
2011 3,746,000 288,000
2012 1,569,000 121,000
* The figures set forth in this Exhibit D are based on a 20-year Pro forma
Statement of Operations and Cash Flow for the Partnership (the "Projection")
which assumes the occurrence of the Term Loan Date on January 1, 1993 and the
consequent computation and distribution of Available Cash commencing from and
after that date. The Partners have agreed that the Term Loan Date is likely to
occur before January 1, 1993 and, accordingly, that the Projection and the
resulting Tranche 1 Threshold and Tranche 2 Amount (collectively, the
"Tranches") will be revised solely to reflect the actual Term Loan Date. Thus,
the period of the revised Projection (the "Revised Projection") and the
corresponding Tranches (the "Revised Tranches") will extend over 21 calendar
years, including a period commencing on the Term Loan Date and ending on
December 31, 1992.
The revision will establish Tranches for 1992 based on the computation of a
daily net cash flow figure derived from the annual Before Tax Cash Flow shown in
the Projection for 1993. For this purpose, the projected 1993 Before Tax Cash
Flow will be adjusted (the "1993 Adjusted Cash Flow") by increasing Before Tax
Cash Flow by (x) 5% of those items of expense that are subject to annual
inflation increases in the Projection and (y) all projected debt service
payments on the Term Loan. "Estimated 1992 Cash Flow" will be the amount
determined by dividing Adjusted 1993 Cash Flow by 365, multiplying the quotient
by the number of days from the Term Loan Date to and including December 31,
1992, and subtracting from the product an amount equal to the aggregate of the
scheduled debt service payments on the Term Loan during 1992 (based on the
interest rate assumed in the Projection for 1993). The Tranche 1 Threshold
-67-
<PAGE>
for 1992 `will be the Estimated 1992 Cash Flow, and the Tranche 2 Amount for
1992 will be 7.69% of the Tranche 1 Threshold for 1992.
With respect to 1993 and subsequent years, the Revised Projection will be
determined by revising the Projection solely to substitute the actual schedule
of debt service payment dates under the Term Loan for the schedule assumed in
the Projection; thus, if the Term Loan Date is earlier or later than January 1,
1993, the entire schedule of debt service in the Projection will be shifted
backward or forward in the Revised Projection to coincide with the scheduled
dates of principal repayment. The Revised Tranches for 1993 and each subsequent
year will be calculated based on the projected Before Tax Cash Flow for each
year in the Revised Projection, in the manner provided in the last sentence of
the preceding paragraph.
The Managing General Partner has provided the Developer General Partner
with a copy of the Projection, initialled by its Vice President for
identification. Promptly following the Term Loan Date, the Managing General
Partner shall prepare a proposed Revised Projection and corresponding Revised
Tranches, utilizing the assumptions underlying the Projection and modified only
as indicated above, and shall deliver copies thereof to the Developer General
Partner. The Revised Trenches as so prepared shall be binding and conclusive
unless the Developer General Partner shall object thereto by notice given to the
Managing General Partner within 30 days after such delivery. If the General
Partners are unable to resolve such objection within 30 days after such notice,
the matter shall be resolved by arbitration in the manner provided in Section
4.1(h). Upon determination of the Revised Tranches in accordance with the
foregoing, the Revised Tranches shall be substituted for this Exhibit D,
effective as of the Term Loan Date.
-68-
<PAGE>
Exhibit E
[Deleted]
<PAGE>
Exhibit F
List of Agreements and Permits
------------------------------
1. Assignment and Assumption Agreement, dated November 30, 1990, between
Orange Development and the Partnership, relating to that certain
Agreement for power sales (the "NIMO Power Purchase Agreement"), dated
September 19, 1986, between Gas Alternative Systems, Inc. ("GAS") and
Niagara Mohawk Power Corporation ("NIMO").
2. Assignment and Assumption Agreement, dated April 6, 1988, between Gas and
Orange Development, relating to the NIMO Power Purchase Agreement.
3. Amendment, dated April 7, 1989, to NIMO Power Purchase Agreement.
4. Steam Contract, dated February 27, 1990, between the Partnership and
Syracuse University (the "University") (the "Steam Contract").
5. Amendment, dated as of December 31, 1990, to the Steam Contract.
6. Operating Agreement, dated February 27, 1990, between the University and
the Partnership (the "Operating Agreement").
7. Amendment, dated as of December 31, 1990, to the operating Agreement.
8. Lease Agreement, dated February 27, 1990, between the University and the
Partnership (the "Lease Agreement").
9. Amendment, dated as of December 31, 1990, to the Lease Agreement.
10. Amendatory Letter, dated May 1, 1990, amending the Steam Contract, the
Operating Agreement and the Lease Agreement.
11. Amendatory Letter, dated June 22, 1990, amending the Steam Contract and
Lease Agreement.
12. Amendatory Letter, dated August 29, 1990, amending the Steam Contract and
Lease Agreement.
13. Letter Agreement, dated January 18, 1991, between Becon Construction
Company ("Becon") and the Partnership regarding the conditions upon which
that certain (i) Cogeneration Facility Turnkey Construction Contract,
dated as of August 17, 1988, between Orange Development and Becon, as
assigned by Orange Development to the Partnership, and as amended by
Amendment No. 1, dated May 17, 1990, and Amendment No. 2, dated May 31,
1990, and (ii) Operation and Maintenance Agreement, dated as of August
17, 1989, between Orange Development and Becon,
-70-
<PAGE>
as assigned by Orange Development to the Partnership, and as amended by
Amendment No. 1, dated May 31, 1990, would be terminated.
14. Assignment and Assumption Agreement, dated November 16, 1988, between GAS
and the Partnership, relating to that certain Agreement for Engineering
Services;, dated January 15, 1985, between GAS and O'Brien & Gere
Engineers, Inc.
15. Restated Gas Sales and Purchase Agreement restating the Gas Purchase
Agreement, dated March 18, 1991, between the partnership and Noranda (the
"Restated Gas Purchase Agreement").
16. Two Side Letter Agreements, dated as of January 3, 1991, between the
Partnership and Century, clarifying and amending the Century Construction
Contract.
17. Amended and Restated Cogeneration Facility Turnkey Construction Contract,
dated as of April 5, 1991, between the Partnership and Century (the
"Restated Facility Construction Contract").
18. Firm Natural Gas Transportation Agreement, dated March 29, 1991, between
Tennessee Co. and the Partnership (the "Tennessee Firm Natural Gas
Transportation Agreement").
19. Letter of Credit Drawing Agreement, dated March 29, 1991, between
Tennessee Co. and the Partnership.
20. Agreement of Limited Partnership of the Partnership, dated May 23, 1988
(the "Partnership Agreement").**
21. Certificate of Limited Partnership of Orange Partners dated May 12, 1988.
22. Assignment and Assumption Agreement, dated January 15, 1990, between
Orange Development and the Partnership, relating to the Certificate of
Environmental Compatibility and Public Need granted to Orange Development
pursuant to the New York State Public Service Commission ("PSC") Opinion
No. 89-17, dated June 5, 1989.
23. Right of Way Agreement, dated as of November 1, 1990, between Tennessee
Co. and the Partnership.
24. Consent to Cross Easement, dated December 10, 1990, between the Dormitory
Authority of the State of New York and the Partnership.
25. Indicative proposal, dated July 24, 1990, for Project financing of up to
$220,500,000 by ABN (the "Term Sheet").
26. Letter, dated July 31, 1990, from AEN to the Partnership converting the
Term Sheet into a commitment.
-71-
<PAGE>
27. Settlement Agreement dated March 21, 1991, among the Partnership, Orange
Development, Asea Brown Boveri Inc., and ABB Power Generation Inc.
28. Consulting Agreement, dated as of April 4, 1991, between Entek Research,
Inc. and the Partnership.
29. Letter Agreements with those claimants listed on Exhibit H to this
Agreement (excluding Donaldson, Lufkin & Jenrette Securities Corporation
and Kronish, Lieb, Weiner & Hellman ("Kronish, Lieb")), regarding of
amounts owed to each claimant and terms of delivering that claimant's
release from escrow.
30. Agreement, dated April 5, 1991, between Kronish, Lieb, on its own behalf
and on behalf of Kronish Lieb Orange Partners, L.P., and Adam H. Victor,
on his own behalf and on behalf of GAS, Orange Partners, and Orange
Development regarding selection of a dispute resolution process and
providing for an interim sharing arrangement.
31. Partial Release and Subordination Agreement, dated as of April 5, 1991,
by and among Kronish, Lieb, Agent, the Partnership and Kronish, Lieb
Orange Partners, L.P.
32. Agreement, dated April 5, 1991, between the Partnership, the City of
Syracuse and the Syracuse Housing Authority, relating to a community
center near the Project.
Permits
-------
1. PSD permit issued December 18, 1989 to the Partnership by the New York
State Department of Environmental Conservation ("DEC") (the "PSD
Permit").
2. Extension of the PSD Permit issued to the Partnership, dated November 27,
1990.
3. FERC Order, issued June 29, 1988, granting certification as a qualifying
cogeneration facility to Orange Development.
4. Notice, dated September 25, 1989, submitted by Orange Development to FERC
regarding self-recertification of qualifying status for a cogeneration
facility.
5. Supplementary letter to FERC dated October 3, 1989 regarding correction
to Notice of self recertification.
6. State Environmental Quality Review Findings Statement, dated January 21,
1990, certifying that the City of Syracuse, as lead agency, has met the
requirements of Article 8, New York State Environmental Conservation Law
and 6 N.Y.C.R.R. Part 617 in its review of the Syracuse Cogeneration
Project.
7. United States of America Department of Energy ("DOE") Order No. 274,
dated October 17, 1988, granting Orange Development conditional authority
to import natural gas from Canada.
-72-
<PAGE>
8. Amendment to DOE Order No. 274, dated December 19, 1988, approving
transfer to the Partnership of conditional authority under Order No. 274.
9. DOE Order No. 274-A, dated January 16, 1990 granting authorization to
import natural gas from Canada using existing facilities.
10. DOE Order No. 425, dated September 29, 1990, granting authorization to
import natural gas from Canada.
11. New York State Public Service Commission ("PSC") Opinion No. 89-17, dated
June 5, 1989, granting Certificate of Environmental Compatibility and
Public Need (the "Certificate") to Orange Development.
12. PSC Order, issued and effective as of November 13, 1989, approving
transfer of Certificate to the Partnership and exempting the Partnership
from regulation as a "gas corporation."
13. Letter, dated January 17, 1990, from John Dax to the PSC advising them of
transfer of Certificate to the Partnership.
14. PSC Order, issued November 30, 1990, setting a new date for the filing of
the Environmental Management and Construction Plan for the pipeline.
15. Self-Certification by Orange Development, dated May 3, 1988, filed with
the DOE pursuant to the Power Plant Industrial Fuel Use Act ("PPIFUA").
16. Revised Self-Certification by Orange Development under PPIFUA, dated May
24, 1988.
17. PSC Order, issued July 7, 1987 (Case 29292), approving the Power Purchase
Contract.
18. PSC Order, issued January 26, 1988 (Case 29292), conditioning revised
approval of the Power Purchase Contract (which requires submission to PSC
of all final environmental permits and a description of the environmental
impacts of the facility).
19. Notice by GAS to the PSC, dated February 12, 1988, relating to acceptance
of the terms and conditions of the PSC Order issued January 26, 1988
(Case 29292).
20. Notice by GAS to the PSC, by letter, dated April 22, 1988, relating to
(i) plans to construct a facility of 80 MW net electric power generation
capacity, (ii) the assignment of GAS' interest under the Power Purchase
Contract to Orange Development, and (iii) plans that Orange Development
will assign its interest under the Power Purchase Contract to a limited
partnership.
21. Notice by the PSC, dated July 10, 1989, approving amendment of April 7,
1989 to Power Purchase Contract.
-73-
<PAGE>
22. Letter, dated November 5, 1990, from PSC to the Partnership's counsel
stating that all conditions capable of being satisfied prior to operation
of the facility have been satisfied.
23. Permits from Onondaga County Department of Transportation to install
pipeline within the public right of way of Sentinel Heights Road,
Lafayette Road and Rock Cut Road.
24. Permit or License, dated April 4, 1991, issued by the City of Syracuse to
the Partnership (and currently being held in escrow by Kronish, Lieb
until the Initial Funding Date) regarding street crossings.
__________________
** Superseded by this Agreement.
-74-
<PAGE>
Exhibit G
Legal Proceedings
-----------------
1. Proceeding presently before the New York State Public Service Commission
(the "PSC") regarding Guarantor's Application (filed March 15, 1991) to
amend the Certificate of Environmental Compatibility and Public Need
issued by the PSC pursuant to Opinion No. 89-17.
2. Proceeding presently before the PSC regarding approval of the
Environmental Management and Construction Plan ("EM&CP") which was
submitted by the Guarantor on March 15, 1991.
3. Phase II EM&CP proceedings to be instituted upon Phase II filings with
the PSC.
4. Proceeding presently before the United States Department of Energy
("DOE") regarding Guarantor's Application (filed March 22, 1991) to Amend
DOE Order No. 425.
5. Possible action by Donaldson, Lufkin & Jenrette Securities Corporation
against the Guarantor for a claim estimated to be $2,870,000.
6. Possible arbitration involving Orange Partners, Orange Development and
Kronish, Lieb, Weiner & Hellman regarding legal fees (if not settled
pursuant to the agreement between them).
7. Other right of way and permit applications or proceedings contemplated by
Exhibits to the Financing Agreement.
-75-
<PAGE>
Exhibit H
List of Claims
--------------
1. Claim, as of the Initial Funding Date, by Brown, Williams, Quinn & Chinn,
Inc., in the amount of $50,000.*
2. Claim, as Of the Initial Funding Date, by Bower & Gardener, in the amount
of $89,950.*
3. Claim, as of the Initial Funding Date, by Pepper Hamilton & Scheetz, in
the amount of $9,890.*
4. Claim, as of the Initial Funding Date, by Hodgson, Russ, Andrews, Woods &
Goodyear in the amount of $8,436.25.*
5. Claim, as of the Initial Funding Date, by Holden Day Wilson, in the
amount of $25,847.29.*
6. Claim, as of the Initial Funding Date, by Barclays Bank PLC, in the
amount of $339,662.*
7. Claim, as of the Initial Funding Date, by the Estate of Charlene Victor,
in the amount of $70,000.*
8. Claim, as of the Initial Funding Date, by the Estate of Alfred Bruggeman,
in the amount of $50,000.*
9. Claim, as of the Initial Funding Date, by AEB Power Generation, Inc., in
the amount of $700,000.*
10. Claim, as of the Initial Funding Date, by Syracuse University, in the
amount of $12,500.*
11. Claim, as of the Initial Funding Date, by Perelson, Johnson & Rones,
P.C., in the amount of $160,000.
12. Claim, as of February 28, 1991, by Cohen and Dax, in the amount of
$243,361.34.+
13. Claim, as of February 28, 1991, by Nixon, Hargrave, Devans & Doyle, in
the amount of $140,301.60.+
14. Claim, as of the Initial Funding Date, by Douglas C. Corbett, Esq., in
the amount of $52,750.16.*
15. Claim, as of the Initial Funding Date, by Entek Research, Inc., in the
amount of $750,000.++
-76-
<PAGE>
16. Claim, as of the Initial Funding Date, by Irwin Margiloff, in the amount
of $22,000.*
17. Claim, as of the Initial Funding Date, by KPMG Peat Marwick, in the
amount of $9,900.*
18. Claim, as of the Initial Funding Date, by Bizar Shustak, Martin &
Schneider, in the amount of $120,000.*
19. Claim, as of the Initial Funding Date, by the New York State Energy
Research Development Authority, in the amount of $480,000.*
20. Claim, as of the Initial Funding Date, by LFC Energy Resources in right
of Cogeneration Capital Associates, in the amount of $50,000.*
21. Claim, as of the Initial Funding Date, by Donaldson Lufkin & Jenrette
Securities Corporation estimated to be $2,870,000.
22. Claim, as of the Initial Funding Date, by O'Brien & Gere Engineers, Inc.,
in the amount of $l,000,000.*
23. Claim, as of the Initial Funding Date, by Tenneco Gas, in the amount of
$2,120.*
24. Claim, as of the Initial Funding Date, by Kronish, Lieb, Weiner &
Heilman, in the amount of $67,500 for loans.
25. Claim, as of the Initial Funding Date, by Abe Reingold, in the amount of
$25,000.
26. Claim, as of the Initial Funding Date, by the Estate of Leonard Miller,
in the amount of $15,000.
27. Claim, as of the Initial Funding Date, by Becon Construction Company, in
the amount of $1,000,000.
28. Claim, as of April 30, 1991, by Century Contractors West, Inc.
("Century"), in the amount of $90,000 for advances made pursuant to the
that certain letter agreement, dated as of January 3, 1991, between
Century and the Partnership.
29. Claim, as of April 5, 1991, by McKenzie, Smith, Lewis, Michell & Hughes,
in an amount at least equal to $9,800.+
30. Claim, as of the Initial Funding Date, by Kronish, Lieb, Weiner &
Hellman, in an indeterminate amount, for legal fees. +
31. Claim, by Syracuse University for fees of Bond, Schoeneck & King in the
amount of $ ** for certain legal services rendered pursuant to
--
Article IV and Article VI of the Steam Contract.
-77-
<PAGE>
32. Claim, as of the Initial Funding Date, by Hiscock & Barclay for legal
fees in an amount estimated at $80,000.
33. Claim by Consolidated Rail Corporation, as of April 5, 1991, for an
estimated $2,500.
_____________________
+ Claim will continue to increase until the Initial Funding Date because
services are still being rendered. There is however a $300,000 cap on
claim by Cohen and Dax.
++ $500,000 will be paid on the Initial Funding Date. The balance will be
paid and/or extinguished at Term Loan Date in accordance with the terms
of the Financing Agreement.
* Amount of Claim is based on a release (the "Releases") received and
currently being held in escrow by Kronish, Lieb, Weiner & Hellman. The
claimant may demand return of its Release at any time prior to the
Initial Funding Date.
** To be provided prior to the Initial Funding Date.
-78-
<PAGE>
Exhibit 3.2
Certificate of Incorporation
of
Project Orange Capital Corp.
1. Name. The name of the corporation is Project Orange Capital Corp.
----
(the "Corporation").
2. Address; Registered Agent. The address of the Corporation's
-------------------------
registered office is 1013 Centre Road, City of Wilmington, County of New Castle,
Delaware 19805-1297 and its registered agent at such address is Corporation
Service Company.
3. Nature of Business; Purposes. The nature of the business and
----------------------------
purposes to be conducted or promoted by the Corporation are to engage in, carry
on and conduct any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
4. Number of Shares. The total number of shares of stock which the
----------------
Corporation shall have authority to issue is 10,000 shares of Common Stock, $.01
par value.
5. Name and Address of Incorporator. The name and address of the
--------------------------------
incorporator are as follows:
Name Address
---- -------
Constance Notter Piper Marbury Rudnick & Wolfe LLP
1251 Avenue of the Americas
New York, NY 10020-1104
6. Election of Directors. Members of the Board of Directors may be
---------------------
elected either by written ballot or by voice vote.
7. Adoption, Amendment and/or Repeal of By-Laws. In furtherance and
--------------------------------------------
not in limitation of the powers conferred by the General Corporation Law of the
State of Delaware, the Board of Directors may from time to time make, alter or
repeal the by-laws of the Corporation; provided, however, that the Board of
Directors shall not make, alter or repeal any Bylaw pertaining to the number of
stockholders or directors required to constitute a quorum at meetings of
stockholders or directors.
8. Compromise or Arrangement. Whenever a compromise or arrangement
-------------------------
is proposed between this Corporation and its creditors or any class of them
and/or between this Corporation and its stockholders or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
for this Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the
<PAGE>
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
9. Liability of Directors; Indemnification. (a) No director of the
---------------------------------------
Corporation shall have any personal liability to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director of
the Corporation, except (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware
or (iv) for any transaction from which the director derived an improper personal
benefit.
(b) The Corporation shall indemnify any director or officer of the
Corporation and may indemnify any employee or agent of the Corporation who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(c) The Corporation shall indemnify any director or officer of the
Corporation and may indemnify any employee or agent of the Corporation who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and
<PAGE>
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(d) Any indemnification under paragraphs (b) or (c) of this Article 9
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in such
paragraphs (b) and (c). Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (i) by a
majority vote of the directors of the Corporation who are not parties to such
action, suit or proceeding, even though less than a quorum, or (ii) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (iii) if there are no such directors, or, even if
such directors so direct, by independent legal counsel in a written opinion, or
(iv) by the stockholders of the Corporation.
(e) Expenses (including attorneys' fees) incurred by an officer,
director, employee or agent in defending any civil, criminal, administrative or
investigative action, suit or proceeding as provided herein may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation authorized in this
Article 9. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon such
terms and conditions, if any, as the Corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other sections of this Article 9 shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
(g) The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of Section 145
of the General Corporation Law.
<PAGE>
(h) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article 9 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
10. Books of Corporation. The books of the Corporation may be kept
--------------------
(subject to any provision contained in the General Corporation Law of the State
of Delaware) outside the State of Delaware at such place as may be designated
from time to time by the Board of Directors or the by-laws of the Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation on this 10th day of November, 1999.
/s/ Constance Notter
_________________________________
Constance Notter
Sole Incorporator
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
PROJECT ORANGE CAPITAL CORP.
ARTICLE I.
OFFICES
Section 1. Registered Office. The registered office of the above-named
-----------------
corporation shall be located at 1013 Centre Road, City of Wilmington, County of
New Castle, Delaware 19805-1297.
Section 2. Other Offices. The corporation may also have offices at
-------------
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place. All meetings of the stockholders for any
--------------
purpose shall be held at such time and place, either within or without the State
of Delaware, as shall be designated from time to time by the Board of Directors
and stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual Meeting. Annual meetings of stockholders, commencing
--------------
with the year 1999, shall be held on the second Tuesday in December if not a
legal holiday, and, if a legal holiday, then on the next business day following,
at 10:00 A.M., or at such other date and time as shall be designated from time
to time by the Board of Directors. For the purposes of these bylaws a "business
day" shall mean any day other than a Saturday, a Sunday or a day on which
banking institutions in The City of New York, New York are authorized or
obligated by law or executive order to be closed. At the annual meeting, holders
of the corporation's voting stock, shall elect, by a plurality vote, subject to
the certificate of incorporation and any agreement by and among the
stockholders, a Board of Directors and transact such other business as may
properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual
------------------------
meeting, stating the place, date and time of the meeting, shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
<PAGE>
Section 4. List of Stockholders. The officer who has charge of the
--------------------
stock ledger of the corporation shall prepare and make, at least five (5) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least five (5) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 5. Special Meetings. Special meetings of the stockholders for
----------------
any purpose or purposes, unless otherwise prescribed by statute, by the
certificate of incorporation or by an agreement by and among the stockholders,
may be called by the President and shall be called by the President or the
Secretary at the request in writing of two (2) members of the Board of Directors
or at the request in writing of stockholders owning a majority in amount of the
entire capital stock of the corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Notice of Special Meetings. Written notice of a special
--------------------------
meeting, stating the place, date and time of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting.
Section 7. Limit on Business at Special Meetings. Business transacted
-------------------------------------
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
Section 8. Quorums. The holders of a majority of the stock issued and
-------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of stockholders for the
transaction of business, except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting of the time and place of such adjourned meeting, until a quorum
shall be present in person or represented by proxy. At any adjourned meeting at
which a quorum shall be present or represented by proxy, any business may be
transacted which might have been transacted at the meeting as originally called.
If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. Voting at Meetings. When a quorum is present at any
------------------
meeting, the vote of the holders of a majority of the stock having voting power,
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question
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<PAGE>
is one upon which by express statutory provision, provision of the certificate
of incorporation or provision of an agreement by and among the stockholders a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 10. Voting Power. Unless otherwise provided in the certificate
------------
of incorporation or an agreement by and among the stockholders, each stockholder
shall at every meeting of the stockholders be entitled to one (1) vote in person
or by proxy for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three (3) years from its date,
unless the proxy provides for a longer period.
Section 11. Written Consent Without Meeting. Unless otherwise provided
-------------------------------
in the certificate of incorporation or an agreement by and among the
stockholders, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III.
DIRECTORS
Section 1. General Powers. The business of the corporation shall be
--------------
managed by, or under the direction of, its Board of Directors which may exercise
all such powers of the corporation and do all such lawful acts and things as are
not by statute, the certificate of incorporation, these bylaws or an agreement
by and among the stockholders directed or required to be exercised or done by
the stockholders.
Section 2. Election and Tenure. The number of directors which shall
-------------------
constitute the whole board shall be a minimum of two (2). The first board shall
consist of three (3) director. Thereafter the number of directors shall be
determined by the Board of Directors or by the stockholders at any meeting or in
an agreement by and among the stockholders subject to any restrictions set forth
in the certificate of incorporation or any agreement with any shareholder.
Except as provided in Section 3 of this Article III or in an agreement by and
among the stockholders, each director shall hold office until his successor or
successors are elected and shall qualify or until his earlier resignation or
removal.
Section 3. Vacancies and Newly Created Directorships. Subject to any
------------------------------------------
restrictions set forth in the certificate of incorporation or any agreement with
any shareholder vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum,
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<PAGE>
or by a sole remaining director and the directors so chosen shall hold office
for the remainder of the term of the directors whom they replaced and for newly
created directors until the next annual meeting and until their successors are
duly elected and qualified, or until their earlier resignation or removal. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute or by an agreement by and among the stockholders.
Section 4. Place of Meetings. The Board of Directors of the
-----------------
corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected
---------------
Board of Directors shall be held immediately after the annual meeting and no
notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting, provided a quorum shall be present.
Section 6. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held with one (1) days notice to each director, either
personally, by mail, by telegram, by telex or by facsimile transmission at such
time and at such place as shall from time to time be determined by the board.
Section 7. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by the President on two (2) days' notice to each
director, either personally, by mail, by telegram, by telex or by facsimile
transmission; special meetings shall be called by the President in like manner
and on like notice upon the written request of a two (2) of the directors then
in office. Any notice may be given by the Secretary and need not state the
purpose or purposes of the meeting unless otherwise required by these bylaws.
Section 8. Quorum and Adjournments. At all meetings of the board, a
-----------------------
majority of the directors shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute, by the certificate of
incorporation or by an agreement by and among the stockholders. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time without notice other
than announcement at the meeting until a quorum shall be present.
Section 9. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing and the writing is
filed with the minutes of the proceedings of the board or committee.
Section 10. Meetings by Telephone or Similar Communications Equipment.
---------------------------------------------------------
Members of the Board of Directors or any committee designated by the Board of
Directors may participate in a meeting of the Board of Directors or any
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in
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<PAGE>
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Section 11. Compensation. Unless otherwise restricted by the
------------
certificate of incorporation, these bylaws or by an agreement by and among the
stockholders, the Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 12. Removal of Directors. Unless otherwise restricted by
--------------------
statute, by the certificate of incorporation or by an agreement by and among the
stockholders, any director or the entire Board of Directors may be removed, with
or without cause, by the holders of a majority of shares entitled to vote at an
election of directors.
Section 13. Resignation of Directors. Any director may resign at any
------------------------
time by giving written notice to the Board of Directors, the President or the
Secretary of the corporation. Unless otherwise specified in such notice, a
resignation shall take effect upon the delivery thereof to the Board of
Directors or the designated officer. It shall not be necessary for a resignation
to be accepted before it becomes effective.
ARTICLE IV.
COMMITTEES
Section 1. Designation. Except as restricted by the provisions of the
-----------
statutes, the certificate of incorporation or any agreement by and among the
stockholders, the Board of Directors may, by resolution passed by a majority of
the whole board, designate one (1) or more committees, each committee to consist
of one (1) or more of the directors of the corporation, and the board may
designate one (1) or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee.
Except as restricted by the provisions of the statutes, the
certificate of incorporation or any agreement by and among the stockholders in
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
Section 2. Powers. Any such committee, to the extent provided in the
------
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation and may authorize
-5-
<PAGE>
the seal of the corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to amending
the certificate of incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors as provided in Section 151(a) of the
State of Delaware General Corporation Law, fix any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the corporation), adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution or amending these bylaws; and, unless the resolution
or the certificate of incorporation expressly so provides, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock or to adopt a certificate of ownership and merger. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 3. Minutes and Reports. Each committee shall keep regular
-------------------
minutes of its meetings and report the same to the Board of Directors when
required.
ARTICLE V.
NOTICES
Section 1. Form and Delivery. Whenever, under the provisions of
-----------------
statutes, the certificate of incorporation or these bylaws, notice is required
to be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given three (3) days after the time of mailing. Notice to directors may also be
given by telegram, telex or facsimile transmission at such director's address as
it appears in the corporation's records.
Section 2. Waiver. Whenever any notice is required to be given under
------
the provisions of statutes, the certificate of incorporation or these bylaws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent to receipt of the notice.
Section 3. Attendance at Meetings as Waiver of Notice. Any
------------------------------------------
stockholder who attends a meeting of stockholders in person or is represented at
that meeting by proxy without protesting, at the commencement of the meeting,
the lack of notice to him or any director who attends a meeting of the Board of
Directors without protesting, at the commencement of the meeting, the lack of
notice to him shall, in each case, be conclusively deemed to have waived notice
of that meeting.
-6-
<PAGE>
ARTICLE VI.
OFFICERS
Section 1. Designation. Subject to the terms of any agreement by and
-----------
among the stockholders, the officers of the corporation shall be chosen by the
Board of Directors and shall be a Chairman, a President, a Treasurer and a
Secretary. The Board of Directors may also choose one or more Vice Presidents
and one or more Assistant Treasurers and Assistant Secretaries. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these bylaws otherwise provide.
Section 2. Election. Subject to the terms of any agreement by and
--------
among the stockholders, the Board of Directors at its annual meeting shall
choose a President, a Treasurer and a Secretary and may choose such other
officers as it deems appropriate.
Section 3. Powers and Other Duties. The officers shall exercise such
-----------------------
powers and perform such duties as shall be determined from time to time by the
Board of Directors.
Section 4. Salaries. The salaries of all officers and agents of the
--------
corporation shall be fixed by the Board of Directors.
Section 5. Term of, and Removal from Office. The officers of the
--------------------------------
corporation shall hold office until their successors are chosen and qualified.
Any officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the corporation shall be filled by the Board
of Directors.
Section 6. The Chairman. The Chairman shall be the Chairman of the
------------
Board of Directors. The Chairman shall have such powers and perform such duties
as usually pertain to the office of the Chairman as may from time to time be
assigned by the Board of Directors. The Chairman shall preside at all meetings
of the stockholders and the Board of Directors.
Section 7. The President. The President shall be the chief executive
-------------
officer of the corporation and shall have general supervision and control over,
and responsibility for, the day-to-day operations of the corporation, subject to
the general policy directions of the Chairman of the Board and/or the Board of
Directors itself, shall see that all orders and resolutions of the Board of
Directors are carried into effect and shall have such other powers and shall
perform such other duties as may from time to time be assigned to him by the
Chairman and/or the Board of Directors.
The President shall, under the seal of the corporation, execute bonds,
mortgages and other contracts requiring a seal except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
-7-
<PAGE>
Section 8. The Treasurer. The Treasurer shall have the custody of the
-------------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings or when the Board of Directors so requires, an account of
all the Treasurer's transactions and of the financial condition of the
corporation.
If required by the Board of Directors, the Treasurer shall give the
corporation a bond (which shall be renewed every six (6) years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of the Treasurer's office and for the
restoration to the corporation, in case of the Treasurer's death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under the Treasurer's
control belonging to the corporation.
Section 9. Vice Presidents. The Vice Presidents, if any, shall
---------------
perform such duties and have such powers as the Board of Directors may from time
to time prescribe.
Section 10. The Secretary. The Secretary shall attend all meetings of
-------------
the Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Board of Directors and of the stockholders in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors and shall perform such other duties as may be prescribed by
the Board of Directors or the President, under whose supervision he shall be.
The Secretary shall have custody of the corporate seal of the corporation and
the Secretary or an Assistant Secretary shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by the
Secretary's signature or by the signature of such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the corporation and to attest the affixing by the Secretary's signature.
Section 11. The Assistant Treasurers and Secretaries. The Assistant
----------------------------------------
Treasurer and Assistant Secretary (or, if there is more than one, the Assistant
Treasurers and Assistant Secretaries in the order designated by the Board of
Directors or, if there be no such designation, then in the order of their
election) shall, in the absence of the Treasurer or Secretary, or in the event
of the Treasurer's or Secretary's inability or refusal to act, perform the
duties and exercise the powers of the Treasurer or Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
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<PAGE>
ARTICLE VII.
CERTIFICATES FOR SHARES
Section 1. Form and Signatures. The shares of the corporation shall
-------------------
be represented by a certificate or shall be uncertificated. Certificates shall
be signed by, or in the name of the corporation by, the President and the
Treasurer or Secretary or an Assistant Treasurer or Assistant Secretary of the
corporation.
Upon the face or back of each stock certificate issued to represent
any partly paid shares, or upon the books and records of the corporation in the
case of uncertificated partly paid shares, shall be set forth the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated.
If the corporation shall be authorized to issue more than one (1)
class of stock or more than one (1) series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock; provided
that, except as otherwise provided in Section 202 of the State of Delaware
General Corporation Law, in lieu of the foregoing requirements, there may be set
forth on the face or faces of the certificate which the corporation shall issue
to represent such class or series of stock a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the State of
Delaware General Corporation Law or a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Signature on Certificates. Any or all of the signatures on
-------------------------
a certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
-----------------
certificate or certificates or uncertificated shares to be issued in place of
any certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates or uncertificated shares, the Board of
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<PAGE>
Directors may require the owner or his legal representative to give the
corporation a bond in such sum as it may direct as indemnity against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 4. Transfers of Stock. Upon surrender to the corporation or
------------------
the transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instruments from the
registered owner of uncertificated shares, such uncertificated shares shall be
canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the corporation.
Section 5. Record Date. In order that the corporation may determine
-----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, to express consent to corporate action in writing
without a meeting, to receive payment of any dividend or other distribution or
allotment of any rights, to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty (60) nor less than ten (10) days before the date of such meeting
nor more than sixty (60) days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 6. Registered Stockholders. The corporation shall be entitled
-----------------------
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by statute.
ARTICLE VIII.
INDEMNIFICATION AND INSURANCE
Section 1. Indemnification. (a) The Corporation shall indemnify any
---------------
director or officer of the Corporation and may indemnify any employee or agent
of the Corporation who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
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<PAGE>
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any director or officer of
the Corporation and may indemnify any employee or agent of the Corporation who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(c) Any indemnification under Section 1(a) and (b) of this Article
VIII (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1(a) and (b). Such determination shall be made, with respect to a person
who is a director or officer at the time of such determination, (i) by a
majority vote of the directors of the Corporation who are not parties to such
action, suit or proceeding, even though less than a quorum, or (ii) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (iii) if there are no such directors, or, even if
such directors so direct, by independent legal counsel in a written opinion, or
(iv) by the stockholders of the Corporation.
(d) Expenses (including attorneys' fees) incurred by an
officer, director, employee or agent in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation pursuant to this
Article VIII. Such expenses (including attorneys' fees)
-11-
<PAGE>
incurred by former directors and officers or other employees and agents may be
so paid upon such terms and conditions, if any, as the Board deems appropriate.
(e) The indemnification and advancement of expenses provided by, or
granted pursuant to, other Sections of this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 2. Insurance for Indemnification. The Corporation may
-----------------------------
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of Section 145 of the General Corporation Law.
ARTICLE IX.
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding capital stock of
---------
the corporation, subject to the provisions of the statutes, the certificate of
incorporation or any agreement by and among or with any stockholders, may be
declared by the Board of Directors at any regular or special meeting of
directors and dividends may be paid in cash, property or in shares of the
capital stock.
Section 2. Reserves. Before payment of any dividend, there may
--------
be set aside out of any funds of the corporation available for dividends such
sum or sums as the directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, for equalizing
dividends, for repairing or maintaining any property of the corporation or for
such other purpose as the directors shall think conducive to the interest of the
corporation and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 3. Annual Statement. The Board of Directors shall present at
----------------
each annual meeting or special meeting of the stockholders, when called for by
vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
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<PAGE>
Section 4. Checks. All checks or demands for money and notes of the
------
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the corporation shall be
-----------
fixed by resolution of the Board of Directors.
Section 6. Corporate Seal. The corporate seal shall have inscribed
--------------
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed, affixed, reproduced or otherwise.
Section 7. Indemnification. The corporation shall indemnify its
---------------
officers and directors to the fullest extent permitted by the General
Corporation Law of the State of Delaware. The Corporation may indemnify
employees and agents of the corporation in accordance with Delaware law as the
Board of Directors shall determine in its sole discretion.
ARTICLE X.
AMENDMENTS
These bylaws may be altered, amended or repealed or new bylaws may be
adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new bylaws is contained in the
notice of such special meeting. If the power to adopt, amend or repeal bylaws is
conferred upon the Board of Directors by the certificate of incorporation, it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal bylaws.
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<PAGE>
Exhibit 3.4
FIRST AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
-----------------------------------
THIS AGREEMENT, dated December 6, 1999, and effective as of June 17, 1999,
is among the individuals and/or entities signing it below.
WHEREAS, the individuals and entities signing this Agreement desire to form
a limited liability company known as G.A.S. ORANGE ASSOCIATES, L.L.C. pursuant
to the Delaware Limited Liability Company Act;
WHEREAS, the individuals and entities signing this Agreement desire to
establish their respective rights and obligations pursuant to the Delaware
Limited Liability Company Act in connection with forming such a limited
liability company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the individuals and entities signing this
Agreement below agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Definitions. In this Agreement, the following terms shall have the
-----------
meanings set forth below:
(a) "Certificate of Formation" shall mean the Certificate of
Formation of the Company filed with the Delaware Secretary of State on June 17,
1999, as it may from time to time be amended.
(b) "Capital Account" as of any date shall mean the Capital
Contribution to the Company by a Member, adjusted as of such date pursuant to of
this Agreement.
(c) "Capital Contribution" shall mean any contribution by a Member to
the capital of the Company in cash, property or services rendered or a
promissory note or other obligation to contribute cash or property or to render
services.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended,
or any superseding federal revenue statute.
(e) "Company" shall refer to G.A.S. ORANGE ASSOCIATES, L.L.C.
(f) "Distribution" means any cash and other property paid to a Member
by the Company from the operations of the Company.
<PAGE>
(g) "Fiscal Year" shall mean the fiscal year of the Company, which
shall be the year ending December 31.
(h) "Membership Interests" shall mean with respect to the Company the
value of all Capital Contributions and with respect to any Member the ratio of
the value of the Capital Contribution of such Member to the aggregate value of
all Capital Contributions.
(i) "Member" shall mean each Person who or which executes a
counterpart of this Agreement as a Member and each Person who or which may
hereafter become a party to this Agreement.
(j) "Net Losses" shall mean the losses of the Company, if any;
determined in accordance with generally accepted accounting principals employed
under the cash method of accounting.
(k) "Net Profits" shall mean the income of the Company, if any,
determined in accordance with generally accepted accounting principles employed
under the cash method of accounting.
(l) "Delaware Act" shall mean the Delaware Limited Liability Company
Act as set forth in the Delaware Code Annotated, Title 6, Chapter 18.
(m) "Person" shall mean any corporation, governmental authority,
limited liability company, partnership, trust, unincorporated association or
other entity.
(n) "Selling Member" shall mean a Member desiring to sell a
Membership Interest.
(o) "Treasury Regulations" shall mean all proposed, temporary and
final regulations promulgated under the Code as from time to time in effect.
ARTICLE II
ORGANIZATION
------------
2.1 Formation. One or more Persons has acted or will act as an organizer
---------
or organizers to form a limited liability company by preparing, executing and
filing with the Delaware Secretary of State the Certificate of Formation
pursuant to the Delaware Act.
2.2 Name. The name of the Company is G.A.S. ORANGE ASSOCIATES, L.L.C.
----
2
<PAGE>
2.3 Principal Place of Business. The principal place of business of the
---------------------------
Company within the State of New York shall be in Onondaga County, New York. The
Company may establish any other places of business as the Members may from time
to time deem advisable.
2.4 Term. The term of the Company shall begin on the date of filing of
----
the Certificate of Formation with the Delaware Secretary of State and shall
continue until the Company is dissolved pursuant to this Agreement or the
Delaware Act.
2.5 Purposes. The purpose for which the Company is formed shall consist
--------
solely of the following:
(i) to acquire and own a general partner interest and a limited
partner interests in Project Orange Associates, L.P., a Delaware
Limited Partnership ("POA").
(ii) to acquire and maintain, directly or indirectly, equity
interests in Project Orange Funding L.P. and Project Orange Capital
Corp., and/or such other entities, the existence of which is necessary
or desirable for the purpose of owning, operating, maintaining and/or
financing POA, including without limitation in connection with the
issuance and servicing of the Senior Secured Notes ("Senior Secured
Notes") originally issued by said entities to Donaldson, Lufkin and
Jenrette Securities Corporation pursuant to the Offering Memorandum of
said entities dated on or about November 17, 1999, as such Offering
Memorandum may be amended, supplemented or reissued from time to time.
(iii) to act as, and exercise all of the authority of, a general
partner and a limited partner of POA;
(iv) to take any and all other action necessary to maintain the
existence of the Company as a limited liability company in good
standing under the laws of the State of Delaware and/or to qualify the
Company to do business as a foreign limited liability company in any
other state in which such qualification is required; and
(v) to engage in any lawful acts or activities and to exercise any
powers permitted to limited liability companies organized under the
laws of the State of Delaware; provided that any such act, activity or
power is related or incidental to an necessary, appropriate or
convenient for the accomplishment of the foregoing purposes.
At all times as long as any obligations evidenced by the Senior Secured
Notes remain outstanding and are not discharged in full, and unless such action
is otherwise permitted under the Financing Documents or authorized in writing by
the Trustee, the Company shall be prohibited from engaging in any dissolution,
liquidation, consolidation, merger or sale of
3
<PAGE>
substantially all of the Company's assets, and shall not incur any indebtedness
except for indebtedness connected with or arising out of the purposes stated in
this Section 2.5 and normal trade accounts payable in the ordinary course of
business or as may otherwise by approved by the Trustee in writing.
ARTICLE III
MEMBERS
-------
3.1 Names. The names of the Members are as set forth in Exhibit A to
-----
this Agreement.
3.2 Additional Members. A Person may be admitted as a member after the
------------------
date of this Agreement upon the vote or written consent of a majority of
Membership Interests.
3.2.A Member. In addition to the Members as set forth on Exhibit A and
------
any other Members admitted in accordance with the terms of this Agreement, the
Company shall, on or before the date on which the Offering and the Partnership
Interest Purchase Agreement are consummated, admit and shall at all times at
which Senior Secured Notes are outstanding continue to have a "Special
-------
Independent Member". Although the Special Independent Member shall be a member
- ------------------
of the Company under this Agreement and the Delaware Act, (i) all references in
this Agreement to a "Member" or the "Members" shall not, unless expressly
provided otherwise, include the Special Independent Member, (ii) the Special
Independent Member shall have no rights to receive any allocations of profits or
losses or distributions from the Company, (iii) the Special Independent Member
shall not, except as expressly provided herein, have any right to participate in
any actions or decisions required or permitted to be taken by the Members
hereunder and (iii) the Special Independent Member shall only have such rights,
benefits, duties and obligations in and to the Company as are expressly provided
under this Agreement.
As used herein the following terms shall have the following meanings:
(1) "Affiliate" shall have the same meaning as now defined in Section
---------
101 of the United States Bankruptcy Code and shall include all
"insiders", as such term is now defined in Section 101 of the Untied
States Bankruptcy Code, with respect to the Company and the Special
Independent Member.
(2) "Control" means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management and policies of a
person or entity, whether through ownership of voting securities, by
contract or otherwise.
(3) "Special Independent Member" means an individual who is admitted to
--------------------------
the Company as a Special Independent Member and who shall not have
been at the time of such individual's admission to the Company, and
may not have been at
4
<PAGE>
any time during the preceding five (t) years, and shall not be at
any time while serving as a Special Independent Member, (i) a direct
or indirect owner or beneficial holder of any equity interest of the
Company, or an officer, director, partner or employee of, the
Company or any of its equity owners, subsidiaries or Affiliates,
(ii) a substantial creditor, customer of, or supplier to, the
Company or any of its equity owners, subsidiaries or Affiliates,
(iii) a person or other entity controlling or under common Control
with any such equity owner, partner, supplier or customer, or (iv) a
member of the immediate family of any such equity owner, officer,
director, partner, employee, supplier or customer.
If, at any time during which any obligations evidenced by the Senior
Secured Notes remain outstanding and are not discharged in full, the Special
Independent Member resigns or otherwise ceases for any reason to be such (or to
qualify as a Special Independent Member), (i) no action requiring the
affirmative vote of the Special Independent Member shall be taken until a
successor Special Independent Member is appointed by the Members and such
Special Independent Member approves such action and (ii) the Members shall take
any and all actions as may be necessary or advisable to appoint a successor
Special Independent Member as promptly as possible.
3.3 Books and Records. The Company shall keep books and records of
-----------------
accounts and minutes of all meetings of the Members. Such books and records
shall be maintained on a cash basis in accordance with this Agreement.
3.4 Information. Each Member may inspect during ordinary business hours
-----------
and at the principal place of business of the Company the Certificate of
Formation, the Operating Agreement, the minutes of any meeting of the Members
and any tax returns of the Company for the immediately preceding three (3)
Fiscal Years.
3.5 Limitation of Liability. Each Member's liability shall be limited as
-----------------------
set forth in this Agreement, the Delaware Act and other applicable law. A
Member shall not be personally liable for any indebtedness, liability or
obligation of the Company, except that such Member shall remain personally
liable for the payment of his or her Capital Contribution of such Member and as
otherwise set forth in this Agreement, the Delaware Act and any other applicable
law.
3.6 Sale of All Assets. The Members shall have the right, by the vote or
------------------
written consent of at least two-thirds of all Membership Interests, to approve
the sale, lease exchange or other disposition of all or substantially all of the
assets of the Company, subject to the limitations set forth in Section 4.1.B
herein.
3.7 Priority and Return of Capital. No Member shall have priority over
------------------------------
any other Member, whether for the return of a Capital Contribution or for Net
Profits, Net Losses or a Distribution; provided, however, that this Section
shall not apply to loan or other indebtedness (as distinguished from a Capital
Contribution) made by a Member to the Company.
5
<PAGE>
3.8 Liability of a Member to the Company. A Member who or which
------------------------------------
rightfully receives the return of any portion of a Capital Contribution is
liable to the Company only to the extent now or hereafter provided by the
Delaware Act. A Member who or which receives a Distribution made by the Company
in violation of this Agreement or made when the Company's liabilities exceed its
assets (after giving effect to such Distribution) shall be liable to the Company
for the amount of such Distribution.
3.9 Financial Adjustments. No Members admitted after the date of this
---------------------
Agreement shall be entitled to any retroactive allocation of losses, income or
expense deductions incurred by the Company. The Members may, at the discretion
of the Members, at the time a Member is admitted, close the books and records of
the Company (as though the Fiscal Year had ended) or make pro rata allocations
of loss, income and expense deductions to such Member for that portion of the
Fiscal Year in which such Member was admitted in accordance with of the Code.
ARTICLE IV
MANAGEMENT
----------
4.1 Management by Members.
---------------------
(a) The powers of the Company shall be exercised by or under the
authority of, and the business and affairs of the Company shall be managed under
the direction of the Members; and the Members may make all decisions and take
all action for the Company not otherwise provided for in this Agreement.
Without limiting the generality of the foregoing, the Members shall have the
duty and authority to perform the following:
(1) Managing the Company's daily activities and establishing and
administering Company policies, procedures, and long-range plans;
(2) Opening and maintaining bank and investment accounts and
arrangements, drawing checks and other orders for the payment of money, and
designating individuals with authority to sign or give instructions with respect
to those accounts and arrangements;
(3) Delegating both professional and administrative functions to
other Members and staff;
(4) Organizing operations, developing departments and
specialties, and maintaining performance standards;
(5) Maintaining effective Company objectives and organizational
structure;
6
<PAGE>
(6) Providing and maintaining adequate insurance coverage for
all appropriate areas of Company concern;
(7) Developing Company goals, budgets and objectives;
(8) Recommending mergers with other companies, and the admission
of new Members to the Company;
(9) Determining the Company's capital requirements and the
amount of Permanent Capital which the Company shall maintain;
(10) Entering into, making and performing contracts, agreements,
and other undertakings binding the Company that may be necessary, appropriate,
or advisable in furtherance of the purposes of the Company and making all
decisions and waivers thereunder;
(11) Collecting sums due the Company;
(12) To the extent that funds of the Company are available
therefor, paying debts and obligations of the Company;
(13) Acquiring, utilizing for Company purposes, and disposing of
any asset of the Company;
(14) Borrowing money or otherwise committing the credit of the
Company for Company activities and voluntary prepayments or extensions of debt;
(15) Selecting, removing and changing the authority and
responsibility of lawyers, accountants and other advisers and consultants to the
Company;
(b) Separateness Covenants. At all times as long as any obligations
----------------------
evidenced by the Senior Secured Notes remain outstanding and are not discharged
in full, the Members shall manage the business and affairs of the Company so
that, except as the Trustee may otherwise agree from time to time in writing,
the Company shall not:
(i) engage in any business or activity other than as provided in
Section 2.5 hereof;
(ii) fail to maintain its records, books of account and bank accounts
separate and apart from those of its Members and any other person or
entity;
(iii) have its assets listed on the financial statements of any other
entity (other than to the extent reflected on a consolidated financial
statement);
7
<PAGE>
(iv) commingle its assets with the assets of any of its Members or
of any other person or entity;
(v) fail either to hold itself out to the public as a legal entity
separate and distinct from any other entity or person or to conduct
its business solely in its own name;
(vi) fail to file its own tax returns, to the extent such returns
are required to be filed;
(vii) fail to pay its debts and liabilities only out of its own
assets;
(viii) fail to preserve its existence as an entity duly organized and
validly existing under the laws of the jurisdiction of its formation,
or otherwise fail to observe all its limited liability company and
other organizational formalities;
(ix) enter into any contract or agreement with any Member or
affiliate of the Company of a Member, except upon the terms and
conditions that commercially reasonable and substantially similar to
those that would be available on an arms-length basis with
unaffiliated third parties;
(x) fail to maintain a sufficient number of employees in light of
its contemplated business operations or fail to pay the salaries of
its own employees only from its own funds;
(xi) incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any debt or obligation of any person, other
than the Senior Secured Notes), except in the ordinary course of its
business, provided that such debt is not evidenced by a note;
(xii) hold itself out to be responsible for the debts of another
person.
(xiii) own any subsidiary or make any investment in, any person or
entity, except for its ownership of partnership interests in POA or in
Project Orange Funding L.P. and Project Orange Capital Corp., and/or
such other entities, the existence of which is necessary or desirable
for the purpose of owning, operating, maintaining and /or financing
POA, including without limitation in connection with the issuance and
servicing of the Senior Secured Notes, or otherwise acquire the
obligations or securities of its Members or their Affiliates;
(xiv) make any loans or advances to any Member, Affiliate of the
Company or any third party;
8
<PAGE>
(xv) fail to allocate fairly and reasonably any overhead expenses
that are shared with an affiliate, including paying for office space
and services performed by an employee of an affiliate;
(xvi) fail to use separate stationery, invoices and checks bearing
its own name;
(xvii) pledge its assets for the benefit of any other person or
entity [other than pursuant to the terms of the Financing Documents];
(xviii) fail to correct any known misunderstandings regarding the
separate identity of the Company from that of any Member, affiliate
thereof or any other person;
(xix) fail to 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;
(xx) merge into or consolidate with any person or entity or
dissolve, terminate or liquidate in whole or in part, transfer or
otherwise dispose of all or substantially all of its assets or change
its legal structure; or
(xxi) fail to have a Special Independent Member.
As of the date hereof, the Special Independent Member of the Company is
Thomas K. O'Brien.
Notwithstanding anything to the contrary set forth in the Certificate of
Formation or this Agreement, so long as any obligations evidenced by the Senior
Secured Notes remain outstanding and are not discharged in full, the prior
written consent of all Members, including the Special Independent Member, shall
be required for the Company to:
(i) file or consent to a voluntary petition or otherwise initiate
proceedings for the Company to be adjudicated bankruptcy or insolvent
or seeking an order for relief as a debtor under the Bankruptcy Code
or file or consent to the filing of, or cause the filing of, any
petition seeking any composition, bankruptcy, reorganization,
readjustment, liquidation, dissolution or similar relief for the
Company under any applicable state or federal bankruptcy laws or any
other present or future applicable federal, state or other statute or
law relative to bankruptcy, insolvency or other relief for debtors, or
(ii) seek or consent to the appointment of a trustee, receiver,
conservator, assignee, sequestrator, custodian, liquidator (or other
similar official) of the
9
<PAGE>
Company or of all or any substantial part of the properties and assets
of the Company; or
(iii) make or consent to any general assignment for the benefit of
creditors, or
(iv) admit in writing its inability to pay its debts generally as
they become due, or declare or effect a moratorium on its debt, or
(v) sell, give, pledge, encumber, assign, transfer or otherwise
dispose of all or any part of the partnership interests in POA or the
taking of any other action that would cause the Company to fail to
have effective control over POA, or
(vi) amend or modify in any respect the Agreement Concerning
Management of Project Orange Associates, L.P. dated December 6, 1999
by and between G.A.S. Orange Associates, L.L.C. and G.A.S. Orange
Partners, L.P.
Except for the foregoing actions and decisions, and any other actions or
decisions for which the affirmative vote of the Special Independent Member is
expressly required hereunder, the Special Independent Member shall not be
entitled to participate in any actions or decisions of the Members. Whenever in
this Agreement the Special Independent Member is required to make an affirmative
vote to authorize any action or decision of the Company, the Special Independent
Member shall have an affirmative duty to consider the interests of the creditors
of the Company (and the interests of the creditors of POA as the case may be) as
well as the interest of the other Members of the Company in determining its
affirmative vote to authorize any action or decision of the Company, regardless
of whether the Company is insolvent at the time of such proposed action or
decision. In accordance with Section 18-1101 of the Delaware Act, this provision
is intended to modify any duty (including fiduciary duties) that the Special
Independent Member may have at law or in equity to the Company or its Members,
and the Special Independent Member shall not be liable to the Company or to any
Member based on its performance of its duties in good faith reliance on the
foregoing.
4.2 Intentionally Left Blank.
------------------------
4.3 Meetings of Members.
-------------------
(a) Annual Meeting. The annual meeting of the Members shall be held
--------------
on each third Tuesday in March or at such other time as shall be determined by
the vote or written consent of the Membership Interests for the purpose of the
transaction of any business as may come before such meeting.
(b) Special Meetings. Special meetings of the Members, for any
----------------
purpose or purposes, may be called by any Member.
10
<PAGE>
(c) Place of Meetings. Meetings of the Members may be held at any
-----------------
place, within or outside the State of New York, for any meeting of the Members
designated in any notice of such meeting. If no such designation is made, the
place of any such meeting shall be the chief executive office of the Company.
(d) Notice of Meetings. Written notice stating the place, day and
------------------
hour of the meeting indicating that it is being issued by or at the direction of
the person or persons calling the meeting, stating the purpose or purposes for
which the meeting is called shall be delivered no fewer than ten (10) nor more
than sixty (60) days before the date of the meeting. Attendance of a Member at
a meeting shall constitute a waiver of notice of such meeting, except where a
Member attends a meeting for the express purpose of objecting to the transaction
of any business on the ground that the meeting is not lawfully called or
convened.
(e) Record Date. For the purpose of determining the Members entitled
-----------
to notice of or to vote at any meeting of Members or any adjournment of such
meeting, or Members entitled to receive payment of any Distribution, or to make
a determination of Members for any other purpose, the date on which notice of
the meeting is mailed or the date on which the resolution declaring Distribution
is adopted, as the case may be, shall be the record date for making such a
determination. When a determination of Members entitled to vote at any meeting
of Members has been made pursuant to this Section, the determination shall apply
to any adjournment of the meeting.
(f) Quorum. Members holding not less than a majority of all
------
Membership Interests, represented in person or by proxy, shall constitute a
quorum at any meeting of Members. In the absence of a quorum at any meeting of
Members, a majority of the Membership Interests so represented may adjourn the
meeting from time to time for a period not to exceed sixty (60) days without
further notice. However, if the adjournment is for more than sixty (60) days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each Member of
record entitled to vote at such meeting. At an adjourned meeting at which a
quorum shall be present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed. The Members
present at a meeting may continue to transact business until adjournment,
notwithstanding the withdrawal during the meeting of Membership Interests whose
absence results in less than a quorum being present.
(g) Manner of Acting. If a quorum is present at any meeting, the vote
----------------
or written consent of Members holding not less than a majority of Membership
Interests shall be the act of the Members, unless the vote of a greater or
lesser proportion or number is otherwise required by the Delaware Act, the
Certificate of Formation or this Agreement. The act of a majority of the
Members of the Members present at a meeting at which a quorum is present shall
be the act of the Members who are present at a meeting of the Members at which
action on any Company matter is taken shall be presumed to have assented to the
action unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action
11
<PAGE>
with the person acting as Secretary of the meeting before the adjournment
thereof or shall deliver such dissent to the Company immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Member
who voted in favor of such action.
(h) Proxies.
-------
(i) A Member may vote in person, or in the case of a Member
other than the Special Independent Member, by proxy executed in writing by
the Member or by a duly authorized attorney-in-fact.
(ii) Every proxy must be signed by the Member or his attorney-
in-fact. No proxy shall be valid after the expiration of eleven (11) months
from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Member executing it, except as
otherwise provided in this Section.
(iii) The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the Member who executed the proxy
unless, before the authority is exercised, written notice of an
adjudication of such incompetence or of such death is received by any
Member.
(iv) Except when other provision shall have been made by written
agreement between the parties, the record holder of a Membership Interest
which he, she or it holds as pledgee or otherwise as security or which
belong to another, shall issue to the pledgor or to such owner of such
Membership Interest, upon demand therefor and payment of necessary expenses
thereof, a proxy to vote or take other action thereon.
(v) A proxy which is entitled "irrevocable proxy" and which
states that it is irrevocable, is irrevocable when it is held by (1) a
pledgee, (2) a Person who has purchased or agreed to purchase the
Membership Interest, (3) a creditor or creditors of the Company who extend
or continue credit to the Company in consideration of the proxy if the
proxy states that it was given in consideration of such extension or
continuation of credit, the amount thereof, and the name of the person
extending or continuing credit, (4) a Person who has contracted to perform
services as an officer of the Company, if a proxy is required by the
contract of employment, if the proxy states that it was given in
consideration of such contract of employment, the name of the employee and
the period of employment contracted for, or (5) a nominee of any of the
Persons described in clauses (1)-(4) of this sentence.
(vi) Notwithstanding a provision in a proxy, stating that it is
irrevocable, the proxy becomes revocable after the pledge is redeemed, or
the debt of the Company is paid, or the period of employment provided for
in the contract of employment has terminated and, in a case provided for in
Section 4.3(h)(v)(3) or (4) of this Agreement, becomes revocable three (3)
years after the date of the proxy or at the
12
<PAGE>
end of the period, if any, specified therein, whichever period is less,
unless the period of irrevocability is renewed from time to time by the
execution of a new irrevocable proxy as provided in this Section. This
paragraph does not affect the duration of a proxy under paragraph
4.3(h)(ii) of this Section.
(vii) A proxy may be revoked, notwithstanding a provision making
it irrevocable, by a purchaser of a Membership Interest without knowledge of the
existence of such proxy.
4.4 Action by Members Without a Meeting.
-----------------------------------
(a) Whenever the Members of the Company are required or permitted to
take any action by vote, such action may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken shall be signed by the Members who hold the voting
interests having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all of the
Members entitled to vote therein were present and voted and shall be delivered
to the office of the Company, its principal place of business or Member,
employee or agent of the Company. Delivery made to the office of the Company
shall be by hand or by certified or registered mail, return receipt requested.
(b) Every written consent shall bear the date of signature of each
Member who signs the consent, and no written consent shall be effective to take
the action referred to therein unless, within sixty (60) days of the earliest
dated consent delivered in the manner required by this Section to the Company,
written consents signed by a sufficient number of Members to take the action are
delivered to the office the Company, its principal place of business or Member,
employee or agent of the Company having custody of the records of the Company.
Delivery made to such office, principal place of business of a Member, employee
or agent shall be by hand or by certified or registered mail, return receipt
requested.
(c) Prompt notice of the taking of the action without a meeting by
less than unanimous written consent shall be given to each Member who have not
consented in writing but who would have been entitled to vote thereon had such
action been taken at a meeting.
4.5 Telephonic Meeting. Members of the Company may participate in any
------------------
meeting of the Members by means of a conference telephone or similar
communications equipment if all Persons participating in such meeting can hear
one another for the entire discussion of the matter(s) to be voted upon.
Participation in a meeting pursuant to this Section 4.5 shall be deemed to
constitute presence in person at such meeting.
4.6 Waiver of Notice. Notice of a meeting need not be given to any Member
----------------
who submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy, without protesting prior to
13
<PAGE>
the conclusion of the meeting the lack of notice of such meeting, shall
constitute a waiver of notice by him or her.
4.7 Voting Agreements. An agreement between two (2) or more Members, if
-----------------
in writing and signed by the parties thereto, may provide that in exercising any
voting rights, the Membership Interest held by them shall be voted as therein
provided, or as they may agree, or as determined in accordance with a procedure
agreed upon by them.
4.8 Liability for Certain Acts. The Members shall perform their duties in
--------------------------
good faith, in a manner he or she reasonably believes to be in the best
interests of the Company and with such care as an ordinarily prudent person in a
similar position would use under similar circumstances. A Member who so
performs such duties shall not have any liability by reason of being or having
been a Member. A Member shall not be liable to the Company or any Member for
any loss or damage sustained by the Company or any Member, unless the loss or
damage shall have been the result of the gross negligence or willful misconduct
of such Member. Without limiting the generality of the preceding sentence, a
Member does not in any way guaranty the return of any Capital Contribution to a
Member or a profit for the Members from the operations of the Company.
4.9 No Exclusive Duty to Company. The Members shall not be required to
----------------------------
manage the Company as their sole and exclusive function and they may have other
business interests and may engage in other activities in addition to those
relating to the Company. Neither the Company nor any Member shall have any
right pursuant to this Agreement to share or participate in such other business
interests or activities or to the income or proceeds derived therefrom. The
Members shall incur no liability to the Company or any Member as a result of
engaging in any other business interests or activities.
4.10 Indemnification. The Company shall indemnify and hold harmless the
---------------
Members, including the Special Independent Member, from and against all claims
and demands to the maximum extent permitted under the Delaware Act.
4.11 Salaries. The salaries and other compensation of the Members shall be
--------
fixed from time to time by the vote or written consent of at least a majority of
the Membership Interests.
4.12 Officers. The Members may designate one or more individuals as
--------
officers of the Company (who do not have to be a Member), who shall have such
titles and exercise and perform such powers and duties as shall be assigned to
them from time to time by the Members. Any officer may be removed by the Members
at any time, with or without cause. Each officer shall hold office until his or
her successor is elected and qualified. Any number of offices may be held by
the same individual. The salaries and other compensation of the officers shall
be fixed by the Members.
14
<PAGE>
ARTICLE V
CAPITAL CONTRIBUTIONS
---------------------
5.1 Capital Contributions. Each Member shall contribute the amount set
---------------------
forth in Exhibit A to this Agreement as the Capital Contribution to be made by
him, her or it.
5.2 Additional Contributions. Except as set forth in Section 5.1 of this
------------------------
Agreement, no Member shall be required to make any Capital Contribution.
5.3 Capital Accounts. A Capital Account shall be maintained for each
----------------
Member. Each Member's Capital Account shall be increased by the value of each
Capital Contribution made by the Member, allocations to such Member of the Net
Profits and any other allocations to such Member of income pursuant to the Code.
Each Member's Capital Account will be decreased by the value of each
Distribution made to the Member by the Company, allocations to such Member of
Net Losses and other allocations to such Member pursuant to the Code.
5.4 Transfers. Upon a permitted sale or other transfer of a Membership
---------
Interest in the Company, the Capital Account of the Member transferring his, her
or its Membership Interests shall become the Capital Account of the Person to
which or whom such Membership Interest is sold or transferred in accordance with
Section 1.704-1(b) (2) (iv) of the Treasury Regulations.
5.5 Modifications. The manner in which Capital Accounts are to be
-------------
maintained pursuant to this Section is intended to comply with the requirements
of Section 704(b) of the Code. If, in the opinion of the Members, the manner in
which Capital Accounts are to be maintained pursuant to this Agreement should be
modified to comply with Section 704(b) of the Code, then the method in which
Capital Accounts are maintained shall be so modified; provided, however, that
any change in the manner of maintaining Capital Accounts shall not materially
alter the economic agreement between or among the Members.
5.6 Deficit Capital Account. Except as otherwise required in the Delaware
-----------------------
Act or this Agreement, no Member shall have any liability to restore all or any
portion of a deficit balance in a Capital Account.
5.7 Withdrawal or Reduction of Capital Contributions. A Member shall not
------------------------------------------------
receive from the Company any portion of a Capital Contribution until all
indebtedness, liabilities of the Company, except any indebtedness, liabilities
and obligations to Members on account of their Capital Contributions, have been
paid or there remains property of the Company, in the sole discretion of the
Members, sufficient to pay them. A Member, irrespective of the nature of the
Capital Contribution of such Member, has only the right to demand and receive
cash in return for such Capital Contribution.
15
<PAGE>
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
-----------------------------
6.1 Allocations of Profits and Losses. After giving effect to the special
---------------------------------
allocations set forth in Section 6.2, the Net Profits and the Net Losses for
each Fiscal Year shall be allocated to each Member in proportion to their
Membership Interests.
6.2 Regulatory Allocations.
----------------------
(a) Qualified Income Offset. No Member shall be allocated Losses or
-----------------------
deductions if the allocation causes the Member to have an Adjusted Capital
Account Deficit. If a Member unexpectedly receives an adjustment, allocation or
distribution described in Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or
(6), such Member will be allocated items of income and gain of the Company
(consisting of a pro rata portion of each item of Company income, including
gross income and gain) for that taxable year in an amount sufficient to
eliminate such Adjusted Capital Account Deficit as quickly as possible.
(b) Minimum Gain Chargeback. Except as set forth in Regulation
-----------------------
Section 1.704-2(f)(2), (3), and (4), if, during any taxable year, there is a net
decrease in Minimum Gain, each Member, prior to any other allocation pursuant to
this Article VI, shall be specially allocated items of gross income and gain for
such taxable year (and, if necessary, subsequent taxable years) in an amount
equal to that Economic Interest Holder's share of the net decrease of Minimum
Gain, computed in accordance with Regulation Section 1.704-2(g). Allocations of
gross income and gain pursuant to this Section 6.2(b) shall be made first from
gain recognized from the disposition of Company assets subject to non-recourse
liabilities (within the meaning of the Regulations promulgated under Code
Section 752), to the extent of the Minimum Gain attributable to those assets,
and thereafter, from a pro rata portion of the Company's other items of income
and gain for the taxable year. It is the intent of the parties hereto that any
allocation pursuant to this Section 6.2(b) shall constitute a "minimum gain
chargeback" under Regulation Section 1.704-2(f).
(c) Contributed Property and Book-Ups.
---------------------------------
(i) Generally, the Capital Accounts of Members shall be
adjusted in accordance with Regulations Section 1.704-1(b)(2)(iv)(g) for
allocations to them of income, gain, loss, and deduction (including
depreciation, depletion, amortization or other cost recovery) as computed for
book purposes, with respect to property of the Company.
(ii) Notwithstanding Section 6.2(c)(i) hereof, if, with respect
to a property, the Company chooses to eliminate distortions caused by the
ceiling rule (as defined in Regulations Section 1.704-3(b)(1)) by means of the
Remedial Allocation Method (as defined in Regulations Section 1.704-3(d) and
as provided in Section 6.2(c) herein), then the Capital Accounts of Members
shall be adjusted in accordance with Regulations Section
16
<PAGE>
1.704-3(d)(2) for allocations to them of income, gain, loss, and deduction
(including depreciation, depletion, amortization or other cost recovery) as
computed for book purposes, with respect to such property.
(d) Curative Allocations. Members who contribute (or are deemed to
--------------------
contribute under Regulation (S)1.704-1(b)(2)(iv)(g)) property with a fair market
book value that differs from the adjusted basis of the property for federal
income tax purposes shall have specifically allocated to them income, gain or
deduction that reflects the difference between the fair market book value and
the adjusted basis of such property according to (S)704(c) and Regulations
(S)1.704-3(c), or (d).
6.3 Distributions. The Members may from time to time, in the discretion
-------------
of the Members, make Distributions to the Members. All Distributions shall be
made to the Members pro rata in proportion to their Membership Interests as of
the record date set for such Distribution.
6.4 Offset. The Company may offset all amounts owing to the Company by a
------
Member against any Distribution to be made to such Member.
6.5 Limitation Upon Distributions. No Distribution shall be declared and
-----------------------------
paid unless, after such Distribution is made, the assets of the Company are in
excess of all liabilities of the Company.
6.6 Interest on and Return of Capital Contributions. No Member shall be
-----------------------------------------------
entitled to interest on his, her or its Capital Contribution or to a return of
his, her or its Capital Contribution, except as specifically set forth in this
Agreement.
6.7 Accounting Period. The accounting period of the Company shall be the
-----------------
Fiscal Year.
ARTICLE VII
TAXES
-----
7.1 Tax Returns. The Members shall cause to be prepared and filed all
-----------
necessary federal and state income tax returns for the Company. Each Member
shall furnish all pertinent information in its possession relating to Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed.
7.2 Tax Elections. The Company shall make the following elections on the
-------------
appropriate tax returns:
(a) To adopt the calendar year as the Fiscal Year;
17
<PAGE>
(b) To adopt the cash method of accounting and keep the Company's
books and records on the income tax method;
(c) If a Distribution as described in Section 734 of the Code occurs
or if a transfer of a Membership Interest described in Section 743 of the Code
occurs, upon the written request of any Member, to elect to adjust the basis of
the property of the Company pursuant to Section 754 of the Code;
(d) To elect to amortize the organizational expenses of the Company
and the start-up expenditures of the Company under Section 195 of the Code
ratably over a period of sixty (60) months as permitted by Section 709(b) of the
Code; and
(e) Any other election that the Members may deem appropriate and in
the best interests of the Members.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of Subchapter K of chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state law, and no provisions of
this Agreement shall be interpreted to authorize any such election.
7.3 Tax Matters Partners. The Members shall designate one Member to be
--------------------
the "tax matters partner" of the Company pursuant to Section 6231(a) (7) of the
Code. Any Member who is designated "tax matters partner" shall take any action
as may be necessary to cause each other Member to become a "notice partner"
within the meaning of Section 6223 of the Code.
ARTICLE VIII
TRANSFERABILITY
---------------
8.1 General. No Member shall gift, sell, assign, pledge, hypothecate,
-------
exchange or otherwise transfer to another Person any portion of a Membership
Interest, except with the prior written consent of all of the Members, and only
to the extent such transfer will not violate any provision of the Financing
Documents. Nothing set forth herein shall prohibit a Member from selling,
assigning or otherwise transferring his interest in the Company to another
Member who is a party to this Agreement. Any attempted transfer or withdrawal
in contravention of this Agreement shall be void ad initio and shall not bind or
be recognized by the Company.
8.2 Offer to Acquire. If a Member desires to sell a Membership Interest
----------------
to another Person (except for another Member), such Member shall obtain from
such Person a bona fide written offer to purchase such Membership Interest,
stating the terms and conditions upon which the purchase is to be made. Such
Member shall give written notification to the other Members of his, her or its
intention to sell such Membership Interest and a copy of such bona fide written
offer.
18
<PAGE>
8.3 Right of First Refusal. Each Member other than the Selling Member, on
----------------------
a basis pro rata to the Membership Interests of each Member exercising his, her
or its right of first refusal, shall have the right to exercise a right of first
refusal to purchase all (but not less than all) of the Membership Interest
proposed to be sold by the Selling Member upon the same terms and conditions as
stated in the bona fide written offer by giving written notification to the
Selling Member of his, her or its intention to do so within thirty (30) days
after receiving written notice from the Selling Member. The failure of any
Member to so notify the Selling Member of a desire to exercise such right of
first refusal within such thirty (30) day period shall result in the termination
of such right of first refusal and the Selling Member shall be entitled to
consummate the sale of his, her or its Membership Interest with respect to which
such right of first refusal has not been exercised to the Person offering to do
so pursuant to the bona fide written offer. If the selling Member does to sell
his, her or its Membership Interest within thirty (30) days after receiving the
right to do so, his her or its right to do so terminates and the terms and
conditions of this Section shall again be in effect.
8.4 Closing. If any Member gives written notice to the Selling Member of
-------
his, her or its desire to exercise such right of first refusal and to purchase
all of the Selling Member's Interest upon the same terms and conditions as are
stated in the written offer, such Member shall have the right to designate the
time, date and place of closing within ninety (90) days after receipt of written
notification from the Selling Member of the bona fide offer.
8.5 Transferee Not a Member. No Person acquiring a Membership Interest
-----------------------
pursuant to this Section other than a Member shall become a Member unless such
Person is approved by the unanimous vote or written consent of all Membership
Interests. If no such approval is obtained, such Person's Membership Interest
shall only entitle such Person to receive the distributions and allocations of
profits and losses to which the Member from whom or which such Person received
such Membership Interest would be entitled. Any such approval may be subject to
any terms and conditions imposed by the Members.
8.6 Effective Date. Any sale of a Membership Interest or admission of a
--------------
Member pursuant to this Article shall be deemed effective as of the last day of
the calendar month in which such sale or admission occurs.
ARTICLE IX
DISSOLUTION
-----------
9.1 Dissolution. The Company shall not dissolve and terminate prior to
-----------
the date on which all obligations evidenced by the Senior Secured Notes have
been satisfied in full. The bankruptcy, dissolution, liquidation or termination
of a Member shall not cause the termination or dissolution of the Company, and
the business of the Company shall continue. Upon any such occurrence, the
trustee, receiver, executor, administrator, committee or conservator of such
Members shall have the rights of an assignee of the Membership Interests of such
Member for the purpose of settling or managing the former Member's estate of
property. At any time
19
<PAGE>
thereafter, the Company shall be dissolved and its affairs shall be wound up
upon the first to occur of the following:
(a) The vote or written consent of at least two-thirds in interest of
all Members; or
(b) The bankruptcy, death, dissolution, expulsion, incapacity or
withdrawal of any Member or the occurrence of any other event that terminates
the continued membership of any Member, unless within one hundred eighty (180)
days after such event the Company is continued by the vote or written consent of
a majority in interest of all of the remaining Members.
9.2 Winding Up. Upon the dissolution of the Company the Members may, in
----------
the name of and for an on behalf of the Company, prosecute and defend suits,
whether civil, criminal or administrative, sell and close the Company's
business, dispose of and covey the Company's property, discharge the Company's
liabilities and distribute to the Members any remaining assets of the Company,
all without affecting the liability of Members. Upon winding up of the Company,
the assets shall be distributed as follows:
(a) To creditors, including any Member who is a creditor, to the
extent permitted by law, in satisfaction of liabilities of the Company, whether
by payment or by establishment of adequate reserves, other than liabilities for
distributions to Members under Section 18-803 or Section 18-804 of the Delaware
Act;
(b) To Members and former Members in satisfaction of liabilities for
Distributions under Section 18-803 or Section 18-804 of the Delaware Act; and
(c) To Members first for the return of their Capital Contributions,
to the extent not previously returned, and second respecting their Membership
Interests, in the proportions in which the Members share in Distributions in
accordance with this Agreement.
9.3 Articles of Dissolution. Within ninety (90) days following the
-----------------------
dissolution and the commencement of winding up of the Company, or at any other
time there are no Members, articles of dissolution shall be filed with the
Delaware Secretary of State pursuant to the Delaware Act.
9.4 Deficit Capital Account. Upon a liquidation of the Company within the
-----------------------
meaning of Section 1.704-1(b) (2) (ii) (g) of the Treasury Regulations, if any
Member has a Deficit Capital Account (after giving effect to all contributions,
distributions, allocations and other adjustments for all Fiscal Years, including
the Fiscal Year in which such liquidation occurs), the Member shall have no
obligation to make any Capital Contribution, and the negative balance of any
Capital Account shall not be considered a debt owed by the Member to the Company
or to any other Person for any purpose.
20
<PAGE>
9.5 Nonrecourse to Other Members. Except as provided by applicable law
----------------------------
or as expressly provided in this Agreement, upon dissolution, each Member shall
receive a return of his, her or its Capital Contribution solely from the assets
of the Company. If the assets of the Company remaining after the payment or
discharge of the debts and liabilities of the Company is insufficient to return
any Capital Contribution of any Member, such Member shall have no recourse
against any other Member.
9.6 Termination. Upon completion of the dissolution, winding up,
-----------
liquidation, and distribution of the assets of the Company, the Company shall be
deemed terminated.
ARTICLE X
GENERAL PROVISIONS
------------------
10.1 Notices. Any notice, demand or other communication required or
-------
permitted to be given pursuant to this Agreement shall have been sufficiently
given for all purposes if (a) delivered personally to the party or to an
executive officer of the party to whom such notice, demand or other
communication is directed or (b) sent by registered or certified mail, postage
prepaid, addressed to the Member or the Company at his, her or its address set
forth in this Agreement. Except as otherwise provided in this Agreement, any
such notice shall be deemed to be given three (3) business days after the date
on which it was deposited in a regularly maintained receptacle for the deposit
of United States mail, addressed and sent as set forth in this Section.
10.2 Amendments. This Agreement contains the entire agreement among the
----------
Members with respect to the subject matter of this Agreement, and supersedes
each course of conduct previously pursued or acquiesced in, and each oral
agreement and representation previously made, by the Members with respect
thereto, whether or not relied or acted upon. No course of performance or other
conduct subsequently pursued or acquiesced in, and no oral agreement or
representation subsequently made, by the Members, whether or not relied or acted
upon, and no usage of trade, whether or not relied or acted upon, shall amend
this Agreement or impair or otherwise affect any Member's obligations pursuant
to this Agreement or any rights and remedies of a Member pursuant to this
Agreement. No amendment to this Agreement shall be effective unless made in a
writing duly executed by all Members and specifically referring to each
provision of this Agreement being amended.
10.2.A Prohibited Amendments During the Period the Senior Secured Notes
----------------------------------------------------------------
are Outstanding. Notwithstanding Section 10.2, at all times during which any
- ---------------
obligation evidenced by the Senior Secured Notes remains outstanding and is not
discharged in full, none of the Sections 2.5, 3.2.A, 4.1(b), 9.1 or this Section
10.2.A may be amended without receiving the prior written consent of all of the
Members, including the Special Independent Member.
21
<PAGE>
10.3 Construction. Whenever the singular number is used in this Agreement
------------
and when required by the context, the same shall include the plural and vice
versa, and the masculine gender shall include the feminine and neuter genders
and vice versa.
10.4 Headings. The headings in this Agreement are for convenience only and
--------
shall not be used to interpret or construe any provision of this Agreement.
10.5 Waiver. No failure of a Member to exercise, and no delay by a Member
------
in exercising, any right or remedy under this Agreement shall constitute a
waiver of such right or remedy. No waiver by a Member of any such right or
remedy under this Agreement shall be effective unless made in a writing duly
executed by all Members and specifically referring to each such right or remedy
being waived.
10.6 Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be effective and valid under
applicable law. However, if any provision of this Agreement shall be prohibited
by or invalid under such law, it shall be deemed modified to conform to the
minimum requirements of such law or, if for any reason it is not deemed so
modified, it shall be prohibited or invalid only to the extent of such
prohibition or invalidity without the remainder thereof or any other such
provision being prohibited or invalid.
10.7 Binding. This Agreement shall be binding upon and inure to the
-------
benefit of all Members, and each of the successors and assignees or the Members,
except that right or obligation of a Member under this Agreement may be assigned
by such Member to another Person without first obtaining the written consent of
all other Members.
10.8 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original and all of which shall constitute one and the
same instrument.
10.9 Governing Law. This Agreement shall be governed by, and interpreted
-------------
and construed in accordance with, the laws of the State of Delaware, without
regard to principles of conflict of laws.
22
<PAGE>
IN WITNESS WHEREOF, the individuals and/or entities signing this Agreement
below conclusively evidence their agreement to the terms and conditions of this
Agreement by so signing this Agreement.
THE VICTOR FAMILY IRREVOCABLE TRUST
/s/ Thomas K. O'Brien
By: ____________________________________
Thomas K. O'Brien, Trustee
/s/ Douglas Corbett
________________________________________
Douglas Corbett
/s/ Richard S. Scolaro
________________________________________
Richard S. Scolaro
/s/ James Ryan
________________________________________
James Ryan
/s/ Jeffrey M. Fetter
________________________________________
Jeffrey M. Fetter
SPECIAL INDEPENDENT MEMBER
--------------------------
COUNTERPART SIGNATURE PAGE
--------------------------
The undersigned intending to be admitted to G.A.S. Orange Associates,
L.L.C., a Delaware limited liability company (the "Company"), as the Special
Independent Member of the Company pursuant to the terms and provisions of the
Limited Liability Company Agreement of the Company dated as of December 6, 1999
and effective as of June 17, 1999 (the "LLC Agreement"), a copy of which has
been provided to the undersigned, and to accept and agree to be bound by all the
terms and provision of the LLC Agreement applicable to the undersigned as
Special Independent Member, does hereby execute, acknowledge and deliver this
Counterpart Signature Page.
/s/ Thomas K. O'Brien
________________________________________
Thomas K. O'Brien
<PAGE>
EXHIBIT A
---------
MEMBERS
-------
<TABLE>
<CAPTION>
PERCENTAGE CAPITAL
NAME OWNERSHIP CONTRIBUTION
---- ----------- ------------
<S> <C> <C>
The Victor Family Irrevocable Trust 84.0% $840.00
Douglas Corbett 12.5% $125.00
Richard S. Scolaro 2.0% $ 20.00
James Ryan 1.0% $ 10.00
Jeffrey M. Fetter 0.5% $ 5.00
</TABLE>
2
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
PROJECT ORANGE FUNDING, L.P.,
PROJECT ORANGE CAPITAL CORP.,
as Issuers
$68,000,000
10.5% SENIOR SECURED NOTES DUE 2007
INDENTURE
DATED AS OF DECEMBER 6, 1999
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee and Collateral Agent
<PAGE>
TABLE OF CONTENTS
_____________
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
Definitions and Incorporation by Reference
Section 1.01. Definitions..................................................... 1
Section 1.02. Other Definitions............................................... 34
Section 1.03. Trust Indenture Act Provisions.................................. 34
Section 1.04. Rules of Construction........................................... 34
ARTICLE 2
The Senior Secured Notes
Section 2.01. Form and Dating................................................. 36
Section 2.02. Execution and Authentication.................................... 38
Section 2.03. Registrar and Paying Agent...................................... 38
Section 2.04. Paying Agent to Hold Money in Trust............................. 39
Section 2.05. Holder Lists.................................................... 39
Section 2.06. Transfer and Exchange........................................... 39
Section 2.07. Replacement Senior Secured Notes................................ 54
Section 2.08. Outstanding Senior Secured Notes................................ 55
Section 2.09. Treasury Notes.................................................. 56
Section 2.10. Temporary Senior Secured Notes.................................. 56
Section 2.11. Cancellation.................................................... 56
Section 2.12. Defaulted Interest.............................................. 56
Section 2.13. The Collateral Agent............................................ 57
ARTICLE 3
Redemption and Prepayment
Section 3.01. Notices to Trustee.............................................. 57
Section 3.02. Selection of Senior Secured Notes to Be Redeemed................ 57
Section 3.03. Notice of Redemption............................................ 58
Section 3.04. Effect of Notice of Redemption.................................. 59
Section 3.05. Deposit of Redemption Price..................................... 59
Section 3.06. Senior Secured Notes Redeemed in Part........................... 59
Section 3.07. Optional Redemption............................................. 59
Section 3.08. Mandatory Redemption............................................ 60
Section 3.09. Repurchase at the Option of Holders Upon a Change of Control.... 61
ARTICLE 4
Covenants
Section 4.01. Payment of Senior Secured Notes................................. 62
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Section 4.02. Partnership Existence........................................... 63
Section 4.03. Maintenance of Office or Agency................................. 63
Section 4.04. Reports, Budget................................................. 64
Section 4.05. Compliance and Estoppel Certificates............................ 65
Section 4.06. Taxes........................................................... 66
Section 4.07. Stay, Extension and Usury Laws.................................. 66
Section 4.08. Restricted Payments............................................. 67
Section 4.09. Insurance....................................................... 67
Section 4.10. Limitation on Indebtedness...................................... 72
Section 4.11. Limitation on Liens............................................. 72
Section 4.12. Limitation on Guarantees........................................ 72
Section 4.13. Prohibitions on Other Obligations or Assignments................ 72
Section 4.14. Prohibition on Sale and Leaseback Transactions.................. 72
Section 4.15. Transactions with Affiliates.................................... 72
Section 4.16. Project Documents............................................... 73
Section 4.17. Operation of the Project........................................ 74
Section 4.18. Prohibitions on Fundamental Changes............................. 76
Section 4.19. Separate Existence.............................................. 78
Section 4.20. Investments..................................................... 79
Section 4.21. Compliance with Laws............................................ 79
Section 4.22. Books and Records............................................... 80
Section 4.23. Maintenance of "Qualifying Facility" Status..................... 80
Section 4.24. Limitations on Activities by Capital Co......................... 80
Section 4.25. Compliance with the Covenant.................................... 80
ARTICLE 5
Defaults and Remedies
Section 5.01. Events of Default............................................... 81
Section 5.02. Enforcement of Remedies......................................... 83
Section 5.03. Other Remedies.................................................. 85
Section 5.04. Waiver of Past Defaults......................................... 86
Section 5.05. Control by Majority............................................. 86
Section 5.06. Limitation on Suits............................................. 86
Section 5.07. Rights of Holders of Senior Secured Notes to Receive Payment.... 87
Section 5.08. Collection Suit by Trustee...................................... 87
Section 5.09. Trustee May File Proofs of Claim................................ 87
Section 5.10. Priorities...................................................... 88
Section 5.11. Undertaking for Costs........................................... 88
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ARTICLE 6
Trustee
Section 6.01. Duties of Trustee............................................... 89
Section 6.02. Rights of Trustee............................................... 90
Section 6.03. Individual Rights of Trustee.................................... 91
Section 6.04. Trustee's Disclaimer............................................ 91
Section 6.05. Notice of Defaults.............................................. 91
Section 6.06. Reports by Trustee to Holders of the Senior Secured Notes;
Information to Rating Agencies.................................. 91
Section 6.07. Compensation and Indemnity...................................... 92
Section 6.08. Replacement of Trustee.......................................... 93
Section 6.09. Successor Trustee by Merger, Etc................................ 94
Section 6.10. Eligibility; Disqualification................................... 94
Section 6.11. Preferential Collection of Claims Against Issuers............... 94
Section 6.12. Default Rate of Interest........................................ 95
Section 6.13. Receipt of Documents............................................ 95
ARTICLE 7
Legal Defeasance and Covenant Defeasance
Section 7.01. Option to Effect Legal Defeasance or Covenant Defeasance........ 95
Section 7.02. Legal Defeasance and Discharge.................................. 95
Section 7.03. Covenant Defeasance............................................. 96
Section 7.04. Conditions to Legal or Covenant Defeasance...................... 96
Section 7.05. Release of Collateral upon Legal or Covenant Defeasance......... 98
Section 7.06. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.................................. 98
Section 7.07. Repayment to Issuers............................................ 99
Section 7.08. Reinstatement................................................... 99
ARTICLE 8
Amendment, Supplement and Waiver
Section 8.01. Without Consent of Holders of Senior Secured Notes.............. 99
Section 8.02. With Consent of Holders of Senior Secured Notes................. 100
Section 8.03. Revocation and Effect of Consents............................... 102
Section 8.04. Notation on or Exchange of Senior Secured Notes................. 102
Section 8.05. Trustee to Sign Amendments, Etc................................. 102
ARTICLE 9
Miscellaneous
Section 9.01. Trust Indenture Act Controls.................................... 103
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Section 9.02. Notices........................................................ 103
Section 9.03. Communication by Holders of Senior Secured Notes with Other
Holders of Senior Secured Notes................................ 104
Section 9.04. Certificate and Opinion as to Conditions Precedent............. 104
Section 9.05. Statements Required in Certificate or Opinion.................. 105
Section 9.06. Rules by Trustee and Agents.................................... 105
Section 9.07. No Personal Liability of Directors, Officers, Partners,
Employees and Stockholders..................................... 105
Section 9.08. Governing Law.................................................. 106
Section 9.09. No Adverse Interpretation of Other Agreements.................. 106
Section 9.10. Successors..................................................... 106
Section 9.11. Severability................................................... 106
Section 9.12. Counterpart Originals.......................................... 106
Section 9.13. Table of Contents, Headings, Etc............................... 106
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INDENTURE dated as of December 6, 1999 among Project Orange Funding, L.P.
("Funding L.P."), a Delaware limited partnership (together with its successors,
including Project Orange Associates, L.P. ("Orange L.P."), a Delaware limited
partnership, as the survivor of the merger of Funding, L.P. with and into Orange
L.P. concurrently with the issuance of the Senior Secured Notes hereunder and
the execution of this Indenture by the parties hereto, "POA"), Project Orange
Capital Corp., a Delaware corporation ("Capital Co." and, together with POA, the
"Issuers") and U.S. Bank Trust National Association as trustee (the "Trustee")
and as collateral agent (the "Collateral Agent").
The Issuers and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 10.5% Senior Secured
Notes due 2007 (the "Senior Secured Notes"); and
On the date hereof, pursuant to the terms of this Indenture, the Issuers
are issuing for the equal and ratable benefit of the Holders of the $68,000,000
principal amount of the Senior Secured Notes.
ARTICLE 1
Definitions and Incorporation by Reference
Section 1.1. Definitions.
"144A Global Note" means a global Note in the form of Exhibit A-I hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of, and registered in the name of, the Depositary Agent or its
nominee that will be issued in a denomination equal to the outstanding principal
amount of the Senior Secured Notes sold in reliance on Rule 144A.
"Accounts" means the accounts established under and defined in the
Depositary Agreement.
"Additional Project Document" means any contract or agreement related to
the construction, testing, maintenance, repair, operation or use of the Project
or the Steam Plant (other than any contract or agreement for or evidencing
Indebtedness) entered into by POA and any other Person subsequent to the date
hereof.
"Adjusted Treasury Rate" means, with respect to any date of redemption, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such date of redemption, plus 0.5%.
<PAGE>
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling", "controlled by" and "under common control
with" shall have correlative meanings.
"Agency" means SIDA.
"Agency Agreement" means the Agency Agreement and Power of Attorney dated
as of April 5, 1991 between SIDA and Orange L.P.
"Applicable Permit" means any Permit, including any zoning, environmental
protection, pollution, sanitation, the Federal Energy Regulation Commission, the
New York Public Service Commission, safety, siting or building Permit, (a) that
is necessary at any given time to operate, maintain, repair, lease, own or use
the Project and the Steam Plant as contemplated by the Operative Documents, to
sell electricity and steam therefrom, to enter into any Operative Document or to
consummate any transaction contemplated thereby, or (b) that is necessary so
that none of POA, or the Secured Parties nor any Affiliate of any of them may be
deemed by any Governmental Authority to be subject to regulation under the FPA
or PUHCA or under any state laws or regulations respecting the rates or the
financial or organizational regulation of electric utilities solely as a result
of the operation of the Project or the sale of electricity or steam therefrom.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear or Cedel that apply to such transfer or exchange.
"Asset Manager" means Niagara Mohawk Energy Marketing, Inc., a New York
corporation.
"Asset Manager Agreements" means the Asset Management Letter Agreement
dated as of December 6, 1999 between POA and the Asset Manager pursuant to which
the Asset Manager agrees to manage the business operations and finances of POA,
including the administration of the Project Documents and to seek to maximize
the Project's revenues from the Closing Date as the same may be supplemented or
amended from time to time and any energy services management agreement entered
into in connection therewith.
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"Asset Manager Consent and Agreement" means the Consent and Agreement dated
as of December 6, 1999 among the Asset Manager, Orange L.P. and the Collateral
Agent relating to the Asset Manager Agreements.
"Assumption Agreement" means the Assumption Agreement in the form of
Exhibit F hereto executed and delivered by Orange L.P. to the Trustee on the
Closing Date currently with the consummation of the Merger.
"Bankruptcy Code" means Bankruptcy Law.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Boiler Guaranty" means the Guaranty Agreement of Century Contractors West,
Inc. units as construction contractor to the Project dated as of April 5, 1991
to the University guaranteeing certain obligations of POA under the Steam Plant
Operating Agreement and assumed by General Electric Company on February 2, 1998.
"Business Day" means any day other than a Legal Holiday.
"Canadian Hunter" means Canadian Hunter Exploration Ltd., an Alberta,
Canada corporation.
"Canadian Hunter Agreements" means the Gas Purchase Agreement, the
TransCanada Agreement and the Collateral Assignment of the Firm Service
Agreement.
"Canadian Hunter Consent and Agreement" means the Consent and Agreement
dated as of December 6, 1999 among Canadian Hunter, the Collateral Agent and
Orange L.P. relating to the Gas Purchase Agreement.
"Capital Expenditure Reserve Account" means the account of such name
created under and defined in the Depositary Agreement.
"Capital Expenditure Reserve Required Balance" means an amount equal to:
(1) the aggregate Capital Expenditures budgeted for the next succeeding
twelve-month period (A) as approved by the Independent Engineer and delivered to
the Trustee and the Collateral Agent at least annually and (B) as adjusted by
management and set forth in an Officers' Certificate delivered to the Trustee
and the Collateral Agent six (6) months following each budget approved by the
Independent Engineer plus
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(2) $3.5 million until such time as a life extension program for the Steam
Plant is approved by POA and the Independent Engineer, at which time the portion
of the Capital Expenditures Reserve Required Balance required by this clause (2)
shall be reduced to an amount equal to the discounted present value of the
Capital Expenditures contemplated by the approved life extension program for the
Steam Plant (or, in the event of a dispute between the two, the Required Capital
Expenditure Reserve Balance shall be reduced to the discounted present value of
the Capital Expenditures contemplated by the life extension program approved by
the Independent Engineer and then, if the net present value of the Capital
Expenditures contemplated by the life extension program approved by a third
party pursuant to expedited dispute resolution procedures set forth in Section
6.14 of the Depositary Agreement, is lower, the Required Capital Expenditure
Reserve Balance shall be further reduced to such lower amount).
"Capital Expenditures" means:
(1) labor, materials and other direct expenses for any major overhaul of
or major maintenance procedure for the Project or the Steam Plant (including
major maintenance such as turbine overhauls or the refurbishment or replacement
of the steam boilers) which requires significant disassembly or shutdown of the
Project or the Steam Plant pursuant to manufacturers' guidelines or
recommendations, engineering or operating considerations or the requirements of
any applicable legal requirement or any Project Contracts; and
(2) any other expenses that are capitalized on the balance sheet and
qualify as capital expenditures of POA in accordance with GAAP;
provided that:
(A) the "Fired-Hour Fee" payable pursuant to Section 5.10 of the O&M
Agreement shall not constitute a "Capital Expenditure" even if any portion
thereof would be treated as a capital expenditure of POA in accordance with
GAAP, and
(B) amounts expended by POA pursuant to Section 7.01 of the Steam
Plant Operating Agreement to repair, overhaul, refurbish or replace the
Steam Plant shall be deemed to constitute "Capital Expenditures" to the
extent that they would be treated as capital expenditures of POA in
accordance with GAAP if POA owned the Steam Plant.
"Capital Stock" means:
4
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(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cedelbank" means Cedelbank, societe anonyme.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of POA to
any "person" (as that term is used in Section 13(d)(3) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or dissolution of
POA; or
(3) the first day following the Closing Date on which Permitted Holders
cease to own, directly or indirectly, (a) 50% or more of the total voting power
of the Voting Stock of POA and (b) 85% or more of the total economic ownership
interests in POA.
"Change of Control Offer" shall have the meaning described in Section 3.09
of this Indenture.
"Change of Control Payment" shall mean the payment by the Issuers, in cash,
of the Change of Control Offer price equal to 101% of the aggregate principal
amount of the Senior Secured Notes purchased pursuant to Section 3.09 of this
Indenture, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date of purchase.
"Change of Control Payment Date" means the date, no earlier than 30 days
and no later than 60 days after a notice of a Change of Control has been sent to
each Holder, wherein the Issuer offers to repurchase the Senior Secured Notes
pursuant to Section 3.09(b) of this Indenture.
5
<PAGE>
"City Easement Agreements" means the easements, licenses, rights of way,
passages and similar agreements described in Exhibit A-3 to the First Mortgage
and the City Easement Assignment and the improvements, appurtenances, fixtures
and additions now or hereafter thereon and relating thereto.
"City Easement Assignment" means the Assignment of Easements dated as of
April 5, 1991 by Orange L.P., as assignor, to the SIDA, as assignee, recorded in
the Clerk's Office on May 3, 1991.
"City Easements" means certain easements located within the City of
Syracuse, New York described in Exhibit A-2 to the First Mortgage granted by the
City Easement Agreements and assigned by the City Easement Assignment.
"Clerk's Office" means the Office of the County Clerk of Onondaga County,
New York.
"Closing Date" means the date of the issuance of the Senior Secured Notes.
"Collateral" means all real and personal property interests which are
subject or are to become subject to the security interests or liens granted by
any of the Collateral Documents. The definition of "Collateral" expressly
excludes (a) the Excluded Accounts, (b) the Steam Plant and any improvements,
accessions and additions thereto and (c) insurance proceeds relating to the
Steam Plant.
"Collateral Agent" or "Agent" means U.S. Bank Trust National Association,
as collateral agent for the benefit of the Secured Parties, together with its
successors and assigns.
"Collateral Assignment of the Firm Service Agreement" means the Collateral
Assignment of the Firm Service Agreement dated as of April 5, 1991 between
Canadian Hunter and Orange L.P.
"Collateral Documents" means, collectively, the Depositary Agreement, the
First Mortgage, the Security Agreement, the SIDA Security Agreement, the Pledge
Agreements, the Consents and any other document providing for any lien, pledge,
encumbrance, mortgage or security interest to secure the payment and performance
by SIDA and the Credit Parties of their respective obligations under this
Indenture, the Senior Secured Notes and the Collateral Documents on (i) any or
all of the assets of POA, the ownership interests thereof or (ii) the assets and
contracts constituting or related to the Project.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Reference Treasury Dealer as having a maturity comparable to the
6
<PAGE>
Remaining Average Life of the Senior Secured Notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the Remaining Average Life of such Senior Secured Notes.
"Comparable Treasury Price" means, with respect to any date of redemption,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such date of redemption, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities," or (ii) if such release (or any successor release) is
not published or does not contain such prices on such business day, (A) the
average of the Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of all such Reference Treasury Dealer Quotations.
"Consent" means each of the Asset Manager Consent and Agreement, the
University Consent and Agreement, the University Subordination Agreement, the
SIDA Consent and Agreement, the PILOT Consent and Agreement, the Niagara Mohawk
Consent and Agreement, the TGPC Consent and Agreement, Canadian Hunter Consent
and Agreement, TransCanada Consent and Agreement, and the Operator Consent and
Agreement.
"Contract Termination Event" means:
(i) the occurrence of an early termination event (whether by default
or otherwise) under the Indexed Swap Agreement with respect to which
Niagara Mohawk is required to make a termination payment under the Indexed
Swap Agreement to POA; or
(ii) any event of force majeure under, or the termination of, the Gas
Purchase Agreement with respect to which Canadian Hunter is required to
refund or repay any portion of the lump-sum payment corresponding to the
unused portion of the Maximum Entitlement (as defined in the Gas Purchase
Agreement).
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 9.02 hereof or such other address as to which the
Trustee may give notice to the Issuers.
"Covenant" means the Amendment, Release and Covenant Not to Sue dated April
5, 1991 among Kronish Lieb, GAS LP, Adam Victor, Orange L.P. and others
7
<PAGE>
pursuant to which Orange L.P. is authorized and directed to pay Kronish Lieb all
amounts which it is entitled to receive under the Stipulation.
"Credit Parties" means each of the Issuers, POA, each of the Partners, and
each Affiliate of the Issuers, POA or the Partners that is a party to any
Collateral Document.
"Custodian" means, initially, the Trustee, and its successors and assigns
or any other custodian performing similar functions.
"Debt Service Coverage Ratio" means for any period, without duplication,
the ratio of (i) the sum of (A) all revenues (including interest and fee income
but excluding any insurance proceeds and all other similar non-recurring
receipts) of POA for such period, minus (B) the aggregate amount of Operating
and Maintenance Costs of POA for such period, minus (C) all Capital Expenditures
during such period, to (ii) the sum of (A) all principal, premium (if any) and
interest payable with respect to Permitted Indebtedness outstanding for such
period, plus (B) the aggregate amount of overdue principal, premium (if any) and
interest payments owed with respect to Permitted Indebtedness outstanding from
previous periods; all as determined on a cash basis in accordance with GAAP.
"Debt Service Reserve Account" means the account of such name created under
and defined in the Depositary Agreement.
"Debt Service Reserve Letter of Credit" one or more irrevocable, direct pay
letters of credit issued by the Debt Service Reserve LOC Provider in favor of
the Collateral Agent where the account party is not POA.
"Debt Service Reserve LOC Provider" means any commercial bank(s) or
financial institution(s) issuing the Debt Service Reserve Letter of Credit,
which institution shall be rated not less than A by S&P and A2 by Moody's.
"Debt Service Reserve Required Balance" means, on the Closing Date,
$6,200,000, and thereafter an amount equal to the aggregate amount of the
principal and interest due on the Senior Secured Notes on the next succeeding
semi-annual scheduled payment date.
"Default" means an event or condition that, with the giving of notice,
lapse of time or failure to satisfy certain specified conditions, or any
combination thereof, would become an Event of Default.
"Default Rate" means 12.5% per annum.
8
<PAGE>
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, in the form of
Exhibit A-1 hereto except that such Note shall not bear the Global Note Legend
and shall not have the "Schedule of Exchanges of Interests in the Global Note"
attached thereto.
"Depositary Agent" means, with respect to the Senior Secured Notes issuable
or issued in whole or in part in global form, the Person specified in Section
2.03 hereof as the Depositary Agent with respect to the Senior Secured Notes,
and any and all successors thereto appointed as depositary hereunder and having
become such pursuant to the applicable provision of this Indenture.
"Depositary Agreement" means the Deposit and Disbursement Agreement, dated
as of the date hereof, among POA, the Trustee and the Collateral Agent.
"Distribution Account" means the account of such name created under and
defined in the Depositary Agreement.
"Distribution Suspense Account" means the account of such name created
under and defined in the Depositary Agreement.
"Drawing Agreement" means the Letter of Credit Drawing Agreement dated as
of March 29, 1991 between TGPC and Orange L.P.
"Easement Agreements" means the City Easement Agreements, the Outside
Easement Agreements and the Outside Easement Lease.
"Easements" means the City Easements and the Outside Easements.
"Eminent Domain Proceeds" means all amounts and proceeds (including
instruments) received by POA in respect of any Event of Eminent Domain, after
deducting all reasonable expenses incurred in litigating, arbitrating,
compromising, settling or consenting to the settlement of any claims against the
appropriate Governmental Authority.
"Equipment" means all machinery, apparatus, equipment, fittings, fixtures
and other personal property of every kind and nature whatsoever owned by SIDA or
Orange L.P., or in which SIDA or Orange L.P. has or may hereafter have or
acquire an interest, whether actually now or hereafter located at, upon or about
the Premises or not, and whether in storage or otherwise, wherever they may be
located, or any appurtenance thereto, and used or usable in connection with the
present or future operation and occupancy of all or any part of the property
subject to the First Mortgage, and all building equipment, materials and
supplies or any nature whatsoever
9
<PAGE>
owned by SIDA or Orange L.P., or in which SIDA or Orange L.P. has or may
hereafter have or acquire an interest, whether actually now or hereafter located
upon the Premises or not, and whether in storage or otherwise, wherever they may
be located, including power plants, particle separators, moisture separators,
injection systems, gas pipelines, steam lines, power lines, pumps, control and
monitoring equipment, tanks, boilers and turbines, all of which equipment,
including replacements and additions thereto, shall, to the fullest extent
permitted by law and for the purposes of the First Mortgage, be deemed to be
part and parcel of the property subject to the First Mortgage.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Default" shall have the meaning set forth in Section 5.01 hereof.
"Event of Eminent Domain" means any compulsory transfer or taking or any
transfer under threat of compulsory transfer or taking of any material part of
the Collateral or the Project by any Governmental Authority.
"Event of Loss" means an event which causes all or a portion of the Project
to be damaged, destroyed or rendered unfit for normal use for any reason
whatsoever, other than an Event of Eminent Domain or a Title Event.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f) hereof and which are also referred to as the "Series B Notes".
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Excluded Accounts" has the meaning set forth in the Depositary Agreement.
"Facility" means the Project.
10
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"Fair Value" when applied to any property means its fair value to POA,
which may be determined without physical inspection by use of accounting and
other data maintained by, or available to, POA; provided, that POA delivers an
Officers' Certificate specifying the Fair Value of the relevant assets and, in
the event of a transaction in excess of $2.5 million, POA also delivers an
opinion of a nationally recognized expert in the valuation of such assets as to
their Fair Value and that the transaction is fair to POA.
"Final Maturity Date" means the latest stated maturity date of the
Senior Secured Notes.
"Financing Documents" means, collectively, this Indenture, the
Assumption Agreement, the Purchase Agreement, the Collateral Documents, the
Registration Rights Agreement and the Senior Secured Notes.
"First Mortgage" means the Mortgage and Assignment of Rents (First
Mortgage) dated as of December 4, 1999 by SIDA and POA, as mortgagors, to the
Collateral Agent, as mortgagee, to be recorded in the Clerk's Office.
"FPA" means the Federal Power Act, excluding Sections 1-18, 21-30,
202(c), 210, 211, 212, 305(c) and necessary enforcement provision of Part III of
the Act with regard to the foregoing sections.
"Fuel Supply Agreements" means the Canadian Hunter Agreements, the
Natural Gas Transportation Agreements, and any other agreements necessary for or
entered into in connection with the supply of fuel to the Project.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"GAS LP" means G.A.S. Orange Partners, L.P., a Delaware limited
partnership.
"GAS Orange" means G.A.S. Orange Associates, L.L.C., a Delaware limited
liability company.
"Gas Purchase Agreement" means (i) the Restated Gas Sale and Purchase
Agreement dated as of March 18, 1991, between POA and Noranda, which was
assigned by Noranda to, and assumed by, Canadian Hunter pursuant to an
Assignment,
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Amendment and Release Agreement dated on or prior to the Closing Date among
Noranda, Canadian Hunter and Orange L.P. and (ii) the agreements between Orange
L.P. and Canadian Hunter and UPR, respectively, to be entered into in
replacement of the Restated Gas Sale and Purchase Agreement in accordance with
the terms of a letter agreement dated on or prior to the Closing Date among
Orange L.P., Canadian Hunter and UPR as in effect on the date hereof.
"Gas Reserve Account" means the account of such name created under and
defined in the Depositary Agreement.
"Gas Reserve Required Balance" means, at any time, the amount equal to
the Gas Reserve Deficit at such time multiplied by the highest average "Niagara
Border Spot Price" for natural gas (delivered to pipe as stated in U.S. dollars)
at any time during the previous twelve (12) months in the weekly Canadian Price
Report published by Natural Gas Week (on an MMBtu basis).
"Gas Reserve Deficit" means, at any time, the amount that equals (i)
the amount of gas necessary, in the judgment of the Independent Engineer, to
operate the Project through the Final Maturity Date so that electric output of
the Project for such period will average at least 663,000 MWh per year and POA
can meet its obligations to deliver steam under the Steam Contract, less (ii)
the sum of (A) the "Unconsumed Entitlement" (as such term is used in the Gas
Purchase Agreement) at such time plus (B) the unconsumed quantity, at such time,
of any natural gas (in addition to the Unconsumed Entitlement), purchased and
paid for by POA and as to which transportation pursuant to arrangements approved
by the Independent Engineer as being consistent with prudent industry practice
are in place plus (C) the Btu equivalent of energy and associated capacity that
POA has purchased the right to acquire in connection with permitted sales of
natural gas as described in Section 4.18 hereof.
"General Partner" means GAS Orange in its capacity as general partner
of POA.
"Global Notes" means, individually and collectively each of the
Restricted Global Notes and the Unrestricted Notes, in the form of Exhibit A-1
and A-2 hereto issued in accordance with the terms hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Governmental Approvals" means all governmental approvals,
authorizations, consents, decrees, permits, waivers, privileges and filings with
all Governmental Authorities required to be obtained for the construction,
operation and maintenance of the Project or the Steam Plant.
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"Governmental Authority" means the government of any federal, state,
municipal or other political subdivision in which the Project is located, and
any other government or political subdivision thereof exercising jurisdiction
over the Project or any party to any of the Project Documents, including all
agencies and instrumentalities of such governments and political subdivisions.
"Government Securities" means direct obligations of, or obligations,
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Ground Lease" means the Lease Agreement covering the Premises dated as
of February 27, 1990 between the University, as lessor, and Orange L.P., as
lessee, a memorandum of which dated April 24, 1991 was recorded in the Clerk's
Office in May 23, 1991 in Book 3693 at Page 87 as amended by those three
amendatory letters dated May 1, 1990, June 22, 1990 and August 29, 1990 and as
further amended by the amendment dated December 31, 1990, as further amended by
that Amendment to Lease dated as of December 16, 1992, as the lessee's interest
thereunder was assigned by the Ground Lease Assignment, and as amended and
otherwise affected by the University Consent and Agreement.
"Ground Lease Assignment" means Assignment of the Ground Lease dated as
of April 5, 1991 between Orange L.P., assignor, and SIDA, as assignee, recorded
in the Clerk's Office on May 3, 1991 in Book 3693 at Page 139.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Holder" means as of any particular time, the Person in whose name a
Senior Secured Note is registered.
"Hot Tap Reimbursement Agreement" means the agreement relating to
Installation of a Hot Tap, Measurement and DAC, dated May 25, 1988, between TGPC
and GAS Inc. as amended by that certain letter agreement, dated August 11, 1988,
and assigned to Orange L.P. by that certain Assignment and Assumption Agreement
dated November 30, 1990 between GAS Inc. and Orange L.P..
"Impositions" means all payments in lieu of taxes (including all
payments due under the PILOT Agreement), taxes (including real estate taxes and
transfer, sales and use taxes), assessments (including all assessments for
public improvements or benefits, whether or not commenced or completed prior to
the date hereof but excluding any water or other utilities to the extent the
same are governed by a contract between POA
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and the applicable service provider), rates and charges, excises, levies,
license fees, permit fees, inspection fees and other authorization fees and
other charges of any Governmental Authority, in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every character
(including all interest and penalties thereon), which at any time may be
assessed, levied, confirmed or imposed on or in respect of, or be a Lien upon
the Project, any occupancy, use or possession thereof, the rents, income, issues
and profits therefrom, the Obligations under the Senior Secured Notes or the
Financing Documents, but excluding income, excess profits, franchise, capital
stock, estate, inheritance, succession, gift or similar taxes of any Secured
Party, except to the extent that such taxes of any Secured Party are imposed in
whole or in part in lieu of, or as a substitute for, any taxes which are or
would otherwise be Impositions; all rent and other amounts payable under the
Ground Lease, the Master Lease, the Outside Easement Lease and the Easement
Agreements, and all other amounts payable under any of the other Project
Documents.
"Improvements" means all buildings, structures, pipelines, fixtures,
appurtenances and other improvements, including the Project Pipeline, the
Project, now or hereafter located on the Premises.
"Indebtedness" of any Person means, at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by Senior Secured Notes, debentures, notes or other
similar instruments (excluding "deposit only" endorsements on checks payable to
the order of such Person), (iii) all obligations of such Person to pay the
deferred purchase price of property or services (except accounts payable and
similar obligations arising in the ordinary course of business shall not be
included herein), (iv) all obligations of such Person as lessee under capital
leases to the extent required to be capitalized on the books of such Person in
accordance with GAAP and (v) all obligations of others of the type referred to
in clause (i) through (iv) above guaranteed by such Person, whether or not
secured by a lien or other security interest on any asset of such Person.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Independent Engineer" means Stone & Webster Management Consultants,
Inc. or another nationally recognized independent engineering firm with at least
the same standing as Stone & Webster Management Consultants, Inc. in terms of
size, experience and technical expertise with respect to assignment of such
nature and which has been retained as independent engineer by POA.
"Independent Engineer's Base Case Projections" means the base case
projections prepared by the Independent Engineer and included in the Independent
Engineer's Report.
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"Independent Engineer's Report" means the Independent Engineer's
Report, dated November 16, 1999, prepared by the Independent Engineer and
attached to the Offering Memorandum as Appendix A.
"Indexed Swap Agreement" means the ISDA Master Agreement and the
related Confirmation each dated as of June 30, 1998 between Orange L.P. and
Niagara Mohawk.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means $68,000,000 in aggregate principal amount of
Senior Secured Notes issued under this Indenture on the date hereof which are
also referred to as the "Series A Notes".
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"Insurance Consultant" means J&H Marsh & McLennan, Limited, or another
nationally recognized independent insurance consulting firm which is retained by
POA to act as Insurance Consultant for the benefit of the Secured Parties
hereunder.
"Interest Account" means the account of such name created under and
defined in the Depositary Agreement.
"Interest Payment Date" means each March 15 and September 15 commencing
March 15, 2000 and concluding on the Final Maturity Date.
"Investment" means, with respect to any Person, any investment by such
Person in other Persons (including Affiliates) in the form of direct or indirect
loans (including guarantees of Indebtedness or other obligations), advances
(excluding commission, travel and similar advances to employees made in the
ordinary course of business), or capital contributions, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"Investment Grade Rating" means a rating of "BBB-" or higher from S&P
and "Baa3" or higher from Moody's (or an equivalent rating by another nationally
recognized credit rating agency if none of such corporations is rating the
Senior Secured Notes).
"Issuers" means the POA and Capital Co., and any and all successors
thereto.
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"ISO/PE" means the New York Independent System Operator and Power
Exchange.
"Kronish Lieb" means Kronish, Lieb, Weiner & Hellman.
"Lease Documents" means the Ground Lease, the Master Lease and any
other lease of property necessary or entered into in connection with the
Project.
"Leased Site" means Leased Premises.
"Leased Premises" means the real property described in Exhibit A-1 to
the First Mortgage and the improvements, appurtenances, fixtures and additions
now or hereafter thereon or relating thereto.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Issuers and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means any mortgage, pledge, hypothecation, assignment, mandatory
deposit arrangement with any Person owning Indebtedness of such Person,
encumbrance, lien (statutory or other), preference, priority or other security
agreement of any kind or nature whatsoever which has the substantial effect of
constituting a security interest, including, without limitation, any conditional
sale or other title retention agreement, any financing statement or similar
instrument under the UCC or comparable law of any jurisdiction, domestic or
foreign.
"Liquidated Damages" shall have the same meaning as in Section 5 of the
Registration Rights Agreement.
"Loss Proceeds" means all net proceeds from an Event of Loss received
by POA, including insurance proceeds or other amounts actually received, except
proceeds of business interruption insurance, on account of an event which causes
all or any portion of the Project to be damaged, destroyed or rendered unfit for
normal use.
"Loss Proceeds Account" means the account of such name created under
and defined in the Depositary Agreement.
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"Master Lease" means the Lease and Sublease Agreement dated as of April
5, 1991 between Orange L.P., as lessee, and SIDA, as lessor, a memorandum of
which dated as of April 15, 1991 was recorded in the Clerk's Office on May 3,
1991 in Book 3693 at Page 149, as amended and otherwise affected by the SIDA
Consent and Agreement.
"Material Adverse Effect" means a material adverse effect on (i) the
financial position or results of operation of the Issuers, (ii) the Collateral
or the validity or priority of any of the Liens on the Collateral under any of
the Collateral Documents, (iii) the ability of the Issuers to pay any of their
payment obligations or to perform any of their other material obligations under
this Indenture, the Senior Secured Notes or any of the other Financing Documents
or under any of the Project Documents to which either Issuer is a party, or (iv)
the ability of the Trustee or the Collateral Agent to enforce any of the payment
obligations of the Issuers, any of the other material obligations of the Issuers
or any of the material rights of the Trustee or the Collateral Agent under this
Indenture, the Senior Secured Notes or any of the other Financing Documents; or
(v) the ability of POA to enforce any of its material rights under any of the
Project Documents.
"Material Project Documents" means the Niagara Mohawk Agreements, the
Partnership Agreement, the Drawing Agreement, the Natural Gas Transportation
Agreements, the Canadian Hunter Agreements, the Boiler Guaranty, the PILOT
Agreement, the Master Lease, the University Agreements, the Easement Agreements,
the Asset Manager Agreements, the Consents and the O&M Agreement.
"Merger" means the merger on the Closing Date of Funding L.P. with and
into Orange L.P. (with Orange L.P. as the surviving partnership) pursuant to the
Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
December 6, 1999 between Funding L.P. and Orange L.P.
"Moody's" means Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware, its successors
and assigns.
"National Flood Insurance Program" means the National Flood Insurance
Act of 1968 and the Flood Disaster Protection Act of 1973 (42 U.S.C. Sections
4001 et seq.)
"Natural Gas Transportation Agreements" means the TGPC Interruptible
Gas Transportation Agreement, the TGPC Firm Gas Transportation Agreement, the
Drawing Agreement and the Hot Tap Reimbursement Agreement.
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"NCP Syracuse" means NCP Syracuse, Inc., a Delaware corporation.
"Niagara Mohawk" means the Niagara Mohawk Power Corporation, a New York
corporation.
"Niagara Mohawk Agreements" means the Power Put Agreement and the
Indexed Swap Agreement.
"Niagara Mohawk Consent and Agreement" means the Consent and Agreement
dated as of December 6, 1999 among Niagara Mohawk, Orange L.P. and the
Collateral Agent relating to the Niagara Mohawk Agreements.
"Non-US. Person" means a Person who is not a U.S. Person.
"Noranda" means Noranda Inc., a corporation incorporated pursuant to
the Laws of the Province of Ontario, Canada.
"O&M Agreement" means (i) the Cogeneration Facility Operation and
Maintenance Agreement dated as of November 1, 1998 between Orange L.P. and
Operator and (ii) any subsequent operation and maintenance agreement entered
into by POA with the Operator having terms and conditions that are, in the
opinion of the Independent Engineer, reasonable and customary for agreements of
its type and which are consistent with prudent industry practice.
"Obligations" means all principal, interest, penalties, fees,
indemnifications, reimbursements, damages, premiums, liabilities and other
amounts payable under the documentation governing any Indebtedness.
"Offering" means the offering of the Senior Secured Notes by the
Issuers.
"Offering Memorandum" means that certain offering memorandum dated
December 2, 1999 offering the Senior Secured Notes for sale.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Managing Member, the Managing
Partner, the Chief Operating Officer, the Chief Financial Officer, the
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any
Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of either
Issuer by Officers of such Issuer or the General Partner, one of whom must be
the principal executive officer or managing member, managing partner, principal
financial officer, the treasurer or principal accounting officer of such Issuer
or the General Partner.
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"Operating and Maintenance Costs" means, for any periods, all amounts
disbursed by or on behalf of POA for operation, maintenance (excluding Capital
Expenditures), administration, repair, or improvement of the Project, including,
without limitation, premiums on insurance policies, property and other taxes,
payments under the relevant Lease Documents and under agreements, or options, to
purchase energy and associated capacity in connection with permitted sales of
natural gas, operating and maintenance agreements, leases, royalty and other
land use agreements and fees, expenses, and any other payments required under
the Project Documents (excluding Subordinated Asset Management Charges).
"Operating Budget" means a budget of Operating and Maintenance Costs
and Capital Expenditures with respect to POA and the Project for any given
fiscal year, or part thereof, and prepared in good faith on the basis of
estimated requirements, showing such costs by category for such fiscal year, or
part thereof, and as approved by the Independent Engineer.
"Operative Documents" means the Financing Documents, the Project
Documents and any Additional Project Document.
"Operator" means General Electric International, Inc., a Delaware
corporation, or such other Person with technical expertise and industry standing
of at least that of General Electric International, Inc. as the operator of the
Project pursuant to the O&M Agreement.
"Operator Consent and Agreement" means the Consent and Agreement dated
as of December 6, 1999 among the Operator, the Collateral Agent and Orange L.P.
relating to the O&M Agreement.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
9.05 hereof. The counsel may be an employee of or counsel to the Issuers, any
Affiliate of the Issuers or the Trustee.
"Outside Easement Agreements" means the easements, licenses, rights of
way, passages and similar agreements described in Exhibit A-5 to the First
Mortgage, the Outside Easement Assignments and the Outside Easement Lease.
"Outside Easement Assignments" means the Assignment and Assumption of
Easements dated as of April 5, 1991 by O'Brien and Geer, as assignor, to OBG
Technical Services, Inc., as assignee, recorded in the Clerk's Office on May 3,
1991 and the Assignment and Assumption of Easements dated as of April 5, 1991 by
OBG Technical Services, Inc., as assignor, to Orange L.P., as assignee, recorded
in the Clerk's Office on May 3, 1991 in Book 3693 at Page 15.
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"Outside Easement Lease" means the Lease Agreement dated as of April 5,
1991 between Orange L.P., as lessor, and SIDA, as lessee, a memorandum of which
dated as of April 5, 1991 was recorded in the Clerk's Office on May 3, 1991 in
Book 3693 at Page 143.
"Outside Easements" means certain easements located outside of the City
of Syracuse, New York described in Exhibit A-4 to the First Mortgage granted
pursuant to the Outside Easement Agreements, assigned to Orange L.P. by the
Outside Easement Assignments and leased by Orange L.P. to SIDA by the Outside
Easement Lease and the improvements, appurtenances, fixtures and additions now
or hereafter thereon and relating thereto.
"Outstanding Notes" means, as of the time in question, all Senior
Secured Notes authenticated and delivered under this Indenture, except (i)
Senior Secured Notes theretofore canceled or required to be canceled under this
Indenture; (ii) Senior Secured Notes for which provision for payment shall have
been made in accordance with this Indenture; and (iii) Senior Secured Notes in
substitution for which other Senior Secured Notes have been authenticated and
delivered pursuant to this Indenture.
"Participant" means, with respect to the Depositary Agent, Euroclear or
Cedelbank, a Person who has an account with the Depositary Agent, Euroclear or
Cedelbank, respectively (and, with respect to The Depository Trust Company,
shall include Euroclear and Cedelbank).
"Partners" means the General Partner and GAS L.P.
"Partnership Agreement" means the Second Amended and Restated Agreement
of Limited Partnership of Orange L.P. dated as of December 16, 1992, as amended,
among the General Partner and GAS L.P.
"Partnership Interest Purchase Agreement" means the Purchase and Sale
Agreement dated as of July 29, 1999, as amended, among GAS Orange, as purchaser,
and NCP Syracuse and SOP, as sellers.
"Payment Date" means any Interest Payment Date or Principal Payment
Date.
"Permit" means any action, approval, consent, waiver, exemption,
variance, franchise, order, permit, authorization, right of license of or from a
Governmental Authority.
"Permitted Holders" means Adam H. Victor, the Victor Family Irrevocable
Trust and their respective Permitted Transferees.
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"Permitted Indebtedness" means:
(1) the Senior Secured Notes;
(2) Indebtedness incurred to finance the making of capital
improvements to the Project required to maintain compliance with applicable law
or anticipated changes therein; provided that no such Indebtedness may be
incurred unless at the time of such incurrence (i) no Default or Event of
Default has occurred and is continuing, (ii) the Independent Engineer confirms
as reasonable a certification by POA (containing customary qualifications) that
the proposed capital improvements are reasonably expected to enable the Project
to comply with applicable or anticipated legal requirements, (iii) the
calculations of POA demonstrate that, after giving effect to the incurrence of
such Indebtedness, the projected Debt Service Coverage Ratio of POA (x) for the
next four consecutive fiscal quarters, commencing with the quarter in which such
Indebtedness is incurred, taken as one annual period, and (y) for each
subsequent fiscal year through the Final Maturity Date (treated as a single
accounting period), will be an average of not less than 1.4 to 1 for the entire
period and not less than 1.35 to 1 for any such fiscal year, and (iv) the Rating
Agencies confirm that the incurrence of such Indebtedness will not result in a
Rating Downgrade;
(3) Indebtedness in respect of any letter of credit under the Drawing
Agreement in an aggregate principal amount outstanding at no time in excess of
$700,000;
(4) Indebtedness incurred to finance the purchase price of tangible
movable assets which are not essential to the operation of the Project or the
Steam Plant and with an aggregate principal amount not in excess of $500,000 any
time outstanding;
(5) promissory notes issued to NCP Syracuse and SOP pursuant to
Section 6.10(e) of the Partnership Interest Purchase Agreement; and
(6) the Project Documents or any rights or obligations thereunder
that may be construed to be Indebtedness.
"Permitted Investments" means an Investment in any of the following:
(1) direct obligations of the Department of the Treasury of the
United States of America;
(2) obligations, representing full faith and credit of the United
States of America, of any of the following federal agencies: Export-Import Bank,
Farmers Home Administration, General Services Administration, U.S. Maritime
Administration, Small Business Administration, Government National Mortgage
Association (GNMA), U.S.
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Department of Housing & Urban Development (PHA's) and Federal Housing
Administration;
(3) obligations issued or fully guaranteed by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof and, at the time of the acquisition, having one of the
two highest ratings obtainable from either S&P's or Moody's;
(4) certificates of deposit and Eurodollar time deposits, bankers'
acceptances and overnight bank deposits, in each case with any domestic or
foreign commercial bank having capital and surplus in excess of $250.0 million;
(5) notes, bonds, collateralized mortgage obligations or other
evidences of indebtedness rated "AAA" by S&P's and "Aaa" by Moody's issued by
the Federal Home Loan Bank, the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation;
(6) commercial paper rated in any one of the two highest rating
categories by Moody's or S&P's;
(7) investment agreements with banks (foreign and domestic),
broker/dealers, and other financial institutions rated at the time of bid in any
one of the three highest rating categories by Moody's and S&P's;
(8) repurchase agreements with banks (foreign and domestic),
broker/dealers, and other financial institutions rated at the time of bid in any
one of the three highest rating categories by Moody's and S&P's, provided, (a)
collateral is limited to the securities specified in clauses (1) through (5)
above, (b) the margin levels for collateral must be maintained at a minimum of
102% including principal and interest, (c) the Trustee shall have a first
perfected security interest in the collateral, (d) the collateral will be
delivered to a third party custodian, designated by POA, acting for the benefit
of the Trustee and all fees and expenses related to collateral custody will be
the responsibility of POA, (e) the collateral must have been or will be acquired
at the market price and marked to market weekly and collateral level shortfalls
cured within 24 hours, (f) unlimited right of substitution of collateral is
allowed provided that substitution of collateral must be permitted collateral
substituted at a current market price and substitution fees of the custodian
shall be paid by POA;
(9) asset-backed securities having the highest rating obtainable from
either S&P's or Moody's;
(10) forward purchase agreements delivering securities specified in
clauses (1) and (6) above with banks (foreign and domestic), broker/dealers, and
other financial
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institutions maintaining a long-term rating on the day of bid no lower than
investment grade by both S&P's and Moody's (such rating may be at either the
parent or subsidiary level); and
(11) money market funds rated "AAAm" or "AAAm-G" or better by S&P's
and other financial funds investing exclusively in investments of the types
described in clauses (1) through this clause (11) of this definition.
"Permitted Lien" means, collectively:
(1) Liens to secure Indebtedness described in clauses (2) or (4) of
the definition of Permitted Indebtedness on the assets financed with the
proceeds of such Indebtedness;
(2) Liens under the University Collateral Documents, provided the
same are subordinate to the Liens under the Collateral Documents;
(3) mechanic's, workmen's, materialmen's, supplier's, construction or
other like Liens arising in the ordinary course of business that in each case,
have not become the subject of foreclosure or any other action or proceeding and
for which adequate reserves have been established under generally accepted
accounting principles;
(4) servitudes, easements, rights-of-way, restrictions, minor defects
or irregularities in title and such other encumbrances against real property or
interests therein, which do not secure any monetary obligation, and which are of
a nature generally existing with respect to property of a character similar in
character and use to the property that is subject thereto and which do not
individually or in the aggregate with other Permitted Liens under this clause
(4) and clauses (5) and (6) below materially interfere with the use thereof in
the business of POA or materially adversely affect the value thereof;
(5) other Liens incidental to the conduct of POA's business or the
ownership of properties and assets which do not secure any monetary obligation
(other than vendor's liens for accounts payable with respect to the acquisition
of the property in question in the ordinary course of business and liens for
taxes, assessments or governmental charges which are either not yet due or which
are being diligently contested in good faith by appropriate proceedings and for
which adequate reserves are established in accordance with GAAP), and which do
not individually or in the aggregate with other Permitted Liens under this
clause (5) or clause (4) above or clause (6) below materially interfere with the
use thereof in the business of POA or materially adversely affect the value
thereof;
(6) the Permitted Title Encumbrances;
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(7) Liens to secure the Senior Secured Notes; and
(8) Liens on cash and Permitted Investments and securities
entitlements with respect thereto to secure Indebtedness described in clause (3)
of the definition of Permitted Indebtedness.
"Permitted Title Encumbrances" means (i) the Liens and encumbrances
described in Schedule B of the Leasehold Loan Policy of Title Insurance No.
5399-25256 dated December 6, 1999 issued by the Title Company; and (ii) the
University Mortgages and the University Security Agreements, provided that the
same are subordinate to the First Mortgage pursuant to the University
Subordination Agreement.
"Permitted Transferees" shall mean with respect to any Person: (i) in
the case of any Person who is a natural person, such individual's spouse or
children (natural or adopted), any trust for such individual's benefit or the
benefit of such individual's spouse or children (natural or adopted), or any
corporation or partnership in which the direct and beneficial owner of all of
the equity interest in such Person or such individual's spouse or children
(natural or adopted) or any trust for the benefit of such persons; (ii) in the
case of any Person who is a natural person, the heirs, executors, administrators
or personal representatives upon the death of such Person or upon the
incompetency or disability of such Person for purposes of the protection and
management of such individual's assets; (iii) in the case of any Person who is
not a natural person (other than a trust), any Affiliate of such Person; and
(iv) in the case of the Victor Family Irrevocable Trust, its beneficiaries on
the Closing Date.
"Person" means any individual, sole proprietorship, corporation,
partnership, joint venture, limited liability partnership, limited liability
company, trust, unincorporated association, institution, Governmental Authority
or any other entity.
"PILOT Agreement" means the Payment in Lieu of Tax Agreement dated as
of April 5, 1991, among the City of Syracuse, Orange L.P. and SIDA as amended
and otherwise affected by the PILOT Consent and Agreement.
"PILOT Consent and Agreement" means the Consent and Agreement dated
as of December 6, 1999 among Orange L.P., the City of Syracuse, SIDA and the
Collateral Agent for and on behalf of the Secured Parties, relating to the PILOT
Agreement, to be recorded in the Clerk's Office.
"Pledge Agreements" means (i) the Pledge and Security Agreement,
dated as of December 6, 1999 among POA, GAS Orange, the Trustee and the
Collateral Agent (ii) the Pledge and Security Agreement, dated as of December 6,
1999 among POA, GAS LP, the Trustee and the Collateral Agent (iii) the Pledge
and Security Agreement,
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dated as of December 6, 1999 among GAS L.P., G.A.S. Alternatives Systems, Inc.
the Trustee and the Collateral Agent and (iv) the Pledge and Security Agreement,
dated as of December 6, 1999 among GAS LP, G.A.S./Orange Development, Inc., the
Trustee and the Collateral Agent.
"Power Put Agreement" means the Power Put Agreement, dated as of
September 19, 1986 between Orange L.P. and Niagara Mohawk Power Corporation.
"Premises" means the Leased Premises and the Easements.
"Principal Account" means the Account of such name created under and
defined in the Depositary Agreement.
"Principal Payment Date" when used with respect to any Senior Secured
Note means the date on which all or a portion of the principal of such Senior
Secured Note becomes due and payable as provided therein or in this Indenture,
whether on a scheduled date for payment of principal at a Redemption Date, the
Final Maturity Date, a date of declaration of acceleration, or otherwise.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Senior Secured Notes issued under this Indenture
except where otherwise permitted by the provisions of this Indenture.
"Project" means an 80 megawatt (net) gas fired cogeneration power plant
(including the electric transmission line and the Project Pipeline) (but
excluding the Steam Plant and related facilities and improvements), together
with all buildings, structures or other improvements erected on the Leased
Premises and the Easements, all alterations thereto or replacements thereof, all
fixtures, attachments, appliances, equipment, machinery and other articles
attached thereto or used in connection therewith and all parts which may from
time to time be incorporated or installed in or attached thereto, all contracts
and agreements for the purchase or sale of commodities or other personal
property related thereto, all Lease Documents of real or personal property
related thereto, and all other real and tangible and intangible personal
property owned by POA or SIDA and placed upon or used in connection with the
electric and steam generation plant, electric transmission line and the Project
Pipeline built upon the Leased Premises and the Easements.
"Project Documents" means the Material Project Documents, the Fuel
Supply Agreements, other Lease Documents and any other material agreement or
document relating to the development, construction or operation of the Project
or the Steam Plant.
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"Project Pipeline" means the gas pipeline and related facilities
connecting the Project to the TGPC pipeline referred to in the Natural Gas
Transportation Agreements.
"Project Revenues" means all income and receipts of POA derived from
the ownership or operation of the Project, including payments due POA under the
Niagara Mohawk Agreements, the Canadian Hunter Agreements or the O&M Agreement,
proceeds of any business interruption or other insurance, income derived from
the sale or use of electric energy or steam transmitted or distributed by the
Project, together with any receipts derived from the sale of natural gas and any
other property pertaining to the Project or incidental to the operation of the
Project, all as determined in conformity with cash accounting principles, the
investment income on amounts in the Accounts established under the Depositary
Agreement, the proceeds of any insurance or condemnation awards relating to the
Project and proceeds from the Collateral Documents, and any payments to POA (to
the extent not included within other items listed in this definition) under the
Master Lease, but not including sums paid to POA in satisfaction of a
contractual obligation to indemnify POA for third party liability to the extent
such sums do not exceed the actual damage, loss or cost suffered by POA in
connection therewith.
"PURPA" means the Public Utility Regulatory Policies Act of 1978.
"PUHCA" means the Public Utility Holding Company Act of 1935.
"Purchase Agreement" means the Purchase Agreement, dated as of December
2, 1999 between the Issuers and the Initial Purchaser.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A
of the Securities Act.
"Rating" means the rating of the Senior Secured Notes by the Rating
Agencies.
"Rating Agency" means either Moody's or S&P.
"Rating Downgrade" means a lowering by the Rating Agencies of then
current credit ratings of the Senior Secured Notes.
"Redemption Account" means the Account of such name created under and
defined in the Depositary Agreement.
"Redemption Date" means the date on which the Issuers redeem or shall
redeem any Senior Secured Notes in accordance with this Indenture.
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"Reference Treasury Dealer" means any nationally recognized primary
U.S. Government securities dealer in New York City selected by POA.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any date of redemption, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such date of redemption.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of December 6, 1999, by and among the Issuers and the
Initial Purchaser.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Senior
Secured Note in the form of Exhibit A-1 hereto bearing the Global Note Legend
and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary Agent or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Note upon expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Senior
Secured Note in the form of Exhibit A-2 hereto bearing the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary Agent or its nominee, issued in a denomination equal to the
outstanding principal amount of the Senior Secured Notes initially sold in
reliance on Rule 903 of Regulation S.
"Remaining Average Life" means, with respect to any Senior Secured
Note, the principal of which is to be redeemed (the "Called Principal"), the
number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products obtained by
multiplying (a) the principal component of each Remaining Scheduled Payment (as
defined below) with respect to such Called Principal by (b) the number of years
(calculated to the nearest one-twelfth year) that will elapse between the date
on which such Called Principal is to be redeemed (the "Settlement Date") and the
scheduled due date of such Remaining Scheduled Payment. For purposes of this
definition, the term "Remaining Scheduled Payments" means, with respect to the
Called Principal of any Senior Secured Note, all payments of such Called
Principal and interest thereon that would be due after the
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Settlement Date with respect to such Called Principal if no payment of such
Called Principal were made prior to its scheduled due date.
"Required Holders" means, at any time, Persons that at such time hold
not less than a majority in aggregate principal amount of the Outstanding Notes.
"Responsible Officer" means, with respect to knowledge of any default
under this Indenture, the chief executive officer, president, managing member,
managing partner, chief financial officer, general counsel, principal accounting
officer, treasurer, or any vice president of POA or the General Partner, as
applicable, or other officer of such corporation who in the normal performance
of his or her operational duties would have knowledge of the subject matter
relating to such default.
"Responsible Trust Officer" when used with respect to the Trustee or
the Collateral Agent, means any officer within the Corporate Trust Office of the
Trustee (or any successor group of the Trustee) including any Managing Director,
Vice President, Assistant Vice President, Trust Officer, Secretary, Assistant
Secretary or Assistant Treasurer or any other officer of the Trustee or the
Collateral Agent customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Payment" means, with respect to any Person, (i) the
declaration and payment of distributions, dividends, the issuance of Equity
Interests in such person or any other payment in respect of any Equity Interests
made in cash, property, obligations or other notes or (ii) the making of any
Investment in, including any loans or advances to, any Affiliate; provided,
however, that "Restricted Payment" shall not include (x) payments under any of
the Project Documents for services rendered or (y) payments of a distribution by
Funding L.P. to GAS Orange on the Closing Date with a portion of the net
proceeds of the issuance of the Senior Secured Notes in an aggregate amount not
to exceed $48,100,000 or (z) amounts paid from the Stipulation Reserve Account.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
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"Revenue Account" means the Account of such name created under and
defined in the Depositary Agreement.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"S&P" means Standard & Poor's Rating Services, a division of
McGraw-Hill Companies, Inc., a corporation organized and existing under the laws
of the State of New York, its successors and assigns.
"Sale and Leaseback Transaction" means any arrangement with any Person
providing for the leasing by POA of any real or tangible personal property,
which property has been or is to be sold or transferred by POA to such Person in
contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" means the Holders, the Trustee and the Collateral
Agent.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement, dated as of December
6, 1999 between POA and the Collateral Agent.
"Senior Secured Notes" has the meaning assigned to it in the preamble
to this Indenture.
"Senior Collateral Documents" means the First Mortgage, the Security
Agreement and the SIDA Security Agreement.
"SIDA" means the Syracuse Industrial Development Authority, a public
benefit corporation of the State of New York.
"SIDA Consent and Agreement" means the Consent and Agreement dated as
of December 6, 1999 among Orange L.P., SIDA and the Collateral Agent for and on
behalf of the Secured Parties, to be recorded in the Clerk's Office relating to
the Master Lease and the Lease Documents.
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"SIDA Security Agreement" means the Security Agreement dated as of
December 6, 1999 between SIDA and the Collateral Agent.
"SOP" means Syracuse Orange Partners, L.P., a Delaware limited
partnership.
"Steam Contract" means the Steam Contract, dated as of February 27,
1990 between Orange L.P. and Syracuse University as amended by those certain
letter agreements dated May 1, 1990, June 22, 1990, August 29, 1990, and an
amendment dated December 31, 1990.
"Steam Plant" means the University's existing stream generation
facility as more particularly defined in the Steam Contract.
"Steam Plant Operating Agreement" means the Operating Agreement dated
as of February 27, 1990 between Orange L.P. and the University, as amended by
the letter agreement dated May 1, 1990.
"Stipulation" means the Stipulation dated November 14, 1994 and Order
of the Bankruptcy Court dated December 8, 1994 among Kronish Lieb, Adam Victor
and GAS LP.
"Stipulation Reserve Account" means the Account of such name created
under and defined in the Depositary Agreement.
"Subordinated Asset Management Fees" means fees and other amounts
payable to the Asset Manager pursuant to the Asset Management Agreements and the
Asset Manager Consent and Agreement.
"Subordinated Asset Management Fee Account" means the Account of such
name created under and defined in the Depositary Agreement.
"Subordinated Collateral Documents" means the University Collateral
Documents.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person or a combination
thereof.
"TGPC" means Tennessee Gas Pipeline Company, a Delaware corporation.
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"TGPC Consent and Agreement" means the Consent and Agreement dated as
of December 6, 1999 among TGPC, Orange L.P. and the Collateral Agent relating to
the Natural Gas Transportation Agreements.
"TGPC Firm Gas Transportation Agreement" means that certain Firm
Natural Gas Transportation Agreement dated March 29, 1991 between Orange L.P.
and TGPC.
"TGPC Interruptible Gas Transportation Agreement" means the certain Gas
Transportation agreement dated as of November 19, 1987 between TGPC and Gas
Alternative Systems, Inc., as amended by that certain letter agreement dated as
of October 4, 1988, and as assigned by Gas Alternative Systems, Inc. to Orange
L.P.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Title Company" means Ticor Title Insurance Company.
"Title Event" means the existence of any defect of title or lien or
encumbrance on the Project (other than certain Permitted Liens) in effect on the
Closing Date that entitles the Collateral Agent to make a claim under the policy
or policies of title insurance issued to it pursuant to the Financing Documents
or that entitles POA to make a claim under any policy or policies of title
insurance held by it.
"Title Event Proceeds" means all amounts and proceeds (including
instruments) received by the Collateral Agent or POA in respect of any Title
Event.
"TransCanada" means TransCanada Pipelines Ltd., a Canadian company.
"TransCanada Agreement" means the Firm Service Contact, dated as of
October 11, 1990 between TransCanada and Canadian Hunter.
"TransCanada Consent and Agreement" means the Consent and Agreement
dated as of December 6, 1999 among TransCanada, Canadian Hunter, Orange L.P. and
the Collateral Agent relating to the TransCanada Agreement.
"Treasury Rate" means, with respect to any date of redemption, the rate
per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such date of redemption.
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"Trustee" means the Trustee named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"UCC" means the New York Uniform Commercial Code.
"Unassigned Rights" means (i) the rights of the SIDA granted under the
Master Lease pursuant to Section 9.1(a)(3), 9.2(a)(3), 10.4 and 10.5 thereof,
(ii) the rights of the SIDA under Sections 2.2(f), 2.2(g), 2.4, 3.1, 4.1(b),
4.4, 6.2, 7.1(a), 7.1(b), 8.3, 10.2, 10.3 and 10.9 of the Master Lease and
monies due and to become due to the SIDA for its own account or to the members,
directors, officers and employees of the SIDA for their own account pursuant to
Section 7.1(a), 7.1(b), 8.3, 8.4, 10.3 and 10.9 of the Master Lease, (iii) the
monies due as payments in lieu of taxes pursuant to Section 8.2(a)(4) of the
Master Lease and (iv) the right to enforce the foregoing pursuant to Article XII
of the Master Lease. Notwithstanding the preceding sentence, to the extent the
obligations of POA under the sections of the Master Lease listed above do not
relate to the payment of monies to the SIDA for its own account or to the
members, officers, agents (other than the SIDA) and employees of the SIDA for
their own account, such obligations, upon assignment of the Master Lease to
Collateral Agent pursuant to the Financing Documents, shall be deemed to and
shall constitute obligations of POA to the SIDA and Collateral Agent, jointly
and severally.
"University" means Syracuse University.
"University Agreements" means the Ground Lease, the Steam Contract, the
Steam Plant Operating Agreement, the University Easement Agreements, the
University Consent and Agreement and the University Subordination Agreement.
"University Collateral Documents" means the University Facility
Mortgage, the University Pipeline Mortgage and the University Security
Agreements.
"University Consent and Agreement" means the Consent and Agreement
dated as of December 6, 1999 among Orange L.P., the University and Collateral
Agent for and on behalf of the Secured Parties relating to, among other things,
the Ground Lease and the Steam Contract, to be recorded in the Clerk's Office.
"University Easement Agreements" means the City Easement Agreement
granted by the University described in item 2 of Exhibit A-3 to the First
Mortgage and the Outside Easements granted by the University described in items
15 and 16 of Exhibit A-5 to the First Mortgage.
"University Facility Mortgage" means the Mortgage and Security
Agreement (A), dated as of April 5, 1991, recorded in the Clerk's Office on May
3,
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1991 in Book 5857 at Page 221, as amended by the First Amendment of Mortgage and
Security Agreement (A), dated as of December 24, 1992, recorded in the Clerk's
Office on January 7, 1993, in Book 6731 at Page 254, given by SIDA and POA to
the University relating to the Project and securing POA's obligations to the
University under the Steam Contract, the Steam Plant Operating Agreement and the
Ground Lease up to a maximum of $20,000,000 principal amount of such
obligations.
"University Pipeline Mortgage" means the Mortgage and Security
Agreement (B), dated as of April 5, 1991, recorded in the Clerk's Office on May
3, 1991 in Book 5857 at Page 249, as amended by the First Amendment of Mortgage
and Security Agreement (B), dated as of December 24, 1992, recorded in the
Clerk's Office on January 7, 1993 in Book 6731 at Page 274, given by SIDA to the
University relating to the Project Pipeline and securing POA's obligation to the
University relating to access to the Project Pipeline upon termination of the
Steam Contract and the Steam Plant Operating Agreement up to a maximum of
$10,000,000 principal amount of such obligations.
"University Security Agreements" means two Security Agreements dated as
of April 5, 1991 among POA, SIDA and the University and Orange L.P.
"University Subordination Agreement" means the Subordination Agreement,
dated as of December 6, 1999 among POA, the University and the Collateral Agent
for and on behalf of the Secured Parties.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Senior Secured Note
in the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary Agent, representing a series of Senior Secured Notes that do
not bear the Private Placement Legend.
"UPR" means Union Pacific Resources Inc.
"U.S. Person" means a U.S. person as defined in Rule 902(o) of
Regulation S.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors or otherwise entitled to vote in the determination of the management
of such Person.
Section 1.02. Other Definitions.
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<TABLE>
<CAPTION>
Defined in
Term Section
- ----- ----------
<S> <C>
"Authentication Order"................................................. 2.02
"Covenant Defeasance".................................................. 7.03
"Debtor Relief Law".................................................... 5.01
"Event of Default"..................................................... 5.01
"incur"................................................................ 4.10
"Legal Defeasance"..................................................... 7.02
"Make-Whole Price"..................................................... 3.07
"Paying Agent"......................................................... 2.03
"Registrar"............................................................ 2.03
</TABLE>
Section 1.03. Trust Indenture Act Provisions. Whenever this Indenture
refers to a provision of the TIA, the provision is incorporated by reference in
and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Senior Secured Notes;
"indenture security Holder" means a Holder of a Senior Secured Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Senior Secured Notes means the Issuers and any
successor obligor upon the Senior Secured Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
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(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions;
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement or successor sections or rules
adopted by the SEC from time to time;
(7) references to any gender include the other genders;
(8) the term "including" is not limited and has the inclusive meaning
represented by the phrase "including without limitation", the term "include" is
not limited and has the inclusive meaning represented by the phrase "include
without limitation", and the term "includes" is not limited and has the
inclusive meaning represented by the phrase "includes without limitation";
(9) the term "hereof", "herein", "hereunder", "hereto", and similar
terms refer to this Agreement as a whole and not to any particular provision of
this Agreement;
(10) references in this Agreement to any document, instrument or
agreement (including this Agreement) shall (i) include all exhibits, schedules
and other attachments thereto, (ii) include all documents, instruments or
agreements issued or executed in replacement thereof, and (iii) to the extent
permitted hereby, mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified or supplemented from time to time in
accordance with its terms and in effect at any given time;
(11) words which include a number of constituent parts, things or
elements, including the terms Leased Premises, Easements, Easement Agreements,
Improvements, Equipment, Real Property and Mortgaged Property, shall be
construed as referring separately to each constituent part;
(12) references to any Person include such Person's successors and
assigns and in the case of an individual, the word "successors" includes such
Person's heirs, devisees, legatees, executors, administrators and personal
representatives;
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(13) references to any statute or other law include all applicable
rules, regulations and orders adopted or made thereunder and all statutes or
other laws amending, consolidating or replacing the statute or law referred to;
and
(14) the words "consent", "approve" and "agree", and derivations
thereof or words of similar import, mean the prior written consent, approval or
agreement of the Person in question.
ARTICLE 2
The Senior Secured Notes
Section 2.01. Form and Dating.
(a) General. The Senior Secured Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto for the
Senior Secured Notes. The Senior Secured Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Senior Secured
Note shall be dated the date of its authentication. The Senior Secured Notes
shall be issued in denominations of $100,000 and integral multiples of $1,000 in
excess thereof.
The terms and provisions contained in the Senior Secured Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Issuers and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Senior Secured Note conflicts with the
express provisions of this Indenture, the provisions of this Indenture shall
govern and be controlling.
(b) Global Notes. Senior Secured Notes issued in global form shall be
substantially in the form of Exhibits A-1 or A-2 attached hereto (including the
Global Note Legend thereon and the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). Senior Secured Notes issued in definitive form
shall be substantially in the form of Exhibit A-1 hereto (but without the Global
Note Legend thereon and without the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). Each Global Note shall represent such of the
outstanding Senior Secured Notes as shall be specified therein and each shall
provide that it shall represent the aggregate principal amount of outstanding
Senior Secured Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Senior Secured Notes represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges
and redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Senior
Secured Notes represented thereby shall be made by the Trustee or the note
custodian,
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at the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Senior Secured Notes offered and sold in
reliance on Regulation S shall be issued initially in the form of the Regulation
S Temporary Global Note, which shall be deposited on behalf of the purchasers of
the Senior Secured Notes represented thereby with the Trustee, at its Corporate
Trust Office, as custodian for the Depositary Agent, and registered in the name
of the Depositary Agent or the nominee of the Depositary Agent for the accounts
of designated agents holding on behalf of Euroclear or Cedelbank, duly executed
by the Issuers and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary Agent, together with copies of
certificates from Euroclear and Cedelbank certifying that they have received
certification of non-United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Note (except to the extent
of any beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who will take delivery of a beneficial ownership interest in
a 144A Global Note bearing a Private Placement Legend, all as contemplated by
Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate. Following the
termination of the Restricted Period, beneficial interests in the Regulation S
Temporary Global Note shall be exchanged for beneficial interests in Regulation
S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously
with the authentication of Regulation S Permanent Global Notes, the Trustee
shall cancel the Regulation S Temporary Global Note. The aggregate principal
amount of the Regulation S Temporary Global Note and the Regulation S Permanent
Global Notes may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depositary Agent or its nominee, as the
case may be, in connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedelbank Procedures Applicable. The provisions of
the "Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedelbank"
and "Customer Handbook" of Cedelbank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedelbank.
(e) CUSIP and Private Placement Numbers. The Issuers in issuing the
Senior Secured Notes may use "CUSIP" or "private placement" numbers (if then
generally in use), and, if so, the Trustee shall indicate the "CUSIP" or
"private placement" numbers of the Senior Secured Notes in notices of redemption
and related materials as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the
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Senior Secured Notes or as contained in any notice of redemption and related
materials.
Section 2.02. Execution and Authentication. One Responsible Officer
shall sign the Senior Secured Notes for the Issuers by manual or facsimile
signature.
If the Responsible Officer whose signature is on a Senior Secured Note
is no longer a Responsible Officer at the time a Senior Secured Note is
authenticated, the Senior Secured Note shall nevertheless be valid.
A Senior Secured Note shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence that
the Senior Secured Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed by one
Responsible Officer of each Issuer (an "Authentication Order"), authenticate
Senior Secured Notes for original issue up to the aggregate principal amount
stated in paragraph 4 of the Senior Secured Notes. The aggregate principal
amount of Senior Secured Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Issuers to authenticate Senior Secured Notes. An authenticating agent may
authenticate Senior Secured Notes whenever the Trustee may do so. Each reference
in this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to deal with
Holders or an Affiliate of the Issuers.
Section 2.03. Registrar and Paying Agent. The Issuers shall maintain an
office or agency where Senior Secured Notes may be presented for registration of
transfer or for exchange ("Registrar") and an office or agency where Senior
Secured Notes may be presented for payment ("Paying Agent"). The Registrar shall
keep a register of the Senior Secured Notes and of their transfer and exchange.
The Issuers may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Issuers may change any
Paying Agent or Registrar without notice to any Holder. The Issuers shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Issuers fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Issuers or any of
their Affiliates may act as Paying Agent or Registrar.
The Issuers initially appoint The Depository Trust Company ("DTC") to
act as Depositary Agent with respect to the Global Notes.
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The Issuers initially appoint the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust. The Issuers shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Holders or the Trustee all
money held by the Paying Agent for the payment of principal, premium, if any, or
interest on the Senior Secured Notes, and will notify the Trustee of any default
by the Issuers in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Issuers at any time may require a Paying Agent to pay all money held by it
to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than one of the Issuers or an Affiliate of the Issuers) shall have no further
liability for the money. If one of the Issuers or an Affiliate of the Issuers
acts as Paying Agent, it shall segregate and hold in a separate trust fund for
the benefit of the Holders all money held by it as Paying Agent. Upon any
bankruptcy or reorganization proceedings relating to the Issuers, the Trustee
shall serve as Paying Agent for the Senior Secured Notes.
Section 2.05. Holder Lists. The Trustee shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of all Holders and shall otherwise comply with TIA (S)
312(a). If the Trustee is not the Registrar, the Issuers shall furnish to the
Trustee at least seven (7) Business Days before each interest payment date and
at such other times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Holders of Senior Secured Notes and the Issuers shall otherwise
comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary Agent to a nominee of the
Depositary Agent, by a nominee of the Depositary Agent to the Depositary Agent
or to another nominee of the Depositary Agent, the Depositary Agent or any such
nominee to a successor Depositary Agent or a nominee of such successor
Depositary Agent. All Global Notes will be exchanged by the Issuers for
Definitive Notes if (i) the Issuers deliver to the Trustee notice from the
Depositary Agent that it is unwilling or unable to continue to act as Depositary
Agent or that it is no longer a clearing agency registered under the Exchange
Act and, in either case, a successor Depositary Agent is not appointed by the
Issuers within 120 days after the date of such notice from the Depositary Agent
or (ii) the Issuers in their sole discretion determine that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and deliver a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Issuers for
Definitive Notes
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prior to (x) the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under
the Securities Act. Upon the occurrence of either of the preceding events in (i)
or (ii) above, Definitive Notes shall be issued in such names as the Depositary
Agent shall instruct the Trustee. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every Senior Secured Note authenticated and delivered in exchange for, or in
lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b) or (c) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary Agent, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the Restricted
Period, transfers of beneficial interests in the Temporary Regulation S
Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons
who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary Agent in accordance with
the Applicable Procedures directing the Depositary Agent to credit or
cause to be credited a beneficial interest in another Global Note in an
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amount equal to the beneficial interest to be transferred or exchanged
and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to
be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary Agent
in accordance with the Applicable Procedures directing the Depositary
Agent to cause to be issued a Definitive Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2)
instructions given by the Depositary Agent to the Registrar containing
information regarding the Person in whose name such Definitive Note
shall be registered to effect the transfer or exchange referred to in
(1) above; provided that in no event shall Definitive Notes be issued
upon the transfer or exchange of beneficial interests in the
Regulation S Temporary Global Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903 under the Securities Act.
Upon consummation of an Exchange Offer by the Issuers in accordance
with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted
Global Notes. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Notes contained
in this Indenture and the Senior Secured Notes or otherwise applicable
under the Securities Act, the Trustee shall adjust the principal
amount of the relevant Global Note(s) pursuant to Section 2.06(h)
hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may
be transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit C
hereto, including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Temporary Global
Note or the Regulation S Global Note, then the transferor must
deliver a certificate in the form of Exhibit C hereto, including
the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in an Unrestricted
Global Note. A
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beneficial interest in any Restricted Global Note may be exchanged by
any Holder thereof for a beneficial interest in an Unrestricted Global
Note or transferred to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note if the
exchange or transfer complies with the requirements of Section
2.06(b)(ii) above and the Registrar receives the following:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not a broker-dealer, a Person
participating in the distribution of the Exchange Notes or a
Person who is an affiliate (as defined in Rule 144) of the
Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit D
hereto, including the certifications in item (1)(a)
thereof; or
(2) if the Holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to
the Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and
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in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Issuers shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
If any such transfer is effected pursuant to this subparagraph at a
time when an Unrestricted Global Note has not yet been issued, the Issuers shall
issue and, upon receipt of an Authentication Order in accordance with Section
2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global
Notes in an aggregate principal amount equal to the aggregate principal amount
of beneficial interests transferred pursuant to this subparagraph.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Global Notes to Restrictive
Definitive Notes. If any Holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such Holder in the form of Exhibit D hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit C
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule
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903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit C hereto, including the
certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit C hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to the Issuers, a certificate to the effect set forth in
Exhibit C hereto, including the certifications in item (3)(b)
thereof; or
(F) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit C hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Issuers shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions
a Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or
denominations as the Holder of such beneficial interest shall instruct
the Registrar through instructions from the Depositary Agent and the
Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Senior Secured
Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c)(i) shall bear the Private Placement Legend and shall
be subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C)
hereof, a beneficial interest in the Regulation S Temporary Global
Note may not be exchanged for a Definitive Note or transferred to a
Person who takes delivery thereof in the form of a Definitive Note
prior to (x) the expiration of the Restricted Period and (y) the
receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements
of the Securities Act other than Rule 903 or Rule 904.
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(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A Holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if the Registrar receives the following:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the Holder of such beneficial interest,
in the case of an exchange, or the transferee, in the case of
a transfer, certifies in the applicable Letter of Transmittal
that it is not a broker-dealer, a Person participating in the
distribution of the Exchange Notes or a Person who is an
affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend,
a certificate from such Holder in the form of Exhibit
D hereto, including the certifications in item (1)(b)
thereof; or
(2) if the Holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
Definitive Note that does not bear the Private
Placement Legend, a certificate from such Holder in
the form of Exhibit C hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and
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in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any Holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly
pursuant to Section 2.06(h) hereof, and the Issuers shall execute and
the Trustee shall authenticate and deliver to the Person designated in
the instructions a Definitive Note in the appropriate principal
amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iv) shall be registered in
such name or names and in such authorized denomination or
denominations as the Holder of such beneficial interest shall instruct
the Registrar through instructions from the Depositary Agent and the
Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Senior Secured
Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iv) shall not
bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Global
Note or to transfer such Restricted Definitive Notes to a Person who
takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Global Note, a certificate from such Holder in the form of
Exhibit D hereto, including the certifications in item (2)(b)
thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit C hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non U.S. Person in an offshore transaction in
accordance with Rule
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903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit C hereto, including the
certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit C hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to the Issuers, a certificate to the effect set
forth in Exhibit C hereto, including the certifications in
item (3)(b) thereof; or
(F) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit C hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case
of clause (i) above, the appropriate Global Note, in the case of
clause (ii) above, the 144A Global Note, in the case of clause (iii)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests
in Unrestricted Global Notes. A Holder of a Restricted Definitive Note
may exchange such Senior Secured Note for a beneficial interest in an
Unrestricted Global Note or transfer such Restricted Definitive Note
to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note only if the Registrar receives
the following:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the Holder, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not a broker-
dealer, a Person participating in the distribution of the
Exchange Notes or a Person who is an affiliate (as defined in
Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
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(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Senior Secured Notes for a
beneficial interest in the Unrestricted Global Note,
a certificate from such Holder in the form of Exhibit
D hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive Notes
proposes to transfer such Senior Secured Notes to a
Person who shall take delivery thereof in the form of
a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests
in Unrestricted Global Notes. A Holder of an Unrestricted Definitive
Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii) or (iii) above at a
time when an Unrestricted Global Note has not yet been issued, the Issuers
shall issue and, upon receipt of an
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Authentication Order in accordance with Section 2.02 hereof, the Trustee
shall authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of Definitive Notes so
transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance
with the provisions of this Section 2.06(e), the Registrar shall register
the transfer or exchange of Definitive Notes. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to
the Registrar the Definitive Notes duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional
certifications, documents and information, as applicable, required pursuant
to the following provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Definitive Note may be transferred to and registered in the
name of Persons who take delivery thereof in the form of a Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit C hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule
903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit C hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit C hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if the Registrar receives the following:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the Holder, in the case of an exchange,
or the transferee, in the
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case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3)
a Person who is an affiliate (as defined in Rule 144) of the
Issuers;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Senior
Secured Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit D
hereto, including the certifications in item (1)(d)
thereof; or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Restricted
Definitive Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive
Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests, an Opinion of Counsel in form
reasonably acceptable to the Issuers to the effect that such
exchange or transfer is in compliance with the Securities Act
and that the restrictions on transfer contained herein and in
the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted
Definitive Notes. A Holder of Unrestricted Definitive Notes may
transfer such Senior Secured Notes to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note. Upon receipt of
a request to register such a transfer, the Registrar shall register the
Unrestricted Definitive Notes pursuant to the instructions from the
Holder thereof.
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(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Issuers shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Notes tendered for acceptance by Persons that certify in
the applicable Letters of Transmittal that (x) they are not broker-dealers, (y)
they are not participating in a distribution of the Exchange Notes and (z) they
are not affiliates (as defined in Rule 144) of the Issuers, and accepted for
exchange in the Exchange Offer and Definitive Notes in an aggregate principal
amount equal to the principal amount of the Restricted Definitive Notes accepted
for exchange in the Exchange Offer. Concurrently with the issuance of such
Notes, the Trustee shall cause the aggregate principal amount of the applicable
Restricted Global Notes to be reduced accordingly, and the Issuers shall execute
and the Trustee shall authenticate and deliver to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Note and each Definitive Note (and all Senior Secured
Notes issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
"THE SENIOR SECURED NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT: (A) SUCH SECURITY
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) (a)
INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY
BELIEVES
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IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144(A)), (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE ISSUERS SO REQUEST), (2) TO THE ISSUERS OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTION SET
FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
to this Section 2.06 (and all Senior Secured Notes issued in
exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a
legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY AGENT (AS DEFINED IN THE
INDENTURE GOVERNING THIS SENIOR SECURED NOTE) OR ITS NOMINEE IN
CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE
TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE
PRIOR WRITTEN CONSENT OF THE ISSUERS."
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(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in
substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Senior Secured Notes represented by such Global
Note shall be reduced accordingly and an endorsement shall be made on such
Global Note by the Trustee or by the Depositary Agent at the direction of the
Trustee to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary Agent at the direction of the Trustee
to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Issuers shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Issuers' order or at the Registrar's
request.
(ii) No service charge shall be made to a Holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Issuers may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other
than any such transfer taxes or similar governmental charge payable
upon exchange or transfer pursuant to Sections 2.10 and 3.06 hereof).
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(iii) The Registrar shall not be required to register the
transfer of or exchange any Senior Secured Note selected for
redemption in whole or in part, except the unredeemed portion of any
Senior Secured Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Issuers, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such
registration of transfer or exchange.
(v) The Issuers shall not be required (A) to issue, to
register the transfer of, or to exchange any Senior Secured Notes
during a period beginning at the opening of business fifteen (15) days
before the day of any selection of Senior Secured Notes for redemption
under Section 3.02 hereof and ending at the close of business on the
day of selection, (B) to register the transfer of or to exchange any
Senior Secured Note so selected for redemption in whole or in part,
except the unredeemed portion of any Senior Secured Note being
redeemed in part or (C) to register the transfer of or to exchange a
Senior Secured Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Issuers may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Senior Secured Notes and for all
other purposes, and none of the Trustee, any Agent or the Issuers
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section
2.06 to effect a registration of transfer or exchange may be submitted
by facsimile.
Section 2.07. Replacement Senior Secured Notes. If any mutilated
Senior Secured Note is surrendered to the Trustee or the Issuers and the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Senior Secured Note, the Issuers shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Senior Secured Note if
the Trustee's requirements are met. If required by the Trustee, Registrar or the
Issuers, an indemnity must be supplied by the Holder that is sufficient in the
judgment of the Trustee, Registrar and the Issuers to
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protect the Issuers, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Senior Secured Note is replaced. The
Issuers and the Trustee may charge the Holder for their respective expenses in
replacing a Senior Secured Note.
Every replacement Senior Secured Note is an additional obligation of
the Issuers and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Senior Secured Notes duly issued
hereunder.
SECTION 2.08. Outstanding Senior Secured Notes. The Senior Secured
Notes outstanding at any time are all the Senior Secured Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a
Senior Secured Note does not cease to be outstanding because either Issuer or an
Affiliate of the Issuers holds the Senior Secured Note; however, Senior Secured
Notes held by either Issuer or an Affiliate of the Issuers shall not be deemed
to be outstanding for purposes of Section 3.07(b) hereof.
If a Senior Secured Note is replaced pursuant to Section 2.07 hereof,
it ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Senior Secured Note is held by a bona fide purchaser.
If the principal amount of any Senior Secured Note is considered paid
under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases
to accrue.
If the Paying Agent (other than one of the Issuers, or an Affiliate of
the Issuers) holds, on a redemption date or maturity date, money sufficient to
pay Senior Secured Notes payable on that date, then on and after that date such
Senior Secured Notes shall be deemed to be no longer outstanding and shall cease
to accrue interest.
In the event the Senior Secured Notes are issued in book-entry form
with the Depositary Agent: (i) the Trustee may deal with the Depositary Agent as
the authorized representative of the Holders; (ii) the rights of the Holders
shall be exercised only through the Depositary Agent and shall be limited to
those established by law and agreement between the Holders and the Depositary
Agent and/or direct participants of the Depositary Agent; (iii) the Depositary
Agent will make book-entry transfers among the direct participants of the
Depositary Agent and will receive and transmit distributions of principal and
interest on the Senior Secured Notes to such direct participants; and (iv) the
direct participants of the Depositary Agent shall have no rights under this
Indenture under or with respect to any of the Senior Secured Notes held on their
behalf by the Depositary Agent, and the Depositary Agent may be treated by the
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Trustee and its agents, employees, officers and directors as the absolute owner
of the Senior Secured Notes for all purposes whatsoever.
Section 2.09. Treasury Notes. In determining whether the Holders of
the required principal amount of Senior Secured Notes have concurred in any
direction, waiver or consent, Senior Secured Notes owned by either Issuer, or by
any Affiliate of the Issuers shall be considered as though not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Senior
Secured Notes that a Responsible Trust Officer of the Trustee actually knows are
so owned shall be so disregarded.
Section 2.10. Temporary Senior Secured Notes. Until certificates
representing Senior Secured Notes are ready for delivery, the Issuers may
prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Senior Secured Notes. Temporary Notes shall be
substantially in the form of certificated Senior Secured Notes but may have
variations that the Issuers considers appropriate for temporary Senior Secured
Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable
delay, the Issuers shall prepare and the Trustee shall authenticate definitive
Senior Secured Notes in exchange for temporary Senior Secured Notes.
Holders of temporary Senior Secured Notes shall be entitled to all of
the benefits of this Indenture.
Section 2.11. Cancellation. The Issuers at any time may deliver Senior
Secured Notes to the Trustee for cancellation. The Registrar and Paying Agent
shall forward to the Trustee any Senior Secured Notes surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else shall
cancel all Senior Secured Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy canceled Senior
Secured Notes (subject to the record retention requirement of the Exchange Act).
Certification of the destruction of all canceled Senior Secured Notes shall be
delivered to the Issuers. The Issuers may not issue new Senior Secured Notes to
replace Senior Secured Notes that they have paid or that have been delivered to
the Trustee for cancellation.
Section 2.12. Defaulted Interest. If the Issuers default in a payment
of interest on the Senior Secured Notes, it shall pay the defaulted interest in
any lawful manner plus, to the extent lawful, interest payable on the defaulted
interest, to the Persons who are Holders on a subsequent special record date, in
each case at the rate provided in the Senior Secured Notes and in Section 4.01
hereof. The Issuers shall notify the Trustee in writing of the amount of
defaulted interest proposed to be paid on each Senior Secured Note and the date
of the proposed payment. The Issuers shall fix or cause to be fixed each such
special record date and payment date, provided that no
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such special record date shall be less than ten (10) days prior to the related
payment date for such defaulted interest. At least fifteen (15) days before the
special record date, the Issuers (or, upon the written request of the Issuers,
the Trustee in the name and at the expense of the Issuers) shall mail or cause
to be mailed to Holders a notice that states the special record date, the
related payment date and the amount of such interest to be paid.
Section 2.13. The Collateral Agent. The Issuers and the Trustee (on
behalf of itself, and the Holders of the Senior Secured Notes) on the terms and
conditions specified herein and the Collateral Documents hereby irrevocably
appoint and authorize U.S. Bank Trust National Association, to act as the
Collateral Agent hereunder and under the Collateral Documents to which the
Collateral Agent is or becomes a party, with such powers, rights and obligations
as are expressly delegated to the Collateral Agent by the terms of this
Indenture and by the Collateral Documents.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee. If the Issuers elect to redeem the
Senior Secured Notes pursuant to the optional redemption provisions of Section
3.07 hereof, they shall furnish to the Trustee, at least thirty (30) days but
not more than sixty (60) days before a redemption date, an Officers' Certificate
setting forth (i) the clause of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of the Senior
Secured Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Senior Secured Notes to Be Redeemed. If
less than all of the Senior Secured Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Senior Secured Notes
to be redeemed or purchased among the Holders of the Senior Secured Notes in
compliance with the requirements of the principle national securities exchange,
if any, on which the Senior Secured Notes are listed or, if the Senior Secured
Notes are not listed, on a pro rata basis, by lot or in accordance with any
other method the Trustee considers fair and appropriate; provided that no Senior
Secured Note less than $1,000 shall be redeemed in part. In the event of partial
redemption by lot, the particular Senior Secured Notes to be redeemed shall be
selected, unless otherwise provided herein, not less than thirty (30) nor more
than sixty (60) days prior to the redemption date by the Trustee from the
outstanding Senior Secured Notes not previously called for redemption.
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The Trustee shall promptly notify the Issuers in writing of the Senior
Secured Notes selected for redemption and, in the case of any Senior Secured
Note selected for partial redemption, the principal amount thereof to be
redeemed. Senior Secured Notes and portions of Senior Secured Notes selected
shall be in denominations of $100,000 and integral multiples of $1,000 in excess
thereof; except that if all of the Senior Secured Notes of a Holder are to be
redeemed, the entire outstanding amount of Senior Secured Notes held by such
Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided
in the preceding sentence, provisions of this Indenture that apply to Senior
Secured Notes called for redemption also apply to portions of Senior Secured
Notes called for redemption.
Section 3.03. Notice of Redemption. At least thirty (30) days but not
more than sixty (60) days before a redemption date, the Issuers shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Senior Secured Notes are to be redeemed at its registered address.
The notice shall identify the Senior Secured Notes to be redeemed and
shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Senior Secured Note is being redeemed in part, the portion
of the principal amount of such Senior Secured Note to be redeemed and that,
after the redemption date upon surrender of such Senior Secured Note, a new
Senior Secured Note or Notes in principal amount equal to the unredeemed portion
shall be issued upon cancellation of the original Senior Secured Note;
(d) the name and address of the Paying Agent;
(e) that Senior Secured Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(f) that, unless the Issuers default in making such redemption
payment, interest on Senior Secured Notes called for redemption ceases to accrue
on and after the Redemption Date;
(g) the paragraph of the Senior Secured Notes and/or Section of this
Indenture pursuant to which the Senior Secured Notes called for redemption are
being redeemed; and
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(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Senior
Secured Notes.
At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at their expense; provided, however, that
the Issuers shall have delivered to the Trustee, at least forty-five (45) days
prior to the redemption date, an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed in accordance with Section 3.03 hereof, Senior Secured
Notes called for redemption become irrevocably due and payable on the Redemption
Date at the redemption price. A notice of redemption may not be conditional.
Section 3.05. Deposit of Redemption Price. One Business Day prior to
the Redemption Date, the Issuers shall deposit with the Trustee or with the
Paying Agent money sufficient to pay the redemption price of and accrued
interest on all Senior Secured Notes to be redeemed on that date. The Trustee or
the Paying Agent shall promptly return to the Issuers any money deposited with
the Trustee or the Paying Agent by the Issuers in excess of the amounts
necessary to pay the redemption price of, and accrued interest on, all Senior
Secured Notes to be redeemed.
If the Issuers comply with the provisions of the preceding paragraph,
on and after the Redemption Date, interest shall cease to accrue on the Senior
Secured Notes or the portions of Senior Secured Notes called for redemption. If
a Senior Secured Note is redeemed on or after an interest record date but on or
prior to the related interest payment date, then any accrued and unpaid interest
shall be paid to the Person in whose name such Senior Secured Note was
registered at the close of business on such record date. If any Senior Secured
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Issuers to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the Redemption Date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Senior Secured
Notes and in Section 4.01 hereof.
Section 3.06. Senior Secured Notes Redeemed in Part. Upon surrender of
a Senior Secured Note that is redeemed in part, the Issuers shall issue and,
upon the Issuers' written request, the Trustee shall authenticate for the Holder
at the expense of the Issuers a new Senior Secured Note equal in principal
amount to the unredeemed portion of the Senior Secured Note surrendered.
Section 3.07. Optional Redemption. (a) The Senior Secured Notes will be
redeemable at the option of the Issuers at any time and from time to time, in
whole or in
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part, upon not less than thirty (30) nor more than sixty (60) days notice to
each Holder of the Senior Secured Notes, at a redemption price equal to the
Make-Whole Price. "Make-Whole Price" means an amount equal to the greater of (i)
100% of the principal amount of such Senior Secured Note and (ii) as determined
by a Reference Treasury Dealer, the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the date of
redemption on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued and
unpaid interest thereon to the Redemption Date. Unless the Issuers default in
payment of the redemption price, on and after the Redemption Date, interest will
cease to accrue on the Senior Secured Note or portions thereof called for
redemption.
(b) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. Mandatory Redemption. The Senior Secured Notes will be
subject to mandatory redemption, in whole or in part, at a redemption price
equal to the principal amount thereof plus accrued and unpaid interest to the
Redemption Date, upon:
(a) the receipt of Loss Proceeds or Eminent Domain Proceeds by POA if
POA determines that (i) the Project cannot be rebuilt, repaired or restored to
permit operations on a commercially reasonable basis, or POA determines not to
rebuild, repair or restore the Project, in which case the amount of such Loss
Proceeds or Eminent Domain Proceeds shall be available for such redemption, or
(ii) only a portion of the Project is capable of being rebuilt, repaired or
restored, in which case, if excess proceeds exist after such rebuild, repair or
restoration, only the amount of such excess Loss Proceeds or Eminent Domain
Proceeds shall be made available for such redemption;
(b) the receipt by POA of proceeds in connection with a Title Event,
in which case the amount of such Title Event Proceeds shall be made available
for such redemption, subject to reduction by the costs expended in connection
with collecting proceeds upon the occurrence of such Title Event, and any
additional reasonable costs or expenses that the Issuers will be subject to as a
result of the Title Event; and
(c) the receipt by POA of payments arising from the occurrence of a
Contract Termination Event in which case the amount of all such payments shall
be made available for such redemption subject to reduction in the case of a
Contract Termination Event relating to the Gas Purchase Agreement, by the costs
expended in connection with obtaining a replacement or substitute gas supply and
funding the Gas Reserve Account.
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Other than as specifically provided in this Section 3.08, any purchase
pursuant to this Section 3.08 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
Section 3.09. Repurchase at the Option of Holders Upon a Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Senior Secured
Notes will have the right to require the Issuers to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Senior
Secured Notes, pursuant to the offer described in Sections (b) and (c) below
(the "Change of Control Offer"), at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase (the "Change of
Control Payment").
(b) Within ten (10) days following any Change of Control, the Issuers will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Senior Secured Notes
on the date specified in such notice, which date shall be no earlier than thirty
(30) days and no later than sixty (60) days from the date such notice is mailed
(the "Change of Control Payment Date"), pursuant to the procedures required by
this Indenture and described in such notice. The Issuers will comply with the
requirements of Rule l4e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Senior Secured Notes as a
result of a Change of Control.
(c) On the Change of Control Payment Date, the Issuers will, to the
extent lawful:
(i) accept for payment all Senior Secured Notes or portions thereof
properly tendered pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Senior Secured Notes or portions thereof
so tendered; and
(iii) deliver or cause to be delivered to the Trustee the Senior
Secured Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Senior Secured Notes or portions thereof
being purchased by the Issuers. The Paying Agent will promptly mail to each
Holder of Senior Secured Notes so tendered the Change of Control Payment
for such Senior Secured Notes, and the Trustee will promptly authenticate
and mail (or cause to be transferred by book entry) to each Holder a new
Senior Secured Note equal in principal amount to any unpurchased portion of
the Senior Secured Notes surrendered, if any; provided that each such new
Senior
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Secured Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Issuers will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(d) The Change of Control provisions described above in (a), (b) and (c)
of this Section 3.09 will be applicable whether or not any other provisions of
this Indenture are applicable to any Change of Control.
(e) Except as provided in this Section 3.09 with respect to a Change of
Control, nothing in this Indenture shall permit the Holders of the Senior
Secured Notes to require that the Issuers repurchase or redeem the Senior
Secured Notes in the event of a takeover, recapitalization or similar
transaction.
(f) Notwithstanding anything in (a), (b) or (c) of Section this 3.09, the
Issuers will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Indenture applicable to a Change of Control Offer made by the Issuers and
purchases all Senior Secured Notes validly tendered and not withdrawn under such
Change of Control Offer.
ARTICLE 4
Covenants
Section 4.01. Payment of Senior Secured Notes. The Issuers shall pay
or cause to be paid the principal of the Senior Secured Notes as follows:
Principal
Scheduled Payment Date Amount Payable
---------------------- --------------
March 15, 2000 $ 2,210,000
September 15, 2000 $ 4,590,000
March 15, 2001 $ 2,890,000
September 15, 2001 $ 3,060,000
March 15, 2002 $ 3,060,000
September 15, 2002 $ 3,570,000
March 15, 2003 $ 3,570,000
September 15, 2003 $ 4,080,000
March 15, 2004 $ 4,080,000
September 15, 2004 $ 4,420,000
March 15, 2005 $ 4,760,000
September 15, 2005 $ 4,760,000
March 15, 2006 $ 5,440,000
September 15, 2006 $ 5,440,000
March 15, 2007 $ 5,950,000
September 15, 2007 $ 6,120,000
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The Issuers shall pay or cause to be paid the principal, premium, if any,
and interest on the Senior Secured Notes on the dates and in the manner provided
in the Senior Secured Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than one of the
Issuers or an Affiliate thereof, holds as of 10:00 a.m. Eastern Time on the due
date money deposited by the Issuers in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due.
The Issuers shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Senior
Secured Notes to the extent lawful; it shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
Section 4.02. Partnership Existence. Each Issuer shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
partnership existence, in accordance with its Partnership Agreement (as the same
may be amended from time to time) or its corporate existence, in accordance with
its certificate of incorporation (as the same may be amended from time to time),
as applicable, and (ii) the rights (charter and statutory), licenses and
franchises of such Issuer; provided, however, that neither Issuer shall be
required to preserve any such right, license or franchise, if the management
committee of such Issuer determines that the preservation thereof is no longer
desirable in the conduct of the business of such Issuer, and that the loss
thereof is not adverse in any material respect to the Holders of the Senior
Secured Notes.
Section 4.03. Maintenance of Office or Agency. The Issuers shall maintain
in the Borough of Manhattan, the City of New York, an office or agency (which
may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-
registrar) where Senior Secured Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Issuers in
respect of the Senior Secured Notes and this Indenture may be served. The
Issuers shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Issuers
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Issuers may also from time to time designate one or more other offices
or agencies where the Senior Secured Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided,
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however, that no such designation or rescission shall in any manner relieve the
Issuers of their obligations to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Issuers shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Issuers hereby designate the Corporate Trust Office of the Trustee as
one such office or agency of the Issuers in accordance with Section 2.03.
Section 4.04. Reports, Budget. (a) Whether or not required by the rules and
regulations of the SEC, so long as any Senior Secured Notes are outstanding, the
Issuers shall furnish to the Holders of Senior Secured Notes, the Trustee and to
each Rating Agency (i) all quarterly and annual financial information that would
be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Issuers were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the certified
independent accountants of the Issuers; (ii) all current reports that would be
required to be filed with the SEC on Form 8-K if the Issuers were required to
file such reports, in each case, within the time periods specified in the SEC's
rules and regulations; (iii) copies of material notices and (iv) written notice
of any Event of Default or any event or condition that could reasonably be
expected to result in a Material Adverse Effect. The Issuers shall at all times
comply with TIA (S) 314.
(b) For so long as any Senior Secured Notes remain outstanding, the
Issuers shall furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
(c) POA shall, no less than ninety (90) days in advance of the beginning
of each fiscal year adopt a draft Operating Budget of anticipated revenues, debt
service, proposed partnership distributions, maintenance, repair and operation
expenses (including reasonable allowance for contingencies), major maintenance
reserves and all other anticipated Operation and Maintenance Costs for the
ensuing fiscal year. Copies of the draft annual Operating Budget for each year
of operation shall be promptly furnished to the Independent Engineer for its
review and approval, which shall not be unreasonably withheld or delayed. POA
shall incorporate the Independent Engineer's reasonable suggestions (but only if
such suggestions are delivered to POA at least sixty (60) days in advance of
such fiscal year) into a final Operating Budget, which shall be prepared no less
than forty-five (45) days in advance of each fiscal year. The Operation and
Maintenance Costs in each such Operating Budget which are subject to escalation
limitations in the Project Documents shall not, absent extraordinary
circumstances, be increased by more than the amounts provided in such Project
Documents. POA will
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operate and maintain the Project, or cause the Project to be operated and
maintained, in accordance with the requirements of such Operating Budget and the
Depositary Agreement; provided that the Operating Budget may be further amended
with the Independent Engineer's consent, which will not be unreasonably withheld
or delayed, to account for contingencies which could not reasonably have been
expected and in such event POA shall operate and maintain the Project, or cause
the Project to be operated and maintained, in accordance with the requirements
of the Depositary Agreement as applicable to the Operating Budget as so amended;
provided, further, that POA may make emergency repairs costing in excess of
amounts budgeted therefor if POA gives the Trustee, the Collateral Agent and the
Independent Engineer notice thereof promptly thereafter.
Section 4.05. Compliance and Estoppel Certificates. (a) The Issuers shall
deliver to the Trustee and to each Rating Agency, within ninety (90) days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Issuers during the preceding fiscal year has been made
under the supervision of the signing Officer with a view to determining whether
the Issuers have kept, observed, performed and fulfilled their obligations under
this Indenture and the other Financing Documents, and further stating that to
the best of his or her knowledge the Issuers have kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and the other
Financing Documents and are not in default in the performance or observance of
any of the terms, provisions and conditions of this Indenture and the other
Financing Documents (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Issuers are taking or propose to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest, if any, on the Senior Secured Notes is prohibited or if such event
has occurred, a description of the event and what action the Issuers are taking
or propose to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.05(a) above shall be accompanied by a
written statement of the Issuers' independent public accountants (who shall be a
firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Issuers have violated
any provisions of Article 4 hereof or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
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(c) The Issuers shall, so long as any of the Senior Secured Notes are
outstanding, deliver to the Trustee, forthwith upon any Responsible Officer
becoming aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Issuers are
taking or propose to take with respect thereto.
(d) The Issuers shall, so long as any of the Senior Secured Notes are
outstanding, deliver to the Trustee and the Collateral Agent, within five (5)
Business Days after receipt of a written request therefor from the Trustee or
the Collateral Agent, (i) an Officer's Certificate (in form for recording in the
Clerk's office, if requested by the Trustee or the Collateral Agent) specifying
(A) the aggregate unpaid principal amount of the Senior Secured Notes
outstanding, (B) the date to which interest payments due pursuant to the Senior
Secured Notes have been paid, (C) whether or not any Default or Event of Default
has occurred and is continuing, and (D) if any Default or Event of Default is
continuing, describing such Default or Event of Default and what action the
Issuers are taking or propose to take with respect thereto; and (ii) evidence
reasonably requested by, and reasonably satisfactory to, the Trustee and the
Collateral Agent that the Issuers have complied with their obligations under
this Indenture and the other Financing Documents.
(e) The Trustee or the Collateral Agent shall, so long as any Senior
Secured Notes are outstanding, deliver to the Issuers, promptly (but in any
event within twenty (20) Business Days) after receipt of a written request
therefor from the Issuers, a certificate by the Trustee or the Collateral Agent,
as the case may be, specifying to the knowledge of the Trustee or the Collateral
Agent, as the case may be (i) the aggregate unpaid principal amount of the
Senior Secured Notes outstanding, (ii) the date to which interest payments due
pursuant to the Senior Secured Notes have been paid, and (iii) whether or not
any Default or Event of Default has occurred or is continuing.
Section 4.06. Taxes. The Issuers shall pay prior to delinquency, all
Impositions except such as are contested in good faith and by appropriate
proceedings, for which adequate reserves have been established in accordance
with generally accepted accounting principles, and which would not have a
Material Adverse Effect.
Section 4.07. Stay, Extension and Usury Laws. The Issuers shall not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay, extension or usury law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Issuers hereby expressly waive all benefit or advantage
of any such law, and covenants that they shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law has been enacted.
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Section 4.08. Restricted Payments. POA shall not make any Restricted
Payments except for payments permitted under the Depositary Agreement.
Section 4.09. Insurance. (a) POA shall, at its own cost, maintain or cause
to be maintained on its behalf in effect at all times the types of insurance
required by the following provisions together with any other types of insurance
required hereunder, with insurance companies rated "A" or better (and a minimum
size rating of XIII) by Best's Insurance Guide and Key Ratings (or an equivalent
rating by another nationally recognized insurance rating agency of similar
standing if Best's Insurance Guide and Key Ratings shall no longer be published)
or Lloyd's Companies, the following insurance coverages until all obligations of
the Issuers pursuant to this Indenture and the other Financing Documents have
been fully discharged:
(i) Comprehensive or commercial general liability insurance insuring
POA, and its contractors and subcontractors on or with respect to the
Premises and the Project, on an "occurrence" basis, including, but not
limited to, coverage for failure to supply steam, premises/operations,
explosion, collapse and underground hazards, products/completed operations,
broad form property damage, blanket contractual liability, independent
contractor's, and coverage for bodily injury, property damage or death,
with primary coverage limits of no less than $1,000,000 per occurrences
with respect to bodily injury, property damage or death and no less than
$2,000,000 in the aggregate for multiple occurrences in any year with
respect to bodily injury, property damage or death;
Deductibles and exclusions shall be consistent with normal
industry practice for similar operations for property and facilities
similar in nature, use and location of the Project and the Steam Plant. The
comprehensive or commercial general liability policy shall also include a
cross-liability and severability of interest clause. Work performed by
others for the Issuers shall not commence until a certificate of insurance
has been delivered verifying coverages outlined above to be in place and
naming the Issuers as insured or additional insured and the Collateral
Agent as additional insured;
(ii) Automobile liability insurance, including coverage for owned,
non-owned and hired automobiles for both bodily injury and property damage
and containing appropriate no-fault insurance provisions or other
endorsements as in accordance with state legal requirements, with limits of
no less than $1,000,000 per occurrence with respect to bodily injury,
property damage or death;
(iii) Workers' compensation insurance, employer's liability insurance,
disability benefits insurance and such other forms of insurance which POA
and
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its contractors and subcontractors are required by applicable law to
maintain with respect to the Premises and employees performing work on or
with respect to the Premises and the Project, providing statutory benefits
and other states' endorsement and USL&H Act coverage (if such exposure
exists), covering loss resulting from injury, sickness, disability or death
of the employees of POA or its contractors or subcontractors performing
work on or with respect to the Premises and the Project; and POA shall
require that all said contractors and subcontractors shall maintain all of
the foregoing insurance with respect to their employees performing work on
or with respect to the Premises and the Project or the Steam Plant;
(iv) POA shall maintain "all risk" property insurance coverage in the
full amount of the replacement cost of the Project and the Steam Plant and
including a full replacement cost endorsement on an "agreed amount" basis
(with no deduction for depreciation), providing, without limitation, (A)
coverages against loss or damage by fire, lightning, windstorm, hail,
explosion, riot, civil commotion, aircraft, vehicles, smoke, other-risks
from time to time included under "all risk" or "extended coverage"
policies, earthquake, flood (provided, however, that earthquake and flood
coverage shall be subject to an annual aggregate limit of $50,000,000),
first party hazardous material cleanup for the Premises (provided however
that such hazardous material clean up shall be subject to an annual
aggregate limit of $250,000) collapse, sinkhole, subsidence and such other
perils as POA, may from time to time require to be insured, and (B) with
respect to the Project, boiler and machinery coverage on a "comprehensive"
basis including breakdown and repair with limits not-loss than full
replacement cost of the insured objects. POA shall also maintain or cause
to be maintained off-site coverage with a per occurrence limit sufficient
to cover replacement of all off-site equipment, and transit coverage
(including ocean cargo where ocean transit will be required) with a per
occurrence limit sufficient to cover the full insurable value of any item
in transit. POA shall also maintain or cause to be maintained with respect
to the Project business interruption insurance on both property and boiler
policies, including contingent business interruption insurance with respect
to the Niagara Mohawk substation, in an amount equal to satisfy policy
coinsurance conditions, but not less than the sum of fifteen (15) months
debt service, continuing expenses and profits. If profits are insured, the
business interruption policy may include an endorsement allowing such
profits to be paid to POA; other proceeds shall be paid to the Collateral
Agent. POA shall also maintain or cause to be maintained, expediting or
extra expense coverage in an amount not less than $3,000,000. With respect
to the policies required by this Section 4.09(a)(iv), all such policies
shall have a deductible of not greater than $250,000 per loss; except
earthquake and flood coverage shall have a deductible of not greater than
$100,000, and business interruption insurance shall have a deductible of
not
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greater than thirty (30) days. The policy/policies shall include increased
cost of construction coverage, debris removable, and building ordinance
coverage to pay for loss of "undamaged" property which may be required to
be replaced due to enforcement of local, state, or federal ordinances.
(v) Fidelity and employee dishonesty coverage shall be secured for
the Project, protecting against loss from employees of POA and the
Partners, the Operator, the Asset Manager and any other contractors or
subcontractors on or with respect to the Premises and the Project, in an
amount of $1,000,000 and a deductible of not greater than $25,000.
(vi) Umbrella Excess Liability Insurance on or with respect to the
Premises and the Project of not less than $50,000,000. Such coverages shall
be on a per occurrence basis and over and above coverage provided by the
policies described in clauses (i), (ii), and (iii) above. The umbrella
and/or excess policies shall not contain endorsements which restrict
coverages as set forth in clauses (i), (ii), and (iii) above, and which are
provided in the underlying policies, with the exception of "Failure to
Supply", which may be sublimited to $25,000,000.
(vii) Liability insurance in the amount of $25,000,000 for hired or
non-owned aircraft and, in the event any exposure to the Project or the
Issuers exists for owned aircraft, liability insurance in the amount of
$25,000,000 for such owned aircraft.
(viii) Such other insurance (as to risks covered, policy amounts,
policy provisions or otherwise) as, consistent with normal industry
practice for similar operations, are from time to time insured against for
property and facilities similar in nature, use and location to the Project
and the Steam Plant which the Required Holders, after consultation with the
Insurance Consultant, may reasonably require.
All insurance coverage shall be on a "no coinsurance basis".
For purposes of this Section 4.09, the term "Project" shall include all
property which may not otherwise be within the definition of "Project" but which
is within the care, custody or control of POA or its agents, with the exception
of contractor and subcontractor tools and equipment.
(b) All policies except the worker's compensation policies described
in Section 4.09(a)(iii) and the property insurance policies described in Section
4.09(a)(iv), shall name the Collateral Agent, the Trustee and the other Secured
Parties as additional insureds. The property insurance described in Section
4.09(a)(iv) and any other
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property insurance covering loss or damage to the Project shall name the
Collateral Agent as mortgagee and loss payee and shall provide that any payment
thereunder for any loss or damage with respect to the Project shall be made to
the Collateral Agent, except that such policies may provide that any payments of
less than $250,000 made in respect of any single casualty or other occurrence
(not to exceed $500,000 in any year with respect to multiple casualties or
occurrences) may be paid solely to POA, unless Trustee shall have notified the
respective insurer that an Event of Default has occurred thereunder and shall be
continuing. Upon payment and satisfaction of all of the Issuers' obligations
under and termination of the Financing Documents, the Trustee and the Collateral
Agent, at the request and expense of POA, will instruct the insurers to name
POA, or such successor credit provider or other Person as POA shall specify, as
loss payee. Each such policy shall expressly provide that all provisions
thereof, except the limits of liability (which shall be applicable to all
insureds as a group) and liability for premiums (which shall be solely a
liability of POA) shall operate in the same manner as if there were a separate
policy covering each such insured. Each such policy shall waive subrogation
against any of the Secured Parties and POA and shall waive any right of the
insurers to any setoff or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of POA or the Secured
Parties. Each such policy shall provide that if any premium or installment is
not paid when due, or if such insurance is to be canceled, terminated or
materially changed for any reason whatsoever, the insurers (or their
representatives) will promptly notify POA and the Trustee and the Collateral
Agent, and any such cancellation, termination or change shall not be effective
until thirty (30) days after receipt of such notice by the Trustee and the
Collateral Agent, and that appropriate certification shall be made to POA by
each insurer with respect thereto.
(c) In the event that POA fails to respond in a timely and appropriate
manner (as reasonably determined by the Collateral Agent) to take any steps
necessary or reasonably requested by the Collateral Agent to collect from any
insurers for any loss covered by any insurance required to be maintained by this
Section 4.09, the Collateral Agent shall have the right to make all proofs of
loss, adjust all claims and/or receive all or any part of the proceeds of the
foregoing insurance policies, either in its own name or the name of POA;
provided, however, that POA shall, upon the Collateral Agent's request and at
POA's own cost and expense, make all proofs of loss and take all other steps
necessary or reasonably requested by the Collateral Agent to collect from
insurers for any loss covered by any insurance required to be obtained by this
Section 4.09.
(d) On or before March 1 of each year, commencing with March 1, 2000, POA
shall furnish to the Trustee and the Collateral Agent, an Officers' Certificate,
showing the insurance then maintained by or on behalf of POA pursuant to this
Section 4.09 and stating that such insurance complies in all material aspects
with the terms hereof, together with evidence of payment of the premiums
thereon. In the event that at
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any time the insurance as herein provided shall be reduced or cease to be
maintained, then (without limiting the rights of the Trustee hereunder in
respect of the Event of Default which arises as a result of such failure) the
Trustee or the Collateral Agent may at its option maintain the insurance
required hereby and, in such event, POA shall reimburse the Trustee or the
Collateral Agent, as the case may be, upon demand for the cost thereof together
with interest thereon at a rate per annum equal to the Default Rate, but in no
event shall the rate of interest exceed the maximum rate permitted by law. On or
before December 15, 1999, POA shall furnish to the Trustee and the Collateral
Agent all insurance appraisals of the replacement cost of the Project and the
Steam Plant prepared by a qualified independent appraiser; and, if such
appraisal shall show a replacement cost of the Project and the Steam Plant in
excess of the current amount of the property insurance described in Section
4.09(a)(iv) then applicable with respect to the Project and the Steam Plant, an
Officers' Certificate showing that the amount of such property insurance has
been increased to at least the amount of the replacement cost set forth in such
appraisal. On or before March 1 or such even numbered year commencing with March
1, 2002, POA shall furnish to the Trustee and the Collateral Agent insurance
appraisals of the replacement cost of the Project prepared by a qualified
independent appraiser; and, if such appraisals shall show a replacement cost of
the Project in excess of the current amount of the property insurance described
in Section 4.09(a)(iv) then applicable with respect to the Project an Officers'
Certificate showing that the amount of such property insurance has been
increased to the amount of the replacement cost set forth in such appraisal.
(e) In the event any insurance (including the limits or deductibles
thereof) hereby required to be maintained, above shall not be available at
commercially reasonable rates and on commercially reasonable terms in the
commercial insurance market, then such requirement shall be deemed waived, but
only to the extent and for so long as, the maintenance thereof is not so
available; provided, however, that (i) POA shall first request any such waiver
in writing, which request shall be accompanied by written reports prepared by
two independent insurance advisers of recognized national standing certifying
that such insurance is not reasonably available and commercially feasible in the
commercial insurance market for electric generating plants of similar type and
capacity (and, in any case where the required amount is not so available,
certifying as to the maximum amount which is so available) and explaining in
detail the basis for such conclusions; (ii) at any time after the granting of
any such waiver, the Trustee or the Collateral Agent may request, and POA shall
furnish to the Trustee or the Collateral Agent within fifteen (15) days after
such request, supplemental reports from such insurance advisers updating their
prior reports and reaffirming such conclusion; and (iii) any such waiver shall
be effective only so long as such insurance shall not be available and
commercially feasible in the commercial insurance market, it being understood
that the failure of POA to timely furnish any such supplemental report shall be
conclusive evidence that such waiver is no longer effective because such
condition no longer exists, but that such failure is not the only way to
establish such non-
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existence. The failure at any time to satisfy the conditions to any waiver of an
insurance requirement set forth in the proviso to the preceding sentence shall
not impair or be construed as a relinquishment of POA's ability to obtain a
waiver of an insurance requirement pursuant to the preceding sentence at any
other time upon satisfaction of such conditions.
(f) In the event that any policy is written on a "claims-made" basis
and such policy is not renewed or the retroactive date of such policy is to be
changed, POA shall obtain for each such policy or policies the broadest basic
and supplemental extended reporting period coverage or "tail" reasonably
available in the commercial insurance market for each such policy or policies
and shall provide the Trustee and the Collateral Agent with proof that such
basic and supplemental extended reporting period coverage or "tail" has been
obtained.
Section 4.10. Limitation on Indebtedness. The Issuers will not create,
incur or suffer to exist any Indebtedness except Permitted Indebtedness.
Section 4.11. Limitation on Liens. The Issuers will not directly or
indirectly create, incur, assume or suffer to exist any Lien of any kind on any
of their respective assets now owned or hereafter acquired, except Permitted
Liens or to the extent they may be considered Liens, Permitted Title
Encumbrances.
Section 4.12. Limitation on Guarantees. The Issuers will not
contingently or otherwise be or become liable in connection with any Guarantee,
except for endorsements and similar obligations in the ordinary course of
business.
Section 4.13. Prohibitions on Other Obligations or Assignments. The
Issuers shall not assign any of its rights or obligations under any Financing
Document or Material Project Document, and shall not enter into additional
contracts if entering into such additional contracts would be reasonably
expected to cause a Material Adverse Effect. The Issuers may enter into
additional contracts to the extent contemplated under this Indenture, including
entering into contracts in connection with Permitted Investments.
Section 4.14. Prohibition on Sale and Leaseback Transactions. The
Issuers shall not enter into any Sale or Leaseback Transactions.
Section 4.15. Transactions with Affiliates. The Issuers will not make
any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make any contract agreement, understanding, loan advance or guarantee with,
or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the applicable Issuer than those
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that would have been obtained in a comparable transaction by such Issuer with an
unrelated Person and (b) such Issuer delivers to the Trustee (i) with respect to
any Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (a) above and
that such Affiliate Transaction; and (ii) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $2.5 million, an opinion as to the fairness to such
Issuer of such Affiliate Transaction from a financial point of view issued by a
nationally recognized expert in evaluating such transactions; provided that
transactions expressly permitted by the provisions of the Indenture, shall not
be deemed Affiliate Transactions.
Section 4.16. Project Documents. (a) POA shall (i) pay all amounts
payable under each of the Project Documents as and when such amounts become due
and payable, (ii) perform and observe in all material respects the covenants and
agreements contained in each of the Project Documents, (iii) enforce, defend and
protect all of its material rights contained in any of the Project Documents and
(iv) take all reasonable and necessary actions to prevent the termination or
cancellation of any of the Project Documents (other than by performance) unless
(x) POA determines in good faith that such failure to perform, observe, enforce,
defend, protect or act under clauses (ii), (iii) or (iv) above is in the best
interest of POA (y) such failure would not have a Material Adverse Effect and
(z) POA promptly gives the Trustee and the Collateral Agent notice of the
failure so to perform, observe, defend, protect or act and the basis for such
determination, if possible, not later than five (5) days prior to such failure,
but in any event not later than five (5) days thereafter.
(b) POA shall not (i) breach any obligation under any Project
Document to which it is a party and fail to cure such breach within the
applicable cure period provided for in such Project Document (or, if no cure
period is specified in such Project Document, within thirty (30) days of such
breach), (ii) (x) amend, vary or waive, or consent to any amendment, variation
or waiver of, any terms of any of the Project Documents, (y) release, surrender,
cancel or terminate any rights or obligations under, or discharge any
obligations (other than by performance), consent to any release, surrender,
cancellation, termination or discharge (other than by performance) under any of
the Project Documents or (z) affirmatively consent to the assignment by any
party to any Project Document of such party's right or obligations under such
Project Document, in each case without the consent of the Required Holders or
(iii) assign, transfer or otherwise dispose of any of its rights in any of the
Project Documents unless, in each case, (x) POA determines in good faith that
such action is in the best interests of POA, (y) such action would not have a
Material Adverse Effect and (z) POA promptly gives the Trustee and the
Collateral Agent notice of such action and the basis of such determination, if
possible, not later than five (5) days prior to such action, but in any event
not later than five (5) days thereafter.
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Section 4.17. Operation of the Project. (a) POA will operate the
Project at all times except to the extent prevented by scheduled and unscheduled
maintenance in a manner consistent with prudent industry practice for similar
operations and, in any event, in a manner so as to guarantee that POA's
obligations to provide steam to the University under the Steam Contract and to
make payments to Niagara Mohawk under the Indexed Swap Agreement shall be met,
and as consistent with prudent industry practice, and in compliance with the
Project Documents so as to assure, to the extent reasonably possible, the
maximum generation of net revenue for the Project consistent with the Project
Documents.
(b) (i) POA shall renew, extend or replace the O&M Agreement so
that its remains in full force and effect at all times and shall
replace or consent to the replacement of the Operator if the Operator
is not operating the Project and the Steam Plant in accordance, in all
material respects, with the provisions of any of the Financing
Documents, the O&M Agreement, and the other Material Project
Documents, upon receipt of notice from Trustee to the effect that, in
the opinion of the Required Holders or the Independent Engineer, the
Operator has failed to perform any material obligations which are or
may be performed on POA's behalf by the Operator or has failed to
perform its obligations under the O&M Agreement; provided however,
that the Operator may have thirty (30) days from POA's receipt of
notice to cure said failure (or to establish to the satisfaction of
the Required Holders that a failure does not exist); provided,
further, that if such failure cannot be corrected within such 30-day
period, the Required Holders will not unreasonably withhold their
consent to an extension of such time if corrective action is promptly
instituted by the Operator within the 30-day period and thereafter
diligently pursued until the failure is corrected and such extension
shall not in the judgment of the Required Holders have a material
adverse effect on the Holders' interests in the Project and the
Collateral. Notwithstanding the above, POA will have no obligation to
terminate the O&M Agreement if such termination would constitute a
breach under the O&M Agreement.
(ii) POA shall not exercise its right under Section of 6.01(b)
the O&M Agreement as in effect on the Closing Date to terminate the
obligation of the Operator to perform major maintenance on the gas
turbine packages in return for the payment of the fired-hour fee
without the consent of the Required Holders.
(iii) POA shall continue its membership in the lease engine
support program under which General Electric Company will deliver and
install substitute leased turbine equipment if either of the Project's
gas turbines inoperative and need to be repaired or replaced; provided
that if such lease
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engine support program (or a substantially similar program) shall not
be available at commercially reasonable rates and on commercially
reasonable terms, then such requirement shall be deemed waived, but
only to the extent and for so long as, such lease engine support
program (or a substantially similar program) is not so available;
provided, further, that (i) POA shall first request any such waiver in
writing, which request shall be accompanied by a written report
prepared by the Independent Engineer certifying that such lease engine
support program (or a substantially similar program) is not reasonably
available and commercially feasible and explaining in detail the basis
for such conclusions; (ii) at any time after the granting of any such
waiver, the Trustee may request, and POA shall furnish to the Trustee
within fifteen (15) days after such request, supplemental reports from
the Independent Engineer updating its prior reports and reaffirming
such conclusion; and (iii) any such waiver shall be effective only so
long as such lease engine support program (or a substantially similar
program) shall not be available and commercially feasible, it being
understood that the failure of POA to timely furnish any such
supplemental report shall be conclusive evidence that such waiver is no
longer effective because such condition no longer exists, but that such
failure is not the only way to establish such non-existence. The
failure at any time to satisfy the conditions to any waiver of this
requirement set forth in the proviso to the preceding sentence shall
not impair or be construed as a relinquishment of POA's ability to
obtain a waiver of the requirement that it participate in the lease
engine support program pursuant to the preceding sentence at any other
time upon satisfaction of such conditions.
(c) POA shall renew, extend or replace the Asset Management Agreement
so that it remains in full force and effect at all times and shall replace or
consent to the replacement of the Asset Manager if the Asset Manager is not
managing the Project and the Steam Plant in accordance, in all material
respects, with the provisions of any of the Financing Documents, the Asset
Management Agreement and the other Material Project Documents, upon receipt of
notice from Trustee to the effect that, in the opinion of the Required Holders
or the Independent Engineer, the Asset Manager has failed to perform any
material obligations which are or may be performed on POA's behalf by the Asset
Manager or has failed to perform its obligations under the Asset Management
Agreement; provided however, that the Asset Manager may have thirty (30) days
from POA's receipt of notice to cure said failure (or to establish to the
satisfaction of the Required Holders that a failure does not exist); provided
further, that if such failure cannot be corrected within such thirty (30) days,
the Required Holders will not unreasonably withhold their consent to an
extension of such time if corrective action is promptly instituted by the Asset
Manager within the 30-day period and thereafter diligently pursued until the
failure is corrected and such extension shall not in the judgment of the
Required Holders have a material adverse effect on the Holders' interests in the
Project and the Collateral. Notwithstanding the above, POA will have
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no obligation to terminate the Asset Management Agreement if such termination
would constitute a breach under the Asset Management Agreement.
Section 4.18. Prohibitions on Fundamental Changes. (a) Except for the
Merger, POA shall not enter into any transaction of merger or consolidation,
change its form of organization or its business, liquidate, wind-up or dissolve
itself or discontinue its business. POA shall not engage in any business other
than in connection with owning and operating the Project and the activities
incidental thereto, issuing the Senior Secured Notes, incurring Permitted
Indebtedness and performing its obligations under the Operative Documents. POA
shall not lease (as lessor) or sell, transfer, assign, hypothecate, pledge or
otherwise dispose of any of its property or assets, except for (i) sales of
obsolete, worn out or replaced property not used or useful in its business, in
each case for not less than fair market value, (ii) in the ordinary course of
business as contemplated by the Project Documents (it being understood that any
sales of natural gas must be made in accordance with Section 4.18(b)), (iii) the
sale of Permitted Investments, and (iv) sales of natural gas that are permitted
pursuant to subsection (b).
(b) In order for a sale of natural gas to be permitted, it must
satisfy the following conditions:
(1) after giving effect to such sale of natural gas, the aggregate
quantity of gas sold or consumed by the Project and the Steam
Plant during any twelve month period shall not exceed the maximum
displacement amount permitted to be drawn under the Gas Purchase
Agreement during such period plus such additional amounts as would
not cause the Gas Reserve Deficit to be greater than zero;
(2) such sale of natural gas must satisfy the requirements of the Gas
Purchase Agreement and the other Project Documents and, after
giving effect to such sale, POA shall continue to be entitled to
draw and/or have secured supply and transportation rights to,
natural gas sufficient for it to meet its obligations under the
Steam Contract;
(3) the purchase price for such natural gas must be payable in U.S.
dollars on a date certain and the purchaser must, in writing,
agree to remit such purchase price directly to the Revenue Account
and consent to the assignment by POA of its rights under the
natural gas purchase agreement with such purchaser to the
Collateral Agent;
(4) the purchaser of such natural gas must either itself have, or
arrange for its obligations to POA to be secured by a letter of
credit or guaranty issued by an entity that has outstanding
unsubordinated unsecured long term debt that is rated Investment
Grade, defined as "Baa3" and "BBB-" by Moody's and
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S&P, respectively, or if a rating agency from one or both of the
foregoing rating agencies is not available a rating of at least
"BBB-" by Dominion Bond Rating Service or B++ low by Canadian Bond
Rating Service, or in the alternative, secure its payment
obligations to POA by depositing cash or cash equivalents as
collateral with the Collateral Agent in a manner sufficient, as
established by an Opinion of Counsel, to create a perfected
security interest therein in favor of POA and the Collateral Agent
as POA's assignee; and
(5) POA shall not sell any natural gas which it is entitled to draw
during any period when the Senior Secured Notes remain outstanding
unless all of the following conditions are satisfied:
(A) POA shall not sell any entitlement that it has to draw natural
gas during on-peak hours (as defined in the Indexed Swap
Agreement) between June 15 and September 15 of any year;
(B) For any period for which POA does sell its entitlement to draw
natural gas, it will purchase the right (whether in a
financial transaction or transaction for physical delivery of
energy and associated capacity) to acquire an equivalent
amount of energy and associated capacity (on a Btu equivalent
basis assuming an unadjusted heat rate value equal to 10,000
Btu/kWh at the higher heating value in 2000, and as adjusted
for 0.5% annual degradation on a going forward basis) for a
purchase price that is less than or equal to the net proceeds
payable to POA from the sale of such natural gas;
(C) The energy and associated capacity that POA has the right to
purchase must be deliverable or settle during the same period
during which the natural gas sold was to be drawn so that POA
could acquire and resell such energy and associated capacity
through the ISO/PE or settle the financial transaction in such
a way as to generate revenues sufficient to pay Niagara Mohawk
the floating rate payment payable by POA under the Indexed
Swap Agreement that corresponds to such period;
(D) The payment terms with regard to the energy and associated
capacity that POA has the right to purchase for any period
must be such that the proceeds of sale from the natural gas
sold that corresponds to such period will be available to pay
when due the purchase price of, or settlement amount for, such
energy and associated capacity;
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(E) In the case of contracts for the delivery of energy and
associated capacity, the seller of such energy and associated
capacity to POA must agree to pay liquidated damages to POA in
the event that the seller fails to deliver any energy and
associated capacity acquired by POA in an amount at least
equal to the amount that POA would have received if such
energy and associated capacity was delivered and sold by POA
through the ISO/PE net of revenues (after costs of cover) POA
receives from any cover transaction in replacement of such
failed deliveries of energy and associated capacity;
(F) The seller of such energy and associated capacity must agree
in writing to remit any liquidated damages or other payments
required to be made by it to POA directly to the Revenue
Account and consent to the assignment by POA of its rights
under the energy and associated capacity purchase agreement to
the Collateral Agent; and
(G) The seller of such energy and associated capacity must either
itself have, or arrange for its obligations to POA to be
secured by a letter of credit or guaranty issued by an entity
that has, outstanding unsubordinated unsecured long term debt
that is rated investment grade by either Moody's or S&P or, in
the alternative, secure its payment obligations to POA by
depositing cash or cash equivalents as collateral with the
Collateral Agent in a manner sufficient, as established by an
Opinion of Counsel, to create a perfected security interest
therein in favor of POA and the Collateral Agent as POA's
assignee, such security to be in an amount adequate, in
accordance with then applicable industry standards, to protect
POA from risk of counterparty default.
Section 4.19. Separate Existence. POA covenants and agrees:
(a) to maintain its own deposit account or accounts to which none of
its Affiliates has independent access, and POA will not commingle its funds with
the funds of any Affiliate of POA;
(b) that to the extent it shares the same officers or other employees
with any of its partners or any of its Affiliates, the salaries of and the
expenses related to providing benefits to such officers and other employees
shall be fairly allocated among such entities, and each such entity shall bear
its fair share of the salary and benefit costs associated with all such common
officers and employees;
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(c) that to the extent it jointly contracts with any of its partners
or any of its Affiliates to do business with vendors or service providers or to
share over head expenses, the costs incurred in so doing shall be allocated
fairly among the entities, and each such entity shall bear its fair share of
such costs;
(d) that to the extent it contracts or does business with vendors or
service providers where the goods and services provided are partially for the
benefit of any of its partners or any of its Affiliates, the costs incurred in
so doing shall be fairly allocated to or among such entities for whose benefit
the goods or services are provided, and each such entity shall bear its fair
share of such costs;
(e) that to the extent it and any of its partners or any of its
Affiliates have officers in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such entity shall
bear its fair share of such expenses; and
(f) to conduct its affairs strictly in accordance with its Partnership
Agreement and the Project Orange Associates L.P. Partnership Management
Agreement, and to observe all necessary, appropriate and customary corporate
formalities including, but not limited to, holding all regular meetings,
maintaining current minute books, and maintaining financial reports, corporate
records and books of account separate from those of any other Person.
Section 4.20. Investments. The Issuers shall not make any Investments
except (i) Permitted Investments, (ii) POA's investment in Capital Co. on the
Closing Date, (iii) to the extent they constitute Investments: (A) contracts to
purchase natural gas described in clause (ii)(B) of the definition of "Gas
Reserve Deficit" and (B) contracts to purchase energy and associated capacity
required to be entered into in connection with sales of gas permitted by Section
4.18(b) and (iv) the Project Documents and the exercise of rights thereunder as
permitted hereunder to the extent they constitute an Investment.
Section 4.21. Compliance with Laws. The Issuers shall comply with all
applicable laws, ordinances, rules, regulations, requirements, orders, decrees
and judgments of Governmental Authorities (including, Environmental Laws and
ERISA and the rules and regulations thereunder) (except (i) where the failure to
so comply would not have a Material Adverse Effect and would not in any manner
draw into question the validity of any Operative Document or (ii) where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings and for which adequate reserves have been established in accordance
with generally accepted accounting principles) and will maintain all applicable
Permits (except where the failure to maintain such applicable Permits would not
have a Material Adverse Effect and would not in any manner draw into question
the validity of any Operative Document).
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Section 4.22. Books and Records. The Issuers shall maintain proper
books and records with respect to the Project, the Project Documents, the
Financing Documents and its business, assets and liabilities and, at reasonable
times and upon reasonable notice, shall make such books and records available
for inspection and copying by the Trustee, the Collateral Agent or the
Independent Engineer and shall make the Issuer's and the General Partner's
Responsible Officers and personnel available to discuss such books and records
with the Trustee, the Collateral Agent or the Independent Engineer.
Section 4.23. Maintenance of "Qualifying Facility" Status. POA shall
maintain the Project's status as a cogeneration "qualifying facility" as such
term is defined under PURPA, so long as PURPA remains in effect, or otherwise
remain exempt from regulation under the FPA and PUHCA (except as an "exempt
wholesale generator" of electricity as defined in PUHCA) so long as such laws
remain in effect such that none of the Secured Parties or any of their
Affiliates shall be deemed subject to, or not be exempt from, regulation under
the FPA or PUHCA or under any state laws or regulations respecting sales or the
financial or organizational regulation of electric utilities solely as a result
of holding the Senior Secured Notes.
Section 4.24. Limitations on Activities by Capital Co. Capital Co.
shall not, directly or indirectly, (i) enter into or permit to exist any
transaction or agreement (including any agreement for incurrence or assumption
of Indebtedness, any purchase, sale, lease or exchange of any property or the
rendering of any service), between itself or any other Person, other than the
Purchase Agreement and the Financing Documents to which it is a party (the
"Capital Co. Documents"), (ii) engage in any business or conduct any activity
(including the making of any Investment or payment) or transfer any of its
assets, other than the performance of the Capital Co. Documents in accordance
with the terms thereof and performance of ministerial activities and payment of
taxes and administrative fees necessary for compliance with clause (iii) or
(iii) consolidate, renew and keep in full force and effect its existence.
Section 4.25. Compliance with the Covenant. POA shall comply with its
obligations under the Covenant for so long as such obligations are in existence.
ARTICLE 5
Defaults and Remedies
Section 5.01. Events of Default. The following events constitute an
"Event of Default":
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(a) failure to pay any principal, premium, if any, and interest or
other amounts owed on any Senior Secured Note when the same becomes due and
payable, whether by scheduled maturity or required prepayment or redemption or
by acceleration or otherwise, and such failure continues for five (5) days or
more following the due date for payment; or
(b) any representation or warranty made by the Issuers or any other
Credit Party in this Indenture or in any other Financing Document or any
representation, warranty or statement in any certificate, financial statement or
other document furnished to the Trustee or any other Person by or on behalf of
either of the Issuers or any other Credit Party proves to have been untrue or
misleading in any material respect as of the time made, confirmed or furnished
and the fact, event or circumstance that gave rise to such inaccuracy has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect and that fact, event or circumstance continues uncured for thirty (30) or
more days from the date the POA receives notice thereof from the Trustee;
provided that, if such Issuer or other Credit Party commences and diligently
pursues efforts to cure such fact, event or circumstance within such 30-day
period and deliver written notice to the Trustee thereof, such Issuer or other
Credit Party may continue to effect such cure, and such misrepresentation shall
not be deemed an "Event of Default" for an additional sixty (60) days so long as
such Issuer or other Credit Party is diligently pursuing such cure; or
(c) (i) either Issuer fails to pay any Imposition as and when due and
payable, and such failure continues for fifteen (15) days or more following the
date such payment becomes delinquent; or (ii) either Issuer fails to perform or
observe any covenant, agreement or provision binding upon it contained in this
Indenture or any of the other Financing Documents regarding maintenance of
existence or restrictions on Indebtedness, Liens, Restricted Payments,
Guarantees, Investments, Sale Lease-Back Transactions, Affiliate Transactions,
Project Documents, disposition of assets, operation of the Project, fundamental
changes, or nature of business and such failure continues uncured for thirty
(30) or more days from the date the Issuers receive notice thereof from the
Trustee; or if such Issuer fails to perform or observe any covenant, agreement
or provision binding upon it contained in any of the Project Documents and such
failure continues uncured for thirty (30) or more days from the date such Issuer
receives notice thereof from the Trustee (provided that the same does not
constitute an event of default under the relevant Project Document), or (iii) an
event that then gives any Person the right to terminate or materially adversely
affect any of POA's rights under the relevant Project Document; or (iv) if any
event of default by POA under any of the Project Documents, or any event arises
that in either case then gives any Person (other than POA) the right to
terminate or materially adversely affects any of POA's rights under any of the
Project Documents, shall occur and be continuing; or (v) any event that then
gives the University the right to foreclose under any University Collateral
Document; or (vi) the commencement and continuance of any action, suit or
proceeding
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for the foreclosure, including foreclosure any power of sale, of any lien on or
security interest in any Collateral, including any such foreclosure under any
University Collateral Document; or
(d) either Issuer or any other Credit Party fails to perform or
observe any covenant, agreement or provision binding upon it contained in this
Indenture or any of the other Financing Documents (other than those referred to
in clauses (a) through (c) inclusive above and (e) through (g) inclusive below)
and such failure continues uncured for thirty (30) or more days from the date
POA receives notice thereof from the Trustee of such failure; provided that if
such Issuer or other Credit Party commences and diligently pursues efforts to
cure such default within such 30-day period, such Issuer or other Credit Party
may continue to effect such cure of the default and such default will not be
deemed an "Event of Default" for an additional ninety (90) days so long as such
Issuer or other Credit Party is diligently pursuing such cure;
(e) either Issuer:
(i) admits in writing its inability, or is generally unable,
to pay its debts as the debts become due or makes a general assignment
for the benefit of creditors; or
(ii) commences any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement, adjustment,
insolvency, reorganization or similar laws affecting the rights or
remedies of creditors generally, as in effect from time to time
(collectively, "Debtor Relief Law"); or
(iii) in any involuntary case, proceeding or other action
commenced against it which seeks to have an order for relief
(injunctive or otherwise) entered against it, as debtor, or seeks
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any Debtor Relief Law, (A) fails
to obtain a dismissal of such case, proceeding or other action within
ninety (90) days of its commencement, or (B) converts the case from one
chapter of the Bankruptcy Reform Act of 1978, as amended, to another
chapter, or (C) is the subject of an order for relief, or
(iv) has a trustee, receiver, custodian or other official
appointed for or take possession of all or any part of its property or
has any court take jurisdiction of any of its property, which action
remains undismissed for a period of ninety (90) days;
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(f) any Collateral Document or any material provision thereof ceases
to be in full force and effect or there is a Material Adverse Effect on the Lien
purported to be granted under any such Collateral Document such that it ceases
to be a valid and perfected Lien in favor of the Collateral Agent for the
benefit of the Secured Parties on the Collateral described therein with the
priority purported to be created thereby; provided, however, that POA shall have
ten (10) days after POA obtains actual knowledge thereof to cure any such
cessation, if curable, or to furnish to the Collateral Agent all documents or
instruments required to cure any such cessation, if curable; or
(g) any event of default under any Permitted Indebtedness of either
Issuer which results in Permitted Indebtedness in excess of $2,500,000 becoming
due and payable prior to its stated maturity.
Section 5.02. Enforcement of Remedies. (a) If one or more Events of
Default have occurred and are continuing, then:
(i) in the case of an Event of Default described in Section
5.01(e), 9.13(k), 1.01(k) above, the entire principal amount of the
Outstanding Notes, all interest accrued and unpaid thereon, and all
premium and other amounts payable under the Senior Secured Notes, this
Indenture, and the other Financing Documents if any, will automatically
become due and payable without presentment, demand, protest or notice
of any kind; or
(ii) in the case of an Event of Default described in:
(A) Section 5.01(a), upon the written direction of the
Holders of no less than 25% in aggregate principal amount of the
Outstanding Notes, the Trustee will, by notice to the Issuers,
declare the entire principal amount of the Outstanding Notes, all
interest accrued and unpaid thereon, and all premium and other
amounts payable under the Senior Secured Notes, this Indenture
and the other Financing Documents, if any, to be due and payable,
or
(B) Section 5.01(b), 9.13(k), 1.01(k), (c), (d), (f) or (g)
upon the written direction of the Required Holders, the Trustee
will, by notice to the Issuers, declare the entire principal
amount of the Senior Secured Notes, all interest accrued and
unpaid thereon, and all premium and other amounts payable under
the Senior Secured Notes, this Indenture and the other Financing
Documents, if any, to be due and payable.
If an Event of Default occurs and is continuing and is actually known
to a Responsible Trust Officer, the Trustee will mail to each Holder notice of
the Event of
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Default within thirty (30) days after the occurrence thereof. Except in the case
of an Event of Default in payment of principal of or interest on any Senior
Secured Note, the Trustee may withhold the notice to the Holders if the Trustee
in good faith determines that withholding the notice is in the interest of the
Holders.
If an Event of Default relating to failure to pay amounts owed on the
Senior Secured Notes has occurred and is continuing, the Trustee may declare the
principal amount of the Outstanding Notes, all interest accrued and unpaid
thereon, and all premium and other amounts payable under the Senior Secured
Notes, this Indenture and other Financing Documents, if any, to be due and
payable notwithstanding the absence of direction from Holders of at least 25% in
aggregate principal amount of the Outstanding Notes directing the Trustee in
writing to accelerate the maturity of the Senior Secured Notes, unless Holders
of more than 75% in aggregate principal amount of the Outstanding Notes direct
the Trustee not to accelerate the maturity of such Senior Secured Notes, if in
the good faith exercise of its discretion the Trustee determines that such
action is necessary to protect the interests of the Holders.
In addition, if one or more of the Events of Default referred to in
Section 5.02(a)(ii)(B) has occurred and is continuing, the Trustee may declare
the entire principal amount of the Outstanding Notes, all interest accrued and
unpaid thereon, and all premium and other amounts payable under the Senior
Secured Notes, this Indenture and the other Financing Documents, if any, to be
due and payable notwithstanding the absence of direction from the Required
Holders directing the Trustee to accelerate the maturity of the Senior Secured
Notes unless the Required Holders direct the Trustee in writing not to
accelerate the maturity of the Senior Secured Notes if in the good faith
exercise of its discretion the Trustee determines that such action is necessary
to protect the interests of the Holders.
(b) At any time after the principal of the Senior Secured Notes has
become due and payable upon a declared acceleration, and before any judgment or
decree for the payment of the money so due, or any portion thereof, has been
entered, the Holders of not less than a majority in aggregate principal amount
of the Outstanding Notes, by written notice to the Issuers and the Trustee,
shall rescind and annul such declaration and its consequences if:
(i) there has been paid to or deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest on the Senior Secured
Notes; and
(B) the principal of and premium, if any, on any Senior
Secured Notes that have become due (including overdue principal)
other than by such declaration of acceleration and interest
thereon at
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the respective rates provided in the Senior Secured Notes for
overdue principal; and
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the respective rates
provided in the Senior Secured Notes for overdue interest; and
(D) all sums paid or advanced by the Trustee and the
Collateral Agent and the reasonable compensation, expenses,
disbursements, and advances of the Trustee and the Collateral
Agent and their agents and counsel; and
(E) all Events of Default, other than the nonpayment
of the principal of the Senior Secured Notes that has become
due solely by such acceleration, have been cured or waived in
accordance with this Indenture.
(c) If an Event of Default relating to failure to pay amounts owed on
the Senior Secured Notes has occurred and is continuing and an acceleration has
occurred, the Trustee may (as the Holders of 25% in aggregate principal amount
of the Outstanding Notes request in writing) direct the Collateral Agent to
foreclose upon and take possession of all Collateral.
(d) If an Event of Default other than that referred to in Section
5.02(d) has occurred and is continuing and an acceleration has occurred, the
Trustee may (as the Required Holders request in writing) direct the Collateral
Agent to foreclose upon and take possession of all Collateral.
(e) If an Event of Default occurs by reason of any willful action or
inaction taken or not taken by or on behalf of the Issuers with the intention of
avoiding payment of the premium that the Issuers would have had to pay if the
Issuers then had elected to redeem the Senior Secured Notes pursuant to the
optional redemption provisions of this Indenture, a premium equal to the then
applicable Treasury Rate shall also become and be immediately due and payable to
the extent permitted by law upon the acceleration of the Senior Secured Notes.
Section 5.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal, premium, if any, and interest and all other amounts payable on the
Senior Secured Notes or to enforce the performance of any provision of the
Senior Secured Notes, this Indenture or any other Financing Document.
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The Trustee may maintain a proceeding even if it does not possess any
of the Senior Secured Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 5.04. Waiver of Past Defaults. Required Holders by notice to
the Trustee may on behalf of the Holders of all of the Senior Secured Notes
waive an existing Default or Event of Default and its consequences hereunder,
except a continuing Default or Event of Default in the payment of the principal
of, premium, if any, or interest on, the Senior Secured Notes provided, however,
that the Required Holders may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
Section 5.05. Control by Majority. The Required Holders have the right
to direct the time, place and method of conducting any proceeding for any right
or remedy available to the Trustee or exercising any trust or power conferred on
the Trustee in this Indenture or in any other Financing Document.
Section 5.06. Limitation on Suits. A Holder of a Senior Secured Note
may pursue a remedy with respect to this Indenture or the Senior Secured Notes
only if:
(a) the Holder of a Senior Secured Note gives to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Senior Secured Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Senior Secured Note or Holders of Senior Secured
Notes offer and, if requested, provide to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within sixty (60)
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Senior Secured Notes do not give the Trustee a
direction inconsistent with the request.
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A Holder of a Senior Secured Note may not use this Indenture to
prejudice the rights of another Holder of a Senior Secured Note or to obtain a
preference or priority over another Holder of a Senior Secured Note.
Section 5.07. Rights of Holders of Senior Secured Notes to Receive
Payment. Notwithstanding any other provision of this Indenture, the right of any
Holder of a Senior Secured Note to receive payment of principal, premium, if
any, and interest on the Senior Secured Notes, on or after the respective due
dates expressed in the Senior Secured Notes (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
Section 5.08. Collection Suit by Trustee. If an Event of Default
specified in Section 5.01(a) occurs and is continuing, the Trustee is authorized
to recover judgment in its own name and as trustee of an express trust against
the Issuers for the whole amount of principal of, premium, if any, and interest
remaining unpaid on the Senior Secured Notes and interest on overdue principal
and, to the extent lawful, interest and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 5.09. Trustee May File Proofs of Claim. The Trustee is
authorized 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 Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and the Holders of the Senior Secured Notes
allowed in any judicial proceedings relative to either of the Issuers (or any
other obligor upon the Senior Secured Notes), their creditors or their property
and shall be entitled and empowered to collect, receive and distribute any money
or other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 6.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any
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Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Senior Secured Notes or the rights of any Holder, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 5.10. Priorities. If the Trustee collects any money pursuant to
this Article, it shall be applied in the following order from time to time, on
the date or dates fixed by the Trustee: (i) first, to the payment of all amounts
due to the Trustee or any predecessor Trustee under this Indenture; (ii) second;
(A) in case the unpaid principal amount of the Outstanding Notes has not become
due, to the payment of any overdue interest, (B) in case a portion of the unpaid
principal amount of the Outstanding Notes has become due, first to the payment
of accrued interest on all Outstanding Notes for overdue principal, premium, if
any, and overdue interest, and next to the payment of the overdue principal on
all Senior Secured Notes or (C) in case all the unpaid principal amount of
Outstanding Notes has become due, first to the payment of the whole amount then
due and unpaid upon the Outstanding Notes for principal, premium, if any, and
interest, together with interest for overdue principal, premium, if any, and
overdue interest; and (iii) third, in case the unpaid principal amount of all
the Outstanding Notes has become due, and all of the outstanding principal,
premium, if any, interest and other amounts owed in connection with the Senior
Secured Notes have been fully paid, any surplus then remaining will be paid to
the Issuers, or to whomsoever may be lawfully entitled to receive the same, or
as a court of competent jurisdiction may direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Senior Secured Notes pursuant to this Section 5.10.
Section 5.11. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as a Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder of a Senior Secured Note pursuant to Section 5.07
hereof, or a suit by Holders of more than 10% in principal amount of the then
outstanding Senior Secured Notes.
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ARTICLE 6
Trustee
Section 6.01. Duties of Trustee. (a) If an Event of Default actually
known to a Responsible Trust Officer has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct or bad faith, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 6.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
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(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Issuers. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 6.02. Rights of Trustee. (a) The Trustee may conclusively rely
upon any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
and shall be entitled to an Officers' Certificate or an Opinion of Counsel or
both. The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such an Officers' Certificate or Opinion of
Counsel. The Trustee may consult with counsel and the advice, promptly confirmed
in writing thereafter, of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may act through its attorneys, custodians, nominees
and agents and shall not be responsible for the misconduct or negligence of any
agent, attorney, custodian or nominee appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuers shall be sufficient if
signed by a Responsible Officer of each Issuer.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to the Trustee against the costs, expenses
and liabilities that might be incurred by it in compliance with such request or
direction.
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(g) In no event shall the Trustee be required to take notice of any
default or breach hereof or any Event of Default hereunder, except for Events of
Default specified in Sections 5.01(a) and (b) hereof, unless and until the
Trustee shall have received from a Holder or from the Issuers express written
notice of the circumstances constituting the breach, default or Event of Default
and stating that said circumstances constitute an Event of Default hereunder.
(h) If the Trustee is acting as Paying Agent or Transfer Agent and
Registrar hereunder, the rights and protections afforded to the Trustee pursuant
to this Article 6 will also be afforded to such Paying Agent or Transfer Agent
and Registrar.
Section 6.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Senior
Secured Notes and may otherwise deal with the Issuers or any Affiliate of the
Issuers with the same rights it would have if it were not Trustee. The Trustee
shall comply with the provisions of Section 310(b) of the TIA regarding
conflicting interests. Any Agent may do the same with like rights and duties.
The Trustee is also subject to Sections 6.10 and 6.11 hereof.
Section 6.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Senior Secured Notes, it shall not be accountable for the
Issuers' use of the proceeds from the Senior Secured Notes or any money paid to
the Issuers or upon the Issuers' direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Senior
Secured Notes or any other document in connection with the sale of the Senior
Secured Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 6.05. Notice of Defaults. If a Default or Event of Default
occurs and is continuing and if it is actually known to a Responsible Trust
Officer, or if appropriate notice is provided in writing in accordance with
Section 6.02(g), as applicable, the Trustee shall mail to Holders of Senior
Secured Notes a notice of the Default or Event of Default within ninety (90)
days after it occurs. Except in the case of a Default or Event of Default in
payment of principal of, premium, if any, or interest on any Senior Secured
Note, the Trustee may withhold the notice if and so long as a committee of its
Responsible Trust Officers in good faith determines that withholding the notice
is in the interests of the Holders of the Senior Secured Notes.
Section 6.06. Reports by Trustee to Holders of the Senior Secured
Notes; Information to Rating Agencies. Within sixty (60) days after each May 15
beginning with the May 15 following the date hereof, and for so long as Senior
Secured Notes remain outstanding, the Trustee shall mail to the Holders of the
Senior Secured Notes a brief report dated as of such reporting date that
complies with TIA (S) 313(a) (but if no
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event described in TIA (S) 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA (S) 313(b). The Trustee shall also transmit by mail all
reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of
Senior Secured Notes shall be mailed to the Issuers and filed with the SEC and
each stock exchange on which the Senior Secured Notes are listed in accordance
with TIA (S) 313(d). The Issuers shall promptly notify the Trustee in writing
when the Senior Secured Notes are listed on any stock exchange.
Trustee shall mail to each Rating Agency each report or certificate,
including without limitation operating reports and reports of independent
consultants, delivered to the Trustee by or on behalf of the Issuers and not
otherwise required to be delivered directly to such Rating Agency by the Issuers
pursuant to Section 4.03, promptly, and in any case within thirty (30) days
following Trustee's receipt thereof.
Section 6.07. Compensation and Indemnity. The Issuers shall pay to the
Trustee from time to time reasonable compensation for its acceptance of this
Indenture and services hereunder as is now or hereafter agreed to in writing by
the Issuers and the Trustee. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Issuers shall
reimburse the Trustee promptly upon request for all reasonable and properly
documented disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable and properly documented fees, disbursements and expenses of the
Trustee's agents and counsel.
The Issuers shall indemnify the Trustee against any and all losses,
liabilities, damages or expenses incurred by the Trustee arising out of or in
connection with the acceptance or administration of the Trustee's duties under
this Indenture, including the costs and expenses of enforcing this Indenture
against the Issuers (including this Section 6.07) and defending itself against
any claim (whether asserted by the Issuers or any Holder or any other person) or
liability in connection with the exercise or performance of any of the Trustee's
powers or duties hereunder, except to the extent any such loss, liability or
expense may be attributable to the Trustee's negligence or bad faith. The
Trustee shall notify the Issuers promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Issuers shall not relieve the
Issuers of their obligations hereunder. The Issuers shall defend the claim and
the Trustee shall reasonably cooperate in the defense. The Trustee may have
separate counsel (reasonably acceptable to the Issuers) and the Issuers shall
pay the reasonable fees and expenses of such counsel. The Issuers need not pay
for any settlement made without its consent, which consent shall not be
unreasonably withheld.
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The obligations of the Issuers under this Section 6.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Issuers' payment obligations in this Section, the Trustee
shall have a Lien prior to the Senior Secured Notes on all money or property
held or collected by the Trustee, except that held in trust to pay principal and
interest on particular Senior Secured Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.01(e), 9.13(k), 1.01(k) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b) to the
extent applicable.
Section 6.08. Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Issuers. The Holders of Senior
Secured Notes of a majority in principal amount of the then outstanding Senior
Secured Notes may remove the Trustee by so notifying the Trustee and the Issuers
in writing. The Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 6.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Senior Secured Notes
may appoint a successor Trustee to replace the successor Trustee appointed by
the Issuers.
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If a successor Trustee does not take office within sixty (60) days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuers, or the Holders of Senior Secured Notes of at least 10% in principal
amount of the then outstanding Senior Secured Notes may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Senior Secured
Note who has been a Holder of a Senior Secured Note for at least six (6) months,
fails to comply with Section 6.10, such Holder of a Senior Secured Note may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Senior Secured Notes. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
provided all sums owing to the Trustee hereunder have been paid and subject to
the Lien provided for in Section 6.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 6.08, the Issuers' obligations under Section
6.07 hereof shall continue for the benefit of the retiring Trustee.
Section 6.09. Successor Trustee by Merger, Etc. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.
Section 6.10. Eligibility; Disqualification. There shall at all times
be a Trustee under this Indenture, which shall be a corporation having either
(a) a combined capital and surplus of at least $500.0 million, or (b) having a
combined capital and surplus of at least $100.0 million and being a wholly owned
subsidiary of a corporation having a combined capital and surplus of at least
$500.0 million in each case subject to supervision or examination by a Federal
or State or District of Columbia authority and having a corporate trust office
in New York, New York, to the extent there is such an institution eligible and
willing to serve.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA
(S) 310(b).
Section 6.11. Preferential Collection of Claims Against Issuers. The
Trustee is subject to TIA (S) 311(a), excluding any creditor relationship listed
in TIA
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(S) 311(b). A Trustee who has resigned or been removed shall be subject to
TIA (S) 311(a) to the extent indicated therein.
Section 6.12. Default Rate of Interest. All sums of money owed to the
Trustee shall bear interest from the date on which the same are due and payable
until the date of payment at a rate equal to the "Base Rate" of Bankers Trust
Company, as such rate is announced from time to time, said rate to change when
and as the said Base Rate changes.
Section 6.13. Receipt of Documents. In no event shall receipt by the
Trustee of financial and other reports from the Issuers as provided in this
Indenture, review of which could lead to the conclusion that an Event of Default
exists hereunder, result, without further action, in the occurrence of an Event
of Default, or impose upon the Trustee the obligation to review and examine the
same, it being understood that all such information shall be received by the
Trustee as repository for said information and documents with no obligation on
the part of the Trustee to review the same.
ARTICLE 7
Legal Defeasance and Covenant Defeasance
Section 7.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Issuers may, at their option evidenced by an Officers' Certificate, at any
time, elect to have either Section 7.02 or 7.03 hereof be applied to all
outstanding Senior Secured Notes upon compliance with the conditions set forth
below in this Article 7.
Section 7.02. Legal Defeasance and Discharge. Upon the Issuers'
exercise under Section 7.01 hereof of the option applicable to this Section
7.02, the Issuers shall, subject to the satisfaction of the conditions set forth
in Section 7.04 hereof, be deemed to have been discharged from their obligations
with respect to all outstanding Senior Secured Notes on the date the conditions
set forth below are satisfied (hereinafter, "Legal Defeasance"). For this
purpose, Legal Defeasance means that the Issuers shall be deemed to have paid
and discharged the entire Indebtedness represented by the outstanding Senior
Secured Notes, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 7.06 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all their other
obligations under such Senior Secured Notes and this Indenture (and the Trustee,
on demand of and at the expense of the Issuers, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Senior Secured Notes to receive payments in respect of the principal
of,
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premium, if any, and interest on such Senior Secured Notes when such payments
are due from the trust referred to below, (b) the Issuers' obligations with
respect to the Senior Secured Notes concerning issuing temporary Senior Secured
Notes, registration of Senior Secured Notes, mutilated, destroyed, lost or
stolen Senior Secured Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (c) the rights, powers,
trusts, duties, immunities and indemnities of the Trustee, and the Issuers'
obligations in connection therewith and (d) this Article 7. Subject to
compliance with this Article 7, the Issuers may exercise their option under this
Section 7.02 notwithstanding the prior exercise of their option under Section
7.03 hereof.
Section 7.03. Covenant Defeasance. Upon the Issuers' exercise under
Section 7.01 hereof of the option applicable to this Section 7.03, the Issuers
shall, subject to the satisfaction of the conditions set forth in Section 7.04
hereof, be released from their obligations under the covenants contained in
Sections 4.08 through 4.23, inclusive, hereof with respect to the outstanding
Senior Secured Notes on and after the date the conditions set forth in Section
7.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Senior Secured
Notes shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Senior Secured Notes shall not be deemed outstanding for
accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Senior Secured Notes, the Issuers may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 5.01 hereof, but, except as specified above, the remainder of this
Indenture and such Senior Secured Notes shall be unaffected thereby. In
addition, upon the Issuers' exercise under Section 7.01 hereof of the option
applicable to this Section 7.03 hereof, subject to the satisfaction of the
conditions set forth in Section 7.04 hereof, Sections 5.01(b), 9.13(k), 1.01(k)
through 5.01(d) hereof shall not constitute Events of Default.
Section 7.04. Conditions to Legal or Covenant Defeasance. The following
shall be the conditions to the application of either Section 7.02 or 7.03 hereof
to the outstanding Senior Secured Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuers must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government
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Securities, or a combination thereof, in such amounts as shall be sufficient,
'in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Senior Secured Notes on the stated date for payment thereof or on
the applicable Redemption Date, as the case may be, and the Issuers must specify
whether the Senior Secured Notes are being defeased to maturity or to a
particular redemption date;
(b) the case of an election under Section 7.02 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United States
confirming that (A) the Issuers have received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date hereof, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding Senior Secured Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 7.03 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United States
confirming that the Holders of the outstanding Senior Secured Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Senior Secured Notes pursuant to this
Article 7 concurrently with such incurrence) or insofar as Section 5.01(f)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which either Issuer is a party or by
which either Issuer is bound;
(f) the Issuers shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
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(g) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the intent
of preferring the Holders over any other creditors of the Issuers or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Issuers; and
(h) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 7.05. Release of Collateral upon Legal or Covenant Defeasance.
Upon Legal Defeasance or Covenant Defeasance, and upon satisfaction of the
requirements of Section 7.04 above, as applicable, the Collateral Agent shall
release all the Collateral as to which a security interest has been granted
pursuant to this Indenture and the Collateral Documents. The Collateral Agent
shall take all necessary measures to effectuate such release, including, but not
limited to, filing UCC-3 termination statements in the appropriate jurisdiction.
Section 7.06. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions. Subject to Section 7.07 hereof, all money
and non-callable Government Securities (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 7.06, the "Trustee") pursuant to Section 7.04 hereof in
respect of the outstanding Senior Secured Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Senior Secured
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including either Issuer acting as Paying Agent) as the Trustee may
determine, to the Holders of such Senior Secured Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Issuers shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 7.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Senior
Secured Notes.
Anything in this Article 7 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon the request
of the Issuers any money or non-callable Government Securities held by it as
provided in Section 7.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 7.04(a) hereof), are in excess of the
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amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
Section 7.07. Repayment to Issuers. Any money deposited with the
Trustee or any Paying Agent, or then held by either of the Issuers, in trust for
the payment of the principal of, premium, if any, or interest on any Senior
Secured Note and remaining unclaimed for two (2) years after such principal, and
premium, if any, or interest has become due and payable shall be paid to such
Issuer on its request or (if then held by such Issuer) shall be discharged from
such trust; and the Holder of such Senior Secured Note shall thereafter, as a
secured creditor, look only to the Issuers for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Issuers as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Issuers cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than thirty (30) days from the date
of such notification or publication, any unclaimed balance of such money then
remaining shall be repaid to the Issuers.
Section 7.08. Reinstatement. If the Trustee or Paying Agent is unable
to apply any United States dollars or non-callable Government Securities in
accordance with Section 7.02 or 7.03 hereof, as the case may be, by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the Issuers'
obligations under this Indenture and the Senior Secured Notes shall be revived
and reinstated as though no deposit had occurred pursuant to Section 7.02 or
7.03 hereof until such time as the Trustee or Paying Agent is permitted to apply
all such money in accordance with Section 7.02 or 7.03 hereof, as the case may
be; provided, however, that, if the Issuers make any payment of principal of,
premium, if any, or interest on any Senior Secured Note following the
reinstatement of its obligations, the Issuers shall be subrogated to the rights
of the Holders of such Senior Secured Notes to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE 8
Amendment, Supplement and Waiver
Section 8.01. Without Consent of Holders of Senior Secured Notes.
Notwithstanding Section 8.02 of this Indenture, the Issuer, the Trustee and the
Collateral Agent may amend, supplement or execute a waiver of this Indenture,
the Senior Secured Notes and any and all of the other Financing Documents
without the consent of any Holder of a Senior Secured Note:
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(a) to cure any ambiguity, defect or inconsistency;
(b) to add additional covenants of the Issuers or to surrender rights
conferred upon the Issuers;
(c) to increase the assets securing the Issuers' obligations under
this Indenture;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Senior Secured Notes or that does not adversely
affect the legal rights hereunder of any Holder of the Senior Secured Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(f) to reflect any amendments required by a Rating Agency in
circumstances where confirmation of the Ratings is required or permitted under
this Indenture.
Upon the request of the Issuers accompanied by an Officers'
Certificate authorizing the execution of any such amended or supplemental
Indenture or amendments to the other Financing Documents, and upon receipt by
the Trustee of the documents described in Section 6.02 hereof, the Trustee and
the Collateral Agent shall join with the Issuers in the execution of any amended
or supplemental Indenture and any amendment to any of the other Financing
Documents authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee and the Collateral Agent shall not be obligated to enter into
such amended or supplemental Indenture or amendments to the Financing Documents
that affects its own rights, duties, immunities, or indemnities under this
Indenture or otherwise.
Section 8.02. With Consent of Holders of Senior Secured Notes.
Except as provided below in this Section 8.02, the Issuers, the Trustee and the
Collateral Agent may amend or supplement this Indenture (including Section 4.18
hereof), the other Financing Documents and the Senior Secured Notes may be
amended or supplemented with the consent of the Required Holders voting as a
single class (including consents obtained in connection with a tender offer or
exchange offer for, or purchase of, the Senior Secured Notes), and, subject to
Sections 5.04 and 5.07 hereof, any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of, premium,
if any, or interest on the Senior Secured Notes, except a payment default
resulting from an acceleration that has been rescinded) or compliance with any
provision of this Indenture, the other Financing Documents or the Senior Secured
Notes may be waived with the consent of the Required Holders voting as a single
class (including consents obtained in connection with a tender offer or
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exchange offer for, or purchase of, the Senior Secured Notes). Section 2.08
hereof shall determine which Senior Secured Notes are considered to be
"outstanding" for purposes of this Section 8.02.
Upon the request of the Issuers accompanied by an Officers' Certificate
authorizing the execution of any such amended or supplemental Indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Senior Secured Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 6.02 hereof, the Trustee shall
join with the Issuers in the execution of such amended or supplemental Indenture
and amendments to the other Financing Documents unless such amended or
supplemental Indenture or amendments to the Financing Documents affects the
Trustee's own rights, duties, immunities or indemnities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture or such
amendments.
It shall not be necessary for the consent of the Holders of Senior
Secured Notes under this Section 8.02 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Issuers shall mail to the Holders of Senior Secured Notes
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Issuers to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such amended
or supplemental Indenture or waiver or amendments to the Financing Documents.
Subject to Sections 5.04 and 5.07 hereof, the Holders of a majority in aggregate
principal amount of the Senior Secured Notes then outstanding voting as a single
class may waive compliance in a particular instance by the Issuers with any
provision of this Indenture or the Senior Secured Notes. However, without the
consent of all Holders of Outstanding Notes, an amendment or waiver under this
Section 8.02 may not (with respect to any Senior Secured Notes held by a
non-consenting Holder) modify:
(a) the principal, premium, if any, and interest payable upon the
Senior Secured Notes;
(b) the dates on which interest or principal on any Senior Secured
Notes is paid;
(c) the dates of maturity of any Senior Secured Notes; and
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(d) the procedures for amendment by a supplemental indenture or
amendment.
Notwithstanding anything in this Section 8.02, the provisions in
Section 3.09 relating to a Change of Control and the related definitions as used
therein may be amended by the Holders of at least a majority in aggregate
principal amount of the Outstanding Notes.
Section 8.03. Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder of a Senior
Secured Note is a continuing consent by the Holder of a Senior Secured Note and
every subsequent Holder of a Senior Secured Note or portion of a Senior Secured
Note that evidences the same debt as the consenting Holder's Senior Secured
Note, even if notation of the consent is not made on any Senior Secured Note.
However, any such Holder of a Senior Secured Note or subsequent Holder of a
Senior Secured Note may revoke the consent as to its Senior Secured Note if the
Trustee receives written notice of revocation before the date the waiver,
supplement or amendment becomes effective. An amendment, supplement or waiver
becomes effective in accordance with its terms and thereafter binds every
Holder.
Section 8.04. Notation on or Exchange of Senior Secured Notes. The
Trustee may place an appropriate notation about an amendment, supplement or
waiver on any Senior Secured Note thereafter authenticated. The Issuers in
exchange for all Senior Secured Notes may issue and the Trustee shall, upon
receipt of an Authentication Order, authenticate new Senior Secured Notes that
reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior Secured
Note shall not affect the validity and effect of such amendment, supplement or
waiver.
Section 8.05. Trustee to Sign Amendments, Etc. The Trustee and the
Collateral Agent shall sign any amended or supplemental Indenture and amendments
to the other Financing Documents authorized pursuant to this Article 8 if the
amendment or supplement does not adversely affect the rights, duties,
liabilities, immunities or indemnities of the Trustee. In executing any amended
or supplemental indenture or amendments to the other Financing Documents, the
Trustee and the Collateral Agent shall be entitled to receive and (subject to
Section 6.01 hereof) shall be fully protected in relying upon, in addition to
the documents required by Section 9.04 hereof, an Officers' Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture or amendment to the other Financing Documents is authorized or
permitted by this Indenture.
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ARTICLE 9
MISCELLANEOUS
Section 9.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with the duties imposed by TIA (S)
318(c), the imposed duties shall control.
Section 9.02. Notices. Any notice or communication by the Issuers or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address.
If to the Issuers:
Project Orange Associates, L.P.
c/o Scolaro, Shulman, Cohen, Lawler & Berstein, P.C.
90 Presidential Plaza
Syracuse, New York, 13202-2200
Telephone: (315) 471-8111
Fax.: (315) 471-1355
Attention: Richard S. Scolaro
With a copy to:
If to the Trustee and Collateral Agent:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, New York, 10005
Attention: Corporate Trust Services
Fax: 212-809-5459
If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Telecopier No.: (212) 553-0468
Telephone No.: (212) 553-7822
Attention: Corporate Utilities Department
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If to S&P:
Standard & Poor's Rating Group
25 Broadway
New York, New York 10004
Telecopier No.: (212) 208-8946
Telephone No.: (212) 208-1651
Attention: Corporate Finance Department Electric Utilities Group
The Issuers or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five (5) Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Issuers mail a notice or communication to Holders, it shall mail
a copy to the Trustee and each Agent at the same time.
Section 9.03. Communication by Holders of Senior Secured Notes with
Other Holders of Senior Secured Notes. Holders may communicate pursuant to TIA
(S) 312(b) with other Holders with respect to their rights under this Indenture
or the Senior Secured Notes. The Issuers, the Trustee, the Registrar and anyone
else shall have the protection of TIA (S) 312(c).
Section 9.04. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Issuers to the Trustee to take any action
under this Indenture, the Issuers shall furnish to the Trustee:
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(a) an Officers' Certificate (which shall include the statements set
forth in Section 9.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel (which shall include the statements set
forth in Section 9.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
Section 9.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than a certificate provided pursuant to
TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S) 314(e) and shall
include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she 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
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 9.06. Rules by Trustee and Agents. The Trustee may make
reasonable rules for action by or at a meeting of Holders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.
Section 9.07. No Personal Liability of Directors, Officers, Partners,
Employees and Stockholders. No past, present or future director, officer,
employee, incorporator, management committee, stockholder or partner of either
Issuer, as such, or any manager, director, officer, employee, incorporator,
stockholder, partner, management committee, as such, shall have any liability
for any obligations of the Issuers under the Senior Secured Notes, this
Indenture, any Financing Document or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder by accepting a
Senior Secured Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Senior Secured Notes.
This Section 9.07 shall not affect or diminish or constitute a waiver, release
or discharge of any specific written obligation, covenant, or agreement by any
person in any
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Financing Document to which it is a party or any security granted by any person
as security for the obligations of the Issuers.
Section 9.08. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE SENIOR SECURED NOTES
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 9.09. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret any other indenture, loan or Indebtedness
agreement of either Issuer or its Affiliates or of any other Person. Any such
indenture, loan or Indebtedness agreement may not be used to interpret this
Indenture.
Section 9.10. Successors. All agreements of the Issuers in this
Indenture and the Senior Secured Notes shall bind their successors. All
agreements of the Trustee in this Indenture shall bind its successors.
Section 9.11. Severability. In case any provision in this Indenture or
in the Senior Secured Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 9.12. Counterpart Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
Section 9.13. Table of Contents, Headings, Etc. The Table of Contents,
Cross-Reference Table and Headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part of this Indenture and shall in no way modify or restrict any
of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES:
PROJECT ORANGE FUNDING, L.P.
By: G.A.S. Orange Associates, L.L.C.,
a Delaware limited liability company,
its General Partner
By: /s/ Douglas Corbett
__________________________
Name: Douglas Corbett
Its: Vice President
PROJECT ORANGE CAPITAL CORP.
By: /s/ Douglas Corbett
__________________________
Name: Douglas Corbett
Its: Vice President
U.S. BANK TRUST NATIONAL
ASSOCIATION,
as Trustee and Collateral Agent
By: /s/ Ward A. Spooner
__________________________
Name: Ward A. Spooner
Its: Vice President
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EXHIBIT A
(Face of Global Note)
================================================================================
CUSIP/CINS [_________]
10.5% Senior Secured Notes due 2007
No. ____ $___________
PROJECT ORANGE FUNDING, L.P.
PROJECT ORANGE CAPITAL CORP.
jointly and severally promise to pay to Cede & Co., or registered assigns, the
principal sum of ______ Dollars (as such amount shall be increased or decreased
from time to time as indicated on the Schedule of Exchanges attached hereto) in
accordance with Paragraph I herein.
Principal Payment Date: March 15 and September 15 (commencing March 15, 2000)
Interest Payment Dates: March 15 and September 15 (commencing March 15, 2000)
Record Dates: March 1 and September 1
Additional provisions are set forth on the
other side of this Senior Secured Note.
Dated:
PROJECT ORANGE FUNDING, L.P.
By G.A.S. Orange Associates, LLC, a
Delaware limited liability company, its
general partner
By: ______________________
Name:
Title:
PROJECT ORANGE CAPITAL CORP.
By: ______________________
Name:
Title:
This is one of the Global Notes referred
to in the within-mentioned Indenture:
U.S. BANK TRUST NATIONAL ASSOCIATION
as Trustee
By: __________________________
Name:
Title:
================================================================================
<PAGE>
(Back of Note)
10.5% Senior Secured Notes due 2007
[Insert the Global Note legend, if applicable, pursuant to the provisions of the
Indenture]
[Insert the Private Placement legend, if applicable, pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
(a). Principal and Interest. Project Orange Funding, L.P., a Delaware
limited partnership (together with its successors, including Project Orange
Associates, L.P. ("Orange L.P."), a Delaware limited partnership, as the
survivor of the merger of Funding L.P. with and into Orange, L.P. "POA") and
Project Orange Capital Corp., a Delaware corporation (and together as co-obligor
with POA, the "Issuers"), jointly and severally, promise to pay the principal of
this Senior Secured Note in the manner described in Section 4.01 of the
Indenture dated as of December 6, 1999 (as amended or supplemented from time to
time, the "Indenture") among the Issuers, and U.S. Bank Trust National
Association, as trustee (the "Trustee") and as collateral agent (the "Collateral
Agent"). The Issuers also promises to pay interest on the principal amount of
this Senior Secured Note at 10.5% per annum from the date of issuance until
maturity. The Issuers shall pay interest semi-annually in arrears on March 15
and September 15 of each year (the "Interest Payment Date"), or if any such day
is not a Business Day, on the next succeeding Business Day Interest on the
Senior Secured Notes will accrue from the most recent Interest Payment Date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Senior Secured Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be March 15, 2000. The
Issuers shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at 12.5% per annum; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
(b). Method of Payment. The Issuers will pay principal on the Senior
Secured Notes to the Persons who are registered Holders of Senior Secured Notes
at the close of business on the March 1 or September 1 next preceding the
relevant
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payment date for principal, even if such Senior Secured Notes are canceled after
such record date and on or before such payment date for principal. The Issuers
will pay interest on the Senior Secured Notes (except defaulted interest) to the
Persons who are registered Holders of the Senior Secured Notes at the close of
business on the March 1 or September 1 next preceding the Interest Payment Date,
even if such Senior Secured Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Senior Secured Notes will be
payable as to principal, premium, if any, and interest at the office or agency
of the Issuers maintained for such purpose within or without the City and State
of New York, or, at the option of the Issuers, payment of interest may be made
by check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of, interest and premium on all
Global Notes and all other Senior Secured Notes the Holders of which shall have
provided wire transfer instructions to the Issuers or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
(c). Paying Agent and Registrar. Initially, U.S. Bank Trust National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar without notice
to any Holder. The Issuers may act in any such capacity.
(d). Indenture. The Issuers issued the Senior Secured Notes under the
Indenture and the terms of the Senior Secured Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Senior
Secured Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. To the extent any
provision of this Senior Secured Note conflicts with the express provisions of
the Indenture, the provisions of the Indenture shall govern and be controlling.
The Senior Secured Notes are limited to $68 million in aggregate principal
amount.
(e). Optional Redemption. The Senior Secured Notes will be redeemable
at the option of the Issuers at any time and from time to time, in whole or in
part, upon not less than 30 nor more than 60 days notice to each Holder of
Senior Secured Notes, at a redemption price equal to the Make-Whole Price.
"Make-Whole Price" means an amount equal to the greater of (i) 100% of the
principal amount of such Senior Secured Note and (ii) as determined by Reference
Adjusted Treasury Dealer, the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the date of
redemption on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Rate, plus, in each case, accrued and unpaid
interest thereon to the Redemption Date. Unless the Issuers default in payment
of the redemption price, on
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and after the Redemption Date, interest will cease to accrue on the Senior
Secured Note or portions thereof called for redemption.
(f). Mandatory Redemption. The Senior Secured Notes will be subject to
mandatory redemption, in whole or in part, at a redemption price equal to the
principal amount thereof plus accrued and unpaid interest to the Redemption Date
upon: (a) upon the receipt of Loss Proceeds or Eminent Domain Proceeds by POA if
POA determines that (i) the Project cannot be rebuilt, repaired or restored to
permit operations on a commercially reasonable basis, or POA determines not to
rebuild, repair or restore the Project, in which case the amount of such Loss
Proceeds or Eminent Domain Proceeds shall be available for such redemption, or
(ii) only a portion of the Project is capable of being rebuilt, repaired or
restored, in which case if excess proceeds exist after such rebuild, repair, or
restoration, only the amount of such excess Loss Proceeds or Eminent Domain
Proceeds shall be made available for such redemption; (b) the receipt by POA of
proceeds in connection with a Title Event, in which case the amount of such
Title Event Proceeds shall be made available for such redemption, subject to
reduction by the costs expended in connection with collecting proceeds upon the
occurrence of such Title Event, and any additional reasonable costs or expenses
that the Issuers will be subject to as a result of the Title Event; and (c) the
receipt by POA of payments arising from the occurrence of a Contract Termination
Event in which case the amount of all such payments shall be made available for
such redemption subject to reduction in the case of a Contract Termination Event
relating to the Gas Purchase Agreement, by the costs expended in connection with
obtaining a replacement or substitute gas supply and funding the Gas Reserve
Account.
(g). Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Senior Secured Notes are to be redeemed at its registered address.
The Trustee shall promptly notify the Issuers in writing of the Senior Secured
Notes selected for redemption and, in the case of any Senior Secured Note
selected for partial redemption, the principal amount thereof to be redeemed.
Senior Secured Notes and portions of Senior Secured Notes selected shall be in
denominations of $100,000 and integral multiples of $1,000 in excess thereof;
except that if all of the Senior Secured Notes of a Holder are to be redeemed,
the entire outstanding amount of Senior Secured Notes held by such Holder, even
if not a multiple of $1,000, shall be redeemed. Except as provided in the
preceding sentence, provisions of the Indenture that apply to Senior Secured
Notes called for redemption also apply to portions of Senior Secured Notes
called for redemption.
(h). Denominations, Transfer, Exchange. The Senior Secured Notes are
in registered form without coupons in denominations of $100,000 and integral
multiples of $1,000 in excess thereof. The transfer of the Senior Secured Notes
may be registered and Senior Secured Notes may be exchanged as provided in the
Indenture. The Registrar and the Trustee may require a Holder, among other
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things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers need not exchange or register the
transfer of any Senior Secured Notes or portion of a Senior Secured Note
selected for redemption, except for the unredeemed portion of any Senior Secured
Note being redeemed in part. Also, the Issuers need not exchange or register the
transfer of any Senior Secured Notes for a period of 15 days before a selection
of the Senior Secured Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
(i). Persons Deemed Owners. The registered Holder of a Senior Secured
Note may be treated as its owner for all purposes.
(j). Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture or the Senior Secured Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Senior Secured Notes and any existing default or compliance
with any provision of the Indenture or the Senior Secured Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Senior Secured Notes. Without the consent of any Holder of a Senior
Secured Note, the Indenture or the Senior Secured Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to add additional
covenants of the Issuers or to surrender right conferred upon the Issuers, to
increase the assets securing the Issuers' obligations under the Indenture, to
make any change that would provide any additional rights or benefits to the
Holders of the Senior Secured Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the Securities and Exchange Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act, to reflect any
amendments required by a Rating Agency in circumstances where confirmation of
the Ratings is required or permitted under the Indenture.
(k). Defaults and Remedies. Events of Default include: (i) failure to
pay any principal, premium, if any, and interest or other amounts owed on any
Senior Secured Note when the same becomes due and payable, whether by scheduled
maturity or required prepayment or redemption or by acceleration or otherwise,
and such failure continues for 5 days or more following the due date for
payment; or (ii) any representation or warranty made by the Issuers in the
Indenture or in any other Financing Document or any representation, warranty or
statement in any certificate, financial statement or other document furnished to
the Trustee or any other Person by or on behalf of either of the Issuers or any
other Credit Party proves to have been untrue or misleading in any material
respect as of the time made, confirmed or furnished and the fact, event or
circumstance that gave rise to such inaccuracy has resulted in, or could
reasonably be expected to result in, a Material Adverse Effect and that fact,
event or circumstance continues uncured for 30 or more days from the date the
POA receives notice thereof from the Trustee; provided that, if such Issuer or
other Credit
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Party commences and diligently pursues efforts to cure such fact, event or
circumstance within such 30-day period and deliver written notice to the Trustee
thereof, such Issuer or other Credit Party may continue to effect such cure, and
such misrepresentation shall not be deemed an "Event of Default" for an
additional 60 days so long as such Issuer or other Credit Party is diligently
pursuing such cure; or (iii) (A) either Issuer fails to pay any Imposition as
and when due and payable, and such failure continues for 15 days or more
following the date such payment becomes delinquent; or (B) either Issuer fails
to perform or observe any covenant, agreement or provision binding upon it
contained in the Indenture or any of the other Financing Documents regarding
maintenance of existence or restrictions on Indebtedness, Liens, Restricted
Payments, Guarantees, Investments, Sale Lease-Back Transactions, Affiliate
Transactions, Project Documents, disposition of assets, operation of the
Project, fundamental changes, or nature of business and such failure continues
uncured for 30 or more days from the date POA receive notice thereof from the
Trustee; or if such Issuer fails to perform or observe any covenant, agreement
or provision binding upon it contained in any of the Project Documents and such
failure continues uncured for 30 or more days from the date POA receives notice
thereof from the Trustee (provided that the same does not constitute an event of
default under the relevant Project Document), or (C) an event that then gives
any Person the right to terminate or materially adversely affect any of POA's
rights under the relevant Project Document; or (D) if any event of default by
POA under any of the Project Documents, or any event arises that in either case
then gives any Person (other than POA) the right to terminate or materially
adversely affects any of POA's rights under any of the Project Documents, shall
occur and be continuing; or (E) any event that then gives the University the
right to foreclose under any University Collateral Document; or (F) the
commencement and continuance of any action, suit or proceeding for the
foreclosure, including foreclosure any power of sale, of any lien on or a
security interest in any Collateral, including any such foreclosure under any
University Collateral Document; or (iv) either Issuer or any other Credit Party
fails to perform or observe any covenant, agreement or provision binding upon it
contained in the Indenture or any of the other Financing Documents (other than
those referred to in clauses (i) through (iii) inclusive above and (v) through
(vii) inclusive below) and such failure continues uncured for 30 or more days
from the date POA receives notice thereof from the Trustee of such failure;
provided that if such Issuer or other Credit Party commences and diligently
pursues efforts to cure such default within such 30-day period, such Issuer or
other Credit Party may continue to effect such cure of the default and such
default will not be deemed an "Event of Default" for an additional 90 days so
long as such Issuer or other Credit Party is diligently pursuing such cure; or
(v) either Issuer: (A) admits in writing its inability, or is generally unable,
to pay its debts as the debts become due or makes a general assignment for the
benefit of creditors; or (B) commences any case, proceeding or other action
seeking reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any applicable Debtor Relief Law; or (C) in
any involuntary case, proceeding or other action commenced against it which
seeks to have an order for relief (injunctive or otherwise) entered against it,
as debtor, or seeks reorganization, arrangement, adjustment, liquidation,
dissolution or
A-5
<PAGE>
composition of it or its debts under any Debtor Relief Law, (x) fails to obtain
a dismissal of such case, proceeding or other action within 90 days of its
commencement, or (y) converts the case from one chapter of the Bankruptcy Reform
Act of 1978, as amended, to another chapter, or (z) is the subject of an order
for relief; or (D) has a trustee, receiver, custodian or other official
appointed for or take possession of all or any part of its property or has any
court take jurisdiction of any of its property, which action remains undismissed
for a period of 90 days; (vi) any Collateral Document or any material provision
thereof ceases to be in full force and effect or there is a Material Adverse
Effect on the Lien purported to be granted under any such Collateral Document
such that it ceases to be a valid and perfected Lien in favor of the Collateral
Agent for the benefit of the Secured Parties on the Collateral described therein
with the priority purported to be created thereby; provided, however, that POA
shall have 10 days after POA obtains actual knowledge thereof to cure any such
cessation, if curable, or to furnish to the Collateral Agent all documents or
instruments required to cure any such cessation, if curable; or (vii) any event
of default under any Permitted Indebtedness of either Issuer which results in
Permitted Indebtedness in excess of $2,500,000 becoming due and payable prior to
its stated maturity.
(l). Trustee Dealings with Issuer. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for either Issuer or their Affiliates, and may otherwise deal with
either Issuer or their Affiliates, as if it were not the Trustee.
(m). No Recourse Against Others. A past, present or future director,
officer, employee, incorporator, management committee, stockholder or partner of
either of the Issuers, as such, shall not have any liability for any obligations
of either of Issuers under the Senior Secured Notes, the Indenture, any
Financing Documents or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder by accepting a Senior Secured
Note waives and releases all such liability the waiver and release are part of
the consideration for the issuance of the Senior Secured Notes. This Section 13
shall not affect or diminish or constitute a waiver, release or discharge of any
specific written obligation, covenant, or agreement made by any person in any
Financing Document to which it is a party or any security granted by any person
as security for the obligations of the Issuers.
(n). Authentication. This Senior Secured Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
(o). Abbreviations. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
A-6
<PAGE>
(p). Cusip Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Senior Secured Notes and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Senior Secured Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
The Issuers will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Facsimile: (315) 471-1355
Attn: Richard S. Scolaro
A-7
<PAGE>
Assignment Form
To assign this Senior Secured Note, fill in the form below: For value received
(I) or (we) assign and transfer this Senior Secured Note to
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Senior Secured Note on the books of the Issuers. The agent may
substitute another to act for him.
Date: Your Signature:______________________________
(Sign exactly as your name
appears on the Senior Secured
Note)
Tax Identification No: ______________________
Signature Guarantee.
Medallion No.:
Notice: Signature must be guaranteed by a member firm of the STAMP, SEMP or MSP
signature guaranty medallion program
A-8
<PAGE>
Schedule of Exchanges of Interests in the Global Note/1/
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Amount of decrease Principal Amount
in Amount of increase of this Global Signature of
Principal Amount in Principal Amount Note following authorized officer
of this of this such decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Custodian
- ---------------- ------------------ ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
________________
/1/ This should be included only if the Note is issued in global form.
A-9
<PAGE>
EXHIBIT B
(Face of Regulation S Temporary Global Note)
===============================================================================
CUSIP/ClNS [_______]
10.5% Senior Secured Notes due 2007
No.________ U.S.$_______
PROJECT ORANGE FUNDING, L.P.
PROJECT ORANGE CAPITAL CORP.
jointly and severally promise to pay to Cede & Co., or registered assigns, the
principal sum of ____________ Dollars (as such amount shall be increased or
decreased from time to time as indicated on the Schedule of Exchanges attached
hereto) in accordance with Paragraph I herein.
Principal Payment Dates: March 15 and September 15 (commencing March 15, 2002)
Interest Payment Dates: March 15 and September 15 (commencing March 15, 1999)
Record Dates: March 1 and September 1
Dated:
PROJECT ORANGE FUNDING, L.P.
By G.A.S. Orange Associates, LLC, a
Delaware limited liability company, as
general partner
By:____________________________
Name:
Title:
<PAGE>
PROJECT ORANGE CAPITAL CORP.
By: __________________________
Name:
Title:
This is one of the Global Notes referred
to in the within-mentioned Indenture:
U.S. BANK TRUST NATIONAL ASSOCIATION
as Trustee
By:_______________________
Name:
Title:
================================================================================
B-2
<PAGE>
(Back of Regulation S Temporary Global Note)
10.5% Senior Secured Notes due 2007
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
THIS SENIOR SECURED NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS SENIOR SECURED NOTE MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH
EVIDENCE, IF ANY, REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH THIS SENIOR
SECURED NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) (a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144(A), (b) AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2),(3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT (AN "ACCREDITED INVESTOR"), (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
ISSUERS SO REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION
OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT
B-3
<PAGE>
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE ISSUERS
OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTION SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
(a). Principal and Interest. Project Orange Funding, L.P., a Delaware
limited partnership (together with its successors, including Project Orange
Associates, L.P. ("Orange L.P."), a Delaware limited partnership, as the
survivor of the merger of Funding L.P. with and into Orange, L.P. "POA") and
Project Orange Capital Corp., a Delaware corporation (and together as co-obligor
with POA, the "Issuers"), jointly and severally, promise to pay the principal of
this Senior Secured Note in the manner described in Section 4.01 of the
Indenture dated as of December 6, 1999 (as amended or supplemented from time to
time, the "Indenture") among the Issuers, and U.S. Bank Trust National
Association, as trustee (the "Trustee") and as collateral agent (the "Collateral
Agent"). The Issuers also promises to pay interest on the principal amount of
this Senior Secured Note at 10.5% per annum from the date of issuance until
maturity. The Issuers shall pay interest semi-annually in arrears on March 15
and September 15 of each year (the "Interest Payment Date"), or if any such day
is not a Business Day, on the next succeeding Business Day Interest on the
Senior Secured Notes will accrue from the most recent Interest Payment Date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Senior Secured Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be March 15, 2000. The
Issuers shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at 12.5% per annum; it shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
(b). Method of Payment. The Issuers will pay principal on the Senior
Secured Notes to the Persons who are registered Holders of Senior Secured Notes
at the close of business on the March 1 or September 1 next preceding the
relevant
B-4
<PAGE>
payment date for principal, even if such Senior Secured Notes are canceled after
such record date and on or before such payment date for principal. The Issuers
will pay interest on the Senior Secured Notes (except defaulted interest) to the
Persons who are registered Holders of the Senior Secured Notes at the close of
business on the March 1 or September 1 next preceding the Interest Payment Date,
even if such Senior Secured Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Senior Secured Notes will be
payable as to principal, premium, if any, and interest at the office or agency
of the Issuers maintained for such purpose within or without the City and State
of New York, or, at the option of the Issuers, payment of interest may be made
by check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of, interest and premium on all
Global Notes and all other Senior Secured Notes the Holders of which shall have
provided wire transfer instructions to the Issuers or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
(c). Paying Agent and Registrar. Initially, U.S. Bank Trust National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar without notice
to any Holder. The Issuers may act in any such capacity.
(d). Indenture. The Issuers issued the Senior Secured Notes under the
Indenture and the terms of the Senior Secured Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Senior
Secured Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. To the extent any
provision of this Senior Secured Note conflicts with the express provisions of
the Indenture, the provisions of the Indenture shall govern and be controlling.
The Senior Secured Notes are limited to $68 million in aggregate principal
amount.
(e). Optional Redemption. The Senior Secured Notes will be redeemable at
the option of the Issuers at any time and from time to time, in whole or in
part, upon not less than 30 nor more than 60 days notice to each Holder of
Senior Secured Notes, at a redemption price equal to the Make-Whole Price.
"Make-Whole Price" means an amount equal to the greater of (i) 100% of the
principal amount of such Senior Secured Note and (ii) as determined by Reference
Treasury Dealer, the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the date of redemption
on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate, plus, in each case, accrued and unpaid
interest thereon to the
B-5
<PAGE>
Redemption Date. Unless the Issuers default in payment of the redemption price,
on and after the Redemption Date, interest will cease to accrue on the Senior
Secured Note or portions thereof called for redemption.
(f). Mandatory Redemption. The Senior Secured Notes will be subject to
mandatory redemption, in whole or in part, at a redemption price equal to the
principal amount thereof plus accrued and unpaid interest to the Redemption Date
upon: (a) upon the receipt of Loss Proceeds or Eminent Domain Proceeds by POA if
POA determines that (i) the Project cannot be rebuilt, repaired or restored to
permit operations on a commercially reasonable basis, or POA determines not to
rebuild, repair or restore the Project, in which case the amount of such Loss
Proceeds or Eminent Domain Proceeds shall be available for such redemption, or
(ii) only a portion of the Project is capable of being rebuilt, repaired or
restored, in which case if excess proceeds exist after such rebuild, repair, or
restoration, only the amount of such excess Loss Proceeds or Eminent Domain
Proceeds shall be made available for such redemption; (b) the receipt by POA of
proceeds in connection with a Title Event, in which case the amount of such
Title Event Proceeds shall be made available for such redemption, subject to
reduction by the costs expended in connection with collecting proceeds upon the
occurrence of such Title Event, and any additional reasonable costs or expenses
that the Issuers will be subject to as a result of the Title Event; and (c) the
receipt by POA of payments arising from the occurrence of a Contract Termination
Event in which case the amount of all such payments shall be made available for
such redemption subject to reduction in the case of a Contract Termination Event
relating to the Gas Purchase Agreement, by the costs expended in connection with
obtaining a replacement or substitute gas supply and funding the Gas Reserve
Account.
(g). Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Senior Secured Notes are to be redeemed at its registered address. The Trustee
shall promptly notify the Issuers in writing of the Senior Secured Notes
selected for redemption and, in the case of any Senior Secured Note selected for
partial redemption, the principal amount thereof to be redeemed. Senior Secured
Notes and portions of Senior Secured Notes selected shall be in denominations of
$100,000 and integral multiples of $1,000 in excess thereof; except that if all
of the Senior Secured Notes of a Holder are to be redeemed, the entire
outstanding amount of Senior Secured Notes held by such Holder, even if not a
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of the Indenture that apply to Senior Secured Notes called
for redemption also apply to portions of Senior Secured Notes called for
redemption.
(h). Denominations, Transfer, Exchange. The Senior Secured Notes are in
registered form without coupons in denominations of $100,000 and integral
multiples of $1,000 in excess thereof. The transfer of the Senior Secured
B-6
<PAGE>
Notes may be registered and Senior Secured Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers need not exchange or register the
transfer of any Senior Secured Notes or portion of a Senior Secured Note
selected for redemption, except for the unredeemed portion of any Senior Secured
Note being redeemed in part. Also, the Issuers need not exchange or register the
transfer of any Senior Secured Notes for a period of 15 days before a selection
of the Senior Secured Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
(i). Persons Deemed Owners. The registered Holder of a Senior Secured Note
may be treated as its owner for all purposes.
(j). Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Senior Secured Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Senior Secured Notes and any existing default or compliance with any
provision of the Indenture or the Senior Secured Notes may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Senior Secured Notes. Without the consent of any Holder of a Senior Secured
Note, the Indenture or the Senior Secured Notes may be amended or supplemented
to cure any ambiguity, defect or inconsistency, to add additional covenants of
the Issuers or to surrender right conferred upon the Issuers, to increase the
assets securing the Issuers' obligations under the Indenture, to make any change
that would provide any additional rights or benefits to the Holders of the
Senior Secured Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, to comply with the requirements of the
Securities and Exchange Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act, to reflect any
amendments required by a Rating Agency in circumstances where confirmation of
the Ratings is required or permitted under the Indenture.
(k). Defaults and Remedies. Events of Default include: (i) failure to pay
any principal, premium, if any, and interest or other amounts owed on any Senior
Secured Note when the same becomes due and payable, whether by scheduled
maturity or required prepayment or redemption or by acceleration or otherwise,
and such failure continues for 5 days or more following the due date for
payment; or (ii) any representation or warranty made by the Issuers in the
Indenture or in any other Financing Document or any representation, warranty or
statement in any certificate, financial statement or other document furnished to
the Trustee or any other Person by or on behalf of either of the Issuers or any
other Credit Party proves to have been untrue or misleading in any material
respect as of the time made, confirmed or furnished and the fact, event or
circumstance that gave rise to such inaccuracy has resulted in, or
B-7
<PAGE>
could reasonably be expected to result in, a Material Adverse Effect and that
fact, event or circumstance continues uncured for 30 or more days from the date
the POA receives notice thereof from the Trustee; provided that, if such Issuer
or other Credit Party commences and diligently pursues efforts to cure such
fact, event or circumstance within such 30-day period and deliver written notice
to the Trustee thereof, such Issuer or other Credit Party may continue to effect
such cure, and such misrepresentation shall not be deemed an "Event of Default"
for an additional 60 days so long as such Issuer or other Credit Party is
diligently pursuing such cure; or (iii) (A) either Issuer fails to pay any
Imposition as and when due and payable, and such failure continues for 15 days
or more following the date such payment becomes delinquent; or (B) either Issuer
fails to perform or observe any covenant, agreement or provision binding upon it
contained in the Indenture or any of the other Financing Documents regarding
maintenance of existence or restrictions on Indebtedness, Liens, Restricted
Payments, Guarantees, Investments, Sale Lease-Back Transactions, Affiliate
Transactions, Project Documents, disposition of assets, operation of the
Project, fundamental changes, or nature of business and such failure continues
uncured for 30 or more days from the date POA receive notice thereof from the
Trustee; or if such Issuer fails to perform or observe any covenant, agreement
or provision binding upon it contained in any of the Project Documents and such
failure continues uncured for 30 or more days from the date POA receives notice
thereof from the Trustee (provided that the same does not constitute an event of
default under the relevant Project Document), or (C) an event that then gives
any Person the right to terminate or materially adversely affect any of POA's
rights under the relevant Project Document; or (D) if any event of default by
POA under any of the Project Documents, or any event arises that in either case
then gives any Person (other than POA) the right to terminate or materially
adversely affects any of POA's rights under any of the Project Documents, shall
occur and be continuing; or (E) any event that then gives the University the
right to foreclose under any University Collateral Document; or (F) the
commencement and continuance of any action, suit or proceeding for the
foreclosure, including foreclosure any power of sale, of any lien on or a
security interest in any Collateral, including any such foreclosure under any
University Collateral Document; or (iv) either Issuer or any other Credit Party
fails to perform or observe any covenant, agreement or provision binding upon it
contained in the Indenture or any of the other Financing Documents (other than
those referred to in clauses (i) through (iii) inclusive above and (v) through
(vii) inclusive below) and such failure continues uncured for 30 or more days
from the date POA receives notice thereof from the Trustee of such failure;
provided that if such Issuer or other Credit Party commences and diligently
pursues efforts to cure such default within such 30-day period, such Issuer or
other Credit Party may continue to effect such cure of the default and such
default will not be deemed an "Event of Default" for an additional 90 days so
long as such Issuer or other Credit Party is diligently pursuing such cure; or
(v) either Issuer: (A) admits in writing its inability, or is generally unable,
to pay its debts as the debts become due or makes a general assignment for the
benefit of creditors; or (B) commences any case, proceeding or other action
seeking reorganization, arrangement, adjustment, liquidation,
B-8
<PAGE>
dissolution or composition of it or its debts under any applicable Debtor Relief
Law; or (C) in any involuntary case, proceeding or other action commenced
against it which seeks to have an order for relief (injunctive or otherwise)
entered against it, as debtor, or seeks reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any Debtor
Relief Law, (x) fails to obtain a dismissal of such case, proceeding or other
action within 90 days of its commencement, or (y) converts the case from one
chapter of the Bankruptcy Reform Act of 1978, as amended, to another chapter, or
(z) is the subject of an order for relief; or (D) has a trustee, receiver,
custodian or other official appointed for or take possession of all or any part
of its property or has any court take jurisdiction of any of its property, which
action remains undismissed for a period of 90 days; (vi) any Collateral Document
or any material provision thereof ceases to be in full force and effect or there
is a Material Adverse Effect on the Lien purported to be granted under any such
Collateral Document such that it ceases to be a valid and perfected Lien in
favor of the Collateral Agent for the benefit of the Secured Parties on the
Collateral described therein with the priority purported to be created thereby;
provided, however, that POA shall have 10 days after POA obtains actual
knowledge thereof to cure any such cessation, if curable, or to furnish to the
Collateral Agent all documents or instruments required to cure any such
cessation, if curable; or (vii) any event of default under any Permitted
Indebtedness of either Issuer which results in Permitted Indebtedness in excess
of $2,500,000 becoming due and payable prior to its stated maturity.
(l). Trustee Dealings with Issuer. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for either Issuer or their Affiliates, and may otherwise deal with either Issuer
or their Affiliates, as if it were not the Trustee.
(m). No Recourse Against Others. A past, present or future director,
officer, employee, incorporator, management committee, stockholder or partner of
either of the Issuers, as such, shall not have any liability for any obligations
of either of Issuers under the Senior Secured Notes, the Indenture, any
Financing Documents or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder by accepting a Senior Secured
Note waives and releases all such liability the waiver and release are part of
the consideration for the issuance of the Senior Secured Notes. This Section 13
shall not affect or diminish or constitute a waiver, release or discharge of any
specific written obligation, covenant, or agreement made by any person in any
Financing Document to which it is a party or any security granted by any person
as security for the obligations of the Issuers.
(n). Authentication. This Senior Secured Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
B-9
<PAGE>
(o). Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
(p). Cusip Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Senior Secured Notes and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Senior Secured Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
The Issuer will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Facsimile: (315) 471-1355
Attn: Richard S. Scolaro
B-10
<PAGE>
Assignment Form
To assign this Senior Secured Note, fill in the form below: For value received
(1) or (we) assign and transfer this Senior Secured Note to
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________________________________________
to transfer this Senior Secured Note on the books of the Issuers. The agent may
substitute another to act for him.
Date: Your Signature:________________________
(Sign exactly as your name
appears on the Senior
Secured Note)
Tax Identification No:____________________
Signature Guarantee.
Medallion No.:
Notice: Signature must be guaranteed by a member firm of the STAMP, SEMP or MSP
signature guaranty medallion program.
B-11
<PAGE>
Schedule of Exchanges of Regulation S Temporary Global Note
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note,
have been made:
<TABLE>
<CAPTION>
Amount of decrease Principal Amount
in Amount of increase of this Global Signature of
Principal Amount in Principal Amount Note following authorized officer
of this of this such decrease of Trustee or
Date of Exchange Global Note Global Note (or increase) Custodian
- ---------------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
</TABLE>
B-12
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
Project Orange Funding, L.P.
Project Orange Capital Corp.
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Attention: Richard S. Scolaro
[---------------]
[Address]
Re: 10.5% Senior Secured Notes Due 2007
Reference is hereby made to the Indenture, dated as of December 6, 1999
(the "Indenture"), among Project Orange Funding, L.P. ("Funding L.P."), a
Delaware limited partnership (together with its successors, including Project
Orange Associates, L.P. ("Orange L.P."), a Delaware limited partnership, as the
survivor of the merger of Funding L.P. with and into Orange L.P. concurrently
with the issuance and sale of the Senior Secured Notes ("POA"), Project Orange
Capital Corp., a Delaware corporation ("Capital Co." and together with POA, the
"Issuers"), and U.S. Bank Trust National Association, as trustee and collateral
agent. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
_____________, (the "Transferor") owns and proposes to transfer the
Senior Secured Note[s] or interest in such Senior Secured Note[s] specified in
Annex A hereto, in the principal amount of $ ________ in such Senior Secured
Note[s] or interests (the "Transfer"), to ________ (the "Transferee"), as
further specified in Annex A hereto. In connection with the Transfer, the
Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
(a). [_] Check if Transferee will take delivery of a beneficial
interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being
<PAGE>
transferred to a Person that the Transferor reasonably believed and believes is
purchasing the beneficial interest or Definitive Note for its own account, or
for one or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A and such Transfer is in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Note and/or the Definitive Note and in the
Indenture and the Securities Act
(b). [_] Check if Transferee will take delivery of a beneficial
interest in the Temporary Regulation S Global Note, the Regulation S Global Note
or a Definitive Note pursuant to Regulation S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act
and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii)
the transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note, the
Temporary Regulation S Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
(c). [_] Check and complete if Transferee will take delivery of a
beneficial interest in a Global Note or a Definitive Note pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
C-2
<PAGE>
(i) [_] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(ii) [_] such Transfer is being effected to the Issuer or a
subsidiary thereof;
or
(iii) [_] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in
compliance with the prospectus delivery requirements of the Securities
Act;
or
(iv) [_] such Transfer is being effected pursuant to an
exemption from the registration requirements of the Securities Act
other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby
further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the
Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted
Definitive Notes and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) if such
Transfer is in respect of a principal amount of Senior Secured Notes at
the time of transfer of less than $250,000, an Opinion of Counsel
provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of
the proposed transfer in accordance with the terms of the Indenture,
the transferred beneficial interest or Definitive Note will be subject
to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Global Note and/or the Definitive Notes and in
the Indenture and the Securities Act.
(d). [_] Check if Transferee will take delivery of a beneficial
interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.
(i) [_] Check if Transfer is pursuant to Rule 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144
under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the
restrictions on transfer contained in the Indenture and
C-3
<PAGE>
the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes
and in the Indenture.
(ii) [_] Check if Transfer is Pursuant to Regulation S. (i)
The Transfer is being effected pursuant to and in accordance with Rule
903 or Rule 904 under the Securities Act and in compliance with the
transfer restrictions contained in the Indenture and any applicable
blue sky securities laws of any state of the United States and (ii) the
restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes
and in the Indenture.
(iii) [_] Check if Transfer is Pursuant to Other Exemption.
(i) The Transfer is being effected pursuant to and in compliance with
an exemption from the registration requirements of the Securities Act
other than Rule 144, Rule 903 or Rule 904 and in compliance with the
transfer restrictions contained in the Indenture and any applicable
blue sky securities laws of any State of the United States and (ii) the
restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the
Restricted Global Notes or Restricted Definitive Notes and in the
Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.
_______________________________________
[Insert Name of Transferor]
By:____________________________________
C-4
<PAGE>
Name:
Title:
Dated: ____________, ____
C-5
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
(a). The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(i) [_] a beneficial interest in the:
(A) [_] 144A Global Note (CUSIP _____), or
(B) [_] Regulation S Global Note (CUSIP ______), or
(ii) [_] a Restricted Definitive Note.
(b). After the Transfer the Transferee will hold:
[CHECK ONE]
(i) [_] a beneficial interest in the:
(A) [_] 144A Global Note (CUSIP ______), or
(B) [_] Regulation S Global Note (CUSIP _____), or
(C) [_] Unrestricted Global Note (CUSIP _____), or
(ii) [_] a Restricted Definitive Note; or
(iii) [_] an Unrestricted Definitive Note, in accordance with
the terms of the Indenture.
C-6
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF EXCHANGE
Project Orange Funding L.P.
Project Orange Capital Corp.
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Facsimile: (315) 471-1355
Attention: Richard S. Scolaro
[------------------]
[Address]
Re: 10.5% Senior Secured Notes Due 2007
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of December 6, 1999
(the "Indenture"), among Project Orange Funding, L.P. ("Funding L.P."), a
Delaware limited partnership (together with its successors, including Project
Orange Associates, L.P. ("Orange L.P."), a Delaware limited partnership, as the
survivor of the merger of Funding L.P. with and into Orange L.P. concurrently
with the issuance and sale of the Senior Secured Notes ("POA"), Project Orange
Capital Corp., a Delaware corporation ("Capital Co." and together with POA, the
"Issuers"), and U.S. Bank Trust National Association, as trustee and collateral
agent. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
__________, (the "Owner") owns and proposes to exchange the Senior
Secured Note[s] or interest in such Senior Secured Note[s] specified herein, in
the principal amount of $__________ in such Senior Secured Note[s] or interests
(the "Exchange"). In connection with the Exchange, the Owner hereby certifies
that:
(a). Exchange of Restricted Definitive Notes or Beneficial Interests
in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial
Interests in an Unrestricted Global Note
(i) [_] Check if Exchange is from beneficial interest in a
--------------------------------------------------
Restricted Global Note to beneficial interest in an Unrestricted Global
-----------------------------------------------------------------------
Note. In connection with the Exchange of the Owner's beneficial
----
interest in a Restricted Global Note for a beneficial interest in an
Unrestricted Global Note
<PAGE>
in an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend
are not required in order to maintain compliance with the Securities
Act and (iv) the beneficial interest in an Unrestricted Global Note is
being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(ii) [_] Check if Exchange is from beneficial interest in a
--------------------------------------------------
Restricted Global Note to Unrestricted Definitive Note. In connection
------------------------------------------------------
with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Definitive Note is being acquired for the Owner's own
account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted
Global Notes and pursuant to and in accordance with the Securities Act,
(iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is
being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(iii) [_] Check if Exchange is from Restricted Definitive Note
----------------------------------------------------
to beneficial interest in an Unrestricted Global Note. In connection
-----------------------------------------------------
with the Owner's Exchange of a Restricted Definitive Note for a
beneficial interest in an Unrestricted Global Note, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to Restricted
Definitive Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and
the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is
being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(iv) [_] Check if Exchange is from Restricted Definitive Note
----------------------------------------------------
to Unrestricted Definitive Note. In connection with the Owner's
-------------------------------
Exchange of a Restricted Definitive Note for an Unrestricted Definitive
Note, the Owner hereby certifies (i) the Unrestricted Definitive Note
is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Definitive
D-2
<PAGE>
Notes and pursuant to and in accordance with the Securities Act, (iii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Unrestricted Definitive Note is being
acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(b). Exchange of Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes for Restricted Definitive Notes or Beneficial
Interests in Restricted Global Notes.
(i) [_] Check if Exchange is from beneficial interest in a
--------------------------------------------------
Restricted Global Note to Restricted Definitive Note. In connection
----------------------------------------------------
with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a Restricted Definitive Note with an equal principal
amount, the Owner hereby certifies that the Restricted Definitive Note
is being acquired for the Owner's own account without transfer. Upon
consummation of the proposed Exchange in accordance with the terms of
the Indenture, the Restricted Definitive Note issued will continue to
be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the
Indenture and the Securities Act.
(ii) [_] Check if Exchange is from Restricted Definitive Note
----------------------------------------------------
to beneficial interest in a Restricted Global Note. In connection with
--------------------------------------------------
the Exchange of the Owner's Restricted Definitive Note for a beneficial
interest in the [CHECK ONE] "144A Global Note", "Regulation S Global
Note", "IAI Global Note" with an equal principal amount, the Owner
hereby certifies (i) the beneficial interest is being acquired for the
Owner's own account without transfer and (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the
Securities Act, and in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture,
the beneficial interest issued will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the
relevant Restricted Global Note and in the Indenture and the Securities
Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.
[Insert Name of Owner]
D-3
<PAGE>
By:_________________________________
Name:
Title:
Dated: ____________, ____
D-4
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
Project Orange Funding L.P.
Project Orange Capital Corp.
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13209
Facsimile: (315) 471-1355
Attention: Richard S. Scolaro
[____________________]
[Address]
Re: 10.5% Senior Secured Notes Due 2009
Reference is hereby made to the Indenture, dated as of December 6, 1999
(the "Indenture"), among Project Orange Funding, L.P. ("Funding L.P."), a
Delaware limited partnership (together with its successors, including Project
Orange Associates, L.P. ("Orange L.P."), a Delaware limited partnership, as the
survivor of the merger of Funding L.P. with and into Orange L.P. concurrently
with the issuance and sale of the Senior Secured Notes ("POA"), Project Orange
Capital Corp., a Delaware corporation ("Capital Co." and together with POA, the
"Issuers"), and U.S. Bank Trust National Association, as trustee and collateral
agent. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
In connection with our proposed purchase $_________ aggregate principal
amount of:
(a) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note,
we confirm that:
(a). We understand that any subsequent transfer of the Senior Secured
Notes or any interest therein is subject to certain restrictions and conditions
set forth in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Senior Secured Notes or any interest
therein except in
<PAGE>
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
(b). We understand that the offer and sale of the Senior Secured Notes
have not been registered under the Securities Act, and that the Senior Secured
Notes and any interest therein 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
the Senior Secured Notes or any interest therein, we will do so only (A) to the
Issuer 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 (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Issuer a signed letter substantially in the form of this letter
and, if such transfer is in respect of a principal amount of Senior Secured
Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in
form reasonably acceptable to the Issuers to the effect 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
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the Definitive Note or beneficial interest
in a Global Note from us in a transaction meeting the requirements of clauses
(A) through (E) of this paragraph a notice advising such purchaser that resales
thereof are restricted as stated herein.
(c). We understand that, on any proposed resale of the Senior Secured
Notes or beneficial interest therein, we will be required to furnish to you and
the Issuers such certifications, legal opinions and other information as you and
the Issuers may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Senior Secured
Notes purchased by us will bear a legend to the foregoing effect. We further
understand that any subsequent transfer by us of the Senior Secured Notes or
beneficial interest therein acquired by us must be effected through one of the
Placement Agents.
(d). 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 Senior Secured
Notes, and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
(e). We are acquiring the Senior Secured Notes or beneficial interest
therein purchased by us for our own account or for one or more accounts (each of
which is an
E-2
<PAGE>
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
[Insert Name of Accredited Investor]
By:____________________________________
Name:
Title:
Dated: ____________, ____
E-3
<PAGE>
EXHIBIT F
FORM OF ASSUMPTION AGREEMENT
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of December 6, 1999
by and among
Project Orange Funding L.P.
Project Orange Capital Corp.
and
Donaldson, Lufkin & Jenrette
Securities Corporation
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of December 6, 1999 among Project Orange Funding, L.P. ("Funding L.P."),
a Delaware limited partnership (together with its successors, including Project
Orange Associates, L.P. ("Orange L.P."), a Delaware limited partnership, as the
survivor of the merger of Funding, L.P. with and into Orange L.P. concurrently
with the issuance of the Series A Notes (as defined below) under the Indenture
(as defined below) and the execution of this Indenture by the parties hereto,
"POA"), Project Orange Capital Corp., a Delaware corporation ("Capital Co." and,
together with POA, the "Issuers") and Donaldson, Lufkin & Jenrette Securities
Corporation, (the "Initial Purchaser") which has agreed to purchase the Issuers'
10.5% Series A Senior Notes due 2007 (the "Series A Notes") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated December
6, 1999 (the "Purchase Agreement"), by and among Issuers and the Initial
Purchaser. In order to induce the Initial Purchaser to purchase the Series A
Notes, the Issuers have agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchaser set forth in Section 3 of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Indenture (the "Indenture"), dated December
6, 1999 among Issuers and U.S. Bank Trust National Association, as Trustee and
Collateral Agent, relating to the Series A Notes and the Series B Notes.
The parties hereby agree as follows:
Section 1. Definitions.
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date hereof.
2
<PAGE>
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Series B
Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange
Offer Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the period required pursuant to
Section 3(b) hereof and (c) the delivery by the Issuers to the Registrar under
----
the Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
----
Effectiveness Deadline: As defined in Sections 3(a) and 4(a) hereof.
---- ----
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Issuers of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act and pursuant to Regulation S under
the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
---- ----
Holders: As defined in Section 2 hereof.
-
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
---
3
<PAGE>
Registration Default: As defined in Section 5 hereof.
-
Registration Statement: Any registration statement of the Issuers relating
to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, in each case, (i) that is filed pursuant to the
provisions of this Agreement and (ii) including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Issuers' 10.5% Series B Senior Notes due 2007 to be
issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 6(b) hereof.
----
Shelf Registration Statement: As defined in Section 4 hereof.
-
Suspension Notice: As defined in Section 6(d) hereof.
----
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Series A Note, until the earliest to
occur of (a) the date on which such Series A Note is exchanged in the Exchange
Offer for a Series B Note which is entitled to be resold to the public by the
Holder thereof without complying with the prospectus delivery requirements of
the Act, (b) the date on which such Series A Note has been disposed of in
accordance with a Shelf Registration Statement (and the purchasers thereof have
been issued Series B Notes), or (c) the date on which such Series A Note is
distributed to the public pursuant to Rule 144 under the Act (and purchasers
thereof have been issued Series B Notes) and each Series B Note until the date
on which such Series B Note is disposed of by a Broker-Dealer pursuant to the
"Plan of Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
Section 2. Holders.
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
4
<PAGE>
Section 3. Registered Exchange Offer.
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
-------
complied with), the Issuers shall (i) cause the Exchange Offer Registration
Statement to be filed with the Commission as soon as practicable after the
Closing Date, but in no event later than 90 days after the Closing Date (such
90th day being the "Filing Deadline"), (ii) use its best efforts to cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 180 days after the Closing Date (such
180th day being the "Effectiveness Deadline"), (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Series B Notes to be offered
in exchange for the Series A Notes that are Transfer Restricted Securities and
(ii) resales of Series B Notes by Broker-Dealers that tendered into the Exchange
Offer Series A Notes that such Broker-Dealer acquired for its own account as a
result of market making activities or other trading activities (other than
Series A Notes acquired directly from the Issuers or any of their Affiliates) as
contemplated by Section 3(c) below.
----
(b) The Issuers shall use their respective best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be less
than 20 Business Days. The Issuers shall cause the Exchange Offer to comply with
all applicable federal and state securities laws. No securities other than the
Series B Notes shall be included in the Exchange Offer Registration Statement.
The Issuers shall use their respective best efforts to cause the Exchange Offer
to be Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
business days thereafter (such 30th day being the "Consummation Deadline").
(c) The Issuers shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the
5
<PAGE>
account of such Broker-Dealer as a result of market-making activities or other
trading activities (other than Series A Notes acquired directly from the Issuers
or any Affiliate of the Issuers), may exchange such Transfer Restricted
Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section
shall also contain all other information with respect to such sales by such
Broker-Dealers that the Commission may require in order to permit such sales
pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Transfer Restricted Securities held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy, rules or regulations after the date of this
Agreement. See the Shearman & Sterling no-action letter (available July 2,
1993).
Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Issuers shall
permit the use of the Prospectus contained in the Exchange Offer Registration
Statement by such Broker-Dealer to satisfy such prospectus delivery requirement.
To the extent necessary to ensure that the prospectus contained in the Exchange
Offer Registration Statement is available for sales of Series B Notes by Broker-
Dealers, the Issuers agree to use their respective best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented,
amended and current as required by and subject to the provisions of Sections
6(a) and 6(c) hereof and in conformity with the requirements of this Agreement,
- ---- ----
the Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of 30 days from the Consummation Deadline or
such shorter period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold pursuant thereto. The
Issuers shall provide sufficient copies of the latest version of such Prospectus
to such Broker-Dealers, promptly upon request, and in no event later than one
day after such request, at any time during such period.
Section 4. Shelf Registration.
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Issuers have complied with the procedures set forth in
Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities
-------
shall notify the Issuers within 20 Business Days following the Consummation
Deadline that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the Series
B Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds
6
<PAGE>
Series A Notes acquired directly from the Issuers or any of their Affiliates,
then the Issuers shall:
(x) cause to be filed, on or prior to 45 days after the earlier of
(i) the date on which the Issuers determine that the Exchange Offer
Registration Statement cannot be filed as a result of clause 4(a)(i) above
-------
and (ii) the date on which the Issuers receive the notice specified in
clause 4(a)(ii) above, (such earlier date, the "Filing Deadline"), a shelf
--------
registration statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange Offer Registration Statement (the "Shelf
Registration Statement")), relating to all Transfer Restricted Securities,
and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline for the Shelf Registration Statement (such 90th day the
"Effectiveness Deadline").
If, after the Issuers have filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Issuers are required
----
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
4(a)(i) above), then the filing of the Exchange Offer Registration Statement
- -------
shall be deemed to satisfy the requirements of clause (x) above; provided that,
in such event, the Issuers shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
----
to be registered therein pursuant to Section 6(b)(ii) hereof, the Issuers shall
--------
use their respective best efforts to keep any Shelf Registration Statement
required by this Section 4(a) continuously effective, supplemented, amended and
----
current as required by and subject to the provisions of Sections 6(b) and 6(c)
---- ----
hereof and in conformity with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years (as extended pursuant to Section 6(d))
-----
following the Closing Date, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Shelf Registration Statement have
been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement
7
<PAGE>
pursuant to this Agreement unless and until such Holder furnishes to the Issuers
in writing, within 20 days after receipt of a request therefor, the information
specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for
use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to liquidated damages pursuant to Section 5 hereof
-
unless and until such Holder shall have provided all such information. Each
selling Holder agrees to promptly furnish additional information required to be
disclosed in order to make the information previously furnished to the Issuers
by such Holder not materially misleading.
Section 5. Liquidated Damages.
If (a) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (b) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (c) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (d) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective immediately (each such event referred to in clauses
(a) through (d), a "Registration Default"), then the Issuers hereby jointly and
severally agree to pay to each Holder of Transfer Restricted Securities affected
thereby liquidated damages in an amount equal to $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities held by such Holder for each
week or portion thereof that the Registration Default continues for the first
90-day period immediately following the occurrence of such Registration Default.
The amount of the liquidated damages shall increase by an additional $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of liquidated damages of $.25 per week per
$1,000 in principal amount of Transfer Restricted Securities; provided that the
Issuers shall in no event be required to pay liquidated damages for more than
one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (i) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of clause (a) above, (ii) upon the effectiveness of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of clause (b) above, (iii) upon Consummation of the
Exchange Offer, in the case of clause (c) above, or (iv) upon the filing of a
post-effective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement) to
8
<PAGE>
again be declared effective or made usable in the case of clause (d) above, the
accrual of liquidated damages payable with respect to the Transfer Restricted
Securities as a result of such clause (a), (b), (c) or (d), as applicable, shall
cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Senior Secured Notes. Notwithstanding the fact that any securities for which
liquidated damages are due cease to be Transfer Restricted Securities, all
obligations of the Issuers to pay accrued liquidated damages with respect to
securities shall survive until such time as such obligations with respect to
such securities shall have been satisfied in full.
Section 6. Registration Procedures.
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Issuers shall (x) comply with all applicable provisions of Section
6(c) below, (y) use their respective best efforts to effect such exchange and to
- ----
permit the resale of Series B Notes by Broker-Dealers that tendered in the
Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of its market making activities or other trading activities
(other than Series A Notes acquired directly from the Issuers or any of their
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and (z) comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Issuers raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Issuers hereby agree to seek a no-action letter
or other favorable decision from the Commission allowing the Issuers to
Consummate an Exchange Offer for such Transfer Restricted Securities. The
Issuers hereby agree to pursue the issuance of such a decision to the
Commission staff level. In connection with the foregoing, the Issuers
hereby agree to take all such other actions as may be requested by the
Commission or otherwise required in connection with the issuance of such
decision, including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff an
analysis prepared by counsel to the Issuers setting forth the legal bases,
if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursuing a resolution (which need
not be favorable) by the Commission staff.
9
<PAGE>
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall furnish, upon the request of the
Issuers, prior to the Consummation of the Exchange Offer, a written
representation to the Issuers (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to
the effect that (A) it is not an Affiliate of either Issuer, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Series B Notes to be issued in the Exchange Offer and (C) it is acquiring
the Series B Notes in its ordinary course of business. As a condition to
its participation in the Exchange Offer each Holder using the Exchange
Offer to participate in a distribution of the Series B Notes shall
acknowledge and agree that, if the resales are of Series B Notes obtained
by such Holder in exchange for Series A Notes acquired directly from the
Issuers or an Affiliate thereof, it (1) could not, under Commission policy
as in effect on the date of this Agreement, rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc. (available June 5,
1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated July 2,
1993, and similar no-action letters (including, if applicable, any no-
action letter obtained pursuant to Section 6(a)(i) above), and (2) must
-------
comply with the registration and prospectus delivery requirements of the
Act in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Issuers shall provide a supplemental letter to the
Commission (A) stating that the Issuers are registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action
letter obtained pursuant to Section 6(a)(i) above, (B) including a
-------
representation that neither of the Issuers have entered into any
arrangement or understanding with any Person to distribute the Series B
Notes to be received in the Exchange Offer and that, to the best of the
Issuers' information and belief, each Holder participating in the Exchange
Offer is acquiring the Series B Notes in its ordinary course of business
and has no arrangement or understanding with any Person to participate in
the distribution of the Series B Notes received in the Exchange
10
<PAGE>
Offer and (C) any other undertaking or representation required by the
Commission as set forth in any no-action letter obtained pursuant to
Section 6(a)(i) above, if applicable.
-------
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Issuers shall
(i) comply with all the provisions of Section 6(c) below and use
----
their respective best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with
the intended method or methods of distribution thereof (as indicated in the
information furnished to the Issuers pursuant to Section 4(b) hereof), and
----
pursuant thereto the Issuers will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance
with the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of Series
A Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Issuers for cancellation; the
Issuers shall register Series B Notes on the Shelf Registration Statement
for this purpose and issue the Series B Notes to the purchaser(s) of
securities subject to the Shelf Registration Statement in the names as such
purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Issuers shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement, as
- -
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain
an untrue statement of material fact or omit to state any material fact
necessary to make the statements therein not misleading or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Issuers shall file promptly an
appropriate amendment to such Registration Statement curing such defect,
and, if Commission review is
11
<PAGE>
required, use their respective best efforts to cause such amendment to be
declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
- -
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462, as applicable, under the Act in
a timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested by such, confirm
such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
any applicable Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, and (D)
of the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to make
the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Issuers shall use their
12
<PAGE>
respective best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
-------
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
------------
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an 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;
(v) furnish to each Holder in connection with such exchange or sale,
if any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including all
documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review and
comment of such Holders in connection with such sale, if any, for a period
of at least five Business Days, and the Issuers will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which such Holders shall reasonably object
within five Business Days after the receipt thereof. A Holder shall be
deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such
exchange or sale, if any, make the Issuer's representatives available for
discussion of such document and other customary due diligence matters, and
include such information in such document prior to the filing thereof as
such Holders may reasonably request;
(vii) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all
financial and other records, pertinent corporate documents of the Issuers
and cause the
13
<PAGE>
Issuers' officers, directors and employees to supply all information
reasonably requested by any such Holder, attorney or accountant in
connection with such Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its effectiveness;
(viii) if requested by any Holders in connection with such exchange
or sale, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities; and make all
required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Issuers are notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection with such exchange or
sale, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Issuers
hereby consent to the use (in accordance with law) of the Prospectus and
any amendment or supplement thereto by each selling Holder in connection
with the offering and the sale of the Transfer Restricted Securities
covered by the Prospectus or any amendment or supplement thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in order
to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement contemplated
by this Agreement as may be reasonably requested by any Holder in
connection with any sale or resale pursuant to any applicable Registration
Statement. In such connection, the Issuers shall:
(A) upon request of any Holder, furnish (or in the case of
Sections 6(c)(xi)(A)(2) and 6(c)(xi)(A)(3), use its best efforts to
-------------- --------------
cause to be furnished) to each Holder, upon Consummation of the
Exchange
14
<PAGE>
Offer or upon the effectiveness of the Shelf Registration Statement,
as the case may be:
(1) a certificate, dated such date, signed on behalf of
each Issuer by a Responsible Officer of each Issuer confirming,
as of the date thereof, the matters set forth in Sections 6(t),
9(a) and 9(b) of the Purchase Agreement and such other similar
matters as such Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Issuers covering matters similar to those set forth in paragraph
(e) of Section 9 of the Purchase Agreement and such other matter
as such Holder may reasonably request, and in any event including
a statement to the effect that such counsel has participated in
conferences with officers and other representatives of the
Issuers, representatives of the independent public accountants
for the Issuers and have considered the matters required to be
stated therein and the statements contained therein, although
such counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as
to materiality to the extent such counsel deems appropriate upon
the statements of officers and other representatives of the
Issuers) and without independent check or verification), no facts
came to such counsel's attention that caused such counsel to
believe that the applicable Registration Statement, at the time
such Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or
that the Prospectus contained in such Registration Statement as
of its date and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
15
<PAGE>
which they were made, not misleading. Without limiting the
foregoing, such counsel may state further that such counsel
assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data included
in any Registration Statement contemplated by this Agreement or
the related Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Issuers' independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 9(g) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with the matters covered in Section 6(c)(xi)(A) above and with any
-----------
customary conditions contained in any agreement entered into by the
Issuers pursuant to this Section 6(c)(xi);
--------
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling
Holders may request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the applicable Registration Statement;
provided, however, that neither of the Issuers shall be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not
now so subject;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted Securities to
be sold and not
16
<PAGE>
bearing any restrictive legends; and to register such Transfer Restricted
Securities in such denominations and such names as the selling Holders may
request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xiv) use their respective best efforts to cause the disposition
of the Transfer Restricted Securities covered by the Registration Statement
to be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in Section 6(c)(xii) above;
---------
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under
the Indenture with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with the Depository
Trust Company;
(xvi) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and
the Holders to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the TIA;
and execute and use its best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
17
<PAGE>
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from either Issuer of the existence of any
------------
fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
------------
"Suspension Notice"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
--------
advised in writing by the Issuers that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "Recommencement
Date"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Issuers with more
recently dated Prospectuses or (ii) deliver to the Issuers (at the Issuers'
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
- - -
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
Section 7. Registration Expenses.
(a) All expenses incident to the Issuers' performance of or compliance
with this Agreement will be borne by the Issuers, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Series B Notes
to be issued in the Exchange Offer and printing of Prospectuses, messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Issuers and the Holders of Transfer Restricted Securities; (v) all
application and filing fees in connection with listing the Series B Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Issuers (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Issuers will, in any event, bear their internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or
18
<PAGE>
accounting duties), the expenses of any annual audit and the fees and expenses
of any Person, including special experts, retained by the Issuers.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Issuers will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities who are
tendering Series A Notes in the Exchange Offer and/or selling or reselling
Series A Notes or Series B Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Davis Polk & Wardwell, unless another firm shall
be chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
Section 8. Indemnification.
(a) The Issuers agree, jointly and severally, to indemnify and hold
harmless each Holder, its directors, officers and each Person, if any, who
controls such Holder (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act), from and against any and all losses, claims, damages,
liabilities, judgments, (including without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Issuers to any Holder or any prospective purchaser of Series B
Notes or registered Series A Notes, 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, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that is based
upon information relating to any of the Holders furnished in writing to the
Issuers by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Issuers, and their respective
directors, officers, and partners, and each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Issuers, to the same extent as the foregoing indemnity from the Issuers set
forth in Section 8(a) above, but only with reference to information relating to
----
such Holder furnished in writing to the Issuers by such Holder expressly for use
in any Registration Statement. In no event
19
<PAGE>
shall any Holder, its directors, officers or any Person who controls such Holder
be liable or responsible for any amount in excess of the amount by which the
total amount received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages that such Holder, its directors, officers or any Person
who controls such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
---- ----
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
---- ----
defense of such action pursuant to this Section 8(c), but may employ separate
----
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and
----
by the Issuers, in the case of parties indemnified pursuant to Section 8(b). The
----
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any
20
<PAGE>
action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the indemnifying party) and, prior
to the date of such settlement, the indemnifying party shall have failed to
comply with such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
- -
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuers, on the one
hand, and the Holders, on the other hand, from their sale of Transfer Restricted
Securities or (ii) if the allocation provided by clause 8(d)(i) 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 Issuers, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Issuers, on the one hand,
and of the Holder, 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 supplied by the Issuers, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Issuers and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8(d) were determined by pro rata
----
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party
21
<PAGE>
as a result of the losses, claims, damages, liabilities or judgments referred to
in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, no Holder, its directors, its officers or any Person, if any, who
-
controls such Holder shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the total received by such Holder with
respect to the sale of Transfer Restricted Securities pursuant to a Registration
Statement exceeds (i) the amount paid by such Holder for such Transfer
Restricted Securities and (ii) the amount of any damages which such Holder 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 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to con tribute pursuant to this
Section 8(d) are several in proportion to the respective principal amount of
----
Transfer Restricted Securities held by each Holder hereunder and not joint.
Section 9. Rule 144A and Rule 144.
The Issuers agree with each Holder, for so long as any Transfer Restricted
Securities remain outstanding and during any period in which the Issuers (i) is
not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon
request of any Holder, to such Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities designated by such Holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and
(ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings
required thereby in a timely manner in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144.
Section 10. Miscellaneous.
(a) Remedies. The Issuers acknowledge and agree that any failure by the
Issuers to comply with their respective obligations under Sections 3 and 4
- -
hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Issuers' obligations under
Sections 3 and 4 hereof. The Issuers further agree to waive
- -
22
<PAGE>
the defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. Neither Issuer will, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Neither Issuer has previously
entered into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Issuers' securities under any agreement in effect on the date
hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
-
hereof and this clause 10(c)(i), the Issuers have obtained the written consent
--------
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Issuers have obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Issuers or their Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Issuers, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
23
<PAGE>
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to either Issuer:
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Telecopier No.: (315) 471-1355
Attn: Richard S. Scolaro
With a copy to:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, New York, 10005
Attention: Corporate Trust Services
Telecopier No.: 212-809-5459
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
24
<PAGE>
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that 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 shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
25
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PROJECT ORANGE FUNDING, L.P.
By G.A.S. Orange Associates, L.L.C., a
Delaware limited liability company, its
General Partner
By: /s/ Douglas Corbett
_____________________________
Name: Douglas Corbett
Title: Vice President
PROJECT ORANGE CAPITAL CORP.
By: /s/ Douglas Corbett
______________________________
Name: Douglas Corbett
Title: Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Gavin H. Wolfe
________________________
Name: Gavin H. Wolfe
Title: Vice President
26
<PAGE>
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
Date: _____________
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: Project Orange Funding, L.P.
Project Orange Capital Corp.
10.5% Senior Secured Notes due 2007
For your information only (NO ACTION REQUIRED):
Today, ______, 2000, we filed an A/B Exchange Registration Statement/a
Shelf Registration Statement with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within __
business days of the date hereof.
<PAGE>
EXHIBIT 4.3
EXECUTION COPY
DEPOSIT AND DISBURSEMENT AGREEMENT
between
PROJECT ORANGE FUNDING, L.P.,
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
and Securities Intermediary
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
Dated as of December 6, 1999
<PAGE>
TABLE OF CONTENTS
______________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 1
---------
Definitions
-----------
Section 1.01. Capitalized Terms................................... 2
-
Section 1.02. Definitions, Construction........................... 2
-
Article 2
---------
Establishment of Accounts
-------------------------
Section 2.01. Acceptance of Appointment as Collateral Agent....... 11
--
Section 2.02. Establishment of Funds and Sub-funds................ 12
--
Section 2.03. Security Interest................................... 14
--
Section 2.04. Termination......................................... 14
--
Article 3
---------
The Funds
---------
Section 3.01. Revenue Account..................................... 14
--
Section 3.02. Principal Account................................... 18
--
Section 3.03. Interest Account.................................... 18
--
Section 3.04. Debt Service Reserve Account........................ 19
--
Section 3.05. Gas Reserve Account................................. 21
--
Section 3.06. Capital Expenditure Reserve Account................. 21
--
Section 3.07. Subordinated Asset Management Fee Account........... 22
--
Section 3.08. Distribution Account................................ 23
--
Section 3.09. Distribution Suspense Account....................... 24
--
Section 3.10. Loss Proceeds Account............................... 25
--
Section 3.11. Redemption Account.................................. 31
--
Section 3.12. Investment of Accounts.............................. 32
--
Section 3.13. Disposition of Accounts upon Retirement of
Senior Secured Notes................................ 33
--
Section 3.14. Account Balance Statements.......................... 33
--
Section 3.15. Events of Default................................... 34
--
Section 3.16. Accounts Maintained as UCC "Securities Accounts".... 34
--
Section 3.17. Stipulation Reserve Account......................... 35
--
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 4
---------
Collateral Agent
----------------
Section 4.01. Appointment of Collateral Agent, Power and
Immunities.......................................... 36
--
Section 4.02. Reliance by Collateral Agent........................ 37
--
Section 4.03. Court Orders........................................ 38
--
Section 4.04. Resignation or Removal.............................. 38
--
Article 5
---------
Expenses; Indemnification; Fees
-------------------------------
Section 5.01. Expenses............................................ 40
--
Section 5.02. Indemnification..................................... 40
--
Section 5.03. Fees................................................ 40
--
Article 6
---------
Miscellaneous
-------------
Section 6.01. Amendments; Etc..................................... 40
--
Section 6.02. Addresses for Notices............................... 41
--
Section 6.03. Governing Law....................................... 41
--
Section 6.04. Waiver of Jury Trial................................ 41
--
Section 6.05. Headings............................................ 42
--
Section 6.06. No Third Party Beneficiaries........................ 42
--
Section 6.07. No Waiver........................................... 42
--
Section 6.08. Severability........................................ 42
--
Section 6.09. Successors and Assigns.............................. 42
--
Section 6.10. Execution in Counterparts........................... 42
--
Section 6.11. Consequential Damages............................... 42
--
Section 6.12. Limitation of Liability............................. 43
--
Section 6.13. Regarding the Collateral Agent...................... 44
--
Section 6.14. Dispute Resolution.................................. 44
--
</TABLE>
ii
<PAGE>
This DEPOSIT AND DISBURSEMENT AGREEMENT (this "Depositary Agreement") dated
as of December 6, 1999 between Project Orange Funding, L.P., a Delaware limited
partnership (together with its successors, including Project Orange Associates,
L.P., a Delaware limited partnership, as the survivor of the merger of Project
Orange Funding L.P. with and into Project Orange Associates, L.P. concurrently
with the issuance and sale of the Senior Secured Notes referred to below and the
execution and delivery of this Agreement by the parties hereto, the "Issuer"),
and U.S. Bank Trust National Association, a national banking association, in its
separate capacities as Trustee (as defined below), as Collateral Agent (together
with its successors and permitted assigns in such capacity, the "Collateral
Agent"), for the benefit of the holders of all senior secured notes (the "Senior
Secured Notes") issued pursuant to the Indenture (as defined below) and the
other Secured Parties (as defined below), and as securities intermediary
(together with its successors and permitted assigns in such capacity, the
"Securities Intermediary").
RECITALS
A. The Issuer leases and operates an 80 megawatt (net) natural gas fired
simple cycle cogeneration facility, including an electric transmission line, a
9.5 mile gas pipeline and certain easements (the "Project"), located on the
campus of Syracuse University in Syracuse, New York.
B. The Issuer will issue the Senior Secured Notes under the Indenture
dated as of the date hereof (the "Indenture") between the Issuer and U.S. Bank
Trust National Association, a national banking association, in its capacity as
Trustee (together with its successors and permitted assignees in such capacity
the "Trustee").
C. Pursuant to the Indenture, the Issuer will use the proceeds of the
Senior Secured Notes for the purposes and in the amounts described in the
Indenture.
D. The Senior Secured Notes will be secured by a senior first priority
Lien on substantially all of the assets of the Issuer and a pledge of the
partnership interests in the Issuer.
E. The Trustee desires to appoint the Collateral Agent to administer money
deposited in the various accounts established pursuant to this Depositary
Agreement and funded with, among other things, revenues received by the Issuer
from the Project and proceeds of insurance and condemnation and the Issuer
consents to such appointment.
<PAGE>
AGREEMENT
In consideration of the premises and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
Definitions
Section 1.01. Capitalized Terms. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in the indenture.
Section 1.02. Definitions, Construction. For all purposes of this
Depositary Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
(a) all terms defined in this Article have the meanings assigned to them
in this Article, and include the plural as well as the singular;
(b) all references in this Depositary Agreement to designated "Articles,"
"Sections," "Exhibits" and other subdivisions are to be designated Articles,
Sections, Exhibits and other subdivisions of this Depositary Agreement;
(c) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Depositary Agreement as a whole and not to any
particular Article, Section or other subdivision;
(d) unless otherwise expressly specified, any agreement, contract or
document defined or referred to herein shall mean such agreement, contract or
document as in effect as of the date hereof, as the same may thereafter be
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and the Indenture and the other Financing
Documents and including any agreement, contract or document in substitution or
replacement of any of the foregoing;
(e) unless the context clearly intends to the contrary, pronouns having a
masculine or feminine gender shall be deemed to include the other;
(f) unless otherwise specified, all references to the credit ratings of
any person shall mean those assigned to the senior unsecured long-term debt
securities of such person without third-party credit enhancement, and any rating
assigned to any other debt security of such person shall be disregarded; and
2
<PAGE>
(g) any reference to any Person shall include its successors and assigns.
"Account Collateral" has the meaning specified in Section 2.03 hereof.
----
"Accounts" has the meaning specified in Section 2.02.
----
"Administrative Costs" means all obligations of the Issuer, now or
hereafter existing, to pay administrative fees, costs and expenses to any
trustee or agent of the holders of the Senior Secured Notes, including the
Collateral Agent, the Securities Intermediary and the Trustee (including,
without limitation, the reasonable fees and expenses of counsel, agents and
experts).
"Allocation Certificate" means each certificate provided by the Issuer or
the Trustee, as applicable, setting forth the allocation of Loss Proceeds,
Eminent Domain Proceeds, Title Event Proceeds, or cash proceeds resulting from
liquidation of the Collateral (to the extent the Obligations of such Holders of
the Senior Secured Notes may be redeemed or prepaid from such amounts under the
Indenture).
"Canadian Hunter" means Canadian Hunter Exploration Ltd., an Alberta,
Canada corporation.
"Capital Expenditure Reserve Account" means the Account of such name
established pursuant to Section 2.02.
----
"Capital Expenditure Reserve Required Balance" means an amount equal to:
(1) the aggregate Capital Expenditures budgeted for the next succeeding
twelve-month period (A) as approved by the Independent Engineer and delivered to
the Trustee and the Collateral Agent at least annually and (B) as adjusted by
management and set forth in an Officers' Certificate delivered to the Trustee
and the Collateral Agent six (6) months following each budget approved by the
Independent Engineer plus
(2) $3.5 million until such time as a life extension program for the Steam
Plant is approved by the Issuer and the Independent Engineer, at which time the
portion of the Capital Expenditures Reserve Required Balance required by this
clause (2) shall be reduced to an amount equal to the discounted present value
of the Capital Expenditures contemplated by the approved life extension program
for the Steam Plant (or, in the event of a dispute between the two, the Required
Capital Expenditure Reserve Balance shall be reduced to the discounted present
value of the Capital Expenditures
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contemplated by the life extension program approved by the Independent Engineer
and then, if the net present value of the Capital Expenditures contemplated by
the life extension program approved by a third party pursuant to expedited
dispute resolution procedures set forth in Section 6.14 hereof, is lower, the
----
Required Capital Expenditure Reserve Balance shall be further reduced to such
lower amount).
"Contract Termination Event" means:
(i) the occurrence of an early termination event (whether by default
or otherwise) under the Indexed Swap Agreement with respect to which
Niagara Mohawk is required to make a termination payment under the Indexed
Swap Agreement to the Issuer; or
(ii) any event of force majeure under, or the termination of, the Gas
Purchase Agreement with respect to which Canadian Hunter is required to
refund or repay any portion of the lump-sum payment corresponding to the
unused portion of the Maximum Entitlement (as defined in the Gas Purchase
Agreement).
"Creditors" means the Trustee, the Collateral Agent and the Securities
Intermediary.
"Debt Service Coverage Ratio" means for any period, without duplication,
the ratio of (i) the sum of (A) all revenues (including interest and fee income
but excluding any insurance proceeds and all other similar non-recurring
receipts) of the Issuer for such period, minus (B) the aggregate amount of
Operating and Maintenance Costs of the Issuer for such period, minus (C) all
Capital Expenditures during such period, to (ii) the sum of (A) all principal,
premium (if any) and interest payable with respect to Permitted Indebtedness
outstanding for such period, plus (B) the aggregate amount of overdue principal,
premium (if any) and interest payments owed with respect to Permitted
Indebtedness outstanding from previous periods; all as determined on a cash
basis in accordance with GAAP.
"Debt Service Reserve Account" means the Account of such name established
pursuant to Section 2.02.
----
"Debt Service Reserve Letter of Credit" one or more irrevocable, direct pay
letters of credit issued by the Debt Service Reserve LOC Provider in favor of
the Collateral Agent where the account party is not the Issuer.
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"Debt Service Reserve LOC Provider" means any commercial bank(s) or
financial institution(s) issuing the Debt Service Reserve Letter of Credit,
which institution shall be rated not less than A by S&P and A2 by Moody's.
"Debt Service Reserve Required Balance" means, on the Closing Date,
$6,200,000, and thereafter an amount equal to the aggregate amount of the
principal and interest due on the Senior Secured Notes on the next succeeding
semi-annual scheduled payment date.
"Distribution Account" means the Account of such name established pursuant
to Section 2.02.
----
"Distribution Suspense Account" means the Account of such name established
pursuant to Section 2.02.
----
"Funding Date" means any day from the 10th through the 15th day of each
month, as determined by the Issuer in an officer's certificate received by the
Collateral Agent at least three (3) Business Days prior to such Funding Date,
provided that there shall only be a single Funding Date for any month (except in
the case of an immediate need to pay Operating and Maintenance Costs referred
to below), or if no earlier date is so determined, then the 15th day of each
month, or in each case if such day is not a Business Day the next succeeding
Business Day, or in the case of an immediate need to pay Operating and
Maintenance Costs, any Business Day of the month; provided that notice of such
funding shall have been provided to Collateral Agent at least one Business Day
prior to such Funding Date.
"Gas Purchase Agreement" means (i) the Restated Gas Sale and Purchase
Agreement dated as of March 18, 1991, between POA and Noranda, which was
assigned by Noranda to, and assumed by, Canadian Hunter pursuant to an
Assignment, Amendment and Release Agreement dated on or prior to the Closing
Date among Noranda, Canadian Hunter and Orange L.P. and (ii) the agreements
between Orange L.P. and Canadian Hunter and UPR, respectively, to be entered
into in replacement of the Restated Gas Sale and Purchase Agreement in
accordance with the terms of a letter agreement dated on or prior to the Closing
Date among Orange L.P., Canadian Hunter and UPR as in effect on the date hereof.
"Gas Reserve Account" means the Account of such name established pursuant
to Section 2.02.
----
"Gas Reserve Deficit" means, at any time, the amount that equals (i) the
amount of gas necessary, in the judgment of the Independent Engineer, to operate
the
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Project through the Final Maturity Date so that electric output of the Project
for such period will average at least 663,000 MWh per year and the Issuer can
meet its obligations to deliver steam under the Steam Contract, less (ii) the
sum of (A) the "Unconsumed Entitlement" (as such term is used in the Gas
Purchase Agreement) at such time plus (B) the unconsumed quantity, at such time,
of any natural gas (in addition to the Unconsumed Entitlement), purchased and
paid for by the Issuer and as to which transportation pursuant to arrangements
approved by the Independent Engineer as being consistent with prudent industry
practice are in place plus (C) the Btu equivalent of energy and associated
capacity that the Issuer has purchased the right to acquire in connection with
permitted sales of natural gas as described in Section 4.18 of the Indenture.
"Gas Reserve Required Balance" means, at any time, the amount equal to the
Gas Reserve Deficit at such time multiplied by the highest average "Niagara
Border Spot Price" for natural gas (delivered to pipe as stated in U.S. dollars)
at any time during the previous twelve (12) months in the weekly Canadian Price
Report published by Natural Gas Week (on an MMBtu basis).
"Indemnified Party" has the meaning specified in Section 5.02.
----
"Indexed Swap Agreement" means the ISDA Master Agreement and the related
Confirmation each dated as of June 30, 1998 between Orange L.P. and Niagara
Mohawk.
"Interest Account" means the Account of such name established pursuant to
Section 2.02.
----
"Interest Payment Date" means each March 15 and September 15 commencing
March 15, 2000 and concluding on the Final Maturity Date.
"Loss Proceeds Account" means the Account of such name established pursuant
to Section 2.02.
----
"Niagara Mohawk" means the Niagara Mohawk Power Corporation, a New York
corporation.
"Non-Budgeted Operating and Maintenance Costs Certificate" has the meaning
specified in Section 3.01.
----
"O&M Agreement" means (i) the Cogeneration Facility Operation and
Maintenance Agreement dated as of November 1, 1998 between Orange L.P. and
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Operator and (ii) any subsequent operation and maintenance agreement entered
into by POA with the Operator having terms and conditions that are, in the
opinion of the Independent Engineer, reasonable and customary for agreements of
its type and which are consistent with prudent industry practice.
"Operating and Maintenance Costs" means, for any periods, all amounts
disbursed by or on behalf of the Issuer for operation, maintenance (excluding
Capital Expenditures), administration, repair, or improvement of the Project,
including, without limitation, premiums on insurance policies, property and
other taxes, payments under the relevant Lease Documents and under agreements,
or options, to purchase energy and associated capacity in connection with
permitted sales of natural gas, operating and maintenance agreements, leases,
royalty and other land use agreements and fees, expenses, and any other payments
required under the Project Documents (excluding Subordinated Asset Management
Charges).
"Operator" means General Electric International, Inc., a Delaware
corporation, or such other Person with technical expertise and industry standing
of at least that of General Electric International, Inc. as the operator of the
Project pursuant to the O&M Agreement.
"Payment Date" means any Interest Payment Date or Principal Payment Date.
"Permitted Investments" means an Investment in any of the following:
(1) direct obligations of the Department of the Treasury of the United
States of America;
(2) obligations, representing full faith and credit of the United States of
America, of any of the following federal agencies: Export-Import Bank, Farmers
Home Administration, General Services Administration, U.S. Maritime
Administration, Small Business Administration, Government National Mortgage
Association (GNMA), U.S. Department of Housing & Urban Development (PHA's) and
Federal Housing Administration;
(3) obligations issued or fully guaranteed by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof and, at the time of the acquisition, having one of the
two highest ratings obtainable from either S&P's or Moody's;
7
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(4) certificates of deposit and Eurodollar time deposits, bankers'
acceptances and overnight bank deposits, in each case with any domestic or
foreign commercial bank having capital and surplus in excess of $250.0 million;
(5) notes, bonds, collateralized mortgage obligations or other evidences
of indebtedness rated "AAA" by S&P's and "Aaa" by Moody's issued by the Federal
Home Loan Bank, the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation;
(6) commercial paper rated in any one of the two highest rating
categories by Moody's or S&P's;
(7) investment agreements with banks (foreign and domestic),
broker/dealers, and other financial institutions rated at the time of bid in any
one of the three highest rating categories by Moody's and S&P's;
(8) repurchase agreements with banks (foreign and domestic),
broker/dealers, and other financial institutions rated at the time of bid in any
one of the three highest rating categories by Moody's and S&P's, provided, (a)
collateral is limited to the securities specified in clauses (1) through (5)
above, (b) the margin levels for collateral must be maintained at a minimum of
102% including principal and interest, (c) the Trustee shall have a first
perfected security interest in the collateral, (d) the collateral will be
delivered to a third party custodian, designated by the Issuer, acting for the
benefit of the Trustee and all fees and expenses related to collateral custody
will be the responsibility of the Issuer, (e) the collateral must have been or
will be acquired at the market price and marked to market weekly and collateral
level shortfalls cured within 24 hours, (f) unlimited right of substitution of
collateral is allowed provided that substitution of collateral must be permitted
collateral substituted at a current market price and substitution fees of the
custodian shall be paid by the Issuer;
(9) asset-backed securities having the highest rating obtainable from
either S&P's or Moody's;
(10) forward purchase agreements delivering securities specified in
clauses (1) and (6) above with banks (foreign and domestic), broker/dealers, and
other financial institutions maintaining a long-term rating on the day of bid no
lower than investment grade by both S&P's and Moody's (such rating may be at
either the parent or subsidiary level); and
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(11) money market funds rated "AAAm" or "AAAm-G" or better by S&P's and
other financial funds investing exclusively in investments of the types
described in clauses (1) through this clause (11) of this definition.
"Principal Account" means the Account of such name established pursuant to
Section 2.02.
----
"Principal Payment Date" hen used with respect to any Senior Secured Note
means the date on which all or a portion of the principal of such Senior Secured
Note becomes due and payable as provided therein or in this Indenture, whether
on a scheduled date for payment of principal at a Redemption Date, the Final
Maturity Date, a date of declaration of acceleration, or otherwise.
"Project Revenues" means all income and receipts of the Issuer derived from
the ownership or operation of the Project, including payments due the Issuer
under the Niagara Mohawk Agreements, the Canadian Hunter Agreements or the O&M
Agreement, proceeds of any business interruption or other insurance, income
derived from the sale or use of electric energy or steam transmitted or
distributed by the Project, together with any receipts derived from the sale of
natural gas and any other property pertaining to the Project or incidental to
the operation of the Project, all as determined in conformity with cash
accounting principles, the investment income on amounts in the Accounts
established under the Depositary Agreement, the proceeds of any insurance or
condemnation awards relating to the Project and proceeds from the Collateral
Documents, and any payments to the Issuer (to the extent not included within
other items listed in this definition) under the Master Lease, but not including
sums paid to the Issuer in satisfaction of a contractual obligation to indemnify
the Issuer for third party liability to the extent such sums do not exceed the
actual damage, loss or cost suffered by the Issuer in connection therewith.
"Redemption Account" means the Account of such name established pursuant to
Section 2.02.
----
"Requisition" means a Non-Budgeted Operating and Maintenance Costs
Certificate, a Restoration Requisition or a Title Event Requisition.
"Reserve Account" means the Capital Expenditure Reserve Account, the Debt
Service Reserve Account and the Gas Reserve Account.
"Responsible Officer" means, (i) with respect to knowledge of any default
under the Indenture, the chief executive officer, president, managing member,
managing partner, chief financial officer, general counsel, principal accounting
officer, treasurer, or
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any vice president of the Issuer or the General Partner, as applicable, or other
officer of such corporation who in the normal performance of his or her
operational duties would have knowledge of the subject matter relating to such
default or (ii) with respect to the Asset Manager, the chief executive officer,
president, chief financial officer, general counsel, principal accounting
officer, treasurer, or any vice president of the Asset Manager, or other officer
of such corporation who in the normal performance of his or her operational
duties would have knowledge of the subject matter relating to the performance by
the Asset Manager of its obligations under the Asset Management Agreement.
"Restoration Budget" has the meaning specified in Section 3.10.
----
"Restoration Progress Payment Schedule" has the meaning specified in
Section 3.10.
----
"Restoration Requisition" has the meaning specified in Section 3.10.
----
"Restoration Sub-Account" means the Account of such name established
pursuant to Section 2.02.
----
"Revenue Account" means the Account of such name established pursuant to
Section 2.02.
----
"Secured Obligations" means all amounts owing to the Secured Parties
pursuant to the terms of the Indenture, the Senior Secured Notes and the
Collateral Documents, including, without limitation: (a) the principal, premium,
if any, or interest on the Senior Secured Notes (including any interest accruing
after the commencement of any bankruptcy or insolvency proceeding relating to
the Issuer, whether or not such interest is allowed or allowable as a claim in
any such proceeding), and all other obligations and liabilities of the Issuers
including, without limitation, indemnities, fees and interest incurred under,
arising out of or in connection with the Indenture, the Senior Secured Notes and
the Collateral Documents, (b) any and all sums advanced by or on behalf of the
Issuers in order to preserve the Collateral or preserve its interest in the
Collateral, and (c) in the event of any proceeding for collection or enforcement
by or on behalf of any Secured Party after an Event of Default shall have
occurred and be continuing and unwaived, the expenses of retaking, holding,
preparing for sale or lease, selling or otherwise disposing of or realizing on
the Collateral, or of any exercise by or on behalf of any Secured Party of its
rights under the Indenture, the Senior Secured Notes and the Collateral
Documents, together with attorneys' fees and court costs.
"Secured Parties" means the Holders, the Trustee, the Collateral Agent.
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<PAGE>
"Stipulation" means the Stipulation dated November 14, 1994 and Order of
the Bankruptcy Court dated December 8, 1994 among Kronish Lieb, Adam Victor and
GAS LP.
"Stipulation Reserve Account" means the Account of such name established
pursuant to Section 2.02.
----
"Subordinated Asset Management Fees" means fees and other amounts payable
to the Asset Manager pursuant to the Asset Management Agreements and the Asset
Manager Consent and Agreement.
"Subordinated Asset Management Fee Account" means the Account of such name
established pursuant to Section 2.02.
----
"Title Company" means Ticor Title Insurance Company.
"Title Event" means the existence of any defect of title or lien or
encumbrance on the Project (other than certain Permitted Liens) in effect on the
Closing Date that entitles the Collateral Agent to make a claim under the policy
or policies of title insurance issued to it pursuant to the Financing Documents
or that entitles the Issuer to make a claim under any policy or policies of
title insurance held by it.
"Title Event Requisition" has the meaning specified in Section 3.10.
----
"Title Event Sub-Account" means the Account of such name established
pursuant to Section 2.02.
----
"Title Policy" means the policy or policies of title insurance required
pursuant to the Indenture.
"Trigger Event Date" has the meaning specified in Section 3.15.
----
"UPR" means Union Pacific Resources Inc.
"Withdrawal Certificate" shall mean a certificate signed by a Responsible
Officer of the Issuer, or in the case of a withdrawal from the Revenue Account
to pay Operating and Maintenance Costs or from the Capital Expenditures Reserve
Account to pay Capital Expenditures or from the Gas Reserve Account, signed by a
Responsible Officer of the Asset Manager.
11
<PAGE>
Article 2
Establishment of Accounts
Section 2.01. Acceptance of Appointment as Collateral Agent.
(a) U.S. Bank Trust National Association hereby agrees to act as
Collateral Agent and to accept all cash, payments, other amounts and Permitted
Investments to be delivered to or held by the Collateral Agent pursuant to the
terms of this Depositary Agreement and the Indenture. The Collateral Agent
shall hold and safeguard the Accounts during the term of this Depositary
Agreement and shall treat the cash, instruments and notices in the Accounts as
monies, instruments and securities pledged by the Issuer to the Collateral Agent
for the benefit of the Secured Parties to be held in the custody of the
Collateral Agent, in accordance with the provisions of this Depositary
Agreement. Until such time as the Secured Obligations have been fully repaid
or, provision for such payment has been made in accordance with the provision of
the Indenture, in performing its functions and duties under this Depositary
Agreement, the Collateral Agent shall act solely as agent for the Secured
Parties and, except in such capacity, does not assume and shall not be deemed to
have assumed any obligation toward or relationship of agency or trust with or
for the Issuer.
(b) The Issuer shall not have any rights against or to monies held in
the Accounts, as third party beneficiary or otherwise, except the right to
receive or make requisitions of monies held in the Accounts, as permitted by
this Depositary Agreement and the Indenture, and to direct the investment of
monies held in the Accounts as permitted by Section 3.12.
Section 2.02. Establishment of Funds and Sub-funds. The Collateral
Agent hereby establishes the following accounts (the "Accounts") in the form of
non-interest bearing trust accounts and sub-accounts thereof, which shall be
maintained at all times until the termination of this Depositary Agreement:
(a) Revenue Account;
(b) Principal Account;
(c) Interest Account;
(d) Debt Service Reserve Account;
(e) Gas Reserve Account;
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<PAGE>
(f) Capital Expenditure Reserve Account;
(g) Subordinated Asset Management Fee Account;
(h) Distribution Account;
(i) Distribution Suspense Account;
(j) Loss Proceeds Account;
(k) Stipulation Reserve Accounts; and
(l) Redemption Account.
The accounts referred to in clauses (b), (c), (h) and (i) are not required
to be separate accounts but may be maintained as sub-accounts of the Revenue
Account. For administrative purposes, the Collateral Agent shall be permitted
to establish sub-accounts as separate non-interest bearing trust accounts.
The following two sub-accounts are hereby established and created within
the Loss Proceeds Accounts:
(i) Restoration Sub-Account; and
(ii) Title Event Sub-Account.
The following sub-account is hereby established and created within the
Redemption Account:
(i) Mandatory Redemption Sub-Account.
Certain additional sub-accounts within certain of the Accounts may be
established and created from time to time in accordance with this Depositary
Agreement.
All amounts from time to time held in each Account shall be held (a) in the
name of the Collateral Agent for the benefit of the Secured Parties, and (b) in
the sole custody and control of the Collateral Agent for the purposes and on the
terms set forth in this Depositary Agreement and the Indenture and all such
amounts shall constitute a part of the Collateral and shall not constitute
payment of any Secured Obligation or any other obligation of the Issuer until
applied as hereinafter provided.
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In addition to the Accounts, the Issuer may establish, fund and maintain
other accounts ("Excluded Accounts") with any bank, securities brokerage firm,
or financial institution, provided that such accounts are funded exclusively
with one or more of the following: (i) funds contributed to the Issuer by any
Partner, (ii) funds lent to the Issuer that constitute Permitted Indebtedness,
(iii) funds which have been properly released or otherwise properly paid to the
Issuer pursuant to the terms of this Agreement, (iv) pending the release
thereof, cash collateral subject to a Lien in favor of a person other than the
Collateral Agent that is permitted pursuant to the Indenture and/or (v) any
interest or other income earned on any of the Excluded Accounts. All Excluded
Accounts shall be free of any Liens and security interests in favor of the
Collateral Agent and/or the Secured and shall be free of any and all operating
restrictions and investment restrictions imposed under this Agreement, subject
to the requirement that monies released to an Excluded Account to provide for
the payment of Operating and Maintenance Costs and Capital Expenditures shall be
so used.
Section 2.03. Security Interest. As collateral security for the prompt and
complete payment and performance when due of all its Secured Obligations, the
Issuer hereby pledges, assigns, hypothecates and transfers to the Collateral
Agent, and hereby grants to the Collateral Agent for the benefit of the Secured
Parties a Lien on and security interest in and to, (i) each Account and (ii) all
cash, investments and securities at any time on deposit in any Account,
including all income or gain earned thereon and any proceeds thereof
(collectively, the "Account Collateral"). The Collateral Agent is the agent of
the Trustee for the purpose of receiving payments contemplated hereunder and for
the purpose of perfecting the Lien of the Trustee for the benefit of the Secured
Parties in and to the Accounts and all cash, investments and securities and any
proceeds thereof at any time on deposit in the Accounts; provided that the
Collateral Agent shall not be responsible to take any action to perfect such
Lien except through the performance of its express obligations hereunder or upon
the written direction of the Trustee complying with this Depositary Agreement.
Each of the Accounts shall at all times be in the exclusive possession of, and
under the exclusive domain and control of, the Collateral Agent, as agent for
the Trustee.
Section 2.04. Termination. This Depositary Agreement shall remain in full
force and effect until the later of (i) the date on which all the Secured
Obligations have been fully paid or, provision for such payment has been made in
accordance with the provisions of the Indenture, (ii) the termination for the
Indenture pursuant to Article 8 thereof, and (iii) the date on which the actions
contemplated by Section 313(b) have been taken.
------
14
<PAGE>
Article 3
The Funds
Section 3.01. Revenue Account.
(a) The following amounts shall (subject to Section 3.08 hereof) be
----
deposited into the Revenue Account directly, in accordance with this Section
3.01(a):
- -------
(i) all Project Revenues;
(ii) to the extent amounts in any Reserve Account equal the balance
required to be maintained therein under this Depositary Agreement, the
income, if any, from the investment of the monies in such Account pursuant
to Section 3.12; and
----
(iii) all amounts required to be transferred to the Revenue Account
from any other Account as contemplated under this Depositary Agreement.
If any of the foregoing amounts required to be deposited with the Collateral
Agent in accordance with the terms of this Depositary Agreement are received by
the Issuer (or any Affiliate of the Issuer), the Issuer shall (or shall cause
any such Affiliate to) hold such payments in trust for the Collateral Agent and
shall promptly remit such payments to the Collateral Agent deposit in the
Revenue Account, in the form received, with any necessary endorsement.
(b) In the event the Collateral Agent receives monies without adequate
instruction with respect to the proper Account in which such monies are to be
deposited, the Collateral 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 the Issuer of the receipt of such monies. Upon
receipt of written instructions from the Issuer, the Collateral Agent shall
transfer such monies from the Revenue Account to the Account specified by such
instructions (other than the Distribution Account or the Distribution Suspense
Account).
(c) The Issuer hereby irrevocably authorizes and directs the Collateral
Agent to make withdrawals and transfers of monies on each Funding Date (via wire
transfer or by internal transfer between Accounts and/or sub-accounts, if
applicable) to the extent then available in the Revenue Account, upon the
delivery of a Withdrawal Certificate of the Issuer (or any of its duly
authorized agents for such purposes) to the Collateral Agent three Business Days
prior to the Funding Date setting forth the amounts to be withdrawn from the
Revenue Account and the amounts to be transferred pursuant to his
15
<PAGE>
clause (c) pursuant to the terms of this Depositary Agreement in the following
order of priority all in accordance with such Withdrawal Certificate:
(i) First: As and when required, to pay when due the amount of
Operating and Maintenance Costs of the Issuer (or to provide for the
payment when due by transfer to an Excluded Account from which the Issuer
shall pay Operating and Maintenance Costs) as set forth in a Withdrawal
Certificate and certified in such Withdrawal Certificate to be the good
faith estimate of the amounts payable for Operating and Maintenance costs
during the period commencing on the first day of the next calendar month
and ending on the last day of such month, and stating that the proviso
immediately below does not apply to such withdrawal; provided that if the
aggregate cumulative Operating and Maintenance Costs of the Issuer in any
fiscal year, including the amounts set forth in such Withdrawal
Certificate, either exceed or fall short of the aggregate cumulative
projected Operating and Maintenance Costs in the applicable annual
Operational Budget of the Issuer by more than 10%, then no amounts may be
withdrawn on behalf of the Issuer to pay such Operating and Maintenance
Costs that exceed or fall short of the Operating and Maintenance Costs in
the Operating Budget by more than 10% unless there shall be filed with the
Collateral Agent:
(A) a certificate of the Issuer substantially in the form
attached hereto as Exhibit A (the "Non-Budgeted Operating and
Maintenance Costs Certificate") including, without limitation, a
representation that such additional non-budgeted (or reduced under-
budget) costs are reasonably designed to permit (or shall not
adversely affect the ability of) the Issuer to satisfy its obligations
in respect of the Secured Obligations and maximize its revenue and net
income; and
(B) an Independent Engineer's Certificate, in substantially the
form attached as Appendix I to Exhibit A, dated not more than three
Business Days prior to such requested Funding Date, certifying that
the excess (or reduced) Operating and Maintenance Costs are prudent
and reasonable (except to the extent that Permitted Indebtedness other
than Indebtedness described in clause (i) of the definition of
Permitted Indebtedness as set forth in the Indenture is otherwise
available to pay such Costs);
(ii) Second: After making each applicable withdrawal and transfer
specified in clause (i) above, withdraw and transfer from the Revenue
Account, to the Trustee and the Collateral Agent, any amounts set forth in
a Withdrawal
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<PAGE>
Certificate of the Issuer then due and payable to each of them as
Administrative Costs; provided, however, that if funds in the Revenue
Account are insufficient on any date to make the payments specified in this
clause (ii), distribution of funds shall be made ratably to the specified
receipts based on the respective amounts owed such recipients;
(iii) Third: After making each applicable withdrawal and transfer
specified in clauses (i) and (ii) above, transfer an amount set forth in a
Withdrawal Certificate of the Issuer from the Revenue Account (A) to the
Interest Account an amount which, together with the amount then in such
Account, equals all of the interest due or becoming due on the Senior
Secured Notes on the next succeeding Interest Payment Date; (B) to the
Principal Account an amount which, together with the amount then in such
Account, equals all of the principal and premium (if any) due or becoming
due on the Senior Secured Notes on the next succeeding Principal Payment
Date; (C) to a sub-account within the Principal Account an amount which,
together with the amounts then in such sub-account, equals all of the
principal due or becoming due on any Permitted Indebtedness other than the
Senior Secured Notes within the succeeding six-month period; and (D) to a
sub-account within the Interest Account an amount which, together with the
amounts then in such sub-account, equals all of the interest due or
becoming due on any Permitted Indebtedness other than the Senior Secured
Notes within the succeeding six month period; provided, however, that if
monies in the Revenue Account are insufficient on any date to make the
transfers specified in this clause (iii), distribution of monies shall be
made, first, ratably to the Accounts referred to in clauses (A) and (B) of
this paragraph Third based on the respective amounts owed such Accounts and
second, ratably to the Accounts referred to in clauses (C) and (D) of this
paragraph Third based on the respective amounts owed such Accounts;
(iv) Fourth: After making each applicable withdrawal and transfer
specified in clauses (i) through (iii) above, transfer, if the amount
available to be drawn under any Debt Service Reserve Letter of Credit is
less than the Debt Service Reserve Required Balance, to the Debt Service
Reserve Account so that the sum of the amount available to be drawn under
the Debt Service Reserve Letter of Credit plus the balance in the Debt
Service Reserve Account equals the Debt Service Reserve Required Balance;
(v) Fifth: After making each applicable withdrawal and transfer
specified in clauses (i) through (iv) above, transfer to the Gas Reserve
Account an amount necessary to cause the balance thereof to be equal to the
Gas Reserve Required Balance;
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(vi) Sixth: After making each applicable withdrawal and transfer
specified in clauses (i) through (v) above, transfer to the Capital
Expenditure Reserve Account, an amount necessary to cause the balance
thereof to be equal to the Capital Expenditure Reserve Required Balance;
(vi) Seventh: After making each applicable withdrawal and transfer
specified in clauses (i) through (vi) above, transfer to the Subordinated
Asset Management Fee Account an amount necessary for the payment of
Subordinated Asset Management Fee then due and owing;
(vi) Eighth: After making each applicable withdrawal and transfer
specified in clauses (i) through (vii) above, transfer any remaining
amounts to the Distribution Account; and
(ix) Ninth: After making each applicable withdrawal and transfer
specified in clauses (i) through (viii) above, transfer, any amounts in the
Distribution Account which cannot be distributed because of the failure to
satisfy certain conditions to distributions, to the Distribution Suspense
Account.
Section 3.02. Principal Account.
(a) Except as otherwise provided in this Depositary Agreement, monies
deposited in the Principal Account on any Funding Date shall be allocated
ratably among sub-accounts of the Principal Account established for payment of
the principal and premium, if any, with respect to the Senior Secured Notes and
any other outstanding Permitted Indebtedness when due and payable (whether at
the Principal Payment Date or otherwise).
(b) On any date that amounts for the payment of principal of and premium,
if any, on the Senior Secured Notes and any other outstanding Permitted
Indebtedness are due and payable and for which a Withdrawal Certificate has been
delivered in accordance with Section 3.01(c) (or if such day is not a Business
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Day, then on the next succeeding Business Day), the Collateral Agent shall
withdraw the monies on deposit in the relevant sub-account of the Principal
Account, and remit such monies to the Persons entitled thereto for the payment
of such principal and premium, if any; provided, however, that the Collateral
Agent shall segregate such amounts from any other amounts on deposit in the
Principal Account until such time as payment is made to Persons entitled
thereto.
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(c) In the event that monies in the Principal Account exceed the amount
of money required by this Depositary Agreement to be deposited therein, the
Collateral Agent shall transfer such excess monies from the Principal Account to
the Revenue Account on the Business Day following the next Funding Date.
Section 3.03. Interest Account.
(a) Except as otherwise provided in this Depositary Agreement, monies
deposited in the Interest Account on any Funding Date shall be allocated ratably
among sub-accounts of the Interest Account established for the payment of
interest on (i) the Senior Secured Notes and (ii) any other outstanding
Permitted Indebtedness based on the interest with respect to the Senior Secured
Notes or such other outstanding Permitted Indebtedness when due and payable
(whether at the Interest Payment Date or otherwise).
(b) On any date that amounts for the payment of interest on the Senior
Secured Notes and any other Permitted Indebtedness are due and payable and for
which a Withdrawal Certificate has been delivered in accordance with Section
3.01(c) (or if such day is not a Business Day, then on the next succeeding
- -------
Business Day), the Collateral Agent shall withdraw the monies on deposit in the
relevant sub-account of the Interest Account, and remit such monies to the
Persons entitled thereto for the payment of such interest, as requisitioned
pursuant to Section 3.01(c); provided, however, that the Collateral Agent shall
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segregate such amounts from any other amounts on deposit in the Interest Account
until such time as payment is made to Persons entitled thereto.
(c) In the event that monies in the Interest Account exceed the amount
of money required by this Depositary Agreement to be deposited therein, the
Collateral Agent shall transfer such excess monies from the Interest Account to
the Revenue Account on the Business Day following the next Funding Date.
Section 3.04. Debt Service Reserve Account.
(a) The Debt Service Reserve Account shall be funded as of the date of
this Depositary Agreement with proceeds from the sale of the Senior Secured
Notes in the amount equal to the Debt Service Reserve Required Balance. At any
time thereafter, the Issuer may replace amounts in the Debt Service Reserve
Account with a Debt Service Reserve Letter of Credit having a stated amount
equal to the amount being withdrawn from the Debt Service Reserve Account. These
deposits, in conjunction with the Debt Service Reserve Letter of Credit, if any,
will be available to the Collateral Agent to transfer to the applicable Account
in the event the Revenue Account, the
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Principal Account and the Interest Account lack sufficient funds on a Payment
Date to meet payments of principal, premium, if any and interest on the Senior
Secured Notes.
(b) If Issuer elects to replace amounts in the Debt Service Reserve
Account with a Debt Service Reserve Letter of Credit, Issuer shall provide to
the Collateral Agent an unconditional, irrevocable direct-pay letter of credit,
issued in a stated amount equal to the amount replaced in the Debt Service
Reserve Account. The Debt Service Reserve Letter of Credit shall be for the
benefit of the Collateral Agent, naming the Collateral Agent, on behalf of the
Trustee and the holders of the Senior Secured Notes as the beneficiary and
containing customary terms and provisions, including a provision that (i) such
letter of credit shall automatically renew upon the expiration thereof unless,
at least sixty (60) days prior to such expiration, the issuer thereof shall
provide the Collateral Agent with a notice of non-renewal of such letter of
credit and (ii) there are no conditions to drawing other than that any documents
required to be delivered in connection therewith comply on their face with the
requirements thereof.
(c) At any time that the sum of the amount available to be drawn under
the Debt Service Reserve Letter of Credit plus the amount then on deposit in the
Debt Service Reserve Account is less than the Debt Service Reserve Required
Balance, funds shall be accumulated in the Debt Service Reserve Account from
cash available from, and in the following order of priority:
(i) transfers from the Revenue Account, as provided under Section
3.01(c);
------
(ii) net interest, if any, earned on amounts deposited in the Debt
Service Reserve Account; and
(iii) amounts then on deposit in the Subordinated User Charge
Account.
(d) In the event that the Debt Service Reserve Required Balance is
reached, (i) all interest income on amounts in the Debt Service Reserve Account
and other amounts in excess of the Debt Service Reserve Required Balance shall
be transferred, on a daily basis, to the Revenue Account and (ii) the sum of the
amount available to be drawn under the Debt Service Reserve Letter of Credit may
be reduced so long as the reduced amount available to be drawn under the Debt
Service Reserve Letter of Credit plus the amount then on deposit in the Debt
Service Reserve Account is equal to or greater than the Debt Service Reserve
Required Balance.
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(e) In addition to and without limiting the foregoing, the Debt Service
Reserve Letter of Credit (i) shall have an initial expiration date of at least
one (1) year beyond the date of issuance, (ii) except as set forth in Section
3.02(b) or Section 3.03(b), shall not obligate the Collateral Agent to make any
- ------- -------
reimbursement or any other payment to the issuer or otherwise with respect
thereto, or provide the issuer or any other Person with any claim against the
Collateral Agent, the Trustee or the holders of the Senior Secured Notes,
whether for costs of maintenance, reimbursement of amounts drawn thereunder or
otherwise and (iii) shall be issued by a financial institution whose long-term
debt is rated at least "A" or equivalent by S&P and Moody's.
Section 3.05. Gas Reserve Account. (a) The Gas Reserve Account shall be
funded in accordance with the provisions set forth in Section 3.05(b) of this
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Depositary Agreement. Funds in the Gas Reserve Account shall be transferred to
the Revenue Account as set forth in a Withdrawal Certificate and as certified in
such Withdrawal Certificate to be the good faith estimate of full costs payable
by the Issuer within the 30 days following such transfer.
(b) At any time that the sum of the amount on deposit in the Gas Reserve
Account is less than the Gas Reserve Required Balance, funds shall be
accumulated in the Gas Reserve Account from cash available from, and in the
following order of priority:
(i) transfer from the Reserve Account, as provided under Section
3.01(c); and
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(ii) net interest, if any, earned on amounts deposited in the Gas
Reserve Account; and
(iii) amounts then on deposit in the Subordinated Asset Management
Fee Account (after giving effect to any funding of the Debt Service
Reserve Account pursuant to Section 3.04(c)(iii)).
(c) In the event that the Gas Reserve Required Balance is reached, all
interest income on amounts in the Gas Reserve Account and other amounts in
excess of the Gas Reserve Required Balance shall be transferred, on a daily
basis, to the Revenue Account.
Section 3.06. Capital Expenditure Reserve Account.
(a) The Capital Expenditure Reserve Account shall be funded as of the
date of this Depositary Agreement with proceeds from the sale of the Senior
Secured Notes
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in the amount equal to the Capital Expenditure Reserve Required Balance.
Thereafter, the Capital Expenditure Reserve Account shall be funded from amounts
available therefor pursuant to the priority of payments specified in such
Section 3.01(c) in accordance with (i) the provisions set forth in Section
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3.01(c) of this Depositary Agreement and (ii) the Operating Budget and schedules
- -------
thereto approved by the Independent Engineer prior to the end of each calendar
year (and, in good faith, so as to implement even monthly contributions) or with
such variation from such Operating Budget and schedules as the Issuer certifies
to the Trustee and the Collateral Agent is reasonable and necessary and in
accordance with prudent industry practice. Amounts on deposit in the Capital
Expenditure Reserve Account shall be used for Capital Expenditures for which a
Withdrawal Certificate has been delivered to the Collateral Agent certifying
that such Capital Expenditures are to be made in accordance with prudent
industry practice and the Operating Budget and as may be required pursuant to
the terms of the Indenture.
(b) At any time that the sum of the amount on deposit in the Capital
Expenditure Reserve Account is less than the Capital Expenditure Reserve
Required Balance, funds shall be accumulated in the Capital Expenditure Reserve
Account from cash available from:
(i) transfers from the Revenue Account, as provided under Section
3.01(c);
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(ii) net interest, if any, earned on amounts deposited in the
Capital Expenditure Reserve Account; and
(iii) amounts then on deposit in the Subordinated Asset Management
Fee Account (after giving effect to any funding of the Debt Service
Reserve Account pursuant to Section 3.04(c)(iii) and after giving effect
to any funding of the Gas Reserve Account pursuant to Section
3.05(b)(iii)).
(c) In the event that the Capital Expenditure Reserve Required Balance
is reached, all interest income on amounts in the Capital Expenditure Reserve
Account and other amounts in excess of the Capital Expenditure Required Balance
shall be transferred, on a daily basis, to the Revenue Account; provided,
however, that any such excess arising solely as a consequence of a reduction of
the Capital Expenditure Reserve Required Balance by operation of clause (2) of
the definition thereof shall be transferred as specified in a Withdrawal
Certificate of the Issuer; provided that there shall have been filed with the
Collateral Agent a Certificate of the Independent Engineer or an Independent
Expert (as defined in Section 6.14) certifying as to the amount of such
----
reduction.
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<PAGE>
Section 3.07. Subordinated Asset Management Fee Account. The Subordinated
Asset Management Fee Account shall be funded in accordance with the provisions
set forth in Section 3.01(c) of this Depositary Agreement. Funds in the
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Subordinated Asset Management Fee Account shall be used for the payment of
Subordinated Asset Management Fees due and owing under the Asset Management
Agreement as specified in a Withdrawal Certificate of the Issuer.
In addition, funds in the Subordinated User Charge Account shall be
transferred to the Debt Service Reserve Account, the Gas Reserve Account and the
Capital Expenditure Reserve Account under the circumstances set forth in
Sections 3.04, 3.05 and 3.06, respectively, of this Depositary Agreement.
---- ---- ----
Section 3.08. Distribution Account.
(a) On any Business Day that all of the conditions set forth in Section
3.08(b) are satisfied, the Collateral Agent shall make payment from the
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Distribution Account but from no other Account to such Persons as may be
directed in writing by the Issuer; provided that payments from the Distribution
Account shall be made no more frequently than once every six months.
(b) The Distribution Account will be funded from monies transferred from
the Revenue Account after all other then-required amounts have been transferred
as provided in Section 3.01(c). Restricted Payments may be made only from and to
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the extent of monies on deposit in the Distribution Account. Such Restricted
Payments are subject to the prior satisfaction of the following conditions:
(i) the amount then on deposit in the Principal Account shall be
equal to or greater than the aggregate payments of principal and premium,
if any, due on the Senior Secured Notes on the next succeeding Principal
Payment Date and on other outstanding Permitted Indebtedness within the
succeeding six-month period;
(ii) the amount then on deposit in the Interest Account shall be
equal to or greater than the aggregate payments of interest due on the
Senior Secured Notes on the next succeeding Interest Payment Date and on
other outstanding Permitted Indebtedness within the succeeding six-month
period;
(iii) (A) the amount available to be drawn under the Debt Service
Reserve Letter of Credit plus the amount on deposit in the Debt Service
Reserve Account equals or exceeds the Debt Service Reserve Required
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Balance, (B) the amount on deposit in the Gas Reserve Account equals or
exceeds the Gas Reserve Required Balance and (C) the amount on deposit in
the Capital Expenditure Reserve Account equals or exceeds the Capital
Expenditure Reserve Required Balance;
(iv) no Default or Event of Default under the Indenture shall have
occurred and be continuing;
(v) the Debt Service Coverage Ratio for the most recently ended
four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such distribution is to
be made (or in the case of any proposed distribution date prior to the
date on which internal financial statements are available for a period of
four full fiscal quarters after the Closing Date, the Debt Service
Coverage Ratio for the period commencing on the Closing Date and ending
on the last date of the most recently ended month for which internal
financial statements are available immediately preceding the date on
which such distribution is to be made) is equal to or greater than 1.40
to 1 in the opinion of the Independent Engineer;
(vi) the projected Debt Service Coverage Ratio for the next
succeeding four full fiscal quarters is equal to or greater than 1.40 to
1 in the opinion of the Independent Engineer;
(vii) the amount then on deposit in the Revenue Account, after
giving effect to the payment of such distributions, is at least $1.0
million;
(viii) either (i) the average of the "Market Price" (as defined in
the Indexed Swap Agreement) for preceding six months is less than 80% of
the then applicable "Indexed Contract Price" (as so defined) or (ii) if
the average Market Price for such period equals or exceeds 80% of the
then applicable Indexed Contract Price, then the average operating
availability for the immediately preceding four fiscal quarters for which
such information is available and the projected operating availability
for the next succeeding for fiscal quarters are, in each case, at least
94.61% in the opinion of the Independent Engineer; and
(ix) there are no pending or threatened actions or proceedings of
any kind, including actions or proceedings of or before any Governmental
Authority, that could, if determined adversely, have a Material Adverse
Effect.
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<PAGE>
The Collateral Agent may conclusively rely on such certificate of a Responsible
Officer certifying that all conditions for disbursement from the Distribution
Account have been met except that the Independent Engineer must certify as to
the satisfaction of the conditions set forth in clauses (v), (vi) and (viii) to
the extent therein provided.
Section 3.09. Distribution Suspense Account. On any Funding Date on which
any of the conditions precedent to Restricted Payments in Section 3.08(b) have
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not been satisfied, the Collateral Agent shall transfer all monies held in the
Distribution Account to the Distribution Suspension Account. On any Business Day
thereafter on which the conditions to Restricted Payments set forth in Section
3.08(b) are satisfied, upon delivery to the Trustee and the Collateral Agent of
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a certificate of a Responsible Officer of the Issuer certifying that all such
conditions to Restricted Payments are now satisfied, the Collateral Agent shall
withdraw and transfer all monies in the Distribution Suspense Account to the
Distribution Account and then to such Persons as may be directed in writing by
the Issuer. The Collateral Agent may conclusively rely on such certificate of a
Responsible Officer of the Issuer certifying that all conditions for
disbursement from the Distribution Account have been met. At any time that funds
in the Revenue Account are not sufficient to pay any amounts which are due and
payable and required to be paid with proceeds of the Revenue Account, then funds
in the Distribution Suspense Account shall be transferred to the Revenue Account
for distribution as provided therein.
Section 3.10. Loss Proceeds Account.
(i) All Loss Proceeds and Eminent Domain Proceeds received by the
Issuer shall be deposited in the Loss Proceeds Account. The Collateral
Agent shall separately segregate such Loss Proceeds and Eminent Domain
Proceeds for distribution in the manner as set forth below:
(A) All costs, if any, incurred by the Collateral Agent or the
Trustee in connection with any negotiation, action or proceeding to
collect the Loss Proceeds or Eminent Domain Proceeds in question
shall be withdrawn by the Collateral Agent and paid to the
Collateral Agent or the Trustee, as applicable (or reimbursed to the
extent the same have been paid or satisfied by the Issuer; provided
that no less than three Business Days prior to any such withdrawal a
Responsible Officer of the Collateral Agent or the Trustee, as
applicable, shall provide the Issuer with a certificate with the
relevant invoices, receipts or other documentation attached
indicating the aggregate amount of costs actually incurred in
connection with any of the negotiations, actions or proceedings
described above;
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<PAGE>
(B) In the event that the Issuer determines that the Project
cannot be rebuilt, repaired or restored to permit operation of all
or a portion of the Project on a commercially reasonable basis
following an Event of Eminent Domain or Event of Loss, or that the
Loss Proceeds or the Eminent Domain Proceeds together with any other
amounts available to the Issuer for such rebuilding, repair or
restoration are not sufficient to permit such rebuilding, repair or
restoration, upon delivery to the Collateral Agent and Trustee of a
certificate of a Responsible Officer of the Issuer (containing
customary assumptions and qualifications and information concerning
the amount of Loss Proceeds or Eminent Domain Proceeds to be
transferred to the Redemption Account) certifying to the foregoing
and specifying the amount of the Loss Proceeds or Eminent Domain
Proceeds, as applicable. Upon receipt of such certificate from the
Issuer, the Collateral Agent shall withdraw, transfer or distribute
the monies representing the Loss Proceeds or the Eminent Domain
Proceeds in the Loss Proceeds Account to the Redemption Account.
(C) In the event that the Issuer determines not to rebuild,
repair or restore the Project following an Event of Eminent Domain
or Event of Loss, upon delivery to the Collateral Agent and Trustee
of a certificate of a Responsible Officer of the Issuer certifying
that the Issuer has determined not to rebuild, repair or restore the
affected Project and information concerning the amount of Loss
Proceeds or Eminent Domain Proceeds to be transferred to the
Redemption Account. If only a portion of the Project is capable of
being rebuilt or replaced, the Issuer shall deliver to the
Collateral Agent and the Trustee certificate setting forth the
amount of the Loss Proceeds or the Eminent Domain Proceeds in excess
of the cost of repairing or replacing the Project. Upon receipt of
the certificate, the Collateral Agent shall withdraw, transfer or
distribute the monies representing the excess Loss Proceeds or the
excess Eminent Domain Proceeds in the Loss Proceeds Account to the
Redemption Account.
(D) (1) In the event that the Issuer has determined to
rebuild, repair or restore all or a portion of the Project, upon
delivery to the Collateral Agent and Trustee of a certificate of a
Responsible Officer of the Issuer certifying that all or a portion,
as applicable, of the Project will be rebuilt, repaired or restored,
the Collateral Agent shall transfer the applicable Loss
26
<PAGE>
Proceeds or Eminent Domain Proceeds, as the case may be, in the Loss
Proceeds Account to the Restoration Sub-Account. Amounts held in the
Restoration Sub-Account shall be applied solely for the payment of
the cost of rebuilding, restoration or repair of the Project as set
forth below or as otherwise contemplated herein. If the amount
deposited in the Restoration Sub-Account with respect to a
particular Event or Loss or Event of Eminent Domain exceeds
$1,000,000, the Issuer shall deliver to the Collateral Agent and the
Trustee (x) a restoration budget with respect to such Event of Loss
or Event of Eminent Domain (as amended, modified or supplemented
from time to time, the "Restoration Budget") prepared by the Issuer
identifying all categories and approximate amounts reasonably
anticipated to be incurred in connection with the rebuilding,
restoration or repair, together with a statement of uses of proceeds
of the Restoration Sub-Account and any other monies necessary to
complete the rebuilding, restoration or repair and (y) a restoration
progress payment schedule with respect to such Event of Loss or
Event of Eminent Domain (as amended, modified or supplemented from
time to time, the "Restoration Progress Payment Schedule")
determined by the Issuer for the projected requisitions to be made
from the Restoration Sub-Account.
(2) Before any withdrawal or transfer shall be made from
the Restoration Sub-Account, there shall be filed with the
Collateral Agent with respect to each Funding Date:
(I) a requisition from the Issuer substantially in
the form attached hereto as Exhibit B (a "Restoration
Requisition"), dated not more than three Business Days
prior to such Funding Date as set forth therein on which
such withdrawal and transfer is requested to be made,
signed by a Responsible Officer of the Issuer;
(II) if the amount deposited in the Restoration Sub-
Account with respect to any Event of Loss or Event of
Eminent Domain in question exceeds $1,000,000, an
Independent Engineer's Certificate in the form attached
hereto as Appendix I to Exhibit B,
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<PAGE>
dated not more than three Business Days prior to the Funding
Date;
(III) if clause (II) above does not apply, the Restoration
Requisition shall so state; and
(IV) a certification by the Title Company dated the Funding
Date to the effect that there are then no mechanics', workmen's,
materialmen's, supplier's, construction or other like Liens filed
of record against the Project, except such that are referred to
in clauses (a) and (b) of paragraph 7 of Exhibit B hereto.
(3) On the Funding Date referred to in Section 3.10(i)(D)(2) or
as soon thereafter as practicable following receipt of the documents
described in Sections 3.10(i)(D)(2)(I) through (III) above, the
Collateral Agent shall withdraw and transfer from the Restoration Sub-
Account and shall pay to the Issuer or to Persons directed by it in
writing the amounts set forth in the Restoration Requisition.
(4) Upon completion of any rebuilding, restoration or repair of
all or a portion of the Project, there shall be filed with the
Collateral Agent and the Trustee a certificate of a Responsible
Officer of the Issuer certifying that the completion of the
rebuilding, restoration or repair has been performed in accordance
with standard industry practices and the amount, if any, required in
its opinion to be retained in the Restoration Sub-Account for the
payment of any remaining costs of rebuilding, restoration or repair
not then due and payable or the liability for payment of which is
being contested or disputed by the Issuer and for the payment of
reasonable contingencies following completion of the rebuilding,
restoration or repair. Upon receipt of such certificate of a
Responsible Officer, the Collateral Agent shall transfer first the
amount remaining in the Restoration Sub-Account in excess of the
amounts to remain in the Restoration Sub-Account as stated in the
certificate of a Responsible Officer of the Issuer, to the Issuer or
to Persons directed by the Issuer in writing to the extent of any
amounts which have been expended in connection with such rebuilding,
restoration or repair (as set forth in such certificate of a
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<PAGE>
Responsible Officer) and not previously reimbursed and second,
segregate the remaining excess in the Restoration Sub-Account from any
other amounts therein. The Collateral Agent shall transfer any monies
remaining in the Restoration Sub-Account after the application of the
monies therein as provided in the preceding two sentences to the
Redemption Account for application pursuant to Section 3.11.
----
Thereafter, upon receipt of a certificate of a Responsible Officer of
the Issuer certifying payment of all costs of rebuilding, restoration
or repair of the Project, the Collateral Agent shall transfer any
amounts remaining in the Restoration Sub-Account to the Revenue
Account. Any monies retained in the Restoration Sub-Account pursuant
to the first sentence of this paragraph (4) and not used for the
purposes set forth in said sentence within one (1) year shall be
transferred to the Redemption Account for application pursuant to
Section 3.11.
(E) Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing, (1) the Collateral Agent may at its option (and
without obligation to do so) use the Loss Proceeds and Eminent Domain
Proceeds held by it to pay for the cost of restoration, rebuilding or
repair effect by the Collateral Agent; and (2) at the direction of the
Trustee shall transfer all Loss Proceeds and Eminent Domain Proceeds then
held by it (or so much thereof as the Trustee shall direct) to the
Redemption Account for application as provided in Section 3.11.
(ii) All Title Event Proceeds received by the Issuer shall be paid to the
Collateral Agent. All Title Event Proceeds received by the Collateral Agent
shall be deposited in the Loss Proceeds Account. The Collateral Agent shall
separately segregate such Title Event Proceeds for distribution in the manner
set forth below:
(A) All costs, if any, incurred by the Collateral Agent or the
Trustee in connection with any negotiation, retain or proceeding to collect
the Title Event Proceeds in question shall be withdrawn by the Collateral
Agent and paid to the Collateral Agent or the Trustee, as applicable (or
reimbursed to the extent the same have been paid or satisfied by the
Issuer); provided that no less than three Business Days prior to any such
withdrawal a Responsible Officer of the Collateral Agent or the Trustee, as
applicable, shall provide the Issuer with a
29
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certificate with the relevant invoices, receipts or other documentation
attached, indicating the aggregate amount of costs actually incurred in
connection with any of the negotiations, actions or proceedings described
above;
(B) Title Event Proceeds in respect of any particular Title Event
remaining following the withdrawal of any amounts pursuant to paragraph (A)
above shall be applied in an effort to remedy the Title Event and for
payment of expenses incurred in connection therewith, as set forth below.
(C) Except for amounts withdrawn pursuant to Section 3.10(ii)(A)
above, before any withdrawal and transfer shall be made from the Title
Event Sub-Account, there shall be filed with the Collateral Agent and the
Trustee with respect to each Funding Date a requisition from the Issuer
substantially in the form attached hereto as Exhibit C (a "Title Event
Requisition"), dated not more than three Business Days prior to such
Funding Date as set forth therein on which such withdrawal and transfer is
requested to be made, signed by a Responsible Officer of the Issuer.
(D) On the Funding Date referred to in Section 3.10(ii)(C) or as soon
thereafter as practicable following receipt of the Title Event Requisition
described in Section 3.10(ii)(C) above, the Collateral Agent shall withdraw
and transfer from the Title Event Sub-Account and shall pay to the Issuer
or Persons directed by the Issuer in writing the amounts set forth in such
Title Event Requisition.
(E) Upon completion of the effort to remedy the Title Event there
shall be filed with the Collateral Agent and the Trustee a certificate of a
Responsible Officer of the Issuer certifying the result of the effort to
remedy the Title Event and the amount, if any, required in its opinion to
be retained in the Title Event Sub-Account for the payment of any remaining
expenses. Upon receipt of the documents described in the immediately
preceding sentence, the Collateral Agent shall, first, transfer the amount
remaining in the Title Event Sub-Account in excess of the amounts to remain
in the Title Event Sub-Account as stated in the certificate of a
Responsible Officer of the Issuer, to the Issuer or Persons directed by it
in writing to the extent of any amounts expended in connection with such
effort to remedy and not previously reimbursed and second, segregate the
remainder in the Title Event Sub-
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Account from any other amounts therein. The Collateral Agent shall
transfer any monies remaining in the Title Event Sub-Account after
application of the monies therein as provided in the preceding
sentence to the Redemption Account for application pursuant to Section
3.11. Thereafter, upon receipt of a certificate of a Responsible
----
Officer of the Issuer certifying payment of all costs of remedying the
Title Event, the Collateral Agent shall transfer any amounts remaining
in the Title Event Sub-Account to the Revenue Account. Any monies
retained in the Title Event Sub-Account pursuant to the first sentence
of this paragraph E and not used for the purposes set forth in said
sentence within one (1) year shall be transferred to the Redemption
Account for application pursuant to Section 3.11.
(F) Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing, (1) the Collateral Agent may at its option
(and without obligation to do so) use the Title Event Proceeds held by
it to pay for the cost of curing the Title Event in question; and (2)
at the direction of the Trustee shall transfer all Title Event
Proceeds then held by it (or so much thereof as the Trustee shall
direct) to the Redemption Account for application pursuant to Section
3.11.
(G) Notwithstanding the foregoing, any Title Event Proceeds
payable with respect to any New York mortgage recording tax with
respect to the First Mortgage and any penalties and interest relating
thereto shall be used solely to pay such mortgage recording tax,
penalties and interest.
Section 3.11. Redemption Account.
(a) The following amounts shall be deposited into the Redemption Account
directly, or if received by the Issuer, as soon as practicable upon receipt, in
either case in accordance with this Section 3.11(a), to the extent such amounts
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are available for redemption of Senior Secured Notes under the Indenture:
(i) certain amounts from the Loss Proceeds Account received by
the Issuer in connection with an Event of Loss, an Event of Eminent
Domain or a Title Event, to the extent such amounts are required to be
transferred to the Redemption Account in accordance with Section 3.10;
----
(ii) certain amounts received in connection with a Contract
Termination Event; and
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(iii) proceeds received as a result of foreclosure on the
Collateral securing the obligations of the Issuer following an Event
of Default under the Indenture.
If any of the foregoing amounts required to be deposited with the
Collateral Agent in the Redemption Account are received by the Issuer (or
any Affiliate of the Issuer) the Issuer shall (or shall cause any such
Affiliate to) hold such payments in trust for the Trustee and shall
promptly remit such payments to the Collateral Agent for deposit in the
Redemption Account, in the form received, with any necessary endorsements.
(b) The Collateral Agent shall ledger the amounts referred to in
Sections 3.11(a)(i) through (iii) above for distribution in the manner set
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forth below:
(i) Upon the receipt of those amounts described in Section
3.11(a)(i) or 3.11(a)(ii), the Collateral Agent shall so notify the
----------
Trustee, and shall separately segregate such monies. The Collateral
Agent shall withdraw, transfer or distribute the amounts described in
Section 3.11(a)(i) or 3.11(a)(ii) no later than one Business Day
----------
prior to the Redemption Date established pursuant to Section 3.01 of
----
the Indenture, provided, however, that if funds in the Loss Proceeds
Account are insufficient on any date to make the payments specified in
this clause (i), distribution of funds shall be made ratably to the
specified recipients based on the respective amounts owed such
recipients.
(ii) Upon the receipt of those amounts described in Section
3.11(a)(iii), the Collateral Agent shall so notify the Trustee, and
------------
separately ledger such monies. The Collateral Agent shall withdraw,
transfer or distribute the amounts described in Section 3.11(a)(iii)
as directed by the Trustee hereof for the payments described in
Section 5.10 of the Indenture.
Section 3.12. Investment of Accounts. Monies held in any Account
created by and held under this Depositary Agreement shall be invested and
reinvested in Permitted Investments at the written direction (which may be
in the form of a standing instruction) of a Responsible Officer of the
Issuer; provided, however, that at any time when (a) a Responsible Officer
of the Collateral Agent has received written notice that an Event of
Default under the Indenture shall have occurred and be continuing or (b) a
Responsible Officer of the Issuer has not timely furnished such a written
direction or, after a request by the Collateral Agent, has not so confirmed
a standing instruction to the Collateral Agent, the Collateral Agent shall
invest such monies only in Permitted Investments described in clause (viii)
of such definition of a maturity of thirty days or
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less. Such investments 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, but in no event
shall such investments mature more than one year after the date acquired.
The Collateral Agent shall at any time and from time to time liquidate any
or all of such investments prior to their maturity as needed in order to
effect the transfers and withdrawals contemplated by this Depositary
Agreement in accordance with a certificate of a Responsible Officer of the
Issuer; provided that, in the absence of timely receipt of such
certificate, the Collateral Agent shall liquidate any or all such
investments as so needed in such manner as will minimize, to the extent
reasonably practicable, the costs, penalties and losses associated with
such liquidation. Any income or gain realized from such investments shall
be deposited into the Revenue Account. Any loss shall be charged to the
applicable Account. Except as otherwise provided in this Section 3.12, the
----
Collateral Agent shall have no obligation to invest and reinvest any cash
held in the Accounts in the absence of timely and specific written
investment direction from the required party. Other than by reason of its
willful misconduct or gross negligence, the Collateral Agent shall not be
liable for the selection of investments or for investment losses incurred
thereon. Other than by reason of its willful misconduct or negligence, the
Collateral Agent shall have no liability in respect of losses incurred as a
result of the liquidation of any investment prior to its stated maturity or
the failure of the required party to provide timely written investment
direction. 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
the Issuer.
Section 3.13. Disposition of Accounts upon Retirement of Senior
Secured Notes.
(a) Upon the payment in full of the principal, premium, if any, and
interest on the Senior Secured Notes such that the Senior Secured Notes are
no longer outstanding, all amounts held in the Interest Account, the
Principal Account and the Debt Service Reserve Account allocated to the
Senior Secured Notes, as the case may be, shall upon the written direction
of the Issuer be transferred to the Revenue Account.
(b) Upon termination of the Indenture and after payment in full of
the principal of, premium, if any, and interest on and all other amounts
due in respect of all the additional Senior Indebtedness, all Senior
Secured Notes Outstanding and after payment in full of all Administrative
Costs, and all other Secured Obligations, all amounts remaining in any
Account established in Section 2.02 shall be paid by the Collateral Agent
----
to the Issuer.
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Section 3.14. Account Balance Statements. The Collateral Agent shall,
on a monthly basis and at such other times as the Trustee or the Issuer may
from time to time reasonably request, provide to the Trustee and the
Issuer, statements in respect of each of the Accounts, sub-accounts and
amounts segregated in any of the Accounts showing the Account balance,
amount of all receipts, the net investment income or gain received and
collected and shall also include withdrawals and transfers from and to any
Account and sub-accounts.
Section 3.15. Events of Default.
(a) On and after any date on which the Collateral Agent receives
written notice from the Trustee pursuant to Section 5.01 of the Indenture
----
that an Event of Default has occurred under the Indenture (the date of
receipt of such notice, the "Trigger Event Date"), the Collateral Agent
shall thereafter accept all notices and instructions required to be given
to the Collateral Agent pursuant to the terms of this Depositary Agreement
only from the Trustee and not from any other Person and the Collateral
Agent shall not withdraw, transfer, pay or otherwise distribute any monies
in any of the Accounts except pursuant to such notices and instructions
from the Trustee unless such Event of Default has been waived pursuant to
Section 5.04 of the Indenture or cured, in which event the terms of this
provision will be inapplicable to such Event of Default.
(b) On the Trigger Event Date, the Collateral Agent shall render an
accounting of all monies in the Accounts as of the Trigger Event Date to
the Trustee.
(c) On and after the Trigger Event Date, the Collateral Agent shall
distribute all money then held in any Account to the Trustee. The proceeds
of any sale, disposition or other realization with respect to Collateral
shall be applied in the order of priorities specified in Section 5.10 of
the Indenture, as directed by the Trustee.
Section 3.16. Accounts Maintained as UCC "Securities Accounts". The
Securities Intermediary hereby agrees and confirms that it has established
the Accounts as set forth and defined in this Depositary Agreement. The
Securities Intermediary agrees that (i) each such Account established by
the Securities Intermediary is and will be maintained as a "securities
account" (within the meaning of Section 8-501 of the Uniform Commercial
Code as adopted in the State of New York (the "UCC"); (ii) the Issuer is an
"entitlement holder" (within the meaning of Section 8-102(a)(7) of the UCC)
in respect of the "financial assets" (within the meaning of Section
8-102(a)(9) of the UCC, the "Financial Assets") credited to such accounts;
(iii) all Financial Assets in registered form or payable to or to order and
credited to any such Account shall be registered in the name of, payable to
or to the order of, or specially endorsed to, the
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Securities Intermediary or in blank, or credited to another securities
account maintained in the name of the Securities Intermediary, and in no
case will any Financial Asset credited to any such Account be registered in
the name of, payable to or to the order of, or endorsed to, the Issuer
except to the extent the foregoing have been subsequently endorsed by the
Issuer to the Securities Intermediary or in blank. Each item of property
(including a security, security entitlement, investment property,
instrument or obligation, share, participation, interest or other property
whatsoever) credited to any Account shall be treated as a Financial Asset.
Until this Depositary Agreement shall terminate in accordance with the
terms hereof, the Collateral Agent shall have "control" (within the meaning
of Section 8-106(d)(2) of the UCC) of the Issuer's "security entitlements"
(within the meaning of Section 8-102(a)(17) of the UCC) with respect to the
Financial Assets credited to the Accounts. All property delivered to the
Securities Intermediary pursuant to this Depositary Agreement will be
promptly credited to the Accounts. If at any time the Securities
Intermediary shall receive any order from the Collateral Agent on behalf of
the Secured Parties directing transfer or redemption of any Financial Asset
relating to any Account, the Securities Intermediary shall comply with such
entitlement order without further consent by the Issuer or any other
Person.
Section 3.17. Stipulation Reserve Account. The Stipulation Reserve
Account will be funded as of the date of this Depositary Agreement with
proceeds of the Senior Secured Notes in the amount of $3.0 million. Amounts
on deposit to the Stipulation Reserve Account will be applied as certified
in a Withdrawal Certificate of the Issuer to make payments to Kronish Lieb
of amounts which it is entitled to receive from time to time under the
Stipulation or to make provision for other payments to Kronish Lieb in
respect of such amounts or Kronish Lieb's entitlement thereto, including
payments for the extinguishment of Kronish Lieb's entitlement to payment of
such amounts or the resolution of claims relating thereto and payments into
the escrow arrangement described in the Covenant. If the Issuer provides a
written certification to the Collateral Agent to the effect that the
likelihood is remote that all or any part of the amount on deposit to the
Stipulation Reserve Account will be required to make payments to Kronish
Lieb of amounts which it is entitled to receive from time to time under the
Stipulation or to make other payments to Kronish Lieb in respect of such
amounts or Kronish Lieb's entitlement thereto, or if Kronish Lieb has
consented in a writing, filed with the Collateral Agent, to the release of
the amount on deposit in the Stipulation Reserve Account, then the
Collateral Agent will distribute all or any such portion of the amounts on
deposit as directed in a Withdrawal Certificate of the Issuer.
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Article 4
Collateral Agent
Section 4.01. Appointment of Collateral Agent, Power and Immunities.
The Trustee on behalf of and for the benefit of the Secured Parties, hereby
appoints the Collateral Agent to act as its collateral agent hereunder and
under the other Collateral Documents (as defined in the Indenture), with
such powers as are expressly delegated to the Collateral Agent by the terms
of this Depositary Agreement and the terms of the other Collateral
Documents, together with such other powers as are reasonably incidental
thereto, and the Issuer hereby consents to such appointment. The Collateral
Agent shall not have any duties or responsibilities except those expressly
set forth in this Depositary Agreement and the other Collateral Documents
and no implied duties or covenants shall be read against the Collateral
Agent. Without limiting the generality of the foregoing, the Collateral
Agent shall take all actions as the Trustee shall direct it to perform in
accordance with the express provisions of this Depositary Agreement or the
other Collateral Documents or as the Trustee may otherwise direct it to
perform in accordance with the provisions of this Depositary Agreement or
the other Collateral Documents. Notwithstanding anything to the contrary
contained herein, the Collateral Agent shall not be required to take any
action which is contrary to this Depositary Agreement or the other
Collateral Documents or applicable law. Neither the Collateral Agent nor
any of its Affiliates shall be responsible to the Secured Parties for any
recitals, statements, representations or warranties made by the Issuer
contained in this Depositary Agreement or any other Project Document (as
defined in the Indenture) or Financing Document (as defined in the
Indenture) or in any certificate or other document referred to or provided
for in, or received by the Trustee under, the Indenture, this Depositary
Agreement or any other Project Document or Financing Document for the
value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Depositary Agreement or any Project Document or Financing Document
or any other document referred to or provided for herein or therein or for
any failure by the Issuer to perform its obligations hereunder or
thereunder. The Collateral Agent shall not be required to ascertain or
inquire as to the performance by the Issuer of any of its obligations under
the Indenture, any other Financing Document, this Depositary Agreement or
any other document or agreement contemplated hereby or thereby. The
Collateral Agent shall not be (a) required to initiate or conduct any
litigation or collection proceeding hereunder or under any other Collateral
Document or (b) responsible for any action taken or permitted to be taken
by it hereunder or in connection with any other Collateral Document (except
for its own gross negligence or willful misconduct). Except as otherwise
provided under this Depositary Agreement and the other Collateral
Documents, the Collateral Agent shall take action under this Depositary
Agreement and the other Collateral Documents only as it shall be directed
in writing. Whenever in the administration of this Depositary Agreement or
any other
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Collateral Document the Collateral Agent shall deem it necessary or desirable
that a factual matter be proved or established in connection with the Collateral
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 a certificate of a
Responsible Officer of the Issuer, or the Trustee, if appropriate. The
Collateral Agent shall have the right at any time to seek instructions
concerning the administration of this Depositary Agreement or any other
Collateral Document from the Trustee, the Issuer or any court of competent
jurisdiction. If the payment by the Issuer of, or the right of any partner of
the Issuer to receive, any permitted distribution or other payment by the Issuer
to any of its partners, is disputed pursuant to any pending or threatened legal
proceeding, the Collateral Agent shall have the right to deposit the disputed
amount of such distribution or payment in an interest bearing escrow account
pending the final resolution of such dispute. The Collateral Agent shall have no
obligation to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder. The Collateral
Agent shall not be liable for any error of judgment made in good faith by an
officer or officers of the Collateral Agent, unless it shall be conclusively
determined by a court of competent jurisdiction that the Collateral Agent was
grossly negligent in ascertaining the pertinent facts. The Collateral Agent may
execute any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, attorneys, custodians or nominees
appointed with due care, and shall not be responsible for any willful misconduct
or negligence on the part of, or for the supervision of, any agent, attorney,
custodian or nominee so appointed. Neither the Collateral Agent nor any of its
officers, directors, employees or agents shall be liable for any action taken or
omitted under this Depositary Agreement or any other Collateral Document or in
connection therewith except to the extent caused by the Collateral Agent's gross
negligence or willful misconduct, as determined by the final judgment of a court
of competent jurisdiction, no longer subject to appeal or review. The Collateral
Agent shall not be deemed to have knowledge of an Event of Default unless a
Responsible Officer of the Collateral Agent shall have received written notice
thereof.
Section 4.02. Reliance by Collateral Agent. The Collateral Agent shall be
entitled to conclusively rely upon and shall not be bound to make any
investigation into the facts or matters stated in any certificate, certificate
of a Responsible Officer of the Issuer, Independent Engineer's certificate,
Insurance Consultant's certificate, Trustee's certificate or any other notice or
document (including any cable, telegram, telecopy or telex) 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 and statement of legal counsel, independent accountants
and other experts selected by the Collateral Agent and shall have no liability
for its actions taken thereupon, unless due to the Collateral Agent's willful
misconduct or negligence. Without limiting the foregoing, the Collateral Agent
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shall be required to make payments to the Secured Parties only as set forth
herein. The Collateral Agent shall be fully justified in failing or refusing to
take any action under this Depositary Agreement or any other Collateral Document
(i) if such action would, in the reasonable opinion of the Collateral Agent, be
contrary to applicable law or the terms of this Depositary Agreement or any
other Collateral Document, (ii) if such action is not specifically provided for
in this Depositary Agreement or any other Collateral Document, it shall not have
received any such advice or concurrence of the Trustee as it deems appropriate
or (iii) if, in connection with the taking of any such action that would
constitute an exercise of remedies under this Depositary Agreement or any other
Collateral Document (whether such action is or is intended to be an action of
the Collateral Agent of the Trustee), it shall not first be indemnified to its
satisfaction by the Secured Parties (other than the Trustee (in its individual
capacity) or the Collateral Agent (in its individual capacity) or any other
agent or trustee under any of the Financing Documents (in their respective
individual capacities)) against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Collateral Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Depositary Agreement or any other Collateral
Document in accordance with a request of the Trustee (to the extent that the
Trustee is expressly authorized to direct the Collateral Agent to take or
refrain from taking such action), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Secured Parties.
Section 4.03. Court Orders. The Collateral 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 affection any money,
documents or things held by the Collateral Agent. The Collateral Agent shall not
be liable to any of the parties hereto or any of the Secured Parties, their
successors, heirs or personal representatives by reason of the Collateral
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.
Section 4.04. Resignation or Removal. Subject to the appointment and
acceptance of a successor Collateral Agent as provided below, the Collateral
Agent may resign at any time by giving 30 days written notice thereof to the
Trustee and the Issuer, provided that in the event the Collateral Agent is also
the Collateral Agent and Trustee, it must also at the same time resign as
Collateral Agent and Trustee. The Collateral Agent may be removed at any time
with cause by the Trustee. Issuer shall have the right to remove the Collateral
Agent upon thirty (30) days' notice to the Trustee with or without cause,
effective upon the appointment of a successor Collateral Agent under this
Section 4.04, which is reasonably acceptable to the Trustee. In the event that
----
the Collateral Agent shall decline to take any action without first receiving
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adequate indemnity from the Issuer or the Secured Parties, as the case may be
and, having received an indemnity, shall continue to decline to take such
action, the Trustee shall be deemed to have sufficient cause to remove the
Collateral Agent. In the event that the Collateral Agent is also the Trustee,
the Trustee shall have the right to remove the Collateral Agent with or without
cause. Upon any such resignation or removal, the Issuer shall have the right to
appoint a successor Collateral Agent, which Collateral Agent shall be reasonable
acceptable to the Issuer. If no successor Collateral Agent shall have been
appointed by the Issuer and shall have accepted such appointment within 30 days
after the retiring Collateral Agent's giving of notice of resignation or the
removal of the retiring Collateral Agent, then the retiring Collateral Agent may
appoint a successor Collateral Agent, which shall be a bank or trust company
reasonable acceptable to the Issuer. Upon the acceptance of any appointment as
Collateral Agent hereunder by the successor Collateral Agent, (a) such successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent, and the
retiring Collateral Agent shall be discharged from its duties and obligations
hereunder and (b) the retiring Collateral Agent shall promptly transfer all
monies and Permitted Investments within its possession or control to the
possession or control of the successor Collateral Agent and shall execute and
deliver such notices, instructions and assignments as may be necessary or
desirable to transfer the rights of the Collateral Agent with respect to the
monies and Permitted Investments to the successor Collateral Agent. After the
retiring Collateral Agent's resignation or removal hereunder as Collateral
Agent, the provisions of 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 it was acting as Collateral Agent. Any corporation into which the
Collateral Agent 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 Collateral Agent shall be a party, or any corporation succeeding to
the business of the Collateral Agent shall be the successor of the Collateral
Agent hereunder without the execution or filing of any paper with any party
hereto or any further act on the part of any of the parties hereto except where
an instrument of transfer or assignment is required by law to effect such
succession, anything herein to the contrary notwithstanding.
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Article 5
Expenses; Indemnification; Fees
Section 5.01. Expenses. Subject to the terms of the agreement referenced in
Section 5.03, the Issuer agrees to pay or reimburse all reasonable out-of-pocket
----
expenses of the Collateral Agent (including reasonable fees and expenses for
legal services) in respect of, or incident to, the administration or enforcement
of any of the provisions of the Depositary Agreement or any other Collateral
Document or in connection with any amendment, waiver or consent relating to this
Depositary Agreement or any other Collateral Document.
Section 5.02. Indemnification. The Issuer agrees to indemnify the
Collateral Agent in its capacity as such, and in their capacity as such, its
officers, directors, shareholder, controlling persons, employees, agents and
servants (each an "Indemnified Party") from and against any and all claims,
losses, liabilities and expenses (including the reasonable fees and expenses of
counsel) growing out of or resulting from this Depositary Agreement or any other
Collateral Document (including, without limitation, performance under or
enforcement of this Depositary Agreement or any other Collateral Document, but
excluding any such claims, losses or liabilities resulting from the Indemnified
Party's gross negligence or willful misconduct). This indemnity shall survive
the termination of this Depositary Agreement or any other Collateral Document,
and the resignation or removal of the Collateral Agent.
Section 5.03. Fees. On the Closing Date, and on each anniversary of the
Closing Date to and including the Final Maturity Date, the Issuer shall pay the
Collateral Agent an annual fee in an amount mutually agreed on in a separate
agreement between the Issuer and the Collateral Agent. The payment of the
Collateral Agent's reasonable out-of-pocket expenses (including fees and expense
of counsel) for its administration of any provisions of this Depositary
Agreement or any other Collateral Document shall be subject to the terms of such
separate agreement.
Article 6
Miscellaneous
Section 6.01. Amendments; Etc. No amendment or waiver of any provision of
the Depositary Agreement nor consent to any departure by the Issuer herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Trustee, the Collateral Agent and the Issuer. Any such amendment, waiver
or
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consent shall be effective only in the specific instance and from the specified
purpose for which given.
Section 6.02. Addresses for Notices. All notices, requests and other
communication provided for hereunder shall be in writing and, except as
otherwise required by the provisions of the Depositary Agreement, shall be
sufficiently given and shall be deemed given when delivered or mailed by
registered or certified mail, postage prepaid, or sent by overnight delivery,
telecopy, telegram or telex, addressed to the parties as follows:
The Issuer: Project Orange Associates, L.P.
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Fax: (315) 471-1355
Attention: Richard S. Scolaro
Collateral Agent: U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, New York, 10005
Attention: Corporate Trust Services
Fax: 212-809-5459
Section 6.03. Governing Law. This Depositary Agreement, including all matters of
construction, validity, performance and the creation, validity, enforcement or
priority of the lien of, and security interests created by, this Depositary
Agreement in or upon the Accounts shall be governed by the laws of the State of
New York, without reference to conflicts of law (other than Section 5-1401 of
the New York General Obligations law), except as required by mandatory
provisions of law and except to the extent that the validity or perfection of
the lien and security interest hereunder, or remedies hereunder, in respect of
any particular Account are governed by the laws of a jurisdiction other than the
State of New York.
Section 6.04. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE ARISING OUT OF, IN CONNECTION WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP AMONG THEM ESTABLISHED BY THIS
AGREEMENT.
Section 6.05. Headings. Headings used in this Depositary Agreement are for
convenience of reference only and do not constitute part of this Depositary
Agreement for any purpose.
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Section 6.06. No Third Party Beneficiaries. The agreements of the parties hereto
are solely for the benefit of the Issuer, the Collateral Agent, the Trustee and
the other Secured Parties and their respective successors and assigns and no
Person (other than the parties hereto and the Secured Parties) shall have any
rights hereunder.
Section 6.07. No Waiver. No failure on the part of the Collateral Agent, the
Collateral Agent, the Secured Parties or any of their respective 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 thereof, nor shall any single or partial exercise by the Collateral
Agent, the Collateral Agent, the Secured Parties or any of their nominees or
representatives of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
Section 6.08. Severability. If any provision of the 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.
Section 6.09. Successors and Assigns. All covenants, agreements, representations
and warranties in this Depositary Agreement by the Trustee, the Collateral Agent
and the Issuer 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.
Section 6.10. Execution in Counterparts. This Depositary Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 6.11. Consequential Damages. In no event shall the Collateral Agent be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Collateral
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action.
Section 6.12. Limitation of Liability. Notwithstanding anything to the contrary
contained in the Depositary Agreement and the Transaction Documents, no officer,
director, manager, management committee, employee, shareholder or partner of the
Issuer nor any director, officer, manager, management committee, employee,
incorporator, shareholder, partner or member of any partner of the Issuer or any
Affiliate of any such party (collectively, the "Nonrecourse Parties") shall be
personally liable under this Depositary Agreement for the payment of any sums or
for the performance of any obligation contained in, this Depositary Agreement.
Collateral Agent agrees that its rights shall be limited to proceeding against
the Issuer, and the security provided or intended to be provided pursuant to the
Security Documents and that it shall have no right to proceed against the
Nonrecourse Parties for (a) the
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satisfaction of any monetary obligation of, or enforcement of any monetary claim
against, the Issuer, (b) the performance of any obligation, covenant or
agreement arising under this Depositary Agreement, or (c) any deficiency
judgment remaining after foreclosure of any property securing the obligations
hereunder; provided that (a) the foregoing provisions of the Section 6.12 shall
----
not constitute a waiver, release or discharge of any of the indebtedness, or of
any of the terms, covenants, conditions or provisions of the Depositary
Agreement or any Financing Document and the same shall continue until fully
paid, discharged, observed or performed; (b) the foregoing provisions of this
Section 6.12 shall not limit or restrict the right of any Secured Party to name
----
the Issuer or any other Person as a defendant in any action or suit for a
judicial foreclosure or for the exercise of any other remedy under or with
respect to this Depositary Agreement or any other Financing Document, or for
injunction or specific performance, so long as no judgment in the nature of a
deficiency judgment shall be enforced against any Nonrecourse Party, except as
set forth in the Section 6.12; (c) the foregoing provisions of the Section 6.12
---- ----
shall not in any way limit or restrict any right or remedy of any Secured Party
with respect to, and all of the Nonrecourse Parties shall remain fully liable to
the extent that it would otherwise be liable for its own actions with respect
to, any fraud, negligence or willful misrepresentation, or misappropriation of
any revenues derived from the Project and the proceeds thereof or any other
earnings, revenues, rents, issues, profits or proceeds that are subject of the
Security Documents that should or would have been paid as provided therein or
paid or delivered to the Secured Parties towards any payment required under this
Depositary Agreement or any other Financing Document; (d) the foregoing
provisions of this Section 6.12 shall not affect or diminish or constitute a
----
waiver, release or discharge of any specific written obligation, covenant, or
agreement in respect of the Project made by any of the Nonrecourse Parties or
any security granted by the Nonrecourse Parties as security for the obligations
of the Issuer; and (e) nothing contained herein shall limit the liability of (i)
any Person who is a party to any Project Document or has issued any certificate
or statement in connection therewith with respect to such liability as may arise
by reason of the terms and conditions of such Project Document, certificate or
statement, or (ii any Person rendering a legal opinion, in each case under this
clause (e) relating solely to such liability of such Person as may arise under
such referenced instrument, agreement or opinion.
Section 6.13. Regarding the Collateral Agent. The Collateral Agent shall
be afforded all of the rights, powers, protections, immunities and indemnities
set forth in those certain Collateral Documents dated as of the date hereof,
between the Collateral Agent and the Issuer as if the same were specifically set
forth herein.
Section 6.14. Dispute Resolution. In the event of any dispute or
disagreement arising out of or relating to the determination of the amount, if
any, by which the Capital Expenditure Reserve Required Balance is to be reduced
by way of operation of clause (2) of the definition thereof that the
representatives of the Issuer and the Independent
43
<PAGE>
Engineer have been unable to settle or agree upon within a period of 15 days
after the dispute or disagreement arises, the Issuer and the Independent
Engineer shall each nominate and commit a senior officer to meet at a mutually
agreed time and place not later than 30 days after the dispute or disagreement
has arisen to attempt to resolve such dispute or disagreement. Should a
resolution of such dispute or disagreement not be obtained within 15 days after
such meeting of senior officers for such purposes, or such longer period as may
be mutually agreed, then the Issuer and the Independent Engineer shall each have
the right, by written notice to the other, to resolve the dispute or
disagreement through a mutually acceptable independent expert (the "Independent
Expert") agreed upon by the parties at the time of their agreement to submit
such dispute to an Independent Expert for resolution. Such disputes shall be
resolved by the Independent Expert in accordance with such mutually agreed
procedures and rules. The Independent Expert shall resolve such dispute as soon
as practicable in light of the circumstances, but in no event later than 30 days
after submission to him/her of such dispute. The Issuer agrees that any decision
and/or award of the Independent Expert shall be binding on the Issuer and, to
the extent permitted by applicable Law, any rights to appeal from or cause a
review of any such decision and/or award are hereby waived by the Issuer.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
44
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Deposit and Disbursement
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
PROJECT ORANGE FUNDING, L.P.
By: G.A.S. Orange Associates, L.L.C.,
a Delaware limited liability company,
its General Partner
By: /s/ Douglas Corbett
_____________________________________
Name: Douglas Corbett
Title: Vice President
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Collateral Agent and
Securities Intermediary
By: /s/ Ward A. Spooner
_____________________________________
Name: Ward A. Spooner
Title: Vice President
45
<PAGE>
Exhibit A to
Depositary Agreement
NON-BUDGETED OPERATING AND MAINTENANCE
COSTS CERTIFICATE
No. ____
[Date]
U.S. Bank Trust National Association, as Collateral Agent
under the Depositary Agreement
referred to below
[Address]
Attention: [__________________________]
Re: DEPOSIT AND DISBURSEMENT AGREEMENT (as amended, modified or otherwise
supplemented from time to time, the "Depositary Agreement") dated as of
December 6, 1999 among Project Orange Associates, L.P. (as successor by
merger to Project Orange Funding, L.P., the "Issuer"), a Delaware limited
partnership, U.S. Bank Trust National Association, a national banking
association, in its capacity as Collateral Agent and in its capacity as
Collateral Agent.
Ladies and Gentlemen:
This certificate (the "Non-budgeted Operating and Maintenance costs
Certificate") is delivered to you pursuant to Section 3.01(c)(i)(A) of the
-------------
Depositary Agreement. Capitalized terms used and not otherwise defined herein
shall have the meanings assigned thereto in the Depositary Agreement. The
information relating to this Non-Budgeted Operating and Maintenance Costs
Certificate is as follows:
1. The aggregate amount requested to be withdrawn from the Revenue Account in
accordance with this Non-Budgeted Operating and Maintenance Costs
Certificate is $______________.
2. The Funding Date on which the withdrawals and transfers pursuant to this
Non-budgeted Operating and Maintenance Costs Certificate are to be made is
_________, _____.
A-1
<PAGE>
3. Set forth on Schedule I attached hereto is the name of each Person to whom
any payment is to be made, the aggregate amount due and payable on the
Funding Date or reasonably expected to be due and payable within the thirty
(30) day period following the Funding Date to such Person and a summary
description of the work performed, services rendered, materials, equipment
or supplies delivered or any other purpose for which each payment was or is
to be made.
4. The proceeds received pursuant to this Non-Budgeted Operating and
Maintenance Costs Certificate to be withdrawn from the Revenue Account will
be used to pay Operating and Maintenance Costs which exceed the aggregate
projected Operating and Maintenance Costs in the annual Operating Budgets
of the Issuer by more than ten percent (10%).
5. The Operating and Maintenance Costs for which payment is requested under
this Non-Budgeted Operating and Maintenance Costs Certificate have not been
the basis for any prior requisition by the Issuer.
6. All proceeds of prior requisitions under any Non-Budgeted Operating and
Maintenance Costs Certificate have been expended or applied pursuant to the
provisions of the Indenture.
7. Attached hereto as Appendix I is an Independent Engineer's Certificate in
respect of this Non-Budgeted Operating and Maintenance Costs Certificate
confirming that the Operating and Maintenance Costs for which payment is
requested hereunder are prudent and reasonable.
8. The Operating and Maintenance Costs for which payment is requested under
the Non-Budgeted Operating and Maintenance Costs Certificate are reasonably
designed to permit the Issuer to satisfy its obligations in respect of the
Senior Secured Notes and maximize its revenue and net income.
A-2
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Associates, L.L.C.,
a Delaware limited liability company,
its General Partner
By: _________________________________
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent and Securities Intermediary
By: _________________________________
Name:
Title:
A-3
<PAGE>
Schedule 1
to Exhibit A
to Depositary Agreement
Name Amount of Payment Purpose
A-4
<PAGE>
Appendix I
to Exhibit A
to Depositary Agreement
INDEPENDENT ENGINEER'S CERTIFICATE
[Date]
[Name], as Collateral Agent
under the Depositary Agreement
referred to below
[Address]
Attention: [______________]
Re: DEPOSIT AND DISBURSEMENT AGREEMENT (as amended, modified or otherwise
supplemented from time to time, the "Depositary Agreement") dated as of
December 6, 1999 among Project Orange Associates, L.P. (as successor by
merger to Project Orange Funding, L.P., the "Issuer"), a Delaware limited
partnership, U.S. Bank Trust National Association, a national banking
association, in its capacity as Collateral Agent and in its capacity as
Securities Intermediary.
Ladies and Gentlemen:
This certificate (the "Non-Budgeted Operating and Maintenance Costs
Certificate") is delivered to you pursuant to Section 3.01(c)(i)(B) of the
Depositary Agreement. Capitalized terms used and not otherwise defined herein
shall have the meanings assigned thereto in the Depositary Agreement and the
Indenture.
We hereby certify to the Collateral Agent as of the date hereof that:
1. We have reviewed the Non-Budgeted Operating and Maintenance Costs
Certificate dated _____ of the Issuer relating to the Project (the
"Project").
2. Based on our review of the aforementioned information and date provided to
us by the Issuer and such other investigation as is referenced on the Annex
hereto, and the understanding and assumption that we have been provided
true, correct and complete information, and [insert customary exceptions
and qualifications] we are of the opinion that, as of the date hereof, the
expenditures described in
A-5
<PAGE>
the Non-Budgeted Operating and Maintenance Costs Certificate delivered by
the Issuer to the Collateral Agent are prudent and reasonable.
The person signing this Certificate is a duly qualified representative of
the Independent Engineer and as such is authorized to execute this Certificate
on behalf of the Independent Engineer.
[Name of Independent Engineer]
By:___________________________
Name:
Title:
A-6
<PAGE>
Exhibit B to
Depositary Agreement
RESTORATION REQUISITION
No. ________
[Date]
[Name], as Collateral Agent
under the Depositary Agreement
referred to below
[Address]
Attention: [______________]
Re: DEPOSIT AND DISBURSEMENT AGREEMENT (as amended, modified or otherwise
supplemented from time to time, the "Depositary Agreement") dated as of
December 6, 1999 among Project Orange Associates, L.P. (as successor by
merger to Project Orange Funding, L.P., the "Issuer"), a Delaware limited
partnership, U.S. Bank Trust National Association, a national banking
association, in its capacity as Collateral Agent and in its capacity as
Securities Intermediary.
Ladies and Gentlemen:
This requisition (this "Restoration Requisition") is delivered to you
pursuant to Section 3.10(i)(D)(2) of the Depositary Agreement. Capitalized
terms used and not otherwise defined herein shall have the meanings assigned
thereto in the Depositary Agreement. The information relating to the
Restoration Requisition is as follows:
1. The aggregate amount requested to be withdrawn from the Restoration Sub-
Account in accordance with this Restoration Requisition is $____________.
2. The Funding Date on which the withdrawals and transfers pursuant to this
Restoration Requisition are to be made is ________, ___.
3. Set forth on Schedule I attached hereto is the name of each Person to whom
any payment is to be made, the aggregate amount incurred on or prior to the
Funding Date or reasonably expected to be incurred within the thirty (30)
day period following the Funding Date by such Person and a summary
description
B-1
<PAGE>
of the work performed, services rendered, materials, equipment or supplies
delivered or any other purpose for which each payment was or is to be made.
4. The proceeds of this Restoration Requisition withdrawn from the Restoration
Sub-Account will be used to pay the costs of rebuilding, restoration or
repair of ________ (the "Project") in accordance with the Restoration
Budget and the Restoration Progress Payment Schedule, and the Collateral
Agent may properly charge such costs against the Restoration Sub-Account.
5. The rebuilding, restoration, or repair costs which have been paid or for
which payment is requested under this Restoration Requisition are in
accordance with the Restoration Budget and the Restoration Progress Payment
Schedule.
6. The costs of rebuilding, restoration, or repair for which payment is
requested under this Restoration Requisition from the Restoration Sub-
Account have not been the basis for any prior requisition by the Issuer
7. As of the date hereof, the Issuer has not received any written notice of
any lien, right to lien or attachment upon, or claim affecting the
rebuilding, repair or restoration that is the subject of the Restoration
Requisition, or in the event that the Issuer has received notice of any
such lien, attachment or claim, that such lien, attachment or claim,
(giving details with respect thereto) either (a) is a Permitted Lien
pursuant to clause (3) of the definition of "Permitted Liens" and the funds
estimated to be required to pay such lien, attachment or claim (giving
details of the basis for such estimate) remain on deposit in the
Restoration Sub-Account; or (b) has been released or discharged as of the
date hereof or is expected to be released or discharged out of the proceeds
of this Restoration Requisition.
8. [Attached hereto as Appendix I is an Independent Engineer's Certificate in
respect of this Restoration Requisition.]/1/
_________________________
/1/To be furnished only in the event that the amount requested in any
consecutive 12-month period with respect to any Event of Loss or Event of
Eminent Domain exceeds $1,000,000 in the aggregate.
B-2
<PAGE>
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Associates, L.L.C.,
a Delaware limited liability
company, its General Partner
By: _________________________________
Name:
Title:
B-3
<PAGE>
Schedule I
to Exhibit B
to Depositary Agreement
Name Amount of Payment Purpose
B-4
<PAGE>
Appendix I
Exhibit B
to Depositary Agreement
INDEPENDENT ENGINEER'S CERTIFICATE
[Date]
[Name], as Collateral Agent
under the Depositary Agreement
referred to below
[Address]
Attention: [______________]
Re: DEPOSIT AND DISBURSEMENT AGREEMENT (as amended, modified or otherwise
supplemented from time to time, the "Depositary Agreement") dated as of
December 6, 1999 among Project Orange Associates, L.P. (as successor by
merger to Project Orange Funding, L.P., the "Issuer"), a Delaware limited
partnership, U.S. Bank Trust National Association, a national banking
association, in its capacity as Collateral Agent and in its capacity as
Securities Intermediary.
Ladies and Gentlemen:
This Certificate is delivered to you in connection with Section
3.10(i)(D)(2) of the Depositary Agreement and in connection with the requisition
for payment to which this Certificate is attached as Appendix II (the
"Restoration Requisition") delivered by the Issuer to the Collateral Agent.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned thereto in the Depositary Agreement.
We hereby certify to the Collateral Agent as of the date hereof that:
1. We have reviewed the material and data made available to us by the
Issuer with respect to [describe rebuilding, repair or restoration project] and
have performed such other investigation as is referenced in the Annex attached
hereto (the "Review"). Our Review was performed in accordance with generally
accepted engineering and construction practices and included such investigation,
[insert customary exceptions and qualifications] and review as we in our
professional capacity deemed necessary or appropriate in the circumstances and
within the scope of our
B-5
<PAGE>
appointment [insert customary exceptions and qualifications]. We have also
reviewed the Restoration Requisition dated ________________, including any
Appendices, Schedules and requisitions and/or invoices attached thereto or
delivered therewith.
2. Based on our Review and the understanding and assumption that we have
been provided true, correct and complete information, and [insert customary
exceptions and qualifications] we are of the opinion that, as of the date
hereof:
(a) After giving effect to the payments requested under the Restoration
Requisition, the undisbursed moneys in the Restoration Sub-Account
together with any other amounts that the Issuer is willing to commit
or cause to be committed to such rebuilding, repair or restoration is
reasonably estimated to equal or exceed the amount necessary to pay
for (i) all work, labor or services performed and all materials,
supplies or equipment furnished for which payment has not yet been
made and (ii) all other reasonably anticipated costs of rebuilding,
repair or restoration ("Restoration Costs") which have yet to be paid
in order to achieve operation of [all] [a portion] of the Project.
[Alternative if applicable: After giving effect to the payments
requested under the Restoration Requisition, the undisbursed moneys in
the Restoration Sub-Account may be less than the amount necessary to
pay for (i) all work, labor or services performed and all materials,
supplies or equipment furnished for which payment has not yet been
made and (ii) all other reasonably anticipated Restoration Costs which
have yet to be paid in order to achieve operation of [all] [a portion]
of the Project; however, in our opinion, such insufficiency could not
reasonably be expected to result in a Material Adverse Effect.]
(b) The major rebuilding, repair and restoration activities and the
progress of the rebuilding, repair and restoration of the Project
through the date of this Certificate are proceeding in a satisfactory
manner in accordance with the Restoration Budget and the Restoration
Progress Payment Schedule.
(c) The Restoration Costs set forth on Schedule I to the Restoration
Requisition not incurred on or prior to the Funding Date are
reasonably anticipated to be incurred during the thirty (30) day
period following the Funding Date.
B-6
<PAGE>
(d) The payments made with respect to the Restoration Requisition are in
accordance with the Restoration Budget and the Restoration Progress
Payment Schedule.
The person signing this Certificate is a duly qualified representative of
the Independent Engineer and as such is authorized to execute this Certificate
on behalf of the Independent Engineer.
Very truly yours,
[Name of Independent Engineer]
By: ____________________________
Name:
Title:
B-7
<PAGE>
Exhibit C to
Depositary Agreement
TITLE EVENT REQUISITION
No. ____
[Date]
[Name], as Collateral Agent
under the Depositary Agreement
referred to below
[Address]
Attention: [______________]
Re: DEPOSIT AND DISBURSEMENT AGREEMENT (as amended, modified or otherwise
supplemented from time to time, the "Depositary Agreement") dated as of
December 6, 1999 among Project Orange Associates, L.P. (as successor by
merger to Project Orange Funding, L.P., the "Issuer"), a Delaware limited
partnership, U.S. Bank Trust National Association, a national banking
association, in its capacity as Collateral Agent and in its capacity as
Securities Intermediary.
Ladies and Gentlemen:
This requisition (the "Title Event Requisition") is delivered to you
pursuant to Section 3.10(ii)(C) of the Depositary Agreement. Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned
thereto in the Depositary Agreement. The information relating to the Title
Event Requisition is as follows:
1. The aggregate amount requested to be withdrawn from the Title Event
Sub-Account in accordance with this Title Event Requisition is
$__________________.
2. The Funding Date on which the withdrawals and transfers pursuant to
this Title Event Requisition are to be made is _____, ___.
3. Set forth on Schedule I attached hereto is the name of each Person to
whom any payment is to be made, the aggregate amount incurred on or
prior to the Funding Date or reasonably expected to be incurred within
the thirty (30) day period following the Funding Date to such Person.
C-1
<PAGE>
4. The proceeds of this Title Event Requisition withdrawn from the Title
Event Sub-Account will be used solely for the purpose of attempting to
effect a remedy of the Title Event and for payment of expenses
incurred in connection therewith and the Collateral Agent may properly
charge such costs against the Title Event Sub-Account.
5. The costs of such remediation efforts in respect of the Title Event
and expenses incurred in connection therewith for which payment is
requested under this Title Event Requisition from the Title Event Sub-
Account have not been the basis for any prior requisition by the
Issuer.
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Associates, L.L.C.,
a Delaware limited liability
company, its General Partner
By _________________________________
Name:
Title:
C-2
<PAGE>
Schedule I
to Exhibit C
to Depositary Agreement
Name Amount of Payment Purpose
C-3
<PAGE>
EXHIBIT 4.4
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Bernadette M. Sullivan
Legal Assistant
================================================================================
MORTGAGE AND ASSIGNMENT OF RENTS
(FIRST MORTGAGE)
dated as of December 6, 1999
by
CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY,
a New York public benefit corporation,
and
PROJECT ORANGE ASSOCIATES L.P.,
a Delaware limited partnership,
collectively Mortgagors,
to
U.S. BANK TRUST NATIONAL ASSOCIATION,
a national banking association,
as Collateral Agent,
Mortgagee,
Property:
Project Orange Associates L.P. Cogeneration Facility
Lots 116 & 118 and Parts of Lots 115, 118, 120 & 121,
Block 259, City of Syracuse
County of Onondaga, State of New York
and
Project Orange Associates L.P. Pipeline
City of Syracuse and Towns of Dewitt, Lafayette & Onondaga
County of Onondaga, State of New York
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
---------
Granting Clauses
----------------
Section 1.01. Granting Clause.......................................................... 2
-
Section 1.02. Assignment of Rents and Leases........................................... 8
-
Section 1.03. Limitations.............................................................. 8
-
Section 1.04. Removal.................................................................. 8
-
Section 1.05. Secured Obligations...................................................... 9
-
Section 1.06. Maximum Amount of Indebtedness........................................... 9
-
ARTICLE 2
---------
Covenants of POA
----------------
Section 2.01. Definitions and Interpretation........................................... 10
--
Section 2.02. Title.................................................................... 11
--
Section 2.03. Secured Obligations...................................................... 12
--
Section 2.04. Mortgaged Property....................................................... 12
--
Section 2.05. Insurance and Condemnation............................................... 12
--
Section 2.06. (Sub)leases.............................................................. 13
--
Section 2.07. Master Lease, Ground Lease and Easement Agreements....................... 13
--
Section 2.08. Reconveyance under Master Lease and PILOT Agreement...................... 16
--
Section 2.09. Bankruptcy............................................................... 17
--
Section 2.10. Reasonable Acts.......................................................... 19
--
Section 2.11. Performance.............................................................. 20
--
Section 2.12. Attorneys................................................................ 20
--
Section 2.13. Personal Property........................................................ 20
--
Section 2.14. Acceleration upon Sale or Encumbrance.................................... 20
--
ARTICLE 3
---------
Defaults; Remedies of Mortgagee
-------------------------------
Section 3.01. Event of Default......................................................... 21
--
Section 3.02. Remedies and Accelerations............................................... 21
--
Section 3.03. Sale of Mortgaged Property............................................... 24
--
Section 3.04. Application of Proceeds.................................................. 25
--
Section 3.05. Waivers by Mortgagors.................................................... 26
--
Section 3.06. Rights Cumulative........................................................ 26
--
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Section 3.07. Attorney-in-Fact......................................................... 27
--
Section 3.08. Receipt a Sufficient Discharge........................................... 27
--
Section 3.09. Exclusive Power of Mortgagee............................................. 27
--
Section 3.10. Other Rights............................................................. 27
--
ARTICLE 4
---------
Miscellaneous
-------------
Section 4.01. Further Assurances....................................................... 28
--
Section 4.02. Notices.................................................................. 28
--
Section 4.03. Severability............................................................. 29
--
Section 4.04. Amendment................................................................ 29
--
Section 4.05. Headings................................................................. 29
--
Section 4.06. Benefit.................................................................. 29
--
Section 4.07. Governing Law............................................................ 29
--
Section 4.08. Time of the Essence...................................................... 29
--
Section 4.09. Consistency with Financing Agreement..................................... 29
--
Section 4.10. Interaction with Security Agreements..................................... 29
--
Section 4.11. Mortgagee's Covenant..................................................... 29
--
Section 4.12. Recordation of Mortgage; Payment of Recording and Filing Fees and Taxes.. 30
--
Section 4.13. Perfection of Assignment of Rents, Issues and Profits.................... 30
--
Section 4.14. Mortgage to Constitute Security Agreement................................ 31
--
Section 4.15. Cash Collateral.......................................................... 31
--
Section 4.16. Right to Take Possession of Rents, Issues and Profits upon Default....... 31
--
Section 4.17. POA Occupancy After Default.............................................. 32
--
Section 4.18. Concerning the Mortgagee................................................. 32
--
Section 4.19. Limitation of the Agency's Liability..................................... 33
--
Section 4.20. POA Indemnification of the Agency........................................ 34
--
Section 4.21. PILOT Amounts............................................................ 34
--
Section 4.22. SIDA Consent and Agreement............................................... 34
--
Section 4.23. Release of Mortgage; Assignment of Mortgage.............................. 34
--
Section 4.24. Lien Law Section 13 Covenant............................................. 35
--
Section 4.25. Real Property Law Section 291-f Provisions............................... 35
--
Section 4.26. Real Property Law Section 254............................................ 35
--
Section 4.27. Real Property Not Residential Property................................... 36
--
Section 4.28. Counterparts............................................................. 36
--
</TABLE>
ii
<PAGE>
EXHIBITS
Exhibit A-1 Property Description Leased Site
Exhibit A-2 Property Description City Easements
Exhibit A-3 List of City Easement Agreements
Exhibit A-4 Property Description Outside Easements
Exhibit A-5 List of Outside Easement Agreements
Exhibit B Definitions from Financing Agreement
iii
<PAGE>
MORTGAGE AND ASSIGNMENT OF RENTS
(FIRST MORTGAGE)
MORTGAGE AND ASSIGNMENT OF RENTS (this "Mortgage") dated as of December 6,
1999, is given by CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY, a New York
public benefit corporation having its principal office at 233 Washington Street,
Syracuse, New York 13202 (together with its successors and assigns the
"Agency"), and PROJECT ORANGE ASSOCIATES L.P., a Delaware limited partnership
having its principal office at c/o Scolaro, Shulman, Cohen, Lawler & Burstein,
P.C., 90 Presidential Plaza, Syracuse, New York 13202-2200, Attention: Richard
S. Scolaro (together with its successors and assigns the "POA"; together with
the Agency collectively the "Mortgagors" and individually a "Mortgagor"), to
U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association having an
office at 100 Wall Street, Suite 1600, New York, New York 10005, as Collateral
Agent for the Holders of the Senior Secured Notes and the other Secured Parties
(together with its successors and assigns as such Collateral Agent "Mortgagee").
W I T N E S S E T H:/1/
WHEREAS, the Agency is an industrial development agency duly established
under Title I of Article 18-A of the New York General Municipal Law and Chapter
641 of the Laws of New York of 1979 (collectively the "Act") and is a corporate
governmental agency constituting a New York public benefit corporation; on or
about April 5, 1991, the Agency undertook a Project for POA consisting of, among
other things, acquiring, constructing and equipping an 80-megawatt gas-fired
cogenereation Facility, including related easements and pipelines, principally
located in the City of Syracuse, Onondaga County, New York; in furtherance of
the Project, acquired certain ownership and leasehold interests in the Facility,
leased and subleased its interests in the Facility to POA pursuant to the Master
Lease described below and mortgaged its interests in the Facility as security
for debt incurred to finance the Facility; and pursuant to a resolution duly
adopted October 12, 1999 the Agency is consenting to and participating in the
remortgaging of the Facility pursuant to this Mortgage; and
WHEREAS, pursuant to that certain Indenture dated as of the date hereof
(the "Financing Agreement") among Project Orange Funding, L.P., a Delaware
limited partnership ("Funding L.P."; together with its successors and assigns,
including POA as the survivor of the merger of Funding L.P. with and into POA
concurrently with the execution and delivery of the
___________________
/1/ See Section 2.01 below for definitions of capitalized terms.
<PAGE>
Financing Agreement and this Mortgage referred to in the Financing Agreement and
herein as "POA"), and Project Orange Capital Corp. ("Capital Co."; together with
POA, the Issuers under the Financing Agreement) and U.S. Bank Trust National
Association, as Trustee and Collateral Agent, the Issuers are concurrently
issuing their 10.5% Series of Senior Secured Notes due 2007 (the "Series A
Notes") in the aggregate maximum principal amount of SIXTY EIGHT MILLION DOLLARS
($68,000,000) to be used for the purchase or redemption of debt or equity
interests in POA (including payment of capital distributions to POA's partners)
and related financing costs (including the funding of reserves under the
Financing Agreement); and
WHEREAS, the Holders of the Series A Notes will have the registration
rights set forth in the Registration Rights Agreement dated as of the date
hereof between POA and Donaldson Lufkin & Jenrette, pursuant to which POA agrees
to file with the Securities and Exchange Commission (i) a registration statement
relating to the Issuers 10.5% Senior Secured Notes due 2007 in said aggregate
maximum principal amount of SIXTY EIGHT MILLION DOLLARS ($68,000,000) (the
"Series B Notes") to be offered in exchange for the Series A Notes (and
evidencing the same indebtedness as the indebtedness evidenced by the Series A
Notes and not any new, further or additional indebtedness), and (ii) a shelf
registration statement pursuant to Rule 415 under the Securities Act of 1933
relating to the resale by certain Holders of the Series A Notes (the Series A
Notes and the Series B Notes being hereinafter collectively referred to herein
as the "Senior Secured Notes"); and
WHEREAS, as security for the Issuers' payment, performance and observance
of their Obligations under the Senior Secured Notes and the other Secured
Obligations, Mortgagors are hereby granting unto Mortgagee a first priority
mortgage of, and a first priority security interest in, all of each Mortgagor's
right, title and interest in, to and under the Mortgaged Property described
below, excluding only (i) the Unassigned Rights and (ii) the Steam Plant of the
University (as defined in the Steam Contract), any improvements, accessions and
additions to said Steam Plant and any insurance proceeds arising from the Steam
Plant.
ARTICLE 1
Granting Clauses
Section 1.01. Granting Clause. In consideration of the foregoing and other
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, for the purpose of securing the due and punctual payment,
performance and observance of the Secured Obligations, and intending to be bound
hereby, each Mortgagor hereby irrevocably mortgages, grants, bargains, sells,
remises, releases, assigns, transfers, pledges and sets over (and POA warrants)
unto Mortgagee, and (to the extent covered by the UCC) hereby irrevocably grants
2
<PAGE>
(and POA warrants) unto Mortgagee, in each case with power of sale, all of each
Mortgagor's estate, right, title, interest, property or claim, whether now owned
or hereafter acquired or arising, in and to the following property and rights,
excluding only (i) the Unassigned Rights, and (ii) the Steam Plant, any
improvements, accessions and additions to the Steam Plant and any insurance
proceeds arising from the Steam Plant (all of each Mortgagor's right, title and
interest as specified in paragraphs (a) through (p) inclusive below, except for
the items excluded by clauses (i) and (ii) above, shall be hereinafter
collectively referred to as the "Mortgaged Property"):
(a) Each Mortgagor's entire right, title and interest in and to the land
in Onondaga County, New York, described on Exhibit A-1 attached hereto and
incorporated herein, pursuant to or derived from or under the Master Lease, the
Ground Lease or otherwise; together with each Mortgagor's entire right, title
and interest under the Master Lease, the Ground Lease or otherwise in and to any
and all easements, rights of way, gores of land, streets, ways, alleys,
passages, privileges, liberties, tenements, hereditaments, additions,
accretions, and other rights now or hereafter appurtenant thereto, (said land
and appurtenances being hereinafter called the "Leased Site");
(b) Each Mortgagor's entire right, title and interest (now owned or
hereafter acquired) in, to and under that certain Lease Agreement dated February
27, 1990 by and between Syracuse University, as landlord ("Lessor"), and
Mortgagor, as tenant, a memorandum of which dated as of April 24, 1991 was
recorded in the Office of the Clerk of Onondaga County, New York (the "Clerk's
Office") on May 3, 1991 in Book 3693 at Page 87, as amended by those three
amendatory letters dated May 1, 1990; June 22, 1990; and August 29, 1990; and as
further amended by that certain Amendment to Lease dated as of December 31,
1990; and as further amended by that certain Amendment to Lease Agreement dated
as of December 16, 1992, the tenant's interest under which was assigned by
Mortgagor to the Agency pursuant to that certain Assignment of Ground Lease
dated as of April 5, 1991 and recorded in said Clerk's Office on May 3, 1991 in
Book 3693 at Page 139 (collectively as amended and in effect from time to time
the "Ground Lease"); and each Mortgagor's entire right, title and interest (as
landlord or tenant, as the case may be) in, to and under that certain Lease and
Sublease Agreement dated as of April 5, 1991 between the Agency, as issuer and
landlord, and Mortgagor, as guarantor and tenant, a memorandum of which dated as
of April 5, 1991 was recorded in the Clerk's Office, on May 3, 1991 in Book 3693
at Page 149 (collectively as amended and in effect from time to time, the
"Master Lease"); including any and all right, title and interest in any
Mortgaged Property that may have been or may hereafter be acquired by each
Mortgagor; including any and all right, title and interest that may have been or
may hereafter be acquired by POA pursuant to Section 6.2, Section 6.3 or any
other provision of the Master Lease, pursuant to Section 6.03 or any other
provision of the PILOT Agreement or pursuant to any other right or
obligation now or hereafter held by POA to acquire any Mortgaged Property;
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(c) Each Mortgagor's entire right, title and interest in and to the
easements located within the City of Syracuse in Onondaga County, New York,
described on Exhibit A-2 attached hereto and incorporated herein (collectively,
the "City Easements"), including any and all rights in and to, the easements,
licenses, rights of way, passages and similar agreements described on Exhibit A-
3 attached hereto and incorporated herein, which were assigned by POA to the
Agency pursuant to that certain Assignment of Easements dated as of April 5,
1991 and recorded in said Clerk's Office on May 3, 1991 in Book 3693 at Page 136
(collectively as amended and in effect from time to time, the "City Easement
Agreements"); together with each Mortgagor's entire right, title and interest
under the City Easement Agreements; and together with each Mortgagor's entire
right, title and interest under the City Easements or otherwise in and to all
pipelines, appurtenances, fixtures and other improvements now or hereafter
located thereon, including the Project Pipeline;
(d) Each Mortgagor's entire right, title and interest in and to the
easements located outside the City of Syracuse in Onondaga County, New York,
described on Exhibit A-4 attached hereto and incorporated herein (collectively,
the "Outside Easements"), including any and all rights arising under, pursuant
to, or derived from (i) the easements, licenses, rights of way, passages and
similar agreements described on Exhibit A-5 attached hereto and incorporated
herein, which were assigned by O'Brien and Gere to OBG Technical Services, Inc.
pursuant to that certain Assignment and Assumption of Easements dated as of
April 5, 1991 and recorded in said Clerk's Office on May 3, 1991 in Book 3693 at
Page 9 and which were further assigned by OBG Technical Services, Inc. to POA
pursuant to that certain Assignment and Assumption of Easements dated as of
April 5, 1991 and recorded in said Clerk's Office on May 3, 1991 in Book 3693 at
Page 15 (collectively as amended and in effect from time to time, the "Outside
Easement Agreements"), (ii) and that certain Lease Agreement dated as of April
5, 1991, between POA, as landlord, and the Agency, as tenant, a memorandum of
which dated as of April 5, 1991 was recorded in said Clerk's Office on May 3,
1991 in Book 3693 at Page 143, and a restated memorandum of which was recorded
on December 28, 1992 in said Clerk's Office in Book 3816 at Page 217
(collectively as amended and in effect from time to time, the "Outside Easement
Lease"); together with each Mortgagor's entire right, title and interest under
the Outside Easement Agreements and the Outside Easement Lease; and together
with each Mortgagor's entire right, title or interest under the Outside Easement
Agreements, the Outside Easement Lease or otherwise in and to all pipelines,
appurtenances, fixtures and other improvements now or hereafter located thereon,
including the Project Pipeline (the City Easements and the Outside Easements are
collectively referred to as the "Easements"; the Leased Site and the Easements
are hereinafter referred to as the "Site"; the City Easement Agreements, the
Outside Easement Agreements and the Outside Easement Lease are collectively
referred to as the "Easement Agreements";
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(e) All buildings, structures, pipelines, fixtures, appurtenances and
other improvements, including the Project Pipeline, Facility and Project, now or
hereafter located on the Site (collectively, the "Improvements");
(f) All machinery, apparatus, equipment, fittings, fixtures and other
personal property of every kind and nature whatsoever owned by each Mortgagor,
or in which each Mortgagor has or may hereafter have or acquire an interest,
whether actually now or hereafter located at, upon or about the Site or not, and
whether in storage or otherwise, wherever they may be located, or any
appurtenance thereto, and used or usable in connection with the present or
future operation and occupancy of all or any part of the Mortgaged Property, and
all building equipment, materials and supplies or any nature whatsoever owned by
each Mortgagor, or in which each Mortgagor has or may hereafter have or acquire
an interest, whether actually now or hereafter located upon the Site or not, and
whether in storage or otherwise, wherever they may be located, including power
plants, particle separators, moisture separators, injection systems, gas
pipelines, steam lines, power lines, pumps, control and monitoring equipment,
tanks, boilers and turbines, all of which equipment, including replacements and
additions thereto, shall, to the fullest extent permitted by law and for the
purposes of this Mortgage, be deemed to be part and parcel of the Mortgaged
Property (hereinafter collectively referred to as the "Equipment") (the Site,
the Improvements and the Equipment are sometimes referred to collectively herein
as the "Real Property"); together with all other, further, additional or greater
right, title or interest of each Mortgagor in, to, under or derived from the
Real Property or any part thereof, including the right of each Mortgagor to
possession under s 365 of the Bankruptcy Code in the case of any rejection of
the Master Lease, the Ground Lease or any Easement Agreement;
(g) All licenses, permits, franchises and authorizations (including all
Applicable Permits) now or hereafter held or obtained by each Mortgagor from any
Governmental Authorities having jurisdiction over the operation, management or
use of the Real Property and all intangible property and rights relating to the
operation, management or use of the Real Property, or used in connection
therewith, including options, option rights, and contract rights subject however
to Section 4.11 hereof;
----
(h) All development rights or credits, air rights, water rights (whether
riparian, appropriative or otherwise, and whether or not appurtenant) and water
stock and other rights relating to the Real Property;
(i) All moneys deposited by or on behalf of each Mortgagor with any
federal, state, city, county, governmental agency, irrigation, sewer or water
district or company, gas or electric company, telephone company, other utility
company or any other public or quasi-public body or agency, for the
installation, or to secure the installation of, any utility or public service or
work pertaining to the Real Property;
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(j) All (sub)leases affecting the use or occupancy of the Real Property
and, except as otherwise expressly provided herein, the right to receive and
apply the rents, issues, profits, products, income and royalties of the
Mortgaged Property to the payment of the Secured Obligations;
(k) All POA's right, title and interest in, to and under the PILOT
Agreement;
(l) All the remainders, reversions, rents, revenues, issues, profits,
products, royalties, income, proceeds and other benefits derived by each
Mortgagor from the Mortgaged Property, including the water rights and any
mineral rights, all of which are hereby assigned to Mortgagee, who, except as
provided herein, is hereby authorized to collect and receive the same, to give
proper receipts and acquittances therefor and to apply the same to the payment
of the Secured Obligations, notwithstanding the fact that the same may not then
be due and payable;
(m) All proceeds of the conversion, voluntary or involuntary, of any
Mortgaged Property into cash or liquidated claims or amounts, including all
proceeds of insurance now or hereafter payable to each Mortgagor with respect to
the Mortgaged Property, all eminent domain, condemnation and similar awards or
other compensation now or hereafter payable to each Mortgagor with respect to
the Mortgaged Property, all Loss Proceeds, all Eminent Domain Proceeds and all
Title Event Proceeds, all of which are hereby assigned to Mortgagee, who,
subject to the provisions of the Financing Agreement, is hereby authorized to
collect and receive the same, to give proper receipts and acquittances therefor
and to apply the same to the payment of the Secured Obligations, notwithstanding
the fact that the same may not then be due and payable;
(n) Except for the Excluded Accounts, all accounts receivable, contract
rights, chattel paper, instruments, general intangibles and other obligations of
any kind now or hereafter existing arising out of or in connection with the
sale, lease or other disposition of electrical or other energy, goods or the
rendering of services from the Mortgaged Property, and all rights now or
hereafter existing in and to all security agreements, leases, and other
contracts securing or otherwise relating to any such accounts receivable,
contract rights, chattel paper, instruments, general intangibles or obligations
derived by each Mortgagor from the Mortgaged Property, and all inventory, now
owned or hereafter acquired, of each Mortgagor derived from the Mortgaged
Property, including raw materials, supplies, component parts and work in
process, and the proceeds thereof;
(o) All plans and specifications prepared for improvements on, or other
development of, the Mortgaged Property (including all amendments, modifications,
supplements, general conditions and addenda thereof or thereto) and all studies,
data, models and drawings related thereto; and all contracts and agreements of
each Mortgagor relating to the aforesaid plans and specifications or to the
aforesaid plans and specifications or to the aforesaid studies, data,
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models and drawings; and all contracts and agreements of each Mortgagor executed
from time to time relating to the maintenance, operation, occupancy, sale,
alteration, development, or financing of the Mortgaged Property of any portion
thereof, or for the purchase of materials for any of the foregoing purposes; all
contracts with property managers, surveyors, real estate brokers, and other like
agents and professionals that relate to any of the Mortgaged Property or any
improvements constructed or to be constructed on the Mortgaged Property, and all
maps, reports, surveys and studies of, or relating to, any of the Mortgaged
Property or any improvements constructed or to be constructed on the Mortgaged
Property, now or hereafter in the possession of each Mortgagor or any such agent
or professional; and
(p) All additions, accessions, replacements, substitutions, and renewals
of or to any of the foregoing.
PROVIDED, HOWEVER, that the Mortgaged Property shall not include, and this
Mortgage shall not be a Lien upon, (i) any of the Project Documents other than
each Mortgagor's respective interests in, to and under the Master Lease, the
Ground Lease, the Outside Easement Lease and the other Easement Agreements and
POA's interest under the PILOT Agreement as aforesaid and (ii) any turbine or
associated equipment leased by a Mortgagor from General Electric Company or an
affiliate thereof pursuant to its lease engine support program.
TO HAVE AND TO HOLD the foregoing Mortgaged Property subject to the
Permitted Title Encumbrances, to the extent the same remain in effect and affect
the Real Property (provided that, except as provided in Section 4.21, nothing
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herein shall, or shall be construed to, subordinate this Mortgage to any such
Permitted Title Encumbrances to which it is not otherwise subject under
applicable law), but excluding the Unassigned Rights, unto Mortgagee and its
successors and assigns forever.
PROVIDED, NEVERTHELESS, and these presents are upon this express condition,
that if the Issuers shall well and truly pay and perform the Secured Obligations
at the time and in the manner prescribed in the Secured Documents and shall well
and truly abide by each and every covenant set forth in the Secured Documents,
then this Mortgage shall cease, determine and terminate, except for those
provisions hereof which by their terms survive; otherwise, this Mortgage shall
remain in full force and effect for all purposes. Upon such termination,
Mortgagee shall, at POA's request and expense, subject to the provisions of
Section 4.23, execute and deliver to POA a release of this Mortgage as provided
in said Section.
Some of the Mortgaged Property described herein may be or become property
in which Mortgagee has a security interest under the Security Agreement (dated
as of the date hereof executed by POA, as grantor, in favor of Mortgagee, as
secured party), or the SIDA Security Agreement (dated as of the date hereof
executed by the Agency, as grantor, in favor of
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Mortgagee, as secured party. Notwithstanding anything to the contrary in this
Mortgage, the property described in paragraphs (g) through (p) above shall be
subject to the Lien of, and otherwise governed by, this Mortgage to the extent
that such Mortgaged Property legally constitutes real property or fixtures
thereon or to the extent such Mortgaged Property is not the subject of a valid
and perfected security interest governed by the Security Agreement or the SIDA
Security Agreement. The rights, remedies and interests of Mortgagee under this
Mortgage and under the Security Agreements are independent and cumulative, and
there shall be no merger of any Lien hereunder with any valid and perfected
security interest created by the either Security Agreement with respect to such
property. Mortgagee may elect from time to time (which election Mortgagee may
modify from time to time) to exercise or enforce any of its rights, remedies or
interests under this Mortgage, the Security Agreements or applicable law as
Mortgagee may from time to time deem appropriate.
Section 1.02. Assignment of Rents and Leases. Each Mortgagor hereby
absolutely and irrevocably assigns to Mortgagee all its right, title, interest
and lessor's or sublessor's estate or interest in, to or under any leases or
subleases of the Mortgaged Property. Each Mortgagor hereby further absolutely
and irrevocably assigns to Mortgagee all its rights or interests in or to all of
the rents, issues, profits and proceeds of the Mortgaged Property, including all
leases or subleases thereof, all rents and other sums payable under any leases
or subleases thereof, and all proceeds of the conversion, voluntary or
involuntary, of the Mortgaged Property into cash or liquidated amounts or claims
for the purposes and upon the terms and conditions hereinafter set forth.
Mortgagee is hereby authorized to collect and receive the foregoing rents,
issues, profits and proceeds, to give proper receipts and acquittances therefor,
and to apply the same to the payment of the Secured Obligations, notwithstanding
the fact that the same may not then be due and payable, provided however, that
Mortgagee hereby grants to POA the exclusive right to collect, use, enjoy and
receive such rents, issues, profits and proceeds (except Loss Proceeds, Eminent
Domain Proceeds and Title Event Proceeds) until an Event of Default has occurred
and is continuing. The foregoing assignment shall not cause Mortgagee to be a
"mortgagee-in-possession" for any purpose or to be liable in any way under any
leases or subleases so assigned to Mortgagee.
Section 1.03. Limitations. Other than Permitted Liens and except as
otherwise expressly provided in the Financing Agreement, or herein: (a) POA has
not for itself or as agent for the Agency consented to any other security
interest of any other Person in any fixtures and has not disclaimed any interest
in any fixtures; and (b) POA has not for itself or as agent for the Agency
agreed or consented to the removal of any fixtures from the Mortgaged Property,
and any such consent by either Mortgagor shall not be binding on Mortgagee.
Section 1.04. Removal. Notwithstanding any other provisions of this
Mortgage or any other agreement or contract between POA and Mortgagee to the
contrary, POA shall not, without the prior written consent of Mortgagee, remove
or permit the removal of any fixture
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from the Mortgaged Property with a replacement cost in excess of Two Hundred
Fifty Thousand Dollars ($250,000) or Five Hundred Thousand Dollars ($500,000) in
the aggregate of all such fixtures removed during any one (1) year period from
the date of this Mortgage until the date this Mortgage is released. Mortgagee
further reserves the right to prohibit the removal of any such fixture by any
Person other than POA with the legal right to remove any fixture from the
Mortgaged Property unless and until such Person makes arrangements with (and
satisfactory to) Mortgagee for the payment to Mortgagee of all costs of
repairing any physical injury to the Mortgaged Property which may be caused by
the removal of that fixture. So long as an Event of Default does not exist, any
such payment shall be made directly to POA. If an Event of Default has occurred
and is continuing, any such payment shall instead be made directly to Mortgagee,
and Mortgagee may hold such payment as additional collateral under the Security
Agreement, or may apply such payment to the Secured Obligations as authorized by
the Security Agreement, pursuant to Section 9-502 of the UCC or otherwise.
Failure by POA to cause the delivery to Mortgagee of any such payment shall
constitute both (x) waste under (and a breach of) this Mortgage, and (y)
conversion of Collateral under (and a breach of) the Security Agreement.
Section 1.05. Secured Obligations. This Mortgage is granted for the
purpose of securing and secures the payment and performance of all Obligations
of the Issuers, now existing or hereafter arising, under the Financing
Agreement, the Senior Secured Notes, this Mortgage and the other Collateral
Documents (collectively the "Secured Documents"), whether principal, interest,
fees, expenses, obligations of performance or otherwise and any obligations of
the Agency under this Mortgage or the SIDA Security Agreement (all of such
Obligations being herein called the "Secured Obligations").
Section 1.06. Maximum Amount of Indebtedness. (a) Notwithstanding anything
to the contrary in this Mortgage, the maximum principal indebtedness or Secured
Obligations which is or under any contingency may be secured by this Mortgage,
at the date of the execution and delivery hereof or at any time hereafter, is
SIXTY EIGHT MILLION DOLLARS ($68,000,000) provided, however, that the foregoing
limitation shall not limit the Lien and security of this Mortgage with respect
to (i) interest on said maximum principal indebtedness payable pursuant to the
Senior Secured Notes, or any premium payable pursuant to the Senior Secured
Notes upon prepayment of said maximum principal indebtedness, (ii) repayment to
Mortgagee after default of sums advanced or paid for real estate taxes (and
payments in lieu thereof), charges or assessments upon the Mortgaged Property,
(iii) repayment to Mortgagee after default of sums advanced or paid for premiums
for insurance covering the Mortgaged Property, (iv) repayment after default of
all reasonable legal costs and expenses of collection of the indebtedness
secured by this Mortgage or of the defense or prosecution of the rights, Liens
and security interests created by this Mortgage, and (v) repayment to Mortgagee
after default of any amount, cost or charge to which Mortgagee becomes
subrogated, upon payment, whether under recognized principles of law or equity,
or under express statutory authority; and the amounts included under (i) - (v)
inclusive above, together with interest thereon, shall be deemed
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to be Secured Obligations; provided, that the Secured Obligations shall not
include interest on any unpaid interest to the extent, if any, the same would
require the payment of mortgage recording tax with respect thereto, unless such
mortgage recording tax is in fact paid.
(b) The limitation on the maximum principal amount of the Secured
Obligations secured by this Mortgage pursuant to the preceding paragraph does
not, and shall not be construed to, limit the amount of the Secured Obligations
secured by the Security Agreements or any other Collateral Document.
ARTICLE 2
Covenants of POA
Section 2.01. Definitions and Interpretation. (a) Capitalized terms used
in this Mortgage but not otherwise defined herein shall have the respective
meanings ascribed thereto in the Financing Agreement. A copy of Section 1.01
Definitions of the Financing Agreement is attached hereto as Exhibit B and
incorporated herein.
(b) The following terms are defined in the following locations in this
Mortgage:
Term Section
Agency Preamble
Article VII Certificate 4.11
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Capital Co. Recitals
City Easements 1.01(c)
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City Easement Agreements 1.01(c)
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Clerk's Office 1.01(a)
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Easement 1.01(a)
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Easement Agreements 1.01(d)
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Equipment 1.01(f)
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Financing Agreement Recitals
First Mortgage Preamble
Funding L.P. Recitals
Grantor 2.07(a)(vi)
-----------
Ground Lease 1.01(b)
-------
Improvements 1.01(e)
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Issuers Recitals
Leased Site 1.01(b)
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Lessor 1.01(b)
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Master Lease 1.01(a)
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Mortgaged Property 1.01(a)
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Mortgagee Preamble
Mortgagor, Mortgagors Preamble
Outside Easements 1.01(d)
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Outside Easement Agreements 1.01(d)
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Outside Easement Lease 1.01(d)
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POA Preamble
Project Recitals
Real Property 1.01(f)
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Reconveyance Option 2.08
----
Rents and Profits 3.02(b)
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Secured Documents 1.05
----
Secured Obligations 1.05
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Senior Secured Notes Recitals
Series A Notes Recitals
Series B Notes Recitals
Site 1.01(d)
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(c) In this Mortgage, unless the context otherwise requires (i) the rules
of construction in Section 1.04 of the Financing Agreement shall apply to this
mortgage; (ii) words which include a number of constituent parts, things or
elements, including the terms Leased Site, Easements, Easement Agreements,
Improvements, Equipment, Real Property and Mortgaged Property, shall be
construed as referring separately to each constituent part; and (iii) all rights
and powers granted to Mortgagee hereunder shall be deemed to be coupled with an
interest and be irrevocable.
Section 2.02. Title (a) POA warrants that (i) to the best of POA's
knowledge (A) the Agency is the owner of the leasehold estates in the Leased
Site and the City Easements under respectively the Ground Lease and the Outside
Easement Lease, the owner of the easement estates under the City Easement
Agreements, and the owner of the Improvements (including the Project Pipeline)
and Equipment; (B) POA is the owner of the subleasehold and leasehold estates in
the Leased Site, the Easements, the Easement Agreements, the Improvements and
the Equipment under the Master Lease, the owner of the tenant's interest under
the Master Lease, the owner of the grantee's interests under the Outside
Easement Agreements and the owner of the landlord's interest under the Outside
Easement Lease and (ii) the Agency is the owner of the Equipment and POA is the
owner of the leasehold estate in Equipment under the Master Lease, in each case
under clauses (i) and (ii) free and clear of all Liens, except Permitted Liens,
and (iii) the Permitted Liens do not materially interfere with the POA's use,
enjoyment and operation of the Mortgaged Property. POA (A) shall cause the
warranties in the preceding sentence to be true and correct in each and every
respect; (B) shall not permit any Liens against the Mortgaged Property, except
Permitted Liens, and (C) shall
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forever preserve, protect, warrant and defend (1) its estate, right, title and
interest in and to the Mortgaged Property, (2) the validity, enforceability and
priority of the Lien of this Mortgage on the Mortgaged Property, and (3) the
right, title and interest of Mortgagee and any purchaser at any sale of the
Mortgaged Property hereunder, in each case against all other Liens and claims
whatsoever, except Permitted Liens. Except as provided in Section 4.21, nothing
herein shall be construed to subordinate this Mortgage to any Permitted Lien to
which it is not otherwise subject under applicable law.
Section 2.03. Secured Obligations. POA shall duly and punctually pay,
perform and observe the Secured Obligations to be paid, performed and observed
by it and cause the due and punctual payment, performance and observance of the
Secured Obligations to be paid, performed and observed by other Persons, in each
case in accordance with the provisions of the Secured Documents.
Section 2.04. Mortgaged Property. Subject to the provisions of the
Financing Agreement, POA (i) shall keep the Mortgaged Property, or cause the
Mortgaged Property to be kept, in good condition or repair, reasonable wear and
tear excepted; (ii) shall not commit or permit any waste of the Mortgaged
Property; (iii) shall not cause or permit any alterations, removal or demolition
of the Mortgaged Property, except for such alterations, removal or demolition as
may be required or permitted under the Financing Agreement or under Section 1.04
----
hereof or as may be required by any applicable law, ordinance, rule, regulation
or order of any Governmental Authority having jurisdiction over the Mortgaged
Property; (iv) shall complete or cause to be completed in good, first class and
workmanlike manner, fully paid for and free from Liens, any construction, repair
or restoration which may be performed on the Mortgaged Property; (v) shall
promptly restore, or cause to be restored, any portion of the Mortgaged Property
which may be damaged or destroyed, subject to the provisions of the Financing
Agreement, unless the failure to comply with the same would not have a Material
Adverse Effect; (vi) shall duly and punctually pay all Impositions with respect
to the Property; (vii) shall duly and punctually pay and perform all of its
obligations under each of the Project Documents unless the failure to comply
with its obligations under a Project Document would not have a Material Adverse
Effect, subject to any applicable grace or cure period provided in the Financing
Agreement; (viii) shall duly and punctually, subject to any applicable grace or
cure period provide in the Financing Agreement, comply with the requirements of
all applicable laws, ordinances, rules, regulations, requirements, orders,
decrees and judgments of any Governmental Authority having jurisdiction
over the Mortgaged Property and with all licenses, permits, franchises,
authorizations and agreements (including all Applicable Permits) applicable with
respect to the Mortgaged Property unless the failure to comply with the same
would not have a Material Adverse Effect; (ix) keep in force and effect
insurance with respect to the Mortgaged Property as required under the Financing
Agreement; (x) duly and punctually pay the premiums for such insurance; and (xi)
duly and punctually comply with the requirements of the applicable insurance
policies, companies and underwriting boards and agencies.
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Section 2.05. Insurance and Condemnation. All proceeds of insurance,
condemnation and other losses received or receivable by each Mortgagor,
including Loss Proceeds, Eminent Domain Proceeds and Title Event Proceeds, shall
be delivered by each Mortgagor to Mortgagee and deposited, paid and applied by
Mortgagee as provided for in the Financing Agreement.
Section 2.06. (Sub)leases. (a) POA shall submit to Mortgagee for
Mortgagee's prior written approval any (sub)lease of the Project or any portion
of the Mortgaged Property, including approval of any (sub)tenant thereunder, and
no (sub)lease shall be effective unless and until it has been approved by
Mortgagee. In the event Mortgagee approves any such (sub)lease, POA shall not
accept prepayments of rent for any period in excess of one month and shall
perform all covenants of the (sub)lessor under all (sub)leases affecting the
Project or the Mortgaged Property. As used herein, the term "(sub)lease"
includes any extensions or renewals thereof and any amendments thereto to which
Mortgagee has consented. POA shall not amend or terminate any (sub)leases
without the prior written consent of Mortgagee and shall not consent to any
assignment or (sub)subletting under any (sub)leases without the prior written
consent of Mortgagee. POA shall immediately give notice to Mortgagee of any
default under any of the (sub)leases it received or delivers. Mortgagee shall
have the right but not the obligation to cure any default of POA under any of
the (sub)leases upon notice to POA; and POA shall, immediately on demand, pay
Mortgagee all costs incurred in curing such default, together with interest on
such costs from the date of expenditure at a rate per annum equal to the Default
Rate; and all sums due to Mortgagee pursuant to this Section 2.06 and all
----
amounts disbursed in connection with said cure shall be deemed to be Secured
Obligations.
(b) Each (sub)lease of any portion of the Project or the Mortgaged
Property shall be absolutely subordinate to the Lien of this Mortgage, but shall
contain a provision satisfactory to Mortgagee that in the event of foreclosure
hereunder, such (sub)lease, at the sole option of the purchaser at such sale,
shall not be terminated and the tenant thereunder shall enter into a new
(sub)lease for the balance of the term of such (sub)lease then remaining upon
the same terms and conditions.
Section 2.07. Master Lease, Ground Lease and Easement Agreements. (a) POA
agrees:
(i) To keep and perform, or cause to be kept and performed, each and
every covenant, agreement and obligation of the lessee or grantee as set
forth in the Master Lease, Ground Lease, the Easement Agreements and the
PILOT Agreement and any statute, ordinance, rule or regulation relating
thereto, and not to commit, suffer or permit any breach thereof beyond any
applicable grace or cure period provided in the Financing Agreement. POA
shall not, however, be obligated to comply with any amendment to the Ground
Lease made by the Agency and the University without POA's
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consent in contravention of the SIDA Consent and Agreement and the
University Consent and Agreement. If the POA becomes aware of any such
amendment, POA shall promptly notify Mortgagee thereof. If any such
amendment shall exist, POA shall take such commercially reasonable action
as Mortgagee shall request to cause such amendment to be rescinded or
voided. If POA shall default under the Master Lease, Ground Lease or any
Easement Agreement beyond any applicable grace or cure period provided in
the Financing Agreement, Mortgagee may, at its option but without any
obligation to do so, take any action necessary or desirable to cure any
default by POA in the performance of any of the terms, covenants and
conditions of the Master Lease, Ground Lease and Easement Agreements,
Mortgagee being authorized to enter upon the Real Property for such
purposes; and POA shall, immediately on demand, pay to Mortgagee all
reasonable costs of Mortgagee incurred in curing any such default, together
with interest on such costs from the date of expenditure at a rate per
annum equal to the Default Rate; and all sums due to Mortgagee pursuant to
this Section 2.07 shall be deemed to be Secured Obligations; and any
----
default by POA under the Master Lease, the Ground Lease or any of the
Easement Agreements (beyond any applicable grace, notice and cure periods)
shall be an Event of Default under this Mortgage;
(ii) To give immediate notice to Mortgagee of any default under the
Master Lease, the Ground Lease or any of the Easement Agreements within
POA's knowledge or of the receipt by it of any notice of default from the
Agency under the Master Lease, Lessor under the Ground Lease and any other
Person under any of the Easement Agreements, and to furnish to Mortgagee
all information that it may reasonably request concerning the performance
by POA of the covenants of the Master Lease, the Ground Lease and the
Easement Agreements;
(iii) That the provisions hereof shall be deemed to be obligations of
POA in addition to POA's obligations as lessee, sublessee or grantee with
respect to similar matters contained in the Master Lease, the Ground Lease
and the Easement Agreements; provided, however, the inclusion herein of any
covenants and agreements relating to similar matters as to which POA is
obligated under the Master Lease, the Ground Lease and the Easement
Agreements shall not restrict or limit POA's duties and obligations to keep
and perform promptly all of its covenants, agreements and obligations under
the Master Lease, the Ground Lease or the Easement Agreements, and nothing
in this Mortgage shall be construed as requiring POA or Mortgagee to take
or omit to take any action which would cause a default under the Master
Lease, the Ground Lease or any of the Easement Agreements;
(iv) That so long as this Mortgage is in effect, there shall be no
merger of the Master Lease, the Ground Lease or any Easement Agreement or
any interest therein nor of the leasehold estate or other estate created
thereby with the fee estate in the Real
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Property or any portion thereof by reason of the fact that the Master
Lease, the Ground Lease or any Easement Agreement or any interest therein
or the leasehold or other estate thereunder may be held directly or
indirectly by or for the account of any Person who also holds the fee
estate in the Real Property or a portion thereof or any interest therein.
In case POA acquires the fee title or any other estate, title or interest
in the Real Property, this Mortgage shall attach to and cover and be a Lien
upon the fee title or such other estate so acquired, and such fee title or
other estate shall, without further assignment, mortgage or conveyance,
become and be subject to the Lien of and covered by this Mortgage. POA
shall notify Mortgagee of any such acquisition and, on written request by
Mortgagee, shall cause to be executed and recorded all such other and
further assurances or other instruments in writing as may be reasonably
requested by Mortgagee to carry out the intent hereof;
(v) That, so long as this Mortgage is in effect, no surrender
(except a surrender upon the expiration of the term) of the Master Lease,
the Ground Lease or any Easement Agreement or any portion thereof or of any
interest therein, and no termination of the Master Lease, the Ground Lease
or any Easement Agreement, shall be valid or effective, and none of the
Master Lease, Ground Lease or any Easement Agreement, nor the provisions
thereof, may be amended, modified, changed, surrendered or canceled, or
subordinated to any mortgage, to any lease, or to any other interest,
either orally or in writing, without the prior written consent of Mortgagee
in each case, and each Mortgagor agrees that any such action without the
prior written consent of Mortgagee shall be void;
(vi) That POA shall, promptly after the execution and delivery of
this Mortgage or of any instrument or agreement supplemental thereto, give
written notice to the Agency, the Lessor and the grantors under the
Easement Agreements ("Grantors") in writing of the execution and delivery
of this Mortgage; and
(vii) That if the Master Lease, the Ground Lease or any Easement
Agreement is for any reason whatsoever terminated prior to the expiration
of its term and pursuant to any provision of the Master Lease, the Ground
Lease or any Easement Agreement or otherwise Mortgagee or its designee
shall acquire from the Agency, Lessor or any Grantor a new lease or
easement (as the case may be) of the real property affected by the Master
Lease, the Ground Lease or the Easement Agreement, POA shall have no right,
title or interest in or to such new lease, easement or other agreement or
the estate created thereby; provided, however that if POA shall have repaid
the Senior Secured Notes and other Secured Obligations and performed all
its obligations hereunder and under the other Secured Documents, then
Mortgagee shall convey without warranty its right, title and interest in
such new lease, easement or other agreement or estate,
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provided that POA simultaneously pays any taxes, fees and expenses relating
to such conveyance.
(b) POA warrants that (i) each of the Master Lease, the Ground Lease and
the Easement Agreements is in all respects valid, binding and in full force and
effect, (ii) none of the Master Lease, the Ground Lease and the Easement
Agreements has been amended, supplemented, surrendered, terminated or otherwise
modified, except as described herein, (iii) POA is not and, to the knowledge of
POA, none of the Agency, Lessor or any Grantor is in default under any of the
provisions of the Master Lease, the Ground Lease or any Easement Agreement, and
(iv) POA has not made and, to the knowledge of POA, none of the Agency, Lessor
or any Grantor has made any claim of such default that has not been fully cured.
Section 2.08. Reconveyance under Master Lease and PILOT Agreement. (a) In
the event POA has any right or obligation to acquire any or all of the Agency's
interests in the Real Property pursuant to Section 6.2, Section 6.3 or any other
section of the Master Lease, pursuant to Section 6.03 or any other section of
the PILOT Agreement or otherwise (each a "Reconveyance Option"), (i) POA shall
not exercise any Reconveyance Option exercisable by it without the prior written
consent of Mortgagee, and any attempted exercise of such Reconveyance Option
without Mortgagee's consent shall be void; (ii) POA shall not close on any
Reconveyance Option, unless POA simultaneously delivers to Mortgagee such
instruments, documents, opinions of counsel and endorsements to Mortgagee's
title insurance policy as Mortgagee requests to mortgage, grant and confirm to
Mortgagee Liens and security interests under this Mortgage on the interests
being reconveyed; and (iii) if an Event of Default has occurred and is
continuing, then (A) at the option of Mortgagee, the reconveyance of the
Agency's interests in the Real Property being reconveyed pursuant to any
Reconveyance Option shall be conveyed directly to Mortgagee or its designee as
owner; (B) in the case of any Reconveyance Option exercisable by POA, Mortgagee
shall have (1) the right (upon not less than five days notice to POA) to require
POA to exercise (and close pursuant to) such Reconveyance Option; and (2) the
right, on behalf of POA (as POA's attorney-in-fact), to exercise (and/or close
pursuant to) such Reconveyance Option; and (3) to execute and deliver any
instrument or document in connection with any such exercise or closing; and (C)
in connection with any such closing, POA shall, promptly after request by
Mortgagee, deliver to Mortgagee such instruments, documents, opinions of counsel
and endorsements to Mortgagee's title insurance policy as Mortgagee requests to
mortgage, grant and confirm to Mortgagee Liens and security interests under this
Mortgage on the interests being reconveyed (or, in the case of a reconveyance
directly to Mortgagee or its designee pursuant to clause (iii)(A) above,
Mortgagee's or such designee's title to the interests being reconveyed).
(b) Without limiting the foregoing, POA and Mortgagee agree that, in the
event POA acquires any or all of the Agency's interests in the Real Property
pursuant to Section 6.2, Section 6.3 or any other section of the Master Lease,
pursuant to Section 6.03 or any other
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section of the PILOT Agreement or otherwise (including the deemed transfer of
title pursuant to the last sentence of Section 6.03 of the PILOT Agreement),
then (i) immediately upon and simultaneously with the transfer of title (or
deemed transfer) of the Agency's interests in the Real Property to POA, all of
the Agency's interests so transferred to POA shall be deemed to be mortgaged and
granted to Mortgagee under this Mortgage to the same extent as if originally set
forth herein; (ii) POA shall promptly deliver to Mortgagee such instruments,
documents, opinions of counsel and endorsements to Mortgagee's title insurance
policy as Mortgagee requests to confirm to Mortgagee the Liens and security
interests under this Mortgage on the interests reconveyed to POA; and (iii)
Mortgagee shall have the right, on behalf of POA (as POA's attorney-in-fact), to
execute and deliver any instrument or document necessary or appropriate to
confirm the Liens and security interests under this Mortgage on the interests
reconveyed to POA.
(c) All instruments, documents, opinions of counsel and endorsements to
Mortgagee's title insurance policy required to be furnished, and actions
required to be taken, under this Section 2.08 shall be furnished and taken at
----
POA's sole cost; and POA shall be responsible pursuant to Section 4.12 for the
----
recording and filing of, and the payment of recording and filing fees and
transfer mortgage recording and other taxes, with respect to the transactions,
instruments and documents under this Section 2.08. POA shall, immediately on
----
demand, pay to Mortgagee all reasonable costs of Mortgagee incurred in
connection with, or in exercising its rights under, this Section 2.08, together
----
with interest on such costs from the date of expenditure at a rate per annum
equal to the Default Rate. All sums due to Mortgagee pursuant to this Section
shall be deemed to be Secured Obligations.
(d) Nothing in this Section 2.08 shall, or shall be construed to, limit
----
anything in the SIDA Consent and Agreement, including in Section 7(h) thereof.
Section 2.09. Bankruptcy. (a) POA hereby unconditionally assigns,
transfers and sets over to Mortgagee any and all of POA's claims and rights
arising from any rejection of the Master Lease, the Ground Lease or any Easement
Agreement pursuant to the Bankruptcy Code. Mortgagee shall have the right to
proceed in its own name or, if an Event of Default has occurred and is
continuing, in the name of POA, in respect of any claim, suit, action or
proceeding relating to the rejection of the Master Lease, the Ground Lease or
any Easement Agreement, including the right to file and prosecute, to the
exclusion of POA, any proofs of claim, complaints, motions, applications,
notices and other documents, in any case in respect of the Agency, Lessor or any
Grantor under the Bankruptcy Code. This assignment constitutes a present,
irrevocable and unconditional assignment of the foregoing claims, rights and
remedies, and shall continue in effect until the payment and performance in full
of the Secured Obligations and the release of this Mortgage. Any amounts
received by Mortgagee as damages arising out of the rejection of the Master
Lease, the Ground Lease or any Easement Agreement as aforesaid shall be applied
and paid as set forth in Section 3.04.
----
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(b) POA shall not, without Mortgagee's prior consent, elect to treat the
Master Lease, the Ground Lease or any Easement Agreement as terminated under
Section 365(h)(1) of the Bankruptcy Code. Any such election made without
Mortgagee's prior consent shall be void.
(c) If, pursuant to Section 365(h)(1) of the Bankruptcy Code, POA seeks to
offset against the rent or other charges reserved in the Master Lease, the
Ground Lease or any Easement Agreement, the amount of any damages caused by the
non-performance by the Agency, Lessor or any Grantor of its obligations under
the Master Lease, the Ground Lease or any Easement Agreement after rejection
thereof under the Bankruptcy Code, POA shall, prior to effecting such offset,
notify Mortgagee of its intention to do so, setting forth the amounts proposed
to be so offset and the basis therefor. Mortgagee shall have the right, within
ten (10) days after receipt of such notice from POA, to reasonably object to all
or any part of such offset, and, in the event of such reasonable objection, POA
shall not effect any offset of the amounts so objected to by Mortgagee for a
period of thirty (30) days after Mortgagee has delivered its objection notice to
POA, during which time Mortgagee shall have the right to bring its objections to
the attention of any court supervising the bankruptcy of such party, and both
Mortgagee and POA agree to abide by the decision of any such court. If (i)
Mortgagee has failed to object as aforesaid within the (10) days after notice
from Mortgagee or (ii) the court fails to render its decision within the above-
mentioned thirty (30) day period, POA may proceed to effect such offset in the
amounts set forth in POA's notice. Neither Mortgagee's failure to object as
aforesaid nor any objection or other communication between Mortgagee and POA
relating to such offset shall constitute an approval of any such offset by
Mortgagee.
(d) If any action, proceeding, motion or notice shall be commenced or
filed in respect of the Mortgaged Property in connection with any case under the
Bankruptcy Code (other than a case under the Bankruptcy Code commenced with
respect to POA), Mortgagee shall have the option, exercisable upon notice to
POA, to participate in any such litigation with counsel of Mortgagee's choice.
If an Event of Default shall have occurred and be continuing, Mortgagee shall
have the option of assuming the control of any such litigation and may proceed
in its own name or in the name of POA in connection with any such litigation,
and POA agrees to execute any and all powers, authorizations, consents and other
documents required by Mortgagee in connection therewith. POA shall pay to
Mortgagee all costs and expenses (including reasonable attorneys' fees and
disbursements) paid or incurred by Mortgagee in connection with the
participation in or prosecution or conduct of any such proceedings within five
(5) business days after notice from Mortgagee setting forth such costs and
expenses in reasonable detail. Any such costs or expenses not paid by POA as
aforesaid shall be deemed to be Secured Obligations. POA shall not commence any
action, suit, proceeding or case, or file any application or make any motion, in
respect of the Master Lease, the Ground Lease or any Easement Agreement in any
such case under the Bankruptcy Code (other than a case under the Bankruptcy Code
commenced with respect to POA) without the prior written consent of Mortgagee.
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(e) POA shall, promptly after obtaining knowledge thereof, notify
Mortgagee of any filing by or against the Agency, Lessor or any Grantor of a
petition under the Bankruptcy Code. POA shall thereafter forthwith give notice
of such filing to Mortgagee, setting forth any information available to POA as
to the date of such filing, the court in which such petition was filed, and the
relief sought therein. POA shall, promptly after receipt thereof deliver to
Mortgagee any and all notices, summonses, pleadings, applications and other
documents received by POA in connection with any such petition and any
proceedings relating thereto.
(f) If there shall be filed by or against POA a petition under the
Bankruptcy Code, and POA shall determine to reject or consent to the rejection
of the Master Lease, the Ground Lease or any Easement Agreement pursuant to
Section 365(a) of the Bankruptcy Code, then POA shall give Mortgagee not less
than ten (10) days' prior notice of the date on which POA will (x) apply to the
bankruptcy court for authority to reject the Master Lease, the Ground Lease or
any Easement Agreement, or (y) consent to the rejection thereof, as the case may
be. Mortgagee shall have the right, but not the obligation, to serve upon POA
within such 10-day period a notice stating that (i) Mortgagee demands that POA
assume and assign the Master Lease to Mortgagee pursuant to Section 365 of the
Bankruptcy Code, and (ii) Mortgagee covenants to cure or provide adequate
assurance of prompt cure of all defaults and provide adequate assurance of
future performance of POA's obligations under the Master Lease. If Mortgagee
serves upon POA the notice described in the preceding sentence, POA shall not
seek to reject the Master Lease or consent thereto and shall seek court approval
to comply with the demand provided for in clause i) of the preceding sentence
within thirty (30) days after the notice shall have been given, subject to the
performance by Mortgagee of the covenant provided for in clause ii) of the
preceding sentence.
(g) Effective upon the entry of an order for relief in respect of POA
under the Bankruptcy Code, POA hereby assigns and transfers to Mortgagee a non-
exclusive right to apply to the bankruptcy court under Section 365(d)(4) of the
Bankruptcy Code for an order extending the period during which the Master Lease,
the Agency, Lessor or any Grantor may be rejected or assumed.
(h) Nothing in this Section 2.09 shall, or shall be construed to, limit
----
anything in the SIDA Consent and Agreement, including in Sections 7(i) through
(o) thereof.
Section 2.10. Reasonable Acts. POA shall do any and all acts which, from
the character or use of the Mortgaged Property, may be reasonably necessary to
protect and preserve the security of Mortgagee, the specific enumerations herein
not excluding the general.
Section 2.11. Performance. POA shall faithfully perform, subject to any
applicable grace or cure period provided in the Financing Agreement, each and
every covenant to be
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performed by POA under any Lien or encumbrance upon or affecting the Mortgaged
Property, including the Project Documents, the Permitted Title Encumbrances, the
Permitted Liens and all other mortgages, (sub)leases, agreements, covenants,
easements, conditions, restrictions and other encumbrances which now or
hereafter affect the Mortgaged Property, in law or in equity, unless the failure
to comply with the same would not have a Material Adverse Effect.
Section 2.12. Attorneys. Upon election of Mortgagee so to do, employment
of an attorney is authorized and payment by POA of all reasonable attorneys'
fees, costs and expenses in connection with any action and/or actions (including
the cost of evidence or search of title), which may be brought for the
foreclosure of this Mortgage, and/or possession of the property covered hereby,
and/or for the appointment of a receiver, and/or for the enforcement of any
covenant or right in this Mortgage contained as hereinafter provided shall be
deemed to be Secured Obligations.
Section 2.13. Personal Property. Except as provided herein and in the
Financing Agreement, no portion of the Mortgaged Property which is personal
property may be removed from the Real Property without the prior written consent
of Mortgagee unless POA shall immediately replace such personal property with
similar property of equivalent value on which Mortgagee has a valid first Lien.
Section 2.14. Acceleration upon Sale or Encumbrance. Except as expressly
permitted in the Financing Agreement, upon the sale, transfer, hypothecation,
assignment or encumbrance, whether voluntary, involuntary or by operation of
law, of all or any part of the Mortgaged Property or any interest therein or the
transfer of any interest in POA or a Partner or any other sale, transfer or
disposition not permitted by the Financing Agreement without the prior written
consent of Mortgagee, Mortgagee may, at its sole option (exercised in accordance
with the Financing Agreement), unless such event does not constitute an Event of
Default under the Financing Agreement, by written notice to POA, declare all
Secured Obligations immediately due and payable, except to the extent that such
acceleration by Mortgagee is prohibited by law. However, Mortgagee shall give
prior notice to the Agency before Mortgagee exercises any remedies against the
Agency or its interest in the Mortgaged Property.
ARTICLE 3
Defaults; Remedies of Mortgagee
Section 3.01. Event of Default. (a) The occurrence of an Event of Default
under the Financing Agreement (as such term is defined in the Financing
Agreement), whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or
20
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regulation of any administrative or governmental body, shall constitute an Event
of Default hereunder.
(b) Notwithstanding anything to the contrary herein, in any other Secured
Document or (to the fullest extent permitted by law) under applicable law,
Mortgagee and the other Secured Parties shall not have any obligation to provide
notice to the Agency of any Default or Event of Default, any right to receive
such notice being hereby irrevocably waived; and any failure to provide notice
of any Default or Event of Default to the Agency shall not alter the force and
effect of any Default or Event of Default; provided however, that Mortgagee
shall give prior notice to the Agency before Mortgagee exercises any remedies
against Agency or its interest in the Mortgaged Property.
Section 3.02. Remedies and Acceleration. If an Event of Default shall have
occurred and be continuing, subject to the Financing Agreement, Mortgagee may
declare the principal of and interest on the Senior Secured Notes and all other
Secured Obligations to be immediately due and payable by giving notice to POA,
and such principal, interest and other sums shall thereupon be due. Whether or
not Mortgagee has declared all such amounts immediately due and payable, if an
Event of Default has occurred and is continuing, Mortgagee may, at its option,
in each case to the extent permitted by law, take any of the following actions
in such order or together as Mortgagee shall elect:
(a) With or without notice, and without releasing POA from any obligation
hereunder or under any other Financing Document, Mortgagee may cure any Default
or Event of Default hereunder and, in connection therewith, enter upon the
Mortgaged Property and do such acts and things as directed by Mortgagee, if such
acts and things are in the opinion of Mortgagee necessary or desirable to
protect the security hereof, including appearing in and defending any action or
proceeding purporting to affect the title to the Mortgaged Property, the
security hereof or the rights or powers of Mortgagee hereunder; pay, purchase,
contest or compromise any encumbrance, rent, charge, Lien or claim of Lien as
directed by Mortgagee which, in its sole judgment, is prior or superior hereto
or adversely affects the security hereof; pay any premiums or charges with
respect to insurance required to be carried hereunder; and employ counsel,
accountants, contractors and other appropriate Persons as directed by Mortgagee
which it in its sole discretion deems necessary.
(b) Mortgagee may, by itself or by its agents, in its own name or in the
name of POA (or, if applicable, the Agency), with or without entry on or
possession of the Mortgaged Property, collect and control the rents, issues,
profits, income or proceeds of all or any part of the Mortgaged Property ("Rents
and Profits"), to the exclusion of each Mortgagor and all Persons claiming by,
through or under each Mortgagor.
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(c) Mortgagee may, by itself or by its agents, in its own name or in the
name of POA, or by a receiver, enter and take possession of the Mortgaged
Property or any part thereof, exclude each Mortgagor and all Persons claiming
by, through or under each Mortgagor wholly or partly therefrom, and use, manage,
operate and control the same, conduct the business thereof, and from time to
time and at the expense of POA and of the Mortgaged Property, to the same extent
as POA might do in its own name, incur expenses for taxes, payments in lieu of
taxes, assessments, insurance, maintenance, repairs, replacements, alterations,
additions or improvements as may be determined by Mortgagee, and collect and
receive the Rents and Profits thereof and apply the same to the payment of the
costs and expenses incurred by Mortgagee hereunder or under applicable law, the
remainder to be applied as provided in Section 3.04(b) hereof.
-------
(d) Mortgagee shall be entitled to have a receiver of the Rents and
Profits appointed, without notice to either Mortgagor, without regard to the
adequacy of any security for the Secured Obligations, and without regard to the
solvency of POA or any other Person liable for the payment of the Secured
Obligations.
(e) Mortgagee may commence and maintain an action or proceeding, or
actions or proceedings, in any court of competent jurisdiction to foreclose this
Mortgage against any or all of the Mortgaged Property. Each Mortgagor agrees
that in the event of a foreclosure either by judicial action or proceeding
pursuant to this Section 3.02(e) or by power of sale pursuant to the following
-------
Section 3.02(f), at the election of Mortgagee: (i) this Mortgage may be
-------
foreclosed against either (A) POA's interest under the Master Lease, without
including the Agency's interest under the Ground Lease, in which case the
foreclosure would be subject to the Master Lease and the Agency's interest under
the Ground Lease or (B) the Agency's interest under the Ground Lease, in which
case the foreclosure would also be against POA's interest under the Master Lease
and would terminate the Master Lease; (ii) if Mortgagee elects to foreclose
first against POA's interest under the Master Lease, Mortgagee may at its
election thereafter join the Agency's interest under the Ground Lease in such
foreclosure or, if such foreclosure is concluded, bring a separate, subsequent
foreclosure against the Agency's interest under the Ground Lease; and (iii) any
foreclosure (against POA's interest under the Master Lease separately or POA's
and the Agency's interests under the Master Lease and the Ground Lease together)
shall include such of the Easements, Easement Agreements and other Mortgaged
Property as Mortgagee shall elect.
(f) Mortgagee may choose to utilize the procedures set forth in Article 4
of the New York Real Property Actions and Proceedings Law and commence a non-
judicial foreclosure of this Mortgage by power of sale. To the fullest extent
permitted by law, each Mortgagor waives any right granted pursuant to Section
1421 or any other provision of the New York Real Property Actions and
Proceedings Law to challenge the Mortgagee's election to enforce this Mortgage
by means of such non-judicial foreclosure by power of sale.
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(g) Subject to Section 9.07 of the Financing Agreement in the case of such
enforcement against POA and subject to Section 4.19 hereof in the case of any
such enforcement against the Agency (i) Mortgagee may commence and maintain an
action or proceeding, or actions or proceedings, in any court of competent
jurisdiction to obtain specific enforcement of the covenants of each Mortgagor
under this Mortgage or under the other Secured Documents, or may exercise any
other right, power or remedy available under any of the Secured Documents, at
law or in equity; and (ii) each Mortgagor agrees that such covenants shall be
specifically enforceable by injunction or any other appropriate equitable
remedy.
(h) By itself or by its agents, Mortgagee may exercise any or all of the
remedies available to a secured party under the UCC including:
(i) Either itself, by its agents or by means of a court appointed
receiver, take possession of all or any part of the Mortgaged Property and
exclude therefrom each Mortgagor and all others claiming under either
Mortgagor, and thereafter hold, store, operate, use, manage, maintain and
control, make repairs, replacements, alterations, additions and
improvements to and exercise all rights and powers that either Mortgagor
may have in respect of the Mortgaged Property or any part thereof, or cause
the same to be operated by a Person selected by Mortgagee. In the event
Mortgagee demands or attempts to take possession of the Mortgaged Property
in the exercise of any rights hereunder or under the Secured Documents,
each Mortgagor shall promptly turn over and deliver complete possession
thereof to Mortgagee;
(ii) Without notice to or demand upon either Mortgagor, make such
payments and do such acts as Mortgagee may deem necessary to protect the
security interest granted hereby in the Mortgaged Property, including
paying, purchasing, contesting or compromising any encumbrance, charge or
Lien which is prior or superior thereto, and in exercising any such powers
or authority to pay all expenses incurred in connection therewith;
(iii) Require POA to assemble the Mortgaged Property, or any portion
thereof, at a place designated by Mortgagee and reasonably convenient to
both parties, and promptly to deliver such Mortgaged Property to Mortgagee,
or an agent or representative designated by it, it being understood that
Mortgagee, and its agents, representatives and employees, shall have the
right to enter upon any or all of the Real Property to exercise Mortgagee's
rights hereunder; and
(iv) Sell, lease or otherwise dispose of the Mortgaged Property at
public or private sale, with or without having the Mortgaged Property at
the place of sale, and
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upon such terms and in such manner as Mortgagee may direct, and Mortgagee
may be a purchaser at any such sale.
As to any personal property subject to the UCC included in the Mortgaged
Property, including accounts, contract rights and general intangibles, Mortgagee
may proceed separately against such personal property under the UCC or may
proceed as to both real and personal property in accordance with the rights and
remedies Mortgagee has with respect to real property. In either event, if a
Mortgagor alleges any sale pursuant to this Section 3.02 was not conducted in a
----
commercially reasonable manner, such Mortgagor shall have the burden of proving
such allegation.
(i) Resort to and realize upon the security hereunder and any other
security now or hereafter held Mortgagee in such order and manner as Mortgagee
may, in its sole discretion, determine. Resort to any or all such security may
be taken concurrently or successively and in one or several consolidated or
independent judicial actions or proceedings, or lawfully taken non-judicial
proceedings, or both.
Section 3.03. Sales of Mortgaged Property. (a) Mortgagee may adjourn from
time to time any sale by it to be made under or by virtue of this Mortgage by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales; and, except as otherwise provided by any applicable provision of
law, Mortgagee, without any further notice or publication, may make such sale at
the time and place to which the same shall be so adjourned.
(b) Upon the completion of any sale or sales made pursuant to the terms
hereof, Mortgagee (as attorney-in-fact for each Mortgagor), or an officer of any
court empowered to do so, shall execute and deliver to the accepted purchaser or
purchasers a good and sufficient instrument, or good and sufficient instruments,
conveying, assigning and transferring all estate, right, title and interest in
and to the property and rights sold. Mortgagee is hereby appointed the true,
lawful and irrevocable attorney-in-fact of each Mortgagor, in its name and
stead, to make all necessary conveyances, assignments, transfers and deliveries
of the Mortgaged Property and rights so sold and for that purpose Mortgagee may
execute all necessary instruments of conveyance, assignment and transfer, and
may substitute one or more Persons with like power, Mortgagor hereby ratifying
and confirming that all such attorneys-in-fact or such substitute or substitutes
may lawfully do by virtue hereof. Nevertheless, each Mortgagor shall execute,
acknowledge and deliver to Mortgagee or to such purchaser or purchasers all such
instruments as Mortgagee may deem appropriate to evidence, confirm and ratify
such sale or sales. Any such sale or sales, whether made under the power of sale
herein granted or pursuant to a judgment or decree of foreclosure and sale,
shall operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of such Mortgagor in and to the
properties and rights so sold, and shall be a perpetual bar both at law and in
equity against
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such Mortgagor and against any and all Persons claiming or who may claim the
same or any part thereof by, through or under such Mortgagor.
(c) In the event of any sale made pursuant to the terms hereof, the entire
principal balance of the Senior Secured Notes then outstanding, together with
accrued but unpaid interest thereon, and all premiums due thereon and all other
sums required to be paid by the Issuers pursuant to the Senior Secured Notes,
this Mortgage and the other Secured Documents shall be immediately due and
payable, anything in the Senior Secured Notes, this Mortgage, the other Secured
Documents or otherwise to the contrary notwithstanding.
(d) Upon sale of the Mortgaged Property made pursuant to the terms of this
Mortgage, Mortgagee may bid for and acquire the Mortgaged Property or any part
thereof and in lieu of paying cash therefor may make settlement for the purchase
price by crediting the Secured Obligations against the net sales price, after
deducting therefrom the expense of the sale, the cost of the action or
proceeding and any other sums which Mortgagee is authorized to deduct under this
Mortgage, a judgment of foreclosure and sale or applicable law.
(e) If the Mortgaged Property consists of two or more distinct parcels,
all of such parcels shall be sold as one parcel, unless Mortgagee shall elect
otherwise.
Section 3.04. Application of Proceeds. Subject to the provisions of the
Financing Agreement, the proceeds of any sale made either under the power of the
sale hereby given or under a judgment, order or decree made in any action or
proceeding to foreclose or to enforce this Mortgage, shall, unless otherwise
provided by law, be applied:
(a) first, to the payment (in the following order of priority, unless
otherwise provided by law) of (i) any PILOT Amounts then due and payable under
the PILOT Agreement and unpaid, except any Subordinated PILOT Obligations; (ii)
any transfer or other taxes payable with respect to such sale or the transfer
pursuant to such sale, (iii) all of Mortgagee's costs and expenses of such sale,
including reasonable attorneys' fees of Mortgagee, (iv) all charges, expenses
and advances incurred or made by Mortgagee in order to protect the Lien or
estate created by this Mortgage or the security afforded hereby, including
pursuant to Section 3.02, and (v) interest at the Default Rate on the costs and
----
expenses described in clauses (iii) and (iv) of this Section 3.04(a);
-------
(b) next to the Collateral Agent to be deposited in the Redemption Account
pursuant to Section 3.11(a)(iii) and 3.11(b)(ii) of the Depository Agreement to
be paid applied and distributed as provided in Section 3.11(b)(ii) of the
Depository Agreement, Section 5.10 of the Financing Agreement and any other
applicable provisions of the Financing Agreement, the Depository Agreement and
the other Secured Documents;
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(c) next, to the payment of any other Secured Obligations that remain
unpaid; and
(d) any balance thereof shall be paid to POA, or to whoever shall be
legally entitled thereto (including Mortgagee and any other Secured Party to the
extent that Mortgagee or any other Secured Party holds Liens or claims junior to
this Mortgage), or as a court of competent jurisdiction may otherwise direct.
Section 3.05. Waivers by Mortgagors. To the fullest extent permitted under
applicable law, each Mortgagor for itself and for all Persons claiming by,
through or under it, hereby waives the benefit of and agrees not to plead or
otherwise take advantage of if an Event of Default should occur and be
continuing (a) any applicable present or future stay, extension or moratorium
law, which may affect observance or performance of this Mortgage or any other
Secured Document, (b) any applicable present or future law providing for the
valuation or appraisal of the Mortgaged Property or any portion thereof prior to
the exercise of any right or remedy under or pursuant to the provisions of this
Mortgage or any other Secured Document, (c) any and all applicable present or
future defenses of laches and similar defenses, (d) any and all applicable
present or future statutes of limitations and similar statutes, (e) any and all
rights and equities of redemption after any foreclosure of this Mortgage, (f)
any and all applicable present or future rights to notice of seizure, (g) any
and all applicable present or future rights to have the Mortgaged Property
marshaled upon any foreclosure hereof, (h) any and all applicable present or
future laws that may require Mortgagee to pursue or exhaust its rights or
remedies against either Mortgagor before proceeding against the Mortgaged
Property, against any part of the Mortgaged Property before proceeding against
any other part thereof or against any or all of the Mortgaged Property before
proceeding to collect the Secured Obligations, and (i) subject to Section 9.07
of the Financing Agreement in the case of POA and subject to Section 4.19 hereof
in the case of the Agency, any and all present or future laws that may prohibit
or limit any deficiency judgment after any foreclosure of this Mortgage.
Section 3.06. Rights Cumulative. Mortgagee's rights, powers and remedies
under this Mortgage and the other Secured Documents are cumulative and in
addition to any other rights, powers and remedies provided under the other
Secured Documents, at law or in equity. No delay or omission by Mortgagee shall
impair any such right, power or remedy or be construed to be a waiver of or
acquiescence in any Default or Event of Default.
Section 3.07. Attorney-in-Fact. In addition to all other powers of
appointment granted herein, each Mortgagor irrevocably appoints Mortgagee (with
full power of substitution) as its true and lawful attorney-in-fact, with the
right, power and authority to execute and deliver after the occurrence and
during the continuance of an Event of Default, in its name and stead, all bills
of sale, assignments, release and other proper instruments Mortgagee may deem
necessary to effect the sale, assignment transfer or delivery pursuant to the
terms of this Mortgage, to maintain the Mortgaged Property, to perfect the
security interest therein or to carry out the
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provisions of this Mortgage, including assignments from such Mortgagor to of its
right, title, interest and leasehold estate in, to or under the Master Lease,
the Ground Lease and the Easement Agreements.
Section 3.08. Receipt a Sufficient Discharge. Upon any sale of the
Mortgaged Property or any part thereof or interest therein, whether pursuant to
foreclosure or power of sale or otherwise, the receipt of the officer making the
sale under judicial proceedings by private sale shall be sufficient discharge to
the purchaser for the purchase money and such purchaser shall not be obligated
to see to the application of such funds.
Section 3.09. Exclusive Power of Mortgagee. Mortgagee shall have the sole
and exclusive power to exercise any and all rights and remedies provided for in
this Article 3 , without signature, authorization, joinder, consent or other
-
proof of authority from any Person, including any other Secured Party. If, in
its sole and absolute discretion, Mortgagee (in its capacity as Collateral
Agent) fails or refuses to exercise any or all remedies available under this
Mortgage, no other Person, including any other Secured Party in its capacity as
such, shall have the power to exercise any such right or remedy.
Section 3.10. Other Rights. At the time and in the manner herein provided,
Mortgagee may, at Mortgagee's election upon prior written notice to POA, on
behalf of POA, but without releasing POA from any obligation hereunder or any
other Secured Document and without waiving its right to declare an Event of
Default or impairing any declaration of an Event of Default or election to cause
the Mortgaged Property to be sold or any sale proceeding predicated thereon: (i)
make such payments or do such acts as POA is entitled to do in such manner and
to such extent as Mortgagee may deem necessary to protect the security hereof,
Mortgagee being authorized to enter upon and take possession of the Mortgaged
Property for such purposes; (ii) commence, appear in and/or defend any actions
or proceedings purporting to affect the security hereof or the interests,
rights, powers or duties of Mortgagee hereunder, whether brought by or against
POA or Mortgagee; and (iii) pay, purchase, contest or compromise any Imposition,
Lien, insurance premium (for any insurance required under the Financing
Agreement), claim, debt, charge or encumbrance which in the judgment of
Mortgagee may affect or appear to affect the security of this Mortgage or the
interests, rights, powers and/or duties of Mortgagee hereunder. Mortgagee shall
not be under any obligation to make any of the payments or do any of the acts
referred to in this Section 3.10. Any of the actions referred to in this Section
----
3.10 may be taken by Mortgagee irrespective of whether any notice of Default or
- ----
election to sell has been given hereunder and without regard to the adequacy of
the security for the Secured Obligations. Mortgagee shall not be required to
provide POA with prior written notice under this Section 3.10 if an Event of
----
Default has occurred and is continuing. POA shall, immediately on demand, pay to
Mortgagee all costs of Mortgagee incurred in exercising its rights under this
Section 3.10, together with interest on such costs from the date of
----
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expenditure at a rate per annum equal to the Default Rate. All sums due to
Mortgagee pursuant to this Section shall be deemed to be Secured Obligations.
ARTICLE 4
Miscellaneous
Section 4.01. Further Assurances. If Mortgagee shall request that each
Mortgagor execute any instrument or document (including any supplement hereto,
memorandum of lease, security agreement, financing statement, continuation
statement, certificate of title or estoppel certificate stating the principal
interest and other amounts then due, any known defaults or any other matters
with respect to the Secured Obligations or the Secured Documents) that is
necessary or advisable so that Mortgagee and the other Secured Parties may
obtain the full benefit of the Lien intended to be created hereby and the rights
and powers granted herein. If Mortgagee shall provide a Mortgagor with such
instrument or document, such Mortgagor shall promptly execute, acknowledge,
deliver and file (at POA's cost pursuant to Section 4.12) the same. If such
----
Mortgagor shall not promptly execute and deliver the same, Mortgagee shall have
the right and power to execute, acknowledge, deliver and file (at POA's cost
pursuant to Section 4.12) the same acting on behalf such Mortgagor. Mortgagee
----
shall have the right and power to execute, acknowledge and file (at POA's cost
pursuant to Section 4.12) financing statements and continuation statements
----
acting on behalf of each Mortgagor without such Mortgagor's signature.
Section 4.02. Notices. (a) Unless otherwise specifically provided herein,
all notices, consents, directions, approvals, instructions, requests, demands
and other communications hereunder shall be in writing and shall be served or
delivered as provided in Section 9.02 of the Financing Agreement, except that
all notices from or to the Agency shall be served or delivered as provided in
Section 17 of the SIDA Consent and Agreement.
(b) Mortgagee shall send to the Agency copies of all notices of any
Default or Event of Default hereunder that Mortgagee sends to POA; provided,
however, that any failure to provide notice of any Default or Event of Default
to the Agency shall not alter the force and effect of such Default or Event of
Default.
Section 4.03. Severability. If all or any part of any provision hereof
shall be invalid, illegal or unenforceable, the remaining provisions of this
Mortgage shall continue to be valid and enforceable and not affected thereby and
shall be valid and enforceable to the fullest extent permitted by law.
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Section 4.04. Amendment. Any termination, amendment, supplement, waiver or
modification of any provision hereof shall be in writing, executed by POA and
Mortgagee. Notwithstanding the preceding sentence, any termination, amendment,
supplement, waiver or modification of any provision of Sections 4.19 - 4.22
---- ----
inclusive hereof or any other provision hereof binding or benefitting the
Agency, shall be in writing, executed by Mortgagors and Mortgagee.
Section 4.05. Headings. The headings of the Articles, Sections and
subsections hereof are for convenience and shall not affect the meaning of this
Mortgage.
Section 4.06. Benefit. The parties hereto, their permitted successors and
assigns, but no others, shall be bound hereby and entitled to the benefits
hereof. Without limiting the foregoing, Mortgagee may, at its election, assign,
convey, or transfer all or any part(s) of its right, title or interest hereunder
in connection with any assignment or other transfer of all or any part(s) of its
rights or obligations under the Secured Documents.
Section 4.07. Governing Law. This Mortgage shall be governed by and
construed in accordance with the laws of the State of New York.
Section 4.08. Time of the Essence. Time is of the essence in this Mortgage
with respect to any obligation or covenant of any Mortgagor.
Section 4.09. Consistency with Financing Agreement. Where any obligation
or agreement contained herein conflicts with any obligation or agreement
contained in the Financing Agreement, the obligation or agreement contained in
the Financing Agreement shall govern to the exclusion of such obligation or
agreement contained in this Mortgage. Nothing in this paragraph shall impair
Mortgagee's rights and remedies hereunder if an Event of Default has occurred
and it continuing.
Section 4.10. Interaction with Security Agreements. To the extent that any
Mortgaged Property is personal property in which Mortgagee has a "valid" and
"perfected" security interest as defined in Article of the UCC, where there is
any inconsistency between an obligation or agreement contained in the Security
Agreements and an obligation or agreement contained in this Mortgage, the
provisions of the Security Agreements shall govern.
Section 4.11. Mortgagee's Covenant. Mortgagee covenants that if, as the
result of the exercise of any of Mortgagee's remedies under the Secured
Documents, Mortgagee becomes the holder of any license, permit, franchise,
authorization or agreement (including any Applicable Permit) described in
Section 1.01(g) hereof, including that certain certificate of environmental
----
compatibility and public need issued June 5, 1989 pursuant to Article II of the
Public Service Law (the "Article II Certificate"), Mortgagee shall assume the
duties and
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obligations of POA under such license, permit, franchise, authorization or
agreement, but only to the extent required by law if Mortgagee elects (at its
sole discretion) as a condition to Mortgagee's right to obtain the benefits of
such document; provided however that the duties of Mortgagee pursuant to this
Section 4.11 are intended solely for the benefit of any applicable Governmental
----
Authority (and not for the benefit of POA) and Mortgagee shall have no liability
to POA pursuant to this paragraph. Nothing in this Section 4.11 is intended to
----
limit any of the duties or obligations of POA under this Mortgage or any other
Secured Document.
Section 4.12. Recordation of Mortgage; Payment of Recording and Filing
Fees and Taxes. (a) The Agency shall cause this Mortgage to be recorded in the
Clerk's Office, together with an affidavit by the Agency to the effect that no
mortgage recording tax is due upon this Mortgage.
(b) Each Mortgagor, as appropriate, shall record and file such other
financing statements, continuation statements and other instruments and
documents as are necessary or appropriate to give notice of and protect the
priority of the Liens and security interests created by this Mortgage in all
offices where recondition or filing is necessary or appropriate to give such
notice and protect such priority, together with (if appropriate) an affidavit by
the Agency to the effect that no mortgage recording tax is due thereon.
(c) POA shall pay or cause to be paid any and all recording and filing
fees, mortgage recording taxes and interest and penalties thereon which may be
or may hereafter become due or payable in connection with this Mortgage, such
financing statements, continuation statements or such other instruments or the
recording or filing of any thereof; and, if POA shall fail to pay any such fee,
tax, interest or penalty Mortgagee may, but shall not be obligated to, pay the
same on behalf of POA. POA shall, immediately on demand, pay to Mortgagee any
and all amounts paid by Mortgagee pursuant to this Section 4.12, together with
interest on such amounts from the date of payment at the rate per annum equal to
the Default Rate. All sums due to Mortgagee pursuant to this Section 4.12 shall
be deemed to be Secured Obligations.
Section 4.13. Perfection of Assignment of Rents, Issues and Profits. Each
Mortgagor acknowledges and agrees that, upon recordation of this Mortgage and
the filing and/or recording of any other documents required by law to perfect a
security interest, Mortgagee's interest in the rents, issues and profits of the
Real Property shall be deemed to be fully perfected, "choate" and enforced as to
each Mortgagor and all third parties, including any subsequently appointed
trustee in any case under the U.S. Bankruptcy Code, without the necessity of (i)
commencing a foreclosure action or proceeding with respect to this Mortgage,
(ii) furnishing notice to each Mortgagor or tenants under the Leases, (iii)
making formal demand for such rents, issues and profits, (iv) taking possession
of the Real Property as a mortgagee-in-possession, (v) obtaining the appointment
of a receiver of such rents, issues and profits, (vi)
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sequestering or impounding such rents, issues and profits, or taking any other
affirmative action.
Section 4.14. Mortgage to Constitute Security Agreement. For purposes of
Section 552(b) of the Bankruptcy Code, each Mortgagor and Mortgagee acknowledge
and agree that this Mortgage shall constitute a "security agreement," that the
security interest created by such security agreement extends to property of each
Mortgagor acquired before the commencement of a case in bankruptcy and to all
amounts paid as rents, issues and profits of the Real Property and that such
security interest shall extend to all rents, issues and profits of the Real
Property acquired by the estate after the commencement of a case in bankruptcy.
Section 4.15. Cash Collateral. Each Mortgagor hereby acknowledges and
agrees that all rents, issues and profits of the Real Property are and shall be
deemed to be "Cash Collateral" for purposes of Section 363 of the Bankruptcy
Code in the event that it files a voluntary petition in bankruptcy or is made
subject to any involuntary bankruptcy proceeding. Each Mortgagor may not use
Cash Collateral without the consent of Mortgagee and/or an order of any
bankruptcy court pursuant to Section 363(c)(2) of the Bankruptcy Code, and each
Mortgagor hereby waives any right it may have to assert that such rents, issues
and profits do not constitute Cash Collateral. PILOT Amounts (as defined in the
PILOT Agreement) are not Cash Collateral.
Section 4.16. Right to Take Possession of Rents, Issues and Profits upon
Defaults. Upon or at any time after the occurrence of an Event of Default,
Mortgagee may immediately take possession of all rents, issues and profits of
the Real Property, whether past due, then due or to become due, by delivering a
notice of such Event of Default to POA, without the necessity of Mortgagee
giving notice to the Agency, and without the necessity of Mortgagee entering
upon and taking possession of the Real Property in person, by agent or by a
court-appointed receiver, instituting legal proceedings of any kind or taking
any other affirmative action of any kind, and POA shall thereafter hold all such
rents, issues and profits as trustee for the exclusive benefit of Mortgagee.
After the delivery of a notice of such Event of Default, each tenant of the Real
Property is hereby directed by POA to pay all rents, issues and profits to
Mortgagee or Mortgagee's representatives upon receipt by such tenant of
Mortgagee's written demand therefor, delivered to such tenant personally, by
mail or by delivering such demand to the demised premises of such tenant,
without any liability on the part of such tenant to inquire any further as to
the actual existence of such Event of Default, and POA shall execute and deliver
to the tenants of the Real Property any notices reasonably required to
accomplish this result. POA shall forward to Mortgagee all rents, issues and
profits of the Real Property received by POA after the delivery of a notice of
such Event of Default. The Agency shall also forward to Mortgagee any rents,
issues and profits of the Real Property received by the Agency after the
delivery of any notice of an Event of Default to the Agency. Such rents, issues
and profits shall be applied by Mortgagee: (i) first, to the costs of collecting
the rents, issues and profits, including
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attorney's fees, receiver's fees, premiums on receiver's bonds, (ii) next, at
the election of Mortgagee, to the costs of repairs to the Real Property,
premiums on insurance policies, taxes, assessments, PILOT Amounts due and
payable under the PILOT Agreement (except Subordinated PILOT Obligations) and
other charges on the Real Property, and the costs of discharging POA's
obligations as landlord under the applicable (sub)leases, and (iii) then as
provided in Section 3.04(b). Nothing herein shall be construed as constituting
-------
Mortgagee a "mortgagee-in-possession" in the absence of Mortgagee's taking of
actual possession of the Real Property.
Section 4.17. POA Occupancy After Default. In the event that POA is an
occupant of the Real Property or any part thereof after the occurrence of an
Event of Default, POA agrees to surrender possession thereof to Mortgagee upon
demand, and if POA remains in possession after such demand, such possession
shall be as tenant of Mortgagee at Mortgagee's sufferance, and POA agrees to pay
monthly in advance to Mortgagee such rent for the Real Property or any part
thereof so occupied as Mortgagee may reasonably demand, and in default of so
doing, POA may also be dispossessed by summary proceedings or otherwise.
Section 4.18. Concerning the Mortgagee. Mortgagee shall be afforded in
respect of this Mortgage all of the rights, powers, protections, immunities and
indemnities set forth in Article 4 and Article 5 of the Depositary Agreement
which are afforded to the Collateral Agent thereunder, and the provisions of
Article 4 and Article 5 of the Depositary Agreement which are applicable between
the Collateral Agent and the Issuer thereunder shall inure to the benefit of
Mortgagee in respect to this Mortgage and be binding upon POA in such respect,
in each case as if the same were specifically set forth herein, mutatis
mutandis. In furtherance and not in derogation of such rights, powers,
protections, immunities and indemnities set forth in Article 4 and Article 5 of
the Depositary Agreement:
(a) Mortgagee is authorized to take all such action as is provided to
be taken by it as Mortgagee hereunder and all other action incidental thereto.
As to any matters not expressly provided for herein (including, without
limitation, the timing and methods of realization upon the Mortgaged Property)
Mortgagee shall act or refrain from acting in accordance with written
instructions from the Required Holders or, in the absence of such instructions,
in accordance with its discretion.
(b) Mortgagee shall not be responsible for the existence, genuineness
or value of any of the Mortgaged Property or for the validity, perfection,
priority or enforceability of the Lien of this Mortgage on any of the Mortgaged
Property, whether impaired by operation of law or by reason of any action or
omission to act on its part hereunder. Mortgagee shall have no duty to ascertain
or inquire as to the performance or observance of any of the terms of this
Mortgage by each Mortgagor.
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(c) At any time or times, in order to comply with any legal
requirement in any jurisdiction, Mortgagee may appoint another bank or trust
company or one or more other Persons, either to act as co-agents or co-agents,
jointly with Mortgagee, or to act as separate agent or agents on behalf of
Mortgagee with such power and authority of Mortgagee as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment (which may, in the discretion of Mortgagee, include
extending to such co-agent or separate agent the provisions for the protection
of the Collateral Agent contained in Article 4 and Article 5 of the Depositary
Agreement).
Section 4.19. Limitation of the Agency's Liability. (a) The obligations
and agreements of the Agency contained herein and in any financing statement,
fixture filing or other instrument or document executed in connection herewith
or supplemental hereto shall be deemed the obligations and agreements of the
Agency and not of any members, officers, agents (other than POA) or employee of
the Agency in his or her individual capacity; and the members, officers, agents
(other than POA) and employees of the Agency shall not be liable personally
herein or thereon or be subject to any personal liability or accountability
based upon or in respect hereof or thereof or of any transaction contemplated
hereby. The obligations and agreements of the Agency contained herein or therein
shall not constitute or give rise to an obligation of the State of New York or
of the City of Syracuse, and neither the State of New York nor the City of
Syracuse shall be liable hereon or thereon. Further, such obligations and
agreements shall not constitute or give rise to a general obligation of the
Agency, but rather shall constitute limited obligations of the Agency,
enforceable solely against the Mortgaged Property and the revenues and proceeds
derived by the Agency from the Mortgaged Property, except the Unassigned Rights
and the revenues and proceeds from the Unassigned Rights.
(b) No order or decree of specific performance with respect to any of the
obligations of the Agency hereunder shall be sought or enforced unless:
(i) The party seeking such order or decree shall first have
requested the Agency in writing to take the action sought in such order or
decree of specific performance, and ten days shall have elapsed from the
date of receipt of such request, and the Agency shall have refused to
comply with such request (or if compliance therewith would reasonably be
expected to take longer than ten days, shall have failed to institute and
diligently pursue action to cause compliance with such request) or failed
to respond within such notice period; and
(ii) If the Agency refuses to comply with such request and the
Agency's refusal to comply is based on its reasonable expectation that it
will incur fees and expenses, POA or the party seeking such order or decree
shall have placed in an account with the Agency an amount or undertaking
sufficient to cover such reasonable fees and expenses; and
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(iii) If the Agency refuses to comply with such request and the
Agency's refusal to comply is based on its reasonable expectation that it
or any of its members, officers, agents (other than POA) or employees shall
be subject to potential liability, POA or the party seeking such order or
decree shall (1) agree to indemnify and hold harmless the Agency and its
members, officers, agents (other than POA) and employees against any
liability incurred as a result of its compliance with such demand; and (2)
if requested by the Agency, furnish to the Agency satisfactory security to
protect the Agency and its members, officers, agents (other than POA) and
employees against all liability expected to be incurred as a result of
compliance with such request.
If the Agency shall request any deposit, undertaking, indemnity or security
pursuant to this Section 4.19, (i) POA shall promptly after receipt of such
----
request furnish the same to the Agency, (ii) the Agency shall accept the same
from POA, and (iii) if POA shall fail to furnish the same, the Agency shall
accept the same from the party seeking such order or decree. Any failure to
provide any notice, deposit, indemnity or security to the Agency pursuant to
this Section 4.19 shall not alter the force and effect of any Default or Event
----
of Default.
Section 4.20. POA Indemnification of the Agency. POA and the Agency agree
that the provisions of Section 10.3 "Indemnification" of the Master Lease are
---------------
incorporated herein by reference and shall be applicable, mutatis mutandis, as
between POA and the Agency under and with respect to this Mortgage.
Section 4.21. PILOT Amounts. Pursuant to Section 19 of the SIDA Consent
and Agreement, the PILOT Amounts payable pursuant to the PILOT Agreement (other
than the Subordinated PILOT Obligations as defined in the PILOT Agreement) shall
be treated as being a Lien on the Project superior in rank to the lien of this
Mortgage and the other Collateral Documents.
Section 4.22. SIDA Consent and Agreement. Nothing in this Mortgage shall,
or shall be construed to limit anything in the SIDA Consent and Agreement, and
nothing in the SIDA Consent and Agreement shall be construed to limit anything
in this Mortgage.
Section 4.23. Release of Mortgage; Assignment of Mortgage. (a) If the
Issuers shall well and truly pay and perform the Secured Obligations at the time
and in the manner prescribed in the Secured Documents and shall well and truly
abide by each and every covenant set forth in the Secured Documents, then this
Mortgage shall cease, determine and terminate, except for those provisions
hereof which by their terms survive. Upon such termination, Mortgagee shall, at
POA's request and expense, execute and deliver to POA a release of this Mortgage
in form reasonably requested by POA and reasonably satisfactory to Mortgagee,
34
<PAGE>
provided that such release shall be without representation, warranty or recourse
of any kind whatsoever.
(b) If all of the outstanding Senior Secured Notes are acquired by a
purchaser designated by POA, Mortgagee shall, at POA's and such purchaser's
request and POA's expense, execute and deliver to such purchaser an assignment
of this Mortgage to such purchaser in form reasonably requested by POA and such
purchaser and reasonably satisfactory to Mortgagee, provided that (i) until the
Agency's interests in the Mortgaged Property are reconveyed to POA, any such
assignment shall be consented to by the Agency (provided that the Agency shall
not unreasonably withhold such consent), (ii) any such assignment shall not be
precluded or prohibited by then applicable law, (iii) any such assignment shall
be without representation, warranty or recourse of any kind whatsoever.
(c) Mortgagee shall not have any liability or obligation whatsoever to POA
or any such purchaser (if any) if Mortgagee is not able to deliver this Mortgage
or the Notes upon the execution and delivery of any such release or assignment,
unless such inability is due to Mortgagee's gross negligence or willful
misconduct, except that Mortgagee will prepare a lost note affidavit if such
Notes are lost.
Section 4.24. Lien Law Section 13 Covenant. Each Mortgagor shall receive
the proceeds of the Senior Secured Notes received by it subject to the trust
fund provisions of Section 13 of the New York Lien Law.
Section 4.25. Real Property Law Section 291-f Provisions. Each Mortgagor
agrees that it shall not have the right or power, as against Mortgagee without
its consent, to cancel, abridge or otherwise modify, or to accept prepayments of
installments of rent to become due under, any Lease which has an unexpired term
of not less than five years from the date of the execution and delivery of this
Mortgage. The agreement contained in the preceding sentence is made with
reference to and shall be enforceable in accordance with the provisions of
Section 291-f of the New York Real Property Law.
Section 4.26. Real Property Law Section 254. The rights and remedies of
Mortgagee hereunder shall be in addition to its rights and remedies under the
laws of the State of New York, including its rights and remedies under Section
254 of the New York Real Property Law. In the event of any conflict between the
provisions of this Mortgage and the provisions of said Section 254, the
provisions of this Mortgage shall control.
35
<PAGE>
Section 4.27. Real Property Not Residential Property. This Mortgage is not
a mortgage of real property principally improved or to be improved by one or
more structures containing in the aggregate not more than six residential
dwelling units, each dwelling unit having its own separate cooking facilities.
Section 4.28. Counterparts. This Mortgage may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
36
<PAGE>
IN WITNESS WHEREOF, each Mortgagor has caused this Mortgage to be duly
executed by its duly authorized representative as of the day and year first
above written.
Mortgagor - the Agency
CITY OF SYRACUSE INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Vito Sciscioli
______________________________
Name: Vito Sciscioli
Title: Vice Chairman
Mortgagor - POA
PROJECT ORANGE ASSOCIATES L.P.
By: G.A.S. Orange Associates, LLC
general partner
By: /s/ Douglas Corbett
__________________________
Name: Douglas Corbett
Title: Vice President
<PAGE>
Acknowledgment for:
Mortgagor - the Agency
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF __________ ) ss.:
On this ____ day of __________, in the year 1999, before me, the
undersigned, personally appeared ____________________, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
_______________________
Notary Public
<PAGE>
Acknowledgment for:
Mortgagor - POA
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF __________ ) ss.:
On this ____ day of __________, in the year 1999, before me, the
undersigned, personally appeared ____________________, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
_______________________
Notary Public
<PAGE>
Exhibit A-1
-----------
Property Description
--------------------
Leased Site
-----------
<PAGE>
Exhibit A-2
-----------
Property Descriptions
---------------------
City Easements
--------------
<PAGE>
Exhibit A-3
-----------
List of City Easement Agreements
--------------------------------
<PAGE>
Exhibit A-4
-----------
Property Descriptions
---------------------
Outside Easements
-----------------
<PAGE>
Exhibit A-5
-----------
List of Outside Easement Agreements
-----------------------------------
<PAGE>
Exhibit B
---------
Definitions from Financing Agreement
------------------------------------
"144A Global Note" means a global Note in the form of Exhibit A-I hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of, and registered in the name of, the Depositary Agent or its
nominee that will be issued in a denomination equal to the outstanding principal
amount of the Senior Secured Notes sold in reliance on Rule 144A.
"Accounts" means the accounts established under and defined in the
Depositary Agreement.
"Additional Project Document" means any contract or agreement related to
the construction, testing, maintenance, repair, operation or use of the Project
or the Steam Plant (other than any contract or agreement for or evidencing
Indebtedness) entered into by POA and any other Person subsequent to the date
hereof.
"Adjusted Treasury Rate" means, with respect to any date of redemption, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such date of redemption, plus 0.5%.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling", "controlled by" and "under common control
with" shall have correlative meanings.
"Agency" means SIDA.
"Agency Agreement" means the Agency Agreement and Power of Attorney dated
as of April 5, 1991 between SIDA and Orange L.P.
"Applicable Permit" means any Permit, including any zoning, environmental
protection, pollution, sanitation, the Federal Energy Regulation Commission, the
New York Public Service
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<PAGE>
Commission, safety, siting or building Permit, (a) that is necessary at any
given time to operate, maintain, repair, lease, own or use the Project and the
Steam Plant as contemplated by the Operative Documents, to sell electricity and
steam therefrom, to enter into any Operative Document or to consummate any
transaction contemplated thereby, or (b) that is necessary so that none of POA,
or the Secured Parties nor any Affiliate of any of them may be deemed by any
Governmental Authority to be subject to regulation under the FPA or PUHCA or
under any state laws or regulations respecting the rates or the financial or
organizational regulation of electric utilities solely as a result of the
operation of the Project or the sale of electricity or steam therefrom.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear or Cedel that apply to such transfer or exchange.
"Asset Manager" means Niagara Mohawk Energy Marketing, Inc., a New York
corporation.
"Asset Manager Agreements" means the Asset Management Letter Agreement
dated as of December [6], 1999 between POA and the Asset Manager pursuant to
which the Asset Manager agrees to manage the business operations and finances of
POA, including the administration of the Project Documents and to seek to
maximize the Project's revenues from the Closing Date as the same may be
supplemented or amended from time to time and any energy services management
agreement entered into in connection therewith.
"Asset Manager Consent and Agreement" means the Consent and Agreement dated
as of December 6, 1999 among the Asset Manager, Orange L.P. and the Collateral
Agent relating to the Asset Manager Agreements.
"Assumption Agreement" means the Assumption Agreement in the form of
Exhibit F hereto executed and delivered by Orange L.P. to the Trustee on the
Closing Date currently with the consummation of the Merger.
"Bankruptcy Code" means Bankruptcy Law.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Boiler Guaranty" means the Guaranty Agreement of Century Contractors West,
Inc. units as construction contractor to the Project dated as of April 5, 1991
to the University guaranteeing certain obligations of POA under the Steam Plant
Operating Agreement and assumed by General Electric Company on February 2, 1998.
B-2
<PAGE>
"Business Day" means any day other than a Legal Holiday.
"Canadian Hunter" means Canadian Hunter Exploration Ltd., an Alberta,
Canada corporation.
"Canadian Hunter Agreements" means the Gas Purchase Agreement, the
TransCanada Agreement and the Collateral Assignment of the Firm Service
Agreement.
"Canadian Hunter Consent and Agreement" means the Consent and Agreement
dated as of December 6, 1999 among Canadian Hunter, the Collateral Agent and
Orange L.P. relating to the Gas Purchase Agreement.
"Capital Expenditure Reserve Account" means the account of such name
created under and defined in the Depositary Agreement.
"Capital Expenditure Reserve Required Balance" means an amount equal to:
(1) the aggregate Capital Expenditures budgeted for the next succeeding
twelve-month period (A) as approved by the Independent Engineer and delivered to
the Trustee and the Collateral Agent at least annually and (B) as adjusted by
management and set forth in an Officers' Certificate delivered to the Trustee
and the Collateral Agent six (6) months following each budget approved by the
Independent Engineer plus
(2) $3.5 million until such time as a life extension program for the Steam
Plant is approved by POA and the Independent Engineer, at which time the portion
of the Capital Expenditures Reserve Required Balance required by this clause (2)
shall be reduced to an amount equal to the discounted present value of the
Capital Expenditures contemplated by the approved life extension program for the
Steam Plant (or, in the event of a dispute between the two, the Required Capital
Expenditure Reserve Balance shall be reduced to the discounted present value of
the Capital Expenditures contemplated by the life extension program approved by
the Independent Engineer and then, if the net present value of the Capital
Expenditures contemplated by the life extension program approved by a third
party pursuant to expedited dispute resolution procedures set forth in Section
6.14 of the Depositary Agreement, is lower, the Required Capital Expenditure
Reserve Balance shall be further reduced to such lower amount).
"Capital Expenditures" means:
(1) labor, materials and other direct expenses for any major overhaul
of or major maintenance procedure for the Project or the Steam Plant (including
major maintenance such as turbine overhauls or the refurbishment or replacement
of the steam boilers) which requires
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<PAGE>
significant disassembly or shutdown of the Project or the Steam Plant pursuant
to manufacturers' guidelines or recommendations, engineering or operating
considerations or the requirements of any applicable legal requirement or any
Project Contracts; and
(2) any other expenses that are capitalized on the balance sheet and
qualify as capital expenditures of POA in accordance with GAAP;
provided that:
(A) the "Fired-Hour Fee" payable pursuant to Section 5.10 of the O&M
Agreement shall not constitute a "Capital Expenditure" even if any portion
thereof would be treated as a capital expenditure of POA in accordance with
GAAP, and
(B) amounts expended by POA pursuant to Section 7.01 of the Steam
Plant Operating Agreement to repair, overhaul, refurbish or replace the
Steam Plant shall be deemed to constitute "Capital Expenditures" to the
extent that they would be treated as capital expenditures of POA in
accordance with GAAP if POA owned the Steam Plant.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cedelbank" means Cedelbank, societe anonyme.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of POA to
any "person" (as that term is used in Section 13(d)(3) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or dissolution
of POA; or
B-4
<PAGE>
(3) the first day following the Closing Date on which Permitted
Holders cease to own, directly or indirectly, (a) 50% or more of the total
voting power of the Voting Stock of POA and (b) 85% or more of the total
economic ownership interests in POA.
"Change of Control Offer" shall have the meaning described in Section 3.09
of this Indenture. ----
"Change of Control Payment" shall mean the payment by the Issuers, in cash,
of the Change of Control Offer price equal to 101% of the aggregate principal
amount of the Senior Secured Notes purchased pursuant to Section 3.09 of this
----
Indenture, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date of purchase.
"Change of Control Payment Date" means the date, no earlier than 30 days
and no later than 60 days after a notice of a Change of Control has been sent to
each Holder, wherein the Issuer offers to repurchase the Senior Secured Notes
pursuant to Section 3.09(b) of this Indenture.
-------
"City Easement Agreements" means the easements, licenses, rights of way,
passages and similar agreements described in Exhibit A-3 to the First Mortgage
and the City Easement Assignment and the improvements, appurtenances, fixtures
and additions now or hereafter thereon and relating thereto.
"City Easement Assignment" means the Assignment of Easements dated as of
April 5, 1991 by Orange L.P., as assignor, to the SIDA, as assignee, recorded in
the Clerk's Office on May 3, 1991.
"City Easements" means certain easements located within the City of
Syracuse, New York described in Exhibit A-2 to the First Mortgage granted by the
City Easement Agreements and assigned by the City Easement Assignment.
"Clerk's Office" means the Office of the County Clerk of Onondaga County,
New York.
"Closing Date" means the date of the issuance of the Senior Secured Notes.
"Collateral" means all real and personal property interests which are
subject or are to become subject to the security interests or liens granted by
any of the Collateral Documents. The definition of "Collateral" expressly
excludes (a) the Excluded Accounts, (b) the Steam Plant and any improvements,
accessions and additions thereto and (c) insurance proceeds relating to the
Steam Plant.
B-5
<PAGE>
"Collateral Agent" or "Agent" means U.S. Bank Trust National Association,
as collateral agent for the benefit of the Secured Parties, together with its
successors and assigns.
"Collateral Assignment of the Firm Service Agreement" means the Collateral
Assignment of the Firm Service Agreement dated as of April 5, 1991 between
Canadian Hunter and Orange L.P.
"Collateral Documents" means, collectively, the Depositary Agreement, the
First Mortgage, the Security Agreement, the SIDA Security Agreement, the Pledge
Agreements, the Consents and any other document providing for any lien, pledge,
encumbrance, mortgage or security interest to secure the payment and performance
by SIDA and the Credit Parties of their respective obligations under this
Indenture, the Senior Secured Notes and the Collateral Documents on (i) any or
all of the assets of POA, the ownership interests thereof or (ii) the assets and
contracts constituting or related to the Project.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Reference Treasury Dealer as having a maturity comparable to the
Remaining Average Life of the Senior Secured Notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the Remaining Average Life of such Senior Secured Notes.
"Comparable Treasury Price" means, with respect to any date of redemption,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such date of redemption, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities," or (ii) if such release (or any successor release) is
not published or does not contain such prices on such business day, (A) the
average of the Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of all such Reference Treasury Dealer Quotations.
"Consent" means each of the Asset Manager Consent and Agreement, the
University Consent and Agreement, the University Subordination Agreement, the
SIDA Consent and Agreement, the PILOT Consent and Agreement, the Niagara Mohawk
Consent and Agreement, the TGPC Consent and Agreement, Canadian Hunter Consent
and Agreement, TransCanada Consent and Agreement, and the Operator Consent and
Agreement.
"Contract Termination Event" means:
(i) the occurrence of an early termination event (whether by default
or otherwise) under the Indexed Swap Agreement with respect to which
Niagara Mohawk
B-6
<PAGE>
is required to make a termination payment under the Indexed Swap Agreement
to POA; or
(ii) any event of force majeure under, or the termination of, the Gas
Purchase Agreement with respect to which Canadian Hunter is required to
refund or repay any portion of the lump-sum payment corresponding to the
unused portion of the Maximum Entitlement (as defined in the Gas Purchase
Agreement).
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 9.02 hereof or such other address as to which the
----
Trustee may give notice to the Issuers.
"Covenant" means the Amendment, Release and Covenant Not to Sue dated April
5, 1991 among Kronish Lieb, GAS LP, Adam Victor, Orange L.P. and others pursuant
to which Orange L.P. is authorized and directed to pay Kronish Lieb all amounts
which it is entitled to receive under the Stipulation.
"Credit Parties" means each of the Issuers, POA, each of the Partners, and
each Affiliate of the Issuers, POA or the Partners that is a party to any
Collateral Document.
"Custodian" means, initially, the Trustee, and its successors and assigns
or any other custodian performing similar functions.
"Debt Service Coverage Ratio" means for any period, without duplication,
the ratio of (i) the sum of (A) all revenues (including interest and fee income
but excluding any insurance proceeds and all other similar non-recurring
receipts) of POA for such period, minus (B) the aggregate amount of Operating
and Maintenance Costs of POA for such period, minus (C) all Capital Expenditures
during such period, to (ii) the sum of (A) all principal, premium (if any) and
interest payable with respect to Permitted Indebtedness outstanding for such
period, plus (B) the aggregate amount of overdue principal, premium (if any) and
interest payments owed with respect to Permitted Indebtedness outstanding from
previous periods; all as determined on a cash basis in accordance with GAAP.
"Debt Service Reserve Account" means the account of such name created under
and defined in the Depositary Agreement.
"Debt Service Reserve Letter of Credit" one or more irrevocable, direct pay
letters of credit issued by the Debt Service Reserve LOC Provider in favor of
the Collateral Agent where the account party is not POA.
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<PAGE>
"Debt Service Reserve LOC Provider" means any commercial bank(s) or
financial institution(s) issuing the Debt Service Reserve Letter of Credit,
which institution shall be rated not less than A by S&P and A2 by Moody's.
"Debt Service Reserve Required Balance" means, on the Closing Date,
$6,200,000, and thereafter an amount equal to the aggregate amount of the
principal and interest due on the Senior Secured Notes on the next succeeding
semi-annual scheduled payment date.
"Default" means an event or condition that, with the giving of notice,
lapse of time or failure to satisfy certain specified conditions, or any
combination thereof, would become an Event of Default.
"Default Rate" means 12.5% per annum.
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, in the form of
----
Exhibit A-1 hereto except that such Note shall not bear the Global Note Legend
and shall not have the "Schedule of Exchanges of Interests in the Global Note"
attached thereto.
"Depositary Agent" means, with respect to the Senior Secured Notes issuable
or issued in whole or in part in global form, the Person specified in Section
2.03 hereof as the Depositary Agent with respect to the Senior Secured Notes,
- ----
and any and all successors thereto appointed as depositary hereunder and having
become such pursuant to the applicable provision of this Indenture.
"Depositary Agreement" means the Deposit and Disbursement Agreement, dated
as of the date hereof, between POA, the Trustee and the Collateral Agent.
"Distribution Account" means the account of such name created under and
defined in the Depositary Agreement.
"Distribution Suspense Account" means the account of such name created
under and defined in the Depositary Agreement.
"Drawing Agreement" means the Letter of Credit Drawing Agreement dated as
of March 29, 1991 between TGPC and Orange L.P.
"Easement Agreements" means the City Easement Agreements, the Outside
Easement Agreements and the Outside Easement Lease.
"Easements" means the City Easements and the Outside Easements.
B-8
<PAGE>
"Eminent Domain Proceeds" means all amounts and proceeds (including
instruments) received by POA in respect of any Event of Eminent Domain, after
deducting all reasonable expenses incurred in litigating, arbitrating,
compromising, settling or consenting to the settlement of any claims against the
appropriate Governmental Authority.
"Equipment" means all machinery, apparatus, equipment, fittings, fixtures
and other personal property of every kind and nature whatsoever owned by SIDA or
Orange L.P., or in which SIDA or Orange L.P. has or may hereafter have or
acquire an interest, whether actually now or hereafter located at, upon or about
the Premises or not, and whether in storage or otherwise, wherever they may be
located, or any appurtenance thereto, and used or usable in connection with the
present or future operation and occupancy of all or any part of the property
subject to the First Mortgage, and all building equipment, materials and
supplies or any nature whatsoever owned by SIDA or Orange L.P., or in which SIDA
or Orange L.P. has or may hereafter have or acquire an interest, whether
actually now or hereafter located upon the Premises or not, and whether in
storage or otherwise, wherever they may be located, including power plants,
particle separators, moisture separators, injection systems, gas pipelines,
steam lines, power lines, pumps, control and monitoring equipment, tanks,
boilers and turbines, all of which equipment, including replacements and
additions thereto, shall, to the fullest extent permitted by law and for the
purposes of the First Mortgage, be deemed to be part and parcel of the property
subject to the First Mortgage.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Default" shall have the meaning set forth in Section 5.01 hereof.
----
"Event of Eminent Domain" means any compulsory transfer or taking or any
transfer under threat of compulsory transfer or taking of any material part of
the Collateral or the Project by any Governmental Authority.
"Event of Loss" means an event which causes all or a portion of the Project
to be damaged, destroyed or rendered unfit for normal use for any reason
whatsoever, other than an Event of Eminent Domain or a Title Event.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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<PAGE>
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f) hereof and which are also referred to as the "Series B Notes".
-------
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Excluded Accounts" has the meaning set forth in the Depositary Agreement.
"Facility" means the Project.
"Fair Value"when applied to any property means its fair value to POA, which
may be determined without physical inspection by use of accounting and other
data maintained by, or available to, POA; provided, that POA delivers an
Officers' Certificate specifying the Fair Value of the relevant assets and, in
the event of a transaction in excess of $2.5 million, POA also delivers an
opinion of a nationally recognized expert in the valuation of such assets as to
their Fair Value and that the transaction is fair to POA.
"Final Maturity Date" means the latest stated maturity date of the Senior
Secured Notes.
"Financing Documents" means, collectively, this Indenture, the Assumption
Agreement, the Purchase Agreement, the Collateral Documents, the Registration
Rights Agreement and the Senior Secured Notes.
"First Mortgage" means the Mortgage and Assignment of Rents (First
Mortgage) dated as of December 4, 1999 by SIDA and POA, as mortgagors, to the
Collateral Agent, as mortgagee, to be recorded in the Clerk's Office.
"FPA" means the Federal Power Act, excluding Sections 1-18, 21-30, 202(c),
210, 211, 212, 305(c) and necessary enforcement provision of Part III of the Act
with regard to the foregoing sections.
"Fuel Supply Agreements" means the Canadian Hunter Agreements, the Natural
Gas Transportation Agreements, and any other agreements necessary for or entered
into in connection with the supply of fuel to the Project.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board
B-10
<PAGE>
or in such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on the
date of this Indenture.
"GAS LP" means G.A.S. Orange Partners, L.P., a Delaware limited
partnership.
"GAS Orange" means G.A.S. Orange Associates, L.L.C., a Delaware limited
liability company.
"Gas Purchase Agreement" means (i) the Restated Gas Sale and Purchase
Agreement dated as of March 18, 1991, between POA and Noranda, which was
assigned by Noranda to, and assumed by, Canadian Hunter pursuant to an
Assignment, Amendment and Release Agreement dated on or prior to the Closing
Date among Noranda, Canadian Hunter and Orange L.P. and (ii) the agreements
between Orange L.P. and Canadian Hunter and UPR, respectively, to be entered
into in replacement of the Restated Gas Sale and Purchase Agreement in
accordance with the terms of a letter agreement dated on or prior to the Closing
Date among Orange L.P., Canadian Hunter and UPR as in effect on the date hereof.
"Gas Reserve Account" means the account of such name created under and
defined in the Depositary Agreement.
"Gas Reserve Required Balance" means, at any time, the amount equal to the
Gas Reserve Deficit at such time multiplied by the highest average "Niagara
Border Spot Price" for natural gas (delivered to pipe as stated in U.S. dollars)
at any time during the previous twelve (12) months in the weekly Canadian Price
Report published by Natural Gas Week (on an MMBtu basis).
"Gas Reserve Deficit" means, at any time, the amount that equals (i) the
amount of gas necessary, in the judgment of the Independent Engineer, to operate
the Project through the Final Maturity Date so that electric output of the
Project for such period will average at least 663,000 MWh per year and POA can
meet its obligations to deliver steam under the Steam Contract, less (ii) the
sum of (A) the "Unconsumed Entitlement" (as such term is used in the Gas
Purchase Agreement) at such time plus (B) the unconsumed quantity, at such time,
of any natural gas (in addition to the Unconsumed Entitlement), purchased and
paid for by POA and as to which transportation pursuant to arrangements approved
by the Independent Engineer as being consistent with prudent industry practice
are in place plus (C) the Btu equivalent of energy and associated capacity that
POA has purchased the right to acquire in connection with permitted sales of
natural gas as described in Section 4.18 hereof.
"General Partner" means GAS Orange in its capacity as general partner of
POA.
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<PAGE>
"Global Notes" means, individually and collectively each of the Restricted
Global Notes and the Unrestricted Notes, in the form of Exhibit A-1 and A-2
hereto issued in accordance with the terms hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
-----------
which is required to be placed on all Global Notes issued under this Indenture.
"Governmental Approvals" means all governmental approvals, authorizations,
consents, decrees, permits, waivers, privileges and filings with all
Governmental Authorities required to be obtained for the construction, operation
and maintenance of the Project or the Steam Plant.
"Governmental Authority" means the government of any federal, state,
municipal or other political subdivision in which the Project is located, and
any other government or political subdivision thereof exercising jurisdiction
over the Project or any party to any of the Project Documents, including all
agencies and instrumentalities of such governments and political subdivisions.
"Government Securities" means direct obligations of, or obligations,
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Ground Lease" means the Lease Agreement covering the Premises dated as of
February 27, 1990 between the University, as lessor, and Orange L.P., as lessee,
a memorandum of which dated April 24, 1991 was recorded in the Clerk's Office in
May 23, 1991 in Book 3693 at Page 87 as amended by those three amendatory
letters dated May 1, 1990, June 22, 1990 and August 29, 1990 and as further
amended by the amendment dated December 31, 1990, as further amended by that
Amendment to Lease dated as of December 16, 1992, as the lessee's interest
thereunder was assigned by the Ground Lease Assignment, and as amended and
otherwise affected by the University Consent and Agreement.
"Ground Lease Assignment" means Assignment of the Ground Lease dated as of
April 5, 1991 between Orange L.P., assignor, and the SIDA, as assignee, recorded
in the Clerk's Office on May 3, 1991 in Book 3693 at Page 139.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
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"Holder" means as of any particular time, the Person in whose name a Senior
Secured Note is registered.
"Hot Tap Reimbursement Agreement" means the agreement relating to
Installation of a Hot Tap, Measurement and DAC, dated May 25, 1988, between TGPC
and GAS Inc. as amended by that certain letter agreement, dated August 11, 1988,
and assigned to Orange L.P. by that certain Assignment and Assumption Agreement
dated November 30, 1990 between GAS Inc. and Orange L.P..
"Impositions" means all payments in lieu of taxes (including all payments
due under the PILOT Agreement), taxes (including real estate taxes and transfer,
sales and use taxes), assessments (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof but excluding any water or other utilities to the extent the same
are governed by a contract between POA and the applicable service provider),
rates and charges, excises, levies, license fees, permit fees, inspection fees
and other authorization fees and other charges of any Governmental Authority, in
each case whether general or special, ordinary or extraordinary, foreseen or
unforeseen, of every character (including all interest and penalties thereon),
which at any time may be assessed, levied, confirmed or imposed on or in respect
of, or be a Lien upon the Project, any occupancy, use or possession thereof, the
rents, income, issues and profits therefrom, the Obligations under the Senior
Secured Notes or the Financing Documents, but excluding income, excess profits,
franchise, capital stock, estate, inheritance, succession, gift or similar taxes
of any Secured Party, except to the extent that such taxes of any Secured Party
are imposed in whole or in part in lieu of, or as a substitute for, any taxes
which are or would otherwise be Impositions; all rent and other amounts payable
under the Ground Lease, the Master Lease, the Outside Easement Lease and the
Easement Agreements, and all other amounts payable under any of the other
Project Documents.
"Improvements" means all buildings, structures, pipelines, fixtures,
appurtenances and other improvements, including the Project Pipeline, the
Project, now or hereafter located on the Premises.
"Indebtedness" of any Person means, at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by Senior Secured Notes, debentures, notes or other similar
instruments (excluding "deposit only" endorsements on checks payable to the
order of such Person), (iii) all obligations of such Person to pay the deferred
purchase price of property or services (except accounts payable and similar
obligations arising in the ordinary course of business shall not be included
herein), (iv) all obligations of such Person as lessee under capital leases to
the extent required to be capitalized on the books of such Person in accordance
with GAAP and (v) all obligations of others of the
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type referred to in clause (i) through (iv) above guaranteed by such Person,
whether or not secured by a lien or other security interest on any asset of such
Person.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Independent Engineer" means Stone & Webster Management Consultants, Inc.
or another nationally recognized independent engineering firm with at least the
same standing as Stone & Webster Management Consultants, Inc. in terms of size,
experience and technical expertise with respect to assignment of such nature and
which has been retained as independent engineer by POA.
"Independent Engineer's Base Case Projections" means the base case
projections prepared by the Independent Engineer and included in the Independent
Engineer's Report.
"Independent Engineer's Report" means the Independent Engineer's Report,
dated November 16, 1999, prepared by the Independent Engineer and attached to
the Offering Memorandum as Appendix A.
"Indexed Swap Agreement" means the ISDA Master Agreement and the related
Confirmation each dated as of June 30, 1998 between Orange L.P. and Niagara
Mohawk.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Initial Notes" means $68,000,000 in aggregate principal amount of Senior
Secured Notes issued under this Indenture on the date hereof which are also
referred to as the "Series A Notes".
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"Insurance Consultant" means J&H Marsh & McLennan, Limited, or another
nationally recognized independent insurance consulting firm which is retained by
POA to act as Insurance Consultant for the benefit of the Secured Parties
hereunder.
"Interest Account" means the account of such name created under and defined
in the Depositary Agreement.
"Interest Payment Date" means each March 15 and September 15 commencing
March 15, 2000 and concluding on the Final Maturity Date.
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"Investment" means, with respect to any Person, any investment by such
Person in other Persons (including Affiliates) in the form of direct or indirect
loans (including guarantees of Indebtedness or other obligations), advances
(excluding commission, travel and similar advances to employees made in the
ordinary course of business), or capital contributions, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"Investment Grade Rating" means a rating of "BBB-" or higher from S&P and
"Baa3" or higher from Moody's (or an equivalent rating by another nationally
recognized credit rating agency if none of such corporations is rating the
Senior Secured Notes).
"Issuers" means the POA and Capital Co., and any and all successors
thereto.
"ISO/PE" means the New York Independent System Operator and Power Exchange.
"Kronish Lieb" means Kronish, Lieb, Weiner & Hellman.
"Lease Documents" means the Ground Lease, the Master Lease and any other
lease of property necessary or entered into in connection with the Project.
"Leased Site" means Leased Premises.
"Leased Premises" means the real property described in Exhibit A-1 to the
First Mortgage and the improvements, appurtenances, fixtures and additions now
or hereafter thereon or relating thereto.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Issuers and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means any mortgage, pledge, hypothecation, assignment, mandatory
deposit arrangement with any Person owning Indebtedness of such Person,
encumbrance, lien (statutory or other), preference, priority or other security
agreement of any kind or nature whatsoever which has the substantial effect of
constituting a security interest, including, without limitation, any
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conditional sale or other title retention agreement, any financing statement or
similar instrument under the UCC or comparable law of any jurisdiction, domestic
or foreign.
"Liquidated Damages" shall have the same meaning as in Section 5 of the
Registration Rights Agreement.
"Loss Proceeds" means all net proceeds from an Event of Loss received by
POA, including insurance proceeds or other amounts actually received, except
proceeds of business interruption insurance, on account of an event which causes
all or any portion of the Project to be damaged, destroyed or rendered unfit for
normal use.
"Loss Proceeds Account" means the account of such name created under and
defined in the Depositary Agreement.
"Master Lease" means the Lease and Sublease Agreement dated as of April 5,
1991 between Orange L.P., as lessee, and SIDA, as lessor, a memorandum of which
dated as of April 15, 1991 was recorded in the Clerk's Office on May 3, 1991 in
Book 3693 at Page 149, as amended and otherwise affected by the SIDA Consent and
Agreement.
"Material Adverse Effect" means a material adverse effect on (i) the
financial position or results of operation of the Issuers, (ii) the Collateral
or the validity or priority of any of the Liens on the Collateral under any of
the Collateral Documents, (iii) the ability of the Issuers to pay any of their
payment obligations or to perform any of their other material obligations under
this Indenture, the Senior Secured Notes or any of the other Financing Documents
or under any of the Project Documents to which either Issuer is a party, or (iv)
the ability of the Trustee or the Collateral Agent to enforce any of the payment
obligations of the Issuers, any of the other material obligations of the Issuers
or any of the material rights of the Trustee or the Collateral Agent under this
Indenture, the Senior Secured Notes or any of the other Financing Documents; or
(v) the ability of POA to enforce any of its material rights under any of the
Project Documents.
"Material Project Documents" means the Niagara Mohawk Agreements, the
Partnership Agreement, the Drawing Agreement, the Natural Gas Transportation
Agreements, the Canadian Hunter Agreements, the Boiler Guaranty, the PILOT
Agreement, the Master Lease, the University Agreements, the Easement Agreements,
the Asset Manager Agreements, the Consents and the O&M Agreement.
"Merger" means the merger on the Closing Date of Funding L.P. with and into
Orange L.P. (with Orange L.P. as the surviving partnership) pursuant to the
Merger Agreement.
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<PAGE>
"Merger Agreement" means the Agreement and Plan of Merger dated as of
December 6, 1999 between Funding L.P. and Orange L.P.
"Moody's" means Moody's Investors Service, Inc., a corporation organized
and existing under the laws of the State of Delaware, its successors and
assigns.
"National Flood Insurance Program" means the National Flood Insurance Act
of 1968 and the Flood Disaster Protection Act of 1973 (42 U.S.C. Sections 4001
et seq.)
"Natural Gas Transportation Agreements" means the TGPC Interruptible Gas
Transportation Agreement, the TGPC Firm Gas Transportation Agreement, the
Drawing Agreement and the Hot Tap Reimbursement Agreement.
"NCP Syracuse" means NCP Syracuse, Inc., a Delaware corporation.
"Niagara Mohawk" means the Niagara Mohawk Power Corporation, a New York
corporation.
"Niagara Mohawk Agreements" means the Power Put Agreement and the Indexed
Swap Agreement.
"Niagara Mohawk Consent and Agreement" means the Consent and Agreement
dated as of December 6, 1999 between Niagara Mohawk, Orange L.P. and the
Collateral Agent relating to the Niagara Mohawk Agreements.
"Non-US. Person" means a Person who is not a U.S. Person.
"Noranda" means Noranda Inc., a corporation incorporated pursuant to the
Laws of the Province of Ontario, Canada.
"O&M Agreement" means (i) the Cogeneration Facility Operation and
Maintenance Agreement dated as of November 1, 1998 between Orange L.P. and
Operator and (ii) any subsequent operation and maintenance agreement entered
into by POA with the Operator having terms and conditions that are, in the
opinion of the Independent Engineer, reasonable and customary for agreements of
its type and which are consistent with prudent industry practice.
"Obligations" means all principal, interest, penalties, fees,
indemnifications, reimbursements, damages, premiums, liabilities and other
amounts payable under the documentation governing any Indebtedness.
"Offering" means the offering of the Senior Secured Notes by the Issuers.
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"Offering Memorandum" means that certain offering memorandum dated December
2, 1999 offering the Senior Secured Notes for sale.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Managing Member, the Managing
Partner, the Chief Operating Officer, the Chief Financial Officer, the
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-
President of such Person.
"Officers' Certificate" means a certificate signed on behalf of either
Issuer by Officers of such Issuer or the General Partner, one of whom must be
the principal executive officer or managing member, managing partner, principal
financial officer, the treasurer or principal accounting officer of such Issuer
or the General Partner.
"Operating and Maintenance Costs" means, for any periods, all amounts
disbursed by or on behalf of POA for operation, maintenance (excluding Capital
Expenditures), administration, repair, or improvement of the Project, including,
without limitation, premiums on insurance policies, property and other taxes,
payments under the relevant Lease Documents and under agreements, or options, to
purchase energy and associated capacity in connection with permitted sales of
natural gas, operating and maintenance agreements, leases, royalty and other
land use agreements and fees, expenses, and any other payments required under
the Project Documents (excluding Subordinated Asset Management Charges).
"Operating Budget" means a budget of Operating and Maintenance Costs and
Capital Expenditures with respect to POA and the Project for any given fiscal
year, or part thereof, and prepared in good faith on the basis of estimated
requirements, showing such costs by category for such fiscal year, or part
thereof, and as approved by the Independent Engineer.
"Operative Documents" means the Financing Documents, the Project Documents
and any Additional Project Document.
"Operator" means General Electric International, Inc., a Delaware
corporation, or such other Person with technical expertise and industry standing
of at least that of General Electric International, Inc. as the operator of the
Project pursuant to the O&M Agreement.
"Operator Consent and Agreement" means the Consent and Agreement dated as
of December 6, 1999 among the Operator, the Collateral Agent and Orange L.P.
relating to the O&M Agreement.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 9.05 hereof.
----
The counsel may be an employee of or counsel to the Issuers, any Affiliate of
the Issuers or the Trustee.
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<PAGE>
"Outside Easement Agreements" means the easements, licenses, rights of way,
passages and similar agreements described in Exhibit A-5 to the First Mortgage,
the Outside Easement Assignments and the Outside Easement Lease.
"Outside Easement Assignments" means the Assignment and Assumption of
Easements dated as of April 5, 1991 by O'Brien and Geer, as assignor, to OBG
Technical Services, Inc., as assignee, recorded in the Clerk's Office on May 3,
1991 and the Assignment and Assumption of Easements dated as of April 5, 1991 by
OBG Technical Services, Inc., as assignor, to Orange L.P., as assignee, recorded
in the Clerk's Office on May 3, 1991 in Book 3693 at Page 15.
"Outside Easement Lease" means the Lease Agreement dated as of April 5,
1991 between Orange L.P., as lessor, and SIDA, as lessee, a memorandum of which
dated as of April 5, 1991 was recorded in the Clerk's Office on May 3, 1991 in
Book 3693 at Page 143.
"Outside Easements" means certain easements located outside of the City of
Syracuse, New York described in Exhibit A-4 to the First Mortgage granted
pursuant to the Outside Easement Agreements, assigned to Orange L.P. by the
Outside Easement Assignments and leased by Orange L.P. to SIDA by the Outside
Easement Lease and the improvements, appurtenances, fixtures and additions now
or hereafter thereon and relating thereto.
"Outstanding Notes" means, as of the time in question, all Senior Secured
Notes authenticated and delivered under this Indenture, except (i) Senior
Secured Notes theretofore canceled or required to be canceled under this
Indenture; (ii) Senior Secured Notes for which provision for payment shall have
been made in accordance with this Indenture; and (iii) Senior Secured Notes in
substitution for which other Senior Secured Notes have been authenticated and
delivered pursuant to this Indenture.
"Participant" means, with respect to the Depositary Agent, Euroclear or
Cedelbank, a Person who has an account with the Depositary Agent, Euroclear or
Cedelbank, respectively (and, with respect to The Depository Trust Company,
shall include Euroclear and Cedelbank).
"Partners" means the General Partner and GAS L.P.
"Partnership Agreement" means the Second Amended and Restated Agreement of
Limited Partnership of Orange L.P. dated as of December 16, 1992, as amended,
among the General Partner and GAS L.P.
"Partnership Interest Purchase Agreement" means the Purchase and Sale
Agreement dated as of July 29, 1999, as amended, among GAS Orange, as purchaser,
and NCP Syracuse and SOP, as sellers.
B-19
<PAGE>
"Payment Date" means any Interest Payment Date or Principal Payment Date.
"Permit" means any action, approval, consent, waiver, exemption, variance,
franchise, order, permit, authorization, right of license of or from a
Governmental Authority.
"Permitted Holders" means Adam H. Victor, the Victor Family Irrevocable
Trust and their respective Permitted Transferees.
"Permitted Indebtedness" means:
(1) the Senior Secured Notes;
(2) Indebtedness incurred to finance the making of capital improvements to
the Project required to maintain compliance with applicable law or anticipated
changes therein; provided that no such Indebtedness may be incurred unless at
the time of such incurrence (i) no Default or Event of Default has occurred and
is continuing, (ii) the Independent Engineer confirms as reasonable a
certification by POA (containing customary qualifications) that the proposed
capital improvements are reasonably expected to enable the Project to comply
with applicable or anticipated legal requirements, (iii) the calculations of POA
demonstrate that, after giving effect to the incurrence of such Indebtedness,
the projected Debt Service Coverage Ratio of POA (x) for the next four
consecutive fiscal quarters, commencing with the quarter in which such
Indebtedness is incurred, taken as one annual period, and (y) for each
subsequent fiscal year through the Final Maturity Date (treated as a single
accounting period), will be an average of not less than 1.4 to 1 for the entire
period and not less than 1.35 to 1 for any such fiscal year, and (iv) the Rating
Agencies confirm that the incurrence of such Indebtedness will not result in a
Rating Downgrade;
(3) Indebtedness in respect of any letter of credit under the Drawing
Agreement in an aggregate principal amount outstanding at no time in excess of
$700,000;
(4) Indebtedness incurred to finance the purchase price of tangible movable
assets which are not essential to the operation of the Project or the Steam
Plant and with an aggregate principal amount not in excess of $500,000 any time
outstanding;
(5) promissory notes issued to NCP Syracuse and SOP pursuant to Section
6.10(e) of the Partnership Interest Purchase Agreement; and
(6) the Project Documents or any rights or obligations thereunder that may
be construed to be Indebtedness.
"Permitted Investments" means an Investment in any of the following:
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(1) direct obligations of the Department of the Treasury of the United
States of America;
(2) obligations, representing full faith and credit of the United States of
America, of any of the following federal agencies: Export-Import Bank, Farmers
Home Administration, General Services Administration, U.S. Maritime
Administration, Small Business Administration, Government National Mortgage
Association (GNMA), U.S. Department of Housing & Urban Development (PHA's) and
Federal Housing Administration;
(3) obligations issued or fully guaranteed by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof and, at the time of the acquisition, having one of the
two highest ratings obtainable from either S&P's or Moody's;
(4) certificates of deposit and Eurodollar time deposits, bankers'
acceptances and overnight bank deposits, in each case with any domestic or
foreign commercial bank having capital and surplus in excess of $250.0 million;
(5) notes, bonds, collateralized mortgage obligations or other evidences of
indebtedness rated "AAA" by S&P's and "Aaa" by Moody's issued by the Federal
Home Loan Bank, the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation;
(6) commercial paper rated in any one of the two highest rating categories
by Moody's or S&P's;
(7) investment agreements with banks (foreign and domestic),
broker/dealers, and other financial institutions rated at the time of bid in any
one of the three highest rating categories by Moody's and S&P's;
(8) repurchase agreements with banks (foreign and domestic),
broker/dealers, and other financial institutions rated at the time of bid in any
one of the three highest rating categories by Moody's and S&P's, provided, (a)
collateral is limited to the securities specified in clauses (1) through (5)
above, (b) the margin levels for collateral must be maintained at a minimum of
102% including principal and interest, (c) the Trustee shall have a first
perfected security interest in the collateral, (d) the collateral will be
delivered to a third party custodian, designated by POA, acting for the benefit
of the Trustee and all fees and expenses related to collateral custody will be
the responsibility of POA, (e) the collateral must have been or will be acquired
at the market price and marked to market weekly and collateral level shortfalls
cured within 24 hours, (f) unlimited right of substitution of collateral is
allowed provided that substitution of collateral
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must be permitted collateral substituted at a current market price and
substitution fees of the custodian shall be paid by POA;
(9) asset-backed securities having the highest rating obtainable from
either S&P's or Moody's;
(10) forward purchase agreements delivering securities specified in
clauses (1) and (6) above with banks (foreign and domestic), broker/dealers, and
other financial institutions maintaining a long-term rating on the day of bid no
lower than investment grade by both S&P's and Moody's (such rating may be at
either the parent or subsidiary level); and
(11) money market funds rated "AAAm" or "AAAm-G" or better by S&P's and
other financial funds investing exclusively in investments of the types
described in clauses (1) through this clause (11) of this definition.
"Permitted Lien" means, collectively:
(1) Liens to secure Indebtedness described in clauses (2) or (4) of the
definition of Permitted Indebtedness on the assets financed with the proceeds of
such Indebtedness;
(2) Liens under the University Collateral Documents, provided the same are
subordinate to the Liens under the Collateral Documents;
(3) mechanic's, workmen's, materialmen's, supplier's, construction or
other like Liens arising in the ordinary course of business that in each case,
have not become the subject of foreclosure or any other action or proceeding and
for which adequate reserves have been established under generally accepted
accounting principles;
(4) servitudes, easements, rights-of-way, restrictions, minor defects or
irregularities in title and such other encumbrances against real property or
interests therein, which do not secure any monetary obligation, and which are of
a nature generally existing with respect to property of a character similar in
character and use to the property that is subject thereto and which do not
individually or in the aggregate with other Permitted Liens under this clause
(4) and clauses (5) and (6) below materially interfere with the use thereof in
the business of POA or materially adversely affect the value thereof;
(5) other Liens incidental to the conduct of POA's business or the
ownership of properties and assets which do not secure any monetary obligation
(other than vendor's liens for accounts payable with respect to the acquisition
of the property in question in the ordinary course of business and liens for
taxes, assessments or governmental charges which are either not yet due or which
are being diligently contested in good faith by appropriate proceedings and for
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which adequate reserves are established in accordance with GAAP), and which do
not individually or in the aggregate with other Permitted Liens under this
clause (5) or clause (4) above or clause (6) below materially interfere with the
use thereof in the business of POA or materially adversely affect the value
thereof;
(6) the Permitted Title Encumbrances;
(7) Liens to secure the Senior Secured Notes; and
(8) Liens on cash and Permitted Investments and securities
entitlements with respect thereto to secure Indebtedness described in clause (3)
of the definition of Permitted Indebtedness.
"Permitted Title Encumbrances" means (i) the Liens and encumbrances
described in Schedule B of the Leasehold Loan Policy of Title Insurance No.
5399-25256 dated December 6, 1999 issued by the Title Company; and (ii) the
University Mortgages and the University Security Agreements, provided that the
same are subordinate to the First Mortgage pursuant to the University
Subordination Agreement.
"Permitted Transferees" shall mean with respect to any Person: (i) in the
case of any Person who is a natural person, such individual's spouse or children
(natural or adopted), any trust for such individual's benefit or the benefit of
such individual's spouse or children (natural or adopted), or any corporation or
partnership in which the direct and beneficial owner of all of the equity
interest in such Person or such individual's spouse or children (natural or
adopted) or any trust for the benefit of such persons; (ii) in the case of any
Person who is a natural person, the heirs, executors, administrators or personal
representatives upon the death of such Person or upon the incompetency or
disability of such Person for purposes of the protection and management of such
individual's assets; (iii) in the case of any Person who is not a natural person
(other than a trust), any Affiliate of such Person; and (iv) in the case of the
Victor Family Irrevocable Trust, its beneficiaries on the Closing Date.
"Person" means any individual, sole proprietorship, corporation,
partnership, joint venture, limited liability partnership, limited liability
company, trust, unincorporated association, institution, Governmental Authority
or any other entity.
"PILOT Agreement" means the Payment in Lieu of Tax Agreement dated as of
April 5, 1991, among the City of Syracuse, Orange L.P. and SIDA as amended and
otherwise affected by the PILOT Consent and Agreement.
"PILOT Consent and Agreement" means the Consent and Agreement dated as of
December 6, 1999 among Orange L.P., the City of Syracuse, SIDA and the
Collateral Agent
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for and on behalf of the Secured Parties, relating to the PILOT Agreement, to be
recorded in the Clerk's Office.
"Pledge Agreements" means (i) the Pledge and Security Agreement, dated as
of December 6, 1999 among POA, GAS Orange, the Trustee and the Collateral Agent
(ii) the Pledge and Security Agreement, dated as of December 6, 1999 among POA,
GAS LP, the Trustee and the Collateral Agent (iii) the Pledge and Security
Agreement, dated as of December 6, 1999 among GAS L.P., G.A.S. Alternatives
Systems, Inc. the Trustee and the Collateral Agent and (iv) the Pledge and
Security Agreement, dated as of December 6, 1999 among GAS LP, G.A.S./Orange
Development, Inc., the Trustee and the Collateral Agent.
"Power Put Agreement" means the Power Put Agreement, dated as of September
19, 1986 between Orange L.P. and Niagara Mohawk Power Corporation.
"Premises" means the Leased Premises and the Easements.
"Principal Account" means the Account of such name created under and
defined in the Depositary Agreement.
"Principal Payment Date" when used with respect to any Senior Secured Note
means the date on which all or a portion of the principal of such Senior Secured
Note becomes due and payable as provided therein or in this Indenture, whether
on a scheduled date for payment of principal at a Redemption Date, the Final
Maturity Date, a date of declaration of acceleration, or otherwise.
"Private Placement Legend" means the legend set forth in Section 2.06(g)(i)
----------
to be placed on all Senior Secured Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"Project" means an 80 megawatt (net) gas fired cogeneration power plant
(including the electric transmission line and the Project Pipeline) (but
excluding the Steam Plant and related facilities and improvements), together
with all buildings, structures or other improvements erected on the Leased
Premises and the Easements, all alterations thereto or replacements thereof, all
fixtures, attachments, appliances, equipment, machinery and other articles
attached thereto or used in connection therewith and all parts which may from
time to time be incorporated or installed in or attached thereto, all contracts
and agreements for the purchase or sale of commodities or other personal
property related thereto, all Lease Documents of real or personal property
related thereto, and all other real and tangible and intangible personal
property owned by POA or SIDA and placed upon or used in connection with the
electric and steam generation plant, electric transmission line and the Project
Pipeline built upon the Leased Premises and the Easements.
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"Project Documents" means the Material Project Documents, the Fuel Supply
Agreements, other Lease Documents and any other material agreement or document
relating to the development, construction or operation of the Project or the
Steam Plant.
"Project Pipeline" means the gas pipeline and related facilities connecting
the Project to the TGPC pipeline referred to in the Natural Gas Transportation
Agreements.
"Project Revenues" means all income and receipts of POA derived from the
ownership or operation of the Project, including payments due POA under the
Niagara Mohawk Agreements, the Canadian Hunter Agreements or the O&M Agreement,
proceeds of any business interruption or other insurance, income derived from
the sale or use of electric energy or steam transmitted or distributed by the
Project, together with any receipts derived from the sale of natural gas and any
other property pertaining to the Project or incidental to the operation of the
Project, all as determined in conformity with cash accounting principles, the
investment income on amounts in the Accounts established under the Depositary
Agreement, the proceeds of any insurance or condemnation awards relating to the
Project and proceeds from the Collateral Documents, and any payments to POA (to
the extent not included within other items listed in this definition) under the
Master Lease, but not including sums paid to POA in satisfaction of a
contractual obligation to indemnify POA for third party liability to the extent
such sums do not exceed the actual damage, loss or cost suffered by POA in
connection therewith.
"PURPA" means the Public Utility Regulatory Policies Act of 1978.
"PUHCA" means the Public Utility Holding Company Act of 1935.
"Purchase Agreement" means the Purchase Agreement, dated as of December 2,
1999 between the Issuers and the Initial Purchaser.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A of
the Securities Act.
"Rating" means the rating of the Senior Secured Notes by the Rating
Agencies.
"Rating Agency" means either Moody's or S&P.
"Rating Downgrade" means a lowering by the Rating Agencies of then current
credit ratings of the Senior Secured Notes.
"Redemption Account" means the Account of such name created under and
defined in the Depositary Agreement.
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<PAGE>
"Redemption Date" means the date on which the Issuers redeem or shall
redeem any Senior Secured Notes in accordance with this Indenture.
"Reference Treasury Dealer" means any nationally recognized primary U.S.
Government securities dealer in New York City selected by POA.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any date of redemption, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such date of redemption.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of December 6, 1999, by and among the Issuers and the Initial
Purchaser.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Senior
Secured Note in the form of Exhibit A-1 hereto bearing the Global Note Legend
and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary Agent or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Note upon expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Senior
Secured Note in the form of Exhibit A-2 hereto bearing the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary Agent or its nominee, issued in a denomination equal to the
outstanding principal amount of the Senior Secured Notes initially sold in
reliance on Rule 903 of Regulation S.
"Remaining Average Life" means, with respect to any Senior Secured Note,
the principal of which is to be redeemed (the "Called Principal"), the number of
years (calculated to the nearest one-twelfth year) obtained by dividing (i) such
Called Principal into (ii) the sum of the products obtained by multiplying (a)
the principal component of each Remaining Scheduled Payment (as defined below)
with respect to such Called Principal by (b) the number of years (calculated to
the nearest one-twelfth year) that will elapse between the date on which such
Called Principal is to be redeemed (the "Settlement Date") and the scheduled due
date of such Remaining Scheduled Payment. For purposes of this definition, the
term "Remaining Scheduled Payments" means, with respect to the Called Principal
of any Senior Secured Note,
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<PAGE>
all payments of such Called Principal and interest thereon that would be due
after the Settlement Date with respect to such Called Principal if no payment of
such Called Principal were made prior to its scheduled due date.
"Required Holders" means, at any time, Persons that at such time hold not
less than a majority in aggregate principal amount of the Outstanding Notes.
"Responsible Officer" means, with respect to knowledge of any default under
this Indenture, the chief executive officer, president, managing member,
managing partner, chief financial officer, general counsel, principal accounting
officer, treasurer, or any vice president of POA or the General Partner, as
applicable, or other officer of such corporation who in the normal performance
of his or her operational duties would have knowledge of the subject matter
relating to such default.
"Responsible Trust Officer" when used with respect to the Trustee or the
Collateral Agent, means any officer within the Corporate Trust Office of the
Trustee (or any successor group of the Trustee) including any Managing Director,
Vice President, Assistant Vice President, Trust Officer, Secretary, Assistant
Secretary or Assistant Treasurer or any other officer of the Trustee or the
Collateral Agent customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Payment" means, with respect to any Person, (i) the declaration
and payment of distributions, dividends, the issuance of Equity Interests in
such person or any other payment in respect of any Equity Interests made in
cash, property, obligations or other notes or (ii) the making of any Investment
in, including any loans or advances to, any Affiliate; provided, however, that
"Restricted Payment" shall not include (x) payments under any of the Project
Documents for services rendered or (y) payments of a distribution by Funding
L.P. to GAS Orange on the Closing Date with a portion of the net proceeds of the
issuance of the Senior Secured Notes in an aggregate amount not to exceed
$48,100,000 or (z) amounts paid from the Stipulation Reserve Account.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
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<PAGE>
"Revenue Account" means the Account of such name created under and defined
in the Depositary Agreement.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"S&P" means Standard & Poor's Rating Services, a division of McGraw-Hill
Companies, Inc., a corporation organized and existing under the laws of the
State of New York, its successors and assigns.
"Sale and Leaseback Transaction" means any arrangement with any Person
providing for the leasing by POA of any real or tangible personal property,
which property has been or is to be sold or transferred by POA to such Person in
contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" means the Holders, the Trustee and the Collateral Agent.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement, dated as of December 6,
1999 between POA and the Collateral Agent.
"Senior Secured Notes" has the meaning assigned to it in the preamble to
this Indenture.
"Senior Collateral Documents" means the First Mortgage, the Security
Agreement and the SIDA Security Agreement.
"SIDA" means the Syracuse Industrial Development Authority, a public
benefit corporation of the State of New York.
"SIDA Consent and Agreement" means the Consent and Agreement dated as of
December 6, 1999 among Orange L.P., SIDA and the Collateral Agent for and on
behalf of the Secured Parties, to be recorded in the Clerk's Office relating to
the Master Lease and the Lease Documents.
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<PAGE>
"SIDA Security Agreement" means the Security Agreement dated as of December
6, 1999 between SIDA and the Collateral Agent.
"SOP" means Syracuse Orange Partners, L.P., a Delaware limited partnership.
"Steam Contract" means the Steam Contract, dated as of February 27, 1990
between Orange L.P. and Syracuse University as amended by those certain letter
agreements dated May 1, 1990, June 22, 1990, August 29, 1990, and an amendment
dated December 31, 1990.
"Steam Plant" means the University's existing stream generation facility as
more particularly defined in the Steam Contract.
"Steam Plant Operating Agreement" means the Operating Agreement dated as of
February 27, 1990 between Orange L.P. and the University, as amended by the
letter agreement dated May 1, 1990.
"Stipulation" means the Stipulation dated November 14, 1994 and Order of
the Bankruptcy Court dated December 8, 1994 among Kronish Lieb, Adam Victor and
GAS LP.
"Stipulation Reserve Account" means the Account of such name created under
and defined in the Depositary Agreement.
"Subordinated Asset Management Fees" means fees and other amounts payable
to the Asset Manager pursuant to the Asset Management Agreements and the Asset
Manager Consent and Agreement.
"Subordinated Asset Management Fee Account" means the Account of such name
created under and defined in the Depositary Agreement."
"Subordinated Collateral Documents" means the University Collateral
Documents.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person or a combination
thereof.
"TGPC" means Tennessee Gas Pipeline Company, a Delaware corporation.
B-29
<PAGE>
"TGPC Consent and Agreement" means the Consent and Agreement dated as of
December 6, 1999 among TGPC, Orange L.P. and the Collateral Agent relating to
the Natural Gas Transportation Agreements.
"TGPC Firm Gas Transportation Agreement" means that certain Firm Natural
Gas Transportation Agreement dated March 29, 1991 between Orange L.P. and TGPC.
"TGPC Interruptible Gas Transportation Agreement" means the certain Gas
Transportation agreement dated as of November 19, 1987 between TGPC and Gas
Alternative Systems, Inc., as amended by that certain letter agreement dated as
of October 4, 1988, and as assigned by Gas Alternative Systems, Inc. to Orange
L.P.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA.
"Title Company" means Ticor Title Insurance Company.
"Title Event" means the existence of any defect of title or lien or
encumbrance on the Project (other than certain Permitted Liens) in effect on the
Closing Date that entitles the Collateral Agent to make a claim under the policy
or policies of title insurance issued to it pursuant to the Financing Documents
or that entitles POA to make a claim under any policy or policies of title
insurance held by it.
"Title Event Proceeds" means all amounts and proceeds (including
instruments) received by the Collateral Agent or POA in respect of any Title
Event.
"TransCanada" means TransCanada Pipelines Ltd., a Canadian company.
"TransCanada Agreement" means the Firm Service Contact, dated as of October
11, 1990 between TransCanada and Canadian Hunter.
"TransCanada Consent and Agreement" means the Consent and Agreement dated
as of December 6, 1999 among TransCanada, Canadian Hunter, Orange L.P. and the
Collateral Agent relating to the TransCanada Agreement.
"Treasury Rate" means, with respect to any date of redemption, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such date of redemption.
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<PAGE>
"Trustee" means the Trustee named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"UCC" means the New York Uniform Commercial Code.
"Unassigned Rights" means (i) the rights of the SIDA granted under the
Master Lease pursuant to Section 9.1(a)(3), 9.2(a)(3), 10.4 and 10.5 thereof,
(ii) the rights of the SIDA under Sections 2.2(f), 2.2(g), 2.4, 3.1, 4.1(b),
4.4, 6.2, 7.1(a), 7.1(b), 8.3, 10.2, 10.3 and 10.9 of the Master Lease and
monies due and to become due to the SIDA for its own account or to the members,
directors, officers and employees of the SIDA for their own account pursuant to
Section 7.1(a), 7.1(b), 8.3, 8.4, 10.3 and 10.9 of the Master Lease, (iii) the
monies due as payments in lieu of taxes pursuant to Section 8.2(a)(4) of the
Master Lease and (iv) the right to enforce the foregoing pursuant to Article XII
of the Master Lease. Notwithstanding the preceding sentence, to the extent the
obligations of POA under the sections of the Master Lease listed above do not
relate to the payment of monies to the SIDA for its own account or to the
members, officers, agents (other than the SIDA) and employees of the SIDA for
their own account, such obligations, upon assignment of the Master Lease to
Collateral Agent pursuant to the Financing Documents, shall be deemed to and
shall constitute obligations of POA to the SIDA and Collateral Agent, jointly
and severally.
"University" means Syracuse University.
"University Agreements" means the Ground Lease, the Steam Contract, the
Steam Plant Operating Agreement, the University Easement Agreements, the
University Consent and Agreement and the University Subordination Agreement.
"University Collateral Documents" means the University Facility Mortgage,
the University Pipeline Mortgage and the University Security Agreements.
"University Consent and Agreement" means the Consent and Agreement dated as
of December 6, 1999 among Orange L.P., the University and Collateral Agent for
and on behalf of the Secured Parties relating to, among other things, the Ground
Lease and the Steam Contract, to be recorded in the Clerk's Office.
"University Easement Agreements" means the City Easement Agreement granted
by the University described in item 2 of Exhibit A-3 to the First Mortgage and
the Outside Easements granted by the University described in items 15 and 16 of
Exhibit A-5 to the First Mortgage.
B-31
<PAGE>
"University Facility Mortgage" means the Mortgage and Security Agreement
(A), dated as of April 5, 1991, recorded in the Clerk's Office on May 3, 1991 in
Book 5857 at Page 221, as amended by the First Amendment of Mortgage and
Security Agreement (A), dated as of December 24, 1992, recorded in the Clerk's
Office on January 7, 1993, in Book 6731 at Page 254, given by SIDA and POA to
the University relating to the Project and securing POA's obligations to the
University under the Steam Contract, the Steam Plant Operating Agreement and the
Ground Lease up to a maximum of $20,000,000 principal amount of such
obligations.
"University Pipeline Mortgage" means the Mortgage and Security Agreement
(B), dated as of April 5, 1991, recorded in the Clerk's Office on May 3, 1991 in
Book 5857 at Page 249, as amended by the First Amendment of Mortgage and
Security Agreement (B), dated as of December 24, 1992, recorded in the Clerk's
Office on January 7, 1993 in Book 6731 at Page 274, given by SIDA to the
University relating to the Project Pipeline and securing POA's obligation to the
University relating to access to the Project Pipeline upon termination of the
Steam Contract and the Steam Plant Operating Agreement up to a maximum of
$10,000,000 principal amount of such obligations.
"University Security Agreements" means two Security Agreements dated as of
April 5, 1991 among POA, SIDA and the University and Orange L.P.
"University Subordination Agreement" means the Subordination Agreement,
dated as of December 6, 1999 among POA, the University and the Collateral Agent
for and on behalf of the Secured Parties.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Senior Secured Note in
the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary Agent, representing a series of Senior Secured Notes that do
not bear the Private Placement Legend.
"UPR" means Union Pacific Resources Inc.
"U.S. Person" means a U.S. person as defined in Rule 902(o) of Regulation
S.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors or otherwise entitled to vote in the determination of the management
of such Person.
B-32
<PAGE>
EXHIBIT 4.5
EXECUTION COPY
SECURITY AGREEMENT
Dated as of December 6, 1999
Between
PROJECT ORANGE FUNDING, L.P.,
a Delaware limited partnership,
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Agent for the Secured Parties
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions.......................................................................... 2
-
Section 2. Assignment, Pledge and Grant of Security Interest.................................... 2
-
Section 3. Events of Default.................................................................... 7
-
Section 4. Remedies............................................................................. 7
-
Section 5. Remedies Cumulative; Delay Not Waiver................................................ 9
-
Section 6. Covenants and Representations........................................................ 10
--
Section 7. Notices.............................................................................. 11
--
Section 8. Further Assurances................................................................... 12
--
Section 9. Place of Perfection; Records......................................................... 12
--
Section 10. Covenants of Grantor................................................................. 13
--
Section 11. Continuing Assignment and Security Interest; Transfer of Senior Secured Notes........ 13
--
Section 12. Severability......................................................................... 13
--
Section 13. Successors and Assigns............................................................... 13
--
Section 14. Headings............................................................................. 14
--
Section 15. Governing Law........................................................................ 14
--
Section 16. References to Other Documents........................................................ 14
--
Section 17. Agreement for Security Purposes...................................................... 14
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Section 18. Scope of Liability................................................................... 14
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Section 19. Regarding the Agent.................................................................. 14
--
</TABLE>
<PAGE>
SECURITY AGREEMENT
This Security Agreement ("Agreement") dated as of December 6, 1999, is
entered into by and between the Project Orange Funding, L.P., a Delaware limited
partnership, (together with its successors, including Project Orange Associates,
L.P., a Delaware limited partnership, as the survivor of the merger of Project
Orange Funding L.P. with and into Project Orange Associates, L.P. concurrently
with the issuance and sale of the Senior Secured Notes referred to below, the
"Grantor") and U.S. Bank Trust National Association, ("Agent"), as Agent for the
benefit of the holders from time to time ( "Holders" and, together with the
Agent and the Trustee, the "Secured Parties") of the Senior Secured Notes issued
pursuant to the Financing Agreement described below.
PREFACE
Grantor intends to operate the Project (as defined in the Financing
Agreement described below) located in Syracuse, Onondaga County, New York.
Grantor, Project Orange Capital Corp., a Delaware corporation, ("Capital
Co." and together with Grantor, the "Issuers") and U.S. Bank Trust National
Association, as Trustee (the "Trustee") and as Agent, have entered into that
certain Indenture dated as of December 6, 1999 (the "Financing Agreement") for
the issuance by Grantor of $68 million principal amount of its 10.5% Senior
Secured Notes due 2007 (the "Series A Notes").
The Holders of the Series A Notes will have the registration rights set
forth in the Registration Rights Agreement dated as of December 6, 1999 between
the Issuers and Donaldson Lufkin & Jenrette Securities Corporation (the "Initial
Purchaser") pursuant to which the Issuers agree to file with the Securities and
Exchange Commission (i) a registration statement relating to 10.5% Senior
Secured Notes due 2007 (the "Series B Notes") to be offered in exchange for the
Series A Notes and (ii) a shelf registration statement pursuant to Rule 415
under the Securities Act of 1933 relating to the resale by certain Holders of
the Series A Notes. The Series A Notes and the Series B Notes are collectively
referred to herein as the "Senior Secured Notes".
As a condition precedent to the issuance of the Senior Secured Notes under
the Financing Agreement, the City of Syracuse Development Agency, a New York
public benefit corporation ("SIDA") shall have granted the assignment and
security interest contemplated by the Security Agreement (the "SIDA Security
Agreement") dated as of December 6, 1999 between SIDA and the Agent.
<PAGE>
As a condition precedent to the issuance of the Senior Secured Notes under
the Financing Agreement, Grantor shall have granted the assignment and security
interest contemplated by this Agreement.
AGREEMENT
In consideration of the premises herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Grantor hereby agrees with the Agent as follows:
Section 1. Definitions. All capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Financing Agreement.
Section 2. Assignment, Pledge and Grant of Security Interest.
(a) To secure the timely payment and performance of the Obligations (as
that term is defined in this Section), Grantor does hereby assign, grant and
pledge to, and subject to a security interest in favor of, the Agent, on behalf
of and for the benefit of the Secured Parties, all the estate, right, title and
interest, if any (and subject to the last sentence of this Section 2(a)), of
Grantor in, to and under:
(i) the following agreements and documents, as amended from time to
time (individually, an "Assigned Agreement," collectively, the "Assigned
Agreements"):
(A) the Niagara Mohawk Agreements;
(B) the Canadian Hunter Agreements;
(C) the O&M Agreement;
(D) the Fuel Supply Agreements;
(E) the Agency Agreement;
(F) the PILOT Agreement;
(G) the Natural Gas Transportation Agreements;
(H) the Asset Manager Agreements;
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<PAGE>
(I) the University Agreements;
(J) the Steam Plant Operating Agreement;
(K) the Host Community Agreement;
(L) the insurance policies required to be maintained by Grantor
or any other Person under the Financing Agreement, including, without
limitation, any such policies insuring against loss of revenues by
reason of interruption of the operation of the Project and all loss
proceeds and other amounts payable to Grantor thereunder, and all
eminent domain proceeds;
(M) any agreements providing for the investment of equity or
payment of liquidated damages with respect to the Project entered into
on or after the date hereof;
(N) all other agreements, including vendor warranties, running
to Grantor or assigned to Grantor, relating to transport of material,
equipment and other parts of the Project, including all Project
Documents;
(O) the Ground Lease, the Easement Agreements, the Master Lease
and any other lease or sublease agreements or easement agreements
relating to the Project or the Premises or any ancillary facilities,
to which Grantor may become a party;
(P) the Consents, the Drawing Agreement, the Boiler Guaranty,
each Additional Project Document, and any other agreements to which
Grantor may become a party relating to the operation of the Project or
any part thereof;
(Q) all amendments, supplements, substitutions and renewals to
any of the aforesaid agreements; and
(R) all Applicable Permits;
(ii) all revenues derived in any other manner by Grantor from its
interest in the Project and its operation of the Project;
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<PAGE>
(iii) all other personal property and fixtures of Grantor, whether now
owned or existing or hereafter acquired or arising, or in which Grantor may
have an interest, and wheresoever located, whether or not of a type which
may be subject to a security interest under the Uniform Commercial Code
(the "UCC"), including without limitation all goods, money, instruments,
investment securities, accounts, contract rights, documents, deposit
accounts, chattel paper, general intangibles, equipment, inventory,
machinery, tools, turbine generators (including without limitation those
certain LM5000 STIG 80 gas turbine generator sets and incorporating two (2)
GE aircraft derivative gas turbine engines, serial numbers 474157 and
474158, and two (2) Brush Electric generators, serial numbers 611 73A-3G
and 611 73A-5G, and any replacements thereof), boilers (including without
limitation that certain three pressured level, natural circulation, finned
tube heat recovery steam generator with supplemental firing capability
fabricated by Deltek and any replacements thereof), engines, appliances,
mechanical and electrical systems, elevators, lighting, alarm systems, fire
control systems, furnishings, furniture, service equipment, building or
maintenance equipment, building or maintenance materials, pipes and
pipelines, supplies, goods and property covered by any warehouse receipts
or bills of lading or other such documents, spare parts, maps, plans,
specifications, architectural, engineering, construction or shop drawings,
manuals or similar documents, copyrights, trademarks and trade names, and
any replacements, renewals or substitutions for any of the foregoing or
additional tangible or intangible personal property hereafter acquired by
Grantor;
(iv) the Accounts (as defined in the Depositary Agreement), including
any sub-accounts within such accounts, and all other accounts and sub-
accounts established by the Collateral Agent pursuant to the Depositary
Agreement;
(v) All Permitted Investments and other investment property and the
proceeds thereof; and
(vi) the proceeds of all of the foregoing (all of the collateral
described in the foregoing clauses (i) through (v) together with the
proceeds described in this clause (vi) being herein collectively referred
to as the "Collateral"), including, without limitation, (A) all rights of
Grantor to receive moneys due and to become due under or pursuant to the
Collateral, (B) all rights of Grantor to receive return of any premiums for
or proceeds of any insurance, indemnity, warranty or guaranty with respect
to the Collateral, (C) all claims of Grantor for damages arising out of or
for breach of or default under the Assigned
4
<PAGE>
Agreements or any other Collateral, (D) all rights of Grantor to terminate,
amend, supplement, modify or waive performance under the Assigned
Agreements, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder and (E) to the extent not included in the
foregoing, all proceeds receivable or received when any and all of the
foregoing Collateral is sold, collected, exchanged or otherwise disposed
of, whether voluntarily or involuntarily.
Anything contained in this Agreement or any other Financing Documents to
the contrary notwithstanding, Grantor is not assigning, granting or pledging to,
nor subjecting to a security interest in favor of, the Agent or the Secured
Parties any of Grantor's estate, right, title, interest in, to or under (1) any
of the Unassigned Rights or any revenues derived therefrom, (2) without limiting
the generality of Section 6(j) hereof or any other obligation of Grantor under
the Financing Documents, any agreement purported to be assigned pursuant to
clause (N) of Section 2(a)(i) hereof or any Applicable Permit, in each case the
assignment of which constitutes a breach or violation of the terms or conditions
of such agreement or Permit, (3) any of the Excluded Accounts, (4) the Steam
Plant and any improvements, accessions or additions thereto or (5) insurance
proceeds relating to the Steam Plant or (6) any turbine or associated equipment
leased by Grantor from General Electric Company or its affiliates pursuant to
its lease engine support program and neither the Agent nor its successors and
assigns will acquire or claim any right, title or interest in or lien on such
turbine or associated equipment by reason of its being installed at the Project.
(b) In order to effectuate the foregoing, Grantor has heretofore delivered
or concurrently with the delivery hereof is delivering to the Agent, a photocopy
of an executed counterpart of each of the Assigned Agreements. Grantor will
likewise deliver to Agent a photocopy of an executed counterpart of each future
lease, operation agreement, maintenance agreement and other agreement relating
to the Project, and amendments and supplements to the foregoing, included in the
Collateral, as they are entered into by Grantor promptly upon the execution
thereof. If delivery to the Agent of an executed counterpart of any agreement
leaves Grantor without an executed counterpart thereof, the Agent will release
its executed counterpart to Grantor upon Grantor's request, provided that no
Event of Default hereunder shall have occurred and be continuing, for Grantor's
temporary use in the enforcement of such agreement by judicial proceedings.
Nothing herein shall be construed as or shall constitute the consent or approval
of the Agent or any Holder to or of any such future lease, operation agreement,
maintenance agreement or other material agreement relating to the Project.
(c) Anything herein contained to the contrary notwithstanding, Grantor
shall remain liable under each of the Assigned Agreements, to perform all of the
obligations
5
<PAGE>
assumed by it thereunder, all in accordance with and pursuant to the terms and
provisions thereof, and the Agent shall have no obligation or liability under
any of such Assigned Agreements by reason of or arising out of this Agreement,
nor shall the Agent be required or obligated in any manner to perform or fulfill
any obligations of Grantor thereunder or to make any payment, or to make any
inquiry as to the nature or sufficiency of any payment received by it, or
present or file any claim, or 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.
(d) Grantor does hereby constitute the Agent, acting on behalf of and for
the benefit of the Secured Parties, the true and lawful attorney of Grantor,
irrevocably, with full power upon and during the continuance of an Event of
Default (in the name of Grantor 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 Agreements or any of the
other Collateral, including, without limitation, any insurance policies with
respect to the Project, to elect remedies thereunder, to endorse any checks or
other instruments or orders in connection therewith and to file any claims or
take any action or institute any proceedings in connection therewith which the
Agent may deem to be necessary or advisable, provided, however, that the Agent
shall give Grantor notice of any action taken by the Agent as such attorney-in-
fact promptly after taking such action (provided that the Agent's failure to
promptly give any such notice shall in no way affect the Agent's rights
hereunder).
(e) Grantor agrees that, if any default by Grantor under any of the
Assigned Agreements shall occur, the Agent shall, at its option, be permitted
(but shall not be obligated) to remedy any such default by giving written notice
of such intent to Grantor and to the parties to each Assigned Agreement in
default. As between the Agent and the Grantor, the Agent shall have a reasonable
opportunity, but not fewer than sixty (60) days (or such other period as the
Agent and the Persons other than Grantor who are parties to the Assigned
Agreement may agree) after giving such notice, in which to cure such default and
upon the commencement thereof will proceed diligently to cure such default. Any
curing by the Agent of Grantor's default under any of the Assigned Agreements
shall not be construed as an assumption by the Agent of any obligations,
covenants or agreements of Grantor under such Assigned Agreements, and the Agent
shall not incur any liability to Grantor or any other Person as a result of any
actions undertaken by the Agent in curing or attempting to cure any such
default. This Agreement shall not be deemed to release or to affect in any way
the obligations of Grantor under the Assigned Agreements.
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<PAGE>
(f) This Agreement secures the payment and performance of all obligations
of Grantor and of the other Credit Parties and SIDA, now existing or hereafter
arising, owing to the Secured Parties pursuant to the terms of the Indenture,
the Senior Secured Notes and the Collateral Documents including, without
limitation: (i) the principal, premium, if any, or interest on the Senior
Secured Notes (including any interest accruing after the commencement of any
bankruptcy or insolvency proceeding relating to the Issuers, whether or not such
interest is allowed or allowable as a claim in any such proceeding), and all
other obligations and liabilities of the Issuers including, without limitation,
indemnities, fees and interest incurred under, arising out of or in connection
with the Indenture, the Senior Secured Notes and the Collateral Documents, (ii)
any and all sums advanced by or on behalf of the Issuers in order to preserve
the Collateral or preserve its interest in the Collateral, and (iii) in the
event of any proceeding for collection or enforcement by or on behalf of any
Secured Party after an Event of Default shall have occurred and be continuing
and unwaived, the expenses of retaking, holding, preparing for sale or lease,
selling or otherwise disposing of or realizing on the Collateral, or of any
exercise by or on behalf of any Secured Party of its rights under the Indenture,
the Senior Secured Notes and the Collateral Documents, together with attorneys'
fees and court costs (all such obligations being herein called the
"Obligations").
Section 3. Events of Default. The occurrence of an Event of Default under
the Financing Agreement (as such term is defined in the Financing Agreement),
whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body, shall constitute an Event of Default
hereunder.
Section 4. Remedies. Subject to the terms of the Financing Agreement,
(a) if any Event of Default has occurred and is continuing, the Agent may
(i) declare all amounts payable by Issuers under the Financing
Agreement and the Senior Secured Notes to be due and payable immediately,
and thereupon the same shall become immediately due and payable;
(ii) proceed to protect and enforce the rights vested in it by
this Agreement, including, but not limited to, the right to cause all
revenues hereby pledged as security and all other moneys pledged hereunder
to be paid directly to it, and to enforce its rights hereunder to such
payments and all other rights hereunder by such appropriate judicial
proceedings as it shall deem most effective to protect and enforce any of
such rights, either at law or in equity or
7
<PAGE>
otherwise, whether for specific enforcement of any covenant or agreement
contained in any of the Assigned Agreements, or in aid of the exercise of
any power therein or herein granted, or for any foreclosure hereunder and
sale under a judgment or decree in any judicial proceeding, or to enforce
any other legal or equitable right vested in it by this Agreement or by
law;
(iii) cause any action at law or suit in equity or other
proceeding to be instituted and prosecuted to collect or enforce any
obligations or rights included in the Collateral, or to foreclose or
enforce any other agreement or other instrument by or under or pursuant to
which such obligations are issued or secured, subject in each case to the
provisions and requirements thereof;
(iv) sell or otherwise dispose of any or all of the Collateral
or cause the Collateral to be sold or otherwise disposed of in one or more
sales or transactions, at such prices as the Agent may deem best, and for
cash or on credit or for future delivery, without assumption of any credit
risk, at any broker's board or at public or private sale, without demand of
performance or notice of intention to sell or of time or place of sale
(except such notice as is required by applicable law and cannot be waived
or as is otherwise expressly agreed to by the parties herein or in any
other Financing Document), it being agreed that the Agent may be a
purchaser on behalf of the Secured Parties, or on its own behalf at any
such sale and that the Agent or anyone else who may be the purchaser of any
or all of the Collateral so sold shall thereafter hold the same absolutely,
free from any claim or right of whatsoever kind, including any equity of
redemption, of Grantor, any such demand, notice or right and equity being
hereby expressly waived and released to the extent permitted by law;
(v) incur expenses, including attorneys' fees, consultants'
fees, and other costs appropriate to the exercise of any right or power
under this Agreement;
(vi) perform any obligation of Grantor hereunder or under any
other Financing Document, and make payments, purchase, contest or
compromise any encumbrance, charge, or lien, and pay taxes and expenses,
without, however, any obligation so to do;
(vii) take possession of the Collateral and render it usable, and
repair and renovate the same, without, however, any obligation so to do,
and enter upon the Site or any other location where the same may be located
for that purpose, control, manage, operate, rent and lease the Collateral,
either separately or in conjunction with the Project, collect all rents and
income from
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<PAGE>
the Collateral and apply the same to reimburse the Agent, or any agent
acting on its behalf, for any cost or expenses incurred hereunder or under
any of the Financing Documents and to the payment or performance of
Grantor's obligations hereunder or under any of the Financing Documents,
and apply any remaining excess balance to whomsoever is legally entitled
thereto;
(viii) secure the appointment of a receiver of the Project and/or the
Collateral or any part thereof; or
(ix) exercise any other or additional rights or remedies granted to
a secured party under the UCC. If, pursuant to applicable law, prior notice
of any such action is required to be given to Grantor, Grantor hereby
acknowledges that the minimum time required by such applicable law, or if
no minimum is specified, five (5) Business Days, shall be deemed a
reasonable notice period.
(b) All costs and expenses (including, but without being limited to,
reasonable attorneys, fees and expenses) incurred by the Agent in connection
with any such suit or proceeding, or in connection with the performance by the
Agent of any of Grantor' agreements contained in any exercise of its rights or
remedies hereunder, including, without limitation, any of the Assigned
Agreements pursuant to the terms of this Agreement, together with interest
thereon (to the extent permitted by law) computed at a rate per annum equal to
the Default Rate (as defined in the Financing Agreement) from the date on which
such costs or expenses are incurred to the date of payment thereof, shall
constitute additional indebtedness secured by this Agreement and shall be paid
by Grantor to the Agent on behalf of and for the benefit of the Secured Parties
on demand.
(c) Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral shall be deposited in the Redemption Account to be held, applied and
released in accordance with the Depositary Agreement.
Section 5. Remedies Cumulative; Delay Not Waiver. (a) No right, power
or remedy herein conferred upon or reserved to the Agent is intended to be
exclusive of any other right, power or remedy, and every such right, power and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right, power and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. Resort to any or all
security now or hereafter held by the Agent, may be taken
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<PAGE>
concurrently or successively and in one or several consolidated or independent
judicial actions or lawfully taken nonjudicial proceedings, or both.
(b) No delay or omission of the Agent to exercise any right or power
accruing upon the occurrence and during the continuance of any Event of Default
as aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein; and every power
and remedy given by this Agreement may be exercised from time to time, and as
often as shall be deemed expedient, by the Agent.
Section 6. Covenants and Representations. Grantor covenants, represents
and warrants as follows:
(a) Grantor will duly and punctually pay all amounts payable to the
Secured Parties in accordance with, and subject to, the terms of the Financing
Agreement, the Senior Secured Notes and the other Financing Documents.
(b) Grantor will perform and comply, in all material respects, with all
obligations and conditions on its part to be performed under each of the
Assigned Agreements.
(c) Each Assigned Agreement to which Grantor is a party in effect on the
date hereof, an executed counterpart or true and complete copy of which has been
furnished to the Agent, has been duly authorized, executed and delivered by
Grantor, has not been amended or otherwise modified, and is in full force and
effect and is binding upon and enforceable against all parties thereto in
accordance with its terms. There exists no default under any Assigned Agreement
to which Grantor is a party by Grantor, or to the best of Grantor's knowledge,
by the other parties thereto.
(d) No effective financing statement or other instrument similar in effect
covering all or any part of Grantor's interest in the Collateral or SIDA's
interest in the collateral under the SIDA Security Agreement is on file in any
recording office, except such as may have been filed pursuant to this Agreement
and the other Financing Documents or pursuant to the documents evidencing
Permitted Liens.
(e) Except as permitted by the Financing Agreement, Grantor is lawfully
possessed of ownership of the Collateral and SIDA is lawfully possessed of
ownership of the collateral under the SIDA Security Agreement and has full
right, title and interest in all rights purported to be granted to it under the
Assigned Agreements, subject to no mortgages, liens, charges, or encumbrances
except Permitted Liens, and has full power and lawful authority to grant and
assign the Collateral hereunder. Grantor will, so long
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<PAGE>
as any Obligations shall be outstanding, warrant and defend its title to the
Collateral and SIDA's title to the collateral under the SIDA Security Agreement
against the claims and demands of all Persons whomsoever.
(f) Grantor will not directly or indirectly create, incur, assume or
suffer to exist any liens (except for Permitted Liens) on or with respect to any
property or assets constituting a part of the Collateral and Grantor will at its
own cost and expense promptly take such action as may be necessary to discharge
any such liens on or with respect to any properties or assets constituting a
part of the Collateral or the collateral under the SIDA Security Agreement.
(g) Grantor represents and warrants to the Agent that it has not assigned
any of its rights under the Assigned Agreements except as provided in this
Agreement. Grantor will not make any other assignment of its rights under the
Assigned Agreements as contemplated by the Operative Documents (as in effect on
the Closing Date) and other than such assignments as constitute Permitted Liens.
(h) Grantor agrees that any action or proceeding to enforce this Agreement
or any Assigned Agreement may be taken by the Agent either in Grantor's name or
in the Agent's name, as the Agent may deem necessary.
(i) Except as otherwise permitted under the Financing Agreement, Grantor
shall not without the prior written consent of the Agent, (i) modify, amend,
terminate, waive or supplement any provision of any Assigned Agreement or any
other agreement, contract or instrument included in the Collateral, (ii) fail to
exercise promptly and diligently each and every material right which it may have
under each Assigned Agreement (other than any right of termination), or (iii)
fail to deliver to the Agent a copy of each demand, notice or document received
or given by it relating in any way to any of the Assigned Agreements.
(j) Except as disclosed in writing to the Agent, Grantor has obtained all
necessary consents to this Agreement from each of the parties to the Assigned
Agreements to which Grantor is a party (the "Contracting Parties"), and agrees
to obtain consents from each other Contracting Party and each future or
successor Contracting Party with respect to each material Assigned Agreement to
which Grantor is a party.
(k) Grantor shall give to the Agent prompt notice of any event of default
under any Assigned Agreement of which Grantor has knowledge or as to which
Grantor has received notice.
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<PAGE>
Section 7. Notices. Unless otherwise specifically herein provided, all
notices required or permitted under the terms and provisions hereof shall be in
writing and any such notice shall become effective upon delivery in accordance
with Section 9.02 of the Financing Agreement.
Section 8. Further Assurances. (a) Grantor agrees that from time to time,
at the expense of Grantor, Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be reasonably
necessary or that the Agent may reasonably request, in order to perfect and
protect the assignment and security interest granted or intended to be granted
hereby or to enable the Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, Grantor will: (i) if any Collateral shall be evidenced by a
promissory note or other instrument, deliver and pledge to the Agent for the
benefit of the Secured Parties such note or instrument duly endorsed (without
recourse) and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Agent and (ii) execute
and file such financing or continuation statements, or amendments thereto, and
such other instruments, endorsements or notices, as may be reasonably necessary
or desirable, and as the Agent may reasonably request, in order to perfect and
preserve the assignments and security interests granted or purported to be
granted hereby; provided, however, that this Section 8(a) shall not apply to any
component, subassembly or supply of materials (x) which is located outside the
State of New York and (y) which has a purchase price of less than $1,000,000, in
each case before delivery of such component, subassembly or supply into the
State of New York.
(b) Grantor hereby authorizes the Agent to file one or more financing or
continuation statements and amendments thereto, relative to all or any part of
the Collateral without the signature of Grantor where permitted by law. Copies
of any such statement or amendment thereto shall promptly be delivered to
Grantor.
(c) Grantor shall pay all filing, registration and recording fees or
refiling, re-registration and re-recording fees, and all expenses incident to
the execution and acknowledgment of this Agreement, any assurance, and all
Federal, state, county and municipal stamp taxes and other taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Agreement, any agreement supplemental hereto and
any instruments of further assurance.
Section 9. Place of Perfection; Records. The location of Grantor's
place of business and chief executive office is 90 Presidential Plaza, Syracuse,
New York 13209. Grantor shall give the Agent at least thirty (30) Business Days'
notice before it changes the location of its place of business and chief
executive office and shall at the
12
<PAGE>
expense of Grantor execute and deliver such instruments and documents as
required to maintain a prior perfected security interest and as requested by the
Agent. Grantor will hold and preserve such records and will permit
representatives of the Agent at any time during normal business hours to inspect
and make abstracts from such records.
Section 10. Covenants of Grantor. Grantor shall pay, before the imposition
of any fine, penalty, interest or cost attached thereto, all taxes, assessments
and other governmental or non-governmental charges or levies now or hereafter
assessed or levied against the Collateral or upon the security interest provided
for herein (except for liens for taxes and assessments not then delinquent or
which Grantor may, pursuant to the definition of "Permitted Liens" in the
Financing Agreement, permit to remain unpaid), as well as pay, or cause to be
paid, all claims for labor, materials or supplies which, if unpaid, might become
a prior Lien (other than a Permitted Lien) thereon, and will deliver receipts
showing payment of any of the foregoing to the Agent upon request.
Section 11. Continuing Assignment and Security Interest; Transfer of Senior
Secured Notes. This Agreement shall create a continuing assignment of and
security interest in the Collateral and shall (a) remain in full force and
effect until payment and performance in full of the Obligations (b) be binding
upon Grantor, its successors and assigns and (c) inure, together with the rights
and remedies of the Agent, to the benefit of the Agent and its respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), subject to the terms of the Financing Agreement, the
Holders may assign or otherwise transfer the Senior Secured Notes or other
evidences of indebtedness held by them to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to the Holders herein or otherwise. Upon the payment in full of the
Obligations, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to Grantor. Upon any such termination, the Agent
will, at Grantor's expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
Section 12. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 13. Successors and Assigns. All covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, the parties and their
respective successors and assigns; provided, however, that Grantor may not
assign or
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<PAGE>
delegate its rights or obligations hereunder without the prior written consent
of the Agent.
Section 14. Headings. The headings of the various Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
Section 15. Governing Law. This Agreement, including all matters of
construction, validity and performance and matters relating to the creation,
validity, enforcement or priority of the lien of, and security interests created
by, this Agreement upon the Collateral shall be governed by the laws of the
State of New York.
Section 16. References to Other Documents. All defined terms used in this
Agreement which refer to other documents shall be deemed to refer to such other
documents as they may be amended, supplemented or replaced from time to time,
provided such documents were not amended in breach of a covenant contained in
any agreement to which Grantor or the Agent is a party.
Section 17. Agreement for Security Purposes. This agreement is for security
purposes only. Accordingly, the Agent shall not have a right, pursuant to this
Agreement, to enforce Grantor's rights with respect to the Collateral until such
time as an Event of Default shall have occurred and is continuing at the time
such enforcement is sought.
Section 18. Scope of Liability. This Agreement is one of the Financing
Documents referred to in the Financing Agreement, and the recourse of the Agent
and the other Secured Parties against the Grantor and any of its Affiliates,
stockholders, officers, directors, partners or employees, for any liability to
the Agent or the other Secured Parties arising under this Agreement shall be
limited to the extent provided in the Financing Agreement.
Section 19. Regarding the Agent. The Agent shall be afforded in respect of
this Agreement all of the rights, powers, protections, immunities and
indemnities set forth in Article 4 and Article 5 of the Depositary Agreement
which are applicable between the Agent and the Issuer thereunder, and the
provisions of Article 4 and Article 5 of the Depositary Agreement which are
applicable between the Agent and the Issuer thereunder shall inure to the
benefit of the Agent in respect to this Agreement and be binding upon the
Grantor in such respect, in each case as if the same were specifically set forth
herein, mutatis mutandis. In furtherance and not in derogation of such rights,
powers, protections, immunities and indemnities set forth in Article 4 and
Article 5 of the Depositary Agreement:
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(a) The Agent is authorized to take all such action as is provided to be
taken by it as the Agent hereunder and all other action incidental thereto. As
to any matters not expressly provided for herein the Agent shall act or refrain
from acting in accordance with written instructions from the Required Holders
or, in the absence of such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Lien on any of the Collateral, whether impaired by
operation of law or by reason of any action or omission to act on its part
hereunder. The Agent shall have no duty to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement by the Grantor.
(c) At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint another bank or trust company or one or
more other Persons, either to act as co-agents or co-agents, jointly with the
Agent, or to act as separate agent or agents on behalf of the Agent with such
power and authority of the Agent as may be necessary for the effectual operation
of the provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include extending to such co-agent
or separate agent the provisions for the protection of the Agent contained in
Article 4 and Article 5 of the Depositary Agreement).
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<PAGE>
IN WITNESS WHEREOF, Grantor and Agent have caused this Security Agreement
to be duly executed by their signatories thereunto duly authorized, as of the
day and year first above written.
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Agent for the benefit of the
Secured Parties
By: /s/ Ward A. Spooner
___________________________________
Name: Ward A. Spooner
Title: Vice President
PROJECT ORANGE FUNDING, L.P.,
a Delaware limited partnership
By: G.A.S. Orange Associates, L.L.C.
a Delaware limited liability
company, its general partner
By: /s/ Douglas Corbett
_______________________________
Name: Douglas Corbett
Title: Vice President
16
<PAGE>
EXHIBIT 4.6
EXECUTION COPY
SECURITY AGREEMENT
Dated as of December 6, 1999
Between
CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY,
a New York public benefit corporation,
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Agent for the Secured Parties
<PAGE>
TABLE OF CONTENTS
____________
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Definitions................................................. 2
-
Section 2. Assignment, Pledge and Grant of Security Interest........... 2
-
Section 3. Events of Default........................................... 7
-
Section 4. Remedies.................................................... 7
-
Section 5. Remedies Cumulative; Delay Not Waiver....................... 9
-
Section 6. Covenants................................................... 10
--
Section 7. Notices..................................................... 10
--
Section 8. Further Assurances.......................................... 11
--
Section 9. Place of Perfection; Records................................ 11
--
Section 10. Covenants of Grantor........................................ 12
--
Section 11. Continuing Assignment and Security Interest; Transfer of
Senior Secured Notes........................................ 12
--
Section 12. Severability................................................ 12
--
Section 13. Successors and Assigns...................................... 12
--
Section 14. Headings.................................................... 13
--
Section 15. Governing Law............................................... 13
--
Section 16. References to Other Documents............................... 13
--
Section 17. Agreement for Security Purposes............................. 13
--
Section 18. Scope of Liability.......................................... 13
--
Section 19. Regarding the Agent......................................... 13
--
Section 20. Limitation of the Grantor's Liability....................... 14
--
Section 21. POA Indemnification of the Grantor.......................... 15
--
</TABLE>
<PAGE>
SECURITY AGREEMENT
This Security Agreement ("Agreement") dated as of December 6, 1999, is
entered into by and between the City of Syracuse Industrial Development Agency,
a New York public benefit corporation (the "Grantor") and U.S. Bank Trust
National Association, ("Agent"), as Agent for the benefit of the holders from
time to time (the "Holders" and, together with the Agent and the Trustee, the
"Secured Parties") of the Senior Secured Notes issued pursuant to the Financing
Agreement described below.
PREFACE
Grantor and POA (as defined below) intends to operate the Project (as
defined in the Financing Agreement described below) located in Syracuse,
Onondaga County, New York.
Project Orange Funding, L.P. ("Funding L.P."), a Delaware limited
partnership (together with its successors, including Project Orange Associates,
L.P. ("Orange L.P."), a Delaware limited partnership, as the survivor of the
merger of Funding L.P. with and into Orange L.P. concurrently with the issuance
and sale of the Senior Secured Notes referred to below, and the execution and
delivery of this Agreement by the parties hereto ("POA"), Project Orange Capital
Corp., a Delaware corporation ("Capital Co." and together with POA, the
"Issuers") and U.S. Bank Trust National Association, as Trustee (the "Trustee")
and as Agent, have entered into that certain Indenture dated as of December 6,
1999 (the "Financing Agreement") for the issuance by the Issuers of $68 million
principal amount of its 10.5% Senior Secured Notes due 2007 (the " Series A
Notes").
The Holders of the Series A Notes will have the registration rights set
forth in the Registration Rights Agreement dated as of December 6, 1999 between
the Issuers and Donaldson Lufkin & Jenrette Securities Corporation (the "Initial
Purchaser") pursuant to which the Issuers agree to file with the Securities and
Exchange Commission (i) a registration statement relating to 10.5% Senior
Secured Notes due 2007 (the "Series B Notes") to be offered in exchange for the
Series A Notes and (ii) a shelf registration statement pursuant to Rule 415
under the Securities Act of 1933 relating to the resale by certain Holders of
the Series A Notes. The Series A Notes and the Series B Notes are collectively
referred to herein as the "Senior Secured Notes".
As a condition precedent to the issuance of the Series A Notes under the
Financing Agreement, Orange L.P. shall have granted the assignment and security
<PAGE>
interest contemplated by the Security Agreement dated as of December 6, 1999
between Orange L.P. and the Agent.
As a condition precedent to the issuance of the Series A Notes under the
Financing Agreement, Grantor shall have granted the assignment and security
interest contemplated by this Agreement.
AGREEMENT
In consideration of the premises herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Grantor hereby agrees with the Agent as follows:
Section 1. Definitions. All capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Financing Agreement.
Section 2. Assignment, Pledge and Grant of Security Interest.
(a) To secure the timely payment and performance of the Obligations (as
that term is defined in this Section), Grantor does hereby assign, grant and
pledge to, and subject to a security interest in favor of, the Agent, on behalf
of and for the benefit of the Secured Parties, all the estate, right, title and
interest, if any (and subject to the last sentence of this Section 2(a)), of
Grantor in, to and under:
(i) the following agreements and documents, as amended from time to
time (individually, an "Assigned Agreement," collectively, the "Assigned
Agreements"):
(A) the Niagara Mohawk Agreements;
(B) the Canadian Hunter Agreements;
(C) the O&M Agreement;
(D) the Fuel Supply Agreements;
(E) the PILOT Agreement;
(F) the Natural Gas Transportation Agreements;
(G) the Asset Manager Agreements;
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(H) the University Agreements;
(I) the Steam Plant Operating Agreement;
(J) the Host Community Agreement;
(K) insurance policies required to be maintained by Grantor or
the Issuers or any other Person under the Financing Documents,
including, without limitation, any such policies insuring against loss
of revenues by reason of interruption of the operation of the Project
and all loss proceeds and other amounts payable to Grantor thereunder,
and all eminent domain proceeds;
(L) any agreements providing for the investment of equity or
payment of liquidated damages with respect to the Project entered into
on or after the date hereof;
(M) all other agreements, including vendor warranties, running
to Grantor or assigned to Grantor, relating to transport of material,
equipment and other parts of the Project, including all Project
Documents;
(N) the Ground Lease, the Easement Agreements, the Master Lease
and any other lease or sublease agreements or easement agreements
relating to the Project or the Premises or any ancillary facilities,
to which Grantor may become a party;
(O) each Additional Project Document, and any other agreements
to which Grantor may become a party relating to the operation of the
Project or any part thereof;
(P) all amendments, supplements, substitutions and renewals to
any of the aforesaid agreements; and
(Q) all Applicable Permits;
(ii) all revenues derived in any other manner by Grantor from its
leasehold interest in the Project and the operation of the Project;
3
<PAGE>
(iii) all other personal property and fixtures of Grantor related to
or arising from its leasehold interest in the Project, whether now owned or
existing or hereafter acquired or arising, or in which Grantor may have an
interest, and wheresoever located, whether or not of a type which may be
subject to a security interest under the Uniform Commercial Code (the
"UCC"), including without limitation all goods, money, instruments,
investment securities, accounts, contract rights, documents, deposit
accounts, chattel paper, general intangibles, equipment, inventory,
machinery, tools, turbine generators (including without limitation those
certain LM5000 STIG 80 gas turbine generator sets and incorporating two (2)
GE aircraft derivative gas turbine engines, serial numbers 474157 and
474158, and two (2) Brush Electric generators, serial numbers 611 73A-3G
and 611 73A-5G, and any replacements thereof), boilers (including without
limitation that certain three pressured level, natural circulation, finned
tube heat recovery steam generator with supplemental firing capability
fabricated by Deltek and any replacements thereof), engines, appliances,
mechanical and electrical systems, elevators, lighting, alarm systems, fire
control systems, furnishings, furniture, service equipment, building or
maintenance equipment, building or maintenance materials, pipes and
pipelines, supplies, goods and property covered by any warehouse receipts
or bills of lading or other such documents, spare parts, maps, plans,
specifications, architectural, engineering, construction or shop drawings,
manuals or similar documents, copyrights, trademarks and trade names, and
any replacements, renewals or substitutions for any of the foregoing or
additional tangible or intangible personal property hereafter acquired by
Grantor;
(iv) the Accounts (as defined in the Depositary Agreement),
including any sub-accounts within such accounts, and all other accounts and
sub-accounts established by the Collateral Agent pursuant to the Depositary
Agreement;
(v) all Permitted Investments and other investment property and the
proceeds thereof; and
(vi) the proceeds of all of the foregoing (all of the collateral
described in the foregoing clauses (i) through (v) together with the
proceeds described in this clause (vi) being herein collectively referred
to as the "Collateral"), including, without limitation, (A) all rights of
Grantor to receive moneys due and to become due under or pursuant to the
Collateral, (B) all rights of Grantor to receive return of any premiums for
or proceeds of any insurance, indemnity, warranty or guaranty with respect
to the Collateral, (C) all claims of Grantor for damages arising out of or
for breach of or default under the Assigned
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Agreements or any other Collateral, (D) all rights of Grantor to terminate,
amend, supplement, modify or waive performance under the Assigned
Agreements, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder and (E) to the extent not included in the
foregoing, all proceeds receivable or received when any and all of the
foregoing Collateral is sold, collected, exchanged or otherwise disposed
of, whether voluntarily or involuntarily.
Anything contained in this Agreement or any other Financing Documents to
the contrary notwithstanding, Grantor is not assigning, granting or pledging to,
nor subjecting to a security interest in favor of, the Agent or the Secured
Parties any of Grantor's estate, right, title, interest in, to or under (1) any
of the Unassigned Rights or any revenues derived therefrom, (2) without limiting
the generality of Section 6(j) hereof or any other obligation of Grantor under
the Financing Documents, any agreement purported to be assigned pursuant to
clause (M) of Section 2(a)(i) hereof or any Applicable Permit, in each case the
assignment of which constitutes a breach or violation of the terms or conditions
of such agreement or Permit, (3) any of the Excluded Accounts, (4) the Steam
Plant and any improvements, accessions or additions thereto, (5) insurance
proceeds relating to the Steam Plant or (6) any turbine or associated equipment
leased by POA from General Electric Company or its affiliates pursuant to its
lease engine support program and neither the Agent nor its successors and
assigns will acquire or claim any right, title or interest in or lien on such
turbine or associated equipment by reason of its being installed at the Project.
(b) In order to effectuate the foregoing, POA has heretofore delivered or
concurrently with the delivery hereof is delivering to the Agent, a photocopy of
an executed counterpart of each of the Assigned Agreements. POA will likewise
deliver to Agent a photocopy of an executed counterpart of each future lease,
operation agreement, maintenance agreement and other agreement relating to the
Project, and amendments and supplements to the foregoing, included in the
Collateral, as they are entered into by Grantor promptly upon the execution
thereof. If delivery to the Agent of an executed counterpart of any agreement
leaves Grantor without an executed counterpart thereof, the Agent will release
its executed counterpart to Grantor upon Grantor's request, provided that no
Event of Default hereunder shall have occurred and be continuing, for Grantor's
temporary use in the enforcement of such agreement by judicial proceedings.
Nothing herein shall be construed as or shall constitute the consent or approval
of the Agent or any Holder to or of any such future lease, operation agreement,
maintenance agreement or other material agreement relating to the Project.
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<PAGE>
(c) Anything herein contained to the contrary notwithstanding, Grantor
shall remain liable under each of the Assigned Agreements, to perform all of the
obligations assumed by it thereunder, all in accordance with and pursuant to the
terms and provisions thereof, and the Agent shall have no obligation or
liability under any of such Assigned Agreements by reason of or arising out of
this Agreement, nor shall the Agent be required or obligated in any manner to
perform or fulfill any obligations of Grantor thereunder or to make any payment,
or to make any inquiry as to the nature or sufficiency of any payment received
by it, or present or file any claim, or 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.
(d) Grantor does hereby constitute the Agent, acting on behalf of and for
the benefit of the Secured Parties, the true and lawful attorney of Grantor,
irrevocably, with full power upon and during the continuance of an Event of
Default (in the name of Grantor 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 Agreements or any of the
other Collateral, including, without limitation, any insurance policies with
respect to the Project, to elect remedies thereunder, to endorse any checks or
other instruments or orders in connection therewith and to file any claims or
take any action or institute any proceedings in connection therewith which the
Agent may deem to be necessary or advisable, provided, however, that the Agent
shall give Grantor notice of any action taken by the Agent as such attorney-in-
fact promptly after taking such action (provided that the Agent's failure to
promptly give any such notice shall in no way affect the Agent's rights
hereunder).
(e) Grantor agrees that, if any default by Grantor under any of the
Assigned Agreements shall occur, the Agent shall, at its option, be permitted
(but shall not be obligated) to remedy any such default by giving written notice
of such intent to Grantor and to the parties to each Assigned Agreement in
default. As between the Agent and the Grantor, the Agent shall have a reasonable
opportunity, but not fewer than sixty (60) days (or such other period as the
Agent and the Persons other than Grantor who are parties to the Assigned
Agreement may agree) after giving such notice, in which to cure such default and
upon the commencement thereof will proceed diligently to cure such default. Any
curing by the Agent of Grantor's default under any of the Assigned Agreements
shall not be construed as an assumption by the Agent of any obligations,
covenants or agreements of Grantor under such Assigned Agreements, and the Agent
shall not incur any liability to Grantor or any other Person as a result of any
actions undertaken by the Agent in curing or attempting to cure any such
default. This Agreement shall not be deemed to release or to affect in any way
the obligations of Grantor under the Assigned Agreements.
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(f) This Agreement secures the payment and performance of all obligations
of Grantor and the Issuers and the other Credit Parties, now existing or
hereafter arising, owing to the Secured Parties pursuant to the terms of the
Indenture, the Senior Secured Notes and the Collateral Documents including,
without limitation: (a) the principal, premium, if any, or interest on the
Senior Secured Notes (including any interest accruing after the commencement of
any bankruptcy or insolvency proceeding relating to the Issuers, whether or not
such interest is allowed or allowable as a claim in any such proceeding), and
all other obligations and liabilities of the Issuers including, without
limitation, indemnities, fees and interest incurred under, arising out of or in
connection with the Indenture, the Senior Secured Notes and the Collateral
Documents, (b) any and all sums advanced by or on behalf of the Issuers in order
to preserve the Collateral or preserve its interest in the Collateral, and (c)
in the event of any proceeding for collection or enforcement by or on behalf of
any Secured Party after an Event of Default shall have occurred and be
continuing and unwaived, the expenses of retaking, holding, preparing for sale
or lease, selling or otherwise disposing of or realizing on the Collateral, or
of any exercise by or on behalf of any Secured Party of its rights under the
Indenture, the Senior Secured Notes and the Collateral Documents, together with
attorneys' fees and court costs (all such obligations being herein called the
"Obligations").
Section 3. Events of Default. The occurrence of an Event of Default under
the Financing Agreement (as such term is defined in the Financing Agreement),
whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body, shall constitute an Event of Default
hereunder.
Section 4. Remedies. Subject to the terms of the Financing Agreement,
(a) if any Event of Default has occurred and is continuing, the Agent
may
(i) declare all amounts payable by the Issuers under the Financing
Agreement and the Senior Secured Notes to be due and payable immediately,
and thereupon the same shall become immediately due and payable;
(ii) proceed to protect and enforce the rights vested in it by this
Agreement, including, but not limited to, the right to cause all revenues
hereby pledged as security and all other moneys pledged hereunder to be
paid directly to it, and to enforce its rights hereunder to such payments
and all other rights hereunder by such appropriate judicial proceedings as
it shall deem most
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effective to protect and enforce any of such rights, either at law or in
equity or otherwise, whether for specific enforcement of any covenant or
agreement contained in any of the Assigned Agreements, or in aid of the
exercise of any power therein or herein granted, or for any foreclosure
hereunder and sale under a judgment or decree in any judicial proceeding,
or to enforce any other legal or equitable right vested in it by this
Agreement or by law;
(iii) cause any action at law or suit in equity or other proceeding
to be instituted and prosecuted to collect or enforce any obligations or
rights included in the Collateral, or to foreclose or enforce any other
agreement or other instrument by or under or pursuant to which such
obligations are issued or secured, subject in each case to the provisions
and requirements thereof;
(iv) sell or otherwise dispose of any or all of the Collateral or
cause the Collateral to be sold or otherwise disposed of in one or more
sales or transactions, at such prices as the Agent may deem best, and for
cash or on credit or for future delivery, without assumption of any credit
risk, at any broker's board or at public or private sale, without demand of
performance or notice of intention to sell or of time or place of sale
(except such notice as is required by applicable law and cannot be waived
or as is otherwise expressly agreed to by the parties herein or in any
other Financing Document), it being agreed that the Agent may be a
purchaser on behalf of the Secured Parties, or on its own behalf at any
such sale and that the Agent or anyone else who may be the purchaser of any
or all of the Collateral so sold shall thereafter hold the same absolutely,
free from any claim or right of whatsoever kind, including any equity of
redemption, of Grantor, any such demand, notice or right and equity being
hereby expressly waived and released to the extent permitted by law;
(v) incur expenses, including attorneys' fees, consultants' fees,
and other costs appropriate to the exercise of any right or power under
this Agreement;
(vi) perform any obligation of Grantor hereunder or under any other
Financing Document, and make payments, purchase, contest or compromise any
encumbrance, charge, or lien, and pay taxes and expenses, without, however,
any obligation so to do;
(vii) take possession of the Collateral and render it usable, and
repair and renovate the same, without, however, any obligation so to do,
and enter upon the Site or any other location where the same may be located
for that purpose, control, manage, operate, rent and lease the Collateral,
either
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separately or in conjunction with the Project, collect all rents and income
from the Collateral and apply the same to reimburse the Agent, or any agent
acting on its behalf, for any cost or expenses incurred hereunder or under
any of the Financing Documents and to the payment or performance of
Grantor's obligations hereunder or under any of the Financing Documents,
and apply any remaining excess balance to whomsoever is legally entitled
thereto;
(viii) secure the appointment of a receiver of the Project and/or the
Collateral or any part thereof; or
(ix) exercise any other or additional rights or remedies granted to
a secured party under the UCC. If, pursuant to applicable law, prior notice
of any such action is required to be given to Grantor, Grantor hereby
acknowledges that the minimum time required by such applicable law, or if
no minimum is specified, five (5) Business Days, shall be deemed a
reasonable notice period.
(b) All costs and expenses (including, but without being limited to,
reasonable attorneys, fees and expenses) incurred by the Agent in connection
with any such suit or proceeding, or in connection with the performance by the
Agent of any of Grantor's agreements contained in any exercise of its rights or
remedies hereunder, including, without limitation, any of the Assigned
Agreements pursuant to the terms of this Agreement, together with interest
thereon (to the extent permitted by law) computed at a rate per annum equal to
the Default Rate (as defined in the Financing Agreement) from the date on which
such costs or expenses are incurred to the date of payment thereof, shall
constitute additional indebtedness secured by this Agreement and shall be paid
by POA to the Agent on behalf of and for the benefit of the Secured Parties on
demand.
(c) Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral shall be deposited in the Redemption Account to be held, applied and
released in accordance with the Depositary Agreement.
Section 5. Remedies Cumulative; Delay Not Waiver. (a) No right, power or
remedy herein conferred upon or reserved to the Agent is intended to be
exclusive of any other right, power or remedy, and every such right, power and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right, power and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or
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remedy. Resort to any or all security now or hereafter held by the Agent, may be
taken concurrently or successively and in one or several consolidated or
independent judicial actions or lawfully taken nonjudicial proceedings, or both.
(b) No delay or omission of the Agent to exercise any right or power
accruing upon the occurrence and during the continuance of any Event of Default
as aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein; and every power
and remedy given by this Agreement may be exercised from time to time, and as
often as shall be deemed expedient, by the Agent.
Section 6. Covenants. Grantor covenants as follows:
(a) Grantor will perform and comply, in all material respects, with all
obligations and conditions on its part to be performed under each of the
Assigned Agreements.
(b) Grantor will not directly or indirectly create, incur, assume or
suffer to exist any liens (except for Permitted Liens) on or with respect to any
property or assets constituting a part of the Collateral and Grantor will at
POA's cost and expense promptly take such action as may be necessary to
discharge any such liens on or with respect to any properties or assets
constituting a part of the Collateral.
(c) Grantor will not make any other assignment of its rights under the
Assigned Agreements other than to the Issuers as contemplated by the Operative
Documents (as in effect on the Closing Date) and other than such assignments as
constitute Permitted Liens.
(d) Grantor agrees that any action or proceeding to enforce this
Agreement or any Assigned Agreement may be taken by the Agent either in
Grantor's name or in the Agent's name, as the Agent may deem necessary.
(e) Except as otherwise permitted under the Financing Agreement, Grantor
shall not without the prior written consent of the Agent, modify, amend,
terminate, waive or supplement any provision of any Assigned Agreement or any
other agreement, contract or instrument included in the Collateral.
Section 7. Notices. Unless otherwise specifically herein provided, all
notices required or permitted under the terms and provisions hereof shall be in
writing and any such notice shall become effective upon delivery in accordance
with Section 9.02 of the Financing Agreement.
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Section 8. Further Assurances. (a) Grantor agrees that from time to
time, at the expense of POA, Grantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
reasonably necessary or that the Agent may reasonably request, in order to
perfect and protect the assignment and security interest granted or intended to
be granted hereby or to enable the Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, Grantor will: (i) if any Collateral shall be
evidenced by a promissory note or other instrument, deliver and pledge to the
Agent for the benefit of the Secured Parties such note or instrument duly
endorsed (without recourse) and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the Agent and
(ii execute and file such financing or continuation statements, or amendments
thereto, and such other instruments, endorsements or notices, as may be
reasonably necessary or desirable, and as the Agent may reasonably request, in
order to perfect and preserve the assignments and security interests granted or
purported to be granted hereby; provided, however, that this Section 8(a) shall
not apply to any component, subassembly or supply of materials (x) which is
located outside the State of New York and (y) which has a purchase price of less
than $1,000,000, in each case before delivery of such component, subassembly or
supply into the State of New York.
(b) Grantor hereby authorizes the Agent to file one or more financing or
continuation statements and amendments thereto, relative to all or any part of
the Collateral without the signature of Grantor where permitted by law. Copies
of any such statement or amendment thereto shall promptly be delivered to
Grantor.
(c) POA shall pay all filing, registration and recording fees or
refiling, re-registration and re-recording fees, and all expenses incident to
the execution and acknowledgment of this Agreement, any assurance, and all
Federal, state, county and municipal stamp taxes and other taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Agreement, any agreement supplemental hereto and
any instruments of further assurance.
Section 9. Place of Perfection; Records. The location of Grantor's place
of business and chief executive office is 233 Washington Street, Syracuse, New
York 13202. Grantor shall give the Agent at least thirty (30) Business Days'
notice before it changes the location of its place of business and chief
executive office and shall at the expense of POA execute and deliver such
instruments and documents as required to maintain a prior perfected security
interest and as requested by the Agent. Grantor will hold and preserve such
records and will permit representatives of the Agent at any time during normal
business hours to inspect and make abstracts from such records.
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Section 10. Covenants of Grantor. POA shall pay, before the imposition of
any fine, penalty, interest or cost attached thereto, all taxes, assessments and
other governmental or non-governmental charges or levies now or hereafter
assessed or levied against the Collateral or upon the security interest provided
for herein (except for liens for taxes and assessments not then delinquent or
which POA may, pursuant to the definition of "Permitted Liens" in the Financing
Agreement, permit to remain unpaid), as well as pay, or cause to be paid, all
claims for labor, materials or supplies which, if unpaid, might become a prior
Lien (other than a Permitted Lien) thereon, and will deliver receipts showing
payment of any of the foregoing to the Agent upon request.
Section 11. Continuing Assignment and Security Interest; Transfer of
Senior Secured Notes. This Agreement shall create a continuing assignment of and
security interest in the Collateral and shall (a) remain in full force and
effect until payment and performance in full of the Obligations (b) be binding
upon Grantor, its successors and assigns and (c) inure, together with the rights
and remedies of the Agent, to the benefit of the Agent and its respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), subject to the terms of the Financing Agreement, the
Holders may assign or otherwise transfer the Senior Secured Notes or other
evidences of indebtedness held by them to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to the Holders herein or otherwise. Upon the payment in full of the
Obligations, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to Grantor. Upon any such termination, the Agent
will, at POA's expense, execute and deliver to Grantor such documents as Grantor
shall reasonably request to evidence such termination.
Section 12. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 13. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the parties
and their respective successors and assigns; provided, however, that Grantor may
not assign or delegate its rights or obligations hereunder without the prior
written consent of the Agent.
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Section 14. Headings. The headings of the various Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
Section 15. Governing Law. This Agreement, including all matters of
construction, validity and performance and matters relating to the creation,
validity, enforcement or priority of the lien of, and security interests created
by, this Agreement upon the Collateral shall be governed by the laws of the
State of New York.
Section 16. References to Other Documents. All defined terms used in this
Agreement which refer to other documents shall be deemed to refer to such other
documents as they may be amended, supplemented or replaced from time to time,
provided such documents were not amended in breach of a covenant contained in
any agreement to which Grantor or the Agent is a party.
Section 17. Agreement for Security Purposes. This agreement is for
security purposes only. Accordingly, the Agent shall not, have a right pursuant
to this Agreement, to enforce Grantor's rights with respect to the Collateral
until such time as an Event of Default shall have occurred and is continuing at
the time such enforcement is sought.
Section 18. Scope of Liability. This Agreement is one of the Financing
Documents referred to in the Financing Agreement, and the recourse of the Agent
and the other Secured Parties against the Grantor and any of its Affiliates,
stockholders, officers, directors, partners or employees, for any liability to
the Agent or the other Secured Parties arising under this Agreement shall be
limited to the extent provided in the Financing Agreement.
Section 19. Regarding the Agent. The Agent shall be afforded in respect of
this Agreement all of the rights, powers, protections, immunities and
indemnities set forth in Article 4 and Article 5 of the Depositary Agreement
which are applicable between the Agent and the Issuer thereunder, and the
provisions of Article 4 and Article 5 of the Depositary Agreement which are
applicable between the Agent and the Issuer thereunder shall inure to the
benefit of the Agent in respect to this Agreement and be binding upon POA in
such respect, in each case as if the same were specifically set forth herein,
mutatis mutandis. In furtherance and not in derogation of such rights, powers,
protections, immunities and indemnities set forth in Article 4 and Article 5 of
the Depositary Agreement:
(a) The Agent is authorized to take all such action as is provided to be
taken by it as the Agent hereunder and all other action incidental thereto. As
to any matters
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not expressly provided for herein the Agent shall act or refrain from acting in
accordance with written instructions from the Required Holders or, in the
absence of such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Lien on any of the Collateral, whether impaired by
operation of law or by reason of any action or omission to act on its part
hereunder. The Agent shall have no duty to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement by the Grantor.
(c) At any time or times, in order to comply with any legal requirement
in any jurisdiction, the Agent may appoint another bank or trust company or one
or more other Persons, either to act as co-agents or co-agents, jointly with the
Agent, or to act as separate agent or agents on behalf of the Agent with such
power and authority of the Agent as may be necessary for the effectual operation
of the provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include extending to such co-agent
or separate agent the provisions for the protection of the Agent contained in
Article 4 and Article 5 of the Depositary Agreement).
Section 20. Limitation of the Grantor's Liability. (a) The obligations
and agreements of the Grantor contained herein and in any financing statement,
fixture filing or other instrument or document executed in connection herewith
or supplemental hereto shall be deemed the obligations and agreements of the
Grantor and not of any members, officers, agents (other than POA) or employee of
the Grantor in his or her individual capacity; and the members, officers, agents
(other than POA) and employees of the Grantor shall not be liable personally
herein or thereon or be subject to any personal liability or accountability
based upon or in respect hereof or thereof or of any transaction contemplated
hereby. The obligations and agreements of the Grantor contained herein or
therein shall not constitute or give rise to an obligation of the State of New
York or of the City of Syracuse, and neither the State of New York nor the City
of Syracuse shall be liable hereon or thereon. Further, such obligations and
agreements shall not constitute or give rise to a general obligation of the
Grantor, but rather shall constitute limited obligations of the Grantor,
enforceable solely against the Collateral and the revenues and proceeds derived
by the Grantor from the Collateral, except the Unassigned Rights and the
revenues and proceeds from the Unassigned Rights.
(b) No order or decree of specific performance with respect to any of
the obligations of the Grantor hereunder shall be sought or enforced unless:
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(i) The party seeking such order or decree shall first have
requested the Grantor in writing to take the action sought in such order or
decree of specific performance, and ten (10) days shall have elapsed from
the date of receipt of such request, and the Grantor shall have refused to
comply with such request (or if compliance therewith would reasonably be
expected to take longer than ten (10) days, shall have failed to institute
and diligently pursue action to cause compliance with such request) or
failed to respond within such notice period; and
(ii) If the Grantor refuses to comply with such request and the
Grantor's refusal to comply is based on its reasonable expectation that it
will incur fees and expenses, POA or the party seeking such order or decree
shall have placed in an account with the Grantor an amount or undertaking
sufficient to cover such reasonable fees and expenses; and
(iii) If the Grantor refuses to comply with such request and the
Grantor's refusal to comply is based on its reasonable expectation that it
or any of its members, officers, agents (other than POA) or employees shall
be subject to potential liability, POA or the party seeking such order or
decree shall (1) agree to indemnify and hold harmless the Grantor and its
members, officers, agents (other than POA) and employees against any
liability incurred as a result of its compliance with such demand; and (2)
if requested by the Grantor, furnish to the Grantor satisfactory security
to protect the Grantor and its members, officers, agents (other than POA)
and employees against all liability expected to be incurred as a result of
compliance with such request.
If the Grantor shall request any deposit, undertaking, indemnity or security
pursuant to this Section 20, (i) POA shall promptly after receipt of such
request furnish the same to the Grantor, (ii) the Grantor shall accept the same
from POA, and (iii) if POA shall fail to furnish the same, the Grantor shall
accept the same from the party seeking such order or decree. Any failure to
provide any notice, deposit, indemnity or security to the Grantor pursuant to
this Section 20 shall not alter the force and effect of any Default or Event of
Default.
Section 21. POA Indemnification of the Grantor. POA and the Grantor agree
that the provisions of Section 10.3 "Indemnification" of the Master Lease are
---------------
incorporated herein by reference and shall be applicable, mutatis mutandis, as
between POA and the Grantor under and with respect to this Agreement.
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IN WITNESS WHEREOF, Grantor and Agent have caused this Security Agreement
to be duly executed by their signatories thereunto duly authorized, as of the
day and year first above written.
CITY OF SYRACUSE INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Vito Sciscioli
___________________________________
Name: Vito Sciscioli
Title: Vice Chairman
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Agent for the benefit of the
Secured Parties
By: /s/ Ward A. Spooner
___________________________________
Name: Ward A. Spooner
Title: Vice President
Consented and Agreed to:
PROJECT ORANGE FUNDING, L.P.,
a Delaware limited partnership
By: G.A.S. Orange Associates, L.L.C.,
a Delaware limited liability
company, its general partner
By: /s/ Douglas Corbett
______________________________
Name: Douglas Corbett
Title: Vice President
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EXHIBIT 4.7
EXECUTION COPY
PLEDGE AND SECURITY AGREEMENT
Dated as of December 6, 1999
Among
G.A.S. ORANGE PARTNERS, L.P.,
a Delaware limited partnership
PROJECT ORANGE FUNDING, L.P.,
a Delaware limited partnership,
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
<PAGE>
TABLE OF CONTENTS
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<TABLE>
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PAGE
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<S> <C>
PREFACE.................................................................. 1
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Section 1. Definition................................................... 2
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Section 2. Assignment, Pledge and Grant of Security Interest............ 2
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Section 3. Documents.................................................... 4
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Section 4. Events of Default............................................ 5
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Section 5. Remedies..................................................... 6
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Section 6. Remedies Cumulative; Delay Not Waiver........................ 9
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Section 7. Covenants and Representations of Assignor.................... 9
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Section 8. Certain Consents and Waivers................................. 12
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Section 9. Orange L.P.'s Consent and Covenants.......................... 13
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Section 10. Attorney-in-Fact............................................. 14
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Section 11. Place of Business; Location of Records....................... 14
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Section 12. Perfection; Further Assurances............................... 14
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Section 13. Continuing Assignment and Security Interest; Transfer of
Senior Secured Notes......................................... 15
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Section 14. Liability.................................................... 15
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Section 15. Regarding the Agent.......................................... 16
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Section 16. Severability................................................. 16
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Section 17. Successors and Assigns....................................... 17
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Section 18. Headings..................................................... 17
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Section 19. Governing Law................................................ 17
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Section 20. References to Other Documents................................ 17
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</TABLE>
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PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement ("Agreement") dated as of December 6,
1999, is entered into by and among G.A.S. ORANGE PARTNERS, L.P., a Delaware
limited partnership ("Assignor"), PROJECT ORANGE FUNDING, L.P., ("Funding L.P.")
a Delaware limited partnership (together with its successors, including Project
Orange Associates, L.P., ("Orange L.P.") a Delaware limited partnership, as the
survivor of the merger of Orange L.P. with and into Project Orange Associates,
L.P. concurrently with the issuance and sale of the Senior Secured Notes
referred to below, "POA"), and U.S. BANK TRUST NATIONAL ASSOCIATION, as
collateral agent ("Agent") for the benefit of the Secured Parties under the
Financing Agreement described below.
PREFACE
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A. Orange L.P. operates the Project (as defined in the Financing
Agreement described below) in Syracuse, Onondaga County, New York.
B. POA and Project Orange Capital Corp., a Delaware corporation,
("Capital Co." and together with POA, the "Issuers") will issue $68 million
aggregate principal amount of its 10.5% Senior Secured Notes due 2007 (the
"Series A Notes") pursuant to that certain Indenture dated as of December 6,
1999 ("Financing Agreement") among the Issuers and U.S. Bank Trust National
Association, as Trustee ("Trustee") for the benefit of the holders of the Senior
Secured Notes (the "Holders" and, together with the Trustee, the "Secured
Parties") and as Collateral Agent.
C. The Holders will have the registration rights set forth in the
Registration Rights Agreement dated as of December 6, 1999 between the Issuers
and Donaldson Lufkin & Jenrette (the "Initial Purchaser") pursuant to which the
Issuers agree to file with the Securities and Exchange Commission (i) a
registration statement relating to 10.5% Senior Secured Notes due 2007 (the
"Series B Notes") to be offered in exchange for the Series A Notes and (ii) a
shelf registration statement pursuant to Rule 415 under the Securities Act of
1933 relating to the resale by certain Holders of the Series A Notes. The
Series A Notes and the Series B Notes are collectively referred to herein as the
"Senior Secured Notes".
D. Concurrently with the issuance and sale of the Series A Notes (the
"Offering"), Funding L.P. will merge (the "Merger") with and into Orange L.P.
(with Orange L.P. as the surviving partnership) pursuant to the Agreement and
Plan of Merger dated as of December 6, 1999 (the "Merger Agreement") between
Funding L.P. and Orange L.P.
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E. Assignor is a partner in Orange L.P. pursuant to that certain Second
Amended and Restated Agreement of Limited Partnership dated as of December 16,
1992 ("Partnership Agreement") among G.A.S. Orange Associates, LLC, a Delaware
limited liability company and Assignor (the "Partners").
F. As a condition precedent to the issuance of the Senior Secured Notes
contemplated by the Financing Agreement, the Secured Parties require that
Funding L.P. and Assignor shall have executed this Agreement.
AGREEMENT
---------
In consideration of the premises herein and in order to induce the Trustee,
for the benefit of the Holders, to enter into the Financing Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Funding L.P. and Assignor hereby agree with the Agent for
the benefit of the Secured Parties as follows:
Section 1. Definition.
Unless otherwise defined, all capitalized terms used herein which are
defined in the Financing Agreement shall have their respective meanings therein
defined.
Section 2. Assignment, Pledge and Grant of Security Interest. (a) To
secure the timely payment and performance of the Obligations (as defined below),
Assignor does hereby assign and pledge to the Agent for the benefit of the
Secured Parties and grant to the Agent for the benefit of the Secured Parties a
security interest in all the estate, right, title and interest of Assignor, now
owned or hereafter acquired, in, to and under any and all of the following
(subject to the proviso to this Section 2(a), the "Collateral"):
(i) Assignor's partnership interests in Orange L.P.;
(ii) subject to the rights of Kronish Lieb (as defined below) under
the Stipulation (as defined below), all rights to receive all income, gain,
profit, loss or other items allocated or distributed to Assignor under the
Partnership Agreement;
(iii) subject to the rights of Kronish Lieb under the Stipulation, all
rights of Assignor to receive distributions of any nature whatsoever by
Orange L.P. with respect to such partnership interests;
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(iv) all of Assignor's capital or ownership interest, including
capital accounts, in Orange L.P., and all accounts, deposits or credits of
any kind with Orange L.P.;
(v) all of Assignor's voting rights in or rights to control or
direct the affairs of Orange L.P.;
(vi) all of Assignor's right, title and interest, as a partner in
Orange L.P., in or to any and all of Orange L.P.'s assets or properties;
(vii) subject to the rights of Kronish Lieb under the Stipulation,
all other right, title and interest of Assignor in or to Orange L.P., and
all rights to receive income, profits or other distributions from Orange
L.P., of any nature whatsoever, in each case, as such rights are derived
from Assignor's partnership interests in Orange L.P.;
(viii) subject to the rights of Kronish Lieb under the Stipulation,
all claims of the Assignor for damages arising out of or for breach of or
default relating to the Collateral except for claims against the other
Partner in its capacity as Partner;
(ix) all rights of Assignor to terminate, amend, supplement, modify
or waive performance under the Partnership Agreement, to perform thereunder
and to compel performance and otherwise exercise all remedies thereunder;
and
(x) subject to the rights of Kronish Lieb under the Stipulation,
all proceeds of any of the above.
provided that the Collateral shall not include anything described in clauses
(i), (iv), (v), (vi) or (ix) above (the "Excluded Collateral") unless and until
Kronish Lieb Weiner & Hellman LLP ("Kronish Lieb") ceases to have rights under
the Stipulation dated November 14, 1994 and Order of Bankruptcy Court dated
December 8, 1994 (the "Stipulation").
(b) This Agreement secures the payment and performance of all obligations
of POA and the other Credit Parties and SIDA, now existing or hereafter arising,
due or owing to the Secured Parties pursuant to the terms of the Indenture, the
Senior Secured Notes and the Collateral Documents including, without limitation:
(i) the principal, premium, if any, or interest on the Senior Secured Notes
(including any interest accruing after the commencement of any bankruptcy or
insolvency proceeding
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relating to the Issuers, whether or not such interest is allowed or allowable as
a claim in any such proceeding), and all other obligations and liabilities of
the Issuers including, without limitation, indemnities, fees and interest
incurred under, arising out of or in connection with the Indenture, the Senior
Secured Notes and the Collateral Documents, (ii) any and all sums advanced by or
on behalf of the Issuers in order to preserve the Collateral or preserve its
interest in the Collateral, and (iii) in the event of any proceeding for
collection or enforcement by or on behalf of any Secured Party after an Event of
Default shall have occurred and be continuing and unwaived, the expenses of
retaking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by or on behalf of any
Secured Party of its rights under the Indenture, the Senior Secured Notes and
the Collateral Documents, together with attorneys' fees and court costs (all
such obligations being herein called the "Obligations").
(c) Upon the occurrence and during the continuation of an Event of
Default, Assignor hereby irrevocably appoints and constitutes the Agent and its
successors and assigns as Assignor's true and lawful attorney in fact, with full
power (in the name of Assignor or otherwise) to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for money due
and to become due under or arising out of the Collateral, to elect remedies
thereunder, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
in connection therewith which the Agent may deem to be necessary or advisable.
Section 3. Documents. (a) At any time and from time to time upon the
request of the Agent, Assignor will:
(i) deliver and pledge to the Agent endorsed and/or accompanied by
such evidence of assignment and transfer, in such form and substance, as
the Agent may request, any and all instruments, documents, chattel paper
and/or general intangibles relating to the Collateral as the Agent may
specify;
(ii) give, execute, deliver, file and/or record any notice,
statement, instrument, document, agreement or other papers that may be
reasonably necessary, and as the Agent may reasonably request, in order to
create, preserve, perfect or validate the assignment and security interest
granted pursuant hereto or to enable the Agent to exercise and enforce its
rights hereunder or with respect to such assignment and security interest;
and
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(iii) keep and stamp or otherwise mark any and all documents and its
individual books and records relating to Collateral in such manner as the
Agent may require.
(b) The right is expressly granted to the Agent, at its discretion, to
file in those jurisdictions where the same is permitted one or more financing
statements under the Uniform Commercial Code (the "UCC") signed only by the
Agent, naming Assignor as debtor and the Agent as secured party, and indicating
therein the types or describing the items of Collateral herein specified.
Without the prior written consent of the Agent, the Assignor will not file or
authorize or permit to be filed in any jurisdiction any such financing or like
statement (other than for Permitted Liens) in which the Agent is not named as
the sole secured party. Nothing herein shall be construed as obligating the
Agent to file any financing statement.
(c) If any default by Assignor under the Partnership Agreement shall
occur, the Agent shall, at its option, be permitted (but shall not be obligated)
to remedy any such default by giving written notice of such intent to Orange
L.P. and Assignor. The Agent shall have a period of sixty (60) days after giving
such notice in which to cure such default. In the event that any such default
(except monetary defaults) shall not be reasonably curable within such 60-day
period, neither Orange L.P. nor any Person acting on behalf of Orange L.P.,
including, without limitation, a general partner of Orange L.P., shall exercise
any remedies thereunder if the Agent shall, within such 60-day period, initiate
action to cure such default and proceed diligently to the curing thereof. Any
cure by the Agent of Assignor's default under the Partnership Agreement shall
not be construed as an assumption by the Agent or any of the Secured Parties of
any obligations, covenants or agreements of Assignor under the Partnership
Agreement and neither the Agent nor the Secured Parties shall be liable for any
action taken pursuant to this Section 3(c) to cure any such default. In no event
shall the Agent be deemed to be a partner under such Partnership Agreement and
in no event shall the Agent have any liability thereunder. This Agreement shall
not be deemed to release or to affect in any way the obligations of Assignor
under the Partnership Agreement.
Section 4. Events of Default. The occurrence of any of the following
events ("Events of Default"), whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body, shall entitle the Agent
to exercise any and all of its rights and remedies hereunder or at law:
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(a) the occurrence (whether as a result of acts or omissions by Orange
L.P. or any other Person) of an Event of Default under the Financing Agreement
or any of the other Financing Documents; or
(b) subject to such notice requirements and cure periods as may be
applicable thereto pursuant to the Financing Agreement, the failure on the part
of Assignor to observe or perform any material covenant, condition or agreement
on its part to be observed or performed, or the material breach of any
representation or warranty of Assignor, contained in this Agreement; or
(c) the impairment of the priority of the security interest in the
Collateral granted herein in any material respect.
Section 5. Remedies. (a) If any Event of Default has occurred and is
continuing, the Agent shall have the right, at its election, but not the
obligation, to do any of the following (subject to the terms of the Financing
Agreement and except to the extent such action or actions are prohibited
pursuant to applicable law):
(i) subject to Section 5(f) below but only after Kronish Lieb
ceases to have rights under the Stipulation, vote or exercise any and all
of Assignor's rights or powers under the Partnership Agreement, including
any rights or powers to manage or control the Orange L.P.;
(ii) demand, sue for, collect or receive any money or property at
any time payable to or receivable by Assignor on account of, or in
exchange for, all or any part of the Collateral;
(iii) institute and prosecute any action at law or suit in equity
or other proceeding to collect or enforce any obligations or rights
hereunder or in the Collateral, including specific enforcement of any
covenant or agreement contained herein or in the Partnership Agreement,
or to foreclose or enforce the security interest in all or any part of
the Collateral granted herein, or to enforce any other legal or equitable
right vested in it by this Agreement or by law;
(iv) sell or otherwise dispose of any or all of the Collateral or
cause all or any part of the Collateral to be sold or otherwise disposed
of in one or more sales or transactions, after five (5) days prior
written notice to the Assignor of its intent to take such action, at such
prices as the Agent may deem appropriate or adequate, and for cash or on
credit or for future delivery, without assumption of any credit risk, at
any broker's board or at public or private sale, without demand of
performance or notice of time or place of sale
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(except such notice which under applicable law cannot be waived), and any
Secured Party or any other Person may be the purchaser of any or all of the
Collateral so sold and thereafter hold the same absolutely free from any
claim or right of whatsoever kind, including any equity of redemption, of
Assignor or Orange L.P., any such demand, notice or right and equity being
hereby expressly waived and released;
(v) incur expenses, including attorneys' fees, consultants' fees,
and other costs appropriate to the exercise of any right or power under
this Agreement;
(vi) perform any obligation of Assignor hereunder or under the
Partnership Agreement;
(vii) secure the appointment of a receiver for Assignor without
notice to Orange L.P. or Assignor; or
(viii) exercise any other or additional rights or remedies granted to
a secured party under the UCC.
If, pursuant to applicable law, prior notice of any such action is required
to be given to Assignor or Orange L.P., Assignor and Orange L.P. hereby
acknowledge and agree that the minimum time required by such applicable law, or
if no minimum is specified, five (5) Banking Days, shall be deemed a reasonable
notice period.
(b) In addition to the foregoing remedies, the Agent may (subject to
Section 3(c) hereof), but shall not be obligated to, cure any Event of Default
and incur reasonable fees, costs and expenses in doing so, in which event Orange
L.P. or Assignor shall immediately reimburse the Agent on demand for all such
fees, costs and expenses, together with interest on the total amount at the
Default Rate from the date incurred until the date repaid in full. Subject to
the Assignor's rights described in Section 5(c) hereof, the Agent shall be the
sole judge of the validity of any adverse claims, taxes, assessments, charges or
encumbrances pertaining to the Collateral, and the amount to be paid in
satisfaction thereof, and of the necessity for, and of the time and manner of
doing, everything herein authorized to be done, provided that the Agent shall be
under no obligation to do any such acts or to make any such payments.
(c) Assignor may contest in good faith any taxes, assessments and other
governmental charges in connection with the Collateral and, in such event, may
permit the taxes, assessments or other charges so contested to remain unpaid
during any period, including appeals, when Assignor is in good faith contesting
the same, so long as
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(i) reserves have been established in an amount sufficient to pay any such
taxes, assessments or other charges, accrued interest thereon and potential
penalties or other costs relating thereto, or other adequate provision for the
payment thereof shall have been made, (ii) enforcement of the contested tax,
assessment or other charge is effectively stayed for the entire duration of such
contest, and (ii) any tax, assessment or other charge determined to be due,
together with any interest or penalties thereon, is immediately paid after
resolution of such contest. Additionally, Assignor may contest in good faith
Liens for any tax, assessment or other governmental charge, by appropriate
proceedings, so long as in connection with such proceedings a bond or other
security has been posted or provided in such manner and amount as to assure that
any taxes, assessment or other charges determined to be due will be promptly
paid in full when such contest is determined.
(d) If the Agent shall decide to exercise its right to sell any or all
of the Collateral, and if it is necessary to have such Collateral, or that
portion thereof to be sold, registered under the provisions of the Securities
Act of 1933, as amended, or otherwise registered or qualified under any federal
or state securities laws or regulations (collectively, the "Securities Laws"),
Orange L.P. will execute and deliver, all at Orange L.P.'s expense, all such
instruments and documents which, in the opinion of the Agent, are necessary to
register or qualify such Collateral, or that portion thereof to be sold, under
the provisions of the Securities Laws and will use best efforts to cause any
registration statement relating thereto to become effective and to remain
effective for a period of not less than six (6) months from the date of the
first public offering of such Collateral, or that portion thereof to be sold,
and to make all amendments thereto and/or to any related prospectus or similar
document which are necessary, all in conformity with the Securities Laws
applicable thereto. Without limiting the generality of the foregoing, Orange
L.P. agrees to comply with the provisions of all applicable securities or "Blue
Sky" laws of any jurisdiction(s) and to make available to its security holders,
as soon as practicable, an earnings statement which will satisfy the provisions
of Section 11(a) of the Securities Act of 1933.
(e) All costs and expenses (including, without limitation, attorneys'
fees and expenses) incurred by the Agent or any Secured Party in connection with
exercising any remedy provided for herein or at law, curing any Event of Default
or performing any of Assignor's agreements contained herein or in the
Partnership Agreement or in respect of any part of the Collateral, together with
interest thereon computed at the Default Rate from the date on which such costs
or expenses are incurred to the date of payment thereof, shall constitute
indebtedness secured by this Agreement and shall be paid by Assignor or the
Orange L.P. to the Agent on demand for the account of the Agent or any such
Secured Party, as the case may be.
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(f) So long as no Event of Default has occurred and is continuing,
Assignor reserves the right to exercise all of its rights under the Partnership
Agreement (except as limited by the Financing Documents) and to receive all
income and other distributions from the Collateral and such distributions shall
be free of any lien of Agent and/or the Secured Parties under the Financing
Documents (so long as such distributions do not violate any terms or provisions
of the Financing Documents).
(g) Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any part
of the Collateral shall be deposited in the Redemption Account to be held,
applied and released in accordance with the Depositary Agreement.
Section 6. Remedies Cumulative; Delay Not Waiver. No right, power or
remedy herein conferred upon or reserved to the Agent or the Secured Parties is
intended to be exclusive of any other right, power or remedy, and every such
right, power and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right, power and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. No delay or omission of the
Agent to exercise any right or power accruing upon the occurrence and during the
continuance of any Event of Default as aforesaid shall impair any such right or
power or shall be construed to be a waiver of any such Event of Default or an
acquiescence therein. Every power and remedy given by this Agreement may be
exercised from time to time, and as often as shall be deemed expedient, by the
Agent.
Section 7. Covenants and Representations of Assignor. Assignor
covenants, agrees and represents as follows:
(a) Assignor will perform and comply, in all material respects, with all
obligations and conditions on its part to be performed hereunder, under the
Partnership Agreement or with respect to the Collateral.
(b) The Partnership Agreement has been duly authorized, executed and
delivered by Assignor and, to the best of Assignor's knowledge, the other
parties thereto, has not been amended or otherwise modified, and is in full
force and effect and is binding upon and enforceable against Assignor and, to
the best of Assignor's knowledge, the other parties thereto, in accordance with
its terms. There exists no default under the Partnership Agreement by Assignor,
or to the best of Assignor's knowledge, by the other parties thereto.
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(c) Assignor has not executed and is not aware of any effective
financing statement, security agreement or other instrument similar in effect
covering all or any part of the Collateral on file in any recording office,
except such as may have been filed pursuant to this Agreement or the other
Financing Documents or pursuant to the documents evidencing Permitted Liens.
(d) Assignor is the lawful owner of and has full right, title and
interest in and to, the Collateral, subject to no mortgages, liens, charges, or
encumbrances of any kind except Permitted Liens, and has full power and lawful
authority to pledge, assign and grant a security interest in the Collateral
hereunder. Assignor will, so long as any Obligations shall be outstanding,
warrant and defend its title to the Collateral against the claims and demands of
all persons whomsoever.
(e) Assignor will not directly or indirectly create, incur, assume or
suffer to exist any liens on or with respect to any part of the Collateral
except for the liens created by this Agreement or Permitted Liens or as
otherwise expressly permitted pursuant to the Financing Agreement. Assignor will
at its own cost and expense promptly take such action as may be necessary to
discharge any such liens.
(f) Except as provided in the Stipulation, Assignor has not assigned any
of its rights under the Partnership Agreement or any of the Collateral except as
provided in this Agreement.
(g) Any action or proceeding to enforce the rights granted or to protect
or preserve the Collateral under this Agreement may be taken by the Agent either
in Assignor's name or in the Agent's name as the Agent may deem necessary.
(h) Without the prior written consent of the Agent, or unless otherwise
expressly permitted by the Financing Agreement, Assignor shall not (i)
terminate, modify or amend the Partnership Agreement or (ii) fail to deliver to
the Agent a copy of each demand or notice received or given by it relating to
the Partnership Agreement and which could reasonably be expected to have a
material adverse effect upon the Collateral or the Agent's rights therein.
(i) Assignor shall give to the Agent prompt notice of any default, event
of default or event which with the giving of notice or the passage of time or
both might become an event of default (however "default" or "event of default"
may be defined) under the Partnership Agreement, whether by Orange L.P.,
Assignor or any other Person, of which Assignor has actual knowledge or has
received notice.
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(j) If Assignor in its capacity as a partner of Orange L.P. (whether as
a general partner or a limited partner) receives any income or distribution of
money or property of any kind from Orange L.P. while an Event of Default (with
respect to which the Assignor has received written notice) has occurred and is
continuing, Assignor shall (except for income or distributions which the
Assignor is obligated to pay over to Kronish Lieb pursuant to the Stipulation)
hold such income or distribution as trustee for and shall deliver the same to
the Agent (unless all such Events of Default have been cured or waived or unless
Agent shall have provided written notice to Assignor to the effect that Agent
shall have determined, in its sole discretion, that the continuance of any such
Event(s) of Default could not have an adverse effect on Orange L.P. or the
Collateral) and that Assignor may retain such income, money or property.
(k) Assignor will, at all times, keep accurate and complete records of
the Collateral. Assignor shall, at all times on seven (7) days' notice, permit
representatives of the Agent at any time during normal business hours of
Assignor to inspect and make abstracts from the Assignor's books and records
pertaining to the Collateral.
(l) Assignor will give prompt notice in writing to the Agent of any
change in the location of the place of business where correspondence, notices or
proceeds in connection with the Collateral are received or located or of any
change in the location of the place of business where records concerning
Collateral are kept.
(m) Assignor is not, and will not as a result of becoming a general or
limited partner of Orange L.P. be or become, or cause Orange L.P. to be or
become, or be deemed by any Governmental Authority to be a "utility" or subject
to, or not exempt from, regulation under the FPA or the PUHCA or under state
laws and regulations respecting the rates or the financial or organizational
regulation of public or electric utilities, except as a "qualifying facility"
under PURPA.
(n) Assignor shall not do anything or cause, suffer or permit anything
to be done, including, without limitation, sale or other transfer of Assignor's
partnership interests in the Orange L.P. or of any stock, partnership interest
or other ownership interest in Assignor, which may cause the Project to lose its
status as a "qualifying facility" under PURPA.
(o) As a condition to any transfer of any Collateral the transferee must
agree that the security interest needed by this agreement shall continue
unimpaired following such transfer and shall sign all necessary agreements and
instruments and take all other action necessary to create a first priority
security in favor of the Agent on such Collateral that is the subject of such
transfer. In connection with any such transfer, the Agent shall be entitled to
receive such information with respect to the identity of the
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proposed transferee and the ultimate beneficial ownership and control of the
Orange L.P. as it may reasonably request in order to make an informed
determination as to whether the requested change in ownership of the Orange L.P.
would result in a Change of Control.
(p) Assignor shall perform and comply with all obligations and
conditions binding upon it under the Stipulation.
Section 8. Certain Consents and Waivers. (a) Assignor hereby consents
to the execution, by the other Partners, of agreements similar to this Agreement
in favor of the Agent for the benefit of the Secured Parties. Assignor
specifically agrees that such other agreements may, among other things, assign
or delegate to the Agent rights to cure defaults under the Partnership
Agreement, to exercise voting rights and other rights to manage or control the
Orange L.P., and to act as such other Partner's attorney in fact in a manner
similar to the assignment and delegation of such rights provided herein and
that, to the extent permitted by applicable law, Assignor will recognize and
accept such assignment and delegation and the exercise of such rights by the
Agent in connection with any actions by or business of Orange L.P..
(b) Assignor hereby waives, to the maximum extent permitted by law:
(i) all rights under any law limiting remedies, including
recovery of a deficiency, under an obligation secured by a deed of trust
or mortgage on real property if the real property is sold under a power
of sale contained in the mortgage, and all defenses based on any loss
whether as a result of any such sale or otherwise, of Assignor's right to
recover any amount from Orange L.P. or any other Credit Party or SIDA,
whether by right of subrogation or otherwise;
(ii) all rights under any law to require the Agent to pursue
Orange L.P. or any other Person, any security which the Agent may hold,
or any other remedy before proceeding against Assignor;
(iii) all rights of reimbursement or subrogation, all rights to
enforce any remedy that the Agent or the Secured Parties may have against
Orange L.P., or any other Credit Party or SIDA and all rights to
participate in any security held by the Agent until the Obligations have
been paid and the covenants of the Financing Documents have been
performed in full;
(iv) Except as otherwise provided herein, all rights to require
the Agent to give any notices of any kind, including, without limitation,
notices of
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nonpayment, nonperformance, protest, dishonor, default, delinquency or
acceleration, or to make any presentments, demands or protests, except as
expressly provided herein, in the Financing Agreement and the other
Financing Documents;
(v) all rights to assert the bankruptcy or insolvency of Orange
L.P. as a defense hereunder or as the basis for rescission hereof;
(vi) all rights under any law purporting to proportionally reduce
Assignor's Obligations hereunder if Orange L.P.'s or any other Credit
Party's or SIDA's Obligations are reduced;
(vii) all defenses based on the disability or lack of authority of
Orange L.P. or any Person, the repudiation of the Financing Documents by
Orange L.P. or any Person, the failure by Agent or the Secured Parties to
enforce any claim against Orange L.P. or any other Credit Party or SIDA,
or the unenforceability in whole or in part of any Financing Documents;
and
(viii) all suretyship and guarantor's defenses generally.
Assignor further agrees that upon the occurrence of an Event of Default
under the Financing Agreement, the Agent may elect to nonjudicially or
judicially foreclose against any real or personal property security it holds for
the Obligations or any part thereof, or to exercise any other remedy against
Orange L.P. or any other Credit Party or SIDA, any security or any guarantor,
even if the effect of that action is to deprive Assignor of the right to collect
reimbursement from Orange L.P. or any other Credit Party or SIDA for any sums
paid by Assignor to the Agent or any Secured Party.
Section 9. Orange L.P.'s Consent and Covenants. Orange L.P. hereby
consents to the assignment of and grant of a security interest in the Collateral
to the Agent and to the exercise by the Agent of all rights and powers assigned
or delegated to the Agent by Assignor hereunder, including without limitation
the rights upon and during an Event of Default and after Kronish Lieb ceases to
have rights under the Stipulation to exercise Assignor's voting rights and other
rights under the Partnership Agreement to manage or control Orange L.P..
Orange L.P. further agrees to perform all covenants and obligations herein
which, by their express or implied terms, are to be performed by Orange L.P.
Without limiting the generality of the foregoing, Orange L.P. agrees not to
permit the withdrawal of any present Partners or to admit any new Partners
except in compliance with Section 7(o) of this Agreement and to give the Agent
prompt notice of any (a) Change of Control or (b) default, event of default or
event which with the giving of notice or the passage of time or both might
become an
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<PAGE>
event of default (however "default" or "event of default", may be defined) by
Assignor or any other Partner under the Partnership Agreement.
Section 10. Attorney-in-Fact. Upon the occurrence and during the
continuation of an Event of Default, Assignor hereby irrevocably constitutes and
appoints the Agent its true and lawful attorney-in-fact to enforce all rights of
Assignor with respect to the Collateral, including, without limitation, the
right to vote, demand, receive and enforce Assignor's rights with respect to the
Collateral, and to give appropriate receipts, releases and satisfactions for and
on behalf of and in the name of the Assignor or at the option of the Agent, in
the name of the Agent, with the same force and effect as Assignor could do if
this Agreement had not been made. This power of attorney is a power coupled with
an interest and shall be irrevocable.
Section 11. Place of Business; Location of Records.
(a) Unless the Agent is otherwise notified, the place of business and
chief executive office of Assignor is and all records of Assignor concerning the
Collateral are and will be located at, the following address:
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Attn: Richard S. Scolaro
(b) All notices required or permitted under the terms and provisions
hereof shall be in writing and any such notice shall be effective if given in
accordance with the provisions of Section 9.02 of the Financing Agreement.
Notice to the Assignor may be given at the address set forth in clause (a)
above. Notices to the Agent may be given at the address set forth in Section
9.02 of the Financing Agreement.
Section 12. Perfection; Further Assurances. (a) Assignor agrees that from
time to time, Assignor will promptly execute and deliver all instruments and
documents, and take all action, that may be reasonably necessary or that the
Agent may reasonably request, in order to perfect and protect the assignment and
security interest granted or intended to be granted hereby or to enable the
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, Assignor will
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments, endorsements or notices, as may be
reasonably necessary or as the Agent may reasonably request, in order to perfect
and preserve the assignments and security interests granted or purported to be
granted hereby.
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<PAGE>
(b) Orange L.P. shall pay all filing, registration and recording fees
and all refiling, re-registration and re-recording fees, and all reasonable
expenses incident to the execution and acknowledgment or performance of this
Agreement, and all Federal, state, county and municipal stamp taxes and other
taxes, duties, imports, assessments and charges arising out of or in connection
with the execution and delivery of this Agreement, any agreement supplemental
hereto, any financing statements and any instruments of further assurance.
(c) Assignor shall give the Agent at least thirty (30) days' notice
before it changes the location of its place of business and chief executive
office and shall at the expense of Orange L.P. execute and deliver such
instruments and documents as may be required by the Agent to maintain a prior
perfected security interest in the Collateral.
Section 13. Continuing Assignment and Security Interest; Transfer of
Senior Secured Notes. This Agreement shall create a continuing pledge and
assignment of and security interest in the Collateral and shall (a) remain in
full force and effect until payment and performance in full of the Obligations,
(b) be binding upon Orange L.P., Assignor, and their respective successors and
assigns, and (c) inure, together with the rights and remedies provided herein,
to the benefit of the Agent, the Secured Parties and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing, any of the Secured Parties may assign or otherwise transfer all or
any part of or interest in the Senior Secured Notes or other evidence of
indebtedness held by them to any other Person to the extent permitted by and in
accordance with the Financing Agreement, and such other Person shall thereupon
become vested with all or an appropriate part of the benefits in respect thereof
granted to the Secured Parties herein or otherwise. The release of the security
interest in any or all of the Collateral, the taking or acceptance of additional
security, or the resort by the Agent to any security it may have in any order it
may deem appropriate, shall not affect the liability of any person on the
Obligations. Upon the payment and performance in full of the Obligations, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Assignor. Upon any such termination, the Agent shall,
at Assignor's expense, execute and deliver to Assignor such documents as the
Orange L.P. or the Assignor shall reasonably request to evidence such
termination. If this Agreement shall be terminated or revoked by operation of
law, Assignor will indemnify and save the Agent harmless from any loss which may
be suffered or incurred by the Agent in acting hereunder prior to the receipt by
the Agent, its successors, transferees or assigns of notice of such termination
or revocation.
Section 14. Liability. This Agreement is one of the Financing Documents
referred to in the Financing Agreement, and the recourse of the Agent and the
Secured
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<PAGE>
Parties against the Assignor, Orange L.P. or any of their respective Affiliates,
stockholders, officers, directors, partners or employees, for any liability to
the Agent or the Secured Parties arising under this Agreement shall be limited
to the extent provided in Section 9.07 of the Financing Agreement.
Section 15. Regarding the Agent. The Agent shall be afforded in respect
of this Agreement all of the rights, powers, protections, immunities and
indemnities set forth in Article 4 and Article 5 of the Depositary Agreement
which are applicable between the Agent and the Issuer thereunder, and the
provisions of Article 4 and Article 5 of the Depositary Agreement which are
applicable between the Agent and the Issuer thereunder shall inure to the
benefit of the Agent in respect to this Agreement and be binding upon POA in
such respect, in each case as if the same were specifically set forth herein,
mutatis mutandis. In furtherance and not in derogation of such rights, powers,
protections, immunities and indemnities set forth in Article 4 and Article 5 of
the Depositary Agreement:
(a) The Agent is authorized to take all such action as is provided to be
taken by it as the Agent hereunder and all other action incidental thereto. As
to any matters not expressly provided for herein the Agent shall act or refrain
from acting in accordance with written instructions from the Required Holders
or, in the absence of such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Lien on any of the Collateral, whether impaired by
operation of law or by reason of any action or omission to act on its part
hereunder. The Agent shall have no duty to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement by each of POA
and the Assignor.
(c) At any time or times, in order to comply with any legal requirement
in any jurisdiction, the Agent may appoint another bank or trust company or one
or more other Persons, either to act as co-agents or co-agents, jointly with the
Agent, or to act as separate agent or agents on behalf of the Agent with such
power and authority of the Agent as may be necessary for the effectual operation
of the provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include extending to such co-agent
or separate agent the provisions for the protection of the Agent contained in
Article 4 and Article 5 of the Depositary Agreement).
Section 16. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the
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<PAGE>
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 17. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the parties
and their respective successors and assigns; provided, however, that neither
Assignor nor Orange L.P. may assign its rights or obligations hereunder without
the prior written consent of the Agent.
Section 18. Headings. The headings of the various Sections herein are
for convenience of reference only and shall not define or limit any of the terms
or provisions hereof.
Section 19. Governing Law. This Agreement, including all matters of
construction, validity, performance and the creation, validity, enforcement or
priority of the lien of, and security interests created by, this Agreement in or
upon the Collateral shall be governed by the laws of the State of New York.
Section 20. References to Other Documents. All defined terms used in
this Agreement which refer to other documents shall be deemed to refer to such
other documents as they may be amended, supplemented or replaced from time to
time, provided such documents were not amended in breach of a covenant contained
in any agreement to which Assignor, Orange L.P., the Agent or any of the Secured
Parties is a party.
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<PAGE>
IN WITNESS WHEREOF, Assignor, Orange L.P. and Agent have caused this
Agreement to be duly executed by their duly authorized signatory as of the day
and year first above written.
G.A.S. ORANGE PARTNERS, L.P.,
a Delaware limited partnership
By: G.A.S. Orange Development, Inc.,
its general partner
By: /s/ Adam Victor
__________________________
Name: Adam Victor
Its: President
Accepted and Agreed:
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Agent
By: /s/ Ward A. Spooner
_______________________
Name: Ward A. Spooner
Title: Vice President
PROJECT ORANGE FUNDING, L.P., a
Delaware limited partnership
By: G.A.S. Orange Associates, L.L.C.,
a Delaware limited liability
company, its general partner
By: /s/ Douglas Corbett
__________________________
Name: Douglas Corbett
Title: Vice President
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<PAGE>
EXHIBIT 4.8
EXECUTION COPY
PLEDGE AND SECURITY AGREEMENT
Dated as of December 6, 1999
Among
G.A.S. ORANGE ASSOCIATES, L.L.C.,
a Delaware limited liability company
PROJECT ORANGE FUNDING, L.P.,
a Delaware limited partnership,
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
<PAGE>
TABLE OF CONTENTS
______________
<TABLE>
<CAPTION>
Page
----
<S> <C>
PREFACE............................................................................................... 1
-
Section 1. Definition............................................................................... 2
-
Section 2. Assignment, Pledge and Grant of Security Interest........................................ 2
-
Section 3. Documents................................................................................ 4
-
Section 4. Events of Default........................................................................ 5
-
Section 5. Remedies................................................................................. 6
-
Section 6. Remedies Cumulative; Delay Not Waiver.................................................... 9
-
Section 7. Covenants and Representations of Assignor................................................ 9
-
Section 8. Certain Consents and Waivers............................................................. 11
--
Section 9. Orange L.P.'s Consent and Covenants...................................................... 13
--
Section 10. Attorney-in-Fact......................................................................... 13
--
Section 11. Place of Business; Location of Records................................................... 14
--
Section 12. Perfection; Further Assurances........................................................... 14
--
Section 13. Continuing Assignment and Security Interest; Transfer of Senior Secured Notes............ 15
--
Section 14. Liability................................................................................ 15
--
Section 15. Regarding the Agent...................................................................... 15
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Section 16. Severability............................................................................. 16
--
Section 17. Successors and Assigns................................................................... 16
--
Section 18. Headings................................................................................. 17
--
Section 19. Governing Law............................................................................ 17
--
Section 20. References to Other Documents............................................................ 17
--
</TABLE>
<PAGE>
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement ("Agreement") dated as of December
6, 1999, is entered into by and among G.A.S. ORANGE ASSOCIATES, LLC, a Delaware
limited liability company ("Assignor"), PROJECT ORANGE FUNDING, L.P., ("Funding
L.P.") a Delaware limited partnership (together with its successors, including
Project Orange Associates, L.P. ("Orange L.P."), a Delaware limited partnership,
as the survivor of the merger of Funding L.P. with and into Orange L.P.
concurrently with the issuance and sale of the Senior Secured Notes referred to
below, "POA"), and U.S. BANK TRUST NATIONAL ASSOCIATION, as collateral agent
("Agent") for the benefit of the Secured Parties under the Financing Agreement
described below.
PREFACE
-------
A. Orange L.P. operates the Project (as defined in the Financing
Agreement described below) in Syracuse, Onondaga County, New York.
B. POA and Project Orange Capital Corp., a Delaware corporation
("Capital Co." and together with POA, the "Issuers") will issue $68 million
aggregate principal amount of its 10.5% Senior Secured Notes due 2007 (the
"Series A Notes") pursuant to that certain Indenture dated as of December 6,
1999 ("Financing Agreement") among the Issuers and U.S. Bank Trust National
Association, as Trustee ("Trustee") for the benefit of the holders of the Senior
Secured Notes (the "Holders" and, together with the Trustee, the "Secured
Parties") and as Collateral Agent.
C. The Holders will have the registration rights set forth in the
Registration Rights Agreement dated as of December 6, 1999 between the Issuers
and Donaldson Lufkin & Jenrette (the "Initial Purchaser") pursuant to which the
Issuers agree to file with the Securities and Exchange Commission (i) a
registration statement relating to 10.5% Senior Secured Notes due 2007 (the
"Series B Notes") to be offered in exchange for the Series A Notes and (ii) a
shelf registration statement pursuant to Rule 415 under the Securities Act of
1933 relating to the resale by certain Holders of the Series A Notes. The Series
A Notes and the Series B Notes are collectively referred to herein as the
"Senior Secured Notes".
D. Concurrently with the issuance and sale of the Series A Notes (the
"Offering"), and prior to the consummation of the Merger (as defined below)
Assignor will, using the proceeds of the Offering, acquire a 1% general
partnership interest in Orange L.P. from NCP Syracuse, Inc.("NCP Syracuse") and
an 89% limited partnership interest in Orange L.P. from Syracuse Orange
Partners, L.P. ("SOP)
<PAGE>
pursuant to a Partnership Interest Purchase and Sale Agreement dated as of July
29, 1999 among Assignor, NCP Syracuse and SOP (the "Acquisition"). Immediately
upon completion of the Acquisition, Funding L.P. will merge (the "Merger") with
and into Orange L.P. (with Orange L.P. as the surviving partnership) pursuant to
the Agreement and Plan of Merger dated as of December 6, 1999 (the "Merger
Agreement") between Funding L.P. and Orange L.P.
E. The Assignor will be, upon the completion of the Merger, a partner
in Orange L.P. pursuant to that certain Second Amended and Restated Agreement of
Limited Partnership dated as of December 16, 1992 ("Partnership Agreement")
among G.A.S. Orange Partners, L.P., a Delaware limited partnership and Assignor,
(the "Partners").
F. As a condition precedent to the issuance of the Senior Secured
Notes contemplated by the Financing Agreement, the Secured Parties require that
POA and Assignor shall have executed this Agreement.
AGREEMENT
---------
In consideration of the premises herein and in order to induce the
Trustee, for the benefit of the Holders, to enter into the Financing Agreement,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, POA and Assignor hereby agree with the Agent for the
benefit of the Secured Parties as follows:
Section 1. Definition.
Unless otherwise defined, all capitalized terms used herein which are
defined in the Financing Agreement shall have their respective meanings therein
defined.
Section 2. Assignment, Pledge and Grant of Security Interest. (a) To
secure the timely payment and performance of the Obligations (as defined below),
Assignor does hereby assign and pledge to the Agent for the benefit of the
Secured Parties and grant to the Agent for the benefit of the Secured Parties a
security interest in all the estate, right, title and interest of Assignor, now
owned or hereafter acquired, in, to and under any and all of the following (the
"Collateral"):
(i) Assignor's partnership interests in Orange L.P.;
(ii) all rights to receive all income, gain, profit, loss or
other items allocated or distributed to Assignor under the Partnership
Agreement;
2
<PAGE>
(iii) all rights to receive all distributions of any nature
whatsoever by Orange L.P. with respect to such partnership interests;
(iv) all of Assignor's capital or ownership interest, including
capital accounts, in Orange L.P., and all accounts, deposits or credits
of any kind with Orange L.P.;
(v) all of Assignor's voting rights in or rights to control or
direct the affairs of Orange L.P.;
(vi) all of Assignor's right, title and interest, as a partner
in Orange L.P., in or to any and all of Orange L.P.'s assets or
properties;
(vii) all other right, title and interest in or to Orange L.P.,
and all rights to receive income, profits or other distributions from
Orange L.P., of any nature whatsoever, in each case, as such rights are
derived from Assignor's partnership interests in Orange L.P.;
(viii) all claims of the Assignor for damages arising out of or
for breach of or default relating to the Collateral except for claims
against the other Partner in its capacity as Partner;
(ix) all rights of Assignor to terminate, amend, supplement,
modify or waive performance under the Partnership Agreement, to perform
thereunder and to compel performance and otherwise exercise all
remedies thereunder; and
(x) all proceeds of any of the above.
(b) This Agreement secures the payment and performance of all
obligations of POA and of the other Credit Parties and SIDA, now existing or
hereafter arising, due or owing to the Secured Parties pursuant to the terms of
the Indenture, the Senior Secured Notes and the Collateral Documents, including,
without limitation: (i) the principal, premium, if any, or interest on the
Senior Secured Notes (including any interest accruing after the commencement of
any bankruptcy or insolvency proceeding relating to the Issuers, whether or not
such interest is allowed or allowable as a claim in any such proceeding), and
all other obligations and liabilities of the Issuers including, without
limitation, indemnities, fees and interest incurred under, arising out of or in
connection with the Indenture, the Senior Secured Notes and the Collateral
Documents, (ii) any and all sums advanced by or on behalf of the Issuers in
order to
3
<PAGE>
preserve the Collateral or preserve its interest in the Collateral, and (iii) in
the event of any proceeding for collection or enforcement by or on behalf of any
Secured Party after an Event of Default shall have occurred and be continuing
and unwaived, the expenses of retaking, holding, preparing for sale or lease,
selling or otherwise disposing of or realizing on the Collateral, or of any
exercise by or on behalf of any Secured Party of its rights under the Indenture,
the Senior Secured Notes and the Collateral Documents, together with attorneys'
fees and court costs (all such obligations being herein called the
"Obligations").
(c) Upon the occurrence and during the continuation of an Event of
Default, Assignor hereby irrevocably appoints and constitutes the Agent and its
successors and assigns as Assignor's true and lawful attorney in fact, with full
power (in the name of Assignor or otherwise) to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for money due
and to become due under or arising out of the Collateral, to elect remedies
thereunder, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
in connection therewith which the Agent may deem to be necessary or advisable.
Section 3. Documents. (a) At any time and from time to time upon the
request of the Agent, Assignor will:
(i) deliver and pledge to the Agent endorsed and/or accompanied
by such evidence of assignment and transfer, in such form and
substance, as the Agent may request, any and all instruments,
documents, chattel paper and/or general intangibles relating to the
Collateral as the Agent may specify;
(ii) give, execute, deliver, file and/or record any notice,
statement, instrument, document, agreement or other papers that may be
reasonably necessary, and as the Agent may reasonably request, in
order to create, preserve, perfect or validate the assignment and
security interest granted pursuant hereto or to enable the Agent to
exercise and enforce its rights hereunder or with respect to such
assignment and security interest; and
(iii) keep and stamp or otherwise mark any and all documents and
its individual books and records relating to Collateral in such manner
as the Agent may require.
(b) The right is expressly granted to the Agent, at its discretion,
to file in those jurisdictions where the same is permitted one or more financing
statements under the Uniform Commercial Code (the "UCC") signed only by the
Agent, naming Assignor as
4
<PAGE>
debtor and the Agent as secured party, and indicating therein the types or
describing the items of Collateral herein specified. Without the prior written
consent of the Agent, the Assignor will not file or authorize or permit to be
filed in any jurisdiction any such financing or like statement (other than for
Permitted Liens) in which the Agent is not named as the sole secured party.
Nothing herein shall be construed as obligating the Agent to file any financing
statement.
(c) If any default by Assignor under the Partnership Agreement shall
occur, the Agent shall, at its option, be permitted (but shall not be obligated)
to remedy any such default by giving written notice of such intent to Orange
L.P. and Assignor. The Agent shall have a period of sixty (60) days after giving
such notice in which to cure such default. In the event that any such default
(except monetary defaults) shall not be reasonably curable within such 60-day
period, neither Orange L.P. nor any Person acting on behalf of Orange L.P.,
including, without limitation, a general partner of Orange L.P., shall exercise
any remedies thereunder if the Agent shall, within such 60-day period, initiate
action to cure such default and proceed diligently to the curing thereof. Any
cure by the Agent of Assignor's default under the Partnership Agreement shall
not be construed as an assumption by the Agent or any of the Secured Parties of
any obligations, covenants or agreements of Assignor under the Partnership
Agreement and neither the Agent nor the Secured Parties shall be liable for any
action taken pursuant to this Section 3(c) to cure any such default. In no event
shall the Agent be deemed to be a partner under such Partnership Agreement and
in no event shall the Agent have any liability thereunder. This Agreement shall
not be deemed to release or to affect in any way the obligations of Assignor
under the Partnership Agreement.
SECTION 4. Events of Default. The occurrence of any of the following
events ("Events of Default"), whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body, shall entitle the Agent
to exercise any and all of its rights and remedies hereunder or at law:
(a) the occurrence (whether as a result of acts or omissions by
Orange L.P. or any other Person) of an Event of Default under the Financing
Agreement or any of the other Financing Documents; or
(b) subject to such notice requirements and cure periods as may be
applicable thereto pursuant to the Financing Agreement, the failure on the part
of Assignor to observe or perform any material covenant, condition or agreement
on its part to be observed or performed, or the material breach of any
representation or warranty of Assignor, contained in this Agreement; or
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<PAGE>
(c) the impairment of the priority of the security interest in the
Collateral granted herein in any material respect.
Section 5. Remedies. (a) If any Event of Default has occurred and is
continuing, the Agent shall have the right, at its election, but not the
obligation, to do any of the following (subject to the terms of the Financing
Agreement and except to the extent such action or actions are prohibited
pursuant to applicable law):
(i) subject to Section 5(f) below, vote or exercise any and
all of Assignor's rights or powers under the Partnership Agreement,
including any rights or powers to manage or control the Orange L.P.;
(ii) demand, sue for, collect or receive any money or property
at any time payable to or receivable by Assignor on account of, or in
exchange for, all or any part of the Collateral;
(iii) institute and prosecute any action at law or suit in equity
or other proceeding to collect or enforce any obligations or rights
hereunder or in the Collateral, including specific enforcement of any
covenant or agreement contained herein or in the Partnership
Agreement, or to foreclose or enforce the security interest in all or
any part of the Collateral granted herein, or to enforce any other
legal or equitable right vested in it by this Agreement or by law;
(iv) sell or otherwise dispose of any or all of the Collateral
or cause all or any part of the Collateral to be sold or otherwise
disposed of in one or more sales or transactions, after five (5) days
prior written notice to the Assignor of its intent to take such
action, at such prices as the Agent may deem appropriate or adequate,
and for cash or on credit or for future delivery, without assumption
of any credit risk, at any broker's board or at public or private
sale, without demand of performance or notice of time or place of sale
(except such notice which under applicable law cannot be waived), and
any Secured Party or any other Person may be the purchaser of any or
all of the Collateral so sold and thereafter hold the same absolutely
free from any claim or right of whatsoever kind, including any equity
of redemption, of Assignor or Orange L.P., any such demand, notice or
right and equity being hereby expressly waived and released;
(v) incur expenses, including attorneys' fees, consultants'
fees, and other costs appropriate to the exercise of any right or
power under this Agreement;
6
<PAGE>
(vi) perform any obligation of Assignor hereunder or under the
Partnership Agreement;
(vii) secure the appointment of a receiver for Assignor without
notice to Orange L.P. or Assignor; or
(viii) exercise any other or additional rights or remedies
granted to a secured party under the UCC.
If, pursuant to applicable law, prior notice of any such action is
required to be given to Assignor or Orange L.P., Assignor and Orange L.P. hereby
acknowledge and agree that the minimum time required by such applicable law, or
if no minimum is specified, five (5) Banking Days, shall be deemed a reasonable
notice period.
(b) In addition to the foregoing remedies, the Agent may (subject to
Section 3(c) hereof), but shall not be obligated to, cure any Event of Default
and incur reasonable fees, costs and expenses in doing so, in which event Orange
L.P. or Assignor shall immediately reimburse the Agent on demand for all such
fees, costs and expenses, together with interest on the total amount at the
Default Rate from the date incurred until the date repaid in full. Subject to
the Assignor's rights described in Section 5(c) hereof, the Agent shall be the
sole judge of the validity of any adverse claims, taxes, assessments, charges or
encumbrances pertaining to the Collateral, and the amount to be paid in
satisfaction thereof, and of the necessity for, and of the time and manner of
doing, everything herein authorized to be done, provided that the Agent shall be
under no obligation to do any such acts or to make any such payments.
(c) Assignor may contest in good faith any taxes, assessments and
other governmental charges in connection with the Collateral and, in such event,
may permit the taxes, assessments or other charges so contested to remain unpaid
during any period, including appeals, when Assignor is in good faith contesting
the same, so long as (i) reserves have been established in an amount sufficient
to pay any such taxes, assessments or other charges, accrued interest thereon
and potential penalties or other costs relating thereto, or other adequate
provision for the payment thereof shall have been made, (ii) enforcement of the
contested tax, assessment or other charge is effectively stayed for the entire
duration of such contest, and (iii) any tax, assessment or other charge
determined to be due, together with any interest or penalties thereon, is
immediately paid after resolution of such contest. Additionally, Assignor may
contest in good faith Liens for any tax, assessment or other governmental
charge, by appropriate proceedings, so long as in connection with such
proceedings a bond or other security has been posted or provided in such manner
and amount as to assure that any taxes,
7
<PAGE>
assessment or other charges determined to be due will be promptly paid in full
when such contest is determined.
(d) If the Agent shall decide to exercise its right to sell any or
all of the Collateral, and if it is necessary to have such Collateral, or that
portion thereof to be sold, registered under the provisions of the Securities
Act of 1933, as amended, or otherwise registered or qualified under any federal
or state securities laws or regulations (collectively, the "Securities Laws"),
Orange L.P. will execute and deliver, all at Orange L.P.'s expense, all such
instruments and documents which are necessary to register or qualify such
Collateral, or that portion thereof to be sold, under the provisions of the
Securities Laws and will use best efforts to cause any registration statement
relating thereto to become effective and to remain effective for a period of not
less than six (6) months from the date of the first public offering of such
Collateral, or that portion thereof to be sold, and to make all amendments
thereto and/or to any related prospectus or similar document which are
necessary, all in conformity with the Securities Laws applicable thereto.
Without limiting the generality of the foregoing, Orange L.P. agrees to comply
with the provisions of all applicable securities or "Blue Sky" laws of any
jurisdiction(s) and to make available to its security holders, as soon as
practicable, an earnings statement which will satisfy the provisions of Section
11(a) of the Securities Act of 1933.
(e) All costs and expenses (including, without limitation, attorneys'
fees and expenses) incurred by the Agent or any Secured Party in connection with
exercising any remedy provided for herein or at law, curing any Event of Default
or performing any of Assignor's agreements contained herein or in the
Partnership Agreement or in respect of any part of the Collateral, together with
interest thereon computed at the Default Rate from the date on which such costs
or expenses are incurred to the date of payment thereof, shall constitute
indebtedness secured by this Agreement and shall be paid by Assignor or the
Orange L.P. to the Agent on demand for the account of the Agent or any such
Secured Party, as the case may be.
(f) So long as no Event of Default has occurred and is continuing,
Assignor reserves the right to exercise all of its rights under the Partnership
Agreement (except as limited by the Financing Documents) and to receive all
income and other distributions from the Collateral and such distributions shall
be free of any lien of Agent and/or the Secured Parties under the Financing
Documents (so long as such distributions do not violate any terms or provisions
of the Financing Documents).
(g) Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any part
of the Collateral
8
<PAGE>
shall be deposited in the Redemption Account to be held, applied and released in
accordance with the Depositary Agreement.
Section 6. Remedies Cumulative; Delay Not Waiver. No right, power or
remedy herein conferred upon or reserved to the Agent or the Secured Parties is
intended to be exclusive of any other right, power or remedy, and every such
right, power and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right, power and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. No delay or omission of the
Agent to exercise any right or power accruing upon the occurrence and during the
continuance of any Event of Default as aforesaid shall impair any such right or
power or shall be construed to be a waiver of any such Event of Default or an
acquiescence therein. Every power and remedy given by this Agreement may be
exercised from time to time, and as often as shall be deemed expedient, by the
Agent.
Section 7. Covenants and Representations of Assignor. Assignor
covenants, agrees and represents as follows:
(a) Assignor will perform and comply, in all material respects, with
all obligations and conditions on its part to be performed hereunder, under the
Partnership Agreement or with respect to the Collateral.
(b) The Partnership Agreement has been duly authorized, executed and
delivered by Assignor and, to the best of Assignor's knowledge, the other
parties thereto, has not been amended or otherwise modified, and is in full
force and effect and is binding upon and enforceable against Assignor and, to
the best of Assignor's knowledge, the other parties thereto, in accordance with
its terms. There exists no default under the Partnership Agreement by Assignor,
or to the best of Assignor's knowledge, by the other parties thereto.
(c) Assignor has not executed and is not aware of any effective
financing statement, security agreement or other instrument similar in effect
covering all or any part of the Collateral on file in any recording office,
except such as may have been filed pursuant to this Agreement or the other
Financing Documents or pursuant to the documents evidencing Permitted Liens.
(d) Assignor is the lawful owner of and has full right, title and
interest in and to, the Collateral, subject to no mortgages, liens, charges, or
encumbrances of any kind except Permitted Liens, and has full power and lawful
authority to pledge, assign and
9
<PAGE>
grant a security interest in the Collateral hereunder. Assignor will, so long as
any Obligations shall be outstanding, warrant and defend its title to the
Collateral against the claims and demands of all persons whomsoever.
(e) Assignor will not directly or indirectly create, incur, assume or
suffer to exist any liens on or with respect to any part of the Collateral
except for the liens created by this Agreement or Permitted Liens or as
otherwise expressly permitted pursuant to the Financing Agreement. Assignor will
at its own cost and expense promptly take such action as may be necessary to
discharge any such liens.
(f) Assignor has not assigned any of its rights under the Partnership
Agreement or any of the Collateral except as provided in this Agreement.
(g) Any action or proceeding to enforce the rights granted or to
protect or preserve the Collateral under this Agreement may be taken by the
Agent either in Assignor's name or in the Agent's name as the Agent may deem
necessary.
(h) Without the prior written consent of the Agent, or unless
otherwise expressly permitted by the Financing Agreement, Assignor shall not (i)
terminate, modify or amend the Partnership Agreement or (ii) fail to deliver to
the Agent a copy of each demand or notice received or given by it relating to
the Partnership Agreement and which could reasonably be expected to have a
material adverse effect upon the Collateral or the Agent's rights therein.
(i) Assignor shall give to the Agent prompt notice of any default,
event of default or event which with the giving of notice or the passage of time
or both might become an event of default (however "default" or "event of
default" may be defined) under the Partnership Agreement, whether by Orange
L.P., Assignor or any other Person, of which Assignor has actual knowledge or
has received notice.
(j) If Assignor in its capacity as a partner of Orange L.P. (whether
as a general partner or a limited partner) receives any income or distribution
of money or property of any kind from Orange L.P. while an Event of Default
(with respect to which the Assignor has received written notice) has occurred
and is continuing, Assignor shall hold such income or distribution as trustee
for and shall deliver the same to the Agent (unless all such Events of Default
have been cured or waived or unless Agent shall have provided written notice to
Assignor to the effect that Agent shall have determined, in its sole discretion,
that the continuance of any such Event(s) of Default could not have an adverse
effect on Orange L.P. or the Collateral) and that Assignor may retain such
income, money or property.
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<PAGE>
(k) Assignor will, at all times, keep accurate and complete records of
the Collateral. Assignor shall, at all times on seven (7) days' notice, permit
representatives of the Agent at any time during normal business hours of
Assignor to inspect and make abstracts from the Assignor's books and records
pertaining to the Collateral.
(l) Assignor will give prompt notice in writing to the Agent of any
change in the location of the place of business where correspondence, notices or
proceeds in connection with the Collateral are received or located or of any
change in the location of the place of business where records concerning
Collateral are kept.
(m) Assignor is not, and will not as a result of becoming a general or
limited partner of Orange L.P. be or become, or cause Orange L.P. to be or
become, or be deemed by any Governmental Authority to be a "utility" or subject
to, or not exempt from, regulation under the FPA or the PUHCA or under state
laws and regulations respecting the rates or the financial or organizational
regulation of public or electric utilities, except as a qualifying facility
under PURPA.
(n) Assignor shall not do anything or cause, suffer or permit anything
to be done, including, without limitation, sale or other transfer of Assignor's
partnership interests in the Orange L.P. or of any stock, partnership interest
or other ownership interest in Assignor, which may cause the Project to lose its
status as a "qualifying facility" under PURPA.
(o) As a condition to any transfer of any Collateral the transferee
must agree that the security interest needed by this agreement shall continue
unimpaired following such transfer and shall sign all necessary agreements and
instruments and take all other action necessary to create a first priority
security in favor of the Agent on such Collateral that is the subject of such
transfer. In connection with any such transfer, the Agent shall be entitled to
receive such information with respect to the identity of the proposed transferee
and the ultimate beneficial ownership and control of the Orange L.P. as it may
reasonably request in order to make an informed determination as to whether the
requested change in ownership of the Orange L.P. would result in a Change of
Control.
Section 8. Certain Consents and Waivers. (a) Assignor hereby consents
to the execution, by the other Partner, of agreements similar to this Agreement
in favor of the Agent for the benefit of the Secured Parties. Assignor
specifically agrees that such other agreements may, among other things, assign
or delegate to the Agent rights to cure defaults under the Partnership
Agreement, to exercise voting rights and other rights to manage or control the
Orange L.P., and to act as such other Partner's attorney in fact in a manner
similar to the assignment and delegation of such rights provided herein
11
<PAGE>
and that, to the extent permitted by applicable law, Assignor will recognize and
accept such assignment and delegation and the exercise of such rights by the
Agent in connection with any actions by or business of Orange L.P..
(b) Assignor hereby waives, to the maximum extent permitted by law:
(i) all rights under any law limiting remedies, including
recovery of a deficiency, under an obligation secured by a deed of
trust or mortgage on real property if the real property is sold under
a power of sale contained in the mortgage, and all defenses based on
any loss whether as a result of any such sale or otherwise, of
Assignor's right to recover any amount from Orange L.P. or any other
Credit Party or SIDA, whether by right of subrogation or otherwise;
(ii) all rights under any law to require the Agent to pursue
Orange L.P. or any other Person, any security which the Agent may
hold, or any other remedy before proceeding against Assignor;
(iii) all rights of reimbursement or subrogation, all rights to
enforce any remedy that the Agent or the Secured Parties may have
against Orange L.P. or any other Credit Party or SIDA, and all rights
to participate in any security held by the Agent until the Obligations
have been paid and the covenants of the Financing Documents have been
performed in full;
(iv) all rights to require the Agent to give any notices of any
kind, including, without limitation, notices of nonpayment,
nonperformance, protest, dishonor, default, delinquency or
acceleration, or to make any presentments, demands or protests, except
as expressly provided herein, in the Financing Agreement and the other
Financing Documents;
(v) all rights to assert the bankruptcy or insolvency of
Orange L.P. as a defense hereunder or as the basis for rescission
hereof;
(vi) all rights under any law purporting to proportionally
reduce Assignor's Obligations hereunder if Orange L.P.'s or any other
Credit Party's or SIDA's Obligations are reduced;
(vii) all defenses based on the disability or lack of authority
of Orange L.P. or any Person, the repudiation of the Financing
Documents by Orange L.P. or any Person, the failure by Agent or the
Secured Parties to enforce any
12
<PAGE>
claim against Orange L.P. or any other Credit Party or SIDA, or the
unenforceability in whole or in part of any Financing Documents; and
(viii) all suretyship and guarantor's defenses generally.
Assignor further agrees that upon the occurrence of an Event of
Default under the Financing Agreement, the Agent may elect to nonjudicially or
judicially foreclose against any real or personal property security it holds for
the Obligations or any part thereof, or to exercise any other remedy against
Orange L.P. or any other Credit Party or SIDA, any security or any guarantor,
even if the effect of that action is to deprive Assignor of the right to collect
reimbursement from Orange L.P. or any other Credit Party or SIDA for any sums
paid by Assignor to the Agent or any Secured Party.
Section 9. Orange L.P.'s Consent and Covenants. Orange L.P. hereby
consents to the assignment of and grant of a security interest in the Collateral
to the Agent and to the exercise by the Agent of all rights and powers assigned
or delegated to the Agent by Assignor hereunder, including without limitation
the rights upon and during an Event of Default to exercise Assignor's voting
rights and other rights under the Partnership Agreement to manage or control
Orange L.P.. Orange L.P. further agrees to perform all covenants and obligations
herein which, by their express or implied terms, are to be performed by Orange
L.P.. Without limiting the generality of the foregoing, Orange L.P. agrees not
to permit the withdrawal of any present Partner or to admit any new Partners
except in compliance with Section 7(o) of this Agreement and to give the Agent
prompt notice of any (a) Change of Control or (b) default, event of default or
event which with the giving of notice or the passage of time or both might
become an event of default (however "default" or "event of default", may be
defined) by Assignor or any other Partner under the Partnership Agreement.
Section 10. Attorney-in-Fact. Upon the occurrence and during the
continuation of an Event of Default, Assignor hereby irrevocably constitutes and
appoints the Agent its true and lawful attorney-in-fact to enforce all rights of
Assignor with respect to the Collateral, including, without limitation, the
right to vote, demand, receive and enforce Assignor's rights with respect to the
Collateral, and to give appropriate receipts, releases and satisfactions for and
on behalf of and in the name of the Assignor or at the option of the Agent, in
the name of the Agent, with the same force and effect as Assignor could do if
this Agreement had not been made. This power of attorney is a power coupled with
an interest and shall be irrevocable.
Section 11. Place of Business; Location of Records.
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<PAGE>
(a) Unless the Agent is otherwise notified, the place of business and
chief executive office of Assignor is and all records of Assignor concerning the
Collateral are and will be located at, the following address:
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Attn: Richard S. Scolaro
(b) All notices required or permitted under the terms and provisions
hereof shall be in writing and any such notice shall be effective if given in
accordance with the provisions of Section 9.02 of the Financing Agreement.
Notice to the Assignor may be given at the address set forth in clause (a)
above. Notices to the Agent may be given at the address set forth in Section
9.02 of the Financing Agreement.
Section 12. Perfection; Further Assurances. (a) Assignor agrees that
from time to time, Assignor will promptly execute and deliver all instruments
and documents, and take all action, that may be reasonably necessary or that the
Agent may reasonably request, in order to perfect and protect the assignment and
security interest granted or intended to be granted hereby or to enable the
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, Assignor will
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments, endorsements or notices, as may be
reasonably necessary or as the Agent may reasonably request, in order to perfect
and preserve the assignments and security interests granted or purported to be
granted hereby.
(b) Orange L.P. shall pay all filing, registration and recording fees
and all refiling, re-registration and re-recording fees, and all reasonable
expenses incident to the execution and acknowledgment or performance of this
Agreement and all Federal, state, county and municipal stamp taxes and other
taxes, duties, imports, assessments and charges arising out of or in connection
with the execution and delivery of this Agreement, any agreement supplemental
hereto, any financing statements and any instruments of further assurance.
(c) Assignor shall give the Agent at least thirty (30) days' notice
before it changes the location of its place of business and chief executive
office and shall at the expense of Orange L.P. execute and deliver such
instruments and documents as may be required by the Agent to maintain a prior
perfected security interest in the Collateral.
14
<PAGE>
Section 13. Continuing Assignment and Security Interest; Transfer of
Senior Secured Notes. This Agreement shall create a continuing pledge and
assignment of and security interest in the Collateral and shall (a) remain in
full force and effect until payment and performance in full of the Obligations,
(b) be binding upon Orange L.P., Assignor, and their respective successors and
assigns, and (c) inure, together with the rights and remedies provided herein,
to the benefit of the Agent, the Secured Parties and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing, any of the Secured Parties may assign or otherwise transfer all or
any part of or interest in the Senior Secured Notes or other evidence of
indebtedness held by them to any other Person to the extent permitted by and in
accordance with the Financing Agreement, and such other Person shall thereupon
become vested with all or an appropriate part of the benefits in respect thereof
granted to the Secured Parties herein or otherwise. The release of the security
interest in any or all of the Collateral, the taking or acceptance of additional
security, or the resort by the Agent to any security it may have in any order it
may deem appropriate, shall not affect the liability of any person on the
Obligations. Upon the payment and performance in full of the Obligations, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Assignor. Upon any such termination, the Agent shall,
at Assignor's expense, execute and deliver to Assignor such documents as the
Orange L.P. or the Assignor shall reasonably request to evidence such
termination. If this Agreement shall be terminated or revoked by operation of
law, Assignor will indemnify and save the Agent harmless from any loss which may
be suffered or incurred by the Agent in acting hereunder prior to the receipt by
the Agent, its successors, transferees or assigns of notice of such termination
or revocation.
Section 14. Liability. This Agreement is one of the Financing
Documents referred to in the Financing Agreement, and the recourse of the Agent
and the Secured Parties against the Assignor, the Orange L.P. or any of their
respective Affiliates, stockholders, officers, directors, partners or employees,
for any liability to the Agent or the Secured Parties arising under this
Agreement shall be limited to the extent provided in Section 9.07 of the
Financing Agreement.
Section 15. Regarding the Agent. The Agent shall be afforded in
respect of this Agreement all of the rights, powers, protections, immunities and
indemnities set forth in Article 4 and Article 5 of the Depositary Agreement
which are applicable between the Agent and the Issuer thereunder, and the
provisions of Article 4 and Article 5 of the Depositary Agreement which are
applicable between the Agent and the Issuer thereunder shall inure to the
benefit of the Agent in respect to this Agreement and be binding upon POA in
such respect, in each case as if the same were specifically set forth herein,
mutatis mutandis. In furtherance and not in derogation of such rights,
15
<PAGE>
powers, protections, immunities and indemnities set forth in Article 4 and
Article 5 of the Depositary Agreement:
(a) The Agent is authorized to take all such action as is provided to
be taken by it as the Agent hereunder and all other action incidental thereto.
As to any matters not expressly provided for herein the Agent shall act or
refrain from acting in accordance with written instructions from the Required
Holders or, in the absence of such instructions, in accordance with its
discretion.
(b) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Lien on any of the Collateral, whether impaired by
operation of law or by reason of any action or omission to act on its part
hereunder. The Agent shall have no duty to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement by each of POA
and the Assignor.
(c) At any time or times, in order to comply with any legal
requirement in any jurisdiction, the Agent may appoint another bank or trust
company or one or more other Persons, either to act as co-agents or co-agents,
jointly with the Agent, or to act as separate agent or agents on behalf of the
Agent with such power and authority of the Agent as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment (which may, in the discretion of the Agent, include
extending to such co-agent or separate agent the provisions for the protection
of the Agent contained in Article 4 and Article 5 of the Depositary Agreement).
Section 16. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 17. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the parties
and their respective successors and assigns; provided, however, that neither
Assignor nor Orange L.P. may assign its rights or obligations hereunder without
the prior written consent of the Agent.
Section 18. Headings. The headings of the various Sections herein are
for convenience of reference only and shall not define or limit any of the terms
or provisions hereof.
16
<PAGE>
Section 19. Governing Law. This Agreement, including all matters of
construction, validity, performance and the creation, validity, enforcement or
priority of the lien of, and security interests created by, this Agreement in or
upon the Collateral shall be governed by the laws of the State of New York.
Section 20. References to Other Documents. All defined terms used in
this Agreement which refer to other documents shall be deemed to refer to such
other documents as they may be amended, supplemented or replaced from time to
time, provided such documents were not amended in breach of a covenant contained
in any agreement to which Assignor, Orange L.P., the Agent or any of the Secured
Parties is a party.
17
<PAGE>
IN WITNESS WHEREOF, Assignor, Funding L.P. and Agent have caused this
Agreement to be duly executed by their duly authorized signatory as of the day
and year first above written.
G.A.S. ORANGE ASSOCIATES,
L.L.C., a Delaware limited liability
company
By: /s/ Douglas Corbett
__________________________
Name: Douglas Corbett
Its: Vice President
Accepted and Agreed:
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Agent
By: /s/ Ward A. Spooner
_______________________
Name: Ward A. Spooner
Title: Vice President
PROJECT ORANGE FUNDING, L.P., a
Delaware limited partnership
By: G.A.S. Orange Associates, L.L.C.,
a Delaware limited liability company,
its general partner
By: /s/ Douglas Corbett
__________________________
Name: Douglas Corbett
Title: Vice President
18
<PAGE>
EXHIBIT 4.9
EXECUTION COPY
PLEDGE AND SECURITY AGREEMENT
Dated as of December 6, 1999
Among
A.V. GRANTOR TRUST,
a New York trust
G.A.S. ORANGE PARTNERS, L.P.,
a Delaware limited partnership
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
<PAGE>
TABLE OF CONTENTS
____________
<TABLE>
<CAPTION>
Page
----
<S> <C>
PREFACE............................................................................................... 1
Section 1. Definition................................................................................ 2
Section 2. Assignment, Pledge and Grant of Security Interest......................................... 2
Section 3. Documents................................................................................. 4
Section 4. Events of Default......................................................................... 5
Section 5. Remedies.................................................................................. 6
Section 6. Remedies Cumulative; Delay Not Waiver..................................................... 9
Section 7. Covenants and Representations of Assignor................................................. 9
Section 8. Certain Consents and Waivers.............................................................. 11
Section 9. GAS LP's Consent and Covenants............................................................ 13
Section 10. Attorney-in-Fact.......................................................................... 13
Section 11. Place of Business; Location of Records.................................................... 13
Section 12. Perfection; Further Assurances............................................................ 14
Section 13. Continuing Assignment and Security Interest; Transfer of Senior Secured Notes............. 15
Section 14. Liability................................................................................. 15
Section 15. Regarding the Agent....................................................................... 15
Section 16. Severability.............................................................................. 16
Section 17. Successors and Assigns.................................................................... 16
Section 18. Headings.................................................................................. 16
Section 19. Governing Law............................................................................. 17
Section 20. References to Other Documents............................................................. 17
</TABLE>
<PAGE>
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement ("Agreement") dated as of December 6,
1999, is entered into by and among A.V. GRANTOR TRUST, a New York trust
("Assignor"), G.A.S. ORANGE PARTNERS, L.P., a Delaware limited partnership ("GAS
LP"), and U.S. BANK TRUST NATIONAL ASSOCIATION, as collateral agent ("Agent")
for the benefit of the Secured Parties under the Financing Agreement described
below.
PREFACE
-------
A. Project Orange Associates, L.P. ("Orange L.P.") operates the Project
(as defined in the Financing Agreement described below) in Syracuse, Onondaga
County, New York.
B. Project Orange Funding, L.P., ("Funding L.P.") a Delaware limited
partnership (together with its successors, including Orange L.P., a Delaware
limited partnership, as the survivor of the merger of Project Orange Funding
L.P. with and into Orange L.P. concurrently with the issuance and sale of the
Senior Secured Notes, "POA"), Project Orange Capital Corp., a Delaware
corporation, ("Capital Co." and together with POA, the "Issuers") will issue $68
million aggregate principal amount of its 10.5% Senior Secured Notes due 2007
(the "Series A Notes") pursuant to that certain Indenture dated as of December
6, 1999 ("Financing Agreement") among the Issuers and U.S. Bank Trust National
Association, as Trustee ("Trustee") for the benefit of the holders of the Senior
Secured Notes (the "Holders" and, together with the Trustee, the "Secured
Parties") and as Collateral Agent.
C. The Holders will have the registration rights set forth in the
Registration Rights Agreement dated as of December 6, 1999 between the Issuer
and Donaldson Lufkin & Jenrette (the "Initial Purchaser") pursuant to which the
Issuer agrees to file with the Securities and Exchange Commission (i) a
registration statement relating to 10.5% Senior Secured Notes due 2007 (the
"Series B Notes") to be offered in exchange for the Series A Notes and (ii) a
shelf registration statement pursuant to Rule 415 under the Securities Act of
1933 relating to the resale by certain Holders of the Series A Notes. The
Series A Notes and the Series B Notes are collectively referred to herein as the
"Senior Secured Notes".
D. Concurrently with the issuance and sale of the Series A Notes (the
"Offering"), Funding L.P. will merge (the "Merger") with and into Orange L.P.
(with Orange L.P. as the surviving partnership) pursuant to the Agreement and
Plan of
<PAGE>
Merger dated as of December 6, 1999 (the "Merger Agreement") between
Funding L.P. and Orange L.P.
E. Assignor is a partner in GAS LP pursuant to that certain Agreement of
Limited Partnership dated as of April 5, 1991 ("Partnership Agreement") between
G.A.S. Orange Development, Inc., a Delaware corporation, and Assignor
("Partners").
F. As a condition precedent to the issuance of the Senior Secured Notes
contemplated by the Financing Agreement, the Secured Parties require that GAS LP
and Assignor shall have executed this Agreement.
AGREEMENT
---------
In consideration of the premises herein and in order to induce the Trustee,
for the benefit of the Holders, to enter into the Financing Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, GAS LP and Assignor hereby agree with the Agent for the
benefit of the Secured Parties as follows:
Section 1. Definition.
Unless otherwise defined, all capitalized terms used herein which are
defined in the Financing Agreement shall have their respective meanings therein
defined.
Section 2. Assignment, Pledge and Grant of Security Interest. (a) To
secure the timely payment and performance of the Obligations (as defined below),
Assignor does hereby assign and pledge to the Agent for the benefit of the
Secured Parties and grant to the Agent for the benefit of the Secured Parties a
security interest in all the estate, right, title and interest of Assignor, now
owned or hereafter acquired, in, to and under any and all of the following (the
"Collateral"):
(i) Assignor's partnership interests in GAS LP;
(ii) all rights to receive all income, gain, profit, loss or other
items allocated or distributed to Assignor under the Partnership Agreement;
(iii) all rights to receive all distributions of any nature whatsoever
by GAS LP with respect to such partnership interests;
2
<PAGE>
(iv) all of Assignor's capital or ownership interest, including
capital accounts, in GAS LP, and all accounts, deposits or credits of any
kind with GAS LP;
(v) all of Assignor's voting rights in or rights to control or
direct the affairs of GAS LP;
(vi) all of Assignor's right, title and interest, as a partner in
GAS LP, in or to any and all of GAS LP's assets or properties;
(vii) all other right, title and interest in or to GAS LP, and all
rights to receive income, profits or other distributions from GAS LP, of
any nature whatsoever, in each case, as such rights are derived from
Assignor's partnership interests in GAS LP;
(viii) all claims of the Assignor for damages arising out of or for
breach of or default relating to the Collateral except for claims against
the other Partner in its capacity as Partner;
(ix) all rights of Assignor to terminate, amend, supplement, modify
or waive performance under the Partnership Agreement, to perform thereunder
and to compel performance and otherwise exercise all remedies thereunder;
and
(x) all proceeds of any of the above;
provided, however, that to the extent that the Collateral described above
would otherwise include any direct partnership interest in Project Orange
Associates L.P., a Delaware limited partnership, then such partnership interest
and rights and interests relating thereto shall be excluded from the Collateral
to the same extent and for so long as they would be excluded from the
"Collateral" as defined in the terms of the Pledge and Security Agreement dated
as of December 6, 1999 among GAS LP, Funding L.P. and the Agent.
(b) This Agreement secures the payment and performance of all
obligations of POA and of the other Credit Parties and SIDA, now existing or
hereafter arising, due or owing to the Secured Parties pursuant to the terms of
the Indenture, the Senior Secured Notes and the Collateral Documents, including,
without limitation: (i) the principal, premium, if any, or interest on the
Senior Secured Notes (including any interest accruing after the commencement of
any bankruptcy or insolvency proceeding relating to the Issuers, whether or not
such interest is allowed or allowable as a claim in
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any such proceeding), and all other obligations and liabilities of the Issuers
including, without limitation, indemnities, fees and interest incurred under,
arising out of or in connection with the Indenture, the Senior Secured Notes and
the Collateral Documents, (ii any and all sums advanced by or on behalf of the
Issuers in order to preserve the Collateral or preserve its interest in the
Collateral, and (ii in the event of any proceeding for collection or enforcement
by or on behalf of any Secured Party after an Event of Default shall have
occurred and be continuing and unwaived, the expenses of retaking, holding,
preparing for sale or lease, selling or otherwise disposing of or realizing on
the Collateral, or of any exercise by or on behalf of any Secured Party of its
rights under the Indenture, the Senior Secured Notes and the Collateral
Documents, together with attorneys' fees and court costs (all such obligations
being herein called the "Obligations").
(c) Upon the occurrence and during the continuation of an Event of
Default, Assignor hereby irrevocably appoints and constitutes the Agent and its
successors and assigns as Assignor's true and lawful attorney in fact, with full
power (in the name of Assignor or otherwise) to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for money due
and to become due under or arising out of the Collateral, to elect remedies
thereunder, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
in connection therewith which the Agent may deem to be necessary or advisable.
Section 3. Documents. (a) At any time and from time to time upon the
request of the Agent, Assignor will:
(i) deliver and pledge to the Agent endorsed and/or accompanied by
such evidence of assignment and transfer, in such form and substance, as
the Agent may request, any and all instruments, documents, chattel paper
and/or general intangibles relating to the Collateral as the Agent may
specify;
(ii) give, execute, deliver, file and/or record any notice,
statement, instrument, document, agreement or other papers that may be
reasonably necessary, and as the Agent may reasonably request, in order to
create, preserve, perfect or validate the assignment and security interest
granted pursuant hereto or to enable the Agent to exercise and enforce its
rights hereunder or with respect to such assignment and security interest;
and
(iii) keep and stamp or otherwise mark any and all documents and its
individual books and records relating to Collateral in such manner as the
Agent may require.
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(b) The right is expressly granted to the Agent, at its discretion, to
file in those jurisdictions where the same is permitted one or more financing
statements under the Uniform Commercial Code (the "UCC") signed only by the
Agent, naming Assignor as debtor and the Agent as secured party, and indicating
therein the types or describing the items of Collateral herein specified.
Without the prior written consent of the Agent, the Assignor will not file or
authorize or permit to be filed in any jurisdiction any such financing or like
statement (other than for Permitted Liens) in which the Agent is not named as
the sole secured party. Nothing herein shall be construed as obligating the
Agent to file any financing statement.
(c) If any default by Assignor under the Partnership Agreement shall
occur, the Agent shall, at its option, be permitted (but shall not be obligated)
to remedy any such default by giving written notice of such intent to GAS LP and
Assignor. The Agent shall have a period of sixty (60) days after giving such
notice in which to cure such default. In the event that any such default (except
monetary defaults) shall not be reasonably curable within such 60-day period,
neither GAS LP nor any Person acting on behalf of GAS LP, including, without
limitation, a general partner of GAS LP, shall exercise any remedies thereunder
if the Agent shall, within such 60-day period, initiate action to cure such
default and proceed diligently to the curing thereof. Any cure by the Agent of
Assignor's default under the Partnership Agreement shall not be construed as an
assumption by the Agent or any of the Secured Parties of any obligations,
covenants or agreements of Assignor under the Partnership Agreement and neither
the Agent nor the Secured Parties shall be liable for any action taken pursuant
to this Section 3(c) to cure any such default. In no event shall the Agent be
deemed to be a partner under such Partnership Agreement and in no event shall
the Agent have any liability thereunder. This Agreement shall not be deemed to
release or to affect in any way the obligations of Assignor under the
Partnership Agreement.
Section 4. Events of Default. The occurrence of any of the following
events ("Events of Default"), whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body, shall entitle the Agent
to exercise any and all of its rights and remedies hereunder or at law:
(a) the occurrence (whether as a result of acts or omissions by GAS LP
or any other Person) of an Event of Default under the Financing Agreement or any
of the other Financing Documents; or
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(b) subject to such notice requirements and cure periods as may be
applicable thereto pursuant to the Financing Agreement, the failure on the part
of Assignor to observe or perform any material covenant, condition or agreement
on its part to be observed or performed, or the material breach of any
representation or warranty of Assignor, contained in this Agreement; or
(c) the impairment of the priority of the security interest in the
Collateral granted herein in any material respect.
Section 5. Remedies. (a) If any Event of Default has occurred and is
continuing, the Agent shall have the right, at its election, but not the
obligation, to do any of the following (subject to the terms of the Financing
Agreement and except to the extent such action or actions are prohibited
pursuant to applicable law):
(i) subject to Section 5(f) below, vote or exercise any and all of
Assignor's rights or powers under the Partnership Agreement, including any
rights or powers to manage or control the GAS LP;
(ii) demand, sue for, collect or receive any money or property at any
time payable to or receivable by Assignor on account of, or in exchange
for, all or any part of the Collateral;
(iii) institute and prosecute any action at law or suit in equity or
other proceeding to collect or enforce any obligations or rights hereunder
or in the Collateral, including specific enforcement of any covenant or
agreement contained herein or in the Partnership Agreement, or to foreclose
or enforce the security interest in all or any part of the Collateral
granted herein, or to enforce any other legal or equitable right vested in
it by this Agreement or by law;
(iv) sell or otherwise dispose of any or all of the Collateral or
cause all or any part of the Collateral to be sold or otherwise disposed of
in one or more sales or transactions, after five (5) days prior written
notice to the Assignor of its intent to take such action, at such prices as
the Agent may deem appropriate or adequate, and for cash or on credit or
for future delivery, without assumption of any credit risk, at any broker's
board or at public or private sale, without demand of performance or notice
of time or place of sale (except such notice which under applicable law
cannot be waived), and any Secured Party or any other Person may be the
purchaser of any or all of the Collateral so sold and thereafter hold the
same absolutely free from any claim or right of whatsoever kind, including
any equity of redemption, of Assignor or
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GAS LP, any such demand, notice or right and equity being hereby expressly
waived and released;
(v) incur expenses, including attorneys' fees, consultants' fees,
and other costs appropriate to the exercise of any right or power under
this Agreement;
(vi) perform any obligation of Assignor hereunder or under the
Partnership Agreement;
(vii) secure the appointment of a receiver for Assignor without
notice to GAS LP or Assignor; or
(viii) exercise any other or additional rights or remedies granted to
a secured party under the UCC.
If, pursuant to applicable law, prior notice of any such action is required
to be given to Assignor or GAS LP, Assignor and GAS LP hereby acknowledge and
agree that the minimum time required by such applicable law, or if no minimum is
specified, five (5) Banking Days, shall be deemed a reasonable notice period.
(b) In addition to the foregoing remedies, the Agent may (subject to
Section 3(c) hereof), but shall not be obligated to, cure any Event of Default
and incur reasonable fees, costs and expenses in doing so, in which event GAS LP
or Assignor shall immediately reimburse the Agent on demand for all such fees,
costs and expenses, together with interest on the total amount at the Default
Rate from the date incurred until the date repaid in full. Subject to the
Assignor's rights described in Section 5(c) hereof, the Agent shall be the sole
judge of the validity of any adverse claims, taxes, assessments, charges or
encumbrances pertaining to the Collateral, and the amount to be paid in
satisfaction thereof, and of the necessity for, and of the time and manner of
doing, everything herein authorized to be done, provided that the Agent shall be
under no obligation to do any such acts or to make any such payments.
(c) Assignor may contest in good faith any taxes, assessments and other
governmental charges in connection with the Collateral and, in such event, may
permit the taxes, assessments or other charges so contested to remain unpaid
during any period, including appeals, when Assignor is in good faith contesting
the same, so long as (i) reserves have been established in an amount sufficient
to pay any such taxes, assessments or other charges, accrued interest thereon
and potential penalties or other costs relating thereto, or other adequate
provision for the payment thereof shall have been made, (ii) enforcement of the
contested tax, assessment or other charge is
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effectively stayed for the entire duration of such contest, and (ii) any tax,
assessment or other charge determined to be due, together with any interest or
penalties thereon, is immediately paid after resolution of such contest.
Additionally, Assignor may contest in good faith Liens for any tax, assessment
or other governmental charge, by appropriate proceedings, so long as in
connection with such proceedings a bond or other security has been posted or
provided in such manner and amount as to assure that any taxes, assessment or
other charges determined to be due will be promptly paid in full when such
contest is determined.
(d) If the Agent shall decide to exercise its right to sell any or all
of the Collateral, and if it is necessary to have such Collateral, or that
portion thereof to be sold, registered under the provisions of the Securities
Act of 1933, as amended, or otherwise registered or qualified under any federal
or state securities laws or regulations (collectively, the "Securities Laws"),
GAS LP will execute and deliver, all at GAS LP's expense, all such instruments
and documents which, in the opinion of the Agent, are necessary to register or
qualify such Collateral, or that portion thereof to be sold, under the
provisions of the Securities Laws and will use best efforts to cause any
registration statement relating thereto to become effective and to remain
effective for a period of not less than six (6) months from the date of the
first public offering of such Collateral, or that portion thereof to be sold,
and to make all amendments thereto and/or to any related prospectus or similar
document which are necessary, all in conformity with the Securities Laws
applicable thereto. Without limiting the generality of the foregoing, GAS LP
agrees to comply with the provisions of the securities or "Blue Sky" laws of any
jurisdiction(s) and to make available to its security holders, as soon as
practicable, an earnings statement which will satisfy the provisions of Section
11(a) of the Securities Act of 1933.
(e) All costs and expenses (including, without limitation, attorneys'
fees and expenses) incurred by the Agent or any Secured Party in connection with
exercising any remedy provided for herein or at law, curing any Event of Default
or performing any of Assignor's agreements contained herein or in the
Partnership Agreement or in respect of any part of the Collateral, together with
interest thereon computed at the Default Rate from the date on which such costs
or expenses are incurred to the date of payment thereof, shall constitute
indebtedness secured by this Agreement and shall be paid by Assignor or the GAS
LP to the Agent on demand for the account of the Agent or any such Secured
Party, as the case may be.
(f) So long as no Event of Default has occurred and is continuing,
Assignor reserves the right to exercise all of its rights under the Partnership
Agreement (except as limited by the Financing Documents) and to receive all
income and other distributions from the Collateral and such distributions shall
be free of any lien of Agent and/or the
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Secured Parties under the Financing Documents (so long as such distributions do
not violate any terms or provisions of the Financing Documents).
(g) Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any part
of the Collateral shall be deposited in the Redemption Account to be held,
applied and released in accordance with the Depositary Agreement.
Section 6. Remedies Cumulative; Delay Not Waiver. No right, power or
remedy herein conferred upon or reserved to the Agent or the Secured Parties is
intended to be exclusive of any other right, power or remedy, and every such
right, power and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right, power and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. No delay or omission of the
Agent to exercise any right or power accruing upon the occurrence and during the
continuance of any Event of Default as aforesaid shall impair any such right or
power or shall be construed to be a waiver of any such Event of Default or an
acquiescence therein. Every power and remedy given by this Agreement may be
exercised from time to time, and as often as shall be deemed expedient, by the
Agent.
Section 7. Covenants and Representations of Assignor. Assignor covenants,
agrees and represents as follows:
(a) Assignor will perform and comply, in all material respects, with all
obligations and conditions on its part to be performed hereunder, under the
Partnership Agreement or with respect to the Collateral.
(b) The Partnership Agreement has been duly authorized, executed and
delivered by Assignor and, to the best of Assignor's knowledge, the other
parties thereto, has not been amended or otherwise modified, and is in full
force and effect and is binding upon and enforceable against Assignor and, to
the best of Assignor's knowledge, the other parties thereto, in accordance with
its terms. There exists no default under the Partnership Agreement by Assignor,
or to the best of Assignor's knowledge, by the other parties thereto.
(c) Assignor has not executed and is not aware of any effective
financing statement, security agreement or other instrument similar in effect
covering all or any part of the Collateral on file in any recording office,
except such as may have been filed
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pursuant to this Agreement or the other Financing Documents or pursuant to the
documents evidencing Permitted Liens.
(d) Assignor is the lawful owner of and has full right, title and
interest in and to, the Collateral, subject to no mortgages, liens, charges, or
encumbrances of any kind except Permitted Liens, and has full power and lawful
authority to pledge, assign and grant a security interest in the Collateral
hereunder. Assignor will, so long as any Obligations shall be outstanding,
warrant and defend its title to the Collateral against the claims and demands of
all persons whomsoever.
(e) Assignor will not directly or indirectly create, incur, assume or
suffer to exist any liens on or with respect to any part of the Collateral
except for the liens created by this Agreement or Permitted Liens or as
otherwise expressly permitted pursuant to the Financing Agreement. Assignor will
at its own cost and expense promptly take such action as may be necessary to
discharge any such liens.
(f) Assignor has not assigned any of its rights under the Partnership
Agreement or any of the Collateral except as provided in this Agreement.
(g) Any action or proceeding to enforce the rights granted or to protect
or preserve the Collateral under this Agreement may be taken by the Agent either
in Assignor's name or in the Agent's name as the Agent may deem necessary.
(h) Without the prior written consent of the Agent, or unless otherwise
expressly permitted by the Financing Agreement, Assignor shall not (i)
terminate, modify or amend the Partnership Agreement or (ii) fail to deliver to
the Agent a copy of each demand or notice received or given by it relating to
the Partnership Agreement and which could reasonably be expected to have a
material adverse effect upon the Collateral or the Agent's rights therein.
(i) Assignor shall give to the Agent prompt notice of any default, event
of default or event which with the giving of notice or the passage of time or
both might become an event of default (however "default" or "event of default"
may be defined) under the Partnership Agreement, whether by GAS LP, Assignor or
any other Person, of which Assignor has actual knowledge or has received notice.
(j) If Assignor in its capacity as a partner of GAS LP (whether as a
general partner or a limited partner) receives any income or distribution of
money or property of any kind from GAS LP while an Event of Default (with
respect to which the Assignor has received written notice) has occurred and is
continuing, Assignor shall (except for income or distributions paid pursuant to
Excluded Rights which the Assignor is
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obligated to pay over to Kronish Lieb) hold such income or distribution as
trustee for and shall deliver the same to the Agent (unless all such Events of
Default have been cured or waived or unless Agent shall have provided written
notice to Assignor to the effect that Agent shall have determined, in its sole
discretion, that the continuance of any such Event(s) of Default could not have
an adverse effect on GAS LP or the Collateral) and that Assignor may retain such
income, money or property.
(k) Assignor will, at all times, keep accurate and complete records of
the Collateral. Assignor shall, at all times on seven (7) days' notice, permit
representatives of the Agent at any time during normal business hours of
Assignor to inspect and make abstracts from the Assignor's books and records
pertaining to the Collateral.
(l) Assignor will give prompt notice in writing to the Agent of any
change in the location of the place of business where correspondence, notices or
proceeds in connection with the Collateral are received or located or of any
change in the location of the place of business where records concerning
Collateral are kept.
(m) Assignor is not, and will not as a result of becoming a general or
limited partner of GAS LP be or become, or cause GAS LP to be or become, or be
deemed by any Governmental Authority to be a "utility" or subject to, or not
exempt from, regulation under the FPA or the PUHCA or under state laws and
regulations respecting the rates or the financial or organizational regulation
of public or electric utilities, except as a "qualifying facility" under PURPA.
(n) Assignor shall not do anything or cause, suffer or permit anything
to be done, including, without limitation, sale or other transfer of Assignor's
partnership interests in the GAS LP or of any stock, partnership interest or
other ownership interest in Assignor, which may cause the Project to lose its
status as a "qualifying facility" under PURPA.
(o) As a condition to any transfer of any Collateral the transferee must
agree that the security interest needed by this agreement shall continue
unimpaired following such transfer and shall sign all necessary agreements and
instruments and take all other action necessary to create a first priority
security in favor of the Agent on such Collateral that is the subject of such
transfer. In connection with any such transfer, the Agent shall be entitled to
receive such information with respect to the identity of the proposed transferee
and the ultimate beneficial ownership and control of the GAS LP as it may
reasonably request in order to make an informed determination as to whether the
requested change in ownership of the GAS LP would result in a Change of Control.
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(p) Assignor shall perform and comply with all obligations and conditions
binding upon it under the Stipulation.
Section 8. Certain Consents and Waivers. (a) Assignor hereby consents to
the execution, by the other Partners, of agreements similar to this Agreement in
favor of the Agent for the benefit of the Secured Parties. Assignor specifically
agrees that such other agreements may, among other things, assign or delegate to
the Agent rights to cure defaults under the Partnership Agreement, to exercise
voting rights and other rights to manage or control the GAS LP, and to act as
such other Partner's attorney in fact in a manner similar to the assignment and
delegation of such rights provided herein and that, to the extent permitted by
applicable law, Assignor will recognize and accept such assignment and
delegation and the exercise of such rights by the Agent in connection with any
actions by or business of GAS LP.
(b) Assignor hereby waives, to the maximum extent permitted by law:
(i) all rights under any law limiting remedies, including recovery
of a deficiency, under an obligation secured by a deed of trust or mortgage
on real property if the real property is sold under a power of sale
contained in the mortgage, and all defenses based on any loss whether as a
result of any such sale or otherwise, of Assignor's right to recover any
amount from GAS LP or any other Credit Party or SIDA, whether by right of
subrogation or otherwise;
(ii) all rights under any law to require the Agent to pursue GAS LP
or any other Person, any security which the Agent may hold, or any other
remedy before proceeding against Assignor;
(iii) all rights of reimbursement or subrogation, all rights to
enforce any remedy that the Agent or the Secured Parties may have against
GAS LP or any other Credit Party or SIDA, and all rights to participate in
any security held by the Agent until the Obligations have been paid and the
covenants of the Financing Documents have been performed in full;
(iv) all rights to require the Agent to give any notices of any kind,
including, without limitation, notices of nonpayment, nonperformance,
protest, dishonor, default, delinquency or acceleration, or to make any
presentments, demands or protests, except as expressly provided herein, in
the Financing Agreement and the other Financing Documents;
(v) all rights to assert the bankruptcy or insolvency of GAS LP as a
defense hereunder or as the basis for rescission hereof;
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(vi) all rights under any law purporting to proportionally reduce
Assignor's Obligations hereunder if GAS LP's or any other Credit Party's or
SIDA's Obligations are reduced;
(vii) all defenses based on the disability or lack of authority of
GAS LP or any Person, the repudiation of the Financing Documents by GAS LP
or any Person, the failure by Agent or the Secured Parties to enforce any
claim against GAS LP or any other Credit Party or SIDA, or the
unenforceability in whole or in part of any Financing Documents; and
(viii) all suretyship and guarantor's defenses generally.
Assignor further agrees that upon the occurrence of an Event of Default
under the Financing Agreement, the Agent may elect to nonjudicially or
judicially foreclose against any real or personal property security it holds for
the Obligations or any part thereof, or to exercise any other remedy against GAS
LP or any other Credit Party or SIDA, any security or any guarantor, even if the
effect of that action is to deprive Assignor of the right to collect
reimbursement from GAS LP or any other Credit Party or SIDA for any sums paid by
Assignor to the Agent or any Secured Party.
Section 9. GAS LP's Consent and Covenants. GAS LP hereby consents to the
assignment of and grant of a security interest in the Collateral to the Agent
and to the exercise by the Agent of all rights and powers assigned or delegated
to the Agent by Assignor hereunder, including without limitation the rights upon
and during an Event of Default to exercise Assignor's voting rights and other
rights under the Partnership Agreement to manage or control GAS LP. GAS LP
further agrees to perform all covenants and obligations herein which, by their
express or implied terms, are to be performed by GAS LP. Without limiting the
generality of the foregoing, GAS LP agrees not to permit the withdrawal of any
present Partners or to admit any new Partners except in compliance with Section
7(o) of this Agreement and to give the Agent prompt notice of any (a) Change of
Control or (b) default, event of default or event which with the giving of
notice or the passage of time or both might become an event of default (however
"default" or "event of default", may be defined) by Assignor or any other
Partner under the Partnership Agreement.
Section 10. Attorney-in-Fact. Upon the occurrence and during the
continuation of an Event of Default, Assignor hereby irrevocably constitutes and
appoints the Agent its true and lawful attorney-in-fact to enforce all rights of
Assignor with respect to the Collateral, including, without limitation, the
right to vote, demand, receive and enforce Assignor's rights with respect to the
Collateral, and to give
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appropriate receipts, releases and satisfactions for and on behalf of and in the
name of the Assignor or at the option of the Agent, in the name of the Agent,
with the same force and effect as Assignor could do if this Agreement had not
been made. This power of attorney is a power coupled with an interest and shall
be irrevocable.
Section 11. Place of Business; Location of Records.
(a) Unless the Agent is otherwise notified, the place of business and
chief executive office of Assignor is and all records of Assignor concerning the
Collateral are and will be located at, the following address:
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Attn: Richard S. Scolaro
(b) All notices required or permitted under the terms and provisions
hereof shall be in writing and any such notice shall be effective if given in
accordance with the provisions of Section 9.02 of the Financing Agreement.
Notice to the Assignor may be given at the address set forth in clause (a)
above. Notices to the Agent may be given at the address set forth in Section
9.02 of the Financing Agreement.
Section 12. Perfection; Further Assurances. (a) Assignor agrees that from
time to time, Assignor will promptly execute and deliver all instruments and
documents, and take all action, that may be reasonably necessary or that the
Agent may reasonably request, in order to perfect and protect the assignment and
security interest granted or intended to be granted hereby or to enable the
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, Assignor will
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments, endorsements or notices, as may be
reasonably necessary or as the Agent may reasonably request, in order to perfect
and preserve the assignments and security interests granted or purported to be
granted hereby.
(b) GAS LP shall pay all filing, registration and recording fees and all
refiling, re-registration and re-recording fees, and all reasonable expenses
incident to the execution and acknowledgment or performance of this Agreement,
any assurance, and all Federal, state, county and municipal stamp taxes and
other taxes, duties, imports, assessments and charges arising out of or in
connection with the execution and delivery of this Agreement, any agreement
supplemental hereto, any financing statements and any instruments of further
assurance.
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(c) Assignor shall give the Agent at least thirty (30) days' notice before
it changes the location of its place of business and chief executive office and
shall at the expense of GAS LP execute and deliver such instruments and
documents as may be required by the Agent to maintain a prior perfected security
interest in the Collateral.
Section 13. Continuing Assignment and Security Interest; Transfer of
Senior Secured Notes. This Agreement shall create a continuing pledge and
assignment of and security interest in the Collateral and shall (a) remain in
full force and effect until payment and performance in full of the Obligations,
(b) be binding upon GAS LP, Assignor, and their respective successors and
assigns, and (c) inure, together with the rights and remedies provided herein,
to the benefit of the Agent, the Secured Parties and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing, any of the Secured Parties may assign or otherwise transfer all or
any part of or interest in the Senior Secured Notes or other evidence of
indebtedness held by them to any other Person to the extent permitted by and in
accordance with the Financing Agreement, and such other Person shall thereupon
become vested with all or an appropriate part of the benefits in respect thereof
granted to the Secured Parties herein or otherwise. The release of the security
interest in any or all of the Collateral, the taking or acceptance of additional
security, or the resort by the Agent to any security it may have in any order it
may deem appropriate, shall not affect the liability of any person on the
Obligations. Upon the payment and performance in full of the Obligations, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Assignor. Upon any such termination, the Agent shall,
at Assignor's expense, execute and deliver to Assignor such documents as the GAS
LP or the Assignor shall reasonably request to evidence such termination. If
this Agreement shall be terminated or revoked by operation of law, Assignor will
indemnify and save the Agent harmless from any loss which may be suffered or
incurred by the Agent in acting hereunder prior to the receipt by the Agent, its
successors, transferees or assigns of notice of such termination or revocation.
Section 14. Liability. This Agreement is one of the Financing Documents
referred to in the Financing Agreement, and the recourse of the Agent and the
Secured Parties against the Assignor, the GAS LP or any of their respective
Affiliates, stockholders, officers, directors, partners or employees, for any
liability to the Agent or the Secured Parties arising under this Agreement shall
be limited to the extent provided in Section 9.07 of the Financing Agreement.
Section 15. Regarding the Agent. The Agent shall be afforded in respect
of this Agreement all of the rights, powers, protections, immunities and
indemnities set forth in Article 4 and Article 5 of the Depositary Agreement
which are applicable
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between the Agent and the Issuer thereunder, and the provisions of Article 4 and
Article 5 of the Depositary Agreement which are applicable between the Agent and
the Issuer thereunder shall inure to the benefit of the Agent in respect to this
Agreement and be binding upon POA in such respect, in each case as if the same
were specifically set forth herein, mutatis mutandis. In furtherance and not in
derogation of such rights, powers, protections, immunities and indemnities set
forth in Article 4 and Article 5 of the Depositary Agreement:
(a) The Agent is authorized to take all such action as is provided to be
taken by it as the Agent hereunder and all other action incidental thereto. As
to any matters not expressly provided for herein the Agent shall act or refrain
from acting in accordance with written instructions from the Required Holders
or, in the absence of such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Lien on any of the Collateral, whether impaired by
operation of law or by reason of any action or omission to act on its part
hereunder. The Agent shall have no duty to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement by each of GAS
LP and the Assignor.
(c) At any time or times, in order to comply with any legal requirement
in any jurisdiction, the Agent may appoint another bank or trust company or one
or more other Persons, either to act as co-agents or co-agents, jointly with the
Agent, or to act as separate agent or agents on behalf of the Agent with such
power and authority of the Agent as may be necessary for the effectual operation
of the provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include extending to such co-agent
or separate agent the provisions for the protection of the Agent contained in
Article 4 and Article 5 of the Depositary Agreement).
Section 16. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 17. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the parties
and their respective successors and assigns; provided, however, that neither
Assignor nor GAS
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LP may assign its rights or obligations hereunder without the prior written
consent of the Agent.
Section 18. Headings. The headings of the various Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
Section 19. Governing Law. This Agreement, including all matters of
construction, validity, performance and the creation, validity, enforcement or
priority of the lien of, and security interests created by, this Agreement in or
upon the Collateral shall be governed by the laws of the State of New York.
Section 20. References to Other Documents. All defined terms used in this
Agreement which refer to other documents shall be deemed to refer to such other
documents as they may be amended, supplemented or replaced from time to time,
provided such documents were not amended in breach of a covenant contained in
any agreement to which Assignor, GAS LP, the Agent or any of the Secured Parties
is a party.
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IN WITNESS WHEREOF, Assignor, GAS LP and Agent have caused this Agreement
to be duly executed by their duly authorized signatory as of the day and year
first above written.
A.V. GRANTOR TRUST,
a New York trust
By: /s/ Adam Victor
_________________________
Name: Adam Victor
Its: Trustee
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Agent
By: /s/ Ward A. Spooner
____________________________
Name: Ward A. Spooner
Title: Vice President
G.A.S. ORANGE PARTNERS, L.P.,
a Delaware limited partnership
By: /s/ Adam Victor
_________________________
Name: Adam Victor
Title: President
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EXHIBIT 4.10
EXECUTION COPY
PLEDGE AND SECURITY AGREEMENT
Dated as of December 6, 1999
Among
G.A.S. ORANGE DEVELOPMENT, INC.,
a New York corporation
G.A.S. ORANGE PARTNERS, L.P.,
a Delaware limited partnership
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Collateral Agent
<PAGE>
TABLE OF CONTENTS
____________
<TABLE>
<CAPTION>
Page
----
<S> <C>
PREFACE..................................................................................................... 1
Section 1. Definition...................................................................................... 2
Section 2. Assignment, Pledge and Grant of Security Interest............................................... 2
Section 3. Documents....................................................................................... 4
Section 4. Events of Default............................................................................... 5
Section 5. Remedies........................................................................................ 6
Section 6. Remedies Cumulative; Delay Not Waiver........................................................... 9
Section 7. Covenants and Representations of Assignor....................................................... 9
Section 8. Certain Consents and Waivers.................................................................... 11
Section 9. GAS LP's Consent and Covenants.................................................................. 13
Section 10. Attorney-in-Fact................................................................................ 13
Section 11. Place of Business; Location of Records.......................................................... 13
Section 12. Perfection; Further Assurances.................................................................. 14
Section 13. Continuing Assignment and Security Interest; Transfer of Senior Secured Notes................... 14
Section 14. Liability....................................................................................... 15
Section 15. Regarding the Agent............................................................................. 15
Section 16. Severability.................................................................................... 16
Section 17. Successors and Assigns.......................................................................... 16
Section 18. Headings........................................................................................ 16
Section 19. Governing Law................................................................................... 16
Section 20. References to Other Documents................................................................... 17
</TABLE>
<PAGE>
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement ("Agreement") dated as of December 6,
1999, is entered into by and among G.A.S. ORANGE DEVELOPMENT, INC., a New York
corporation ("Assignor"), G.A.S. Orange Partners, L.P., a Delaware limited
partnership ("GAS LP"), and U.S. BANK TRUST NATIONAL ASSOCIATION, as collateral
agent ("Agent") for the benefit of the Secured Parties under the Financing
Agreement described below.
PREFACE
-------
A. Project Orange Associates, L.P. ("Orange L.P.") operates the Project
(as defined in the Financing Agreement described below) in Syracuse, Onondaga
County, New York.
B. Project Orange Funding, L.P., ("Funding L.P.") a Delaware limited
partnership (together with its successors, including Orange L.P., a Delaware
limited partnership, as the survivor of the merger of Project Orange Funding
L.P. with and into Orange L.P. concurrently with the issuance and sale of the
Senior Secured Notes, "POA"), Project Orange Capital Corp., a Delaware
corporation, ("Capital Co." and together with POA, the "Issuers") will issue $68
million aggregate principal amount of its 10.5% Senior Secured Notes due 2007
(the "Series A Notes") pursuant to that certain Indenture dated as of December
6, 1999 ("Financing Agreement") among the Issuers and U.S. Bank Trust National
Association, as Trustee ("Trustee") for the benefit of the holders of the Senior
Secured Notes (the "Holders" and, together with the Trustee, the "Secured
Parties") and as Collateral Agent.
C. The Holders will have the registration rights set forth in the
Registration Rights Agreement dated as of December 6, 1999 between the Issuers
and Donaldson Lufkin & Jenrette (the "Initial Purchaser") pursuant to which the
Issuer agrees to file with the Securities and Exchange Commission (i) a
registration statement relating to 10.5% Senior Secured Notes due 2007 (the
"Series B Notes") to be offered in exchange for the Series A Notes and (ii) a
shelf registration statement pursuant to Rule 415 under the Securities Act of
1933 relating to the resale by certain Holders of the Series A Notes. The
Series A Notes and the Series B Notes are collectively referred to herein as the
"Senior Secured Notes".
D. Concurrently with the issuance and sale of the Series A Notes (the
"Offering"), Funding L.P. will merge (the "Merger") with and into Orange L.P.
(with Orange L.P. as the surviving partnership) pursuant to the Agreement and
Plan of
<PAGE>
Merger dated as of December 6, 1999 (the "Merger Agreement") between Funding
L.P. and Orange L.P.
E. Assignor is a partner in GAS LP pursuant to that certain Agreement of
Limited Partnership dated as of April 5, 1991 ("Partnership Agreement") between
A.V. Grantor Trust, a New York trust, and Assignor ("Partners").
F. As a condition precedent to the issuance of the Senior Secured Notes
contemplated by the Financing Agreement, the Secured Parties require that GAS LP
and Assignor shall have executed this Agreement.
AGREEMENT
---------
In consideration of the premises herein and in order to induce the Trustee,
for the benefit of the Holders, to enter into the Financing Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, GAS LP and Assignor hereby agree with the Agent for the
benefit of the Secured Parties as follows:
Section 1. Definition.
Unless otherwise defined, all capitalized terms used herein which are
defined in the Financing Agreement shall have their respective meanings therein
defined.
Section 2. Assignment, Pledge and Grant of Security Interest. (a) To
secure the timely payment and performance of the Obligations (as defined below),
Assignor does hereby assign and pledge to the Agent for the benefit of the
Secured Parties and grant to the Agent for the benefit of the Secured Parties a
security interest in all the estate, right, title and interest of Assignor, now
owned or hereafter acquired, in, to and under any and all of the following (the
"Collateral"):
(i) Assignor's partnership interests in GAS LP;
(ii) all rights to receive all income, gain, profit, loss or other
items allocated or distributed to Assignor under the Partnership Agreement;
(iii) all rights to receive all distributions of any nature whatsoever
by GAS LP with respect to such partnership interests;
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<PAGE>
(iv) all of Assignor's capital or ownership interest, including
capital accounts, in GAS LP, and all accounts, deposits or credits of any
kind with GAS LP;
(v) all of Assignor's voting rights in or rights to control or
direct the affairs of GAS LP;
(vi) all of Assignor's right, title and interest, as a partner in
GAS LP, in or to any and all of GAS LP's assets or properties;
(vii) all other right, title and interest in or to GAS LP, and all
rights to receive income, profits or other distributions from GAS LP, of
any nature whatsoever, in each case, as such rights are derived from
Assignor's partnership interests in GAS LP;
(viii) all claims of the Assignor for damages arising out of or for
breach of or default relating to the Collateral except for claims against
the other Partner in its capacity as Partner;
(ix) all rights of Assignor to terminate, amend, supplement, modify
or waive performance under the Partnership Agreement, to perform thereunder
and to compel performance and otherwise exercise all remedies thereunder;
and
(x) all proceeds of any of the above;
provided, however, that to the extent that the Collateral described above
would otherwise include any direct partnership interest in Project Orange
Associates L.P., a Delaware limited partnership, then such partnership interest
and rights and interests relating thereto shall be excluded from the Collateral
to the same extent and for so long as they would be excluded from the
"Collateral" as defined in the Pledge and Security Agreement dated as of
December 6, 1999 among GAS LP, Funding, L.P. and the Agent.
(b) This Agreement secures the payment and performance of all
obligations of POA and of the other Credit Parties and SIDA, now existing or
hereafter arising, due or owing to the Secured Parties pursuant to the terms of
the Indenture, the Senior Secured Notes and the Collateral Documents, including,
without limitation: (i) the principal, premium, if any, or interest on the
Senior Secured Notes (including any interest accruing after the commencement of
any bankruptcy or insolvency proceeding relating to the Issuers, whether or not
such interest is allowed or allowable as a claim in
3
<PAGE>
any such proceeding), and all other obligations and liabilities of the
Issuers including, without limitation, indemnities, fees and interest incurred
under, arising out of or in connection with the Indenture, the Senior Secured
Notes and the Collateral Documents, (ii any and all sums advanced by or on
behalf of the Issuers in order to preserve the Collateral or preserve its
interest in the Collateral, and (ii in the event of any proceeding for
collection or enforcement by or on behalf of any Secured Party after an Event of
Default shall have occurred and be continuing and unwaived, the expenses of
retaking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by or on behalf of any
Secured Party of its rights under the Indenture, the Senior Secured Notes and
the Collateral Documents, together with attorneys' fees and court costs (all
such obligations being herein called the "Obligations").
(c) Upon the occurrence and during the continuation of an Event of
Default, Assignor hereby irrevocably appoints and constitutes the Agent and its
successors and assigns as Assignor's true and lawful attorney in fact, with full
power (in the name of Assignor or otherwise) to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for money due
and to become due under or arising out of the Collateral, to elect remedies
thereunder, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
in connection therewith which the Agent may deem to be necessary or advisable.
Section 3. Documents. (a) At any time and from time to time upon the
request of the Agent, Assignor will:
(i) deliver and pledge to the Agent endorsed and/or accompanied by
such evidence of assignment and transfer, in such form and substance, as
the Agent may request, any and all instruments, documents, chattel paper
and/or general intangibles relating to the Collateral as the Agent may
specify;
(ii) give, execute, deliver, file and/or record any notice,
statement, instrument, document, agreement or other papers that may be
reasonably necessary, and as the Agent may reasonably request, in order to
create, preserve, perfect or validate the assignment and security interest
granted pursuant hereto or to enable the Agent to exercise and enforce its
rights hereunder or with respect to such assignment and security interest;
and
(iii) keep and stamp or otherwise mark any and all documents and its
individual books and records relating to Collateral in such manner as the
Agent may require.
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<PAGE>
(b) The right is expressly granted to the Agent, at its discretion, to
file in those jurisdictions where the same is permitted one or more financing
statements under the Uniform Commercial Code (the "UCC") signed only by the
Agent, naming Assignor as debtor and the Agent as secured party, and indicating
therein the types or describing the items of Collateral herein specified.
Without the prior written consent of the Agent, the Assignor will not file or
authorize or permit to be filed in any jurisdiction any such financing or like
statement (other than for Permitted Liens) in which the Agent is not named as
the sole secured party. Nothing herein shall be construed as obligating the
Agent to file any financing statement.
(c) If any default by Assignor under the Partnership Agreement shall
occur, the Agent shall, at its option, be permitted (but shall not be obligated)
to remedy any such default by giving written notice of such intent to GAS LP and
Assignor. The Agent shall have a period of sixty (60) days after giving such
notice in which to cure such default. In the event that any such default (except
monetary defaults) shall not be reasonably curable within such 60-day period,
neither GAS LP nor any Person acting on behalf of GAS LP, including, without
limitation, a general partner of GAS LP, shall exercise any remedies thereunder
if the Agent shall, within such 60-day period, initiate action to cure such
default and proceed diligently to the curing thereof. Any cure by the Agent of
Assignor's default under the Partnership Agreement shall not be construed as an
assumption by the Agent or any of the Secured Parties of any obligations,
covenants or agreements of Assignor under the Partnership Agreement and neither
the Agent nor the Secured Parties shall be liable for any action taken pursuant
to this Section 3(c) to cure any such default. In no event shall the Agent be
deemed to be a partner under such Partnership Agreement and in no event shall
the Agent have any liability thereunder. This Agreement shall not be deemed to
release or to affect in any way the obligations of Assignor under the
Partnership Agreement.
Section 4. Events of Default. The occurrence of any of the following
events ("Events of Default"), whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body, shall entitle the Agent
to exercise any and all of its rights and remedies hereunder or at law:
(a) the occurrence (whether as a result of acts or omissions by GAS LP or
any other Person) of an Event of Default under the Financing Agreement or any of
the other Financing Documents; or
5
<PAGE>
(b) subject to such notice requirements and cure periods as may be
applicable thereto pursuant to the Financing Agreement, the failure on the part
of Assignor to observe or perform any material covenant, condition or agreement
on its part to be observed or performed, or the material breach of any
representation or warranty of Assignor, contained in this Agreement; or
(c) the impairment of the priority of the security interest in the
Collateral granted herein in any material respect.
Section 5. Remedies. (a) If any Event of Default has occurred and is
continuing, the Agent shall have the right, at its election, but not the
obligation, to do any of the following (subject to the terms of the Financing
Agreement and except to the extent such action or actions are prohibited
pursuant to applicable law):
(i) subject to Section 5(f) below, vote or exercise any and all of
Assignor's rights or powers under the Partnership Agreement, including any
rights or powers to manage or control the GAS LP;
(ii) demand, sue for, collect or receive any money or property at
any time payable to or receivable by Assignor on account of, or in exchange
for, all or any part of the Collateral;
(iii) institute and prosecute any action at law or suit in equity or
other proceeding to collect or enforce any obligations or rights hereunder
or in the Collateral, including specific enforcement of any covenant or
agreement contained herein or in the Partnership Agreement, or to foreclose
or enforce the security interest in all or any part of the Collateral
granted herein, or to enforce any other legal or equitable right vested in
it by this Agreement or by law;
(iv) sell or otherwise dispose of any or all of the Collateral or
cause all or any part of the Collateral to be sold or otherwise disposed of
in one or more sales or transactions, after five (5) days prior written
notice to the Assignor of its intent to take such action, at such prices as
the Agent may deem appropriate or adequate, and for cash or on credit or
for future delivery, without assumption of any credit risk, at any broker's
board or at public or private sale, without demand of performance or notice
of time or place of sale (except such notice which under applicable law
cannot be waived), and any Secured Party or any other Person may be the
purchaser of any or all of the Collateral so sold and thereafter hold the
same absolutely free from any claim or right of whatsoever kind, including
any equity of redemption, of Assignor or
6
<PAGE>
GAS LP, any such demand, notice or right and equity being hereby expressly
waived and released;
(v) incur expenses, including attorneys' fees, consultants' fees,
and other costs appropriate to the exercise of any right or power under
this Agreement;
(vi) perform any obligation of Assignor hereunder or under the
Partnership Agreement;
(vii) secure the appointment of a receiver for Assignor without
notice to GAS LP or Assignor; or
(viii) exercise any other or additional rights or remedies granted to
a secured party under the UCC.
If, pursuant to applicable law, prior notice of any such action is required
to be given to Assignor or GAS LP, Assignor and GAS LP hereby acknowledge and
agree that the minimum time required by such applicable law, or if no minimum is
specified, five (5) Banking Days, shall be deemed a reasonable notice period.
(b) In addition to the foregoing remedies, the Agent may (subject to
Section 3(c) hereof), but shall not be obligated to, cure any Event of Default
and incur reasonable fees, costs and expenses in doing so, in which event GAS LP
or Assignor shall immediately reimburse the Agent on demand for all such fees,
costs and expenses, together with interest on the total amount at the Default
Rate from the date incurred until the date repaid in full. Subject to the
Assignor's rights described in Section 5(c) hereof, the Agent shall be the sole
judge of the validity of any adverse claims, taxes, assessments, charges or
encumbrances pertaining to the Collateral, and the amount to be paid in
satisfaction thereof, and of the necessity for, and of the time and manner of
doing, everything herein authorized to be done, provided that the Agent shall be
under no obligation to do any such acts or to make any such payments.
(c) Assignor may contest in good faith any taxes, assessments and other
governmental charges in connection with the Collateral and, in such event, may
permit the taxes, assessments or other charges so contested to remain unpaid
during any period, including appeals, when Assignor is in good faith contesting
the same, so long as (i) reserves have been established in an amount sufficient
to pay any such taxes, assessments or other charges, accrued interest thereon
and potential penalties or other costs relating thereto, or other adequate
provision for the payment thereof shall have been made, (ii enforcement of the
contested tax, assessment or other charge is
7
<PAGE>
effectively stayed for the entire duration of such contest, and (ii any tax,
assessment or other charge determined to be due, together with any interest or
penalties thereon, is immediately paid after resolution of such contest.
Additionally, Assignor may contest in good faith Liens for any tax, assessment
or other governmental charge, by appropriate proceedings, so long as in
connection with such proceedings a bond or other security has been posted or
provided in such manner and amount as to assure that any taxes, assessment or
other charges determined to be due will be promptly paid in full when such
contest is determined.
(d) If the Agent shall decide to exercise its right to sell any or all of
the Collateral, and if it is necessary to have such Collateral, or that portion
thereof to be sold, registered under the provisions of the Securities Act of
1933, as amended, or otherwise registered or qualified under any federal or
state securities laws or regulations (collectively, the "Securities Laws"), GAS
LP will execute and deliver, all at GAS LP's expense, all such instruments and
documents which, in the opinion of the Agent, are necessary to register or
qualify such Collateral, or that portion thereof to be sold, under the
provisions of the Securities Laws and will use best efforts to cause any
registration statement relating thereto to become effective and to remain
effective for a period of not less than six (6) months from the date of the
first public offering of such Collateral, or that portion thereof to be sold,
and to make all amendments thereto and/or to any related prospectus or similar
document are necessary, all in conformity with the Securities Laws applicable
thereto. Without limiting the generality of the foregoing, GAS LP agrees to
comply with the provisions of all applicable securities or "Blue Sky" laws of
any jurisdiction(s) and to make available to its security holders, as soon as
practicable, an earnings statement which will satisfy the provisions of Section
11(a) of the Securities Act of 1933.
(e) All costs and expenses (including, without limitation, attorneys' fees
and expenses) incurred by the Agent or any Secured Party in connection with
exercising any remedy provided for herein or at law, curing any Event of Default
or performing any of Assignor's agreements contained herein or in the
Partnership Agreement or in respect of any part of the Collateral, together with
interest thereon computed at the Default Rate from the date on which such costs
or expenses are incurred to the date of payment thereof, shall constitute
indebtedness secured by this Agreement and shall be paid by Assignor or the GAS
LP to the Agent on demand for the account of the Agent or any such Secured
Party, as the case may be.
(f) So long as no Event of Default has occurred and is continuing,
Assignor reserves the right to exercise all of its rights under the Partnership
Agreement (except as limited by the Financing Documents) and to receive all
income and other distributions from the Collateral and such distributions shall
be free of any lien of Agent and/or the
8
<PAGE>
Secured Parties under the Financing Documents (so long as such distributions do
not violate any terms or provisions of the Financing Documents).
(g) Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral shall be deposited in the Redemption Account to be held, applied and
released in accordance with the Depositary Agreement.
Section 6. Remedies Cumulative; Delay Not Waiver. No right, power or
remedy herein conferred upon or reserved to the Agent or the Secured Parties is
intended to be exclusive of any other right, power or remedy, and every such
right, power and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right, power and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. No delay or omission of the
Agent to exercise any right or power accruing upon the occurrence and during the
continuance of any Event of Default as aforesaid shall impair any such right or
power or shall be construed to be a waiver of any such Event of Default or an
acquiescence therein. Every power and remedy given by this Agreement may be
exercised from time to time, and as often as shall be deemed expedient, by the
Agent.
Section 7. Covenants and Representations of Assignor. Assignor covenants,
agrees and represents as follows:
(a) Assignor will perform and comply, in all material respects, with all
obligations and conditions on its part to be performed hereunder, under the
Partnership Agreement or with respect to the Collateral.
(b) The Partnership Agreement has been duly authorized, executed and
delivered by Assignor and, to the best of Assignor's knowledge, the other
parties thereto, has not been amended or otherwise modified, and is in full
force and effect and is binding upon and enforceable against Assignor and, to
the best of Assignor's knowledge, the other parties thereto, in accordance with
its terms. There exists no default under the Partnership Agreement by Assignor,
or to the best of Assignor's knowledge, by the other parties thereto.
(c) Assignor has not executed and is not aware of any effective financing
statement, security agreement or other instrument similar in effect covering all
or any part of the Collateral on file in any recording office, except such as
may have been filed
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pursuant to this Agreement or the other Financing Documents or pursuant to the
documents evidencing Permitted Liens.
(d) Assignor is the lawful owner of and has full right, title and interest
in and to, the Collateral, subject to no mortgages, liens, charges, or
encumbrances of any kind except Permitted Liens, and has full power and lawful
authority to pledge, assign and grant a security interest in the Collateral
hereunder. Assignor will, so long as any Obligations shall be outstanding,
warrant and defend its title to the Collateral against the claims and demands of
all persons whomsoever.
(e) Assignor will not directly or indirectly create, incur, assume or
suffer to exist any liens on or with respect to any part of the Collateral
except for the liens created by this Agreement or Permitted Liens or as
otherwise expressly permitted pursuant to the Financing Agreement. Assignor will
at its own cost and expense promptly take such action as may be necessary to
discharge any such liens.
(f) Assignor has not assigned any of its rights under the Partnership
Agreement or any of the Collateral except as provided in this Agreement.
(g) Any action or proceeding to enforce the rights granted or to protect
or preserve the Collateral under this Agreement may be taken by the Agent either
in Assignor's name or in the Agent's name as the Agent may deem necessary.
(h) Without the prior written consent of the Agent, or unless otherwise
expressly permitted by the Financing Agreement, Assignor shall not (i)
terminate, modify or amend the Partnership Agreement or (ii) fail to deliver to
the Agent a copy of each demand or notice received or given by it relating to
the Partnership Agreement and which could reasonably be expected to have a
material adverse effect upon the Collateral or the Agent's rights therein.
(i) Assignor shall give to the Agent prompt notice of any default, event
of default or event which with the giving of notice or the passage of time or
both might become an event of default (however "default" or "event of default"
may be defined) under the Partnership Agreement, whether by GAS LP, Assignor or
any other Person, of which Assignor has actual knowledge or has received notice.
(j) If Assignor in its capacity as a partner of GAS LP (whether as a
general partner or a limited partner) receives any income or distribution of
money or property of any kind from GAS LP while an Event of Default (with
respect to which the Assignor has received written notice) has occurred and is
continuing, Assignor shall (except for income or distributions paid pursuant to
Excluded Rights which the Assignor is
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obligated to pay over to Kronish Lieb) hold such income or distribution as
trustee for and shall deliver the same to the Agent (unless all such Events of
Default have been cured or waived or unless Agent shall have provided written
notice to Assignor to the effect that Agent shall have determined, in its sole
discretion, that the continuance of any such Event(s) of Default could not have
an adverse effect on GAS LP or the Collateral) and that Assignor may retain such
income, money or property.
(k) Assignor will, at all times, keep accurate and complete records of the
Collateral. Assignor shall, at all times on seven (7) days' notice, permit
representatives of the Agent at any time during normal business hours of
Assignor to inspect and make abstracts from the Assignor's books and records
pertaining to the Collateral.
(l) Assignor will give prompt notice in writing to the Agent of any change
in the location of the place of business where correspondence, notices or
proceeds in connection with the Collateral are received or located or of any
change in the location of the place of business where records concerning
Collateral are kept.
(m) Assignor is not, and will not as a result of becoming a general or
limited partner of GAS LP be or become, or cause GAS LP to be or become, or be
deemed by any Governmental Authority to be a "utility" or subject to, or not
exempt from, regulation under the FPA or the PUHCA or under state laws and
regulations respecting the rates or the financial or organizational regulation
of public or electric utilities, except as a "qualifying facility" under PURPA.
(n) Assignor shall not do anything or cause, suffer or permit anything to
be done, including, without limitation, sale or other transfer of Assignor's
partnership interests in the GAS LP or of any stock, partnership interest or
other ownership interest in Assignor, which may cause the Project to lose its
status as a "qualifying facility" under PURPA.
(o) As a condition to any transfer of any Collateral the transferee must
agree that the security interest needed by this agreement shall continue
unimpaired following such transfer and shall sign all necessary agreements and
instruments and take all other action necessary to create a first priority
security in favor of the Agent on such Collateral that is the subject of such
transfer. In connection with any such transfer, the Agent shall be entitled to
receive such information with respect to the identity of the proposed transferee
and the ultimate beneficial ownership and control of the GAS LP as it may
reasonably request in order to make an informed determination as to whether the
requested change in ownership of the GAS LP would result in a Change of Control.
11
<PAGE>
(p) Assignor shall perform and comply with all obligations and conditions
binding upon it under the Stipulation.
Section 8. Certain Consents and Waivers. (a) Assignor hereby consents to
the execution, by the other Partners, of agreements similar to this Agreement in
favor of the Agent for the benefit of the Secured Parties. Assignor specifically
agrees that such other agreements may, among other things, assign or delegate to
the Agent rights to cure defaults under the Partnership Agreement, to exercise
voting rights and other rights to manage or control the GAS LP, and to act as
such other Partner's attorney in fact in a manner similar to the assignment and
delegation of such rights provided herein and that, to the extent permitted by
applicable law, Assignor will recognize and accept such assignment and
delegation and the exercise of such rights by the Agent in connection with any
actions by or business of GAS LP.
(b) Assignor hereby waives, to the maximum extent permitted by law:
(i) all rights under any law limiting remedies, including recovery
of a deficiency, under an obligation secured by a deed of trust or mortgage
on real property if the real property is sold under a power of sale
contained in the mortgage, and all defenses based on any loss whether as a
result of any such sale or otherwise, of Assignor's right to recover any
amount from GAS LP or any other Credit Party or SIDA, whether by right of
subrogation or otherwise;
(ii) all rights under any law to require the Agent to pursue GAS LP
or any other Person, any security which the Agent may hold, or any other
remedy before proceeding against Assignor;
(iii) all rights of reimbursement or subrogation, all rights to
enforce any remedy that the Agent or the Secured Parties may have against
GAS LP or any other Credit Party or SIDA, and all rights to participate in
any security held by the Agent until the Obligations have been paid and the
covenants of the Financing Documents have been performed in full;
(iv) all rights to require the Agent to give any notices of any kind,
including, without limitation, notices of nonpayment, nonperformance,
protest, dishonor, default, delinquency or acceleration, or to make any
presentments, demands or protests, except as expressly provided herein, in
the Financing Agreement and the other Financing Documents;
(v) all rights to assert the bankruptcy or insolvency of GAS LP as a
defense hereunder or as the basis for rescission hereof;
12
<PAGE>
(vi) all rights under any law purporting to proportionally reduce
Assignor's Obligations hereunder if GAS LP's or any other Credit Party's or
SIDA's Obligations are reduced;
(vii) all defenses based on the disability or lack of authority of
GAS LP or any Person, the repudiation of the Financing Documents by GAS LP
or any Person, the failure by Agent or the Secured Parties to enforce any
claim against GAS LP or any other Credit Party or SIDA, or the
unenforceability in whole or in part of any Financing Documents; and
(viii) all suretyship and guarantor's defenses generally.
Assignor further agrees that upon the occurrence of an Event of Default
under the Financing Agreement, the Agent may elect to nonjudicially or
judicially foreclose against any real or personal property security it holds for
the Obligations or any part thereof, or to exercise any other remedy against GAS
LP or any other Credit Party or SIDA, any security or any guarantor, even if the
effect of that action is to deprive Assignor of the right to collect
reimbursement from GAS LP for any sums paid by Assignor to the Agent or any
Secured Party.
Section 9. GAS LP's Consent and Covenants. GAS LP hereby consents to the
assignment of and grant of a security interest in the Collateral to the Agent
and to the exercise by the Agent of all rights and powers assigned or delegated
to the Agent by Assignor hereunder, including without limitation the rights upon
and during an Event of Default to exercise Assignor's voting rights and other
rights under the Partnership Agreement to manage or control GAS LP. GAS LP
further agrees to perform all covenants and obligations herein which, by their
express or implied terms, are to be performed by GAS LP. Without limiting the
generality of the foregoing, GAS LP agrees not to permit the withdrawal of any
present Partners or to admit any new Partners except in compliance with Section
7(o) of this Agreement and to give the Agent prompt notice of any (a) Change of
Control or (b) default, event of default or event which with the giving of
notice or the passage of time or both might become an event of default (however
"default" or "event of default", may be defined) by Assignor or any other
Partner under the Partnership Agreement.
Section 10. Attorney-in-Fact. Upon the occurrence and during the
continuation of an Event of Default, Assignor hereby irrevocably constitutes and
appoints the Agent its true and lawful attorney-in-fact to enforce all rights of
Assignor with respect to the Collateral, including, without limitation, the
right to vote, demand, receive and enforce Assignor's rights with respect to the
Collateral, and to give
13
<PAGE>
appropriate receipts, releases and satisfactions for and on behalf of and in the
name of the Assignor or at the option of the Agent, in the name of the Agent,
with the same force and effect as Assignor could do if this Agreement had not
been made. This power of attorney is a power coupled with an interest and shall
be irrevocable.
Section 11. Place of Business; Location of Records.
(a) Unless the Agent is otherwise notified, the place of business and
chief executive office of Assignor is and all records of Assignor concerning the
Collateral are and will be located at, the following address:
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Attn: Richard S. Scolaro
(b) All notices required or permitted under the terms and provisions
hereof shall be in writing and any such notice shall be effective if given in
accordance with the provisions of Section 9.02 of the Financing Agreement.
Notice to the Assignor may be given at the address set forth in clause (a)
above. Notices to the Agent may be given at the address set forth in Section
9.02 of the Financing Agreement.
Section 12. Perfection; Further Assurances. (a) Assignor agrees that from
time to time, Assignor will promptly execute and deliver all instruments and
documents, and take all action, that may be reasonably necessary or that the
Agent may reasonably request, in order to perfect and protect the assignment and
security interest granted or intended to be granted hereby or to enable the
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, Assignor will
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments, endorsements or notices, as may be
reasonably necessary or as the Agent may reasonably request, in order to perfect
and preserve the assignments and security interests granted or purported to be
granted hereby.
(b) GAS LP shall pay all filing, registration and recording fees and all
refiling, re-registration and re-recording fees, and all reasonable expenses
incident to the execution and acknowledgment or performance of this Agreement,
and all Federal, state, county and municipal stamp taxes and other taxes,
duties, imports, assessments and charges arising out of or in connection with
the execution and delivery of this Agreement, any agreement supplemental hereto,
any financing statements and any instruments of further assurance.
14
<PAGE>
(c) Assignor shall give the Agent at least thirty (30) days' notice before
it changes the location of its place of business and chief executive office and
shall at the expense of GAS LP execute and deliver such instruments and
documents as may be required by the Agent to maintain a prior perfected security
interest in the Collateral.
Section 13. Continuing Assignment and Security Interest; Transfer of
Senior Secured Notes. This Agreement shall create a continuing pledge and
assignment of and security interest in the Collateral and shall (a) remain in
full force and effect until payment and performance in full of the Obligations,
(b) be binding upon GAS LP, Assignor, and their respective successors and
assigns, and (c) inure, together with the rights and remedies provided herein,
to the benefit of the Agent, the Secured Parties and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing, any of the Secured Parties may assign or otherwise transfer all or
any part of or interest in the Senior Secured Notes or other evidence of
indebtedness held by them to any other Person to the extent permitted by and in
accordance with the Financing Agreement, and such other Person shall thereupon
become vested with all or an appropriate part of the benefits in respect thereof
granted to the Secured Parties herein or otherwise. The release of the security
interest in any or all of the Collateral, the taking or acceptance of additional
security, or the resort by the Agent to any security it may have in any order it
may deem appropriate, shall not affect the liability of any person on the
Obligations. Upon the payment and performance in full of the Obligations, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Assignor. Upon any such termination, the Agent shall,
at Assignor's expense, execute and deliver to Assignor such documents as the GAS
LP or the Assignor shall reasonably request to evidence such termination. If
this Agreement shall be terminated or revoked by operation of law, Assignor will
indemnify and save the Agent harmless from any loss which may be suffered or
incurred by the Agent in acting hereunder prior to the receipt by the Agent, its
successors, transferees or assigns of notice of such termination or revocation.
Section 14. Liability. This Agreement is one of the Financing Documents
referred to in the Financing Agreement, and the recourse of the Agent and the
Secured Parties against the Assignor, the GAS LP or any of their respective
Affiliates, stockholders, officers, directors, partners or employees, for any
liability to the Agent or the Secured Parties arising under this Agreement shall
be limited to the extent provided in Section 9.07 of the Financing Agreement.
Section 15. Regarding the Agent. The Agent shall be afforded in respect of
this Agreement all of the rights, powers, protections, immunities and
indemnities set forth in Article 4 and Article 5 of the Depositary Agreement
which are applicable
15
<PAGE>
between the Agent and the Issuer thereunder, and the provisions of Article 4 and
Article 5 of the Depositary Agreement which are applicable between the Agent and
the Issuer thereunder shall inure to the benefit of the Agent in respect to this
Agreement and be binding upon POA in such respect, in each case as if the same
were specifically set forth herein, mutatis mutandis. In furtherance and not in
derogation of such rights, powers, protections, immunities and indemnities set
forth in Article 4 and Article 5 of the Depositary Agreement:
(a) The Agent is authorized to take all such action as is provided to be
taken by it as the Agent hereunder and all other action incidental thereto. As
to any matters not expressly provided for herein the Agent shall act or refrain
from acting in accordance with written instructions from the Required Holders
or, in the absence of such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Lien on any of the Collateral, whether impaired by
operation of law or by reason of any action or omission to act on its part
hereunder. The Agent shall have no duty to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement by each of GAS
LP and the Assignor.
(c) At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint another bank or trust company or one or
more other Persons, either to act as co-agents or co-agents, jointly with the
Agent, or to act as separate agent or agents on behalf of the Agent with such
power and authority of the Agent as may be necessary for the effectual operation
of the provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include extending to such co-agent
or separate agent the provisions for the protection of the Agent contained in
Article 4 and Article 5 of the Depositary Agreement).
Section 16. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 17. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the parties
and their respective successors and assigns; provided, however, that neither
Assignor nor GAS
16
<PAGE>
LP may assign its rights or obligations hereunder without the prior written
consent of the Agent.
Section 18. Headings. The headings of the various Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
Section 19. Governing Law. This Agreement, including all matters of
construction, validity, performance and the creation, validity, enforcement or
priority of the lien of, and security interests created by, this Agreement in or
upon the Collateral shall be governed by the laws of the State of New York.
Section 20. References to Other Documents. All defined terms used in this
Agreement which refer to other documents shall be deemed to refer to such other
documents as they may be amended, supplemented or replaced from time to time,
provided such documents were not amended in breach of a covenant contained in
any agreement to which Assignor, GAS LP, the Agent or any of the Secured Parties
is a party.
17
<PAGE>
IN WITNESS WHEREOF, Assignor, GAS LP and Agent have caused this Agreement
to be duly executed by their duly authorized signatory, as of the day and year
first above written.
G.A.S. ORANGE DEVELOPMENT, INC.,
a New York corporation
By: /s/ Adam Victor
___________________________
Name: Adam Victor
Its: President
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Agent
By: /s/ Ward A. Spooner
______________________________
Name: Ward A. Spooner
Title: Vice President
G.A.S. ORANGE PARTNERS, L.P.,
a Delaware limited partnership
By: /s/ Adam Victor
______________________________
Name: Adam Victor
Title: President
18
<PAGE>
LETTER OF TRANSMITTAL
Offer to Exchange
All Outstanding Senior Secured Notes, 10.5% Series A due 2007
for
Senior Secured Notes, 10.5% Series B due 2007
of
Project Orange Associates L.P. and Project Orange Capital Corp.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
____________, 2000 UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
Deliver To:
U.S. Bank Trust National Association, Exchange Agent
By Registered or Certified Mail:
180 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Services, Specialized Finance
By Facsimile:
(651) 244-1537Confirm by Telephone:
(651) 244-1215
By Hand or Overnight Courier:
180 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Services, Specialized Finance
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
<PAGE>
The undersigned acknowledges that he or she has received and reviewed the
Prospectus dated __________, 2000 (the "Prospectus") of Project Orange
Associates L.P. and Project Orange Capital Corp. (together, the "Issuer") and
this Letter of Transmittal (the "Letter of Transmittal"), which together
constitute (i) the Issuer's offer (the "Exchange Offer") to exchange its
outstanding Senior Secured Notes, 10.5% Series A due 2007 (the "Old Notes"), of
which an aggregate of $68,000,000 in principal amount is outstanding as of the
date hereof, for an equal principal amount of newly issued Senior Secured Notes,
10.5% Series B due 2007 (the "New Notes"). The New Notes have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement of which the Prospectus is a part. Old Notes may be
tendered only in integral multiples of $1,000. Other capitalized terms used but
not defined herein have the meaning given to them in the Prospectus.
This Letter of Transmittal is to be completed by a Holder of Old Notes
either if certificates are to be forwarded herewith or if a tender of
certificates for Old Notes, if available, is to be made by book-entry transfer
to the account maintained by the Exchange Agent at the Depository Trust Company
("DTC") pursuant to the procedures set forth in "The Exchange Offer--Procedures
for Tendering--Registered Holders and DTC Participants" section of the
Prospectus. Holders of Old Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Old Notes into the Exchange Agent's account at
DTC (a "Book-Entry Confirmation") and all other documents required by this
Letter of Transmittal to the Exchange Agent on or prior to the Expiration Date,
must tender their Old Notes according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Procedures for Tendering--Registered Holders and
DTC Participants" section of the Prospectus. See Instruction 1. Delivery of
Documents to the DTC does not constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Issuer or any other
person who has obtained a properly completed Note power from the registered
Holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this letter in its entirety.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOX
-2-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Names and address(es) of Certificate Aggregate Principal
Registered Holders Number(s) Principal Amount
(Please fill in, if blank) Amount Tendered
Represented by (must be in
Certificate(s) integral
multiples of
1000)*
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------------------------
* Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of
Old Notes will be deemed to have tendered the entire aggregate principal amount represented by
the column labeled "Aggregate Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and principal amounts on
a separate signed schedule and affix the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Old Notes. All other tenders must
be in integral multiples of $1,000.
- --------------------------------------------------------------------------------------------------
</TABLE>
0 CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
0 CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER DEFINED)
ONLY):
Name of Tendering Institution
------------------------------------------------
Account Number
---------------------------------------------------------------
Transaction Code Number
------------------------------------------------------
0 CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR USE BY
ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Tendering Institution(s)
------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------------
Window Ticket Number (if available)
---------------------------------------
Name of Institution which Guaranteed Delivery
-----------------------------
Account Number (if delivered by book-entry transfer)
----------------------
-3-
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6) (See Instructions 4, 5 and 6)
To be completed ONLY (i) if certificates for Old To be completed ONLY if certificates for Old Notes
Notes not tendered, or New Notes issued in not tendered, or New Notes issued in exchange for
exchange for Old Notes accepted for exchange, are Old Notes accepted for exchange, are to be sent to
to be issued in the name of someone other than the someone other than the undersigned, or to the
undersigned, or (ii) if Old Notes tendered by undersigned at an address other than that shown
book-entry transfer which are not exchanged are to above.
be returned by credit to an account maintained at
DTC. Mail to:
Name
Issue certificate(s) to: ----------------------------------------------
(Please Print)
Name
----------------------------------------------- Address
(Please Print) -------------------------------------------
(Include Zip Code)
Address
-------------------------------------------- (Tax Identification or Social Security No.)
(Include Zip Code)
(Tax Identification or Social Security No.)
Credit Old Notes not exchanged and delivered by
book-entry transfer to the DTC account set forth
below:
- ------------------
DTC Account Number
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Issuer the principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Issuer
all right, title and interest in and to the Old Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver certificates for such Old Notes, or
transfer ownership of such Old Notes on the account books maintained by DTC, to
the Issuer and deliver all accompanying evidences of transfer and authenticity
to, or upon the order of, the Issuer and (ii) present such Old Notes for
transfer on the books of the Issuer and receive all benefits and otherwise
exercise all rights of beneficial ownership of such Old Notes, all in accordance
with the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Issuer 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 acquired by the Issuer. The
undersigned hereby further represents that (i) any New Notes acquired in
exchange for Old Notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such New Notes, whether or not the
undersigned, (ii) neither the undersigned nor any such other person is engaging
in or intends to engage in a distribution of the New Notes, (iii) neither the
Holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such New Notes and (iv) neither the
Holder nor any such other person is an "affiliate," as defined in Rule 405 under
the Securities Act, of the Issuer.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance upon interpretations contained in letters issued to third parties by
the staff of the Securities and Exchange Commission (the "SEC") that the New
Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by Holders thereof (other
than any such Holder that is an "affiliate" of the Issuer 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
Notes are acquired in the ordinary course of such Holders' business and such
Holders are not engaging in and do not intend to engage in a distribution of the
New Notes and have no arrangement or understanding with any person to
participate in distribution of such New Notes. 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 New Notes. If the undersigned is a
broker-dealer that will receive New Notes for its own account in exchange for
Old Notes that were acquired as a result of market-making activities or other
trading activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the assignment, transfer and purchase of the Old Notes
tendered hereby.
For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Old Notes when, as and if the Issuer has given oral or
written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned, without expense, to the undersigned at the address shown below
or at a different address as may be indicated herein under "Special Delivery
Instructions" as promptly as practicable after the Expiration Date.
-5-
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering--Registered Holders and DTC Participants" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Issuer upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged, in the name(s) of the undersigned. Similarly, unless otherwise
indicated under "Special Delivery Instructions," please send the certificates
representing the New Notes issued in exchange for the Old Notes accepted for
exchange and any certificates for Old Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s). In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Old Notes not tendered
or not exchanged and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Issuer has no obligation pursuant to the
"Special Payment Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered Holder(s) thereof if the Issuer
does not accept for exchange any of the Old Notes so tendered.
Holders of Old Notes who wish to tender their Old Notes and (i) whose Old
Notes are not immediately available, or (ii) who cannot deliver their Old Notes,
this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date (or who cannot comply with the book-
entry transfer procedure on a timely basis), may tender their Old Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer-- Procedures for Tendering--Registered
Holders and DTC Participants." See Instruction 1 regarding the completion of
this Letter of Transmittal, printed below.
-6-
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X
--------------------
Date
X
--------------------
Signature(s) of Registered Holder(s) Date
or Authorized Signatory
Area Code and Telephone Number:
--------------------
The above lines must be signed by the registered Holder(s) of Old Notes as
their name(s) appear(s) on the Old Notes or by person(s) authorized to become
registered Holder(s) by a properly completed note power from the registered
Holder(s), a copy of which must be transmitted with this Letter of Transmittal.
If Old Notes to which this Letter of Transmittal relate are held of record by
two or more joint Holders, then all such Holders must sign this Letter of
Transmittal. If signature is by trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, then such person must (i) set forth his or her full
title below and (ii) unless waived by the Issuer, submit evidence satisfactory
to the Issuer of such person's authority so to act. See Instruction 4 regarding
the completion of this Letter of Transmittal, printed below.
Name(s):
- --------------------------------------------------------------------------------
(Please Print)
Capacity:
Address:
- --------------------------------------------------------------------------------
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution (as hereinafter
defined):
(If required by Instruction 4)
------------------------------------------------------
(Authorized Signature)
------------------------------------------------------
(Title)
------------------------------------------------------
(Name of Firm)
Dated: , 1998
-----------------
-7-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes. The tendered Old
Notes or any confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof and any other documents required by
this Letter of Transmittal must be received by the Exchange Agent at its address
set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date.
The method of delivery of the tendered Old Notes, this Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the Holder and, except as otherwise provided below, the delivery will be
deemed made only when actually received or confirmed by the Exchange Agent.
Instead of delivery by mail, it is recommended that the Holder use an overnight
or hand delivery service. In all cases, sufficient time should be allowed to
assure delivery to the Exchange Agent before the Expiration Date. No Letter of
Transmittal or Old Notes should be sent to the Issuer.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent
prior to the Expiration Date or (iii) who are unable to complete the procedure
for book-entry transfer on a timely basis, must tender their Old Notes according
to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to
such procedure: (i) such tender must be made by or through an Eligible
Institution (as hereinafter defined); (ii) prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
Holder of the Old Notes, the certificate number or numbers of such Old Notes and
the principal amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within five New York Stock Exchange trading
days after the Expiration Date, this Letter of Transmittal (or facsimile hereof)
together with the certificate(s) representing the Old Notes (or a Book-Entry
Confirmation) and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter of Transmittal (or facsimile hereof), as well as all other
documents required by this Letter of Transmittal and the certificates(s)
representing all tendered Old Notes (or a Book-Entry Confirmation) in proper
form for transfer, must be received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date, all as provided in the
Prospectus under the caption "The Exchange Offer-- Procedures for Tendering--
Registered Holders and DTC Participants." Any Holder of Old Notes who wishes to
tender his or her Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration
Date. Upon request of the Exchange Agent, a Notice of Guaranteed Delivery will
be sent to Holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Issuer in its sole discretion, which determination
will be final and binding. The Issuer reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Issuer's acceptance
of which would, in the opinion of counsel for the Issuer, be unlawful. The
Issuer also reserves the right to waive any irregularities or conditions of
tender as to particular Old Notes. The Issuer's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Issuer shall determine. Neither the Issuer, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes, nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to
-8-
<PAGE>
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders of Old Notes, unless
otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
2. Tender by Holder. Only a Holder of Old Notes may tender such Old Notes
in the Exchange Offer. Any beneficial Holder of Old Notes who is not the
registered Holder and who wishes to tender should arrange with the registered
Holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such Holder's name or obtain a properly completed note power from the
registered Holder.
3. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering Holder should fill in the principal amount
tendered in the third column of the box entitled "Description of Old Notes"
above. The entire principal amount of Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Old Notes is not tendered, then Old Notes for the
principal amount of Old Notes not tendered and a certificate or certificates
representing New Notes issued in exchange for any Old Notes accepted will be
sent to the Holder at his or her registered address, unless a different address
is provided in the appropriate box on this Letter of Transmittal, promptly after
the Old Notes are accepted for exchange.
4. Signatures on the Letter of Transmittal; Note Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal (or facsimile hereof) is
signed by the registered Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor is to be issued (or any
untendered principal amount of Old Notes is to be reissued) to the registered
Holder, the said Holder need not and should not endorse any tendered Old Notes,
nor provide a separate note power. In any other case, such Holder must either
properly endorse the Old Notes tendered or transmit a properly completed
separate note power with this Letter of Transmittal, with the signatures on the
endorsement or note power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate note powers, in each case
signed as the name of the registered Holder or Holders appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
note powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuer, evidence satisfactory to the Issuer of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on note powers required by this
Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a participant in a [Recognized Signature
Guarantee Medallion Program] (an "Eligible Institution"). Signatures on this
Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal
is signed by the registered Holder(s) of the Old Notes tendered herewith and
such Holder(s) have not completed the box set forth herein entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions," or
(b) if such Old Notes are tendered for the account of an Eligible Institution.
-9-
<PAGE>
5. Special Payment and Delivery Instructions. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
6. Transfer Taxes. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange 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 Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or on any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
7. Waiver of Conditions. The Issuer reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Old Notes tendered.
8. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
9. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at (651) 244-1215.
Holders may also contact their broker, dealer, commercial bank, trust company or
other nominee for assistance concerning the Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
------------------------------------------------
Certificate Old Notes Old Notes
Surrendered Tendered Accepted
------------------------------------------------
------------------------------------------------
------------------------------------------------
Delivery Prepared by Checked By Date
-10-
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
PROJECT ORANGE ASSOCIATES L.P. AND PROJECT ORANGE CAPITAL CORP.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Project Orange Associates L.P. and Project Orange Capital
Corp. (together, the "Issuer") made pursuant to the Prospectus, dated
______________, 2000 (the "Prospectus"), if certificates for Old Notes of the
Issuer 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 the Exchange Agent prior to 5:00 p.m., New York City time, on
the Expiration Date of the Exchange Offer. Such form may be delivered or
transmitted by telegram, telex, facsimile transmission, mail or hand delivery to
U.S. Bank Trust National Association (the "Exchange Agent") as set forth below.
In addition, in order to utilize the guaranteed delivery procedure to tender Old
Notes pursuant to the 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.
Deliver To:
U.S. Bank Trust National Association, Exchange Agent
By Registered or Certified Mail:
180 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Services, Specialized Finance
By Facsimile:
(651) 244-1537
Confirm by Telephone:
(651) 244-1215
By Hand or Overnight Courier:
180 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Services, Specialized Finance
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.
-11-
<PAGE>
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 Issuer
the principal amount at maturity of Old Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Procedures for
Tendering-Registered Holders and DTC Participants" section of the Prospectus.
By so tendering, the undersigned hereby does make, at and as of the date hereof,
the representations and warranties of a tendering Holder of Old Notes set forth
in the Letter of Transmittal.
<TABLE>
<S> <C>
Principal Amount of Old Notes Tendered: If Old Notes will be delivered by book-entry transfer to
$ Depository Trust Company, provide account number.
-------------------------------
Certificate Nos. (if available):
- --------------------------------
Total Principal Amount Represented by Old Notes
Certificate(s):
$
-------------------------------
Account Number
-------------------------------
</TABLE>
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X
------------------- --------
X
------------------- --------
Signatures of Owner(s) Date
or Authorized Signatory
Area Code and Telephone
Number:
----------
Must be signed by the Holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered Holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
-12-
<PAGE>
Please print name(s) and address(es)
Name(s):
----------------------------------------------------------------------
----------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
----------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------
--------------------------------------------------------------------
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an officer or correspondent in the
United States, hereby guarantees that the certificates representing the
principal amount of Old Notes tendered hereby in proper form or transfer, or
timely confirmation of the book-entry transfer of such Old Notes into the
Exchange Agent's account at Depository Trust Company pursuant to the procedures
set forth in "The Exchange Offer--Procedures for Tendering--Registered Holders
and DTC Participants" section of the Prospectus, together with a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with any required signature guarantee and any other documents
required by the Letter of Transmittal, will be received by the Exchange Agent at
the address set forth above, no later than five New York Stock Exchange trading
days after the date of execution hereof.
<TABLE>
<S> <C>
- ---------------------------------------------- --------------------------------------------------
Name of Firm Authorized Signature
- ---------------------------------------------- --------------------------------------------------
Address Title
Name:
- ---------------------------------------------- ---------------------------------------------
Zip Code (Please Type or Print)
Area Code and Tel. No. Dated:
------------------------ -------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
-13-
<PAGE>
EXHIBIT 10.1
POWER PUT AGREEMENT
This Power Put Agreement (this "Agreement") is entered into as of
September 19, 1986 and it replaces in its entirety that certain agreement,
between Project Orange Associates, L.P. ("Seller") and Niagara Mohawk Power
Corporation ("Buyer") (each a "Party", and collectively "the Parties"). The
Parties anticipate entering into one or more transactions that will be governed
by this Agreement.
W I T N E S S E T H:
WHEREAS, Seller and Buyer are parties to an agreement (the "Power Purchase
Agreement"), dated as of September 19, 1986 and amended April 7, 1989 and
August 20, 1996; and
WHEREAS, the Parties and several other independent power producers ("IPPs")
have entered into a Master Restructuring Agreement dated July 9, 1997 ("MRA")
pursuant to which the IPPs have agreed to amend, amend and restate or terminate
each of their existing power purchase agreements with Buyer pursuant to the
terms and conditions set forth in the MRA and in anticipation of the
introduction of competition in wholesale and retail electricity markets and the
restructuring of Buyer's electric operations; and
WHEREAS, the Parties wish to amend and restate their Power Purchase
Agreement so that, as of the Effective Date, as defined in the MRA, the Power
Purchase Agreement shall thereafter consist of this Agreement and the indexed
swap agreement (the "Indexed Swap") which the Parties will enter into, or have
entered into concurrently with this Agreement, pursuant to the MRA, and which
will become effective as of the Effective Date; and
Page -1-
<PAGE>
WHEREAS, Buyer owns certain interconnection facilities connected to
Seller's Plant which are operated and maintained in accordance with the
Interconnection Agreement between Buyer and Seller dated January 13, 1992; and
WHEREAS, Buyer and Seller desire to amend such Interconnection Agreement.
NOW, THEREFORE, in consideration of the mutual obligations and undertakings
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged the Parties hereto agree as
follows:
I. Amendment and Restatement, Effective Date and Term
1.1 As of the Effective Date, the Power Purchase Agreement shall be
amended and restated in its entirety so that such agreement shall consist, on
and after the Effective Date, of this Agreement and the Indexed Swap.
1.2 Notwithstanding the foregoing, except to the extent specifically
amended, waived or otherwise addressed herein, the rights and obligations of the
Parties which accrue and have accrued under the Power Purchase Agreement prior
to the Effective Date shall be enforceable and shall be performed in accordance
with the Power Purchase Agreement without regard to the amendment and
restatement thereof as set forth herein and in the Indexed Swap.
1.3 The Agreement shall take effect as the Effective Date. The
effectiveness of the provisions in respect of the put option in Section III
below shall expire at the end of the Proxy-Market Price Period, but in no event
later than at the end of ten (10) Contract Years. The effectiveness of all other
provisions of this Agreement shall expire at the end of ten (10) Contract Years,
unless otherwise provided below.
Page -2-
<PAGE>
II. Representations
Each Party represents to the other Party that (i) it is duly organized and
validly existing under the laws of the jurisdiction of its organization or
incorporation and, if relevant under such laws, in good standing; (ii) it has
the power to execute this Agreement and any other documentation relating to this
Agreement to which it is a party, to deliver this Agreement and any other
documentation relating to this Agreement that is required by this Agreement, to
deliver and to perform its obligations under this Agreement and has taken all
necessary actions to authorize such execution, delivery and performance; (iii)
such execution, delivery and performance do not violate or conflict with any law
applicable to it, any provision of its constitutional documents, any order or
judgment of any court or other agency or government applicable to it or any of
its assets or any contractual restriction binding on or affecting it or any of
it assets; (iv) all governmental and other consents that are required to have
been obtained by it with respect to this Agreement have been obtained and are in
full force and effect and all conditions of any such consents have been complied
with; and (v) its obligations under this Agreement constitute its legal, valid
and binding obligations, enforceable in accordance with their respective terms
(subject to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or law)).
III. Power Put Option
3.1 Power Put Quantity and Pricing. At the option of Seller, Seller shall
have the right to put (i) energy to Buyer up to the specified contract quantity
of electricity set forth in
Page -3-
<PAGE>
Attachment A (including energy subject to the Overgeneration Amount), and (ii)
capacity, which is subject to both seasonal variation and degradation associated
with the contract quantity of electricity, in each case, for each Interval
during the immediately succeeding Settlement Period, and Buyer shall be
obligated to take and pay for such energy and capacity from Seller at the Proxy-
Market Price or the Market Price and, if applicable, the Market Capacity Price,
as the case may be. Energy and associated capacity in excess of the Interval
Quantity shall not be subject to this Agreement and, at the option of Seller,
may be sold to third parties without an obligation to offer such energy and
capacity to Buyer.
3.2 Energy and Capacity Subject to Put Options. The right of Seller to put
energy and capacity to Buyer hereunder shall be limited to energy and associated
capacity of Seller's Plant, subject to Seller's rights to assign this Agreement
pursuant to the assignment provisions contained herein. Seller shall not object
to Buyer's inclusion of all capacity associated with the contract quantity of
electricity pursuant to the terms hereof as capacity available to Buyer for
regulatory purposes.
3.3 Notice of Put Exercise and Length of Exercise Period. Seller shall
have the right to put energy and capacity to Buyer for periods ranging for a
minimum period of time of one hour to a maximum period of one month. On or prior
to 12:00 p.m. noon of the business day two days prior to the first day of the
month, Seller shall provide to Buyer a dynamic schedule showing, on an hour-by-
hour basis, the projected deliveries of energy and capacity to Buyer for the
following calendar month. Seller shall have the right to update such dynamic
schedule on an hourly basis by providing notice of the change, in writing or
through electronic telecommunications, no less than thirty minutes prior to the
start of the hour in which the change
Page -4-
<PAGE>
to the schedule is to be effected.
3.4 Payment Notices and Payment Dates. After netting the amounts owing
pursuant to the payment provisions of this section, Seller shall provide Buyer
with a Notice of any payment due for energy and/or capacity put to Buyer during
each Settlement Period on or before the 5th business day of the following
calendar month, unless Seller and Buyer agree otherwise. Payments set forth in a
Notice shall be due on the associated Payment Date. The Buyer and Seller agree
that the Notice may at times include estimated electricity prices or quantities
as applicable to the Settlement Period. Buyer agrees to make payment to Seller
based upon these estimated amounts on the Payment Date. However as soon as
practicable, Seller will provide Buyer with a revised Notice that contains the
actual electricity prices and quantities for the applicable Settlement Period.
The Buyer or Seller, as the case may be, shall remit any payment or credit due
under the revised Notice on the next Payment Date. Interest shall not be applied
to such adjustments.
3.5 Payment Disputes. If either Party, in good faith, disputes any part of
any Notice of a payment obligation, that Party shall provide a written
explanation of the basis for such dispute and the undisputed portion of the net
payment obligations set forth in such Notice shall be paid by the party
obligated to pay such amounts no later than the applicable Payment Date. Any
adjustment under this Section shall bear interest at the prime rate for U.S.
currency as published from time to time under "Money Rates" in The Wall Street
Journal, from and including the Payment Date any such underpayment or
overpayment was originally due but excluding the date on which such underpayment
or overpayment is finally settled by the Parties hereto, or in the event the
Parties hereto are unable to settle such matter, such matter shall be
Page -5-
<PAGE>
settled by an independent nationally recognized public accounting firm mutually
selected by the Parties whose determination shall be final and binding on the
Parties hereto and whose fees and expenses shall be borne by the Party found to
be at substantial fault by such independent nationally recognized public
accounting firm. If the independent public accounting firm finds that there is
no substantial fault on the part of either Party, each Party shall be
responsible for it own fees and expenses. No Notice (or payment obligation
thereunder) shall be subject to this Section unless a notice of dispute is given
with respect thereto within one year of the Payment Date applicable to such
Notice.
3.6 Buyer's Right of First Refusal. If Seller determines not to
exercise its rights to put energy and capacity to Buyer, Seller may sell any
energy or capacity associated with the Interval Quantity or the contract
quantity of electricity set forth in Attachment A to third parties, provided
Seller has first offered to sell energy and capacity to Buyer at the Proxy
Market Price or Market Price, whichever is applicable, and the Market Capacity
Price, if applicable, and Buyer has declined the opportunity to purchase such
energy and capacity.
With respect each possible sale, Seller shall provide Buyer with notice of
Seller's intention to sell energy and/or capacity to one or more third parties.
Such notice shall specify the quantity of energy and/or capacity and the
delivery point on Buyer's transmission or distribution system, if applicable.
Such notice shall be given as far in advance of the time of the anticipated sale
as is reasonable in the circumstances.
After receiving Seller's notice, Buyer shall advise Seller as promptly as
is reasonable in the circumstances whether Buyer wishes to purchase such energy
and capacity.
Seller and Buyer acknowledge that their views of what notice is
"reasonable in the
Page -6-
<PAGE>
circumstances" may change from time to time. Also, notification for sale of
energy and/or capacity to a third party shall be completed within the FERC
approved notification period for market participants to submit day-ahead bids to
the New York Independent System Operator. Accordingly, each agrees to discuss
and make reasonable revisions to notice periods whenever requested by the other.
Until the parties agree otherwise, the following notice periods shall
apply to sales of the indicated durations:
(a) for energy and/or capacity sales for one hour up to and including one
week - Seller shall notify Buyer of such request, by 9:00 a.m. two
business days prior to the start of the energy and/or capacity sale
and Buyer shall respond no later than four hours from such request;
(b) for energy and/or capacity sales for more than one week up to and
including one month - Seller shall notify Buyer of such request, by
9:00 a.m. three business days prior to the start of the energy and/or
capacity sale and Buyer shall respond no later than one business day
from such request;
(c) for energy and/or capacity sales for more than one month up to and
including twelve months - Seller shall notify Buyer of such request,
by 9:00 a.m. five business days prior to the start of the energy
and/or capacity sale and Buyer shall respond no later than three
business days from such request; and
(d) for energy and/or capacity sales for more than twelve months -Seller
shall notify Buyer of such request, by 9:00 a.m. seven business days
prior to the start of the energy and/or capacity sale and Buyer shall
respond no later than five business
Page -7-
<PAGE>
days from such request.
All notifications by Seller and responses by Buyer described herein shall
be made during normal business hours (8:00 a.m. to 5:00 p.m.). In the event that
Buyer fails to respond to Seller's request within the specified time period,
Buyer shall be deemed to have waived its rights to such energy and/or capacity
and Seller shall have the right to proceed with the sale of such energy and/or
capacity to a third party.
IV. Required Payments for Changes in Costs
4.1 Required Netting Payments for Cost Changes. On each Payment Date,
Buyer shall be obligated to pay to Seller (to the extent that such number is
positive) and Seller shall be obligated to pay Buyer (to the extent that such
number is negative and in such case the absolute value of such number) (x) the
difference between (A) any increase as compared to the costs under Seller's
contractual arrangements with Buyer as of January 1, 1997 during the associated
Settlement Period in (i) Buyer's local distribution system gas transportation
and fixed and variable charges and retainages actually incurred by Seller, and
(ii) electrical interconnection, costs and costs associated with industry
reliability standards actually incurred by Seller (including any increase in
cost related to Seller's compliance with Niagara Mohawk's Electric System
Bulletin #756 dated December, 1997), and (B) any decreases as compared to the
costs under Seller's contractual arrangements with Buyer as of January 1, 1997
during the associated Settlement Period in those costs listed in (i) and (ii)
above, and (y) any increase as compared to the costs under Seller's contractual
arrangements with Buyer as of January 1, 1997 during the associated Settlement
Period in costs incurred by Seller caused by changes in federal, state or local
laws, rules or regulations; provided that this clause (y) shall only be
effective during the
Page -8-
<PAGE>
Proxy-Market Price Period and any periods thereafter during which like
adjustments in costs are also recovered by any entity that owns any of Buyer's
non-nuclear generating assets.
4.2 Certain Other Cost Additions. On each Payment Date, Buyer shall be
obligated to pay to Seller any increase as compared to the costs under Seller's
contractual arrangements with Buyer as of January 1, 1997 in electrical
transmission costs or access or other charges, which are actually incurred by
Seller during the preceding calendar month while physically delivering
electricity to (x) Buyer during the Proxy-Market Price Period or (y) an ISO/PE
following the Proxy-Market Price Period; provided that this clause (y) shall
only be effective during the periods when like increases in costs or charges are
then also incurred by any entity that owns any of Buyer's non-nuclear generating
assets.
4.3 Reactive Power, Voltage Support Services and Line-Loss Charges. Buyer
and Seller acknowledge that the contract prices under this Agreement do not
include charges for reactive power, voltage support services or line-losses. In
the event that Buyer's tariffs require Seller to pay Buyer for reactive power or
line-losses during periods when the Seller's generating facilities are
generating electricity, then Seller shall be entitled to reimbursement by Buyer
in an amount equal to all reactive power charges and/or line-loss charges or
costs actually incurred by Seller during the associated Settlement Period. In
addition, in the event (i) under any ISO tariff, Seller is required to provide
voltage support services, as defined by such ISO tariff, Buyer shall pay to
Seller on each Settlement Date any and all voltage support service payments made
by the ISO to Buyer in the associated Settlement Period which are attributable
to the voltage support services provided by Seller, and (ii) the ISO charges
Seller for any line-losses, then Seller shall be entitled to reimbursement by
Buyer in an amount equal to all such line-loss charges incurred
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by Seller during the associated Settlement Period.
4.4 Payment Notices and Payment Dates. After netting the amounts owing
pursuant to the payment provisions of this section, Seller shall provide Buyer
with a Notice of any payment due for energy and/or capacity put to Buyer during
each Settlement Period on or before the 5th business day of the following
calendar month, unless Seller and Buyer agree otherwise. Payments set forth in a
Notice shall be due on the associated Payment Date. The Buyer and Seller agree
that the Notice may at times include estimated electricity prices or quantities
as applicable to the Settlement Period. Buyer agrees to make payment to Seller
based upon these estimated amounts on the Payment Date. However as soon as
practicable, Seller will provide Buyer with a revised Notice that contains the
actual electricity prices and quantities for the applicable Settlement Period.
The Buyer or Seller, as the case may be, shall remit any payment or credit due
under the revised Notice on the next Payment Date. Interest shall not be applied
to such adjustments.
4.5 Payment Disputes. If either Party, in good faith, disputes any part of
any Notice of a payment obligation, that Party shall provide a written
explanation of the basis for such dispute and the undisputed portion of the net
payment obligations set forth in such Notice shall be paid by the Party
obligated to pay such amounts no later than the applicable Payment Date. Any
adjustment under this Section shall bear interest at the prime rate for U.S.
currency as published from time to time under "Money Rates" in The Wall Street
Journal, from and including the Payment Date any such underpayment or
overpayment was originally due but excluding the date on which such underpayment
or overpayment is finally settled by the Parties hereto, or in the event the
Parties hereto are unable to settle such matter, such matter shall be
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settled by an independent nationally recognized public accounting firm mutually
selected by the Parties whose determination shall be final and binding on the
Parties hereto and whose fees and expenses shall be borne by the Party found to
be at substantial fault by such independent public accounting firm. If the
independent public accounting firm finds that there is no substantial fault on
the part of either Party, each Party shall be responsible for it own fees and
expenses. No Notice (or payment obligation thereunder) shall be subject to this
Section unless a notice of dispute is given with respect thereto within one year
of the Payment Date applicable to such Notice.
V. Delivery of Electricity
Seller shall deliver the electricity to the system of Buyer at
approximately 115,000 volts, 60 Hertz and 3 Phase. The installation of the
electrical connections and the operation of the Plant must meet or exceed the
requirements of Niagara Mohawk's Electric System Bulletin #756 (including
Appendix C), dated December, 1997 including the exceptions and clarifications
included in Attachment B of this Agreement, or, if applicable, the standards of
the ISO/PE. A copy of Niagara Mohawk's Electric System Bulletin #756 (including
Appendix C), dated December, 1997 is incorporated herein by reference. Seller
shall deliver electricity to the Delivery Point.
Buyer's acceptance of and obligation to pay for electricity produced by
Seller may from time to time be suspended for any periods of time during which,
for reasons of necessary maintenance, repair, system emergency, safety or
similar actions, Buyer's transmission system is temporarily physically unable to
accept such electricity. Buyer shall give reasonable notice
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under the circumstances of the need for such disconnecting to Seller, upon
receipt of which Seller shall carry out the required action without delay.
During any such period of suspension, Buyer shall use its best efforts to
restore Buyer's capability to accept delivery of electricity as promptly as
possible. Buyer will use its best efforts to schedule any planned outages upon
consultation with Seller and commensurate with Seller's schedule for planned
maintenance or other outages. Buyer shall bear any costs incurred by it in
connection with any such disconnection or reconnection. All deliveries of power
which are subject to any such suspension may be rescheduled at the option of the
Seller. Seller shall have the right to shut down the operation of the Plant for
any reason and for any period whatsoever upon reasonable notice to Buyer.
VI. Coordinated Maintenance
Seller shall have the right to shut down the operation of the Plant or to
temporarily disconnect it from Buyer's system whenever and for such periods of
time as may be necessary for maintenance, safety, or emergency reasons. Seller
shall bear its own cost of disconnection and reconnection. Annually, Seller
shall provide Buyer with a five year schedule detailing the projected
maintenance requirements of Seller's Plant, including the number and duration of
planned outages. At least three (3) months before the end of the annual period
preceding the annual period to be scheduled, Seller shall provide Buyer with
Seller's planned maintenance schedule. Prior to the final week before the
planned maintenance, Seller may make changes to the planned maintenance schedule
for its Plant upon advance written notice to Buyer. Buyer shall have the right
to require seller to move the planned maintenance date for Seller's Plant to a
date not earlier than nor later than one (1) day from the scheduled date
provided (i) it is
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reasonably possible for Seller to arrange such rescheduling, (ii) Buyer
reimburses Seller for any costs (including any applicable penalties) of
rescheduling the planned maintenance date, (iii) such rescheduling will not
cause Seller to violate any applicable equipment warranties, and (iv) all
deliveries of electricity which are affected by such changes can be rescheduled
at the option, if Seller so requires. Notwithstanding the foregoing, Seller may
perform maintenance, whether planned or unplanned, at any time the Seller is not
putting electricity to Buyer under this Agreement.
VII. Metering
Electricity delivered by Seller hereunder shall be measured by electric
watthour meters of a type approved by the Commission. The meters shall be
located in Seller's Plant. These metering facilities will be installed, owned
and maintained by Buyer and shall be sealed by Buyer, with the seal broken only
upon occasion when the meters are to be inspected, tested or adjusted and
representatives of both Buyer and Seller are present. The meter and installation
costs shall be borne by Seller. The meters shall be maintained in accordance
with the rules set forth in 16 NYCRR Part 92. Buyer will guarantee the
installation of any meter and its accuracy for a period of one year from the
date that said meter is installed. Any repair or replacement required during the
initial year for any such meter will be at the expense of Buyer. In the event
that any meter is found to be inaccurate after the initial year, Buyer will
repair or replace the same as soon as possible at the expense of Seller. Each
Party shall have the right at all reasonable times; upon giving not less than
five (5) days notice to the other Party for the purpose of permitting the other
Party to be present at the inspection, to inspect, and test said meters and, if
found defective, Buyer shall adjust, repair or replace the same at the expense
of Seller. Any
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test or inspection requested by a Party shall be at the expense of that Party.
Seller shall have the right, but not the obligation, to read all meters
installed and maintained pursuant to this Section. Buyer agrees to make
available to Seller, at no additional cost, all information of the kind which is
available to the Buyer as of the Consummation Date and which is captured by the
Buyer's meter including, but not limited to, reactive power and voltage support
services. Upon written request, Buyer shall provide Seller's operating personnel
with appropriate written instructions and training to enable such personnel to
read the meters.
If a meter fails to register, or if the measurement made by a meter is
found to be inaccurate by more than the limits defined in 16 NYCRR Part 92, then
an adjustment shall be made correcting all measurements made by the inaccurate
or defective meter for (a) the actual period during which inaccurate
measurements were made, if that period can be determined to the satisfaction of
the Parties; or (b) if the actual period cannot be determined to the mutual
satisfaction of the Parties, one-half of the period from the date of the last
previous test of the meter. To the extent that the adjustment period covers a
period of deliveries for which payment has already been made by Buyer, a payment
corresponding to the adjustment for that period shall be made by the Party
against whom the adjustment runs, to the other Party, not later than the twenty-
fifth (25) day of the month following the month in which the paying Party
receives notice from the other Party that such a payment is due. Seller may
elect to install its own metering equipment in addition to Buyer's metering
equipment. Such metering equipment shall meet the requirements of 16 NYCRR Part
92. Should any metering equipment installed by Buyer fail to register during the
term of this Agreement, the Parties shall use Seller's metering equipment, if
installed, to determine the amount of electricity delivered to Buyer. On a day
or days on which
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neither Buyer's nor Seller's metering equipment is in service, the quantity of
electricity delivered shall be determined in such manner as the Parties shall
agree.
VIII. Maintenance of Interconnection
Seller shall install, own and maintain the portion of its interconnection
with Buyer's transmission system that includes the generator output leads, the
generator step-up transformer and the 115 kV tap, together with associated
equipment. The 115 kV tap line from the dead-end tower to Buyer's 115 kV
transmission system will be owned and maintained by Buyer. The Interconnection
Agreement between Buyer and Seller dated January 13, 1992 shall remain in full
force and affect except that it shall extend to, and terminate at the end of
this Agreement.
IX. Force Majeure
In the event either Party hereto is rendered unable, wholly or in part,
by Force Majeure to carry out its obligations under the Agreement, other than
the obligation to make payments of amounts due hereunder, it is agreed that upon
notice, with reasonably full particulars of such Force Majeure given by such
Party to the other Party in writing within a reasonable time frame after the
occurrence of the cause relied upon, then the obligation or obligations
hereunder of the party giving such notice, so far as they are affected by such
Force Majeure, shall be suspended during the continuance of an inability so
caused. Such cause shall, as far as possible, be remedied with all reasonable
dispatch. All deliveries of power which are subject to any such Force Majeure
event may be rescheduled by Seller, at Sellers option, upon a mutually agreeable
schedule.
X. Relocation of Power Lines
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10.1 In the event it becomes necessary for Buyer to relocate or
rearrange its transmission system to which Seller is connected, Buyer shall
advise Seller at least one year in advance in writing. If such relocation or
rearrangement is ordered or required by a Governmental Authority, Buyer shall
give prior written notice to Seller equal in time to the notice given to Buyer
by such Governmental Authority. Buyer shall consult with Seller on the new
facilities that Buyer shall propose to reestablish the connection. Such new
facilities shall be reasonably satisfactory to Seller and, at a minimum, shall
provide Seller with at least as much output capacity as with the prior
connection facilities. Buyer shall bear the full cost and expense of
reestablishing the connection to the Seller. Buyer shall use its best efforts to
minimize the duration of any disruption to Seller's service during the
relocation or rearrangement of Buyer's transmission facilities. Not withstanding
anything to the contrary contained herein, the provisions of this Section 10.1
shall not apply to the abandonment of power lines.
10.2 In the event that Buyer determines it is necessary to retire or
abandon its transmission system to which Seller's Plant is connected, Buyer
shall advise Seller, at least one year in advance, in writing, indicating
Buyer's annual cost of the transmission facilities dedicated exclusively to
accommodate the output of the Plant. Seller shall then have the option of paying
Buyer for these annual costs or of providing alternate interconnection to
Buyer's transmission system. Such alternate interconnection may be the purchase
by Seller of Buyer's existing 115 kV facilities at the depreciated book cost or
salvage value, whichever is lower, but not less than zero. In the event Seller
elects to pay Buyer the annual charges associated with these facilities, said
charges shall be recomputed as of January 1 of every year.
XI. Qualifying Facility Monitoring and Status
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11.1 Buyer shall have no contractual right and shall waive any other right
which it might have under state or federal law to demand information from
Seller, or any other person, including but not limited to any Governmental
Authority, with respect to such Seller's status as a qualifying facility ("QF
Status") under state and/or federal law.
11.2 Seller shall have the right, but not the obligation, in its sole
discretion to obtain and/or maintain its QF Status. Buyer's rights and
obligations, including without limitation its obligation to pay for electricity
produced by Seller as set forth hereunder, shall continue as a matter of
contractual right regardless of whether the Seller maintains its QF Status. Any
failure by Seller to comply with the requirements applicable to QF Status under
New York law (including compliance with NYPSL (S) 2(2-a)) shall have no adverse
impact on Seller under this Agreement. In the event Seller wishes to qualify or
perform as an Exempt Wholesale Generator under Section 32 of PUHCA and FERC's
regulations promulgated thereunder, as the same may be amended, modified or
restated from time to time, Buyer shall cooperate with (including, without
limitation, by providing consents and affidavits), and shall not take any action
to oppose, impede or subvert, Seller's efforts to obtain appropriate regulatory
exemptions and approvals, including market-based rate approval. Except to the
extent that the contract prices under this Agreement are or may be based
thereon, during the term of the Agreement, Seller (i) shall waive any statutory
right it may have under Section 66-c of NYPSL pursuant to which Seller may
demand a 6c per kWh minimum power purchase rate from Buyer, and (ii) shall
waive, for itself and for the successors and assigns of its Plant with respect
to such Plant, any statutory right it may have under PURPA or NYPSL to require
Buyer to enter into a power purchase contract or otherwise take the output of
Seller's Plant; provided, however, that until the end of the Proxy-
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Market Price Period Buyer agrees, at Seller's request, to act as agent for
Seller (or, if necessary to effectuate such sales to the New York Power Pool, by
purchase and resale of Seller's capacity and/or energy, at no cost to Buyer) for
the sale on up to a monthly basis, of the Seller's Plant capacity and energy to
the New York Power Pool or any third party, in each case on a nondiscriminatory
basis with respect to Buyer's or any third party's capacity and energy, at no
cost to the Seller. Buyer agrees to use its Reasonable Best Efforts to effect
such sales on the most favorable terms, including price, to the Seller giving
consideration to the quantity, term, and market conditions prevailing at the
time of sale. Nothing contained herein shall be construed to constitute a waiver
by the Seller of any other rights it may have under PURPA, NYPSL, or applicable
law, including rights with respect to back-up services, interconnection,
reactive power or other similar rights, whether or not a contract is required or
desirable.
XII. Indemnification
Each Party hereto respectively assumes full responsibility in connection
with the electricity supplied hereunder on its side of the Delivery Point and
for the wires, apparatus, devices and appurtenances used in connection
therewith. Each Party shall indemnify, save harmless and defend the other
against all claims, demands, cost or expense for loss, damage or injury to
person or persons or property in any manner directly or indirectly arising from,
connected with or growing out of the generation, transmission or use of energy
by it on its side of the Delivery Point or for the operation of switching
equipment in connection with said delivery; provided, however, that each Party
shall be liable for all claims of the Party's own employees arising out of any
provision of the Workers' Compensation Law. Each Party shall maintain or cause
to be maintained Workers' Compensation and Employees' Liability Insurance
covering
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their respective employees as required by law.
XIII. ASSIGNMENT
13.1 Assignment by Seller. Upon notice to Buyer, Seller may assign or
transfer the Agreement in whole or in part, without the consent of Buyer, (a) as
collateral security for purposes of securing indebtedness, or (b) to any
approved assigned or transferee (an "Approved Assignee"). An Approved Assignee
shall be (i) any person who (x) (A) acquires Seller's Plant, or (B) has a plant
with technical capability that is equal to or greater than the technical
capability of the Seller's plant, and (y) has (A) a long-term unsecured debt
credit rating of no less than investment grade issued by Moody's or S&P or the
equivalent of such rating from another nationally recognized rating agency, or
(B) a net worth calculated in accordance with generally accepted accounting
principles ("Net Worth"), that is equal to or greater than the Net Worth of the
entity making such assignment or transfer on the date of such assignment or
transfer, provided that evidence of such qualifying Net Worth is reasonably
demonstrated to Buyer; or (ii) any Affiliate of Seller; provided (x) such
Affiliate has a long-term unsecured debt credit rating of no less than
investment grade issued by Moody's or S&P or the equivalent of such rating from
another nationally recognized rating agency, (y) such Affiliate has a Net Worth
that is equal to or greater than the Net Worth of the entity making such
assignment or transfer on the date of such assignment or transfer, or (z) Seller
unconditionally guarantees, pursuant to a guarantee in form and substance
reasonably satisfactory to Buyer, the obligations of such Affiliate in
connection with such assignment or transfer. Seller may split and assign the
quantities of electricity and Intervals to Approved Assignees, each in respect
of a lesser quantity and/or Intervals that the full
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amounts thereof hereunder, provided that (a) each such assignment is for 50,000
MWh of electricity per year or any integral multiples thereof and to the extent
that the remaining unassigned balance of the quantity of electricity hereunder
for any such year is less than 50,000 MWh, then for such remaining balance, (b)
each such assignment is for a period of at least one year, and (c) the sum of
all assigned and retained quantities of electricity and Intervals does not
exceed the total quantities of electricity and Intervals hereunder. At the
request of Seller during the individual negotiations and during the term of the
Agreement, Buyer and Seller shall use their Reasonable Best Efforts to mutually
agree upon reasonable alternatives to the assignment qualification contained in
the immediately preceding sentence. Except to the extent expressly provided in
any applicable guarantee, upon any such assignment or transfer, Seller shall be
released and have no further obligations to Buyer hereunder with respect to the
assigned or transferred quantities and/or Intervals.
13.2 Assignment by Buyer. Buyer shall not assign its rights and
obligations hereunder except as expressly authorized under this Section.
(a) Niagara Restructuring. In the event that Buyer restructures its
---------------------
corporate structure or assets, including by creating any new entities that hold
significant assets, whether in connection with the Niagara Restructuring or
otherwise, upon notice to Seller (or its assignee hereunder) the Agreement will
be assigned to and assumed by the entity or entities owning all or substantially
all of Buyer's electric transmission and distribution assets or, if separated
from Buyer's electric transmission assets pursuant to such a restructuring
Buyer's electric distribution assets, provided that, upon the effective date of
the restructuring (i) such assignee's performance under this Agreement is
unconditionally guaranteed, pursuant to a guarantee in form and
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substance reasonably satisfactory to Seller (or its assignee hereunder), by each
of the other entities arising out of the restructuring, including any entity
spun-off to Buyer's shareholders or any Affiliate of Buyer holding significant
assets that were held by Buyer prior (or any subsidiary of Buyer) to the
restructuring, unless such assignee has a long-term unsecured debt credit rating
issued by Moody's, S&P or another nationally recognized rating agency that is at
least as favorable as Buyer's long-term unsecured debt credit rating immediately
prior to the effective date of the restructuring, and (ii) if such assignee is
not the entity which will collect from customers the Competitive Transaction
Charge approved by the Commission pursuant to the Commission Approval, such
assignee's performance under this Agreement is unconditionally guaranteed,
pursuant to a guarantee in form and substance reasonably satisfactory to Seller
(or its assignee hereunder), by each of the entities which will collect from
customers the Competitive Transaction Charge provided by the Commission pursuant
to the Commission Approval.
(b) Third Party Assignment. Upon notice to Seller (or its assignee
----------------------
hereunder), Buyer may assign its rights and obligations under this Agreement to
any third party ("Buyer Assignee") (except those parties referenced in Section
13.2(a) above) provided that the Buyer Assignee has (i) received a long-term
unsecured debt credit rating by Moody's or S&P of at least investment grade or
the equivalent of such rating from another nationally recognized rating agency,
as of the date of consummation of the assignment; or (ii) furnished Seller with
such collateral security as may be reasonably acceptable to Seller in order to
limit Seller's credit risk in connection with such assignment.
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XIV. Further Assurances
Subject to the terms and conditions contained herein, upon the request
from time to time of either Party hereto, the other Party shall promptly execute
and deliver or use its Reasonable Best Efforts to cause to be executed and
delivered, such consents, approvals and other instruments, including, without
limitation, assignments of the Agreement as collateral, estoppel certificates
and utility certificates, in form and substance reasonably satisfactory to both
Parties and their respective counsel to implement any financing or other
material business transaction undertaken by the requesting Party.
XV. Curtailment
Buyer agrees that its obligation to accept and pay for electricity as
provided herein shall in no event be subject to any curtailment of electricity
under the provisions of 18 C.F.R. (S) 292.304(f) (1997), or any subsequent or
similar rule or regulation adopted by the PSC or the FERC, or any rule or order
of the PSC, the FERC, or any other Governmental Authority interpreting or
applying those provisions or authorizing Buyer to reserve any rights under those
provisions.
XVI. Wheeling
Seller shall have the right to have Buyer wheel some or all of the output
of its Plant to third parties pursuant to applicable law, or Buyer's, or other
companies', duly filed transmission and distribution tariffs or schedules.
XVII. Certain Amendments
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In the event that Buyer restructures its corporate structure or assets,
including by creating any new entities that hold significant assets, whether in
connection with the Niagara Restructuring or otherwise, Seller (or its assignee
hereunder) shall have the right to replace the Agreement, as applicable, with
power purchase and/or hedging contractual arrangements substantially equivalent
to those that are entered into between the entity(ies) holding the transmission
and/or distribution assets of Buyer or which will collect from customers the
Competitive Transition Charge approved by the Commission pursuant to the
Commission Approval and the entity(ies) holding the non-nuclear generating
assets of Buyer, whether or not such assets are spun-off to Buyer's shareholders
(a "Genco Contract"), provided that the term, price and quantity under the
Agreement shall not be altered thereby, unless any of such terms are materially
and expressly conditioned by certain provisions in the Genco Contract, in which
case appropriate and equitable adjustments in such terms shall be mutually
agreed upon by Buyer or its assignee, as the case may be, and Seller.
XVIII. Persons Bound and Benefited
This Agreement shall bind and benefit assigns and other successors of the
Parties.
XIX. Waivers
No failure on the part of a Party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof. No waiver by
a Party of any right hereunder with respect to any matter or default arising in
connection with this Agreement shall be considered a waiver with respect to any
subsequent matter or default.
XX. Governing Law
This Agreement shall be governed by the substantive law of New York,
irrespective of
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conflicts of law rules.
XXI. Execution in Counterparts.
This Agreement may be executed by the Parties in separate counterparts,
each of which shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
XXII. Headings.
Section headings in this Agreement are included herein for convenience of
references only and shall not constitute a part of this Agreement for any other
purpose.
XXIII. Notices.
All written notifications pursuant to this Agreement shall be in writing
and shall be personally delivered or mailed by certified or registered first
class mail, return receipt requested, as follows:
To Buyer: To Seller:
Niagara Mohawk Power Corporation Project Orange Associates, L.P.
Director Energy Transactions c/o GPU International, Inc.
300 Erie Boulevard West One Upper Pond Road
Syracuse, New York 13202 Parsippany, NJ 07054
315-428-3159 (phone) Attn: President
315-460-2660 (fax)
Either Party may change its address for notices by notice to the other in the
manner provided above.
XXIV. Entire Agreement
This Agreement constitutes the entire agreement between the Parties with
respect to the
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subject matter hereof, and supersedes all prior agreements and understandings,
written or oral, between the Parties with respect thereto.
XXV. Definitions
As used in this Agreement:
"Affiliate" means, with respect to any Party to this Agreement, any person or
entity which controls, is controlled by, or is under the common control with,
such Party, wherein the term "control" shall mean the power to direct the
management and policies by or of such Party through the ownership of voting
securities, by contract or otherwise.
"Commission" means the New York State Public Service Commission.
"Commission Approval" means a final Commission order setting forth the findings,
authorizations and approvals set forth in Schedule 6.6C of the Master
Restructuring Agreement.
"Competitive Transition Charge" means a charge, however designated, for the
recovery of strandable costs.
"Consummation Date" has the meaning set forth in Section 10.2 of the Master
Restructuring Agreement.
"Contract Quantity" means the amount of electricity (expressed in megawatt
hours) as set forth in Attachment A under the heading Contract Quantity for the
applicable month and which may be adjusted in accordance with Section 3.1, and
shall be subject to the Interval Cap.
"Contract Year" means the period commencing at 11:59:59 p.m. on the Consummation
Date and ending at 11:59:59 p.m. on the first anniversary of the last day of the
month in which the Consummation Date occurs and each successive 12-month period
thereafter to the extent applicable.
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"Delivery Point" means (a) with respect to electricity delivered from the Plant,
the receiving point as set forth in the Interconnection Agreement dated January
13, 1992; and (b) with respect to electricity delivered thereunder from any
other source, any other interconnection on Buyer's transmission system, subject
to Buyer's concurrence which shall not be unreasonably withheld.
"Effective Date" means 11:59:59 p.m. on the Consummation Date.
"FERC" means the Federal Energy Regulatory Commission.
"Force Majeure" as used herein means acts of God, strikes, lockouts, act of
public enemies, wars, blockades, insurrections, riots, epidemics, landslides,
lightning, system emergencies, earthquakes, fires, storms, floods, washouts,
arrests, explosions, force majeure gas supplier interruptions, breakage or
accident to machinery, equipment or transmission or distribution lines or gas
pipelines; provided that the term Force Majeure does not mean or include any
cause which by the exercise of reasonable diligence of the party claiming
suspension could be overcome.
"Governmental Authority" means any federal, state, municipal or local
governmental authority, department, commission, board, agency, body or official,
whether executive, legislative, administrative, regulatory or judicial,
including but not limited to the FERC and the Commission.
"Interval" means 1 hour or such other period of time as Buyer and Seller shall
mutually agree upon, provided that such mutually agreed upon time period may
only be modified upon the prior written consent of Buyer and Seller.
"Interval Quantity" shall mean the amount of electricity scheduled for delivery
to Buyer during each Interval in accordance with Section 3.3 hereof and subject
to Attachment A.
"ISO/PE" means a New York Independent System Operator and Power Exchange.
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"Market Capacity Price" Shall equal zero (i) prior to the ISO/PE Establishment
Date (as defined below) and (ii) thereafter at any time when no separate market
for capacity exists. Commencing on the first day of the month following the
calendar month in which the ISO/PE Establishment Date occurs and only if there
then exists a separate market for capacity, the Market Capacity Price shall mean
the market price paid to sellers for capacity, at the region in which the
Delivery Point is located, established by the ISO/PE capacity auction; provided,
however, that at such time the parties shall conduct good faith negotiations and
diligently endeavor to mutually determine whether to continue the pricing
referred to in clause (i) of the definition of Proxy-Market Price for a mutually
agreed upon additional period of time. Following the Proxy-Market Price Period
and only if there then exists a separate market for capacity, the parties shall
conduct good faith negotiations and diligently endeavor to adjust the applicable
capacity on a basis consistent with the structure of such separate market.
"Market Price" means commencing on the first day of the month following the
calendar month in which the ISO/PE is established, the day ahead locational
based market price (ALBMP") paid to sellers for energy, at the region in which
Delivery Point is located, specified and published by the ISO/PE; provided,
however, that at such time the Parties shall conduct good faith negotiations and
use their Reasonable Best Efforts to mutually determine whether to continue the
pricing referred to in clause (i) of the definition of Proxy-Market Price for a
mutually agreed upon additional period of time.
"Moodys" means Moody's Investor Services.
"Notice" means a notice of payment due pursuant to Section 3.4 and/or Section
4.4 delivered by Seller to Buyer.
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"Overgeneration Amount" means an amount of energy in excess of the Contract
Quantity of Electricity; provided such amount of excess energy shall not exceed
5% of the contract quantity of electricity for the applicable Interval. Seller
shall have the right to put the Overgeneration Amount to Buyer hereunder at the
Proxy-Market Price or the Market Price, as the case may be.
"Payment Date" means the day of the month which is the later of (i) the 25th day
of the calendar month in which a Notice is given by Seller to Buyer; or (ii) the
15th day after delivery by Seller to Buyer of a Notice. In the event that the
Payment Date is a Saturday, Sunday, or legal holiday, the corresponding payment
shall be due on or before the first business day following such Payment Date or
legal holiday, as the case may be .
"Plant" means Seller's generating facility located in Syracuse, New York.
"Proxy-Market Price" means (i) prior to the establishment of the ISO/PE, Buyer's
short-term avoided energy and capacity costs at the transmission voltage level
of Seller's Plant's bus bar and location (or region) of the Delivery Point, as
stated in its tariff approved by the Commission providing for the purchase of
power from PURPA qualifying facilities, which tariff is currently designated as
S.C.-6, as the same may be in effect from time to time, or any successor tariff
thereto or such other price as may be agreed upon by Buyer and Seller, and (ii)
on the first day of the month following the calendar month in which the ISO/PE
is established, the Market Price and, if applicable, the Market Capacity Price;
provided, however, that at such time the Parties shall conduct good faith
negotiations and use their Reasonable Best Efforts to mutually determine whether
to continue the pricing referenced in clause (i) above for a mutually agreed
upon additional period of time. The Proxy-Market Price shall not be reduced or
offset by any costs that Buyer may incur, including, without limitation, costs
for ancillary services,
Page -28-
<PAGE>
transmission services or transition (or stranded) costs.
"Proxy-Market Price Period" means the period commencing on the date of this
Agreement and ending on the first day of the calendar month following the
calendar month in which the ISO/PE has been fully established and functioning,
provided the following conditions have been satisfied during each of the
previous six months:
(i) the volumes (in GWh) of energy sales and purchases transacted
through the ISO/PE in the day ahead market based upon the day
ahead pricing mechanism adopted by the FERC for the ISO/PE for
the Upstate Market shall be at least equal to those
corresponding with the months listed in the following table
(which GWh shall include the aggregate contract quantities of
energy during such period under all physical delivery Restated
Contracts with Gas IPPs and all physical delivery Contracts
between Buyer and any IPP party to the Master Restructuring
Agreement entered into in lieu of Fixed Price Swap Contracts,
regardless of whether the IPPs parties thereto actually effected
such sales, and all sales on up to a monthly basis of energy
(other than sales through the ISO/PE) by the IPPs parties to the
Master Restructuring Agreement which are effectuated by Buyer
acting as agent for any such IPP);
---------------------- ----------------
Month GWh
---------------------- ----------------
January 4,611
---------------------- ----------------
Page -29-
<PAGE>
---------------------- ----------------
February 4,136
---------------------- ----------------
March 4,327
---------------------- ----------------
April 3,827
---------------------- ----------------
May 3,788
---------------------- ----------------
June 3,974
---------------------- ----------------
Month GWh
---------------------- ----------------
July 4,278
---------------------- ----------------
August 4,160
---------------------- ----------------
September 3,793
---------------------- ----------------
October 3,856
---------------------- ----------------
November 3,896
---------------------- ----------------
December 4,361
---------------------- ----------------
and
(ii) only if a separate market for capacity then exists, a minimum of
5,700 MW of the capacity sales and purchases within the Upstate
Market have been transacted through the ISO/PE capacity auction
(which MW shall include the aggregate capacity associated with the
aggregate contract quantities of energy during such
Page -30-
<PAGE>
period under all physical delivery Restated Contracts with Gas IPPs
and all physical delivery Contracts between Buyer and any IPP party
to the Master Restructuring Agreement entered into in lieu of Fixed
Price Swap Contracts, regardless of whether the IPPs parties thereto
actually effected such sales, and all sales on up to a monthly basis
of capacity (other than sales through the ISO/PE) by the IPPs
parties to the Master Restructuring Agreement which are effectuated
by Buyer acting as agent for any such IPP).
Notwithstanding the foregoing, the Proxy-Market Price Period may be extended or
terminated upon the mutual agreement of the parties.
In the event the ISO/PE does not provide adequate information to confirm
the monthly sales within the Upstate Market transacted through the ISO/PE, the
parties agree to renegotiate the conditions based on the original intent of the
Master Restructuring Agreement (as defined by the "Proxy-Market Price Period",
page 28, Attachment A-8 of the "Terms of Amended Power Purchase Agreements,
Restated Contracts and Fixed Price Swap Contracts").
"PURPA" shall mean the Public Utility Regulatory Policies Act of 1978, as
amended.
"Reasonable Best Efforts" means, with respect to any Party, such Party's
diligent pursuance of the course of action or result stated as determined by
such Party itself in good faith, but shall not require such Party to pay any sum
or other consideration or incur or assume any liability or obligation that is
not otherwise expressly required to be paid, incurred or assumed pursuant to
this Agreement, excluding (i) normal and customary incidental out-of-pocket
costs and expenses and (ii) attorneys' fees (except, with respect to any IPP,
attorneys' fees required to be paid by Buyer pursuant to the IPPs' Special
Counsel Fee Letter or the IPPs' Local Regulatory Counsel
Page -31-
<PAGE>
Fee Letter).
"Restated Contracts" has the meaning set forth in Exhibit A to the Master
Restructuring Agreement.
"Settlement Period' means each calendar month during the term of this Agreement.
AS&P" means Standard & Poor's Corporation.
"Upstate Market" means collectively (i) the service territory retail loads in
the regions currently served by Niagara Mohawk Power Corporation, New York State
Electric & Gas Corporation, Rochester Gas & Electric Corporation and Central
Hudson Gas & Electric Corporation (each a "Utility", collectively the
"Utilities"), and (ii) wholesale sales transactions by any of the Utilities to
third parties outside the regions currently served by such Utility, excluding
any such sales which are effectuated pursuant to contracts having a term of at
least one year existing as of the date of the Master Restructuring Agreement to
the extent such contracts are in effect thereafter.
IN WITNESS WHEREOF, the Parties hereto have signed this Agreement as
of the date first above written.
PROJECT ORANGE ASSOCIATES NIAGARA MOHAWK POWER CORP.
LIMITED PARTNERSHIP
By: NCP Syracuse, Inc. By: /s/ William F. Edwards
Its: General Partner ________________________________
Name: William F. Edwards
Title: Senior Vice President
By: NCP Energy, Inc.
Its: Attorney-In-Fact
By: /s/ Bruce Levy
___________________________
Name: Bruce Levy
Title: President
Page -32-
<PAGE>
Attachment A
<TABLE>
<CAPTION>
- ------------- ----------- --------------------------------------------------------------------------------------------------------
Contract Quantity
- ------------- ----------- --------------------------------------------------------------------------------------------------------
Annual Period Period Period Period Period Period Period Period Period
Contract Contract Jan Feb Mar Apr May Jun Jul Aug Sep
Year Quantity (MWh) (MWh) (MWh) (MWh) (MWh) (MWh) (MWh) (MWh) (MWh)
(MWh)
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
2 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
3 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
4 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
5 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
6 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
7 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
8 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
9 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
10 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590
- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------
<CAPTION>
- ------------- ------------------------------------
- ------------- ------------------------------------
Period Period Period
Contract Oct Nov Dec
Year (MWh) (MWh) (MWh)
- ------------- ----------- ----------- -----------
<S> <C> <C> <C>
1 57,884 55,976 57,884
- ------------- ----------- ----------- -----------
2 57,884 55,976 57,884
- ------------- ----------- ----------- -----------
3 57,884 55,976 57,884
- ------------- ----------- ----------- -----------
4 57,884 55,976 57,884
- ------------- ----------- ----------- -----------
5 57,884 55,976 57,884
- ------------- ------------ ----------- -----------
6 57,884 55,976 57,884
- ------------- ------------ ----------- -----------
7 57,884 55,976 57,884
- ------------- ------------ ----------- -----------
8 57,884 55,976 57,884
- ------------- ------------ ----------- -----------
9 57,884 55,976 57,884
- ------------- ------------ ----------- -----------
10 57,884 55,976 57,884
- ------------- ------------ ---------- -----------
</TABLE>
The contract quantity of electricity for each Interval shall not exceed 80 MWh
+5% (the "Interval Cap"), provided however, the aggregate contract quantity of
electricity that Seller shall have the right to put to Buyer in each Contract
Year hereunder shall not exceed 663,000 MWh + 5%.
Page -33-
<PAGE>
Attachment B
Exceptions/Clarifications to Electric System Bulletin 756 (Including Appendix C)
dated December 1997
1.) II. GENERAL, B. CONTRIBUTIONS, Page 4:
Replace: "The Company will advise the Generator-owner concerning any
charges and payment schedules required"
With: "The Company will provide the Generator-owner with an invoice
detailing all charges. The Generator-owner agrees to pay all
undisputed amounts within thirty days of the invoice date."
2.) III. PROJECT MANAGEMENT, C. COMPLIANCE, 4.0 Periodic, Page 10, Paragraph 1:
Add: The Company will seal or witness the installation of the
Generator-owner's seal on all protective devices.
3.) III. PROJECT MANAGEMENT, C. COMPLIANCE, 4.0 Periodic, Page 10, Paragraph 2:
Add: ,or by the Generator-owner
4.) III. PROJECT MANAGEMENT, C. COMPLIANCE, 4.0 Periodic, Page 10, Paragraph 3:
Add: In the event that the Generator-owner is notified by the Company
that is not in compliance with any provision contained in the
Electric Bulletin #756 dated December 1997, the Generator-owner
will be given a reasonable period of time to come into
compliance.
5.) Appendix C, IV. PLANT PERFORMANCE, A. Generator Criteria, Page C-6:
Replace: bullet (1)
With: In order to minimize the interference of the Generator-owner's
parallel generation with the Company's electric power system or
electric service operation, the following criteria shall be met:
A. Voltage - the Generator-owner's generating equipment shall not cause
-------
excessive voltage excursions in excess of +/- 5% of nominal. The
Generator-owner shall install any necessary voltage regulating
equipment. The Generator-owner shall provide relaying to disconnect
his generating equipment from the Company system if the voltage cannot
be maintained within acceptable tolerances.
Page -34-
<PAGE>
Attachment B, Continued
Exceptions/Clarifications to Electric System Bulletin 756 (Including Appendix C)
dated December 1997
B. Flicker - The Generator-owner shall not cause voltage flicker on the
-------
electric power system.
C. Frequency - The operating frequency of the Generator-owner's
---------
generating equipment shall be maintained between 59.5 hertz and 60.5
hertz.
D. Harmonics - Starting surges or harmonics generated by Generator-owner
---------
equipment must not cause any reduction in the quality of service
provided to other utility Generator-owners nor interfere with the
Company's system. Total harmonic distortion shall be limited to 5% of
the fundamental 60 hertz voltage or current waveform. Any single
harmonic shall not exceed 3% of the fundamental. In certain cases a
more stringent limitation may apply.
E. Fault and Line Clearing - The Generator-owner shall be responsible for
-----------------------
removing his generation equipment from the electric power system for
phase faults, ground faults, or outages occurring on the electric
circuit serving him.
F. Power Factor - The Generator-owner shall maintain a nominal power
------------
factor of unity.
G. Interruptions - The Generator-owner's generating equipment shall not
-------------
cause repeated interruptions on the Company's electric power system.
6.) Appendix C, IV. PLANT PERFORMANCE, B. VAR Control, Bullet 1., Page C-7:
Replace: primary side (high side) voltage schedule as
With: a system unity power factor unless otherwise
7.) Appendix C, IV. PLANT PERFORMANCE, B. VAR Control, Bullet 2., Page C-7:
Delete in its entirety.
8.) Appendix C, V.A. Plant Protection Criteria, Page C-8:
Bullet 1: Delete the words "Return to automatic voltage control after
excitation event shall be automatic."
Bullet 6: Delete in its entirety.
Page -35-
<PAGE>
Attachment B, Continued
Exceptions/Clarifications to Electric System Bulletin 756 (Including Appendix C)
dated December 1997
9.) Appendix C VI. OPERATING B, Disconnection by the Company, Bullet 1.1., Page
C-10:
Replace: Excess generation on the Company's system
With: Excess generation on the Company's system in accordance with
the steps stated in the New York Power Pool Operating Policy
17-0.
10.) Appendix C, VI. OPERATING, C. Generation Scheduling, Bullet 2.0, Page C-10:
Replace bullet in its entirety with: Scheduling notices shall be
adhered to as described in Section 3.1 of the Power Put Agreement.
Page -36-
<PAGE>
Exhibit 10.2
(Multicurrency--Cross Border)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of June 30, 1998
Project Orange Associates L.P. and Niagara Mohawk Power Corporation
- -------------------------------- ----------------------------------
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will bc governed by this Master Agreement, which
includes the schedule (the "Schedule"), and thc documents and other confirming
evidence (each a "Confirmation") exchanged between thc parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the
Schedule will prevail. In the event of any inconsistency between the
provisions of any Confirmation and this Master Agreement (including the
Schedule), such Confirmation will prevail for the purpose of the relevant
Transaction.
(c) Single Agreement. All Transactions arc entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement") and the
parties would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other than by payment),
-1-
<PAGE>
such delivery will be made for receipt on the due date in the manner
customary for the relevant obligation unless otherwise specified in the
relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing, (2)
the condition precedent that no Early Termination Date In respect Of the
relevant Transaction has occurred or been effectively designated and (3)
each other applicable condition precedent specified in this Agreement.
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to
which such change applies unless such other party gives timely notice of a
reasonable objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency, and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to apply to such Transactions from such date). This election may
be made separately (or different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such deduction
or withholding is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, then in effect. If
a party is so required to deduct or withhold, then that party ("X') will:--
(1) promptly notify the other party ("Y") of such requirement:
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y under
this Section 2(d)) promptly upon the
-2-
<PAGE>
earlier of determining that such deduction or withholding is required
or receiving notice that such amount has been assessed against Y:
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the
payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received had no such deduction or withholding been required. However,
X will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:--
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to Section
3(f) to be accurate and true unless such failure would not have
occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date
on which a Transaction is entered into (regardless of whether such
action is taken or brought with respect to a party to this
Agreement) or (II) a Change in Tax Law.
(ii) Liability. If:--
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any deduction
or withholding in respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability for interest, but including any
related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
-3-
<PAGE>
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of the
jurisdiction of its organisation or incorporation and, if relevant under
such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any Obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute legal, valid and
binding obligations, enforceable in accordance with their respective terms
(subject to applicable bankruptcy, reorganisation, insolvency, moratorium
or similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application (regardless
of whether enforcement is sought in a proceeding in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
-4-
<PAGE>
(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation specified in
the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation; and
(iii) upon reasonable demand by such other party, any form or document that
may be required or reasonably requested in writing in order to allow such
other party or its Credit Support Provider to make a payment under this
Agreement or any applicable Credit Support Document without any deduction
or withholding for or on account of any Tax or with such deduction or
withholding at a reduced rate (so long as the completion, execution or
submission of such form or document would not materially prejudice the
legal or commercial position of the party in receipt of such demand), with
any such form or document to be accurate and completed in a manner
reasonably satisfactory to such other party and to be executed and to be
delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority
that are required to be obtained by it with respect to this Agreement or
any Credit Support Document to which it is a party and will use all
reasonable efforts to obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations under
this Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of
this Agreement by a jurisdiction in which it is incorporated, organised,
managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this
Agreement is
-5-
<PAGE>
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. Events of Default and Termination Events
(a) Events of Default. The Occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an 'Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when due, any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party to
comply with or perform any agreement or obligation to he complied with
or performed by it in accordance with any Credit Support Document if
such failure is continuing after any applicable grace period has
elapsed;
(2) the expiration or termination of such Credit Support Document or the
failing or ceasing of such Credit Support Document to be in full force
and effect for the purpose of this Agreement (in either case other than
in accordance with its terms) prior to the satisfaction of all
obligations of such party under each Transaction to which such Credit
Support Document relates without the written consent of the other party;
or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the validity
of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation under
Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party(l)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination
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of, that Specified Transaction, (2) defaults, after giving effect to any
applicable notice requirement or grace period, in making any payment or
delivery due on the last payment, delivery or exchange date of, or any
payment on early termination of, a Specified Transaction (or such default
continues for at least three Local Business Days if there is no applicable
notice requirement or grace period) or (3) disaffirms, disclaims,
repudiates or rejects, in whole or in part, a Specified Transaction (or
such action is taken by any person or entity appointed or empowered to
operate it or act on its behalf);
(vi) Cross Default. If "Cross Default" is Specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however described) in
respect of such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them (individually
or collectively) in an aggregate amount of not less than the applicable
Threshold Amount (as specified in the Schedule) which has resulted in such
Specified Indebtedness becoming, or becoming capable at such time of being
declared, due and payable under such agreements or instruments, before it
would otherwise have been due and payable or (2) a default by such party,
such Credit Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in an
aggregate amount of not less than the applicable Threshold Amount under
such agreements or instruments (after giving effect to any applicable
notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation, amalgamation
or merger); (2) becomes insolvent or is unable to pay its debts or fails
or admits in writing its inability generally to pay its debts as they
become due; (3) makes a general assignment, arrangement or composition
with or for the benefit of its creditors; (4) institutes or has
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or insolvency law or
other similar law affecting creditors' rights, or a petition is
presented for its winding-up or liquidation, and, in the case of any
such proceeding or petition instituted or presented against it, such
proceeding or petition (A) results in a judgment of insolvency or
bankruptcy or the entry of an order for relief or the making of an order
for its winding-up or liquidation or (B) is not dismissed, discharged,
stayed or restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes subject to
the appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar official for
it or for all or substantially all its assets; (7) has a secured party
take possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal process
levied, enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any such process
is not dismissed, discharged, stayed or restrained, in each case within
30 days thereafter; (8) causes or is subject to any event with respect
to it which, under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in clauses (1) to (7)
(inclusive); or (9) takes any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the foregoing
acts; or
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(viii) Merger Without Assumption. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or transfer:-
(1) the resulting, surviving or transferee entity fails to assume all
the obligations of such party or such Credit Support Provider under this
Agreement or any Credit Support Document to which it or its predecessor
was a party by operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fall to extend (without
the consent of the other party) to the performance by such resulting,
surviving or transferee entity of its obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an illegality
if the event is specified in (i) below, a Tax Event if the event is
specified in (ii) below or a Tax Event Upon Merger if the event is
specified in (iii) below, and, if specified to be applicable, a Credit
Event Upon Merger if the event is specified pursuant to (iv) below or an
Additional Termination Event if the event is specified pursuant to (v)
below:--
(i) Illegality. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party):--
(1) to perform any absolute or contingent obligation to make a payment
or delivery or to receive a payment or delivery in respect of such
Transaction or to comply with any other material provision of this
Agreement relating to such Transaction: or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document relating
to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether such action is taken
or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount
in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withheld for or
on account of a Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by reason of
Section 2(d)(i)(4)(A) or (B));
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(iii) Tax Event Upon Merger. The party (the "Burdened Party') on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the
other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate, will
be the Affected Party); or
(v) Additional Termination Event. If any "Additional Termination Event" is
specified in the Schedule or any Confirmation as applying, the occurrence
of such event (and, in such event, the Affected Party or Affected Parties
shall be as specified for such Additional Termination Event in the Schedule
or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute
an Event of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and
is then continuing, the other party (the "Non-defaulting Party") may, by
not more than 20 days notice to the Defaulting Party specifying the
relevant Event of Default, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of all
outstanding Transactions. If, however, "Automatic Early Termination" is
specified in the Schedule as applying to a party, then an Early Termination
Date in respect of all outstanding Transactions will occur immediately upon
the occurrence with respect to such party of an Event of Default specified
in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto,
(8), and as of the time immediately preceding the institution of the
relevant proceeding or the presentation of the relevant petition upon the
occurrence with respect to such party of an Event of Default specified in
Section 5(a)(vii)(4) or, to the extent analogous thereto, (g).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will, promptly
upon becoming aware of it, notify the other party, specifying the nature of
that Termination Event and each Affected Transaction and will also give
such other information about that Termination Event as the other party may
reasonably require.
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(ii) Transfer to A void Termination Event. If either an Illegality under
Section 5(b)(i)(l) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition w its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to
and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) Two Affected Parties, If an Illegality under Section 5(b)(i)(1) or a
Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that Termination
Event.
(iv) Right to Terminate, If;--
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to all
Affected Transactions within 30 days after an Affected Party gives
notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger
or an Additional Termination Event occurs, or a Tax Event Upon Merger
occurs and the Burdened Party is not the Affected Party.
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
or an Additional Termination Event if there is more than one Affected
Party, or the party which Is not the Affected Party in the case of a Credit
Event Upon Merger or an Additional Termination Event if there is only one
Affected Party may, by not more than 20 days notice to the other party and
provided that the relevant Termination Event is then continuing, designate
a day not earlier than the day such notice is effective as an Early
Termination Date in respect of all Affected Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(c) in
respect of the Terminated
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Transactions will be required to be made, but without prejudice to the
other provisions of this Agreement. The amount, if any, payable in respect
of an Early Termination Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in determining
a Market Quotation, the records of the party obtaining such quotation will
be conclusive evidence of the existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment) in the
Termination Currency, from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an
Event of Default:--
(1) First Method and Market Quotation. If the First Method and Market
Quotation apply, the Defaulting Party will pay to the Non-defaulting
Party the excess, if a positive number, of (A) the sum of the Settlement
Amount (determined by the Non-defaulting Party) in respect of the
Terminated Transactions and the Termination Currency Equivalent of the
Unpaid Amounts Owing to the Non-defaulting Party over (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
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(3) Second Method and Market Quotation. If the Second Method and Market
Quotation apply, an amount will be payable equal to (A) the sum of the
Settlement Amount (determined by the Non-defaulting Party) in respect of
the Terminated Transactions and the Termination Currency Equivalent of
the Unpaid Amounts owing to the Non-defaulting Party less (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party. If that amount is a positive number, the Defaulting
Party will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and to
the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the Transactions
are being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and an
amount will be payable equal to (I) the sum of (a) one-half of the
difference between the Settlement Amount of the party with the
higher Settlement Amount ("X") and the Settlement Amount of the
party with the lower Settlement Amount ("Y") and (b) the
Termination Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the Unpaid Amounts
owing to Y; and
(B) if Loss applies, each party will determine its Loss in respect
of this Agreement (or, if fewer than all the Transactions are being
terminated, in respect of all Terminated Transactions) and an
amount will be payable equal to one-half of the difference between
the Loss of the party with the higher Loss ("X") and the Loss of
the party with the lower Loss ("Y").
If the amount payable Is a positive number, Y will pay it to X; if it
is a negative number, X will pay the absolute value of that amount to
Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other
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under this Agreement (and retained by such other party) during the period
from the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty, Such amount is payable for the loss of bargain and
the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of
all or substantially all its assets to, another entity (but without
prejudice to any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the
Contractual Currency will not be discharged or satisfied by any tender in
any currency other than the Contractual Currency, except to the extent such
tender results in the actual receipt by the party to which payment is owed,
acting in a reasonable manner and in good faith in converting the currency
so tendered into the Contractual Currency, of the full amount in the
Contractual Currency of all amounts payable in respect of this Agreement.
If for any reason the amount in the Contractual Currency so received falls
short of the amount in the Contractual Currency payable in respect of this
Agreement, the party required to make the payment will, to the extent
permitted by applicable law, immediately pay such additional amount in the
Contractual Currency as may be necessary to compensate for the shortfall.
If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount
of such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is
rendered (i) for the payment of any amount owing in respect of this
Agreement, (ii) for the payment of any amount relating to any early
termination in respect of this Agreement or (iii) in respect of a judgment
or order of another court for the payment of any amount described in (i) or
(ii) above, the party seeking recovery, after recovery in full of the
aggregate amount to which such party is entitled pursuant to the judgment
or order, will be entitled to receive immediately from the other party the
amount of any shortfall of the Contractual Currency received by such party
as a consequence of sums paid in such other currency and will refund
promptly to the other party any excess of the Contractual Currency received
by such party as a consequence of sums paid in such other
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currency if such shortfall or such excess arises or results from any variation
between the rate of exchange at which the Contractual Currency is converted into
the currency of the judgment or order for the purposes of such judgment or order
and the rate of exchange at which such party is able, acting in a reasonable
manner and in good faith in converting the currency received into the
Contractual Currency, to purchase the Contractual Currency with the amount of
the currency of the judgment or order actually received by such party. The term
"rate of exchange" includes, without limitation, any premiums and costs of
exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and
independent causes of action, will apply notwithstanding any indulgence
granted by the party to which any payment is owed and will not be affected
by judgment being obtained or claim or proof being made for any other sums
payable in respect of this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, It will be sufficient
for a party to demonstrate that It would have suffered a loss had an actual
'exchange or purchase been made.
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and
supersedes all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing
evidenced by a facsimile transmission) and executed by each of the parties
or confirmed by an exchange of telexes or electronic messages on an
electronic messaging System.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive
the termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative
and not exclusive of any rights, powers, remedies and privileges provided
by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable and
may be executed and delivered in counterparts (including by facsimile
transmission) or he created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purpose-s to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
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(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege
will not be presumed to preclude any subsequent or further exercise, of
that right, power or privilege or the exercise of any other right, power or
privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken
into consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of
booking office or jurisdiction of incorporation or organisation of such
party, the obligations of such party are the same as if it had entered into
the Transaction through its head or home office. This representation will
be deemed to be repeated by such party on each date on which a Transaction
is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may nuke and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office
through which it makes and receives payments or deliveries with respect to
a Transaction will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice
or other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it is
delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of
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proving receipt will be on the sender and will not be met by a transmission
report generated by the senders facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivers' is attempted: or
(v) if sent by electronic messaging system, on the date that electronic
message is received.
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details
at which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or re-
enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on
its behalf, service of process In any proceedings. If for any reason any
party's Process Agent is unable to act as such, such party will promptly
notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to
service of process given in the manner
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<PAGE>
provided for notices in Section 12. Nothing in this Agreement will affect the
right of either party to serve process in any other manner permitted by
law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the
grounds of sovereignty or other similar grounds from (i) suit, (ii)
jurisdiction of any court, (iii) relief by way of injunction, order for
specific performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or enforcement
of any judgment to which it or its revenues or assets might otherwise be
entitled in any Proceedings in the courts of any jurisdiction and
irrevocably agrees, to the extent permitted by applicable law, that it will
not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning-specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but (or Section 2(a)(iii)) by a Non-defaulting Party, the Non-
default Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning, specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
irrelevant Transaction is entered into.
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<PAGE>
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(h), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party
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<PAGE>
reasonably determines in good faith to be its total losses and costs (or gain,
in which case expressed as a negative number) in connection with this Agreement
or that Terminated Transaction or group of Terminated Transactions, as the case
may be, including any loss of bargain, cost of funding or, at the election of
such party but without duplication, loss or cost incurred as a result of its
terminating, liquidating, obtaining or reestablishing any hedge or related
trading position (or any gain resulting from any of them). Loss includes losses
and costs (or gains) in respect of any payment or delivery required to have been
made (assuming satisfaction of each applicable condition precedent) on or before
the relevant Early Termination Date and not made, except, so as to avoid
duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does
not include a party's legal fees and out-of-pocket expenses referred to under
Section 11. A party will determine its Loss as of the relevant Early Termination
Date, or, if that is not reasonably practicable, as of the earliest date
thereafter as is reasonably practicable. A party may (but need not) determine
its Loss by reference to quotations of relevant rates or prices from one or more
leading dealers in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference Market-
maker to enter into a transaction (the "Replacement Transaction") that would
have the effect of preserving for such party the economic equivalent of any
payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to-different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
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<PAGE>
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined and
(b) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions (or which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions
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<PAGE>
and (c) any other transaction identified as a Specified Transaction in this
Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
'Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) (or the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or
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<PAGE>
would have been) required to be delivered as of the originally scheduled date
for delivery, in each case together with (to the extent permitted under
applicable law) interest, in the currency of such amounts, from (and including)
the date such amounts or obligations were or would have been required to have
been paid or performed to (but excluding) such Early Termination Date at the
Applicable Rate. Such amounts of interest will be calculated on the basis of
daily compounding and the actual number of days elapsed. The fair market value
of any obligation referred to in clause (b) above shall be reasonably determined
by the party obliged to make the determination under Section 6(e) or, if each
party is so obliged, it shall be the average of the Termination Currency
Equivalents of the fair market values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
Project Orange Associates, L.P. NIAGARA MOHAWK POWER CORPORATION
By: NCP Syracuse, Inc., By: /s/ Clement E. Nadeau
Its General Partner ___________________________________
Name: Clement E. Nadeau
By: NCP Energy, Inc. Title: V.P. Marketing & Planning
Its Attorney-in-Fact Date:
By: /s/ Bruce Levy
_____________________
Name: Bruce Levy
Title: President
Date:
-22-
<PAGE>
SCHEDULE TO ISDA MASTER AGREEMENT
DATED AS OF JUNE 30, 1998
Between Project Orange Associates, L.P. "PROJECT ORANGE" and
Niagara Mohawk Power Corporation "NIAGARA"
I. TERMINATION PROVISIONS
1(a). "Specified Entity" shall mean in relation to NIAGARA for the
purpose of:
(1) Section 5(a)(v): None
(2) Section 5(a)(vi): None
(3) Section 5(a)(vii): None
(4) Section 5(b)(iv): None
1(b). "Specified Entity" shall mean in relation to PROJECT ORANGE for
the purpose of:
(1) Section 5(a)(v): None
(2) Section 5(a)(vi): None
(3) Section 5(a)(vii): None
(4) Section 5(b)(iv): None
1(c). "Specified Transaction" will have the meaning specified in
Section 14 of this Agreement.
1(d). The "Cross Default" provisions of Section 5(a)(vi) will apply to
PROJECT ORANGE and NIAGARA, except that the words "or becoming
capable at such time of being declared" shall be deleted
therefrom.
"Specified Indebtedness" shall have the meaning specified in
Section 14.
"Threshold Amount" means (i) with respect to NIAGARA, the lesser
of $50,000,000 or an amount equal to 10% of NIAGARA's
shareholders' equity as of the end of its most recently completed
fiscal year, and (ii) with respect to PROJECT ORANGE,
$30,000,000.
1(e). The "Credit Event Upon Merger" provisions of Section 5(b)(iv)
will apply to NIAGARA and PROJECT ORANGE; provided, however, that
in no event shall an assignment of the Agreement in compliance
with the terms of the Agreement be deemed a Credit Event Upon
Merger.
Page -1-
<PAGE>
1(f). The "Automatic Early Termination" provisions of Section 6(a) will
apply to either NIAGARA or PROJECT ORANGE.
1(g). "Payments on Early Termination": For purposes of Section 6(e) of
this Agreement, Loss and the Second Method will apply.
1(h). "Termination Currency" means United States Dollars.
1(i). "Additional Termination Event" will not apply.
II. TAX REPRESENTATIONS
(a) Payer Representations: For the purpose of Section 3(e) of this
Agreement, PROJECT ORANGE will make the following representation
and NIAGARA will make the following representation:
It is not required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, of any
Relevant Jurisdiction to make any deduction or withholding for or
on account of any Tax from any payment (other than interest under
Section 2(e), 6 (d)(ii) or 6 (e) of this Agreement) to be made by
it to the other party under this Agreement. In making this
representation, it may rely on (i) the accuracy of any
representations made by the other party pursuant to Section 3(f)
of this Agreement, (ii) the satisfaction of the agreement
contained in Section 4(a)(i) or 4 (a)(iii) of this Agreement and
the accuracy and effectiveness of any document provided by the
other party pursuant to Section 4(a)(i) or 4(a)(iii) of this
Agreement and (iii) the satisfaction of the agreement of the
other party contained in Section 4(d) of this Agreement, provided
that it shall not be a breach of this representation where
reliance is placed on clause (ii) and the other party does not
deliver a form or document under Section 4(a)(iii) by reason of
material prejudice to its legal or commercial position.
(b) Payee Representations: For the purpose of Section 3(f) of this
Agreement, PROJECT ORANGE makes the representation specified
below:
(i) It is a Limited Partnership organized under the laws of
the State of Delaware
For the purpose of Section 3(f) of this Agreement, NIAGARA makes
the representation specified below:
(i) It is a corporation organized under the laws of the State
of New York.
Page -2-
<PAGE>
III. AGREEMENT TO DELIVER DOCUMENTS
For the purposes of Section 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable:
(a) Tax forms, documents or certificates to be delivered are:
Each of PROJECT ORANGE and NIAGARA shall, as soon as practicable after
demand, deliver to the other party any form or document required or
reasonably requested in order to allow a party to make payments under
this Agreement without deduction or withholding for or on account of
any Tax or with such deduction or withholding at a reduced rate.
(b) Other documents to be delivered are:
<TABLE>
<CAPTION>
Party required Covered by
to deliver Form/Document/ Date by which Section 3(d)
document Certificate to be delivered Representation
-------- ----------- --------------- --------------
<S> <C> <C> <C>
PROJECT An opinion of counsel Upon execution of Yes
ORANGE and to PROJECT ORANGE this Agreement.
NIAGARA and NIAGARA
substantially in the form
of Exhibit A to this
---------
Schedule.
PROJECT An incumbency certificate Upon execution of Yes
ORANGE and with respect to the this Agreement.
NIAGARA signatory of this
Agreement.
PROJECT Annual audited financial Upon execution of Yes
ORANGE and statements of such party, this Agreement and
NIAGARA or its Credit Support upon request after public availability
Providers, as the case may thereof.
be, prepared in accordance
with generally accepted
accounting principles
consistently applied ("GAAP").
PROJECT Quarterly unaudited Upon request after Yes
ORANGE and financial statements of public availability
NIAGARA such party, or its Credit thereof.
</TABLE>
Page -3-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Support Providers, as the
case may be, for its most
recent fiscal quarter
prepared in accordance
with GAAP.
PROJECT A copy of the resolutions Upon execution of Yes
ORANGE and (the "Authorizing this Agreement.
NIAGARA Resolution") of the board of
directors or other governing
body of such party, pursuant
to which such party is
authorized to enter into this
Agreement and each Trans-
action entered into under this
Agreement.
</TABLE>
IV. MISCELLANEOUS
4.1 Addresses for Notices: For purposes of Section 12(a) of this
Agreement, the addresses for notices and communications for NIAGARA
and PROJECT ORANGE are as follows:
For PROJECT ORANGE:
Project Orange Associates, L.P.
c/o GPU International, Inc.
One Upper Pond Road
Parsippany, NJ 07054
Attn: President
For NIAGARA:
Director of Energy Transactions
Niagara Mohawk Power Corporation
300 Erie Blvd., West
Syracuse, NY 13202
Facsimile: 315-460-2660
4.2 Process Agent: For the purpose of Section 13 of this Agreement:
PROJECT ORANGE appoints as its Process Agent: Not applicable
Page -4-
<PAGE>
NIAGARA appoints as its Process Agent: Not applicable
4.3 Offices: The provisions of Section 10(a) will apply to this Agreement.
4.4 Multibranch Party: For the purpose of Section 10(c) of this Agreement:
PROJECT ORANGE is not a Multibranch Party.
NIAGARA is not a Multibranch Party.
4.5 Calculation Agent: The Calculation Agent is NIAGARA; provided, that if
NIAGARA fails to comply with or perform any of its agreements or
obligations in that capacity or if any Event of Default with respect
to NIAGARA has occurred and is continuing, then upon notice to
NIAGARA, PROJECT ORANGE (or its designee) shall be the Calculation
Agent for so long as such failure or such Event of Default, as the
case may be, continues.
4.6 Credit Support Documents: None.
4.7 Credit Support Provider: Not Applicable.
4.8 Choice of Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (without reference
to the choice of law doctrine).
4.9 Netting of Payments: Subparagraph (ii) of Section 2(c) of this
Agreement shall not apply to any Transaction under this Agreement.
4.10 Affiliate: Notwithstanding Section 14 of this Agreement, means, with
respect to NIAGARA or PROJECT ORANGE, any other person or entity which
controls, is controlled by, or is under common control with, such
party, wherein the term "control" shall mean the power to direct the
management and policies by or of such party through ownership of
voting securities, by contract, or otherwise.
V. OTHER PROVISIONS
(a) ISDA Definitions
The definitions and provisions contained in the 1991 ISDA Definitions
(the "1991 Definitions") (the "ISDA Definitions"), as published by the
International Swaps and Derivatives Association, Inc. (formerly the
International Swap Dealers Association, Inc.), are incorporated into
this Agreement. Any terms used and not otherwise defined herein which
are contained in the ISDA Definitions shall have
Page -5-
<PAGE>
the meaning set forth herein. In the event of any inconsistency
between the ISDA Definitions and any other definitions incorporated
into a Confirmation, the definitions incorporated into such
Confirmation will govern.
(b) Representations
Section 3 is amended by adding the following at the end of the
Section:
(g) Non-reliance: In connection with this Agreement, each
Transaction, and any other documentation relating to this
Agreement to which it is a party or that it is required to
deliver:
(i) it has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisors to
the extent it has deemed necessary, and it has made its
own investment, hedging and trading decisions (including
decisions regarding the suitability of any Transaction
made pursuant to this Agreement) based upon its own
judgment and upon any advice from such advisors as it has
deemed necessary and not upon any view expressed by the
other party;
(ii) it is not relying on any representations (whether written
or oral) of the other party other than the representations
expressly set forth in this Agreement and in any
Confirmation;
(iii) it has a full understanding of all the terms, conditions
and risks (economic and otherwise) of the Agreement and
each Transaction and is capable of assuming and willing to
assume those risks;
(iv) it is entering into this Agreement, each Transaction and
such other documentation as principal, and not as agent or
in any other capacity, fiduciary or otherwise; and
(v) the other party is not acting as a fiduciary or financial,
investment or commodity trading advisor for it.
(h) Eligible Swap Participant: It is an "eligible swap participant"
as defined in Section 35.1(b) of the regulations of the Commodity
Futures Trading Commission.
(c) Affected Parties in Termination Events
For purposes of Section 6(e) (Payments on Early Termination), both
parties shall
Page -6-
<PAGE>
be deemed to be Affected Parties in connection with any Illegality or Tax
Event, so that payments in connection with early termination shall be
calculated as provided in Section 6(e)(ii).
(d) Set-off
Section 6 of the Agreement is modified to include the following additional
sub-clause (f).
(f) Set-off: Any amount (the "Early Termination Amount") payable to
one party (the "Payee") by the other party (the "Payer") under
Section 6(e), in circumstances where there is a Defaulting Party
or one Affected Party in the case where a Termination Event under
Section 5(b)(iv) has occurred, will, at the option of the party
("X") other than the Defaulting Party or the Affected Party (and
without prior notice to the Defaulting Party or the Affected
Party), be reduced by its set-off against any amount(s) (the
"Other Agreement Amount") payable (whether at such time or in the
future or upon the occurrence of a contingency) by the Payee to
the Payer (irrespective of the currency, place of payment or
booking office of the obligation) under any other agreement(s)
between the Payee and the Payer or instrument(s) or
undertaking(s) issued or executed by one party to, or in favor
of, the other party (and the Other Agreement Amount will be
discharged promptly and in all respects to the extent it is so
set-off). X will give notice to the other party of any set-off
effected under this Section 6(f).
For this purpose, either the Early Termination Amount or the
Other Agreement Amount (or the relevant portion of such amounts)
may be converted by X into the currency in which the other is
denominated at the rate of exchange at which such party would be
able, acting in a reasonable manner and in good faith, to
purchase the relevant amount of such currency.
If an obligation is unascertained, X may in good faith estimate
that obligation and set-off in respect of the estimate, subject
to the relevant party accounting to the other when the obligation
is ascertained.
Nothing in this Section 6(f) shall be effective to create a
charge or other security interest. This Section 6(f) shall be
without prejudice and in addition to any right of set-off,
combination of accounts, lien or other right to which any party
is at any time otherwise entitled (whether by operation of law,
contract or otherwise).
Page -7-
<PAGE>
(e) Miscellaneous
Add the following paragraph c to Section 7:
(c) a party making such transfer shall provide prompt written
notification thereof to the other party.
Add the following paragraphs at the end of Section 9:
(h) Severability: In the event that any provision of this Agreement
is declared illegal, invalid or otherwise unenforceable by a court of
competent jurisdiction, the remainder of this Agreement shall not be
affected except to the extent necessary to delete such illegal,
invalid or unenforceable provision, unless the deletion of such
provision shall substantially impair the benefits of the remaining
portions of this Agreement.
(i) Waiver of Jury Trial: Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury
in respect of any suit, action or proceeding relating to this
Agreement or, after any assignment which requires a Credit Support
Document, such Credit Support Document. Each party (i) certifies that
no representative, agent or attorney of the other party of, after any
assignment which requires a Credit Support Provider, such Credit
Support Provider has represented, expressly or otherwise, that such
other party would not, in the event of such a suit, action or
proceeding, seek to enforce the foregoing waiver and (ii) acknowledges
that it and the other party have been induced to enter into this
Agreement and, after any assignment which requires a Credit Support
Document, provide for any such Credit Support Document, by, among
other things, the mutual waivers and certifications in this Section.
Page -8-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this document by their duly
authorized officers as of the date specified on the first page of this document.
NIAGARA MOHAWK POWER CORPORATION
By: /s/ William F. Edwards
_________________________
Name: William F. Edwards
Title: Senior Vice President
PROJECT ORANGE ASSOCIATES, L.P.
By: NCP Syracuse, Inc.
Its: General Partner
By: NCP Energy
Its: Attorney-In-Fact
By: /s/ Bruce Levy
_________________________
Name: Bruce Levy
Title: President
Page -9-
<PAGE>
EXHIBIT A
FORM OF OPINION OF COUNSEL
Ladies and Gentlemen:
We have acted as counsel to Project Orange Associates, L.P. (the "Company")
in connection with the execution and delivery by the Company of an ISDA Master
Agreement (1992 Multicurrency - Cross Border) dated as of [Date] (including the
Schedule thereto, the Confirmation dated ____________________ and the
Transaction referred to therein, collectively the "Agreement") between the
Company and ____________________. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the Agreement.
In connection with the opinions expressed below, we have examined and
relied upon executed copies of the Agreement and such other documents and
records of the Company and certificates or other comparable documents of public
officials and representatives of the Company and others as we have deemed
necessary or appropriate for the purposes of this opinion. In our examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as conformed, certified or photostatic copies
thereof, and the authenticity of the originals of such conformed, certified or
photostatic copies. We have assumed the due execution and delivery, pursuant to
due authorization, of the Agreement by the parties thereto other than the
Company.
Based upon the foregoing and subject to the limitations, qualifications and
exceptions set forth below, we are of the opinion that:
(1) The Company is duly organized and validly existing and has requisite
power and authority to enter in to, execute and deliver the Agreement and to
perform its obligations thereunder.
(2) The Agreement has been duly authorized, executed and delivered by the
Company.
(3) The execution, delivery and performance of the Agreement by the Company
does not violate or conflict with any United States federal or New York State
law or regulation applicable to the Company, any order or judgment of any court
or other agency of government applicable to the Company or any of its assets of
which I have knowledge or, to the best of my knowledge after due inquiry, any
material contract binding on or affecting the Company or any of its assets.
(4) All United States federal or New York State governmental and other
consents, authorizations, licenses, approvals, registrations, declarations and
filings that are required to have been obtained by the Company with respect to
the execution, delivery or performance of the
Page -10-
<PAGE>
Agreement have been obtained and are in full force and effect and all conditions
of any such consents, authorizations, licenses, approvals, registrations,
declarations and filings have been complied with.
The opinions expressed herein are further subject to the following
assumptions, exceptions, limitations and qualifications:
A. We are members of the Bar of the State of New York and do not impart
to be expert in the laws of any other jurisdiction, other than the
Federal laws of the United States. The opinions expressed herein are
limited to questions arising under the Federal laws of the United
States and the laws of the State of New York. The opinion expressed in
paragraph (3) relates only to those laws and regulations that, in our
experience, are normally applicable to, or relevant in connection
with, transactions of the type provided for in agreements similar to
the Agreement.
B. We have assumed that:
a. the Transactions relate solely to transactions which are not
traded on or over any commodities or other exchange;
b. each party to the Agreement has a valid business purpose for
entering therein and into each Transaction; and
c. the execution, delivery and performance of the Agreement by each
party are exempt from the provisions of the Commodity Exchange
Act (as amended) as provided in 17 C.F.R. (S)35.2.
This opinion is as of the date hereof, and we undertake no, and hereby
disclaim any, obligation to advise you of any change in any matter set forth
herein. The opinions expressed herein are solely for your benefit in connection
with the above transaction and may not be relied on in any manner or for any
purpose by, or disclosed to, any person other than the addressee hereof. This
opinion is specific to the transactions and documents referred to herein, and
this opinion should not be assumed to state general principles of law applicable
to transactions of this kind.
Very truly yours,
Page -11-
<PAGE>
CONFIRMATION
Project Orange Associates, L.P.
c/o GPU International, Inc.
One Upper Pond Road
Parsippany, NJ 07054
Ladies and Gentlemen:
The purpose of this letter agreement (this "Confirmation") is to confirm
the terms and conditions of the Transaction entered into between us on the date
hereof specified below (the "Transaction"). This Confirmation constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
This Confirmation supplements, forms part of, and is subject to the ISDA
Master Agreement dated as of 1992, as amended and supplemented from time to
time, between Niagara Mohawk Power Corporation ("NIAGARA") and Project Orange
Associates, L.P. ("PROJECT ORANGE"). All provisions contained in the ISDA
Master Agreement govern this Confirmation except as expressly modified below.
I. PAYMENT OBLIGATIONS
THE OBLIGATIONS INCURRED PURSUANT TO THIS CONFIRMATION SHALL REQUIRE CASH
PAYMENTS AND SHALL IN NO EVENT BE INTERPRETED TO REQUIRE THE PURCHASE OR
SALE OF ELECTRICITY.
1.1 Payment on Settlement Date: Subject to Section 1.2 of this
Confirmation, on each Settlement Date, NIAGARA shall be obligated to
pay to PROJECT ORANGE the sum of the accrued and unpaid Fixed Payments
from and including the Interval commencing at 12:00 a.m. on the
immediately preceding Settlement Date to but excluding the Interval
commencing at 12:00 a.m. on the current Settlement Date, and PROJECT
ORANGE shall be obligated to pay to NIAGARA the sum of the accrued and
unpaid Floating Payments from and including the Interval commencing at
12:00 a.m. on the immediately preceding Settlement Date to but
excluding the Interval commencing at 12:00 a.m. on the current
Settlement Date. Such payment obligations shall be paid on a net basis
pursuant to Section 2(c) of the Agreement.
1.2 Payment Dispute Mechanism: If PROJECT ORANGE (or NIAGARA in the event
that PROJECT ORANGE or its designee is then acting as the Calculation
Agent), in good faith, disputes any part of any Notice of a net
payment obligation, PROJECT ORANGE (or NIAGARA in the event that
PROJECT ORANGE or its designee is then acting as the Calculation
Agent) shall provide a written
Page -1-
<PAGE>
explanation of the basis for such dispute and the undisputed portion
of the net payment obligations set forth in such Notice shall be paid
by the party obligated to pay such amounts no later than the
applicable Payment Date. Any underpayment or overpayment under this
Section 1.2 shall bear interest at the prime rate for U.S. currency as
published from time to time under "Money Rates" in The Wall Street
Journal, from and including the Payment Date any such underpayment or
overpayment was originally due to but excluding the date on which such
underpayment or overpayment is finally settled by the parties hereto,
or in the event the parties hereto are unable to settle such matter,
such matter shall be settled by an independent nationally recognized
public accounting firm mutually selected by the parties, whose
determination shall be final and binding on the parties hereto and
whose fees and expenses shall be borne by the party found to be at
substantial fault by such independent public accounting firm. No
Notice (or payment obligation thereunder) shall be subject to this
Section 1.2 unless a notice of dispute is given with respect thereto
within one year of the Payment Date applicable to such Notice.
II. DEFINITIONS
In addition to the terms defined in Section 14 of the Agreement, the
following terms shall have the following meanings for purposes of this
Confirmation:
Approved Assignee: Shall be (i) any person, having a long-term unsecured
debt credit rating of no less than Investment Grade issued by Moody's
Investors Service, Inc., or any successor thereof ("Moody's"), or Standard
& Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc.,
or any successor thereof ("S&P"), or the equivalent of such rating from
another nationally recognized rating agency; (ii) any Affiliate of PROJECT
ORANGE; provided (x) such Affiliate has a long-term unsecured debt credit
rating of no less than Investment Grade issued by Moody's or S&P or the
equivalent of such rating from another nationally recognized rating agency,
or (y) such Affiliate has a net worth calculated in accordance with
generally accepted accounting principles ("Net Worth"), that is equal to or
greater than the Net Worth of the entity making assignment or transfer (or
its Credit Support Provider, if it has one) on the date of such assignment
or transfer, or (z) PROJECT ORANGE unconditionally guarantees, pursuant to
a guarantee in form and substance reasonably satisfactory to NIAGARA, the
obligations of such Affiliate so assigned or transferred (in which case
PROJECT ORANGE shall be a Credit Support Provider and such guarantee shall
be a Credit Support Document); (iii) any of the other Gas IPPs party to a
Restated Contract (as defined in the definition of Proxy-Market Price
Period) with NIAGARA or their respective Affiliates; provided (x) such
other Gas IPP or such Affiliate has a long-term unsecured debt credit
rating of no less than Investment Grade issued by Moody's or S&P or the
equivalent of such rating from another nationally recognized rating agency,
or (y) such other Gas IPP or such Affiliate has a Net Worth that is equal
to or greater than the Net Worth of the entity making
Page -2-
<PAGE>
assignment or transfer (or its Credit Support Provider, if it has one) on
the date of such assignment or transfer, or (z) PROJECT ORANGE (in the case
of an assignment or transfer to another Gas IPP) or such other Gas IPP (in
the case of an assignment or transfer to any of its Affiliates)
unconditionally guarantees, pursuant to a guarantee in form and substance
reasonably satisfactory to NIAGARA, the obligations of such other Gas IPP
or such Affiliate, as the case may be, so assigned or transferred (in which
case PROJECT ORANGE or such Gas IPP, as applicable, shall be a Credit
Support Provider and such guarantee shall be a Credit Support Document); or
(iv) any other person who has a Net Worth that is equal to or greater than
the Net Worth of the entity making assignment or transfer (or its Credit
Support Provider, if it has one) on the date of such assignment or
transfer; provided evidence of such qualifying Net Worth is reasonably
demonstrated to NIAGARA;
Business Day: Notwithstanding Section 14 of this Agreement, shall mean any
day other than a Saturday, Sunday or other day on which banks in the State
of New York are authorized or required to be closed.
Competitive Transition Charge: Shall mean a charge, however designated, for
the recovery of strandable costs.
Consummation Date: Shall have the meaning set forth in Section 10.2 of the
Master Restructuring Agreement.
Contract Price: Shall mean for the first two Contract Years of the Term of
this Agreement $53.84/MWh and $54.62/MWh, respectively.
Contract Year: Shall mean the period commencing at 11:59:59 p.m. on the
Consummation Date and ending at 11:59:59 p.m. on the first anniversary of
the last day of the month in which the Consummation Date occurs and each
successive 12-month period thereafter to the extent applicable.
FERC: Shall mean the Federal Energy Regulatory Commission.
Fixed Payment: Shall mean an amount for each Interval equal to the NIAGARA
Payment Obligation for the current Interval.
Floating Payment: Shall mean an amount for each Interval equal to the sum
of (i) the IPP Payment Obligation for the current Interval, and (ii) if
applicable, the Market Capacity Price in $/MW multiplied by the weight
averaged capacity associated with the Notional Quantity of electricity for
each Interval occurring from and including the Interval commencing at 12:00
a.m. on the immediately preceding Settlement Date and to but excluding the
Interval commencing at 12:00 a.m. on the current Settlement Date.
Page -3-
<PAGE>
Gas IPPs: Shall mean those IPPs which produce power using primarily natural
gas.
Governmental Authority: Shall mean any federal, state, municipal or local
governmental authority, department, commission, board, agency, body or
official, whether executive, legislative, administrative, regulatory or
judicial, including but not limited to the FERC and the PSC.
Indexed Contract Price: Shall mean, beginning on the first day of the third
Contract Year of the Term of this Agreement and continuing thereafter, the
price calculated in accordance with the indexing formula set forth in
Schedule 1 attached hereto.
Initial Interval: Shall be the first Interval under this Agreement.
Interval: Shall be (i) 1 hour; provided that, in the event that following
the Proxy-Market Price Period, ISO/PE procedures require the use of an
alternate time period, such alternate time period shall automatically be
deemed to be incorporated in, and shall supersede, the 1 hour period set
forth herein, or (ii) such time period as NIAGARA and PROJECT ORANGE shall
mutually agree in writing; provided that such mutually agreed upon time
period may only be subsequently modified upon the prior written consent of
NIAGARA and PROJECT ORANGE.
IPP Payment Obligation: Shall be an amount equal to the product of the
Notional Quantity of electricity during the applicable Interval multiplied
by the Proxy-Market Price or the Market Price, as the case may be,
applicable to such Interval.
IPPs: Shall mean those independent power producers that are identified on
the signature pages and on Schedule A of the MRA.
ISO/PE: Shall mean a New York Independent System Operator and Power
Exchange.
ISO/PE Establishment Date: Shall be the first day of the month following
the calendar month in which the ISO/PE is established.
Investment Grade: Shall mean a senior unsecured debt rating as published by
S&P of not less than BBB- (or its then-equivalent) and an equivalent rating
as published by Moody's.
Market Capacity Price: Shall equal zero (i) prior to the ISO/PE
Establishment Date (as defined below) and (ii) thereafter at any time when
no separate market for capacity exists. Commencing on the first day of the
month following the calendar month in which the ISO/PE Establishment Date
occurs and only if there then exists a separate market for capacity, the
Market Capacity Price shall mean the market price paid to sellers for
capacity, at the region in which the PROJECT ORANGE's Project's bus bar is
located,
Page -4-
<PAGE>
established by the ISO/PE capacity auction; provided, however, that at such
time the parties shall conduct good faith negotiations and diligently
endeavor to mutually determine whether to continue the pricing referred to
in clause (i) of the definition of Proxy-Market Price for a mutually agreed
upon additional period of time. Following the Proxy-Market Price Period and
only if there then exists a separate market for capacity, the parties shall
conduct good faith negotiations and diligently endeavor to adjust the
applicable capacity on a basis consistent with the structure of such
separate market.
Market Price: Shall mean for any Interval commencing on the first day of
the month following the calendar month in which the ISO/PE Establishment
Date occurs, the day ahead locational based market price ("LBMP") paid to
sellers for energy, at the PROJECT ORANGE's Project's bus bar or the region
in which the PROJECT ORANGE's Project's bus bar is located, specified and
published by the ISO/PE; provided, however, that at such time the parties
shall conduct good faith negotiations and diligently endeavor to mutually
determine whether to continue the pricing referred to in clause (i) of the
definition of Proxy-Market Price for a mutually agreed upon additional
period of time.
MRA: Shall mean the Agreement dated July 9, 1997, as amended, by and
between NIAGARA and the independent power producers identified therein.
NIAGARA Payment Obligation: Shall mean an amount equal to the product of
the Notional Quantity of electricity during the applicable Interval
multiplied by the Contract Price or the Indexed Contract Price, as the case
may be, applicable to such Interval.
NIAGARA Restructuring: Shall mean NIAGARA's proposed corporate
restructuring and disaggregation in connection with PowerChoice proposal.
Notice: After calculating the payments owing pursuant to Section 1.1 of
this Confirmation, NIAGARA shall provide PROJECT ORANGE with notice (each,
a "Notice") of any net payment obligation resulting therefrom on or before
the 5th day of the first calendar month following the Settlement Date;
provided that, in the event that following the Proxy-Market Price Period,
ISO/PE procedures require an alternate date for payment notices, such
alternate notice date shall automatically be deemed to be incorporated in,
and shall supersede, the notice date set forth herein.
Notional Quantity: Shall mean, for each Interval, the sum of the contract
quantity of electricity (in MWh) for each hour or fraction thereof in such
Interval, for which PROJECT ORANGE and NIAGARA are contractually committed.
The contract quantities for Contract Years during the Proxy-Market Price
Period are set forth in Schedule 2A attached hereto. The contract
quantities for Contract Years after the Proxy-Market Price Period are set
forth in Schedule 2B attached hereto.
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<PAGE>
NYPSL: Shall mean the New York Public Service Law, as amended.
Payment Date: Shall occur each month commencing on the Commencement Date
and shall be the day of such month which is the later of (i) the 25th day
of the calendar month after the relevant Settlement Date, provided such day
is a Business Day, and if such day is not a Business Day on the first
Business Day following such 25th day, or (ii) the 15th day after the
receipt by PROJECT ORANGE of a Notice from NIAGARA, provided such day is a
Business Day, and if such is not a Business Day, on the first Business Day
following such 15th day. Notwithstanding the foregoing, in the event that
following the Proxy-Market Price Period ISO/PE procedures require alternate
dates for payments, such alternate payment dates shall automatically be
deemed to be incorporated in, and shall supersede, the payment dates set
forth herein.
Project: Shall be PROJECT ORANGE's natural gas-fired electric generating
plant located in the City of Syracuse, New York.
Proxy-Market Price: Shall mean for any Interval (i) prior to and until the
ISO/PE Establishment Date, NIAGARA's short-term avoided energy and capacity
costs at the voltage level of PROJECT ORANGE's Project bus bar, as stated
in its tariff approved by the PSC providing for the purchase of power from
PURPA qualifying facilities, which tariff is currently designated as S.C.-
6, as the same may be in effect from time to time or any successor tariff
thereto or such other price as may be agreed upon by NIAGARA and PROJECT
ORANGE during individual negotiations, and (ii) after the ISO/PE
Establishment Date, the Market Price and, if applicable, the Market
Capacity Price; provided, however, that at such time the parties shall
conduct good faith negotiations and diligently endeavor to mutually
determine whether to continue the pricing referenced in clause (i) above
for a mutually agreed upon additional period of time. The Proxy-Market
Price shall not be reduced or offset by any costs that NIAGARA may incur,
including, without limitation, costs for ancillary services, transmission
services or transition (or stranded) costs.
Proxy-Market Price Period: Shall mean the period commencing on the date of
this Agreement and ending on the first day of the calendar month following
the calendar month in which the ISO/PE power market satisfies the following
conditions for each of the previous six months:
(i) the volumes (in GWh) of energy sales and purchases transacted
through the ISO/PE in the day ahead market based upon the day
ahead pricing mechanism adopted by the FERC for the ISO/PE for
the Upstate Market shall be at least equal to those corresponding
with the months listed in the following table (which GWh shall
include the aggregate contract quantities of energy during such
period under all physical delivery Restated Contracts with Gas
IPPs and all physical delivery contracts
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<PAGE>
between NIAGARA and any IPP party to the Master Restructuring
Agreement entered into in lieu of Fixed Price Swap Contracts,
regardless of whether the IPPs parties thereto actually effected
such sales, and all sales on up to a monthly basis of energy
(other than sales through the ISO/PE) by the IPPs parties to the
Master Restructuring Agreement which are effectuated by NIAGARA
acting as agent for any such IPP);
--------------------------
Month GWh
--------------------------
January 4,611
--------------------------
February 4,136
--------------------------
March 4,327
--------------------------
April 3,827
--------------------------
May 3,788
--------------------------
June 3,974
--------------------------
July 4,278
--------------------------
August 4,160
--------------------------
September 3,793
--------------------------
October 3,856
--------------------------
November 3,896
--------------------------
December 4,361
--------------------------
and
(ii) only if a separate market for capacity then exists, a minimum of
5,700 MW of the capacity sales and purchases within the Upstate
Market have been transacted through the ISO/PE capacity auction
(which MW shall include the aggregate capacity associated with
the aggregate contract quantities of energy during such period
under all physical delivery Restated Contracts with Gas IPPs and
all physical delivery Contracts between NIAGARA and any IPP party
to the Master Restructuring Agreement entered into in lieu of
Fixed Price Swap Contracts, regardless of whether the IPPs
parties thereto actually effected such sales, and all sales on up
to a monthly basis of capacity (other than sales through the
ISO/PE) by the IPPs parties to the Mastering Restructuring
Agreement
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<PAGE>
which are effectuated by NIAGARA acting as agent for
any such IPP).
Notwithstanding the foregoing, the Proxy-Market Price Period may be
extended or terminated upon the mutual agreement of the Parties.
PSC: Shall mean the New York Public Service Commission.
PUHCA: Shall mean the Public Utility Holding Company Act of 1935, as
amended.
PURPA: Shall mean the Public Utility Regulatory Policies Act of 1978, as
amended.
Reasonable Best Efforts: Shall mean, with respect to any party, such
party's diligent pursuance of the course of action or result stated as
determined by such party itself in good faith, but shall not require such
party to pay any sum or other consideration or incur or assume any
liability or obligation that is not otherwise expressly required to be
paid, incurred or assumed pursuant to this Transaction, excluding (i)
normal and customary incidental out-of-pocket costs and expenses and (ii)
attorneys' fees.
Settlement Date: Shall be the last day of each calendar month during the
Term of this Transaction, commencing on the Commencement Date.
Term: The term of this Agreement shall commence at 11:59:59 p.m. on the
Consummation Date and end at 11:59:59 p.m. on the tenth anniversary of the
last day of the month in which the Consummation Date occurs.
Upstate Market: Shall mean collectively (i) the service territory retail
loads in the regions currently served by NIAGARA, New York State Electric &
Gas Corporation, Rochester Gas & Electric Corporation and Central Hudson
Gas and Electric Corporation (collectively, the "Utilities") and (ii)
wholesale sales transactions by any of the Utilities to third parties
outside the regions currently serviced by such Utility, excluding any such
sales which are effectuated pursuant to contracts having a term of at least
one year existing as of July 9, 1997 to the extent such contracts remain in
effect thereafter.
III. ASSIGNMENTS
3.1 Assignment by PROJECT ORANGE: Notwithstanding Section 5(b)(iv) and
Section 7 of the Agreement, upon delivery to NIAGARA of an
Acknowledgment of Assignment (as such term is defined below), PROJECT
ORANGE may assign or transfer this Agreement in whole or in part,
without the consent of NIAGARA (a) as collateral security for purposes
of securing indebtedness, or (b) to any Approved Assignee. PROJECT
ORANGE may split and assign the Notional Quantities of electricity and
Intervals to Approved Assignees, each in respect of a lesser Notional
Quantity and/or Intervals than the full amounts thereof hereunder,
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<PAGE>
provided that (a) each such assignment is for 50,000 MWh of
electricity per year or any integral multiples thereof and to the
extent that the remaining unassigned balance of the Notional Quality
of electricity hereunder for any such year is less than 50,000 MWh,
then for such remaining balance, (b) each such assignment is for a
period of at least one year, and (c) the sum of all assigned and
retained Notional Quantities of electricity and Intervals does not
exceed the total Notional Quantities of electricity and Intervals
hereunder. In connection with any assignment or transfer to an
Approved Assignee pursuant to clause (b) above, such Approved Assignee
must (1) execute and deliver to NIAGARA an acknowledgment of such
assignment or transfer in the form attached hereto as Schedule 3 (an
"Acknowledgment of Assignment"), which includes representations by
such Approved Assignee to NIAGARA comparable in scope to those
contained in Section 3 of the Agreement and Part 2 of the Schedule to
the Agreement, and (2) provide to NIAGARA an opinion of counsel with
respect to such Approved Assignee (and any Credit Support Provider for
it, if applicable) and the acknowledgment of such assignment
comparable in scope to that delivered by PROJECT ORANGE pursuant to
Part 3 of the Schedule to the Agreement. Except to the extent
expressly provided in any applicable guarantee, upon any such
assignment or transfer, PROJECT ORANGE shall be released and have no
further obligations to NIAGARA hereunder with respect to the assigned
or transferred Notional Quantities and/or Intervals. No assignments in
compliance with Section 3.1 shall be deemed to be a Credit Event Upon
Merger under Section 5(b)(iv) of the Master Agreement. NIAGARA shall
be entitled to rely in good faith upon any Acknowledgment of
Assignment delivered pursuant hereto.
3.2 Assignment by NIAGARA: Notwithstanding Section 5(b)(iv) and Section 7
of this Agreement, NIAGARA shall not assign its rights and obligations
hereunder except as expressly authorized under this Section 3.2. In
connection with any assignment to an authorized assignee pursuant to
this Section 3.2, such assignee must (1) execute and deliver to
PROJECT ORANGE an acknowledgment of such assignment which shall
include representations by such assignee to PROJECT ORANGE comparable
in scope to those contained in Section 3 of the Agreement and Part 2
of the Schedule to the Agreement, and (2) provide to PROJECT ORANGE an
opinion of counsel with respect to such assignee and the
acknowledgment of such assignment comparable in scope to that
delivered by PROJECT ORANGE pursuant to Part 3 of the Schedule to the
Agreement. No assignments in compliance with this Section 3.2 shall be
deemed to be a Credit Event Upon Merger under Section 5(b)(iv) of the
Master Agreement.
(a) NIAGARA Restructuring: In the event that NIAGARA restructures its
corporate structure or assets, including by creating any new
entities that hold significant assets, whether in connection with
the NIAGARA
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<PAGE>
Restructuring or otherwise, upon notice to PROJECT ORANGE (or its
assignee hereunder), this Agreement will be assigned to and
assumed by the entity or entities owning all or substantially all
of NIAGARA's electric transmission and distribution assets or, if
separated from NIAGARA's electric transmission assets pursuant to
such a restructuring, NIAGARA's electric distribution assets,
provided that, upon the effective date of the restructuring (i)
such assignee's performance under this Transaction is
unconditionally guaranteed, pursuant to a guarantee in form and
substance reasonably satisfactory to PROJECT ORANGE (or its
assignee hereunder), by each of the other entities arising out of
the restructuring, including any entity spun-off to NIAGARA's
shareholders or any Affiliate of NIAGARA holding significant
assets that were held by NIAGARA (or any subsidiary of NIAGARA)
prior to the restructuring, unless such assignee has a long-term
unsecured debt credit rating issued by Moody's, S&P or another
nationally recognized rating agency that is at least as favorable
as NIAGARA's long-term unsecured debt credit rating immediately
prior to the effective date of the restructuring, and (ii) if
such assignee is not the entity which will collect from customers
the Competitive Transition Charge approved by the PSC in
connection with the NIAGARA Restructuring, such assignee's
performance under this Transaction is unconditionally guaranteed,
pursuant to a guarantee in form and substance reasonably
satisfactory to PROJECT ORANGE (or its assignee hereunder), by
each of the entities which will collect from customers the
Competitive Transition Charge approved by the PSC.
(b) Third Party Assignment: Upon notice to PROJECT ORANGE (or its
assignee hereunder), NIAGARA may assign its rights and
obligations under this Agreement to any third party (ANIAGARA
Assignee") (except those parties referenced in Section 3.2(a)
above), provided that the NIAGARA Assignee has (i) received a
long-term unsecured debt credit rating by Moody's or S&P of at
least Investment Grade or the equivalent of such rating from
another nationally recognized rating agency, as of the date of
consummation of the assignment; or (ii) furnished PROJECT ORANGE
with such collateral security as may be reasonably acceptable to
PROJECT ORANGE in order to limit PROJECT ORANGE's credit risk in
connection with such assignment.
IV. FURTHER ASSURANCES
Subject to the terms and conditions contained herein, upon the request from
time to time of either party hereto, the other party shall promptly execute
and deliver or use its reasonable best efforts to cause to be executed and
delivered, such consents, approvals and other instruments, including,
without limitation, assignments of this Agreement as
Page -10-
<PAGE>
collateral, estoppel certificates and utility certificates, in form and
substance reasonably satisfactory to both parties and their respective
counsel to implement any financing or other material business transaction
undertaken by the requesting party.
V. QUALIFYING FACILITY MONITORING AND STATUS
5.1 Qualifying Facility Monitoring: NIAGARA shall have no contractual
right and hereby waives any other right which it might have under
state or federal law to demand information from PROJECT ORANGE, or any
other person, including but not limited to any Governmental Authority,
with respect to PROJECT ORANGE's status as a qualifying facility ("QF
Status") under state and/or federal law.
5.2 Qualifying Facility Status: NIAGARA acknowledges and agrees that
PROJECT ORANGE is not required to maintain a generating facility
pursuant to the terms hereof for the performance of its obligations
hereunder. Notwithstanding the foregoing, PROJECT ORANGE shall have
the right, but not the obligation, in its sole discretion to obtain
and/or maintain its QF Status. NIAGARA's rights and obligations
hereunder shall continue as a matter of contractual right, regardless
of whether PROJECT ORANGE maintains its QF Status. Any failure by
PROJECT ORANGE to comply with the requirements applicable to QF Status
under New York law (including compliance with NYPSL (S) 2(2-a)) shall
have no adverse impact on PROJECT ORANGE under this Transaction. In
the event PROJECT ORANGE wishes to qualify or perform as an Exempt
Wholesale Generator (as defined under Section 32 of PUHCA and FERC's
regulations promulgated thereunder, as the same may be amended,
modified or restated from time to time), NIAGARA shall cooperate with
(including, without limitation, by providing consents and affidavits),
and shall not take any action to oppose, impede or subvert, PROJECT
ORANGE's efforts to obtain appropriate regulatory exemptions and
approvals including market-based rate approval. Except to the extent
that the contract prices under this Transaction are or may be based
thereon, during the Term hereof, PROJECT ORANGE (i) shall waive any
statutory right it may have under Section 66-c of NYPSL pursuant to
which PROJECT ORANGE may demand a 6c per kWh minimum power purchase
rate from NIAGARA and (ii) shall waive, for itself and for the
successors and assigns of its Project with respect to such Project,
any statutory right PROJECT ORANGE may have under PURPA or NYPSL to
require NIAGARA to enter into a power purchase contract or otherwise
take the output of PROJECT ORANGE's Project; provided, however, that
until the end of the Proxy-Market Price Period, NIAGARA agrees, at
PROJECT ORANGE's request, to act as agent for PROJECT ORANGE (or, if
necessary to effectuate such sales to the New York Power Pool, by
purchase and resale of PROJECT ORANGE's capacity and energy, at no
cost to NIAGARA), for the sale on up to a monthly basis, of the
PROJECT ORANGE's Project's capacity and energy to the New York Power
Pool or any third party, in each case
Page -11-
<PAGE>
on a nondiscriminatory basis with respect to NIAGARA's or any third
party's capacity and energy, at no cost to PROJECT ORANGE. NIAGARA
agrees to use its Reasonable Best Efforts to effect such sales on the
most favorable terms, including price, to PROJECT ORANGE giving
consideration to the quantity, term and market conditions prevailing
at the time of sale. Nothing contained herein shall be construed to
constitute a waiver by PROJECT ORANGE of any other rights it may have
under PURPA, NYPSL or applicable law, including rights with respect to
back-up services, interconnection, reactive power or other similar
rights, whether or not a contract is required or desirable.
VI. CURTAILMENT
NIAGARA agrees that the performance of any of its obligations hereunder
shall in no event be subject to any curtailment of electricity under the
provisions of 18 C.F.R.(S)292.304 (f) (1997), or any subsequent or similar
rule or regulation adopted by the PSC or the FERC, or any order of the
PSC, the FERC, or any Governmental Authority interpreting or applying
those provisions of authorizing NIAGARA to reserve any rights under those
provisions.
VII. AMENDMENTS
In the event that NIAGARA restructures its corporate structure or assets,
including by creating any new entities that hold significant assets,
whether in connection with the NIAGARA Restructuring or otherwise, PROJECT
ORANGE (or its assignee hereunder) shall have the right to replace this
Agreement, as applicable, with power purchase and/or hedging contractual
arrangements substantially equivalent to those that are entered into
between the entity(ies) holding the transmission and/or distribution
assets of NIAGARA or which will collect from customers the Competitive
Transition Charge approved by the PSC and the entity(ies) holding the non-
nuclear generating assets of NIAGARA, whether or not such assets are spun-
off to NIAGARA's shareholders (a "Genco Contract"), provided that the
term, price and quantity under this Transaction shall not be altered
thereby, unless any of such terms are materially and expressly conditioned
by certain provisions in the Genco Contract, in which case appropriate and
equitable adjustments in such terms shall be mutually agreed upon by
NIAGARA or its assignee, as the case may be, and PROJECT ORANGE.
VIII. ACCOUNT DETAILED
Account for payments to NIAGARA:
Bank name: Citibank
Address: 399 Park Avenue
New York, New York 10022
ABA #: 021000089
Page -12-
<PAGE>
Account name: Niagara Mohawk Power Corporation
Account #: 40662754
Account for payments to PROJECT ORANGE:
Bank name: ABN LaSalle National Bank
Address: 135 South LaSalle Street
Chicago, IL 60603
ABA #: 071000505
Account name: POA Operating Account
Account #: 22-64153
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Sincerely,
NIAGARA MOHAWK POWER CORPORATION
By: _______________________
Name:
Title:
Confirmed as of the date first above written:
PROJECT ORANGE ASSOCIATES, L.P.
By: NCP Syracuse, Inc.
Its: General Partner
By: NCP Energy
Its: Attorney-In-Fact
By: ____________________________
Name: Bruce Levy
Title: President
Page -13-
<PAGE>
FORM OF
ACKNOWLEDGMENT OF ASSIGNMENT
This Acknowledgment of Assignment, dated as of _______________ (this
"Assignment"), is made by _______________ ("Assignee") in favor of Niagara
Mohawk Power Corporation ("Party A" or "NIAGARA") and is acknowledged by
______________ ("Party B" or "Counterparty").
W I T N E S S E T H:
WHEREAS, NIAGARA has entered into a certain ISDA Master Agreement,
including a Schedule thereto and an Indexed Price Swap Confirmation, each dated
as of ______________ (collectively, the "Agreement"), between NIAGARA and Party
B);
WHEREAS, capitalized terms used herein which are not otherwise defined
shall have the meanings given to such terms in the Agreement; and
WHEREAS, in accordance with Section 3.1 of the Confirmation, Party B has
assigned to assignee, and assignee has assumed from Party B, the obligations of
Party B under the Agreement relating to certain Notional Quantities of
electricity and Intervals subject of the Agreement (the "Assigned Obligations").
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignee hereby agrees as follows:
1. Assumption. Assignee hereby assumes and agrees to be solely liable
----------
for and to pay, honor and discharge when due, all Assigned Obligations of Party
B under the Agreement relating to the following Notional Quantities of
electricity and Intervals:
Notional Quantities Intervals
------------------- ---------
[to be supplied] [to be supplied]
2. Tax Representations. Assignee represents to NIAGARA as follow:
-------------------
(a) Payer Tax Representations. For the purpose of Section 3(e) of the
-------------------------
Agreement, it is not required by any applicable law, as modified
by the practice of any relevant governmental revenue authority,
of any Relevant Jurisdiction to make any deduction or withholding
for or on account of any Tax from any payment (other than
interest under Sections 2(e), 6 (d)(ii) and 6 (e) of the
Agreement) to be made by it to the other party under the
Agreement. In making this representation, it may rely on (i) the
accuracy of any representation made by the other party pursuant
to Section
Page -1-
<PAGE>
3(f) of the Agreement, (ii) the satisfaction of the agreement of
the other party contained in Section 4(a)(i) or 4(a)(iii) of the
Agreement and the accuracy and effectiveness of any document
provided by the other party pursuant to Section 4(a)(i) and
4(a)(iii) of the Agreement; and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d) of the
Agreement, provided that it shall not be a breach of this
representation where reliance is placed on clause (a)(ii) of this
Section 2 and the other party does not deliver a form or document
under Section 4(a)(iii) of the Agreement by reason of material
prejudice to its legal or commercial position.
(b) Payee Tax Representation. For the purpose of Section 3(f) of the
------------------------
Agreement, Assignee represents that it is a
__________________________.
3. Other Representations. Assignee represents to NIAGARA on the date
---------------------
hereof (and in the case of the representations in Section 3(f) hereof, at all
times until the termination of the Agreement) that:
(a) Basic Representations.
---------------------
(i) Status. It is duly organized and validly existing under
the laws of the jurisdiction of its organization or
incorporation and, if relevant under such laws, in good
standing;
(ii) Powers. It has the power to execute this Assignment and
any other documentation relating to this Assignment to
which it is a party, to deliver this Assignment and any
other documentation relating to this Assignment that it is
required by this Assignment to deliver and to perform its
obligation under this Assignment and has taken all
necessary action to authorize such execution, delivery and
performance;
(iii) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law
applicable to it, any provision of its constitutional
documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets
or any contractual restriction binding on or affecting it
or any of its assets;
(iv) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this
Assignment have been obtained and are in full force and
effect and all conditions of any
Page -2-
<PAGE>
such consents have been complied with; and
(v) Obligations Binding. Its obligations under
this Assignment constitute its legal, valid
and binding obligations, enforceable in
accordance with their respective terms
(subject to applicable bankruptcy,
reorganization, insolvency, moratorium or
similar laws affecting creditors' rights
generally and subject, as to enforceability,
to equitable principles of general
application (regardless of whether
enforcement is sought in a proceeding in
equity or at law)).
(b) Absence of Certain Events. No Event of Default or
Potential Event of Default or, to its knowledge,
Termination Event with respect to it has occurred and
is continuing and no such event or circumstance would
occur as a result of its entering into or performing
its obligations under this Assignment.
(c) Absence of Litigation. There is not pending or, to its
knowledge, threatened against it or any of its
Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental
body, agency or official or any arbitrator that is
likely to affect the legality, validity or
enforceability against it of this Assignment or its
ability to perform its obligations under this
Assignment.
(d) Accuracy of Specified Information. All applicable
information that is furnished in writing by or on
behalf of it to the other party and is identified for
the purpose of this Section 3(d) in the Schedule is, as
of the date of the information, true, accurate and
complete in every material aspect.
(e) Payer Tax Representation. Each representation specified
in Section 2 of this Assignment as being made by it for
the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation
specified in Section 2 of this Assignment as being made
by it for the purpose of this Section 3(f) is accurate
and true.
(g) Non-reliance. In connection with this Assignment and
any other documentation relating to the Agreement to
which it is a party or that it is required to deliver:
(i) it has consulted with its own legal, regulatory,
tax, business, investment, financial and
accounting advisors to the extent it has
Page -3-
<PAGE>
deemed necessary, and it has made its own
investment, hedging and trading decisions
(including decisions regarding the suitability of
any Transaction made pursuant to the Agreement)
based upon its own judgment and upon any advice
from such advisors as it has deemed necessary and
not upon any view expressed by the other party;
(ii) it is not relying on any representations (whether
written or oral) of the other party other than the
representations expressly set forth in the
Agreement and in any Conformation;
(iii) it has a full understanding of all the terms,
conditions and risks (economic and otherwise) of
the Agreement and each Transaction and is capable
of assuming and is willing to assume those risks;
(iv) it is entering into this Assignment, each
transaction and such other documentation as
principal, and not as agent or in any other
capacity, fiduciary or otherwise; and
(v) the other party is not acting as fiduciary or
financial, investment or commodity trading advisor
for it.
(h) Eligible Swap Participant. It is an Aeligible swap
participant" as defined in Rule 35.1(b) of the regulations
of the Commodity Futures Trading Commission, 17 C.F.R. (S)
35.1 (b) (2) (1993).
4. Notices. For purposes of Section 12(a) of the Agreement:
-------
Except as otherwise specified in a Notice, all notices or
communications to assignee shall be sent to:
[Name]
[Address]
Facsimile: [ ]
Attention:
5. Account Details. Accounts for payments to Assignee:
---------------
[to be supplied]
Page -4-
<PAGE>
IN WITNESS WHEREOF, Assignee has duly executed this Assignment as of the date
first written above.
[ASSIGNEE]
By:______________________________
Name:
Title:
Acknowledged as of the date
first written above.
[PARTY B]
By:______________________________
Name:
Title:
Page -5-
<PAGE>
SCHEDULE 1
PROJECT ORANGE ASSOCIATES, L.P.
INDEXING FORMULA
______________________________________________________________________________
ICP = CP * [(15% * (GC/GC\\o\\)) + (41% * (INF/INF\\o\\))] + CN
Where: ICP = The Indexed Contract Price.
CP = The Contract Price in the reference year (CP = $53.84/MWh).
GC = The average Niagara Border Spot Price for natural gas
(delivered to pipe as stated in U.S. dollars ) published by
Natural Gas Week in its Canadian Price Report first issue of
month.
GC\\o\\ = The average Niagara Border Spot Price for natural gas
(delivered to pipe as stated in U.S. dollars) published by
Natural Gas Week in its weekly Canadian Price Report for the
month in which the Consummation Date occurs.
INF = The Consumer Price Index - All Urban Consumers for New York
- Northern New Jersey - Long Island, All items, available on the
first day of the month from the US Department of Labor, Bureau of
Labor Statistics (base year 1982-84=100).
INF\\o\\ = The Consumer Price Index - All Urban Consumers for New
York - Northern New Jersey - Long Island, All items, available on
the first day of the month in which the Consummation Date occurs
from the US Department of Labor, Bureau of Labor Statistics (base
year 1982-84=100).
CN = as indicated below in $/MWh:
Contract Year CN
------------- -----
1 n/a
2 n/a
3 23.56
4 23.99
5 24.67
6 25.28
7 25.93
Page -6-
<PAGE>
SCHEDULE 1, Continued
PROJECT ORANGE ASSOCIATES, L.P.
INDEXING FORMULA
________________________________________________________________________________
Contract Year CN
------------- -----
8 26.77
9 27.42
10 27.70
Page -7-
<PAGE>
SCHEDULE 2A
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Contract Quantity Proxy Market Period (MWh/hr)
---------------------------------------------------------------------------------------
Annual
Contract Contract
Contract Quantity Price
Year (MWh) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ($/MWh)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 53.84
---------------------------------------------------------------------------------------
2 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 54.62
---------------------------------------------------------------------------------------
3 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
---------------------------------------------------------------------------------------
4 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
---------------------------------------------------------------------------------------
5 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
---------------------------------------------------------------------------------------
6 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
---------------------------------------------------------------------------------------
7 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
---------------------------------------------------------------------------------------
8 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
---------------------------------------------------------------------------------------
9 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
---------------------------------------------------------------------------------------
10 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For each Contract Year which is a leap year the Contract Quantity for the month
of February will be adjusted by a factor of 28 divided by 29.
I = Indexed Contract Price
Page -8-
<PAGE>
SCHEDULE 2B
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Quantity for Contract Years Following the Proxy Market Period (MWh/hr)
---------------------------------------------------------------------------------------
Annual
Contract Contract
Contract Quantity Price
Year (MWh) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ($/MWh)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 53.84
---------------------------------------------------------------------------------------
2 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 54.62
---------------------------------------------------------------------------------------
3 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
---------------------------------------------------------------------------------------
4 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
---------------------------------------------------------------------------------------
5 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
---------------------------------------------------------------------------------------
6 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
---------------------------------------------------------------------------------------
7 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
---------------------------------------------------------------------------------------
8 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
---------------------------------------------------------------------------------------
9 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
---------------------------------------------------------------------------------------
10 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For each Contract Year which is a leap year the Contract Quantity for the month
of February will be adjusted by a factor of 28 divided by 29.
I = Indexed Contract Price
Page -9-
<PAGE>
Exhibit 10.3
RESTATED
GAS SALE AND PURCHASE AGREEMENT
March 18, 1991
- --------------------------------------------------------------------------------
PROJECT ORANGE ASSOCIATES, L.P.
Buyer
- and -
NORANDA INC.
Seller
- and -
CANADIAN HUNTER EXPLORATION LTD.
Agent
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1 - DEFINITIONS
<S> <C> <C>
1.1 Definitions.............................................................................3
ARTICLE 2 - QUANTITIES
2.1 Purchased Quantity.....................................................................15
2.2 Source.................................................................................15
2.3 Maximum Quantity.......................................................................17
2.4 Delivery...............................................................................18
2.5 Daily Schedule.........................................................................20
2.6 Monthly Estimates......................................................................21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE 3 - PRICING
<S> <C> <C>
3.1 General................................................................................21
3.2 For Production, etc. Costs.............................................................21
3.3 For 16th Contract Year et seq..........................................................22
3.4 For Royalties..........................................................................24
3.5 For Transportation.....................................................................26
3.6 Import and Export Taxes................................................................27
3.7 Deferral of Payments...................................................................27
3.8 Fuel Gas for Transportation............................................................35
ARTICLE 4 - POINT OF DELIVERY
4.1 Point of Delivery......................................................................36
4.2 Additional Points of Delivery..........................................................37
ARTICLE 5 - MEASUREMENT AND QUALITY
5.1 Measurement............................................................................37
5.2 Quality................................................................................37
5.3 Quantities Resold......................................................................38
ARTICLE 6 EFFECTIVE DATE AND TERM
6.1 Effective Date.........................................................................38
6.2 Term...................................................................................38
ARTICLE 7 - REGULATORY REQUIREMENTS
7.1 Conditions.............................................................................39
ARTICLE 8 - PAYMENT
8.1 Payment................................................................................40
8.2 Officer's Certificate..................................................................40
8.3 Monthly Statement......................................................................41
8.4 Statements to Third Parties............................................................42
8.5 Payment of Taxes.......................................................................42
8.6 Records and Financial Statements.......................................................43
8.7 Exception to Amount Billed.............................................................44
8.8 Failure to Pay.........................................................................44
8.9 Delay in Statement.....................................................................44
8.10 Overcharges............................................................................44
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE 9 - FORCE MAJEURE
<S> <C> <C>
9.1 Effect.................................................................................45
9.2 Seller's Obligations...................................................................46
9.3 Failure to Deliver.....................................................................46
9.4 Buyer's Right to Terminate after 150 Days..............................................48
9.5 Buyer's Right to Terminate after 60 Days...............................................49
9.6 Notice of Termination..................................................................49
9.7 Repayment by Seller....................................................................49
9.8 Definition.............................................................................51
9.9 Lack of Funds..........................................................................53
9.10 Labour Disputes........................................................................53
ARTICLE 10 - TRANSPORTATION
10.1 To Point(s) of Delivery................................................................53
10.2 From Point(s) of Delivery..............................................................54
10.3 Form and Substance of Contracts........................................................54
10.4 Obligations............................................................................54
10.5 Execution of Contracts.................................................................55
10.6 Use of Transportation by Seller........................................................55
ARTICLE 11 - TERMINATION
11.1 Rights to Terminate....................................................................56
ARTICLE 12 - DEFAULT
12.1 Default by Seller......................................................................56
12.2 Default by Buyer.......................................................................64
ARTICLE 13 - INDEMNIFICATION
13.1 By Seller..............................................................................66
13.2 By Buyer...............................................................................67
ARTICLE 14 - MISCELLANEOUS COVENANTS, REPRESENTATIONS AND WARRANTIES OF SELLER
14.1 Mortgages, etc.........................................................................67
14.2 Title..................................................................................69
14.3 Financial Statements...................................................................69
14.4 Adverse Change.........................................................................70
14.5 Execution and Delivery.................................................................70
14.6 Right and Authority....................................................................71
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE 15 - MARKETING
<S> <C> <C>
15.1 Sales to Third Parties by Seller.......................................................71
15.2 Commencement of Contract Year..........................................................72
15.3 Proceeds of Sales to Third Parties.....................................................72
15.4 Statements re Seller's Sales...........................................................73
15.5 Adjustments............................................................................73
15.6 Sales to Third Parties by Buyer........................................................73
15.7 Statements re Buyer's Sales............................................................75
ARTICLE 16 ARBITRATION
16.1 Arbitration............................................................................76
ARTICLE 17 - MISCELLANEOUS
17.1 Entire Agreement; Amendments...........................................................78
17.2 Enurement..............................................................................78
17.3 Rights and Remedies....................................................................79
17.4 Waiver.................................................................................79
17.5 Captions...............................................................................80
17.6 Notices................................................................................80
17.7 Change of Address......................................................................81
17.8 Severability...........................................................................81
17.9 Currency...............................................................................81
17.10 Time...................................................................................82
17.11 Exhibits...............................................................................82
</TABLE>
-iv-
<PAGE>
RESTATED
GAS SALE AND PURCHASE AGREEMENT
-------------------------------
THIS AGREEMENT restates as of the 18th day of March, 1991 that certain Gas
Sales and Purchase Agreement made and entered into as of the 8th day of
December, 1987, by and between GAS ALTERNATIVE SYSTEMS, INC., a New York
corporation, to whom PROJECT ORANGE ASSOCIATES, L.P., a Delaware limited
partnership (hereinafter referred to as "Buyer"), is the successor by
assignment, and NORANDA INC., an Ontario corporation (hereinafter referred to as
"Seller"), as heretofore amended by the following agreements and as hereby
amended:
(a) Assignment and Assumption Agreement dated as of December 29, 1987 by and
between GAS ALTERNATIVE SYSTEMS, INC. and G.A.S. ORANGE DEVELOPMENT, INC.,
a New York corporation (hereinafter referred to as "G.A.S.");
(b) Amendment to Gas Sales and Purchase Agreement made and entered into on
August 18, 1988 between G.A.S. and Seller;
(c) Amendment to Gas Sales and Purchase Agreement made and entered into on
October 11, 1988 by and between G.A.S. and Seller;
(d) Assignment and Assumption Agreement dated as of November 16, 1988 by and
between G.A.S. and Buyer;
(e) Amendment to Gas Sales and Purchase Agreement made and entered into as of
January 11, 1989 between G.A.S. and Seller;
(f) Amendment to Gas Sales and Purchase Agreement made and entered into as of
May 11, 1989 between G.A.S. and Seller;
(g) Amendment to Gas Sales and Purchase Agreement made and entered into as of
August 1, 1989 between G.A.S. and Seller; and
(h) Amendment to Gas Sales and Purchase Agreement made and entered into as of
November 1, 1989 between Buyer and Seller.
WITNESSETH:
WHEREAS Seller has and will have quantities of natural gas, herein
specified, which can and will be made available to Buyer;
AND WHEREAS Buyer has or will have certain cogeneration facilities which
can and will use the quantities of natural gas, herein specified, and Buyer
desires to purchase and accept such quantities from Seller;
<PAGE>
AND WHEREAS CANADIAN HUNTER EXPLORATION LTD., an Alberta corporation
(hereinafter referred to as "CHEL"), is Seller's wholly-owned subsidiary and has
acted and will in all respects continue to act as Seller's authorized agent in
all matters affecting or relating to this Agreement, unless and until Seller
otherwise notifies Buyer pursuant to this Agreement, and CHEL has executed this
Agreement for the purpose of acknowledging its role as Seller's authorized
agent;
NOW THEREFORE in consideration of the mutual agreements, covenants and
conditions herein contained, Seller and Buyer hereby agree as follows.
ARTICLE 1
DEFINITIONS
-----------
1.1 Definitions
-----------
When used in this Agreement, whether in the singular or the plural, the
following words and terms shall have the following meanings:
(a) Account Balance: on any particular Day, the total of all funds held in the
---------------
Deferral Account;
(b) Accumulated Deposit Deficiency: on any particular Day, the amount by which
------------------------------
(x) the aggregate of (1) all Quarterly Deductions theretofore made
and (2) all interest accrued pursuant to subsection 3.7(c) minus (3)
all withdrawals and payments from the Deferral Account, exceeds
(y) the Account Balance;
(c) Accumulated Payment Deficiency: on any particular Day,
------------------------------
(x) the aggregate of all amounts required to be paid by Buyer to
Seller pursuant to each of subsections 3.7(f), (g) and (h), but not
paid when due, less
(y) the aggregate of (1) all payments theretofore made by Buyer to
Seller pursuant to each of subsections 3.7(j) and (l) and (2) all
reductions effected by Seller pursuant to subsections 3.7(l) and (o)
(where Buyer has not made a payment contemplated in subsection 3.7(l)
or 12.2(a));
(d) Bank: Algemene Bank Nederland N.V. as agent, or such other bank as shall
----
from time to time be designated as agent for the primary lender of the
Senior Debt;
(e) Btu: one (1) British Thermal Unit, being the amount of energy required to
---
raise the temperature of one (1) pound of water one degree (1 degree)
Fahrenheit at sixty degrees (60 degrees) Fahrenheit, or the volume of
natural gas having the said amount of energy;
-2-
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(f) Business Day: each Monday, Tuesday, Wednesday, Thursday and Friday which
------------
is not a legal holiday in the State of New York or the Province of Alberta
or, for the purposes of determining the Libor Rate, in England;
(g) Buyer's Facilities: those cogeneration and related facilities (including
------------------
any facilities for the transportation or storage of natural gas) to be
constructed by Buyer at or near Syracuse, New York and to be used by Buyer
in the production of both thermal energy for use by Syracuse University and
electricity for use by Niagara Mohawk Power Corporation;
(h) Consumed Amount: at any particular time, the aggregate number of MMBtu's
---------------
of natural gas:
(i) theretofore actually delivered hereunder by Seller to Buyer at
the Point(s) of Delivery;
(ii) theretofore resold by Buyer pursuant to sections 2.4(c) and
9.3(b);
(iii) constituting natural gas theretofore sold and delivered
hereunder pursuant to subsection 3.8(d);
(iv) theretofore sold by Seller pursuant to sections 9.3(c) and 15.1;
(v) theretofore added to and deemed to form part of the Consumed
Amount pursuant to subsection 12.1(c);
(vi) theretofore exchanged by Buyer pursuant to section 15.6; and
(vii) which is the quotient of (x) the amount of each refund (made at
the option of the Buyer pursuant to subclause 9.3(a)) of a
portion of the lump-sum payment made under section 8.1 divided by
(y) $0.73333, in respect of each such refund theretofore made;
(i) Contract Year: the first Contract Year shall be the period beginning at
-------------
the beginning of the Initial Delivery Day through and including the last
Day of the Month in which the Initial Delivery Day occurs and continuing
for a period of twelve (12) consecutive Months thereafter; the second
Contract Year and each successive Contract Year except the final Contract
Year shall be the period of twelve (12) consecutive Months commencing with
the end of the preceding Contract Year; and the final Contract Year shall
be a period of eleven (11) consecutive months commencing with the end of
the penultimate Contract Year plus the period if any from the first Day of
the twelfth consecutive Month until immediately prior to the beginning of
the Day on which the twentieth (20th) anniversary of the Initial Delivery
Day falls;
-3-
<PAGE>
(j) Day: the 24 hour period commencing at 7:00 a.m. (Eastern Standard Time) on
---
one calendar day and ending at 7:00 a.m. (Eastern Standard Time) on the
following calendar day;
(k) Debt Repayment Date: each quarterly date on which all or part of the
-------------------
principal of the Senior Debt is to be repaid in accordance with the Senior
Debt Documents and, if all Senior Debt is repaid, each March 31, June 30,
September 30 and December 31 in each calendar year;
(l) Debt Repayment Period: with respect to the first Debt Repayment Date, the
---------------------
period since the Initial Delivery Date and with respect to each subsequent
Debt Repayment Date, the period elapsed since the immediately preceding
Debt Repayment Date;
(m) Deferral Account: the account established for the purposes of section 3.7
----------------
in Buyer's name at the Bank;
(n) Deferral Balance: on any particular Day,
----------------
(x) the aggregate (1) of all Quarterly Deductions theretofore made
(2) all interest accrued pursuant to subsection 3.7(c) (other than
interest which has theretofore become part of the Accumulated Payment
Deficiency) and (3) the Accumulated Payment Deficiency, less
(y) the aggregate of (1) all payments theretofore made by Buyer to
Seller pursuant to each of subclauses 3.7(f), (g), (h) and (l) (other
than payment made in reduction of the Accumulated Payment Deficiency)
and (2) all reductions made by Seller pursuant to subsections 3.7(l)
and (o) (where Buyer has not made a payment or deposit as contemplated
in subsection 3.7(l) or 12.2(a));
(o) Deferral Ratio: on any particular Day, the quotient obtained by dividing
--------------
(x) the Deferral Balance by (y) the Entitlement Value;
(p) Deferred Payment: $470,000 or such lesser amount as is contemplated in the
----------------
first sentence of subsection 3.7(e);
(q) Entitlement Value: the product obtained by multiplying (x) the Unconsumed
-----------------
Entitlement by (y) $0.73333;
(r) Financial Statements: the balance sheet of Buyer as at the end of the
--------------------
particular financial year and statements of income, retained earnings,
changes in financial position and New Cash Flow for such year, prepared in
accordance with generally accepted accounting principles consistently
applied, stating in comparative form and on a consistent basis (except
where noted and quantified) the respective figures as at the end of and for
the previous year;
-4-
<PAGE>
(s) Fuel Gas: natural gas for compressor fuel to transport natural gas to be
--------
sold and delivered hereunder to Buyer from the place of production to the
Point(s) of Delivery;
(t) Initial Delivery Day: the day of initial deliveries of natural gas by
--------------------
Seller to Buyer or to one or more third parties pursuant to Section 15.2 or
Section 15.6;
(u) Libor Rate: an annual rate of interest equal to the rate of interest
----------
(rounded upwards to the nearest one-sixteenth of one percent) at which
deposits of U.S. dollars for a period of 90 days, and in an amount
substantially similar to the particular amount on which interest is to be
calculated as provided herein, are offered to the principal office of
Canadian Imperial Bank of Commerce in London, England by leading banks in
the London Interbank Euro-Currency Market, at approximately 11:00 a.m.,
London time, determined on the day which is two Business Days prior to
January 1, April 1, July 1 and October 1 in each calendar year, which rate
shall apply during the three consecutive calendar months commencing two
Business Days after the determination as aforesaid;
(v) Loan Rate: the annual rate of interest equal to:
---------
(i) the rate of interest that is from time to time charged to Buyer
with respect to its outstanding Senior Debt, including a pro rata
share of any and all closing fees, agent's fees, costs of credit
hedging arrangements and other similar costs and charges imposed
or required to be paid pursuant to the terms of the instruments
governing such Senior Debt as a charge for or as a condition of
the extension of the credit represented by such Senior Debt; or
(ii) if and for so long as no amount is outstanding as Senior Debt,
the rate of interest that is one percentage point above the rate
of interest published in The Wall Street Journal as "Prime Rate:
the base rate on corporate loans at large US money centre
commercial banks";
(w) Maximum Annual Quantity: the number of MMBtu's of natural gas calculated
-----------------------
in accordance with subsection 2.3(b), or (c), as the case may be;
(x) Maximum Daily Quantity: thirty thousand (30,000) MMBtu's of natural gas;
----------------------
(y) Maximum Entitlement: one hundred and twenty million (120,000,000) MMBtu's
-------------------
of natural gas;
(z) MMBtu: one million (1,000,000) Btu's;
-----
(aa) Month: the period beginning at 7:00 a.m. on the first day of a calendar
-----
month and ending at 7:00 a.m. on the first day of the following calendar
month;
(bb) Net Cash Flow: in respect of a Debt Repayment Period, Buyer's cash
-------------
receipts less the aggregate of:
-5-
<PAGE>
(i) debt service in connection with Senior Debt (provided that any
such amounts which are due and payable solely by virtue of an
acceleration shall not be subtracted from cash receipts for
purposes of determining Net Cash Flow);
(ii) all amounts required to be and actually paid for or in connection
with the operation and maintenance of the Buyer's Facilities,
including amounts to be paid to suppliers and transporters of
consumables (but excluding the payment of any bonuses to any
operators, any management or other fees to G.A.S., Adam H. Victor
or any general partner of Buyer or to any entity controlled by,
under common control with or which controls either G.A.S., Adam
H. Victor or any such general partner, or any other similar
payments or fees, except to the extent such bonuses or fees to
operators or general partners are treated under the Senior Debt
Documents as operating expenses which Buyer may pay out of its
revenues prior to the payment of interest on Senior Debt);
(iii) all fees, charges and other amounts required to be and actually
paid in connection with Senior Debt, including payments to any
reserve fund required by such Senior Debt (less all amounts
released to Buyer from any such reserve fund), except any
voluntary prepayments of principal and payments in the nature of
additional interest determined as a percentage of net income or
revenues of Buyer or in any other manner contingent upon the
operations of Buyer;
(iv) all amounts required to be paid and actually paid or set aside
for payment of real property taxes (or payments to municipal
authorities in lieu thereof) with respect to all or part of
Buyer's Facilities or with respect to gross receipts, franchise
or other similar taxes; and
(v) all amounts required to be and actually paid for Buyer's
reasonable expenses of administration and overhead (other than to
or for the benefit of G.A.S., Adam H. Victor or any general
partner of Buyer, or any entity controlled by, under common
control with or which controls either G.A.S., Adam H. Victor or
any such general partner, except to the extent that such amounts
are treated under the Senior Debt Documents as operating expenses
which Buyer may pay out of its revenues prior to the payment of
interest on Senior Debt);
(bb1) Noranda Financial Statements: the consolidated balance sheets of Seller
----------------------------
as at the end of the particular financial year and consolidated statements
of earnings and retained earnings and consolidated statements of changes in
financial position for such year, prepared in accordance with generally
accepted accounting principles consistently applied, stating in comparative
form and on a consistent basis (except where noted and quantified) the
respective figures as at the end of and for the previous year;
-6-
<PAGE>
(cc) NOVA: NOVA Corporation of Alberta;
----
(dd) Permitted Investments:
---------------------
(i) direct obligations of the United States of America (including
obligations issued or held in book-entry form on the books of the
Department of the Treasury of the United States of America) and
obligations the timely payment of the principal of and interest
on which are fully guaranteed by the United States of America;
(ii) obligations, debentures, notes and other evidence of indebtedness
issued or guaranteed by the Export-Import Bank of the United
States or the Federal Housing Administration or other agency or
instrumentality of the United States;
(iii) interest-bearing demand and time deposits (including
certificates of deposit) which are either (A) insured by the
Federal Deposit Insurance Corporation, or (B) held in banks and
savings and loan associations whose general obligations are rated
at least "AA" or equivalent by Standard & Poor's Corporation
("S&P") or Moody's Investors Services, Inc. ("Moody's"), or if
not so rated, secured at all times, in the manner and to the
extent provided by law, by collateral security described in
subsection 1.1(ee) (i) or (ii) of a market value or no less than
the amount of moneys so invested;
(iv) commercial paper rated (on the date of acquisition thereof) at
least A-1 or P-1 or equivalent by S&P or Moody's respectively (or
having an equivalent rating by another nationally recognized
credit-rating agency of similar standing if neither S&P nor
Moody's is then in the business of rating commercial paper),
maturing not more than 270 days from the date of creation
thereof; or
(v) any corporate evidence of indebtedness rated at least "A-" or
equivalent by S&P or Moody's;
(ee) Point(s) of Delivery: the point (or points, if additional points of
--------------------
delivery are designated pursuant to section 4.2) at which natural gas other
than Fuel Gas is delivered hereunder;
(ff) Promissory Note: a promissory note made by Buyer in the form attached
---------------
hereto as Exhibit B;
(gg) Purchase Money Mortgage: any mortgage, charge, hypothec, pledge or other
-----------------------
security or encumbrance created upon any real or personal property acquired
by Seller after the date of this Agreement (or previously acquired and
substantially unimproved) to secure or securing the whole or any part of
the purchase price of such property (or, in the case of previously acquired
and substantially unimproved property, the cost of the improvement
-7-
<PAGE>
thereof) or the repayment of money borrowed to pay the whole or any part of
such purchase price or cost or any Vendor's privilege or lien on such
property securing all or any part of such purchase price or cost, including
title retention agreements and leases in the nature of title retention
agreements;
(hh) Quarterly Deduction: $470,000 or such lesser amount as is contemplated in
------------------
the third sentence of subsection 3.7(b);
(ii) Regularly Scheduled Outage: a shutdown or partial shutdown of Buyer's
--------------------------
Facilities that Buyer schedules in the normal course of business for
purposes of routine inspection, maintenance and repair of Buyer's
Facilities;
(jj) Replacement Contract: shall have the meaning attributed thereto in
--------------------
subsection 12.1(d);
(kk) Scheduled Daily Quantity: each daily quantity of natural gas of which
------------------------
Seller is advised by Buyer pursuant to subsection 2.5(a);
(ll) Seller's Shareholders Equity: at any date, the aggregate of the dollar
----------------------------
amount of the outstanding share capital of Seller, the amount, without
duplication, of any surplus, whether contributed or capital, and retained
earnings, subject to any foreign exchange translation adjustment, all as
set forth in the most recent audited consolidated balance sheet of Seller;
(mm) Senior Debt: indebtedness to one or more financial institutions for money
-----------
borrowed, the aggregate outstanding principal amount of which will at no
time exceed $235,500,000 during construction of Buyer's Facilities and
$200,000,000 following equity infusion, substantially all of the proceeds
of which are designated for use in connection with the construction,
development, improvement, expansion, alteration, maintenance, repair,
replacement, or operation, or for costs of the development of Buyer's
Facilities, or for refinancing of any indebtedness constituting Senior
Debt;
(nn) Senior Debt Documents: the documents evidencing the Senior Debt;
---------------------
(oo) Substitute Supplies: substitute supplies of natural gas or an alternative
-------------------
fuel purchased by Buyer to replace quantities of natural gas which Seller
is obligated but unable to sell and deliver to Buyer at the Point(s) of
Delivery by reason of an event of force majeure, as defined in Article 9,
or by reason of a default by Seller, as contemplated by section 12.1, or
which cannot be delivered to Buyer's Facilities from the Point(s) of
Delivery by reason of an event of force majeure, as defined in Article 9;
(pp) TCPL: TransCanada PipeLines Limited;
----
(qq) Threshold Data: means the Day on which the Deferral Balance first equals
--------------
or exceeds $11,280,000; and
-8-
<PAGE>
(rr) Unconsumed Entitlement: at any particular time, the quantity of natural
----------------------
gas, expressed in MMBtu's, equal to the difference, if any, between
(x) the Maximum Entitlement, and
(y) the sum of the Consumed Amount and the aggregate of all reductions
in the Unconsumed Entitlement made pursuant to subsections 3.7(l) and
12.2(a).
ARTICLE 2
QUANTITIES
----------
2.1 Purchased Quantity
------------------
During the term of this Agreement, and subject to the terms and conditions
of this Agreement, Seller shall make the Unconsumed Entitlement available for
sale and delivery to Buyer at the Point(s) of Delivery. Seller may at its
option purchase natural gas from third parties for sale and delivery hereunder.
2.2 Source
------
During the term of this Agreement, Buyer shall not use in Buyer's
Facilities natural gas purchased from any person other than Seller except in the
following circumstances:
(a) where and for so long as Seller fails, for any reason whatsoever, including
the occurrence of an event of force majeure or Seller's default, to deliver
to the Point(s) of Delivery the quantity of natural gas that Buyer may
nominate under this Agreement, in which case Buyer shall be entitled to use
Substitute Supplies;
(b) where and for so long as, by reason of the occurrence of an event of force
majeure, the quantity of natural gas that Buyer may nominate under this
Agreement cannot be delivered from the Point(s) of Delivery to Buyer's
Facilities, in which case Buyer shall be entitled to use Substitute
Supplies;
(c) where and for so long as the pipeline company or local distribution company
which delivers natural gas directly to Buyer's Facilities shall have
delivered to Buyer a monthly quantity of natural gas in excess of the
quantity that Buyer shall have nominated to Seller under this Agreement,
provided that Buyer shall use reasonable efforts to keep any such excess
deliveries to the minimum quantity practicable in the circumstances;
(d) where and for so long as, pursuant to the terms and conditions set forth in
section 15.6, natural gas purchased from Seller is delivered to one or more
third parties in exchange, directly or indirectly, for the supply to Buyer
of fuel to be consumed at Buyer's Facilities;
(e) where and for so long as, for any reason, the quantity of natural gas
required by Buyer for consumption in Buyer's Facilities for any Day exceeds
the greater of
-9-
<PAGE>
(x) the quantity of natural gas that Buyer has nominated for such
Day, or
(y) 17,250 MMBtu's; or
(f) where, for so long as and to the extent that, for any reason, the quantity
of natural gas required by Buyer for consumption in Buyer's Facilities
exceeds the quantity of natural gas that Seller is obligated to make
available to Buyer hereunder.
2.3 Maximum Quantity.
----------------
(a) Subject to the other provisions of this Agreement, including without
limitation the limitations as to Maximum Annual Quantity set forth in
subsections 2.3(b) and (c), Seller shall make the Maximum Daily Quantity
available for delivery to Buyer at the Point(s) of Delivery on each Day during
the term of this Agreement.
(b) Subject to the other provisions of this Agreement, during each of the
first five Contract Years, Seller shall make available to Buyer at the Point(s)
of Delivery a Maximum Annual Quantity equal to the lesser of the following
numbers of MMBtu's:
(i) 9,000,000; and
(ii) 7,500,000 + [(5,000,000 + [7,500,000 x CY]) - CA]
where CY = the number of completed Contract Years, and
CA = the Consumed Amount as at the end of the most recently
completed Contract Year.
(c) Subject to the other provisions of this Agreement, during each of the
sixth and subsequent Contract Years, Seller shall make available to Buyer at the
Point(s) of Delivery a Maximum Annual Quantity equal to the lesser of the
following numbers of MMBtu's:
(i) 9,000,000; and
(ii) 8,500,000 + [(42,500,000 + [8,500,000 x CY]) - CA]
where CY = the number of completed Contract Years less 5, and
CA = the Consumed Amount as at the end of the most recently
completed Contract Year.
2.4 Delivery
--------
It is understood that Buyer's ability to accept delivery of natural gas
from Seller at the Point(s) of Delivery may be interrupted from time to time as
a result of an outage at Buyer's Facilities, in which case the following
procedures shall apply:
-10-
<PAGE>
(a) In the event of a Regularly Scheduled Outage, Buyer shall use its best
efforts to provide Seller with whatever advance notice is reasonably
practicable in the circumstances and, in any event, Buyer shall provide
Seller with at least thirty (30) Days notice. Such notice shall specify
the time and Day on which Buyer's Facilities will be taken out of service,
the quantity of natural gas, if any, Buyer shall require during the
Regularly Scheduled Outage and the time and the Day on which full
deliveries of natural gas are to be resumed. Seller shall suspend or
reduce, as appropriate, deliveries of natural gas to Buyer at the Point(s)
of Delivery starting on the Day and at the time specified in Buyer's
notice, provided that Seller shall not be required to suspend or reduce
such deliveries prior to the expiry of thirty (30) Days following the
receipt of Buyer's notice. If there is a change in the duration of a
Regularly Scheduled Outage, Buyer shall promptly notify Seller of the new
Day and time on which full deliveries are to be resumed. Seller shall
resume or increase, as appropriate, its daily deliveries of natural gas at
the Point(s) of Delivery on the Day and at the time specified in Buyer's
notice, provided that Seller shall not be required to resume or increase
its daily deliveries until the expiry of forty-eight (48) hours following
the receipt of Buyer's notice.
(b) If for any reason other than a Regularly Scheduled Outage, Buyer's
Facilities are unable to consume all or a portion of the Scheduled Daily
Quantities for one or more remaining Days of the Month, Buyer shall so
notify Seller. Within forty-eight (48) hours following receipt of said
notice, or at such later Day and time as may be specified in said notice,
Seller shall suspend or reduce, as appropriate, deliveries of gas at the
Point(s) of Delivery in accordance with Buyer's notice. Seller shall use
its best efforts to resume or increase, as appropriate, its daily
deliveries of natural gas to the Point(s) of Delivery on the Day and at the
time specified in Buyer's notice but in no event shall Seller be required
to resume or increase its daily deliveries within less than forty-eight
(48) hours following receipt of Buyer's notice.
(c) If for any reason Buyer's Facilities are unable to receive or consume all
or any portion of the Scheduled Daily Quantities for one or more remaining
Days of the Month, Buyer shall have the option of reselling to one or more
third parties which are regularly and substantially engaged in the
development, production and/or transportation or distribution of oil and/or
natural gas a daily quantity of natural gas delivered to Buyer at the
Point(s) of Delivery not exceeding the portion of the Scheduled Daily
Quantities not delivered to Buyer's Facilities. Buyer shall provide Seller
with written notice of Buyer's election to resell such quantities,
specifying the quantities to be resold, the period of time over which the
sale of such quantities is to take place and the name and business address
of the third party purchasing the quantities of natural gas. Buyer shall
provide Seller with as much advance notice of its election as is feasible
under the circumstances. If at the end of such period Buyer's Facilities
continue to be unable to receive or consume all or any portion of the
Maximum Daily Quantity, as specified in section 2.3, Buyer shall have the
option of continuing to resell to one or more such third parties a daily
quantity of natural gas not to exceed the Maximum Daily Quantity upon
written notice to Seller, which notice shall specify the quantities to be
resold, the period of time over which the sale of such quantities is to
take place and the name and business address of the third party purchasing
-11-
<PAGE>
the quantities of natural gas. When Buyer's Facilities return to service
or are able to receive and consume the full amount of Scheduled Daily
Quantities, Buyer shall use reasonable efforts to cease the resale of
natural gas as soon as possible.
2.5 Daily Schedule
--------------
(a) Buyer shall advise Seller no less than seven (7) Days prior to the
first Day of each Month during the term of this Agreement of the schedule of
daily quantities of natural gas to be delivered by Seller at the Point(s) of
Delivery on each Day, not to exceed the Maximum Daily Quantity, during such
Month. Buyer shall not be required to advise Seller as aforesaid in respect of
any period during which Seller is unable to deliver or Buyer is unable to
consume natural gas hereunder as the result of the occurrence of an event of
force majeure.
(b) Buyer shall during any Month be entitled to request changes in
Scheduled Daily Quantities if appropriate to meet Buyer's needs. If Buyer makes
such a request, Seller shall use reasonable efforts to increase or decrease
Scheduled Daily Quantities in order to meet such requests.
2.6 Monthly Estimates
-----------------
Buyer shall provide Seller no less than seven (7) Days prior to the first
Day of each Month during the term of this Agreement with a preliminary estimate
of the total monthly quantity to be nominated by Buyer for the particular Month
and the succeeding two (2) Months. Differences between Buyer's actual Scheduled
Daily Quantities provided pursuant to section 2.5 and its preliminary estimate
shall be not be considered a default under or breach of this Agreement.
ARTICLE 3
PRICING
-------
3.1 General
-------
The Maximum entitlement shall be paid for in accordance with the provisions
of Article 8. In addition to the payment contemplated in section 8.1, Buyer
shall pay to Seller, as part of the price for the Maximum Entitlement, the
amounts provided for in sections 3.2, 3.3, 3.4 and 3.5.
3.2 For Production, etc. Costs
--------------------------
Buyer shall also pay to Seller, as part of the price for natural gas
delivered hereunder, an amount in respect of production, gathering and
processing costs incurred by Seller. The said amount shall be $0.3226 per MMBtu
delivered and measured into the pipeline facilities for NOVA until December 31,
1990. Subject to section 3.3, of the first Day of each particular calendar year
subsequent to 1990, the said amount to be paid for the particular subsequent
calendar year shall be escalated by an amount equal to the product of
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<PAGE>
(x) the percentage increase in the United States GNP Implicit Price
Deflator from the first Day of the immediately preceding calendar year
to the first Day of the particular calendar year, and
(y) the said amount in effect under this Agreement for the
immediately preceding calendar year.
3.3 For 16th Contract Year et seq.
------------------------------
(a) Prior to the commencement of the sixteenth (16th) Contract Year,
Seller shall cause to be calculated, in accordance with subsection 3.3(d), as an
amount per MMBtu, the aggregate of all costs actually being incurred by Seller
during the fifteenth Contract Year in producing, gathering and processing
natural gas for delivery hereunder. Subject to subsection 3.3(b), the amount to
be paid pursuant to section 3.2 by Buyer to Seller for the sixteenth (16th)
Contract Year shall be an amount which is the higher of the amount so calculated
and the amount in effect pursuant to section 3.2 at the end of the fifteenth
(15th) Contract Year.
(b) In respect of all natural gas delivered hereunder on or after the
first Day of the calendar year beginning during the sixteenth (16th) Contract
Year, the said amount to be paid pursuant to section 3.2 shall be equal to the
said amount in effect pursuant to section 3.3(a) on the first Day of the
sixteenth (16th) Contract Year escalated by an amount equal to the product of
(x) the percentage increase in the United States GNP Implicit Price
Deflator from the first Day of the immediately preceding calendar year
to the first Day of the particular calendar year, and
(y) the said amount in effect pursuant to section 3.3(a) on the first
Day of the sixteenth (16th) Contract Year.
(c) In respect of all natural gas delivered on or after the first Day of
each particular calendar year beginning after the end of the sixteenth (16th)
Contract Year, the said amount in effect pursuant to subsection 3.3(b) at the
end of the immediately preceding calendar year shall be escalated by an amount
equal to the product of (x) the increase in the United States GNP Implicit Price
Deflator from the first Day of the immediately preceding calendar year to the
first Day of the particular calendar year and (y) the said amount in effect
pursuant to section 3.3(b) for such immediately preceding calendar year.
(d) The calculation of all costs actually being incurred by Seller in
producing, gathering and processing natural gas prior to the commencement of the
sixteenth (16th) Contract Year shall be performed by the independent chartered
accountant utilized by Seller for its annual audit of its financial statements
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved. Seller shall cause the said
accountant to deliver to Buyer a certificate attesting to the calculation of
such costs within sixty (60) Days after the end of the calendar year ending at
or immediately prior to the commencement of the sixteenth (16th) Contract Year.
The costs included in the calculation shall be of the types described in Exhibit
A hereto, and the calculation shall be made in the same manner and on the same
basis as
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<PAGE>
the calculation used in deriving the figure of $0.30 per MMBtu in respect of
such costs for the year ended December 31, 1988, on which calculation the said
figure of $0.3226 per MMBtu is based.
3.4 For Royalties
-------------
(a) Subject to subsection 3.4(b), Buyer shall also pay to Seller, as part
of the price of natural gas sold and delivered hereunder, an amount equal to all
royalties paid by Seller:
(i) to Her Majesty the Queen in right of Alberta with respect of so
much of such natural gas as is produced in Alberta; and
(ii) to duly constituted governmental authorities in other
jurisdictions in respect of so much of such natural gas as is
produced in each such other jurisdiction;
provided that the amount payable under this subclause in respect of natural gas
produced elsewhere than in Alberta shall be equal to the royalties which would
have been paid to Her Majesty the Queen in right of Alberta in respect of such
natural gas had it been produced by Seller in Alberta, unless and to the extent
that Seller was unable to produce an equal quantity of its own natural gas in
Alberta for sale and delivery hereunder by virtue of the occurrence of an event
of force majeure. The said amount shall be reduced to the extent that such
royalties are, following payment by Buyer of part of the price in respect
thereof, rebated to Seller by such governmental authorities.
(b) If Seller purchases natural gas from one or more third parties for
sale and delivery to Buyer hereunder, the amount to be paid to Seller pursuant
to this section in respect of such natural gas shall be equal to the product of
(x) a fraction having (1) as its numerator the total amount paid by
Buyer to Seller pursuant to subsection 3.4(a) in respect of natural
gas produced by Seller for sale and delivery to Buyer hereunder in
respect of the most recent Month during which natural gas so produced
was sold and delivered hereunder and (2) as its denominator the
aggregate number of MMBtu's of natural gas so produced during the said
most recent Month, and
(y) the number of MMBtu's of natural gas purchased from third parties
and sold and delivered hereunder.
(c) The payment during a Contract Year of amounts in respect of Alberta
royalty tax credit by Her Majesty to Seller pursuant to the Alberta Corporate
Tax Act shall constitute a rebate of royalties to Seller for the purposes of
subsection 3.4(a). The rebate of royalties in a Contract Year for the purposes
of this Agreement shall be deemed to be a portion of the aggregate of all such
amounts paid to Seller in respect of the Alberta royalty tax credit during the
Contract Year, which portion shall be a fraction
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(x) having as its numerator the aggregate of all quantities of
natural gas sold and delivered hereunder by Seller to Buyer during the
Contract Year, and
(y) having as it denominator the aggregate of all quantities of
natural gas sold and delivered by Seller or CHEL to all persons during
the Contract Year, including without limitation Buyer.
3.5 For Transportation
------------------
(a) Buyer shall also pay to Seller, as part of the price of natural gas
delivered hereunder, an amount equal to all transportation costs incurred by
Seller in delivering natural gas to Buyer at the Point(s) of Delivery. For the
purposes of calculating the amount payable by Buyer under this section, it shall
be irrebuttably presumed that all natural gas delivered to Buyer at the Point(s)
of Delivery was initially delivered and measured into NOVA's facilities at the
NOVA Meter Station designated No. 1541 and located in Section 8, Township 70,
Range 11, West of the Sixth (6th) Meridian.
(b) Buyer shall reimburse Seller for all transportation costs incurred by
Seller for service in the NOVA and TCPL pipelines on and after the Initial
Delivery Day in respect of natural gas delivered or to be delivered to Buyer or
third parties hereunder, whether or not actually delivered, including without
limitation fixed costs incurred by Seller for firm service in the NOVA and TCPL
pipelines and facilities whether or not such service is actually utilized,
except to the extent that:
(i) Seller recovers any such costs from other parties in respect of
natural gas delivered to other parties as contemplated hereunder;
(ii) Seller makes use of such service for its own benefit;
(iii) such costs relate to a period during which Seller is in default
under this Agreement; or
(iv) Buyer makes a payment to Seller in respect of such costs pursuant
to subsection 3.5(a).
3.6 Import and Export Taxes
-----------------------
Buyer and Seller each shall pay 50 per cent of any tax on the export of
natural gas from Canada or on the import of natural gas into the United States
of America imposed on either party in respect of natural gas delivered hereunder
by a duly constituted governmental authority or authorities either in Canada or
the United States of America during the term of this Agreement. Subject to the
foregoing sentence:
(a) Seller shall be responsible for all sales and use taxes imposed in respect
of natural gas delivered hereunder by a duly constituted governmental
authority or authorities in Canada; and
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(b) Buyer shall be responsible for all sales and use taxes imposed in respect
of natural gas delivered hereunder by a duly constituted governmental
authority or authorities in the United States of America.
3.7 Deferral of Payments
--------------------
(a) Buyer shall be entitled to defer the payment to Seller of a portion of
certain amounts, in the manner provided in this section 3.7.
(b) Buyer shall forthwith establish the Deferral Account and notify Seller
of the name and account number of the Deferral Account, and shall forthwith
notify Seller of any change in the name or account number of the Deferral
Account. All funds held in the Deferral Account shall be owned by Buyer and
dealt with, applied and paid by Buyer in accordance with the terms of this
Agreement. Buyer shall apply and pay Net Cash Flow in the manner herein
contemplated and not for any other purpose if there is any amount due or
required to be paid hereunder to Seller or due to or required to be deposited
into the Deferral Account. No amount shall be withdrawn from the Deferral
Account and applied, paid or held otherwise than as expressly permitted by this
Agreement, and any amount so withdrawn shall forthwith be replaced by Buyer.
(c) Interest shall accrue quarterly on the Deferral Balance in an amount
equal to:
(i) interest from time to time earned on the Account Balance,
calculated quarterly and compounded yearly; plus
(ii) interest on the remainder of the Deferral Balance, at the
weighted average of investment yields on the Account Balance from
time to time;
except that during any quarter when there is no invested amount contained in the
Deferral Account, interest on the Deferral Balance shall accrue at the Libor
Rate. The Account Balance shall be invested only in Permitted Investments.
Seller shall from time to time notify Buyer as to the Permitted Investments in
which the Account Balance or part thereof shall be invested, and Buyer shall
direct the Bank to invest such amounts in accordance with such instructions. If
Seller fails to provide investment instructions to Buyer at least ten (10) Days
prior to the time when any investment decision is required, amounts held in the
Deferral Account shall be invested in such Permitted Investments as may be
designated by Buyer. The maturity of Permitted Investments in which the Account
Balance or any part thereof is invested shall be structured to allow anticipated
payments from the Deferral Account to be made when due out of uninvested cash in
the Deferral Account.
(d) Out of the aggregate of amounts otherwise due from Buyer to Seller
pursuant to sections 3.2, 3.3, 3.4, 3.5 and 3.6 on a Debt Repayment Date falling
prior to the earlier of
(x) the first Day of the eleventh (11th) Contract Year, and
(y) the Threshold Date,
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Buyer shall be entitled to withhold and defer payment of an amount equal to the
Quarterly Deduction. If less than $470,000 is due to Seller on any particular
Debt Repayment Date, the difference between $470,000 and the amount then due
shall be withheld from successive amounts thereafter becoming due until the
aggregate of all such additional withholdings equals the particular Quarterly
Deduction to be made. Notwithstanding the foregoing, on any Debt Repayment Date
falling after the Threshold Date, Buyer shall not withhold as a Quarterly
Deduction more than the amount actually paid to Seller pursuant to subsection
3.7(g).
(e) On the particular Debt Repayment Date and any such subsequent date on
which a Quarterly Deduction or part thereof is made, Buyer shall deposit into
the Deferral Account the lesser of
(x) the Quarterly Deduction or part thereof, as the case may be, and
(y) Net Cash Flow for the Debt Repayment Period most recently ended
or to which the particular Quarterly Deduction or part thereof
relates.
(f) On each Debt Repayment Date falling after the earlier of
(x) the last Day of the sixth (6th) Contract Year, and
(y) the Threshold Date,
and prior to the eleventh (11th) Contract Year, Buyer shall pay to Seller the
interest accrued pursuant to subsection 3.7(c) during the Debt Repayment Period
ending on the particular Debt Repayment Date or most recently ended, as the case
may be, or, in the case of the first Debt Repayment Date falling after the
Threshold Date if the Threshold Date occurs prior to the first Day of the
seventh (7th) Contract Year, the interest accrued since the Threshold Date.
(g) On each Debt Repayment Date falling after the earlier of
(x) the last day of the sixth (6th) Contract Year, and
(y) the Threshold Date,
and prior to the eleventh (11th) Contract Year, Buyer shall pay to Seller an
amount equal to the Deferred Payment, which shall be equal to the lesser of
(x) $470,000, and
(y) the amount by which (1) the Deferral Balance, immediately prior
to giving effect to the payments to be made on the particular Debt
Repayment Date pursuant to subsection 3.7(f) and this subsection
3.7(g) exceeds (2) the sum of (A) $11,280,000 plus (B) the amount of
the payment to be made on the particular Debt Repayment Date pursuant
to subsection 3.7(f).
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Each such Deferred Payment shall be paid out of the Account Balance to the
extent that the Account Balance is available to be applied thereto in accordance
with subsection 3.7(k).
(h) On each Debt Repayment Date during the eleventh (11th), twelfth (12th)
and thirteenth (13th) Contract Years (other than the last Debt Repayment Date
during the thirteenth (13th) Contract Year), Buyer shall pay to Seller an amount
equal to one twelfth (1/12th) of the Deferral Balance on the first (1st) Day of
the eleventh (11th) Contract Year, plus interest accrued pursuant to subclause
3.7(c) during the Debt Repayment Period most recently ended. On the last Debt
Repayment Date during the thirteenth (13th) Contract Year, Buyer shall pay to
Seller the entire Deferral Balance, if any.
(i) On each Debt Repayment Date, to the extent that Net Cash Flow is
available to be applied thereto in accordance with subsection 3.7(k), Buyer
shall deposit into the Deferral Account an amount equal to the Accumulated
Deposit Deficiency or part thereof.
(j) On each Debt Repayment Date, to the extent that the Account Balance
and Net Cash Flow for the Debt Repayment Period most recently ended, or any of
them, are or is available to be applied thereto in accordance with subsection
3.7(k), Buyer shall pay to Seller the Accumulated Payment Deficiency or part
thereof.
(k) Net Cash Flow shall be paid and applied as contemplated in this
section 3.7 in the following order of priority:
(i) firstly, to the payment of interest accruing under subsection
3.7(c);
(ii) secondly, to the payment of the current Deferred Payment;
(iii) thirdly, to the payment of the amount contemplated to be paid
pursuant to subsection 3.7(h);
(iv) fourthly, to payment of the Accumulated Payment Deficiency or
part thereof; and
(v) fifthly, to deposits to reduce the Accumulated Deposit
Deficiency.
The Account Balance shall be paid and applied as contemplated in this section
3.7 in the following order of priority:
(i) firstly, to the payment of interest accruing under subsection
3.7(c);
(ii) secondly, to the payment of the current Deferred Payment;
(iii) thirdly, to the payment of the amount contemplated to be paid
in subsection 3.7(h); and
(iv) fourthly, to payment of the Accumulated Payment Deficiency or
part thereof.
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(1) If at any time the Deferral Ratio is greater than 0.833, and
notwithstanding that the Deferral Balance may be less than $11,280,000; Seller
may so notify Buyer. Buyer shall, within ten (10) Days of receipt of any such
notice, and whether or not Net Cash Flow is available for the purpose or the
Deferral Balance may as a result of such payment be reduced below $11,280,000,
pay to Seller an amount of money in reduction of the Deferral Balance,
sufficient to reduce the Deferral Ratio such that it is not more than 0.833. If
Buyer does not make any such payment, or pays less than the sufficient amount
aforesaid, within the said ten (10) Day period, Seller may, in its sole
discretion and upon notice to Buyer, unilaterally effect a reduction in the
Deferral Ratio
(i) by reducing the Unconsumed Entitlement and thereby the
Entitlement Value, and
(ii) by reducing the Deferral Balance by the product of (x) 0.909 and
(y) the reduction in the Entitlement Value resulting from the
aforesaid reduction in the Unconsumed Entitlement,
until the Deferral Ratio is equal to 0.833. The reduction of the Deferral
Balance, whether by virtue of a payment by Buyer or upon Seller's election,
shall be effected by first reducing the Accumulated Payment Deficiency, and,
when the Accumulated Payment Deficiency has been reduced to zero, by further
reducing the Deferral Balance. The Unconsumed Entitlement, Entitlement Value,
Accumulated Payment Deficiency and Deferral Balance as so reduced shall be
deemed for all purposes hereunder to be the Unconsumed Entitlement, Entitlement
Value, Accumulated Payment Deficiency and Deferral Balance, respectively, as at
the particular time. An election to reduce or not reduce the Unconsumed
Entitlement pursuant to this subsection 3.7(1) or subsection 12.2(a) shall not
in any way fetter or prejudice the right of Seller to make a different election
at any other time.
(m) If at any time the Deferral Ratio is equal to or greater than 0.909,
and notwithstanding that the Deferral Balance may be less than $11,280,000 and
that the Unconsumed Entitlement may be greater than zero, Seller may, in lieu of
electing to effect the reduction in the Deferral Ratio as contemplated in
subsection 3.7(1), in its sole discretion, upon ten (10) Days Written notice to
Buyer, cease delivering natural gas hereunder until Buyer makes a sufficient
payment to Seller as contemplated in the second sentence of subsection 3.7(1).
An election to cease or not to cease deliveries of natural gas pursuant to this
subsection 3.7(m) at any time shall not in any way fetter or prejudice the right
of Seller to make a different election at any other time.
(n) If on any Debt Repayment Date, after giving effect to the payments
actually made on or in respect of the particular Debt Repayment Date, the
Deferral Balance exceeds $11,280,000, Seller may, within fifteen (15) Days of
receipt of the payment or payments, notify Buyer of the amount of the Deferral
Balance. Buyer shall, within ten (10) Days of receipt of any such notice, and
whether or not there is Net Cash Flow available for the purpose, pay to Seller
an amount of money sufficient to reduce the Deferral Balance such that it does
not exceed $11,280,000 on the date of the payment.
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(o) If the Unconsumed Entitlement is reduced pursuant to subsection
12.2(a) in respect of a failure by Buyer to pay, deposit or replace the deposit
of an amount, then the Deferral Balance shall be reduced by an amount equal to
the particular amount of the payment or deposit which Buyer has failed to make
or replace, and the reduction shall be effected in the order contemplated in the
fourth sentence of subclause 3.7(1).
(p) On the first Debt Repayment Date on which Buyer is entitled to and
does defer payment of an amount due to Seller in accordance with this section
3.7, Buyer shall execute and deliver to Seller the Promissory Note, evidencing
the obligation of Buyer to pay to Seller the amount so deferred and amounts
thereafter so deferred. In the event of a conflict between the terms and
provisions of this Agreement and the terms and provisions of the Promissory
Note, the terms and provisions of this Agreement shall govern and this Agreement
shall, without limiting the generality of the foregoing, be sufficient to
evidence the obligation of Buyer to pay to Seller any deferred amount as
contemplated in this section 3.7. Notwithstanding the foregoing, Seller shall
not be entitled to transfer the right to receive payment of any amount
contemplated by this section 3.7 without a concurrent transfer of the Promissory
Note evidencing such amount made in compliance with the terms and conditions of
such Promissory Note. Buyer shall, while the Promissory Note remains
outstanding, maintain a register of the owner or owners thereof as contemplated
in the form of Promissory Note attached hereto as Exhibit B.
3.8 Fuel Gas for Transportation
---------------------------
(a) Seller is required by virtue of the transportation arrangements with
NOVA and TCPL contemplated in section 10.1 to provide for Fuel Gas, in the
volumes determined by the application of the fuel ratios set forth in the said
transportation arrangements. Unless Buyer is providing Fuel Gas as contemplated
in subsection 3.8(c), Seller shall make such arrangements as it considers
necessary and appropriate in its absolute discretion for the supply of Fuel Gas
and may at its option purchase all or any part thereof from one or more third
parties.
(b) Buyer shall pay Seller, for all Fuel Gas supplied by Seller, a price
equal to the market value thereof (as agreed upon by Buyer and Seller), plus all
transportation and other costs incurred by Seller in causing such Fuel Gas to be
delivered to the places required.
(c) Buyer may, by written notice to Seller, elect to supply all or a
portion of the Fuel Gas required by Seller as contemplated in subsection 3.8(a).
If Buyer so elects, Buyer shall deliver Fuel Gas or cause Fuel Gas to be
delivered to Seller, at no cost to Seller, to the places and in the volumes
required by virtue of Seller's transportation arrangements. Buyer's right and
obligation to supply Fuel Gas shall be subject to any arrangements made by
Seller for the supply of Fuel Gas and the termination thereof.
(d) If Buyer and Seller are unable to agree on the market value of all or
any portion of the Fuel Gas supplied or to be supplied by Seller as contemplated
in subsection 3.8(b), or if Buyer so elects, each quantity of Fuel Gas in
respect of which Buyer and Seller are unable to agree or Buyer so elects shall
constitute natural gas sold and delivered to Buyer at the Point(s) of Delivery
on account of Seller's obligation set forth in section 2.1 in respect of the
Unconsumed Entitlement.
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(e) The volumes of Fuel Gas required during any Day or Contract Year are
in addition to the Maximum Daily Quantity and Maximum Annual Quantity which
Seller is required to make available pursuant to section 2.3.
ARTICLE 4
POINT OF DELIVERY
-----------------
4.1 Point of Delivery
-----------------
Title to, and risk of loss of, all natural gas, other than Fuel Gas,
delivered hereunder shall pass from Seller to Buyer at the point(s) of delivery
(herein the "Point(s) of Delivery") hereinafter described. For purposes of this
Agreement, the initial Point of Delivery of all natural gas delivered by Seller
hereunder shall be at the interconnection between the pipeline facilities of
TCPL and Tennessee Gas Pipeline Company located at or near Niagara Falls, New
York, but such initial Point of Delivery shall be subject to change in
accordance with section 4.2.
4.2 Additional Points of Delivery
-----------------------------
The parties may agree from time to time, in writing, on the designation of
different or additional point(s) of Delivery for the delivery of natural gas
under this Agreement. Seller shall not unreasonably withhold or delay its
agreement to the designation of any such different or additional Point(s) of
Delivery requested by Buyer.
ARTICLE 5
MEASUREMENT AND QUALITY
-----------------------
5.1 Measurement
-----------
The quantities of natural gas delivered at the Point(s) of Delivery
hereunder shall be measured at the Point(s) of Delivery in accordance with the
applicable provisions of the transportation agreement dated October 11, 1990
entered into by TCPL and Seller or CHEL on Seller's behalf with respect to the
natural gas sold hereunder, as contemplated in that certain Precedent Agreement
dated December 21, 1988 between TCPL and CHEL.
5.2 Quality
-------
The natural gas delivered hereunder shall be of pipeline quality and shall
conform to the delivery specifications of TCPL.
5.3 Quantities Resold
-----------------
The quantities of natural gas resold by Seller pursuant to sections 9.3 and
15.1 or exchanged by Buyer pursuant to section 15.6 shall be measured and
determined at the border of the Province of Alberta when such quantities are
delivered for use outside the Province of Alberta or at the point where title to
such quantities passes from Seller when such quantities are delivered for use
within the Province of Alberta.
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ARTICLE 6
EFFECTIVE DATE AND TERM
-----------------------
6.1 Effective Date
--------------
This Agreement shall be effective as of December 8, 1987, provided that
Seller's obligation to deliver natural gas hereunder shall not commence until
the Day specified as the Initial Delivery Day in a notice given by Buyer to
Seller following payment by Buyer to Seller of the lump-sum payment specified in
section 8.1. Buyer shall specify the Initial Delivery Day in writing and on at
least thirty (30) Days notice, but in no event shall Buyer designate as the
Initial Delivery Day a Day less than nine (9) Months following the Month in
which Buyer makes its lump-sum payment to Seller pursuant to section 8.1.
6.2 Term
----
This Agreement shall remain in effect for a term of twenty (20) Contract
Years. At the end of the twentieth (20th) Contract Year, whether or not the
Unconsumed Entitlement has by actual sales and deliveries and otherwise
hereunder been reduced to zero, it shall be deemed irrebuttably and irrevocably
to have reduced to zero and Buyer shall be deemed to have forfeited all right
and entitlement thereto.
ARTICLE 7
REGULATORY REQUIREMENTS
-----------------------
7.1 Conditions
----------
The parties' obligation to perform in accordance with this Agreement is
subject to the satisfaction of the following conditions precedent:
(a) Seller shall have obtained a permit from the Alberta Energy Resources
Conservation Board and the approval of the Lieutenant-Governor in Council
of Alberta pursuant to the Gas Resources Preservation Act, RSA 1980, c. G-
3, as amended, in form and substance satisfactory to the parties acting
reasonably, authorizing the removal of natural gas from the Province of
Alberta at those quantities set forth in Article 2 at the price provided
for in Articles 3 and 8;
(b) Seller shall have obtained an order from the National Energy Board,
pursuant to Part VI of the National Energy Board Act, in form and substance
satisfactory to the parties acting reasonably, authorizing the export of
natural gas from Canada, in those quantities set forth in Article 2 and at
the aggregate price provided for in Articles 3 and 8;
(c) Seller shall have obtained all other permits, approvals, or orders, in form
and substance satisfactory to the parties acting reasonably, required to
enable Seller to perform its obligations under this Agreement and
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(d) Buyer shall have obtained such approvals from regulatory bodies, in form
and substance satisfactory to the parties acting reasonably, as are
necessary to permit the import into the United States of the natural gas to
be delivered to Buyer hereunder and the transportation of such natural gas
from the Point(s) of Delivery to Buyer's Facilities.
ARTICLE 8
PAYMENT
-------
8.1 Payment
-------
In addition to the payments contemplated in Article 3, Buyer shall pay
Seller, on or before April 30, 1991, for the Maximum Entitlement, a lump-sum
payment of $88,000,000.
8.2 Officer's Certificate
---------------------
It shall be a condition precedent to Buyer's obligation to make the lump-
sum payment provided for in section 8.1 that Seller shall have delivered to
Buyer, on a date specified by Buyer which is not more than five (5) Days prior
to the date of such payment, a certificate of an officer dated as of the
specified date certifying for and on behalf of Seller that:
(a) all representations and warranties made by Seller in this Agreement are
true and correct in all material respects as at the specified date,
provided that the said certificate shall not state that the representation
and warranty set forth in section 14.5 is subject to the condition
precedent set forth in subsection 7.1(c);
(b) the execution and delivery of, and the consummation of the transaction
contemplated in, this Agreement by Seller have been duly authorized by all
necessary corporate action on the part of Seller, and this Agreement
constitutes legal, valid and binding obligations of Seller enforceable in
accordance with its terms;
(c) Seller is not aware of any default by it under this Agreement, nor of any
default by any party under any of the transportation agreements, permits,
licences or orders obtained by Seller or to which Seller is a party in
order to carry out its obligations hereunder or to satisfy any conditions
precedent to Buyer's obligations hereunder; and
(d) Seller has entered into one or more agreements with NOVA and TCPL which is
or are, so far as Seller is aware, binding and enforceable against NOVA and
TCPL respectively under which Seller has and will continue to have
available the right to have transported over the systems of NOVA and TCPL
respectively such quantities of natural gas, at such times and in such
amounts as may be necessary to enable Seller to perform its obligations to
deliver natural gas to Buyer at the Point(s) of Delivery in accordance with
the terms of this Agreement.
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8.3 Monthly Statement
-----------------
On or before the twentieth (20th) Day of each Month following the Month of
initial delivery of natural gas by Seller to Buyer, Seller shall render a
statement to Buyer specifying the total quantity of gas delivered to Buyer at
the Point of Delivery during the preceding Month. Seller's statement shall also
specify any and all royalties and transportation costs incurred by Seller in
delivering said quantity to Buyer at the Point of Delivery. Subject to section
3.7, on or before the final Business Day of the Month, Buyer will pay to Seller
an amount equal to the aggregate of the amounts payable in accordance with
sections 3.2, 3.3, 3.4, 3.5, 3.8 and 15.6 as specified in Seller's statement.
All such payments shall be made by wire transfer, directed to a New York bank
account designated by CHEL, as agent for Seller, in such form that funds on
account of such payment shall be collectible in such account on the date payment
is due.
8.4 Statements to Third Parties
---------------------------
If Buyer resells natural gas to one or more third parties pursuant to
section 2.4 or arranges for the exchange of natural gas pursuant to section
15.6, Seller shall provide to each party specified by Buyer a duplicate copy of
the statement supplied by Seller pursuant to section 8.3 at the same time the
statement is provided to Buyer. All payments of amounts billed to Buyer which
are made by such third parties and received by Seller will be accepted by Seller
and applied in payment of amounts owing by Buyer hereunder as though such
payments were made directly by Buyer. Nothing in this section 8.4 or in section
17.2 shall or shall be deemed to relieve or release Buyer from its primary
obligation to make payment of all amounts due and owing to Seller under this
Agreement or to impose upon Seller any obligation to seek or enforce payment or
collection of any amount from any such third party.
8.5 Payment of Taxes
----------------
The party directly responsible for the payment of any import or export tax
on natural gas, as specified in section 3.6, shall make timely payment of the
full amount owed to the applicable governmental authority or authorities and
thereafter render a statement to the other party requesting reimbursement for
fifty percent (50%) of the total tax payment. Following receipt of such
statement, the party from which reimbursement is sought shall remit its fifty
percent (50%) share of the total tax payment (exclusive of any interest or
penalties imposed for the late payment of the tax) to the other party within ten
(10) Days. All such payments shall be made by wire transfer, directed to a bank
account designated by the party to which reimbursement is owed, in such form
that funds on account of such payment shall be collectible in such account on
the date payment is due. In lieu of such reimbursement, Buyer may offset monies
owed by Seller to Buyer pursuant to section 3.6 against any amount payable by
Buyer pursuant to section 3.2, 3.3, 3.4, 3.5, 3.8 or 15.6, in such order as
Buyer in its sole discretion may elect.
8.6 Records and Financial Statements
--------------------------------
(a) Each party shall have the right, at its own cost and at reasonable
times during normal business hours no more often than once each calendar
quarter, to examine and audit the books, records, accounts and charts of the
other party to the extent necessary to verify the
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accuracy of any statement, charge or computation made under or pursuant to any
provisions of this Agreement.
(b) Buyer shall furnish to Seller, as soon as available, and in any event
within ninety (90) days after the end of each financial year of Buyer ending
after the Initial Delivery Date, Financial Statements in respect of the
particular financial year. The Financial Statements furnished pursuant to this
subsection 8.6(b) shall have been audited by independent auditors of nationally
recognized standing and shall be accompanied by such auditors' report and
opinion that they fairly present the results of Buyer's operations for the
particular year.
(c) Seller shall furnish to Buyer, at the time the same are mailed to
Seller's shareholders, and in any event within one hundred and twenty (120) days
after the end of each financial year of Seller ending after the Initial Delivery
Date, Noranda Financial Statements in respect of the particular financial year.
The Noranda Financial Statements furnished pursuant to this subsection 8.6(c)
shall have been audited by independent auditors of nationally recognized
standing and shall be accompanied by such auditors' report and opinion that they
fairly present the results of Seller's operations for the particular year on a
consolidated basis.
8.7 Exception to Amount Billed
--------------------------
If either party takes exception to any amount billed by the other party,
the party required to make the payment shall nonetheless pay the full amount
billed, but such payment may be made under protest.
8.8 Failure to Pay
--------------
Should one party fail to pay the amount of any statement rendered by the
other party as herein provided when such amount is due, interest thereon shall
accrue from the due date at the Loan Rate. Interest on any such amount remaining
unpaid beyond thirty (30) Days following the due date shall accrue at the Loan
Rate compounded monthly until the date of payment.
8.9 Delay in Statement
------------------
If, pursuant to section 8.3, presentation of a statement by Seller is
delayed beyond the twentieth (20th) Day of a Month, then the time for payment
shall be extended accordingly, unless Buyer is responsible for the delay.
8.10 Overcharges
-----------
If Buyer shall find at any time within twelve (12) Months after the date of
any statement rendered by Seller pursuant to section 8.3 that it has been
overcharged in the amount billed in such statement, and if said overcharge shall
have been paid and Buyer shall have made a claim with respect thereto within
such twelve (12) Month period, the overcharge, if verified by Seller, shall be
refunded within thirty (30) Days, with interest calculated at the Loan Rate. If
Seller shall find at any time within twelve (12) Months after the date of any
statement rendered by it that there has been an undercharge in the amount billed
in such statement, it may submit a statement
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for such undercharge to Buyer, and Buyer, upon verifying the same, shall pay to
Seller the amount of such undercharge, with interest calculated at the Loan
Rate.
ARTICLE 9
FORCE MAJEURE
-------------
9.1 Effect
------
If, by reason of the occurrence of an event of force majeure, either party
hereto is rendered unable to exercise all or some part of its rights or to
perform all or some part of its obligations as a result of any cause not
reasonably within the control of such party, and if such inability of exercise
or performance could not have been prevented or overcome or cannot be remedied
with the exercise of due diligence by such party and if such party gives notice
and reasonably full particulars of such event, in writing or by telex,
telecopier or other written form of telecommunication, to the other party within
a reasonable time after the occurrence of the event of force majeure, the
exercise of such rights and performance of such obligations shall be suspended,
to the extent that the party claiming force majeure has been rendered unable to
exercise such rights or perform such obligations notwithstanding the exercise of
due diligence as aforesaid, during the pendency of the event of force majeure.
Notwithstanding any other provision hereof, in no case will the occurrence of an
event of force majeure suspend any obligation of a party to pay money to the
other party hereunder.
9.2 Seller's Obligations
--------------------
Seller may not suspend performance of its obligations under this Agreement
by reason of the occurrence of an event of force majeure if, despite such
occurrence, Seller can deliver quantities of natural gas requested by Buyer from
portions of Seller's natural gas gathering system not affected by such event,
except that Seller shall not be required to deliver to Buyer quantities of
natural gas committed for sale to Pan-Alberta Gas Limited under two agreements
with Seller both dated November 3, 1980 and TCPL under agreements dated October
27, 1976, May 17, 1976, June 2, 1976 and July 15, 1977. It is understood and
agreed that Seller intends to deliver quantities of natural gas requested by
Buyer principally from natural gas supplies located within the Province of
Alberta and owned by Seller. In the event that the occurrence of an event of
force majeure renders impossible the fulfillment of Seller's obligation to
deliver the requested quantities of natural gas from the Province of Alberta,
Seller shall use reasonable efforts to obtain the necessary permits, approvals
or orders authorizing the removal of natural gas from any other province in
which Seller owns quantities of natural gas and to obtain the necessary
transportation arrangements to deliver such quantities to Buyer at the Point of
Delivery.
9.3 Failure to Deliver
------------------
If Seller fails to deliver natural gas requested by Buyer in accordance
with the terms of this Agreement as the result of the occurrence of an event of
force majeure, and provided that Buyer, but for the occurrence of the event of
force majeure, would have been able to take
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delivery of natural gas at Buyer's Facilities, Buyer shall have the right to use
Substitute Supplies and the option but not the obligation of:
(a) obtaining a refund of such portion of the lump-sum payment made under
section 8.1 as is attributable to each Day during which Seller, as a result
of the occurrence of the event of force majeure, fails to make available
and deliver natural gas to Buyer in accordance with the terms of this
Agreement, together with interest from the Day of payment of the lump-sum
payment made by Buyer to Seller on such portion of the lump-sum payment
calculated at the Loan Rates which were in effect from time to time from
the date of the payment of the lump-sum payment to Seller to the date of
the payment of the refunded portion of the lump-sum payment;
(b) reselling on the open market a quantity of natural gas not exceeding the
quantities, if any, not delivered by reason of the occurrence of an event
of force majeure; or
(c) having Seller use all reasonable efforts to sell the quantities, if any,
not delivered by reason of the occurrence of an event of force majeure, to
a third party and, following such sale, remitting to Buyer the proceeds of
such sale less the sum of (x) one and one-half percent (1 1/2%) of the
gross price obtained from the sale of the natural gas to such third party
at the delivery point plus (y) the amount of all taxes (other than income
taxes based on Seller's income) and transportation costs actually paid by
Seller with respect to the sale and not recovered by Seller under another
provision of this Agreement or otherwise, in which event Seller's payment
of the net proceeds from such sale and the right of either party to seek an
adjustment to such payment shall be governed by the provisions of sections
8.7, 8.8, 8.9 and 8.10.
Seller shall account for all sales of natural gas made under the preceding
subsection 9.3(c) pursuant to the terms and conditions of section 15.4. Upon the
occurrence of the event of force majeure, Buyer shall promptly notify Seller of
which option Buyer elects and the period, not to be less than one (1) Month,
such election shall remain in effect. On or before the tenth (10th) Day prior to
the expiry of any period for which Buyer has made an election, Buyer may elect
by notice to Seller to elect the same or a different option, for a further
period specified in such notice and not to be less than one (1) Month, to take
effect upon the expiry of the immediately preceding period for which Buyer has
made an election. For purposes of subsections 9.3(a), (b) and (c), the
quantities of natural gas deemed not to have been delivered on each Day during
the period of force majeure shall be calculated by assuming constant daily
deliveries of 17,250 MMBtu's of natural gas at the Point(s) of Delivery.
9.4 Buyer's Right to Terminate after 150 Days
-----------------------------------------
If, as a result of the occurrence of a single event of force majeure
involving a law, order, rule, regulation, act or restraint by a court,
regulatory authority or a government or governmental body or authority, civil or
military, or the revocation, suspension or amendment of any permit, licence,
certificate or government authorization, Buyer has been prevented from taking
delivery of natural gas under this Agreement for a period of one hundred and
fifty (150) Days or longer,
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Buyer shall have the option of terminating this Agreement in the manner
described in section 9.6.
9.5 Buyer's Right to Terminate after 60 Days
----------------------------------------
If, as a result of the occurrence of a single event of force majeure other
than an event of force majeure to which section 9.4 applies, Buyer has been
prevented from taking delivery of natural gas under this Agreement for a period
of sixty (60) Days or longer, Buyer shall have the option of terminating this
Agreement in the manner described in section 9.6.
9.6 Notice of Termination
---------------------
Upon expiry of the relevant time period set forth in section 9.4 or 9.5,
Buyer may elect to terminate this Agreement effective upon thirty (30) Days
written notice to Seller. If the event of force majeure terminates prior to the
effective date of Buyer's notice of termination, such notice shall be deemed to
be null and void and this Agreement shall remain in full force and effect.
9.7 Repayment by Seller
-------------------
(a) Subject to subsection 9.7(b), following termination of this Agreement
by Buyer pursuant to section 9.6, Seller shall pay to Buyer, in six (6) equal
installments, the first of which shall be paid on the fifteenth (15th) Day
immediately following the effective date of termination, and the balance of
which installments shall be paid on the last Day of each of the five (5)
successive thirty (30) Day periods thereafter, the sum of:
(i) the amount which is (x) the lump-sum payment made by Buyer
pursuant to section 8.1 multiplied by the percentage derived by
dividing (1) the Unconsumed Entitlement as at the effective date
of termination by (2) the Maximum Entitlement, less (y) the
Deferral Balance as at the effective date of termination; plus
(ii) interest for the period from the date of payment of the lump-sum
payment to Seller to the effective date of termination on the
amount so determined in subsection 9.7(a)(i), calculated based on
annual compounding:
(A) at a rate which is 1/2 of a percentage point (0.5%) higher
than the Libor Rate in effect from time to time during the
periods after the date of payment of the lump-sum payment to
Seller to the date of payment of such amounts, if the basis
upon which Buyer has made its election is one or more events
of force majeure not described in subsection 9.7(a)(ii)(B)
or
(B) at the Loan Rate, if the basis upon which Buyer has made its
election is an event of force majeure occurring wholly
within or in relation to Canada or the laws of Canada or any
political subdivision thereof.
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(b) If Seller is required to make a payment pursuant to subsection 9.7(a),
it shall have the sole and exclusive option to pay the amount calculated in
accordance with the said subsection in one payment within fifteen (15) Days of
the effective date of termination instead of paying in- installments as
contemplated in the said subsection. The setting-off of the Deferral Balance or
part thereof as at the effective date of termination as contemplated in
subsection 9.7(a)(i) shall constitute payment by Buyer of the Deferral Balance
or part thereof to the extent of such setting-off.
9.8 Definition
----------
By way of enumeration, but without limiting the generality of section 9.1,
for the purposes of this Agreement, the term "force majeure" shall include but
not be limited to the following:
(a) lightning, storms, earthquakes, landslides, floods, washouts, and other
acts of God;
(b) fires, explosions, ruptures, breakage of or accidents to pipeline, plant,
machinery and equipment;
(c) shortages of necessary labour, strikes, lockouts, or other industrial
disturbances;
(d) civil disturbances, sabotage, acts of the public enemies, war, blockades,
insurrections, vandalism, riots, epidemics;
(e) changes in, or the making and implementation of, laws, orders, rules,
regulations, acts or restraints by a court, regulatory authority or a
government or governmental body or authority, civil or military;
(f) inability to obtain or curtailment of supplies of electric power, water,
fuel or other utilities or services;
(g) inability to obtain or curtailment of supplies of any other materials or
equipment;
(h) interruption or curtailment of transportation either upstream or downstream
from the Point(s) of Delivery;
(i) inability to obtain, or revocation, suspension or amendment of, any permit,
licence, certificate or authorization of any governmental or regulatory
body required to perform or comply with any obligation or condition of this
Agreement, unless the revocation, suspension or amendment of any such
necessary permit, licence or certificate or authorization was caused by the
violation of the terms thereof or consented to by the party holding the
same; provided, however, that, notwithstanding any other provision of this
Agreement, the inability of Seller to obtain a removal permit from the
Energy Resources Conservation Board (Alberta), and the related approval of
the Lieutenant-Governor in Council (Alberta) , or any other approval under
the laws of Alberta, for the removal of all or any part of the Maximum
Entitlement from the Province of Alberta, as
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contemplated by subsection 7.1(c), shall not be considered to be an event
of force majeure;
(j) one or more increases, which together aggregate more than $0.50, in the
aggregate of the amounts per MMBtu of natural gas sold and delivered
hereunder that Buyer is required to pay pursuant to section 3.4 and in
respect of import and export taxes pursuant to section 3.6, over and above
the average amount per MMBtu that Buyer was required to pay pursuant to
section 3.4 and in respect of import and export taxes pursuant to section
3.6 in respect of the first one million (1,000,000) MMBtu's of natural gas
sold and delivered to Buyer hereunder; provided that the only increases in
the amount Buyer is required to pay pursuant to section 3.4 which shall be
included for the purpose of determining whether there shall have occurred
aggregate increases of more than $0.50 as aforesaid shall be increases in
the royalties paid by Seller which are due solely to changes in the formula
established by the laws, rules and regulations of the Province of Alberta
applicable to the calculation of royalty on natural gas produced from
Alberta Crown leases, and further provided that if Seller agrees to and
does reimburse or otherwise compensate Buyer for the amount by which the
aggregate of any such increase or increases aforesaid aggregate more than
$0.50 per MMBtu, the foregoing shall not constitute an event of force
majeure; or
(k) any other cause, whether herein enumerated or otherwise, not reasonably
within the control of the party claiming suspension which by the exercise
of due diligence such party is unable to prevent or overcome.
Buyer shall be responsible for and make all necessary arrangements for
the transportation of the quantities of natural gas specified in section 2.3
from the Point(s) of Delivery to Buyer's Facilities, except for natural gas
delivered in exchange for supplies of natural gas pursuant to section 15.6.
9.9 Lack of Funds
-------------
Notwithstanding any other provision herein, a lack of funds or other
financial cause shall not in any circumstance be an event of force majeure.
9.10 Labour Disputes
---------------
Notwithstanding any other provision herein, the settlement of strikes,
lockouts and other industrial disturbances shall be entirely within the
discretion of the party involved.
ARTICLE 10
TRANSPORTATION
--------------
10.1 To Point(s) of Delivery
-----------------------
Seller shall be responsible for and make all necessary arrangements for the
transportation of the quantities of natural gas specified in section 2.3 to the
initial Point(s) of Delivery.
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10.2 From Point(s) of Delivery
-------------------------
Buyer shall be responsible for and make all necessary arrangements for the
transportation of the quantities of natural gas specified in section 2.3 from
the Point(s) of Delivery to Buyer's Facilities, except for natural gas delivered
in exchange for supplies of natural gas pursuant to section 15.6.
10.3 Form and Substance of Contracts
-------------------------------
All transportation arrangements shall be in form and substance satisfactory
to both parties acting reasonably.
10.4 Obligations
-----------
In arranging transportation of natural gas to the Point(s) of Delivery
pursuant to section 10.1, Seller shall not be obligated to provide for a maximum
daily or annual capacity or a reliability of service which exceeds such capacity
or reliability as is provided for by Buyer in arranging transportation of
natural gas from the Point(s) of Delivery to Buyer's Facilities pursuant to
section 10.2. If Buyer determines that firm, non-interruptible transportation
service of the quantities of natural gas is required, Buyer shall so inform
Seller in writing, specifying the date on which such transportation service is
required, the maximum annual and daily quantities of natural gas to be
transported on a firm, non-interruptible basis and the term over which such
transportation service is to be rendered. Buyer shall provide as much advance
notice of the need for firm, non-interruptible transportation service as is
feasible under the circumstances. Upon Buyer's providing Seller with such
written notice, both parties shall agree on the Point(s) of Delivery, and each
of the parties shall use its best efforts to ensure that the transportation
service required to be arranged by it is available on the date specified in
Buyer's notice and that demand charges payable to the transporting pipelines
shall not become due and owing prior to such date.
10.5 Execution of Contracts
----------------------
On or before the date on which the lump-sum payment is made as contemplated
in section 8.1, Seller and Buyer shall have executed contracts for all necessary
transportation as described in sections 10.1, 10.2 and 10.3, or shall have
obtained evidence satisfactory to the other party acting reasonably that the
necessary transportation can be obtained and shall provide copies of all
executed contracts and such evidence to the other. The refusal of those
providing financing for Buyer's Facilities to accept whatever evidence may be
tendered that either Buyer or Seller can obtain the necessary transportation
shall be considered reasonable grounds for Buyer not accepting such evidence.
10.6 Use of Transportation by Seller
-------------------------------
In delivering natural gas to other parties and thereby making use of
transportation arranged for as contemplated in section 10.1, and in making use
of such transportation for its own benefit, all as contemplated hereunder,
Seller shall, to the extent reasonably possible, and without incurring losses,
liabilities, costs or expenses not provided herein to be recoverable from
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Buyer, and without being obligated to sell natural gas at a net price which is
less than the net price available to Seller through other sale arrangements,
enter into arrangements with such other parties which contemplate, and make use
of, such transportation for its own benefit in such a manner, that use will be
made by any such other party or Seller of Buyer's firm service on the facilities
of Tennessee Gas Pipeline Company from Niagara Falls, New York to Buyer's
Facilities pursuant to the transportation arrangements made as contemplated in
section 10.2.
ARTICLE 11
TERMINATION
-----------
11.1 Rights to Terminate
-------------------
In addition to the rights to terminate provided for in sections 9.4, 9.5
and 9.6 and in Article 12, this Agreement shall be terminable:
(a) at the option of Seller, effective upon written notice to Buyer, if Buyer
does not make its lump-sum payment as required pursuant to section 8.1 on
or before April 30, 1991, or if the Bank and Seller have not entered into a
mutually satisfactory consent and agreement regarding the assignment of
Buyer's interest in this Agreement to the Bank by way of security prior to
the time of the said lump-sum payment; and
(b) at the option of Buyer, effective upon written notice to Seller, if Seller
does not fulfill the condition precedent to the lump-sum payment, as
specified in section 8.2.
ARTICLE 12
DEFAULT
-------
12.1 Default by Seller
-----------------
(a) If Seller defaults for any reason, including, without limitation, if
Seller fails to obtain or maintain a removal permit issued by the Province of
Alberta, but excluding the occurrence of an event of force majeure, in its
obligation to deliver to Buyer at the Point(s) of Delivery quantities of natural
gas requested by Buyer in accordance with the terms and conditions of this
Agreement, and provided that Buyer would have been able to accept the gas
requested if delivered but for Seller's failure to deliver, Buyer shall have the
right immediately to obtain Substitute Supplies and discontinue all payments due
or chargeable pursuant to sections 3.2, 3.3, 3.4, 3.5 or 3.6 until Seller fully
resumes performance hereunder.
(b) Following its default, Seller shall promptly inform Buyer of the
reasons for the default and the anticipated duration of the period of default
and shall take all steps necessary to resume performance fully as soon as
possible. Buyer may obtain Substitute Supplies for the period of the default as
estimated by Seller, as well as for any period prior to the receipt of the said
estimate if the said estimate is not promptly delivered by Seller, and Seller
shall reimburse Buyer for all reasonable costs paid by Buyer in acquiring and
delivering Substitute Supplies, including any demand charges or other sums due
and owing to transporting pipelines during such
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period, over and above the incremental costs (i.e., all costs Buyer has or would
have paid to Seller or third parties other than any allocable portion of the
lump-sum payment made by Buyer pursuant to section 8.1) that would have been
incurred by Buyer in acquiring and delivering natural gas purchased by Buyer
from Seller under this Agreement but not delivered due to Seller's default, with
interest from the date of payment of such costs by Buyer until the date of
reimbursement calculated at the Loan Rate from time to time in effect. If the
said period of default extends beyond the period initially estimated by Seller,
or Seller fails properly to deliver such estimate to Buyer, Buyer may continue
to obtain Substitute Supplies for the period that Buyer reasonably anticipates
that Seller will remain in default and Seller shall reimburse Buyer for all
reasonable costs paid by Buyer in acquiring and delivering Substitute Supplies,
including any demand charges or other sums due and owing to transporting
pipelines during such period, over and above the incremental costs (i.e., all
costs Buyer has or would have paid to Seller or third parties other than any
allocable portion of the lump-sum payment made by Buyer pursuant to section 8.1)
that would have been incurred by Buyer in acquiring and delivering natural gas
purchased by Buyer from Seller under this Agreement but not delivered due to
Seller's default, with interest as aforesaid. Seller shall reimburse Buyer for
the reasonable costs of Substitute Supplies, as defined herein, upon demand by
Buyer at any time after such costs are actually incurred by Buyer and have been
paid by Buyer or are due and payable to a third party.
(c) Buyer may elect to terminate this Agreement:
(i) within five (5) Days after receipt of Seller's estimate of the
anticipated duration of the period of default;
(ii) at any time after expiration of the estimated period of default
set forth in Seller's notice; or
(iii) at any time more than ten (10) Days after the commencement of
the default if Seller has not informed Buyer of the reasons for
the default and the anticipated duration of the period of
default.
Buyer shall exercise its right to terminate by notifying Seller in writing of
its intention to terminate. If Buyer elects to terminate this Agreement within
five (5) Days after receipt of Seller's estimate, or at any time more than ten
(10) Days after the commencement of the default if Seller has not previously
informed Buyer of the reasons for the default and anticipated duration of the
period of default, Seller shall have ninety (90) Days after receipt of Buyer's
notice of intention to terminate in which to remove the cause of its default and
indemnify Buyer, as provided below. If Buyer elects to terminate this Agreement
after expiration of the estimated period of default contained in Seller's
notice, Seller shall have either ninety (90) Days after the commencement of
Seller's default or thirty (30) Days after receipt of Buyer's notice of
intention to terminate, whichever time period is longer, in which to remove the
cause of its default and indemnify Buyer, as provided below. If, within the
applicable time period, Seller does so remove or remedy said cause and fully
indemnify Buyer for:
(iv) all reasonable costs paid by Buyer in acquiring and delivering
Substitute Supplies, including any demand charges or other sums
due and owing to
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transporting pipelines during the duration of Seller's default,
over and above the incremental costs (i.e., all costs Buyer has
or would have paid to Seller or third parties other than any
allocable portion of the lump-sum payment made by Buyer pursuant
to section 8.1) that would have been incurred by Buyer in
acquiring and delivering natural gas purchased by Buyer from
Seller under this Agreement but not delivered to Buyer due to
Seller's default, with interest as calculated pursuant to
subsection 12.1(b), or
(v) if Buyer is unable to purchase and take delivery of Substitute
Supplies at Buyer's Facilities, the fixed costs of Buyer's
Facilities that are paid or payable by Buyer to third parties as
a consequence of Seller's default (including all payments Buyer
is required to make to third parties not related to the
profitability of Buyer's Facility and all income taxes
attributable to the amount of the indemnity payments under this
provision)
then the Agreement shall remain in full force and effect. Upon reimbursement by
Seller to Buyer of such costs of Substitute Supplies, as required by subsection
12.1(c)(iv), the quantities of natural gas acquired by Buyer as Substitute
Supplies shall be added to and deemed to form part of the Consumed Amount.
(d) If Seller does not remedy and remove the cause of default and does not
so indemnify Buyer within the applicable time period set forth in subsection
12.1(c), then upon expiry of said period, this Agreement shall be terminated and
be of no further force or effect. Upon termination, subject to adjustment by
virtue of Seller entering into a Replacement Contract contemplated in this
subsection 12.1(d) and subject to subsection 12.1(f), Seller shall pay to Buyer,
in six (6) equal installments the first of which shall be paid on the fifteenth
(15th) Day immediately following the effective date of termination and the
balance of which shall be paid on the last Day of each of the five (5)
successive thirty (30) Day periods thereafter, the sum of:
(i) the amount which is (x) the lump-sum payment made by Buyer
pursuant to section 8.1 multiplied by the percentage derived by
dividing (1) the Unconsumed Entitlement as at the effective date
of termination by (2) the Maximum Entitlement, less (y) the
Deferral Balance as at the effective date of termination;
(ii) interest for the period from the date of payment of the lump-sum
payment to Seller to the effective date of termination on the
amount so determined pursuant to subsection 12.1(d)(i),
calculated based on quarterly compounding, at the Loan Rate in
effect from time to time for each calendar quarter-year during
the periods from the date of payment of the lump-sum payment to
Seller to the date of payment pursuant to this subsection
12.1(d);
(iii) an amount equal to the costs incurred by Buyer in breaking the
interest rate and interest rate hedging arrangement in force with
respect to such
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portion of the Senior Debt as is required to be prepaid and is
actually prepaid out of the proceeds of the sums paid by Seller
to Buyer pursuant to this subsection 12.1(d);
(iv) the costs reasonably incurred by Buyer in acquiring and
delivering Substitute Supplies to Buyer's Facilities, determined
as set forth in subsection 12.1(c)(iv), for the period from the
date of Seller's default until the effective date of termination;
and
(v) a lump-sum payment equal to the present value (based on an annual
discount rate equal to the Loan Rate as of the effective date of
termination) of the excess, if any, of (x) the aggregate costs
that would be paid by Buyer, under the conditions existing on the
effective date of termination, in acquiring and delivering
Substitute Supplies equal in quantity to the Unconsumed
Entitlement (to the extent Buyer would have been entitled
pursuant to section 2.3 to obtain delivery of such quantity over
the remaining term of the Agreement but for Seller's default)
over (y) the sum of (1) the costs that Buyer would have paid for
obtaining and delivery of such quantity if Seller had continued
performance under this Agreement (other than the lump-sum payment
made by Buyer pursuant to section 8.1) plus (2) the product of
$0.73333 and the Unconsumed Entitlement as at the effective date
of termination plus (3) the amount of interest calculated in
accordance with subsection 12.1(d)(ii).
Seller may, within ninety (90) Days following the effective date of termination,
arrange for a replacement contract, from a source and on terms and conditions
acceptable to Buyer acting reasonably, for the sale and delivery to Buyer at the
Point(s) of Delivery of a quantity of natural gas equal to the Unconsumed
Entitlement to the extent Buyer would have been entitled to obtain delivery of
such quantity over the remaining term of the Agreement as of the effective date
of termination (hereinafter the "Replacement Contract"). If Seller elects to
arrange for such Replacement Contract, the amount payable by Buyer for
Substitute Supplies in determining damages payable by Seller under subsection
12.1(d)(iv) shall be determined based on the costs established by such
Replacement Contract. In determining damages payable by Seller pursuant to
subsection 12.1(d)(iv), Buyer's costs of obtaining delivery of Substitute
Supplies shall include the purchase price of the required quantity of natural
gas plus all production, gathering, processing and transportation costs,
royalties and taxes payable in acquiring and delivering such quantities to
Buyer's Facilities, and the costs Buyer would have paid for obtaining delivery
of such quantity under this Agreement shall include all production, gathering,
processing and transportation costs, royalties and taxes that would have been
payable by Buyer pursuant to this Agreement. Seller shall also remain
responsible following termination of this Agreement pursuant to this section
12.1 for the payment of any demand charges or other sums payable by Buyer to
transporting pipelines under agreements for the transportation of natural gas
sold by Seller to Buyer under this Agreement. Upon termination of this
Agreement, Buyer shall take all reasonable steps to mitigate its damages.
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(e) The costs of Substitute Supplies that are recoverable by Buyer from
Seller pursuant to this section 12.1 shall not exceed the costs that were or
would have been incurred in acquiring and delivering the lowest cost fuel which
was at the time available from a reliable source to Buyer at Buyer's Facilities
and of which Buyer could reasonably have been expected to have been aware, given
the nature and immediacy of Buyer's fuel consumption needs. Disputes between the
parties as to the reasonableness of the costs of acquiring and delivering
Substitute Supplies shall be resolved pursuant to the arbitration provisions in
Article 16, except that costs established by Replacement Contract acceptable to
Buyer acting reasonably shall be conclusive and shall be deemed irrebuttably to
be the lowest costs available for all periods after deliveries of natural gas
are or would be (but for Buyer's inability or refusal to accept same) available
to Buyer at the delivery point pursuant to the Replacement Contract.
(f) If Seller is required to make a payment pursuant to subsection
12.1(d), it shall have the sole and exclusive option to pay the amount
calculated in accordance with the said subsection in one payment within thirty
(30) Days of the effective date of termination, instead of paying in
installments as contemplated in the said subsection.
(g) This section 12.1 shall not be construed to limit the amount
recoverable by Buyer from Seller in the event of termination following Seller's
default or to relieve Seller from liability for payment of any amount due to
Buyer pursuant to any other provision of this Agreement at the time of such
termination.
12.2 Default by Buyer
----------------
(a) If Buyer fails for more than forty-five (45) Days after the same is
due to make a payment due to Seller (and which Buyer is not entitled to defer
pursuant to subsection 3.7(d)) pursuant to any of sections 3.2, 3.3, 3.4, 3.5,
3.6, 3.7, 3.8 and 15.6, or a deposit to the Deferral Account pursuant to section
3.7, or uses or applies an amount withdrawn from the Deferral Account otherwise
than in accordance with section 3.7, as the case may be, then (unless Seller,
pursuant to subsection 3.7(1) reduces the Unconsumed Entitlement in respect of
the particular amount of the payment, deposit or withdrawal, and thereby reduces
the Deferral Balance to $11,280,000 or less) Seller may, on ten (10) Days prior
written notice to Buyer, reduce the Unconsumed Entitlement by an amount equal to
the quotient derived by dividing
(x) an amount equal to 110 per cent of the amount of the payment or
deposit Buyer has failed to make or the withdrawal wrongfully held or
applied, by
(y) $0.73333.
Any such reduction in the Unconsumed Entitlement will take effect immediately
upon the expiry of the said ten (10) Day period commencing with the giving of
the said notice, unless prior thereto Buyer has paid, deposited or replaced the
deposit of the particular amount, as the case may be, and paid to Seller all
other amounts of money then due to Seller under this Agreement. Upon any such
reduction taking effect, Buyer shall be released from any obligation to make the
particular payment or to make or replace the particular deposit, as the case may
be, in respect of which the particular reduction was made, or to pay interest or
other charges with respect to the
-36-
<PAGE>
amount of the payment or deposit. Seller shall not suspend or interrupt
deliveries of natural gas to Buyer pursuant to this subsection 12.2(a) during
the period of Buyer's particular failure to make a payment or deposit or to
replace a particular amount withdrawn from the Deferral Account otherwise than
in accordance with Section 3.7, as the case may be, unless and until the
Unconsumed Entitlement is reduced to zero, but nothing contained in this
subsection 12.2(a) shall in any way affect or restrict Seller's right to suspend
or interrupt deliveries pursuant to subsection 3.7(m). If the Unconsumed
Entitlement is reduced to zero by virtue of reductions pursuant to subsections
3.7(1) and 3.8(d) and this subsection 12.2(a), or any of them, Seller may
immediately suspend deliveries to Buyer and elect to terminate this Agreement by
notifying Buyer of its intention to terminate. This Agreement will terminate on
the expiry of ninety (90) Days following Buyer's receipt of such notice unless
Buyer shall have remedied its particular failure to make a payment or deposit or
to replace a particular amount withdrawn from the Deferral Account otherwise
than in accordance with Section 3.7, as the case may be, within such ninety (90)
Day period and reimbursed Seller for all other monies due under this Agreement,
in which case the reduction in the Unconsumed Entitlement in respect of the
particular failure shall be reversed and deemed not to have been made, the
Unconsumed Entitlement shall be reinstated to that extent and the Agreement
shall remain in full force and effect. An election to suspend or not to suspend
deliveries of natural gas and to terminate this Agreement pursuant to this
subsection at any time shall not in any way fetter or prejudice the right of
Seller to make a different election at any other time.
(b) Upon termination of this Agreement pursuant to subsection 12.2(a),
Seller shall take all reasonable steps to mitigate its damages.
(c) Any termination of this Agreement by Seller under this section shall
be without prejudice to the right of Seller to collect any amounts then due it
and without waiver of any other remedy to which Seller may be entitled for
breach of this Agreement. Buyer shall remain responsible following termination
of this Agreement pursuant to this section 12.2 for the payment of any fixed
costs or other sums payable by Seller to TCPL under agreements for the
transportation of natural gas sold by Seller to Buyer under this Agreement and
not recovered by Seller under another provision of this Agreement or otherwise.
ARTICLE 13
INDEMNIFICATION
---------------
13.1 By Seller
---------
Seller shall defend, indemnify and save Buyer harmless from all suits,
actions, debts, accounts, damages, costs, losses, liabilities and expenses
arising from or out of claims of any or all persons to natural gas sold
hereunder or other charges thereon which attach before title passes to Buyer.
-37-
<PAGE>
13.2 By Buyer
--------
Buyer shall defend, indemnify and save Seller harmless from all suits,
actions, debts, accounts, damages, costs, losses, liabilities and expenses
arising from or out of claims of any or all persons to natural gas sold
hereunder or other charges thereon which attach after title passes to Buyer.
ARTICLE 14
MISCELLANEOUS COVENANTS, REPRESENTATIONS AND WARRANTIES OF SELLER
-----------------------------------------------------------------
14.1 Mortgages, etc.
---------------
Seller covenants and agrees with Buyer that it will not mortgage, charge,
hypothecate, pledge or otherwise encumber any of its property or assets to
secure any indebtedness for borrowed money without also at the same time or
prior thereto securing its obligation to make payments of amounts due under this
Agreement so that, in the opinion of counsel to Seller, such obligation
hereunder shall be secured equally and ratably with such indebtedness, provided
that this covenant shall not apply to nor operate to prevent:
(a) any security given in the ordinary course of business to any bank or banks,
or others, to secure any indebtedness payable on demand or maturing within
twelve (12) Months of the date that such indebtedness is originally
incurred;
(b) any Purchase Money Mortgage;
(c) any security to secure indebtedness incurred for the construction of
townsites, warehouses, employees' housing or office premises;
(d) any security on any resource property of Seller that has not been in
commercial production during the twelve (12) Month period ending on the
date hereof, or has not been in commercial production during the twelve
(12) Month period ending at the time of the imposition of such security, to
secure any indebtedness incurred for the development or improvement thereof
or the development or improvement of any other resource property of Seller
that has not been in commercial production during the twelve (12) Month
period ending on the date hereof or has not been in commercial production
during the twelve (12) Month period ending at the time of the imposition of
such security;
(e) any security with respect to any property in favour of the Government of
Canada or of the United States of America or the government of any province
of Canada or state of the United States of America or any municipality in
Canada or the United States of America or any political subdivision,
department or agency of any of them;
(f) any renewal, refunding or extension of any security or encumbrance referred
to in the foregoing subsections 14.1(a) to (e) or of any security or
encumbrance on any property in existence at the time of acquisition
thereof, in which the principal outstanding after such
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<PAGE>
renewal, refunding or extension is not increased and the security or
encumbrance is limited to the property originally subject thereto and any
improvements thereon; or
(g) any security or encumbrance, other than of the nature referred to in the
foregoing subsections (a) to (f), created by Seller if, after giving effect
to the creation of such security or encumbrance, the aggregate principal
amount of the indebtedness secured by such securities or encumbrances would
not be greater than 5 per cent of Seller's Shareholders' Equity.
14.2 Title
-----
Seller covenants and agrees with Buyer that all natural gas sold by Seller
pursuant to this Agreement will be delivered by Seller free from all liens and
adverse claims.
14.3 Financial Statements
--------------------
Seller represents and warrants to Buyer that it has delivered to Buyer
copies of the audited consolidated balance sheets, consolidated statements of
earnings and retained earnings and consolidated statements of changes in
financial position of Seller as of and for the fiscal years ended December 31,
1990, December 31, 1989, December 31, 1988 and December 31, 1987, together with
such unaudited consolidated financial statements as of and for the periods
ending March 31, June 30 and September 30 as were mailed to Seller's
shareholders, that all such consolidated financial statements are in accordance
with the books and records regularly maintained by Seller and prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved except as disclosed in such consolidated
financial statements, that all such consolidated financial statements fairly
present:
(i) the assets and liabilities of Seller on a consolidated basis as
at the respective dates of the balance sheets; and
(ii) the revenues and expenses of Seller on a consolidated basis for
the fiscal periods ended on such dates;
and that there is no mortgage, charge, hypothecation, pledge or other
encumbrance on any of Seller's property or assets as of the date of this
Agreement, other than as disclosed herein, which if made subsequent to the date
hereof would constitute a breach of the covenant set forth in section 14.1.
14.4 Adverse Change
--------------
Seller represents and warrants to Buyer that since December 31, 1990, there
has been no material adverse change in the business, condition (financial or
otherwise) or results of operations of Seller (and all other entities whose
financial affairs are presented on a consolidated basis in the financial
statements referred to in section 14.3), from that disclosed in the consolidated
financial statements for the fiscal year ended December 31, 1990.
-39-
<PAGE>
14.5 Execution and Delivery
----------------------
Subject to the satisfaction of the condition precedent set forth in
subsection 7.1(c), Seller represents and warrants to Buyer that neither the
execution and delivery by Seller of this Agreement nor the consummation by
Seller of the transactions contemplated hereby is an event which, of itself or
with the giving of notice or the passage of time or both, constitutes a
violation of or will conflict with or result in any material breach of or any
default under, the terms, conditions or provisions of, any judgment, law, rule
or regulation to which Seller is subject, or of Seller's constating documents,
or of any agreement or instrument to which Seller is a party or by which it is
bound, and that to the best of Seller's knowledge, there has been no event which
would hinder its performance under this Agreement or affect the business,
condition (financial or otherwise) or result of operations of Seller, including
without limitation, as a result of any pending or proposed laws, rules,
regulations, orders, injunctions or litigation.
14.6 Right and Authority
-------------------
Seller represents and warrants to Buyer that it has full right and
authority to enter into this Agreement and that CHEL is and shall be its duly
authorized agent for all purposes relating to this Agreement unless and until
Seller shall otherwise notify Buyer. All agreements and arrangements for the
transportation of natural gas and other purposes as contemplated in this
Agreement made by or in the name of CHEL shall be treated as if made by and for
the benefit of Seller.
ARTICLE 15
MARKETING
---------
15.1 Sales to Third Parties by Seller
--------------------------------
From time to time as provided for in section 15.2, Buyer may request and,
upon receipt of such request, Seller shall use all reasonable efforts to sell to
third parties quantities of natural gas purchased by Buyer under this Agreement.
Seller shall not be obligated to sell to third parties over a twelve (12) Month
period more than the lesser of
(x) the excess of nine million (9,000,000) MMBtu's over the aggregate
of the quantities of natural gas actually delivered by Seller to Buyer
at the Point of Delivery, resold by Buyer on the open market pursuant
to subsection 9.3(b) and sold by Seller pursuant to subsection 9.3(c)
during such twelve (12) Month period or
(y) four million, five hundred thousand (4,500,000) MMBtu's.
15.2 Commencement of Contract Year
-----------------------------
For purposes of this Article 15, each twelve (12) Month period shall
commence on the First (1st) Day of November that occurs within a Contract Year.
Within ninety (90) Days prior to the start of each such twelve (12) Month
period, Buyer shall inform Seller in writing of the
-40-
<PAGE>
quantity of natural gas to be sold by Seller during such twelve (12) Month
period. Within forty-five (45) Days prior to the start of such twelve (12) Month
period, Seller shall provide to Buyer in writing a description of the options
available for selling the quantity of natural gas designated by Buyer. Such
description shall specify the purchase price of the natural gas under each
option and the term over which the sale of the natural gas will take place.
Within thirty (30) Days prior to the start of such twelve (12) Month period,
Buyer shall notify Seller in writing of which option, if any, Buyer selects for
the sale of natural gas to third parties.
15.3 Proceeds of Sales to Third Parties
----------------------------------
Following the sale of natural gas pursuant to section 15.1, Seller shall
remit to Buyer the proceeds of such sale net of the sum of (x) three percent
(3%) of the gross price obtained from the sale of the natural gas to such third
party at the delivery point plus (y) the amount of all taxes (other than income
taxes payable by Seller) and transportation costs actually paid by Seller in
connection with such sale, except to the extent (i) such costs are otherwise
paid or reimbursed by Buyer under this Agreement, (ii) a payment in respect of
such costs is made pursuant to section 3.5 or (iii) such costs are attributable
to the initial delivery and measurement of the gas at a location other than as
contemplated by second sentence of subsection 3.5(a). Seller shall remit the net
proceeds of each sale of natural gas to a third party within seven (7) Days of
the receipt of the purchase price by Seller from the third party. Seller shall
use its normal collection procedures in the event of nonpayment by the third
party purchaser.
15.4 Statements re Seller's Sales
----------------------------
Each payment to Buyer of the net proceeds of any sale shall be accompanied
by a statement prepared by Seller specifying for each sale the name and business
address of the purchaser of the natural gas, the quantity of gas sold, the date
of initial deliveries, the purchase price, the term over which the sale is to
occur and an itemization of the transportation costs and taxes paid by Seller.
Seller shall also provide Buyer with copies of all agreements for the sale of
natural gas to third parties.
15.5 Adjustments
-----------
Seller's payment of the net proceeds from such sales to Buyer and the right
of either party to seek an adjustment to such payment shall be governed by the
provisions of sections 8.7, 8.8, 8.9 and 8.10.
15.6 Sales to Third Parties by Buyer
-------------------------------
(a) Subject to the limitations set forth in subsection (b), Buyer may
arrange for the delivery of natural gas purchased by Buyer from Seller under
this Agreement to one or more third parties which are regularly and
substantially engaged in the development, production and/or transportation or
distribution of oil and/or natural gas in exchange, directly or indirectly, for
quantities of natural gas to be delivered to Buyer's Facilities. If such an
arrangement is made, Buyer may send to Seller a transportation request, which
shall be in writing, shall be provided to Seller with as much advance notice as
is feasible under the circumstances but in no event less
-41-
<PAGE>
than thirty (30) Days advance notice prior to the scheduled start of deliveries
to each third party, and shall specify:
(i) the date on which such deliveries are to commence and end;
(ii) the daily quantity to be delivered to each third party;
(iii) the name and business address of each third party; and
(iv) the Point(s) of Delivery of such quantities to each third party.
Upon receipt of Buyer's written request, Seller shall use reasonable efforts to
arrange transportation in Canada of the appropriate daily quantities of natural
gas to each third party at the Point(s) of Delivery in Canada specified in
Buyer's written notice. Buyer shall reimburse Seller for the actual
transportation costs incurred by Seller in delivering such quantities to such
Point(s) of Delivery and for any related payments to third parties made by
Seller with Buyer's prior written consent or authorization, to the extent that
such costs and payments are not paid or reimbursed by Buyer pursuant to any
other provision of this Agreement, including without limitation costs in respect
of which a payment is made pursuant to section 3.5.
(b) Seller shall be required to deliver to one or more third parties,
pursuant to this section 15.6, on any Day specified in Buyer's written notice,
an aggregate quantity of natural gas not to exceed the excess of thirty thousand
(30,000) MMBtu's of natural gas over the aggregate of the quantities actually
delivered by Seller to Buyer, resold by Buyer pursuant to sections 2.4(c) and
9.3(b) and sold by Seller pursuant to sections 9.3(c) and 15.1 on such Day. In
no event shall Seller be required to deliver to one or more third parties,
pursuant to this section 15.6, during any twelve (12) Month period, as defined
in section 15.2, an aggregate quantity of natural gas which is greater than the
lesser of
(x) the excess of nine million (9,000,000) MMBtu's of natural gas over
the aggregate quantities actually delivered by Seller to Buyer, resold
by Buyer pursuant to sections 2.4(c) and 9.3(b) and sold by Seller
pursuant to sections 9.3(c) and 15.1 during such twelve (12) Month
period and
(y) four million, five hundred thousand (4,500,000) MMBtu's.
15.7 Statements re Buyer's Sales
---------------------------
On or before the twentieth (20th) Day of each month following a Month in
which Seller has made deliveries of natural gas pursuant to section 15.6, Seller
shall render a statement to Buyer specifying the quantities of natural gas
delivered by Seller to third parties at Buyer's request, the actual
transportation costs incurred by Seller in delivering such quantities to the
designated Point(s) of Delivery and all other amounts payable by Buyer in
accordance with sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8 and 15.6. A duplicate
copy of such statement shall also be provided to each third party pursuant to
section 8.4. Payment of the amounts specified on
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<PAGE>
Seller's statement and the right of either party to seek an adjustment to such
amounts shall be governed by the provisions of sections 8.7, 8.8, 8.9 and 8.10.
ARTICLE 16
ARBITRATION
-----------
16.1 Arbitration
-----------
In the event of a dispute as to the reasonableness of the costs of
acquiring and delivering Substitute Supplies acquired by Buyer pursuant to
section 12.1, the provisions of this Article 16 shall apply. Buyer or Seller, as
the case may be, may give written notice of such dispute to the other party, and
if the parties are unable to settle the dispute within ten (10) Days of the
delivery of such notice, either party desiring a settlement shall refer the
matter to arbitration by giving prompt written notice to the other party of its
desire to submit the matter to arbitration. Arbitration shall be conducted in
accordance with the following principles and procedures:
(a) Each party shall appoint an arbitrator and the two arbitrators so appointed
shall promptly thereafter appoint a third. If either party shall fail to
appoint an arbitrator within ten (10) Days from the date of such demand,
then the arbitrator shall be appointed by a judge of the Supreme Court of
Ontario. If the two (2) arbitrators shall fail within ten (10) Days of
their appointment to agree upon and appoint the third arbitrator, then upon
the application of either party, such third arbitrator shall be appointed
by a judge of the Supreme Court of Ontario. The arbitration shall take
place within the City of Toronto in the Province of Ontario, Canada.
(b) The arbitrators shall proceed immediately to hear and determine the matter
in dispute. The arbitrators shall be instructed that their award must be
made within forty-five (45) Days of the appointment of the third
arbitrator, subject to any reasonable delay due to unforeseen
circumstances.
(c) The award of the arbitrators shall be drawn up in writing and signed by the
arbitrators, or a majority of them, and shall be final and binding on the
parties, and the parties shall abide by the award and perform the terms and
conditions thereof. Unless otherwise determined by the arbitrators, the
fees and expenses of the arbitrator named by Seller shall be paid by
Seller, the fees and expenses of the arbitrator named by Buyer shall be
paid by Buyer and the fees and expenses of the third arbitrator shall be
paid in equal proportions by Buyer and Seller.
(d) If the arbitrators resolve a dispute in favor of Buyer and grant Buyer an
award, Buyer may offset such award against the amounts otherwise payable by
Buyer to Seller under the several provisions of this Agreement, in such
order of priority as Buyer in its sole discretion may elect.
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<PAGE>
ARTICLE 17
MISCELLANEOUS
-------------
17.1 Entire Agreement; Amendments
----------------------------
This Agreement represents the entire agreement between the parties relative
to the matters contained herein. This Agreement may not be amended without the
execution of a written document by both parties. This Agreement is governed by
and is to be construed under the laws in force in the Province of Ontario,
Canada. This Agreement amends, restates, supersedes and replaces the said Gas
Sales and Purchase Agreement made and entered into as of the 8th day of
December, 1987, as amended as aforesaid.
17.2 Enurement
---------
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Agreement may not be assigned by Seller except with the prior written consent of
Buyer. This Agreement may be freely assigned by Buyer during the first ten (10)
Contract Years. Following the first ten (10) Contract Years, this Agreement may
be assigned by Buyer only with the prior written consent of Seller except that
written consent shall not be required to authorize an assignment by Buyer for
purposes of financing or security. No such assignment shall be effective unless
and until the assignee shall have executed and delivered to the other party an
agreement in writing whereby the assignee agrees to be bound by the assignor's
obligations under this Agreement and no such assignment shall release such
assignor from its duties and obligations under this Agreement, unless expressly
consented to by the other party. Notwithstanding the foregoing:
(a) subject to section 14.1, either party may pledge or mortgage its interests
hereunder for financing purposes; and
(b) Buyer may assign its right to receive deliveries of natural gas from Seller
under this Agreement to one or more third parties which are regularly and
substantially engaged in the development, production and/or transportation
or distribution of oil and/or natural gas as part of an exchange of
Seller's natural gas for quantities of natural gas pursuant to section
15.6, provided that no such assignment pursuant to this subsection (b)
shall be binding on Seller without its written consent, and Seller will not
unreasonably withhold or delay such consent following written request
therefor.
17.3 Rights and Remedies
-------------------
The rights and remedies of each party enumerated in this Agreement are not
exclusive but shall be in addition to all of the rights and remedies at law and
in equity to which that party is or may be entitled against the other party.
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<PAGE>
17.4 Waiver
------
The terms, covenants, representations, warranties and conditions of this
Agreement may be waived only by a written instrument executed by the party
waiving compliance. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
right at a later date to enforce the same. No waiver by any party of any
condition or of the breach of any provision, term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement.
17.5 Captions
--------
The captions and headings of the various articles and sections of this
Agreement are inserted for convenience of reference only and are not to be
construed so as to define or limit the scope, extent or intent of this Agreement
or any of its provisions.
17.6 Notices
-------
Any notice, request, demand or statement provided in this Agreement shall
be in writing and will be deemed properly given if hand delivered, telecopied or
mailed, registered or certified mail, return receipt requested, prepaid, to the
other at the following address:
<TABLE>
<CAPTION>
Buyer: Seller:
- ------ -------
<S> <C>
Project Orange Associates, L.P. Canadian Hunter Exploration Ltd.
630 First Avenue, Suite 30C 700, 435 - 4th Avenue S.W.
New York, New York 10016 Calgary, Alberta T2P 3A8
Attn: Adam H. Victor Attn: Vice-President, Marketing
Telecopier: (212) 725-0427 Telecopier: (403) 260-1146
with a copy to: with a copy to:
- -------------- --------------
Russell S. Berman, Esq. Noranda Inc.
Kronish, Lieb, Weiner & Hellman Suite 4500
1345 Avenue of the Americas Commerce Court West
New York, New York 10105 Toronto, Ontario M5L 1B6
Attn: Vice President, Treasurer
Telecopier: (212) 765-8943 Telecopier (416) 982-7416
</TABLE>
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<PAGE>
17.7 Change of Address
-----------------
Either Seller or Buyer may change addresses by giving the other party
notice of such. Scheduling and dispatching by telephone may be accomplished,
provided written confirmation of the same is given to the other party within
five (5) Days.
17.8 Severability
------------
If any provision in this Agreement shall be held invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions hereof will not in any way be affected or impaired thereby.
17.9 Currency
--------
All amounts of money referred to herein and payments contemplated hereunder
shall be in lawful currency of the United States of America. Any costs and other
amounts which are incurred, received or calculated hereunder in lawful currency
of Canada shall be converted to lawful currency of the United States of America
by applying the simple average, for the Month in or in respect of which the cost
or amount was incurred, received or calculated, as the case may be, of the New
York Canadian dollar selling rates, expressed in United States dollars, applying
to trading among banks in amounts of $1,000,000 and more, as quoted at 3:00 p.m.
Eastern time on each Day in the Month and published in The Wall Street Journal.
17.10 Time
----
All times referred to herein are Eastern Standard Time unless otherwise
stated.
17.11 Exhibits
--------
Exhibits A and B are attached hereto and incorporated herein.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
PROJECT ORANGE ASSOCIATES, L.P.
By its general partner
G.A.S. ORANGE PARTNERS, L.P.
By its general partner
G.A.S. ORANGE DEVELOPMENT, INC.
By: /s/ Adam H. Victor
--------------------------------
President
NORANDA INC.
By: /s/
--------------------------------
(Title: Sr. Vice-President, Finance)
By: /s/
--------------------------------
(Title: Vice-President and Associate Treasurer)
CANADIAN HUNTER EXPLORATION LTD.
By: /s/
--------------------------------
(Title: Vice-President)
By: /s/
--------------------------------
(Title: Senior Vice-President)
-47-
<PAGE>
EXHIBIT A to the
RESTATED GAS SALE AND PURCHASE AGREEMENT
dated March 18, 1991 between
PROJECT ORANGE ASSOCIATES, L.P. (Buyer)
and NORANDA INC. (Seller)
- --------------------------------------------------------------------------------
PRODUCING, GATHERING AND PROCESSING COSTS
-----------------------------------------
Producing Costs
- ---------------
All costs relating to producing each well including without limitation
overhead allowance and the costs described in Appendix 1 attached hereto.
Gathering Costs
- ---------------
1. Operating cost component
-- includes all direct and indirect costs described in Appendix 1
-- also includes an overhead allowance which is a percentage of direct
costs
-- includes environmental costs of site reclamation when the facility is
abandoned
2. Capital cost component (Rate Base)
-- includes capital balance plus working capital allowance
-- return on rate base
-- depreciation
3. Lost gas cost allowance ("GCA")
-- loss occurs because total facility GCA is allocated between facility
owners and custom users on the basis of throughput. Some GCA for
unused capacity will be allocated to custom users, and this GCA plus
the GCA associated with the capacity used by the custom user is lost
to the facility owners, and will result in a higher Crown royalty for
the owners.
Processing Costs
- ----------------
1. Operating cost component
-- includes all direct and indirect costs described in Appendix 1
<PAGE>
-- also includes an overhead allowance which is a percentage of direct
costs
-- includes environmental costs of site reclamation when the facility is
abandoned
2. Capital cost component (Rate Base)
-- includes capital balance plus working capital allowance
-- return on rate base
-- depreciation
3. Lost gas cost allowance
-- loss occurs because total facility GCA is allocated between facility
owners and custom users on the basis of throughput. Some GCA for
unused capacity will be allocated to custom users, and the GCA plus
the GCA associated with the capacity used by the custom user is lost
to the facility owners, and will result in a higher Crown royalty for
the owners.
-2-
<PAGE>
APPENDIX 1
----------
602 Company labour and expenses
603 Contract field supervision and consulting services
606 Facility and equipment maintenance labour
607 Contract operating expenses
608 Contract helicopter rentals
610 Crude oil hauling
611 Freight and hauling
612 Salt water hauling
620 Well servicing and minor workovers
621 Well testing and pressure surveys
622 Lab analysis
623 Gas plant and gathering turnarounds
624 Oil battery turnarounds
630 Utilities
631 Telecontrol
641 Treating and dehydrating chemicals and lube oils
642 Road and lease maintenance
643 Equipment rentals
645 Repair parts and supplies
648 Miscellaneous
X Overhead allowance
X Materials
X Automotive
X Purchased fuel gas
<PAGE>
Exhibit 10.4
December 6, 1999
Union Pacific Resources Inc.
4th Floor
425 - 1st Street S.W.
Calgary, Alberta
T2P 3L8
and
Project Orange Associates, L.P.
c/o G.A.S. Orange Associates LLC
90 Presidential Plaza
Syracuse, New York 13209
Dear Sirs:
Re: Replacement of Restated Gas Purchase and Sale Agreement dated March 18,
1991 (the "Gas Supply Agreement") between Project Orange Associates, L.P.
(the "Buyer"), Noranda Inc. ("Noranda") and Canadian Hunter Exploration
Ltd. ("Old Hunter")
The purpose of this letter agreement ("Letter Agreement") is to set forth the
understanding of the Buyer, Canadian Hunter Exploration Ltd. ("CHEL") (which is
the successor by amalgamation to Old Hunter) and Union Pacific Resources Inc.
("UPRI") (which is the successor to North Canadian Oils Limited and North
Canadian Marketing Inc.) concerning the amendment and restatement, and partial
assignment to UPRI, of the Gas Supply Agreement.
By virtue of an Assignment, Amendment and Release Agreement dated the date
hereof, in respect of the Gas Supply Agreement between Noranda as Assignor, CHEL
as Assignee and the Buyer, CHEL has become a party to the Gas Supply Agreement
in the place and stead of Noranda and Old Hunter (as so assigned the "Assigned
Gas Supply Agreement"). The Buyer, CHEL and UPRI hereby agree that effective
January 1, 2000 (subject only to Section 8 hereof) the Assigned Gas Supply
Agreement will be replaced by two agreements, the first of which will be between
CHEL and the Buyer (the "CHEL Supply Agreement") and the second of which will be
between UPRI and the Buyer (the "UPRI Supply Agreement"). CHEL will not have
any liability under the UPRI Supply Agreement and UPRI will not have any
liability under the CHEL Supply Agreement and
<PAGE>
the liability of CHEL and UPRI hereunder shall be separate and not joint and
several for so long as this Letter Agreement is applicable in the circumstances
described in Section 5(b) hereof, as if the CHEL Supply Agreement and the UPRI
Supply Agreement had been executed and delivered.
1. The terms of the CHEL Supply Agreement will be identical to the Assigned
Gas Supply Agreement with the following exceptions:
(a) for the purpose of establishing the term, the Initial Delivery Day
shall be deemed to have been June 1, 1992;
(b) the Maximum Daily Quantity from and after the effective date of the
CHEL Supply Agreement shall be 17,500 MMBtu;
(c) for the purpose of establishing the Unconsumed Entitlement, the
Maximum Entitlement on the Initial Delivery Day shall be deemed to
have been or 69,999,600 MMBtu;
(d) the introductory phrase of Section 2.2 will be modified to reflect
that Buyer shall be entitled to purchase gas from CHEL and UPRI under
the CHEL Supply Agreement and the UPRI Supply Agreement, respectively
and the quantity of Gas referred to in Section 2.2(e)(y) shall be
10,062 MMBtu;
(e) the quantities of natural gas referred to in Sections 2.3(b)(i) and
(ii) and 2.3(c)(i) and (ii) shall be 58.333% of those quantities set
forth in the same clauses of the Gas Supply Agreement;
(f) there being no Deferral Balance, there shall be no further deferral of
payments as contemplated in Section 3.7 of the Assigned Gas Supply
Agreement, and Section 3.7 and any other references to the Deferral
Balance or the Deferral Account shall therefore not appear in the CHEL
Supply Agreement, mutatis mutandis;
------- --------
(g) the reference in Section 8.6(c) to Noranda Financial Statements shall
be changed to a reference to CHEL Financial Statements;
(h) references to the Deferral Account and the Deferral Balance in Section
12.2 and elsewhere shall be deleted;
(i) Section 14.3 shall be deleted;
(j) Section 14.4 shall be deleted;
(k) Section 14.6 shall be modified, as appropriate, to reflect CHEL being
the successor to Noranda;
-2-
<PAGE>
(l) the quantities set forth in Section 15.1(x) and (y) of the CHEL Supply
Agreement shall be equal to 58.333% of the quantities set forth in
Section 15.1 of the Gas Supply Agreement;
(m) the addresses for notices under the CHEL Supply Agreement in Section
17.6 shall be as follows:
Buyer: Project Orange Associates, L.P.
c/o G.A.S. Orange Associates, LLC
90 Presidential Plaza
Syracuse, New York 13209
Attention: President
Telecopier: (315) 425-3621
CHEL: Canadian Hunter Exploration Ltd.
2800, 605 - 5th Avenue SW
Calgary, Alberta T2P 3H5
Attention: Treasurer
Telecopier: (403) 260-1664
(n) the CHEL Supply Agreement shall be governed by and construed under the
laws in force in the Province of Alberta, Canada.
2. The terms of the UPRI Supply Agreement will be identical to the CHEL Supply
Agreement with the following exceptions:
(a) for the purpose of establishing the term, the Initial Delivery Day shall be
deemed to have been June 1, 1992;
(b) the Maximum Daily Quantity on the effective date of the UPRI Supply
Agreement shall be 12,500 MMBtu;
(c) for the purpose of establishing the Unconsumed Entitlement, the Maximum
Entitlement on the Initial Delivery Day shall be deemed to have been
50,000,400 MMBtu;
(d) the quantity of Gas referred to in Section 2.2(e)(y) shall be 7,188 MMBtu;
(e) the quantities of natural gas referred to in Sections 2.3(b)(i) and (ii)
and 2.3(c)(i) and (ii) shall be 41.667% of those quantities set forth in
the same clauses of the Gas Supply Agreement;
-3-
<PAGE>
(f) the reference in Section 8.6(c) to CHEL Financial Statements shall be
changed to a reference to UPRI Financial Statements;
(g) Section 14.6 shall be modified to reflect the administration by CHEL of the
nominations, transportation services and accounting and that payments due
to UPRI will be made to CHEL as UPRI's agent;
(h) the quantities set forth in Section 15.1(x) and (y) of the UPRI Supply
Agreement shall be equal to 41.667% of the quantities set forth in Section
15.1 of the Gas Supply Agreement;
(i) the addresses for notices under the UPRI Supply Agreement in Section 17.6
shall be as follows:
Buyer: Project Orange Associates, L.P.
c/o G.A.S. Orange Associates LLC
90 Presidential Plaza
Syracuse, New York 13209
Attention: President
Telecopier: (315) 425-3621
UPRI: Union Pacific Resources Inc.
4th Floor
425 - 1st Street S.W.
Calgary, Alberta T2P 3L8
Attention: Vice President, Marketing
Telecopier: (403) 231-0501
(j) the UPRI Supply Agreement shall be governed by and construed under the laws
enforced in the Province of Alberta, Canada.
3. The Parties agree that the Unconsumed Entitlement under the Gas Supply
Agreement was 70,236,028 MMBtu as at November 1, 1999 and that if the CHEL
Supply Agreement and UPRI Supply Agreement had been in force on that date,
the Unconsumed Entitlements thereunder would have been 40,970,782 MMBtu and
29,265,246 MMBtu, respectively.
4. In consideration of the foregoing:
(a) CHEL has paid US $291,665 to the Buyer, the receipt and sufficiency of
which are hereby acknowledged; and
(b) UPRI has paid US $208,335 to the Buyer, the receipt and sufficiency of
which are hereby acknowledged.
-4-
<PAGE>
5. Assuming the conditions precedent set forth in paragraph 8 hereof have been
met, effective January 1, 2000:
(a) if the CHEL Supply Agreement and the UPRI Supply Agreement have been
executed and delivered, then as of such date the CHEL Supply Agreement
and the UPRI Supply Agreement will be deemed to replace, amend and
restate in all respects the Assigned Gas Supply Agreement.
(b) If the CHEL Supply Agreement and the UPRI Supply Agreement have not
then been executed and delivered, then this Letter Agreement shall be
effective to govern the gas purchase and sale arrangement among, and
the respective rights, duties and obligations of, the parties, and
shall for such purpose constitute an amendment to the Assigned Gas
Supply Agreement, until such time as the CHEL Supply Agreement and the
UPRI Supply Agreement have been executed and delivered. In case of
any inconsistencies between this Letter Agreement and the Assigned Gas
Supply Agreement in such event, the terms of this Letter Agreement
shall be controlling.
6. The Buyer, CHEL and UPRI each acknowledge and agree that the foregoing
terms reflect their mutual understanding as of the date hereof of the
changes that will be necessary and appropriate to effectuate the CHEL
Supply Agreement and the UPRI Supply Agreement in replacement of the
Assigned Gas Supply Agreement, leaving Buyer and CHEL in the same position,
economic and otherwise, as they are in under the Gas Supply Agreement as in
effect on the date hereof (except to the extent of the changes agreed to in
connection with paragraphs 1 and 2); provided, however, that UPRI and CHEL
will have separate and not joint and several liability. Nonetheless, the
Parties understand and agree to cooperate fully to incorporate any other
changes to the Assigned Gas Supply Agreement that they mutually determine
to be necessary and appropriate between the date hereof and the date the
CHEL Supply Agreement and UPRI Supply Agreement are executed and delivered.
7. It is the intention of the parties that this Letter Agreement is a binding
contract. CHEL and the Buyer, and UPRI and the Buyer, respectively, will
use their best efforts to enter into formal agreements reflecting the
above, reflecting the terms hereof, on or before December 31, 1999.
8. The following additional actions shall be taken, and the following
additional documents shall be delivered to or as directed by Buyer, as
conditions precedent to the effectiveness of the CHEL Supply Agreement and
the UPRI Supply Agreement:
(a) Buyer shall as soon as practicable submit to the U.S. Department of Energy
("DOE") an application seeking expedited approval of an
-5-
<PAGE>
amendment to Buyer's authorization for the importation of natural gas, and
as a condition to the effectiveness of the CHEL Supply Agreement and the
UPRI Supply Agreement, Buyer shall have received from DOE a binding Order
approving such amendment;
(b) A Consent and Agreement from UPRI in favor of Buyer's lenders substantially
in the form executed by CHEL in connection with the closing of the offering
of Buyer's Senior Secured Notes issued December 6, 1999 (the "Closing"),
modified as appropriate for UPRI;
(c) An opinion of Alberta counsel to UPRI in customary form as to the
enforceability of the UPRI Supply Agreement against UPRI and other
customary matters, addressed to said lenders;
(d) A revised Consent and Agreement from CHEL in favor of the lenders, bringing
forward the Consent and Agreement of CHEL provided in connection with the
Closing;
(e) An opinion from Alberta counsel to CHEL, in customary form as to the
enforceability of the CHEL Supply Agreement against CHEL and other
customary matters, addressed to said lender; and
(f) Buyer shall have received evidence reasonably satisfactory to it that firm
gas transportation arrangements with TransCanada Pipelines Limited shall be
in place with respect to all deliveries to be made under the CHEL Supply
Agreement and the UPRI Supply Agreement at no additional cost to Buyer over
and above Buyer's existing costs for such arrangements under the Assigned
Gas Supply Agreement as in effect on the date of the Closing.
-6-
<PAGE>
If the foregoing accurately reflects your understanding of our agreement, please
so indicate by signing this letter in the space provided below and returning an
executed copy to each other party to this letter.
Yours truly,
CANADIAN HUNTER EXPLORATION LTD.
Per: /s/ John Kowal
------------------------------------
Per: /s/
------------------------------------
ACKNOWLEDGED AND AGREED TO
this 6th day of December, 1999.
UNION PACIFIC RESOURCES INC.
Per: /s/
--------------------------------
ACKNOWLEDGED AND AGREED TO
this 6th day of December, 1999
PROJECT ORANGE ASSOCIATES, L.P., , by its
general partner, G.A.S. ORANGE ASSOCIATES,
LLC
Per: /s/ Adam Victor
----------------------------------
Adam H. Victor
President
-7-
<PAGE>
Exhibit 10.5
FIRM NATURAL GAS TRANSPORTATION AGREEMENT
THIS FIRM NATURAL GAS TRANSPORTATION AGREEMENT ("Agreement") is entered
into this 29/th/ day of March, 1991 between TENNESSEE GAS PIPELINE COMPANY, a
Delaware corporation, herein called "Transporter", and PROJECT ORANGE
ASSOCIATES, L.P., a Delaware limited partnership, herein called "Shipper",
pursuant to the following general terms and representations.
W I T N E S S E T H:
--------------------
WHEREAS, Transporter owns and operates a natural gas transmission pipeline
system which extends in a northeasterly direction from its principal sources of
supply in Texas and Louisiana through the States of Texas, Louisiana, Arkansas,
Mississippi, Alabama, Tennessee, Kentucky, West Virginia, Ohio, Pennsylvania,
New York, New Jersey, Massachusetts, New Hampshire, Rhode Island and
Connecticut; and
WHEREAS, Shipper has entered into certain gas purchase contracts with
various producers providing for the sale by such producers to Shipper of a
maximum quantity of 20,000 dekatherms ("Dth") of natural gas per day and has
made arrangements for the delivery of such natural gas for the account of
Shipper to the points listed in Exhibit A hereto; and
WHEREAS, G.A.S. Orange Development, Inc. ("G.A.S. Orange") and Transporter
have entered into a Precedent Agreement dated January 13, 1989 (the "Precedent
Agreement"), pursuant to which Transporter agreed to file an application with
the Federal Energy Regulatory Commission ("FERC") for the necessary
authorizations to (i) provide firm natural gas transportation service of a daily
quantity not to exceed 20,000 Dth of natural gas, and (ii) construct and operate
the facilities necessary to provide such firm transportation service;
WHEREAS, G.A.S. Orange has assigned all of its rights and obligations under
the Precedent Agreement to Shipper; and
WHEREAS, Transporter has now been authorized by the FERC order issued on
September 13, 1990 in Docket No. CP88-171-001, to render the firm transportation
service described herein and to construct and operate the necessary facilities
therefor; and
WHEREAS, Transporter and Shipper wish to set forth herein the specific
terms and conditions under which Transporter will provide such transportation
service to Shipper;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, Transporter and Shipper agree as follows:
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
1.1 Equivalent Quantity -- shall mean, during any given period of time, a
-------------------
quantity of gas equal to the quantity of gas received by Transporter
for the account of Shipper for transportation hereunder at the Point(s)
of Receipt, less quantities for Transporter's system fuel and use
requirements and gas lost and unaccounted for associated with this
transportation service, which may be provided by Transporter or Shipper
as specified in Article VIII, Section 4. For purposes of determining an
Equivalent Quantity, quantities of gas shall be stated in dekatherms
and measured on a dry basis.
1.2 Point(s) of Receipt -- shall mean those points as specified in Exhibit A
-------------------
attached hereto at which Transporter shall receive gas for
transportation hereunder and such other points as may be agreed to from
time to time by both parties.
1.3 Point(s) of Delivery -- shall mean those points as specified on Exhibit A
--------------------
attached hereto at which Transporter shall deliver gas to Shipper and
such other points as may be agreed to from time to time by both
parties.
1.4 Transportation Quantity -- shall mean the maximum daily quantity of natural
-----------------------
gas that Transporter hereby agrees to receive, subject to Article II
herein, for the account of Shipper at the Point of Receipt during the
term hereof, which shall be 20,000 Dth, provided that Transporter is
under no obligation to receive a volume in excess of 20,000 Mcf.
ARTICLE II
----------
TRANSPORTATION
--------------
2.1 Transportation Service -- After receipt and acceptance by Transporter of
----------------------
FERC authorization to provide service hereunder and completion of the
facilities required to provide such service, beginning on the
Commencement Date (as defined in Article VIII, Section 8.1 hereof),
Transporter agrees to accept and receive daily, on a firm basis, at the
Point of Receipt, from Shipper such quantity of gas as Shipper makes
available up to the Transportation Quantity and to transport and
deliver for Shipper to the Point(s) of Delivery an Equivalent Quantity
of gas.
ARTICLE III
-----------
RECEIPT AND DELIVERY PRESSURES
------------------------------
3.1 Shipper shall cause the delivery of natural gas to Transporter at the
Point(s) of Receipt to be at pressures sufficient to enter
Transporter's pipeline system.
-2-
<PAGE>
3.2 Transporter shall cause the delivery of natural gas to Shipper at the
Point(s) of Delivery as nearly as practicable at Transporter's line
pressure, provided that pressure shall not be less than 400 pounds per
square inch gauge.
ARTICLE IV
----------
CONTROL AND BALANCING OF DELIVERIES
-----------------------------------
The control and balancing of deliveries shall be as provided in Article
III, Section 7 of the General Terms and Conditions of Transporter's FERC Gas
Tariff Volume No. 1.
ARTICLE V
---------
QUALITY SPECIFICATIONS AND STANDARDS FOR MEASUREMENTS
-----------------------------------------------------
For all gas received, transported and delivered hereunder, the parties
agree to the quality specifications and standards for measurement provided for
in Articles II and III of the General Terms and Conditions of Transporter's FERC
Gas Tariff Volume No. 1.
ARTICLE VI
----------
FACILITIES
----------
Transporter shall construct, install, own and operate the facilities,
including but not limited to measurement facilities and hot tap, necessary for
Transporter to receive and deliver the gas as contemplated herein for Shipper's
account at the Point(s) of Receipt and the Point(s) of Delivery.
ARTICLE VII
-----------
DISPATCHER'S NOTIFICATION
-------------------------
Shipper's dispatcher shall notify Transporter's dispatcher of the daily
volume which Shipper desires Transporter to transport on any day in the manner
set forth in Article III, Section 4 of the General Terms and Conditions of
Transporter's FERC Gas Tariff Volume No. 1.
ARTICLE VIII
------------
RATES FOR SERVICE
-----------------
8.1 Commencement of Service. Upon completion of construction of the pipeline
-----------------------
facilities required to enable Transporter to render the transportation
service
-3-
<PAGE>
described herein, Transporter will notify Shipper in writing of the date on
which Transporter will be ready to commence transportation service under
this Contract. The "Commencement Date" shall be 30 days after the date of
Transporter's notice.
8.2 Transportation Rates -- Beginning on the Commencement Date, the
--------------------
compensation to be paid by Shipper to Transporter for the
transportation service provided for herein shall be payable monthly in
accordance with Article X hereof and shall be equal to the sum of the
following: (a) the product of (1) the sum of the "D-l" charges for
Segments 1 and 2 under Transporter's NET-EU Rate Schedule and (2) the
Transportation Quantity, (b) the product of (1) the sum of the "D-2"
charges for Segments 1 and 2 under Transporter's NET-EU Rate Schedule
and (2) the "D-2 Billing Determinant" for the applicable billing
period as set forth in Exhibit B hereto, (c) the product of (1) the
sum of the "Commodity" charges for Segments 1 and 2 under
Transporter's NET-EU Rate Schedule and any applicable surcharges as
included in Transporter's effective FERC Gas Tariff and (2) the
quantity of gas delivered by Transporter to Shipper during the
applicable billing period. References herein to Transporter's NET-EU
Rate Schedule shall include any successor or substitute rate schedule.
8.3 Fuel and Use Quantity Prior to the Commencement Date (as defined in
---------------------
Section 8.1 hereof) Transporter and Shipper shall mutually agree whether
Transporter or Shipper shall supply the fuel required for transportation
hereunder. In the event Transporter and Shipper agree that Transporter
shall supply the fuel required for fuel and losses ("Fuel and Use
Quantity"), Transporter shall charge Shipper an amount equal to the
product of (a) Transporter's Current Average Cost of Purchased Gas plus
adjustment pursuant to Section 3 of Article XXIII of Transporter's FERC
Gas Tariff, Volume No. 1, and (b) the Fuel and Use Quantity.
Transporter's provision of the fuel required for transportation
hereunder is subject to termination on 30 days' written notice, at the
option of either Transporter in its sole discretion or Shipper in its
sole discretion. In the event that Transporter does not provide the Fuel
and Use Quantity as stated above, then Shipper shall make available to
Transporter from the Transportation Quantity the amount of gas equal to
the Fuel and Use Quantity. For purposes of this Agreement, the Fuel and
Use Quantity will be computed and allocated in the same manner in which
Fuel and Use Quantity is computed and allocated for service under
Transporter's Rate Schedule FT-A.
8.4 Rate Changes -- Shipper agrees that Transporter shall have the unilateral
------------
right pursuant to this Article VIII to file and make effective changes
in the rates, charges, and conditions applicable to service pursuant
to the Rate Schedule under which this service is rendered and/or any
provisions of the General Terms and Conditions of Transporter's FERC
Gas Tariff Volume No. 1 as such Tariff may be revised or replaced from
time to time. Without prejudice to Shipper's right to contest such
charges, Shipper agrees to pay the effective rate for service rendered
pursuant to this Agreement, subject to FERC review and adjustment.
-4-
<PAGE>
ARTICLE IX
RESPONSIBILITY DURING TRANSPORTATION
------------------------------------
As between the parties hereto, it is agreed that from the time gas is
delivered by Shipper to Transporter at the Point of Receipt and prior to
delivery of such gas to or for the account of Shipper at the Point(s) of
Delivery, Transporter shall have the unqualified right to commingle such gas
with other gas in its pipeline system and shall have the unqualified right to
handle and treat such gas as its own.
ARTICLE X
---------
BILLINGS AND PAYMENTS
---------------------
Transporter and Shipper agree that the obligations of Transporter and
Shipper for billing and payment for the services provided hereunder shall be in
accordance with Articles V and VI of the General Terms and Conditions of
Transporter's FERC Gas Tariff Volume No. 1.
ARTICLE XI
----------
RATE SCHEDULES AND GENERAL TERMS AND CONDITIONS
-----------------------------------------------
This Agreement and all terms and provisions contained or incorporated
herein are subject to the provisions of Transporter's applicable Rate Schedules
and of Transporter's General Terms and Conditions on file with the FERC, or
other duly constituted authorities having jurisdiction, and as the same may be
legally amended or superseded, which Rate Schedules and General Terms and
Conditions are by this reference made a part hereof.
ARTICLE XII
-----------
TERM OF AGREEMENT
-----------------
This Agreement shall become effective on the date hereof; provided,
however, that Transporter shall be under no obligation to receive or to deliver
any quantities of natural gas hereunder prior to the Commencement Date as
defined in Article VIII, Section 8.1 hereof. This Agreement shall continue in
force and effect until the expiration of 20 years following the Commencement
Date hereunder and from year to year thereafter; provided, however, that either
party may elect to terminate this Agreement as of the end of such 20 year period
or as of the end of any extended annual period by giving 12 months prior written
notice of such termination to be effective on the expiration of such 20 year
period or the applicable anniversary of such period.
-5-
<PAGE>
ARTICLE XIII
------------
REGULATION
----------
This Agreement shall be subject to all applicable governmental statutes and
all applicable and lawful orders, rules, and regulations.
ARTICLE XIV
-----------
WARRANTY
--------
Shipper warrants that it will at the time of delivery of gas to Transporter
hereunder have good title to and the good right to deliver all gas so made
available. Transporter warrants that it will, at the time of delivery of gas for
the account of Shipper hereunder, have the right to deliver all such gas. Each
party warrants to the other and such other party's successors and assigns that
the gas covered by its warranty hereunder shall be free and clear of all liens,
encumbrances, or claims against the warranting party or its affiliates for use
of property of such party or its affiliates. Each party will indemnify the other
and save it harmless from all suits, actions, debts, accounts, damages, costs,
losses, and expenses arising from or out of any adverse claims regarding title
and/or right to delivery of any or all persons against the indemnifying party
and/or to royalties, taxes, license fees, or charges assessed against such
party. Title to the gas received, transported, and delivered hereunder shall at
all times remain with Shipper and shall not pass to Transporter; provided that
title to the gas delivered by Shipper hereunder for fuel and use requirements of
Transporter as set forth in Article VIII herein, shall pass to Transporter upon
delivery of said gas to Transporter at the Point(s) of Receipt.
ARTICLE XV
----------
ASSIGNMENTS
-----------
15.1 Either party may assign or pledge this Agreement and all rights and
obligations hereunder under the provisions of any mortgage, deed of
trust, indenture, or other instrument which it has executed or may
execute hereafter as security for indebtedness, provided such
assignment is consistent with the terms and conditions of the Letter
of Credit Drawing Agreement executed by Shipper and Transporter.
Either party may without relieving itself of its obligations under
this Agreement, assign any of its rights hereunder to a wholly owned
affiliate, but otherwise no assignment of this Agreement or any of the
rights or obligations hereunder shall be made unless there first shall
have been obtained the written consent thereto of the other party,
which consent shall not be unreasonably withheld.
15.2 Any entity which shall succeed by purchase, merger, or consolidation to the
properties, substantially or as an entirety, of either party hereto
shall be entitled to the rights and shall be subject to the
obligations of its predecessor in interest under this Agreement.
-6-
<PAGE>
ARTICLE XVI
-----------
MISCELLANEOUS
-------------
16.1 No modification of or supplement to the terms and provisions hereof shall
be or become effective, except by the execution of supplementary
written consent.
16.2 No waiver by either party of any one or more defaults by the other in the
performance of any provisions of this Agreement shall operate or be
construed as a waiver of any future default or defaults, whether of a
like or of a different character.
16.3 Except as herein otherwise provided, any notice, request, demand,
statement, or bill provided for in this Agreement or any notice which
either party may desire to give to the other shall be in writing and
mailed by registered or certified mail to the post office address of
the party intended to receive the same, as the case may be, as
follows:
TRANSPORTER: Tennessee Gas Pipeline Company
- ------------ P. 0. Box 2511
Houston, Texas 77252
Attention: Market Services
Invoices: Attention: Gas Accounting
Payments: Attention: Treasury Department
Gas Analysis and Attention: Measurement Department
Volume Statements:
SHIPPER Project Orange Associates, L.P.
- ------- 630 First Avenue, Suite 30C
New York, New York 10016
Attention: Mr. Adam H. Victor
or to such other address as either party shall designate by formal
written notice to the other. Routine communications, including monthly
statements and payments, may be mailed by registered, certified or
ordinary mail.
16.4 This Agreement shall be interpreted under the laws of the State of Texas,
except insofar as such laws refer to the laws of another jurisdiction.
16.5 Exhibits A and B attached hereto are incorporated herein by reference
and made a part of this Agreement for all purposes.
-7-
<PAGE>
16.6 This Agreement, as of the date hereof, shall supersede and cancel the
Precedent Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in multiple counterparts as of the date first hereinabove written.
TENNESSEE GAS PIPELINE COMPANY
BY: /s/
_______________________________________
PROJECT ORANGE ASSOCIATES, L.P.
By G.A.S. Orange Partners, L.P.,
Its General Partner
By G.A.S. Orange Development, Inc.,
Its General Partner
BY: /s/ Adam Victor
_______________________________________
-8-
<PAGE>
EXHIBIT A
TO FIRM TRANSPORTATION AGREEMENT DATED MARCH 29, 1991 BETWEEN PROJECT ORANGE
ASSOCIATES, L.P. AND TENNESSEE GAS PIPELINE COMPANY ("TENNESSEE")
RECEIPT POINT(S): Point of interconnection between Tennessee and the
- ---------------- facilities of TransCanada PipeLines Limited at the
Niagara River near Lewiston, New York
DELIVERY POINT(S): New delivery point located at MLV 241 on Tennessee's
- ----------------- "200" main line near Syracuse, New York.
-9-
<PAGE>
EXHIBIT B
TO FIRM TRANSPORTATION AGREEMENT DATED MARCH 29, 1991
BETWEEN PROJECT ORANGE ASSOCIATES, L.P. AND
TENNESSEE GAS PIPELINE COMPANY
Billing Period Number of Days D-2 Billing
- -------------- -------------- Determinants
------------
January 31 527,000
February 28 476,000
March 31 527,000
April 30 510,000
May 31 527,000
June 30 510,000
July 21 527,000
August 31 527,000
September 30 510,000
October 31 527,000
November 30 510,000
December 31 527,000
-10-
<PAGE>
EXHIBIT 10.6
SERVICE PACKAGE NO. 31603
AMENDMENT NO.0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule IT)
THIS AGREEMENT is made and entered into as of the 11th day of November, 1999, by
and between TENNESSEE GAS PIPELINE COMPANY, a Delaware Corporation, hereinafter
referred to as "Transporter" and PROJECT ORANGE ASSOCIATES L P, a DELAWARE
Corporation, hereinafter referred to as "Shipper." Transporter and Shipper shall
collectively be referred to herein as the "Parties."
ARTICLE I
DEFINITIONS
1.1 TRANSPORTATION QUANTITY - shall mean the maximum daily quantity of gas
which Transporter agrees to receive and transport, subject to Article II
herein, for the account of Shipper hereunder on each day during each year
during the term hereof which shall be 5,000 dekatherms.
1.2 EQUIVALENT QUANTITY - shall be as defined in the Article I of the General
Terms and Conditions of Transporter's FERC Gas Tariff.
ARTICLE II
TRANSPORTATION
Transporter agrees to accept and receive daily on an interruptible basis,
as determined in Transporter's sole opinion, at the Point(s) of Receipt, from
Shipper or for Shipper's account such quantity of gas as Shipper makes available
up to the Transportation Quantity of gas and deliver for Shipper to the Delivery
Point(s) an Equivalent Quantity of gas.
ARTICLE III
FACILITIES
All Facilities are in place to render the service provided for in this
Agreement and Transporter shall have no obligation to build facilities to
perform this service.
<PAGE>
SERVICE PACKAGE NO. 31603
AMENDMENT NO.0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule IT)
ARTICLE IV
QUALITY SPECIFICATIONS AND STANDARDS FOR MEASUREMENT
For all gas received, transported and delivered hereunder the Parties agree
to the Quality Specifications and Standards for Measurement as specified in the
General Terms and Conditions of Transporter's FERC Gas Tariff Volume No. 1. To
the extent that no new measurement facilities are installed to provide service
hereunder, measurement operations will continue in the manner in which they have
previously been handled. In the event that such facilities are not operated by
Transporter or a downstream pipeline, then responsibility for operations shall
be deemed to be Shipper's.
ARTICLE V
RATES AND CHARGES FOR GAS TRANSPORTATION
5.1 TRANSPORTATION RATES - Commencing with the date of initial receipt of gas
by rates, charges and surcharges to be paid by Shipper to Transporter for
the transportation service provided herein shall be in accordance with
Transporter's Rate Schedule IT and the General Terms and Conditions of
Transporter's FERC Gas Tariff.
5.2 INCIDENTAL CHARGES - Shipper agrees to reimburse Transporter for any filing
or similar fees, which have not been previously paid by Shipper, which
Transporter incurs in rendering service hereunder.
5.3 CHANGES IN RATES AND CHARGES - Shipper agrees that Transporter shall have
the unilateral right to file with the appropriate regulatory authority and
make changes effective in (a) the rates and charges applicable to service
pursuant to Transporter's Rate Schedule IT, (b) the rate schedule(s)
pursuant to which service hereunder is rendered, or (c) any provision of
the General Terms and Conditions applicable to those rate schedules.
Transporter agrees that Shipper may protest or contest the aforementioned
filings, or may seek authorization from duly constituted regulatory
authorities for such adjustment of Transporter's existing FERC Gas Tariff
as may be found necessary to assure Transporter just and reasonable rates.
ARTICLE VI
BILLINGS AND PAYMENTS
<PAGE>
SERVICE PACKAGE NO. 31603
AMENDMENT NO.0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule IT)
Transporter shall bill and Shipper shall pay all rates and charges in accordance
with Articles V and VI, respectively, of the General Terms and Conditions of
Transporter's FERC Gas Tariff.
ARTICLE VII
GENERAL TERMS AND CONDITIONS
This Agreement shall be subject to the effective provisions of Transporter's
Rate Schedule IT and to the General Terms and Conditions incorporated therein,
as the same may be changed or superseded from time to time in accordance with
the rules and regulations of the FERC.
ARTICLE VIII
REGULATION
8.1 This Agreement shall be subject to all applicable and lawful governmental
statutes, orders, rules and regulations and is contingent upon the receipt
and continuation of all necessary regulatory approvals or authorizations
upon terms acceptable to Transporter. This Agreement shall be void and of
no force and effect if any necessary regulatory approval is not so obtained
or continued. All Parties hereto shall cooperate to obtain or continue all
necessary approvals or authorizations, but no Party shall be liable to any
other Party for failure to obtain or continue such approvals or
authorizations.
8.2 The transportation service described herein shall be provided subject to
Subpart G, Part 284 of the FERC Regulations.
ARTICLE IX
RESPONSIBILITY DURING TRANSPORTATION
Except as herein specified, the responsibility for gas during
transportation shall be as stated in the General Terms and Conditions of
Transporter's FERC Gas Tariff Volume No. 1.
ARTICLE X
WARRANTIES
<PAGE>
SERVICE PACKAGE NO. 31603
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule IT)
10.1 In addition to the warranties set forth in Article IX of the General Terms
and Conditions of Transporter's FERC Gas Tariff, Shipper warrants the
following:
(a) Shipper warrants that all upstream and downstream transportation
arrangements are in place, or will be in place as of the requested
effective date of service, and that it has advised the upstream and
downstream transporters of the receipt and delivery points under this
Agreement and any quantity limitations for each point. Shipper agrees
to indemnify and hold Transporter harmless for refusal to transport
gas hereunder in the event any upstream or downstream transporter
fails to receive or deliver gas as contemplated by this Agreement.
(b) Shipper agrees to indemnify and hold Transporter harmless from all
suits, actions, debts, accounts, damages, costs, losses and expenses
(including reasonable attorneys fees) arising from or out of breach of
any warranty by Shipper herein.
10.2 Transporter shall not be obligated to provide or continue service hereunder
in the event of any breach of warranty.
ARTICLE XI
TERM
11.1 This Agreement shall be effective from the date hereof and shall remain in
full force and effect on a month to month basis unless terminated by either
Party upon at least thirty (30) days prior written notice to the other
Party.
11.2 Any portions of this Agreement necessary to resolve or cash-out imbalances
under this Agreement as required by the General Terms and Conditions of
Transporter's FERC Gas Tariff Volume No. 1, shall survive the other parts
of this Agreement until such time as such balancing has been accomplished;
provided, however, that Transporter notifies Shipper of such imbalance no
later than twelve months after the termination of this Agreement.
11.3 This Agreement will terminate automatically upon written notice from
Transporter in the event Shipper fails to pay all of the amount of any bill
for service rendered by Transporter hereunder in accord with the terms and
conditions of Article VI of the General Terms and Conditions of
Transporter's FERC Tariff.
<PAGE>
SERVICE PACKAGE NO. 31603
AMENDMENT NO.0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule IT)
ARTICLE XII
NOTICE
Except as otherwise provided in the General Terms and Conditions applicable
to this Agreement, any notice under this Agreement shall be in writing and
mailed to the post office address of the Party intended to receive the same, as
follows:
TRANSPORTER: TENNESSEE GAS PIPELINE COMPANY
P.O. Box 2511
Houston, Texas 77252-2511
Attention: Director, Transportation Control
SHIPPER:
NOTICES: PROJECT ORANGE ASSOCIATES L P
C/O GPU INTERNATIONAL, INC.
ONE UPPER POND ROAD
PARSIPPANY, NJ 07054
Attention: TOM REILLY
BILLING: PROJECT ORANGE ASSOCIATES L P
C/O GPU INTERNATIONAL, INC.
ONE UPPER POND ROAD
PARSIPPANY, NJ 07054
Attention: TOM REILLY
or to such other address as either Party shall designate by formal written
notice to the other.
<PAGE>
SERVICE PACKAGE NO. 31603
AMENDMENT NO.0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule IT)
ARTICLE XIII
ASSIGNMENT
Any person which shall succeed by purchase, merger, or consolidation to the
properties, substantially as an entirety, of either Party hereto shall be
entitled to the rights and shall be subject to the obligations of its
predecessor in interest under this Agreement. Otherwise, this Agreement shall
not be assigned.
ARTICLE XIV
MISCELLANEOUS
14.1 THE INTERPRETATION AND PERFORMANCE OF THIS CONTRACT SHALL BE IN ACCORDANCE
WITH AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
THE DOCTRINES GOVERNING CHOICE OF LAW.
14.2 If any provision of this Agreement is declared null and void, or voidable,
by a court of competent jurisdiction, then that provision will be
considered severable at either Party's option; and if the severability
option is exercised, the remaining provisions of the Agreement shall remain
in full force and effect.
14.3 Unless otherwise expressly provided in this Agreement or Transporter's FERC
Gas Tariff, no modification of or supplement to the terms and provisions
stated in this Agreement shall be or become effective, until Shipper has
submitted a request for change through the Electronic Bulletin Board and
Shipper has been notified through the Electronic Bulletin Board of
Transporter's agreement to such change.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the date first hereinabove written.
TENNESSEE GAS PIPELINE COMPANY
BY: /s/ Matthew W. Rowland
__________________________
Agent and Attorney-in-Fact
<PAGE>
SERVICE PACKAGE NO. 31603
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedule IT)
PROJECT ORANGE ASSOCIATES LP
BY: /s/ Beth Matheson
__________________________
TITLE: Vice President
__________________________
DATE: November 18, 1999
__________________________
<PAGE>
EXHIBIT 10.7
STEAM CONTRACT
between
PROJECT ORANGE ASSOCIATES, L.P.
as Company
and
SYRACUSE UNIVERSITY
as Customer
DATED: February 27, 1990
<PAGE>
TABLE OF CONTENTS
-----------------
RECITALS 1
ARTICLE I GENERAL PROVISIONS............................................. 3
Section 1.01. The Facility............................................ 3
Section 1.02. Construction, Installation and Operation of Facility.... 4
Section 1.03. Net Lease of Land....................................... 5
Section 1.04. Interconnection Points; Maintenance Obligations......... 6
Section 1.05. Operation and Maintenance of Existing Plant............. 8
Section 1.06. Term of Agreement....................................... 11
ARTICLE II SUPPLY OF STEAM............................................... 14
Section 2.01. Purchase and Sale of Steam.............................. 14
Section 2.02. Price of Steam.......................................... 17
Section 2.03. Payment for Steam; Meters............................... 31
Section 2.04. Report of Sales to Ancillary Customers.................. 32
ARTICLE III DISCONTINUANCE, CURTAILMENT
OR INTERRUPTION OF STEAM SUPPLY......................................... 33
Section 3.01. General................................................. 33
Section 3.02. Emergency Interruptions................................. 34
Section 3.03. Default by the Company; Remedies; Take-over of Facility. 35
ARTICLE IV SECURITY...................................................... 43
ARTICLE V INDEMNITY...................................................... 45
Section 5.01. 45
Section 5.02. 45
Section 5.03. 46
Section 5.04. 46
ARTICLE VI MISCELLANEOUS................................................. 47
Section 6.01. Customer Training....................................... 47
Section 6.02. Pledge or Assignment.................................... 47
Section 6.03. Notices................................................. 48
Section 6.04. Severability............................................ 49
Section 6.05. Choice of Law........................................... 49
Section 6.06. Entire Agreement; Amendments............................ 49
Section 6.07. Waivers................................................. 50
Section 6.08. Termination............................................. 51
Section 6.09. Approval................................................ 51
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<PAGE>
EXHIBITS
Exhibit A Description of the Leased Land
Exhibit A-1 Lease Agreement
Exhibit B Schematic Diagram of Interconnection Points
Exhibit C Operating Agreement for Existing Plant
Exhibit D Adjustment of Formula Price
Exhibit E Cogeneration Facility Degradation Chart
Exhibit F Form of Consent and Agreement
-ii-
<PAGE>
STEAM CONTRACT
--------------
This Agreement ("Agreement"), dated as of February 27, 1990, between
Syracuse University, a New York educational corporation having its principal
office at Syracuse, New York (the "Customer"), and Project Orange Associates,
L.P., a Delaware limited partnership (the "Company").
RECITALS
1. The Company has undertaken to acquire, construct, install and
operate a facility for the production of steam and electric power (as
hereinafter more specifically described, the "Facility") on property to be
leased by the Customer to the Company under a certain Lease Agreement dated the
date of this Agreement and annexed to this Agreement as Exhibit A-1.
2. The Customer desires to purchase, on its own behalf and on behalf
of certain other institutional users located near the premises of the Customer
who from time to time now or hereafter share steam costs with the Customer (the
"Ancillary Customers"), its and the Ancillary Customers' requirements for steam
from the Company.
3. A standby steam generating facility is necessary to provide an
alternate source of steam to meet the steam requirements of Customer and its
Ancillary Customers whenever the Facility is inoperable or incapable of meeting
these steam requirements.
4. The Company desires to use and operate the Customer's existing
steam generation facility (as hereinafter more specifically described, the
"Existing Plant") to provide the required alternate source of steam.
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<PAGE>
5. The Customer acknowledges that the execution and delivery of this
Agreement and the assignment by the Company of its rights under it, as security,
is a necessary prerequisite of the Company's ability to obtain financing for the
Facility and related costs (any and all such financings which may be secured by
a Permitted Mortgage, as that term is defined in Article 23 of the Lease
Agreement, and which are from time to time outstanding, are hereinafter referred
to as the "Financing");
6. The Customer and a predecessor of the Company have previously
entered into a certain Steam Contract, dated as of December 28, 1987, pertaining
to the subject matter of this Agreement (the "Prior Agreement"). This Agreement
is intended to supersede the Prior Agreement which has been terminated by
contemporaneous separate agreement between the Customer and such predecessor.
NOW, THEREFORE, the parties agree as follows.
ARTICLE I
GENERAL PROVISIONS
------------------
Section 1.01. The Facility.
The Facility will consist principally of (i) two General Electric type
LM 5000 gas turbines, each having an aggregate capacity at ISO conditions of
approximately 40 megawatts of electric power, two waste heat boilers which shall
include supplemental duct firing with a capacity of producing 450,000 pounds of
steam per hour for net export to the Customer at the pressures and temperatures
necessary to provide the steam requirements of Customer and its Ancillary
Customers, and related gas, steam and electric handling installations and
buildings and structures (sometimes collectively referred to as the
"Cogeneration Plant"), (ii) all steam, water
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<PAGE>
and condensate lines, apparatus and equipment necessary or appropriate for the
supply of steam by the Company from the Cogeneration Plant to the Customer's
steam system and chilled water plant at the interconnection points A-l and A-2
described in Section 1.04, (iii) all fuel lines, gas lines and electric
transmission lines (exclusive of those owned by Niagara Mohawk Power Corporation
or any other public utility), fuel storage facilities and related apparatus
necessary or appropriate for the operation of the Cogeneration Plant and the
Existing Plant and (iv) all improvements, additions, substitutions and
replacements of each of the foregoing. The Company will coordinate the operation
of the Facility with the Customer's Existing Plant which the Company will
operate as provided in Section 1.05.
Section 1.02. Construction, Installation and Operation of Facility.
The Company agrees to construct, install and operate the Facility at
its sole cost and expense and without charge to the Customer, except for the
steam charges provided in this Agreement. Without limitation of the generality
of the foregoing, the Company will, without expense to the Customer, contract
with an entity reasonably approved by the Customer (the "Contractor") for all
requisite engineering, construction, installation, testing and operation
services. The Customer may, at its option, require the Contractor to provide,
without expense to the Customer, performance and payment bonds or other
assurances of completion in an amount equal to the total cost of the
construction, acquisition and installation of the Facility, which is presently
estimated to be $73,100,000. If the holders of a Permitted Mortgage shall not
require performance and payment bonds for the total cost of the Facility, the
Contractor may provide performance and payment bonds for less than the total
cost of the Facility, but not less than eighty (80%) percent of the total cost
of the Facility, provided guarantees of completion and
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<PAGE>
performance for the balance of the cost of the Facility shall be provided by
entities, and in form, reasonably acceptable to the University. The Company
shall also make available to Customer, as an additional insured, the benefits of
any System Efficacy Insurance or comparable performance insurance to be provided
to the Company by the Contractor. The Company will be responsible for obtaining,
without additional expense to the Customer, all permits, licenses,
authorizations and other approvals required by governmental authorities for the
installation and operation of the Facility and for the operation of the Existing
Plant. The Customer agrees to cooperate with the Company by providing all
relevant information available to it, without incurring unreasonable expenses.
The Company shall operate and maintain the Facility in good operating
condition in accordance with customary utility maintenance procedures and in
compliance with all applicable present and future laws, ordinances, regulations,
rules, requirements, orders and directives of governmental authorities.
The Company shall not increase the electric generating capacity of the
Cogeneration Plant above 80 megawatts without the prior written consent of the
Customer.
Section 1.03. Net Lease of Land.
The Customer shall lease to the Company for a term (the "Lease Term")
commencing on the date that the Company begins the activities described in
Section 1.02 and expiring on the expiration date or sooner termination of this
Agreement or the Lease Agreement, in accordance with their terms, the land
described on Exhibit A annexed to this Agreement (the "Leased Land") for an
annual rental equal to $1.00 per year payable on the first day of each year of
the Lease Term and on the additional terms and conditions contained in the Lease
Agreement.
-4-
<PAGE>
The Company shall reimburse the Customer the sum of $12,500, which represents
the costs and expenses incurred by the Customer on behalf of the Company for the
zoning approvals obtained in the Town of Onondaga on behalf of the Company
pursuant to Section 1.03 of the Steam Contract between Gas Alternative Systems,
Inc. and the Customer dated October 4, 1984 no later than the date upon which
the Company receives any part of its Financing for the Facility. The rent
payable for the Leased Land shall be absolutely net to the Customer so that,
except as otherwise expressly provided in the Lease Agreement, the Company shall
bear all responsibility for insurance, maintenance, repairs and taxes and all
costs, expenses and obligations of any type whatsoever arising in respect of the
Facility or the Leased Land, including all liabilities to third parties, and
shall indemnify and shall hold harmless the Customer against any of them. Upon
expiration or sooner termination of the Lease Term in accordance with the terms
of the Lease Agreement, the Facility and any improvements of it or the Leased
Land shall become the property of the Customer, without any further
consideration by the Customer or any further act or deed required of either the
Company or the Customer, provided, however, that the Company shall execute and
deliver to the Customer such documents as the Customer reasonably shall request
to evidence Customer's ownership.
Section 1.04. Interconnection Points; Maintenance Obligations.
Steam will be supplied by the Company to the Customer at the
interconnection points between the Facility and the Customer's steam system and
chilled water plant marked as points A-l and A-2, respectively, on the schematic
diagram annexed to this Agreement as Exhibit B, at which point delivery of steam
will be deemed to have been effected, with title and all risk passing to the
Customer. The Customer will provide to the Company the condensate return from
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<PAGE>
its steam distribution system ("the condensate return") in an amount no less
than .50 of a pound of condensate for each pound of steam supplied by the
Company ("the minimum amount"), but shall have no obligation to supply any make-
up water or cooling water, which shall be the obligation of the Company. The
condensate return shall meet the following standards ("the condensate
standards") at the points of interconnection between the Customer's condensate
return lines and the Company's condensate return lines ("the condensate
interconnections"):
(i) no more than 5 ppm of hardness,
(ii) no more than 2 ppm of total organic carbon (TOC), and
(iii) no more than 20 ppm of total dissolved solids.
The Company, at its sole cost and expense, shall install one or more
valves or other appropriate devices at the condensate interconnections for
sampling and measuring the condensate return. The results of the sampling and
measurement of the condensate return by the Company shall be made available to
the Customer. If the condensate return fails to meet the condensate standards or
if the Customer fails to provide the Company the minimum amount of condensate
return, the Customer shall pay the Company its incremental costs for the polish
treatment of the condensate return to meet the condensate standards and the cost
of any make-up water required because of the failure of the Customer to provide
the minimum amount of condensate return ("the condensate charge"). The
condensate charge shall be added to the next invoice for steam rendered to the
Customer together with a statement showing the basis of the calculation of the
condensate charge. The Company shall provide the Customer such additional
information with respect to the calculation of the condensate charge as the
Customer reasonably may request.
-6-
<PAGE>
Section 1.05. Operation and Maintenance of Existing Plant.
The Customer's Existing Plant is a steam generation facility which
consists principally of 4 gas fired and oil fired steam boilers and related
apparatus and equipment and provides the steam requirements of the Customer and
its Ancillary Customers, and is located at Taylor Street in the City of
Syracuse, New York. The Company shall, with its own work force and at its sole
cost and expense, operate and maintain the Existing Plant as a standby and
supplemental steam generation facility for the period and pursuant to the terms
and conditions contained in the Operating Agreement for Existing Plant annexed
to this Agreement as Exhibit C ("Operating Agreement").
As more specifically provided in the Operating Agreement, the Company
shall pay to the Customer, in consideration of its right to operate the Existing
Plant, annually on each anniversary of the Commencement Date (or the Commercial
Operation Date, if later than the Commencement Date) the following amounts:
Anniversary Dates Annual Payment
----------------- --------------
First through Fifth $ 1.00
Sixth through Fifteenth 1,250,000.00
Sixteenth through twentieth 1,350,000.00
Twenty-first through thirtieth 1,450,000.00
Thirty-first through thirty-ninth 1,550,000.00
and a final payment of $1,550,000 on the first day of the last month preceding
the expiration of the term, except that if the Commercial Operation Date is
later than the Commencement Date, the payment on the twentieth anniversary of
the Commercial Operation Date shall be increased
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<PAGE>
("the increase") by the sum of $104,167 for each full month from the
Commencement Date to the Commercial Operation Date.
The Company shall have the option to make the annual payment in twelve
equal monthly installments, commencing on the first day of the month following
each anniversary, together with interest at a rate equal to the prime rate
announced by Chase Manhattan Bank, at its principal office in the City of New
York, New York ("the prime rate"), plus 200 basis points, on the unpaid portion
of the annual payment. Interest shall accrue from the anniversary date and shall
be payable on the due date of each monthly installment, calculated by use of the
prime rate in effect on the first day of the previous month. The annual payments
for the right to operate the Existing Plant shall be payable only once even
though they are set forth in both this Agreement and the Operating Agreement,
and the obligation to make such payments shall be subject to the express
provisions of the Operating Agreement. Except as otherwise provided in the
Operating Agreement, the Company also shall bear all responsibility for
insurance, maintenance, repairs and taxes, if any, and all costs, expenses and
obligations of any type whatsoever arising in respect of the Existing Plant,
including all liabilities to third parties and shall indemnify and shall hold
harmless the Customer against any of them. As more specifically set forth in the
Operating Agreement,
A. the Existing Plant, except as otherwise expressly permitted in the
Operating Agreement, shall be used and operated by the Company only as an
alternate or supplemental source of steam to meet the steam requirements of
Customer and its Ancillary Customers;
B. the Existing Plant (i) shall be maintained in as good condition as
it exists upon the commencement of the term of the Operating Agreement, ordinary
wear and tear
-8-
<PAGE>
excepted, (ii) shall be operated and maintained in compliance with all
applicable present and future laws, ordinances, rules, regulations,
requirements, orders and directives of governmental authorities, and (iii) shall
be operated and maintained in a state of readiness to make available an
alternate or supplemental source of steam to the Customer and its Ancillary
Customers, at the pressures and temperature and meeting the other requirements
of this Agreement, within no more than six (6) hours after the interruption of
the required supply of steam from the Facility, provided, however, that the
Company shall have satisfied the requirements of this subparagraph (iii) if,
within six hours following an interruption of the supply of steam attributable
to the involuntary outage of both gas turbines of the Facility due to causes
beyond the reasonable control of the Company, it shall have commenced delivery
of at least 250,000 pounds per hour of steam from the Existing Plant and shall
continue to fire additional boilers in the Existing Plant to the extent
necessary to meet Customer's additional demands for steam as promptly as is
practical and consistent with the preservation and protection of such boilers;
C. The Company's obligation to provide an alternate or supplemental
source of steam to meet the steam requirements of Customer and its Ancillary
Customers may be satisfied by the installation and operation at the Existing
Plant of the Auxiliary System (as defined in the Operating Agreement) in the
manner and upon the conditions contained in the Operating Agreement.
Section 1.06. Term of Agreement.
The term of this Agreement (the "Term") shall commence upon the date
of this Agreement and shall continue in effect, unless sooner terminated in
accordance with its provisions, for (i) a period of 40 years from the date (the
"Commencement Date") upon which
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<PAGE>
the Company shall have commenced delivery of steam to the Customer (other than
for testing purposes, which shall not extend beyond a reasonable period of time)
either from the Facility or from the Existing Plant (as contemplated by the
second unnumbered paragraph of this Section 1.06) plus (ii) an additional period
equal to any time elapsed from the Commencement Date to the date (the
"Commercial Operation Date") upon which the Company shall have commenced
delivery of steam to the Customer from the Facility (other than for testing
purposes, which shall not extend beyond a reasonable period of time) in
accordance with the requirements of this Agreement. This Agreement may be
terminated by the Customer, at its option, upon 30 days' written notice (x) if
the Company shall not have closed the construction Financing (the "financial
closing") on or before June 30, 1990, or thereafter if the Company fails to
diligently pursue, subject to work stoppages not initiated by the Company, the
completion of construction of the Facility as soon as reasonably possible with a
view towards completion of construction of the Facility and the delivery of
steam to the Customer by October 1, 1991 or (y) if the Company abandons the
construction of the Facility. Any written notice of termination by Customer
shall also be given to the holders of a Permitted Mortgage, who shall have been
identified in a written notice by the Company to the Customer, at the address of
the holder provided in the Company's notice to the Customer. The holders of any
Permitted Mortgage shall have a period of thirty (30) days from the giving of
the notice of termination within which to cure the default of the Company in the
completion of the construction of the Facility. If the default of completion of
construction cannot be cured by the holders of the Permitted Mortgage within
such thirty (30) day period, the holders shall have an additional period of
ninety (90) days within which to cure the default, provided the holders promptly
commence and diligently pursue the curing of the default.
-10-
<PAGE>
In the event that the financial closing does not occur by March 1,
1990, the Company shall (provided that the Steam Contract and the Lease
Agreement shall not have been sooner terminated, each in accordance with its
terms), commencing on October 1, 1991 and continuing thereafter until the
Facility is fully operational and commences the delivery of steam to the
Customer in accordance with the requirements of this Agreement, provide the
Customer its steam requirements and the requirements of its Ancillary Customers
from the Existing Plant at the price of $4.27 per thousand pounds of steam
(without any adjustment, as that term is defined in Section 2.02 of this
Agreement), subject only to the availability of the transportation of natural
gas to the Company by Tennessee Gas Transmission Company ("Tenneco"). In the
event that the Company shall be obligated to provide steam to the Customer from
the Existing Plant in accordance with the preceding sentence, the term of the
Operating Agreement shall commence on October 1, 1991 and shall expire upon the
expiration of the term of the Steam Contract, unless sooner terminated in
accordance with the terms of the Operating Agreement.
The obligations of the Company to the Customer for the reimbursement
of costs and expenses for zoning approvals pursuant to Section 1.03 of the prior
Steam Contract between Gas Alternative Systems, Inc. and the Customer dated
October 4, 1984 and for any indemnification pursuant to this Agreement shall
survive the termination of this Agreement.
ARTICLE II
SUPPLY OF STEAM
---------------
Section 2.01. Purchase and Sale of Steam.
A. From the Commencement Date and throughout the remainder of the
Term, the Customer will purchase, on its own behalf and on behalf of all
Ancillary Customers, all of
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<PAGE>
the Customer's and the Ancillary Customers' requirements for steam and the
Company will supply the steam necessary to meet these requirements; provided,
however, that the Company shall have no obligation to provide steam at a rate in
excess of 450,000 pounds per hour or more than a maximum annual average of
230,000 pounds of steam per hour (a total of 2,014,800,000 pounds during any
twelve (12) month period). The Customer shall use its best efforts to schedule
its demands for steam to avoid any demand for an amount of steam in excess of
the maximum annual amount provided for in the preceding sentence. In no event
shall any failure of the Company to provide steam in an amount in excess of any
such maximum in any period constitute a default by the Company under this
Agreement, the Operating Agreement or the Lease Agreement. The Customer shall be
required to accept delivery of and pay for during each successive 12-month
period during the Term commencing with the first month beginning after the
Commencement Date a quantity of steam (the "Minimum Annual Requirement") equal
to the lesser of (i) the minimum amount required to maintain the status of the
Facility as a qualifying cogeneration facility under the Public Utility
Regulatory Policies Act of 1978 and the regulations promulgated under it or (ii)
60,000 pounds of steam per hour (a total of 525,600,000 pounds in any 12 month
period). In the case of any interruption or discontinuance of the supply of
steam to Customer which is not the fault of the Customer, the Minimum Annual
Requirement shall be reduced proportionately in accordance with the season
during which the interruption or discontinuance occurs, based upon historical
usages. The Customer shall indemnify the Company for any liability for state or
local sales, use or similar taxes, if any, that would be imposed upon the
Customer for the Company's sale of steam to the Customer. The Customer may
submeter and separately charge all Ancillary Customers for steam delivered to
Ancillary Customers, but Customer shall be primarily, and not secondarily or as
a surety, obligated to pay
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<PAGE>
the Company for all steam so delivered. The Customer's requirements for steam
shall mean (i) all steam distributed by the Customer through its steam
distribution system for its own use and (ii) all steam delivered to the Customer
for the operation of its chilled water plant. Ancillary Customers' requirements
for steam shall mean all steam distributed by the Customer through its
distribution system for use by other not-for-profit or governmental
organizations sharing steam costs with the Customer, but limited only to the
amounts of steam which they are obligated to acquire from the Customer. The
Ancillary Customers may include such other not-for-profit or governmental
organizations near the premises of Customer to whom the Customer shall from time
to time provide steam on a cost-sharing basis.
B. The Company shall deliver steam at the interconnection point with
the Customer's steam system marked A-l on Exhibit B at a pressure of 100 PSIG
and at a temperature of 550 [degree] Fahrenheit. The Company shall deliver steam
to the inter-connection point with the Customer's chilled water plant designated
as A-2 on Exhibit B at a pressure of 275 PSIG and at a temperature of 550
[degree] Fahrenheit. All steam delivered to the Customer shall meet all purity
and related requirements for food service facilities and medical facilities
under all applicable federal, state and local laws, rules and regulations, and
all chemicals used in the treatment of boiler feedwater shall be in compliance
with these requirements. The Company, at its sole cost and expense, shall
install one or more valves or other appropriate devices at the interconnection
point for sampling the steam. The results of the sampling of the steam by the
Company shall be made available to the Customer. The Customer shall have no
obligation to accept or pay for any steam delivered that does not meet these
requirements or to pay for any make up water required because of Customer's
refusal to accept delivery of steam that does not meet these requirements. The
Facility shall have the capability of meeting any increase in
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demand by Customer for steam by 50 percent within one (1) hour, provided,
however, that the Company shall not be obligated to provide more than 450,000
pounds of steam per hour or within any hour.
C. The Customer shall be the sole and exclusive purchaser of steam
generated from the Facility. The Company shall not sell to or furnish to others
any steam, power or energy in any form from the Facility (except the sale of
electricity to Niagara Mohawk Power Corporation ("NIMO") or other public
utility) without the prior written approval of Customer.
D. Except for the steam to be sold by the Company to the Customer
pursuant to this Agreement, neither the Company, nor any entity affiliated with
or related to the Company, including, without limitation, any entity
controlling, controlled by or under common control with the Company, nor Adam
Victor shall directly or indirectly engage in, or in any manner participate in
any capacity whatsoever in any venture or project for, the sale or provision of
steam or any other form of energy to any of the Ancillary Customers.
Section 2.02. Price of Steam.
A. Formula Price. Except as otherwise provided in Section 1.06, the
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price to be paid for steam delivered pursuant to the provisions of this
Agreement during each calendar month of the Term shall be the price per thousand
pounds then in effect as provided in the following subparagraphs.
B. Formula Price I. The base price ("Formula Price I") in effect at
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the Commercial Operation Date through the end of the twelfth full calendar month
following the month in which the Commercial Operation Date occurs ("the Base
Year") shall be $4.27 per thousand pounds of steam ("the Base Year Price"). The
Formula Price I for each succeeding
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calendar month following the Base Year and until the sixteenth (16th)
anniversary of the Commercial Operation Date shall be subject to increase or
decrease ("the adjustment") on account of any increases or decreases in (i) the
monthly price of natural gas to the Customer (which shall constitute 70% of the
adjustment) and (ii) Labor and Other Costs (which shall constitute 30% of the
adjustment) which will be adjusted once every 12 months on July 1 of each year
following the Base Year by the budgeted percentage of increase or decrease for
union labor at Syracuse University (which shall constitute 20% of the 30%
adjustment) and by the budgeted percentage of increase or decrease in
departmental operating budgets at Syracuse University, excluding utilities and
other centrally budgeted special items (which shall constitute 80% of the 30%
adjustment), as included in the University's budget approved by its Board of
Trustees, in accordance with the formula set forth on Exhibit D annexed to this
Agreement. For the purposes of this Section 2.02 and Exhibit D, the price of
natural gas shall be the rate per thermal unit (net of any adjustments or
credits) at which natural gas is obtainable by the Customer from NIMO, pursuant
to its Service Classification No. 3 (large general service rate) or its future
equivalent.
C. Formula Price II. Upon the sixteenth (16th) anniversary of the
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Commercial Operation Date and through the end of the calendar month in which the
sixteenth anniversary occurs, the base price ("Formula Price II") shall be $2.13
per thousand pounds of steam adjusted by the percentage adjustments made monthly
and annually to the Base Year Price during the period prior to the sixteenth
(16th) anniversary of the Commercial Operation Date. By way of illustration, if
the Base Year Price were to increase from $4.27 to $6.19 (an aggregate increase
of 45%), the Formula Price II would be $3.09 (1.45 x $2.13=$3.09). The Formula
Price II for each succeeding calendar month until the end of the Term shall be
subject to increase or decrease ("the adjustments") in the same manner as the
adjustments of the Formula Price I
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during the period prior to the sixteenth anniversary of the Commercial Operation
Date, as provided in subparagraph B above.
D. Incremental Price. (1) Notwithstanding the provisions of the
-----------------
preceding subparagraphs of this Section 2.02 and without limitation of any
additional payments required pursuant to the provisions of subsection (4) of
this subparagraph D, the price to be paid per thousand pounds of Excess Steam
(as defined below) delivered to the Customer on any day on or after the
Commercial Operation Date shall be the sum of (i) the Incremental Fuel Cost (as
defined below) for the calendar month in which such day occurs, plus (ii) the
Administrative Charge (as defined below), plus (iii) 2% of the sum of the
Incremental Fuel Cost and the Administrative Charge.
(2) For the purposes of this subparagraph D, the following terms shall
have the following definitions:
(i) "Administrative Charge" shall mean the initial sum of $1.25
through the end of the twelfth full calendar month following the month in which
the Commencement Date occurs, subject to increase or decrease (an "adjustment")
for each succeeding month thereafter by one-twelfth of the budgeted percentage
of increase or decrease for union labor at Syracuse University (which shall
constitute 20% of the adjustment) and by one-twelfth of the budgeted percentage
of increase or decrease in departmental operating budgets at Syracuse
University, excluding utilities and other centrally budgeted special items
(which shall constitute 80% of the adjustment), as included in the University's
budget approved by its Board of Trustees, which budgeted increases or decreases
will be determined once every 12 months effective as of July 1 of each year
following the initial 12 month period.
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(ii) "BTU" shall mean a British Thermal Unit: the amount of energy
required to raise the temperature of one pound of water one degree Fahrenheit at
60 degrees Fahrenheit.
(iii) "Calculated Excess Steam" shall mean with respect to each day
the number (expressed in pounds) equal to the quotient of the Excess Fuel for
that day (expressed in BTUs) divided by 1550.
(iv) "Contract Steam" shall mean with respect to each day the
greater of (x) the quantity of steam that would be available for actual delivery
to the Customer on that day based upon the consumption in the Facility for the
production of steam for the Customer and the generation of electricity of 20,000
dekatherms of natural gas at the average ambient temperature for that day, as
such quantity is determined by reference to the chart annexed to this Agreement
as Exhibit E, or (y) the excess, if any, of the quantity of steam actually
delivered to the Customer on that day over the Calculated Excess Steam for that
day.
(v) "dekatherm" shall mean a quantity of fuel containing 1,000,000
BTUs (higher heating value).
(vi) "Excess Fuel" shall mean with respect to each day the amount
(expressed in BTUs, at higher heating value) equal to the excess, if any, of the
aggregate amount of fuel consumed in the Facility and the Existing Plant on that
day for the production of steam for the Customer and the generation of
electricity, over 20,000 dekatherms.
(vii) "Excess Steam" shall mean with respect to each day the lesser
of (x) Calculated Excess Steam for that day or (y) the excess of the quantity of
steam actually delivered to the Customer on that day over Contract Steam for
that day.
(viii) "Incremental Fuel Cost" shall mean the amount, determined
separately for each calendar month, equal to the product of (x) the average cost
per BTU, determined in
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accordance with the procedures and limitations set forth in subsection (3)
below, of the fuel in excess of 20,000 dekatherms per day consumed in the
Facility and the Existing Plant on all days on which Excess Steam is delivered
during that month, multiplied by (y) 1,550,000.
(3) The Company shall use diligent efforts to obtain Excess Fuel at
prices and on terms which will assure the availability of Excess Fuel when
required at the lowest prices obtainable, having due regard to the certainty of
supplies, the possibility of interruption in production or transportation, and
other relevant factors. Failure to obtain the lowest price shall not in and of
itself constitute a breach of the obligation described in the preceding
sentence. In furtherance of the objective described in the first sentence of
this subsection (3), on or about September 15 of each year, beginning with the
September 15 next following the Commercial Operation Date, the Company shall use
its best efforts to obtain and submit to the Customer (i) the names of at least
two suppliers of natural gas (other than the local distribution company) which
are prepared to make available quantities of natural gas as Excess Fuel during
the 12-month period beginning on the November 1 following such submission,
together with the proposed arrangements for transportation, and the proposed
prices and other terms of sale and transportation, of such gas to the Facility,
(ii) a description of the terms and rates at which natural gas is expected to be
available for purchase at the Facility from the local distribution company
during such period and (iii) the names of at least two suppliers of No. 2 fuel
oil in the Syracuse area which are prepared during such period to provide
delivery of No. 2 fuel oil on an "as needed" basis to the Customer's storage
tanks located adjacent to the Existing Plant together with the prices and other
terms of sale. Within 15 days after receipt of the information described in
clauses (i) and (ii) above the Customer shall by notice to the Company designate
either (x) the gas suppliers and related transportation arrangements described
in clause (i) or (y) the local
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distribution company, as an acceptable source of back-up and peaking gas
supply for such period; provided, however, that in such notice the Customer may
disapprove any of the named suppliers of natural gas on commercially reasonable
grounds which shall be stated in such notice, and any supplier so disapproved
shall not be an acceptable source of back-up and peaking gas supply for such
period. Within 15 days after receipt of the information described in clause
(iii) above the Customer may by notice to the Company disapprove any of the
named suppliers of No. 2 fuel oil on commercially reasonable grounds which shall
be stated in the notice of disapproval, and any named supplier not so
disapproved shall thereafter be an approved supplier of No. 2 fuel oil for such
period. In the event that all of the named gas suppliers or all of the named No.
2 fuel oil suppliers are disapproved by the Customer, the Customer shall at the
time of its disapproval propose one or more alternative gas suppliers (and
related pricing and transportation arrangements) or fuel oil suppliers or both,
as the case may be, and the Company shall be free to accept such named suppliers
(and related pricing and transportation arrangements) in lieu of those
originally submitted by it, or to repeat the submission procedure until there is
at least one acceptable source of natural gas and at least one approved supplier
of No. 2 fuel oil. The Company shall thereafter (A) enter into contracts or
other arrangements with at least one acceptable source of natural gas so as to
confirm the arrangement for such period described in the Company's submission to
the Customer (any arrangement so confirmed for such period being herein referred
to as the "gas program") and (B) place orders from time to time with one or more
of the approved local suppliers of No. 2 fuel oil so as to confirm arrangements
for delivery of such oil. Within a reasonable time prior to the start of each
month of such period during which Excess Fuel is expected to be required, the
Company shall, based upon price information then available, select as the
preferred fuel for that month the less expensive of
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natural gas from the gas program or No. 2 fuel oil from one or more of the
approved suppliers and shall proceed to order, nominate or otherwise make
arrangements to procure appropriate quantities of the preferred fuel for that
month; provided, however, that if natural gas is designated as the preferred
fuel but is not available from the gas program when required, No. 2 fuel oil
shall be deemed the preferred fuel until natural gas shall again become
available pursuant to the gas program and it shall be practical for the Company
to accept delivery of such natural gas. In the event that in making arrangements
to purchase gas or No. 2 fuel oil as the preferred fuel for any period the
Company shall elect to acquire such gas or oil at a delivered price which is
higher than the lowest delivered price available through the gas program or from
an approved oil supplier as of the date of comparison by the Company for
purposes of making such election, the Company shall provide to the Customer
prior to the last day of the month after the month for which such election is
effective, a report in appropriate detail specifying its reasons for such
election. The price (including all storage and transportation charges and all
taxes payable by the Company for the purchase or transportation of the gas) at
which natural gas is ordered, nominated or otherwise selected, and available,
for delivery to the Company at the Facility during such month through the gas
program is herein referred to as the "benchmark gas price," and the price
(including any special service or demand charges and taxes payable by the
Company for the purchase or transportation of oil) at which No. 2 fuel oil is
available or deemed available at the Customer's tanks during such month (as more
specifically provided below) is herein referred to as the "benchmark oil price".
The benchmark gas price shall not include any taxes on the Project Pipeline (as
defined in the Lease Agreement). The cost of fuel for purposes of computing
Incremental Fuel Cost for each month shall be the benchmark price of the
preferred fuel during that month (on a weighted average basis if there is more
than one preferred
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fuel or more than one price for preferred fuel during the month), except that if
and for so long as No. 2 fuel oil (1) is consumed as the preferred fuel, the
benchmark oil price shall be the price of oil purchased by the Company from an
approved fuel oil supplier, as determined on a first in, first out basis,
regardless of the actual cost of No. 2 fuel oil available or purchased during
that month, or (2) is the preferred fuel but natural gas, propane or some other
fuel is consumed as Excess Fuel, the benchmark oil price shall be deemed to be
the actual cost to the Company of No. 2 fuel oil purchased by the Company from
an approved supplier on the day within the same month which is closest in time
to the day of consumption of such other fuel, or if No. 2 fuel oil is not so
purchased by the Company during such month the price at which No. 2 fuel oil is
available as of the first day of the month for delivery to the Company at the
Customer's tanks through the approved fuel oil supplier from which the Company
has then most recently purchased No. 2 fuel oil. All pricing calculations shall
be based on the thermal equivalency of 7.12 gallons of No. 2 fuel oil to one
dekatherm of natural gas.
(4) In the event that in order to maintain availability of fuel for
the supply of Excess Steam during the period from November 1 of any year to the
following March 31, the Company shall nominate and be required to pay for, or to
pay transportation or service or minimum charges with respect to, quantities of
natural gas in excess of the quantities delivered and consumed as Excess Fuel
during such period, a charge equal to 102% of all or any of the amounts so paid
may at any time after the end of such period and on or prior to June 1 of that
year be separately invoiced by the Company to the Customer and shall be paid for
by the Customer, within 30 days after the delivery of any such invoice, as an
additional charge for the Excess Steam delivered during that period. The Company
shall use reasonable care to nominate no more than the quantities of natural gas
reasonably calculated by the Company to be necessary
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to provide the supply of Excess Steam to the Customer, based upon the Customer's
projected steam requirements for the period November 1 through April 1 (as
supplied to the Company by the Customer annually on or before August 1 preceding
each submission of proposed fuel supply arrangements by the Company to the
Customer pursuant to subsection (3) of this subparagraph D), after taking into
account any quantities of natural gas prepaid by the Company through the gas
program and held by transporters for future delivery to the Company. The
invoices by the Company to the Customer pursuant to this subsection (4) shall
set forth in reasonable detail the calculation of the amounts invoiced.
(5) If any change in technology occurs in the operation of the
Facility which results in an increase (per 20,000 dekatherms of fuel) in the net
steam output of the Facility, the Company shall recalculate the chart annexed to
this Agreement as Exhibit E hereto to fairly reflect the effects of such new
technology and shall submit the recalculated chart to the Customer, whereupon
the recalculated chart shall be substituted for Exhibit E as initially annexed
to this Agreement.
E. Alternative Technology Adjustment.
---------------------------------
(1) In the event that the Formula Price as in effect on the later of
the twentieth anniversary of the Commencement Date or the sixteenth anniversary
of the Commercial Operation Date (the "first adjustment date") or on the later
of the thirtieth anniversary of the Commencement Date or the twenty-sixth
anniversary of the Commercial Operation Date (the "second adjustment date")
would be greater than the estimated cost at which the Customer could then obtain
its steam requirements, or thermal energy in lieu of such steam requirements,
based upon some alternative fuel or technology, or both (the "alternative
cost"), after taking into account the capital, labor and other costs that would
be incurred by the Customer in connection
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with the use of such alternative fuel or technology, or both, then by giving
written notice to the Company at least six months prior to such first adjustment
date or second adjustment date the Customer may elect to reduce the Formula
Price as of such first adjustment date or second adjustment date to the amount
of the alternative cost (as such cost is determined within 18 months prior to
the giving of such notice, based upon reasonable assumptions and projections,
including, with respect to the second adjustment date, appropriate assumptions
as to the unamortized alternative cost associated with any such election made by
Customer as of the first adjustment date, by an independent energy consultant
selected by the Customer and acceptable to the Company acting reasonably). The
making of such an election with respect to the first adjustment date shall not
preclude a further such election with respect to the second adjustment date.
(2) If the Formula Price shall have been reduced to the amount of the
alternative cost upon the first adjustment date, then by giving written notice
to the company at least six months prior to the fifth anniversary of the first
adjustment date and (unless the Formula Price shall have been reduced to the
alternative cost on the second adjustment date) prior to the tenth, fifteenth
and, if the twentieth anniversary of the first adjustment date is more than five
years before the end of the Term, the twentieth anniversary of the first
adjustment date, the Customer may elect to engage an energy consultant to
determine the estimated cost at which the Customer could, on such anniversary
date, obtain its steam requirements, or thermal energy in lieu of such steam
requirements, based upon the same alternative fuel or technology, or both, used,
and taking into account the same factors considered, in determining the
alternative cost for the first adjustment date. The estimated cost so determined
by the energy consultant ("the adjusted Formula Price") shall be substituted for
the Formula Price then in effect, as of such
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anniversary date. The determination of the adjusted Formula Price shall be made
by the energy consultant, based upon reasonable assumptions and projections,
within three months after the giving of such notice. In making its determination
of the adjusted Formula Price, the energy consultant shall assume that there is
no change in the fixed cost components of the technology (such as initial
capital costs and the amortization and financing of such costs) used in the
determination of the alternative cost on the first adjustment date and shall
redetermine only the variable cost components of the alternative cost (such as
fuel, labor and other variable costs). If the Formula Price shall have been
reduced to the amount of the alternative cost upon the second adjustment date,
then by giving written notice to the Company at least six months prior to the
fifth anniversary of the second adjustment date and, if the tenth anniversary of
the second adjustment date is more than five years before the end of the Term,
the tenth anniversary of the second adjustment date, the Customer may elect to
engage an energy consultant to determine the estimated cost at which the
Customer could, on such anniversary date, obtain its steam requirements, or
thermal energy in lieu of such steam requirements, based upon the same
alternative fuel or technology, or both, used, and taking into account the same
factors considered, in determining the alternative cost for the second
adjustment date. The estimated cost so determined by the energy consultant ("the
readjusted Formula Price") shall be substituted for the Formula Price then in
effect, as of such anniversary date. The determination of the readjusted Formula
Price shall be made by the energy consultant, based upon reasonable assumptions
and projections, within three months after the giving of such notice by the
Customer. In making its determination of the readjusted Formula Price, the
energy consultant shall assume that there is no change in the fixed cost
components of the technology (such as initial capital costs and the amortization
and financing of such costs) used in the determination of the alternative cost
on the
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second adjustment date and shall redetermine only the variable cost components
of the alternative cost (such as fuel, labor and other variable costs).
(3) The Formula Price as so reduced or adjusted pursuant to
subsections (1) or (2) of this subparagraph shall thereafter be subject to
increase or decrease in the same manner as the adjustments of Formula Price I
during the period prior to the sixteenth anniversary of the Commercial Operation
Date, as provided in subparagraph B above.
Section 2.03. Payment for Steam; Meters.
The Company shall install meters, of a type and quality reasonably
acceptable to Customer, to measure the pounds of steam delivered to the Customer
at the interconnection points A-1 and A-2 described in Section 1.04 and shall
render monthly invoices to the Customer based upon the higher of (i) the
readings of meters for the calendar month, which readings shall be conclusive
absent manifest error, or (ii) the amount of steam that the Company would have
been required to purchase during the calendar month, which, when added to the
amount of steam paid for by the Customer during the preceding 11 calendar
months, equals the Minimum Annual Requirement. All invoices shall be due and
payable upon receipt thereof, and, if not paid within 25 days of receipt, shall
be subject to an administrative charge equal to 1-1/2% of the outstanding
balance for each month overdue. If any invoice shall remain unpaid for more than
55 days from the date due, it shall be subject to an additional administrative
charge equal to 1% of the outstanding balance due for each month overdue beyond
the 25th day following the due date. No administrative charge shall be payable
if payment of the invoice shall have been disputed in good faith by the
Customer, unless, and then only upon the amount in dispute as to which the
Customer is found to have been incorrect in withholding payment. The Company
may, at its own
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expense, have the meter tested at any time and the Company will, upon the
request of the Customer, have the meter tested whenever requested, provided that
the expense of any testing requested by the Customer shall be borne by the
Customer unless the test verifies at least a 2% deviation from accurate
readings. All meter testings shall be conducted by an independent meter tester
designated by the Company and reasonably acceptable to the Customer. A copy of
each report rendered by said meter tester shall be delivered to the Customer.
Section 2.04. Report of Sales to Ancillary Customers.
On or before March 1 of each year the Customer shall prepare and
deliver to the Company a report of the quantity of steam resold by the Customer
to its Ancillary Customers during the preceding calendar year. Such report shall
be in such form and shall contain such information as the Company reasonably may
require to determine the Company's gross operating income for purposes of
Section 186-a of the New York Tax Law.
ARTICLE III
DISCONTINUANCE, CURTAILMENT OR INTERRUPTION OF STEAM SUPPLY
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Section 3.01. General.
The Company shall provide a safe and continuous supply of steam to the
Customer in the amounts and meeting the specifications required by Customer and
its Ancillary Customers as provided in Section 2.01. The Company shall have no
responsibility for any failure to supply steam to Customer that is caused, or
materially contributed to, by acts of God or a public enemy, strikes, lock-outs,
riots, injunctions or other interference through legal proceedings, state,
federal or local laws or regulations or requisitions of any governmental
authority ("force majeure"), or by the fault of the Customer. If Customer shall
be responsible for the interruption
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of the supply of steam, Customer shall bear all costs incident to the
restoration of the supply, and shall not be relieved of its obligations under
Section 2.01. In all cases, the Company shall use its best efforts to restore
service or to provide a temporary emergency supply of steam within the shortest
period of time technically and reasonably possible from the occurrence of
interruption. In determining the reasonableness of any period of interruption,
the urgent needs of the Ancillary Customers which are hospital and medical
facilities shall be of paramount importance.
Section 3.02. Emergency Interruptions.
The Company may discontinue its supply of steam (i) upon notice to
Customer, if in the reasonable judgment of the Company a condition exists which
causes the Customer's equipment or installation (except, however, any equipment
or installation of the Customer which is the obligation of Company to maintain
and repair under the Operating Agreement) to become dangerous or defective or if
the Company has received notice from appropriate authorities that the Customer's
installation or equipment is dangerous or defective so as to injuriously affect
the Company's equipment or the Company's service to others or (ii) immediately
if, in the opinion of the Company, a hazardous condition exists or immediate
action is necessary to protect persons from bodily injury. Such interruption
shall continue until the condition has been corrected by the Customer. The
Company's duly authorized representatives shall have the right of access at any
reasonable time to Customer's steam distribution system and interconnection
points for the purpose of performing safety inspections of the Customer's
equipment and installation. The Customer also shall have the right to
discontinue the purchase of steam from the Company upon notice to the Company,
or immediately in the case of an emergency, if a condition exists with respect
to the Company's Facility or the quality of the steam which may injuriously
affect the
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property of Customer or its Ancillary Customers or the persons they serve. The
discontinuance of purchase of steam by the Customer shall continue until the
condition has been corrected by the Company.
Section 3.03. Default by the Company; Remedies; Take-over of
Facility.
In the event that
A. The Company (or, alternatively, for the purposes of this Section
3.03 only, any entity having assumed responsibility for operation of the
Facility) shall file a petition or answer or consent seeking relief under Title
11 of the United States Code, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or similar law, or shall
consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking of possession of the Company,
or any part of its property, by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official, or the Company shall make an
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due;
B. A decree or order shall be entered by a court having jurisdiction
in the premises for relief in respect of the Company under Title 11 of the
United States Code, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator or similar official of the
Company, or of any part of its property, or ordering the winding up or
liquidation of the affairs of the Company, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days; or
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C. The Company (except for interruptions of service which are the
fault of the Customer or which are permitted under Section 3.02) shall fail to
supply steam to the Customer at the pressures and temperature and meeting the
other requirements of this Agreement for more than 6 consecutive hours,
provided, however, that the Company shall not be deemed to have failed to supply
steam for six consecutive hours if, within six hours following an interruption
of the supply of steam attributable to the involuntary outage of both gas
turbines of the Facility due to causes beyond the reasonable control of the
Company, it shall have commenced delivery of at least 250,000 pounds per hour of
steam from the Existing Plant and shall continue to fire additional boilers in
the Existing Plant to the extent necessary to meet Customer's additional demands
for steam as promptly as is practical and consistent with the preservation and
protection of such boilers.
THEN, the Customer
(1) may, if the interruption in service is caused by an inability to
produce and deliver steam from both the Facility and the Existing Plant (A)
require the Company immediately to make other arrangements for the delivery of
steam to the Customer to meet its requirements and those of its Ancillary
Customers, in which case the Customer shall be required to pay for the steam so
delivered at the rate determined by the Company to be necessary to reimburse the
Company for the cost of providing such steam or (B) if the Company shall have
failed to make other arrangements for the delivery of steam to the Customer
within such period of time as the Customer shall determine necessary under the
circumstances, make its own arrangements for purchase of steam from others or
the production of steam from its Existing Plant during the period of the
interruption, and in either of such events, the Customer shall be entitled to
receive reimbursement from the Company for any amounts paid by the Customer for
the purchase of
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steam, or for the cost to the Customer for its production of steam, which are in
excess ("the excess steam payments") of the amounts that it would have otherwise
been required to pay under the provisions of Sections 2.01 through 2.03,
together with interest on the excess steam payments at the rate of interest
announced by Chase Manhattan Bank at its principal office in the City of New
York, New York, as its prime rate at the time the excess steam payments are made
("interest"), out of the first available cash flow (before payment of debt
service on any Financing) of the Company generated after resumption of normal
service; or
(2) may, if the Company does not reimburse the Customer for all excess
steam payments, with interest, theretofore made by the Customer within 12 months
after the interruption of service, and thereafter supply steam at the prices
provided for in this Agreement or reimburse the Customer on a current basis,
with interest, for any continuing excess steam payments made by the Customer,
terminate this Agreement on thirty (30) days prior written notice to the Company
and to the court, if any, having jurisdiction over any insolvency or similar
proceeding with respect to the Company; or
(3) may (except for a default under paragraph C above caused by force
majeure which does not continue for more than thirty (30) days) immediately
assume operating control of the Facility and, upon such assumption, may continue
operating control until (i) the normal restoration of the supply of steam by the
Company in the case of default under paragraph C above, or (ii) in the case of
default under paragraph A or B above, the earliest of a final legal arrangement
made by a court of competent jurisdiction, or a final private legal arrangement
made among all parties to the Financing and the Company's customers, or (iii) in
any case, the Customer's election to discontinue operating control as
hereinafter provided. The Customer's election to assume operating control of the
Facility shall be communicated to the Company and
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to the court, if any, having jurisdiction over any insolvency or similar
proceeding with respect to the Company by delivery of written notice or delivery
of telephonic notice confirmed in writing within 24 hours. Thereafter, the
Customer shall be entitled to the immediate possession and control of the
Facility, to the assignment of (i) all supply, gas, fuel and other contracts
relating to the operation of the Facility, other than contracts for the long
term supply of gas and related transportation arrangements ("the long term gas
supply and transportation agreements") and (ii) all contracts for the purchase
and sale of electricity, steam or other power or energy in any form from the
Facility and to the right to enforce in the name of the Customer or the Company
the long term gas supply and transportation agreements pursuant to such
documents or instruments as are reasonably satisfactory to the Customer. Each of
such contracts shall be assignable to or enforceable by the Customer, as the
case may be, at its option upon the occurrence of such default, and a true copy
of each of the contracts shall be delivered to the Customer upon its execution.
None of such contracts shall prohibit its assignment to or enforcement by
Customer, as the case may be, without its assumption of the contract; provided,
however, that the Customer shall be liable for the obligations it incurs during
the period of its assumption of operating control of the Facility. The Company,
all fiduciaries, persons and entities acting on behalf of the Company, and all
parties having a security interest in the Facility or in any related contracts,
shall cooperate with the Customer in order to permit the assumption of operating
control by the Customer as expeditiously as possible.
During any period that the Customer has assumed operating control of
the Facility, the Customer shall reasonably endeavor to produce and deliver
steam in the amounts contemplated by this Agreement and the maximum amount of
electrical energy consistent with it and shall be liable for the payment of all
fuel, maintenance, ordinary repairs, insurance and other
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operating costs of the Facility incurred during the period of Customer's
operating control (the "operating costs"), exclusive of debt service payments on
any Financing ("the debt service"). Operating costs shall not include
obligations under, and the Customer shall have no obligation to assume, any
employment agreements, labor agreements, service agreements, rental agreements
or similar agreements, but to the extent that the Customer elects to assume such
obligations, they shall be included in operating costs. The only obligation of
the Customer with respect to the debt service shall be to pay the amounts
provided for in Sections 2.01 through 2.03, if any, net after the deduction of
all operating costs, to any trustees (the "trustees") for the investors in the
Financing, or, absent the existence of any such trustees, directly to the
investors in the Financing, as their interests may appear, for application to
the debt service.
The Customer shall also pay over to the trustees, or the investors, as
the case may be, all revenues received from the production and delivery of
electrical energy from the Facility to any purchaser of it, net after deduction
of the amount, if any, by which the operating costs exceed the amounts provided
for in Sections 2.01 through 2.03 (the "operating deficiency"). The Customer
shall have no other liability whatsoever with respect to the Facility or its
operation during the period of its operating control of the Facility. If the
Customer has an operating deficiency at the time of its cessation of operating
control for any reason, it shall be entitled to recoup the amount of the
operating deficiency, with interest, by an offset against any subsequent amounts
payable by it pursuant to Sections 2.01 through 2.03 or to recover the operating
deficiency as an element of its damages.
Upon Customer's assumption of operating control of the Facility, the
Company or any fiduciary or other person or entity acting on behalf of the
Company shall deliver custody to the Customer of all books, records and
documents relating to the operation of the Facility. The
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Customer may at any time discontinue operating control of the Facility on 30
days written notice stating the effective date of its discontinuance given to
the Company and to the court, if any, having jurisdiction over any insolvency or
similar proceeding with respect to the Company. Upon written request made by the
holders of any Permitted Mortgage in the exercise of the right, if any, of the
holders to assume operating control of the Facility provided for under such
Permitted Mortgage and contemplated under a Consent and Agreement, the Customer
shall discontinue the Customer's operating control of the Facility as promptly
as is reasonably practical and in any event not later than 10 days after
receiving such request, unless Customer shall have cured the default or event of
default, if permitted by the Lease, giving rise to the exercise of such right
under such Permitted Mortgage. Upon the discontinuance of operating control of
the Facility by the Customer for any reason, the Customer shall relinquish its
interest in any contracts and rights assigned to it pursuant to this Section
3.03 (subject to the Customer's continuing security interest in the contracts
and its right to their reassignment upon Customer's resumption of operating
control of the Facility thereafter) and shall have no further liability with
respect to the Facility or operating costs, other than its obligations under
Sections 2.01 through 2.04, subject, however, to Customer's right to recoupment
of the operating deficiency and reimbursement of the excess steam payments by
means of a set off or otherwise.
The Company shall remain liable to the Customer for any operating
deficiency and any excess steam payments for which it shall not have been
reimbursed, which liability shall survive the expiration or sooner termination
of this Agreement.
The remedies provided in this Section 3.03 shall be in addition to
every other right or remedy which the Customer may have at law or in equity or
by statute or otherwise, for the defaults enumerated in this Agreement or for
any other breach of this Agreement, including,
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without limitation, the right to recover damages, excluding consequential
damages, for breach of this Agreement; provided, however, that the Customer
shall have no right to terminate this Agreement, the Operating Agreement or the
Lease Agreement (collectively the "Agreements"), except as expressly provided in
the Agreements. Each right and remedy shall be cumulative and the exercise by
the Customer of any one or more of its rights or remedies shall not preclude the
simultaneous or later exercise by the Customer of any or all other rights or
remedies it may have, and all of such rights and remedies shall survive the
expiration or termination of this Agreement.
ARTICLE IV
SECURITY
--------
As security for the performance of the obligations of the Company, the
Contractor or their subsidiaries or affiliated entities or ventures
(collectively the "Obligors") under and throughout the Term of the Agreements,
the Company shall grant or cause to be granted to Customer (i) a mortgage lien
in the principal amount of Twenty Million Dollars ($20,000,000.00) and a
security interest of the highest priority available on the Facility, (ii) a
security interest of the highest priority available in all supply, gas, fuel and
other contracts of any of the Obligors, and in all property interests or rights
which the Obligors shall have or acquire in any natural gas or other fuel,
related to their performance and (iii) a security interest of the highest
priority available in all contracts of any of the Obligors for the sale of
electricity, steam or other power or energy in any form from the Facility.
The "highest priority available" shall mean (i) a first mortgage lien
or a first security interest or (ii) a mortgage lien or security interest
subordinate only to the rights, as secured parties, of the holders of Permitted
Mortgages.
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The Company agrees to execute and deliver, or cause to be executed or
delivered, to Customer all security agreements, mortgages and other documents as
the Customer shall reasonably request in order to effectuate the foregoing. The
Customer agrees to execute and deliver a Consent and Agreement, in the form
annexed to this Agreement as Exhibit F (a "Consent and Agreement"), with respect
to every Permitted Mortgage, and such other instruments of acknowledgement,
recognition or subordination with respect to the mortgage and security interests
to be granted to Customer pursuant to this Article, as the holders of any
Permitted Mortgage may reasonably request to give effect to the subordination
contemplated by this Article IV and the Consent and Agreement, provided always,
that any instrument or document required of the Customer shall not be
inconsistent with the Agreements, as they may be modified by a Consent and
Agreement. The Company shall bear all costs incurred by either the Company or
the Customer in the preparation or provision of any of the instruments and
documents described in the immediately preceding sentence, and in the filing or
recording of any of the documents described in this paragraph, including, any
mortgage recording taxes.
ARTICLE V
INDEMNITY
---------
Section 5.01.
The Company shall indemnify and hold the Customer harmless from and
against any and all liabilities, obligations, damages, penalties, claims, costs,
charges and expenses, including, without limitation, attorneys fees and fees of
other professionals and experts (collectively "claims"), which may be imposed
upon, incurred by or asserted against the
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<PAGE>
Customer because of any of the following, unless the claims arise as a
consequence of the action or failure to act by the Customer:
(i) Any work or thing done in, on or about the Facility;
(ii) Any use, non-use, possession, occupation, condition, operation,
maintenance or management of the Facility or any part of it;
(iii) Any act or omission of the Company or any of its agents,
contractors, servants, employees, licensees or invitees; or
(iv) Any accident, injury or death to any person or damage to property
occurring in, on or about the Facility.
Section 5.02.
The Customer shall indemnify and hold the Company (including for this
purpose any corporation, partnership or other entity controlling, controlled by
or under common control with, the Company) harmless from and against any and all
claims which may be imposed upon, incurred by or asserted against the Company
because of any of the following, unless said claims arise as a consequence of
the action or failure to act by the Company:
(i) any work or thing done in, on or about the premises of the
Customer (excluding the Facility, except to the extent that they arise as a
consequence of the action or failure to act by the Customer);
(ii) any use, non-use, possession, occupation, condition, operation,
maintenance or management of the premises of the Customer (excluding the
Facility, except to the extent that they arise as a consequence of the action or
failure to act by the Customer);
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<PAGE>
(iii) any act or omission of the Customer or any of its agents,
contractors, servants, employees, licensees, or invitees;
(iv) any accident, injury or death to any person or damage to
property occurring in on or about the premises of the Customer (other than the
Facility, except to the extent that they arise as a consequence of the action or
failure to act by the Customer).
Section 5.03.
The indemnification of the Company by the Customer and the Customer by
the Company pursuant to this Article shall in all events be limited by the
applicable provisions of Article 19 and Section 11.03 of the Lease Agreement.
Section 5.04.
The provisions of this Article shall survive the expiration or earlier
termination of this Agreement.
ARTICLE VI
MISCELLANEOUS
-------------
Section 6.01. Customer Training.
Throughout the Term of this Agreement, the Company, at its sole cost
and expense, (i) shall provide the Customer from time to time complete and up to
date operating manuals, instructions and other documents and information
relating to the operation and maintenance of the Facility and (ii) shall provide
training to employees of the Customer, designated by it from time to time, in
the operation and maintenance of the Facility by the Company's personnel
regularly employed at the Facility.
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Section 6.02. Pledge or Assignment.
The Company may at any time or from time to time assign its rights
under this Agreement, including its right to receive payments under it, (i) to
any corporation, partnership or other entity controlling, controlled by, or
under common control with the Company, or (ii) as security for the investors and
other participants in any Financing and any Permitted Mortgage from time to time
outstanding, and thereafter this Agreement shall not be terminated, modified or
changed by the mutual consent of the parties except as may be permitted, and
subject to any conditions imposed, by the terms and provisions of each such
assignment as security. Except as otherwise expressly permitted by this Section,
this Agreement shall not be assigned or pledged by the Company without the prior
written consent of the Customer. Upon the request of the Company, the Customer
shall execute and deliver such appropriate instruments of estoppel with respect
to the continuing authorization and validity of the Agreements and the existence
of defaults under them, and shall provide opinions of its counsel as to the due
authorization and execution of the Agreements by, and their binding effect upon,
the Customer, as may reasonably be requested by the investors or other
participants in a Financing as a condition to any extension of credit or advance
or funds in conjunction with it, provided, however, that the Company shall bear
the costs of the Customer's provision of such instruments and opinions.
Section 6.03. Notices.
All notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be effective when delivered personally or five
days after deposited in the U.S. mails, certified or registered mail, postage
prepaid, return receipt requested, addressed, if to the Company, to
Project Orange Associates, L.P.
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630 First Avenue, Suite 30C
New York, New York 10016 and
650 North Belt
Houston, Texas 77060
with a copy to:
Kronish, Lieb, Weiner & Hellman
1345 Avenue of the Americas
New York, New York 10105
Attention: Russell S. Berman, Esq., and
To the holders of a Permitted Mortgage identified, and at the address
stated, in a written notice by the Company to the Customer
or, if to the Customer, to
Syracuse University
Skytop Office Building
Syracuse, New York 13244-5300
Attention: Senior Vice President for Business and Finance or
Successor
with a copy to:
Bond, Schoeneck & King
One Lincoln Center
Syracuse, New York 13202
Attention: Anthony R. Pittarelli, Esq.
or such other addresses as either party shall designate by delivery of
notice as aforesaid.
Section 6.04. Severability.
If any clause, provision or section of this Agreement shall be found
to be invalid by any court of competent jurisdiction, the invalidity thereof
shall not change the validity or effectiveness of the remaining provisions
hereof.
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<PAGE>
Section 6.05. Choice of Law.
This Agreement shall be construed in accordance with, and any dispute
arising in connection herewith shall be governed by, the laws of the State of
New York applicable to contracts made and to be performed in such state.
Section 6.06. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement between the parties
with respect to the matters contained herein and all prior agreements or
arrangements with respect to such matters (including the Prior Agreement) are
superseded. Customer is not relying on any representation or agreement other
than those set forth or provided for in the Agreements. No amendment,
modification or change of any of the provisions of this Agreement shall be of
any force or effect unless duly executed by the party against which enforcement
of it is sought. No mutual termination or mutual cancellation of this Agreement
and no termination of this Agreement by the Company shall be of any force or
effect unless approved in writing by the holders of each Permitted Mortgage.
Section 6.07. Waivers.
No failure by the Customer or the Company to insist upon the strict
performance of any agreement, term, covenant or condition of this Agreement or
to exercise any right or remedy upon a breach of any of them, and no acceptance
of full or partial performance during the continuation of any breach, shall
constitute a waiver of the breach or of the agreement, term, covenant or
condition. No agreement, term, covenant or condition to be performed or complied
with by the Company or the Customer, and no breach of any of them, shall be
waived, altered or modified except by a written instrument executed by the
Customer or the Company, as the case
-40-
<PAGE>
may be. No waiver of any breach shall affect or alter this Agreement, and each
and every agreement, term, covenant and condition of this Agreement shall
continue in full force and effect with respect to any other existing or
subsequent breach. No waiver by the Company shall be of any force or effect
unless approved in writing by the holders of each Permitted Mortgage.
Section 6.08. Termination.
If the guaranty by the Approved Operator required by Section 7.01 of
the Operating Agreement shall not be delivered to Customer by March 15, 1990,
Customer may, upon fifteen days written notice to the Company, terminate this
Agreement.
Section 6.09. Approval.
The obligations of the parties under this Agreement are contingent
upon the approval of this Agreement by the Board of Trustees of Customer. If
such approval is not granted by March 5, 1990, either party may terminate this
Agreement upon fifteen days written notice to the other.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized representatives.
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Partners, L.P., its general
partner
By: G.A.S. Orange Development, Inc., its general
partner
By: /s/ Adam H. Victor
___________________________________
Title: President
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SYRACUSE UNIVERSITY
By: /s/ Louis G. Marcoccia
___________________________________
-42-
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 3rd day of May, 1990, before me personally came ADAM
VICTOR to me known, who being by me duly sworn, did depose and say that he
resides in New York, New York, that he is the President of G.A.S. ORANGE
DEVELOPMENT, INC., the General Partner of G.A.S. Orange Partners, L.P., which is
the General Partner of Project Orange Associates L.P., the partnership described
in this instrument, and that he had authority to sign this instrument and he
acknowledged to me that he executed the instrument as the act and deed of the
partnership.
/s/ Joan F. Carey
__________________________________________
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 27th day of February, 1990, before me personally came LOUIS G.
MARCOCCIA to me known, who being by me duly sworn, did depose and say that he
resides in Cazenovia, New York, that he is the Senior Vice President of SYRACUSE
UNIVERSITY, the corporation described in and which executed the above
instrument; that he knows the seal of the corporation; that the seal affixed to
the instrument is the corporate seal; and that he signed his name to the
instrument.
/s/
__________________________________________
Notary Public
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EXHIBIT A
---------
[Metes and bounds description of the leased premises. The leased
premises are shown on the map attached to this Exhibit A. A metes and
bounds description of the leased premises shall be inserted in this
Exhibit A as soon as it is available.]
Together with a non-exclusive easement to Tenant, its successors and
assigns, upon, over and across the premises of Landlord lying between the leased
premises and Landlord's existing steam plant ("the steam plant") for ingress and
egress to and from the leased premises and McBride Street.
Excepting and reserving from the leased premises the existing
transformers and the building in which they are housed (collectively "the
transformer building"), easements to Landlord, its successors and assigns upon,
over, across and under the leased premises (i) for the entry and passage of
pedestrians, vehicles and machines to and from Landlord's transformer building,
chilled water plant ("the chilled water plant") located adjacent to the leased
premises, and the steam plant, including, without limitation, an easement over
an area five feet in width along the west wall of the transformer building, an
area twenty feet in width along the north wall of the transformer building, and,
if Tenant shall not have constructed a common wall along the east and south
walls of the transformer building, an easement three feet in width along the
east and south walls of the transformer building, an easement over an area
fifteen feet in width along the west wall and the north wall of the chilled
water plant and an easement over an area at least ten feet in width, and,
depending on the final design of the Cogeneration Plant, as much as fifteen feet
in width, along the east wall of the Riley Plant, as indicated on the dotted
area on the map attached, and (ii) for the installation, repair, replacement and
maintenance of lines for the transmission of electrical power, communications,
water, steam, condensate, fuel and other
A-1
<PAGE>
utilities, consisting of overhead or underground poles, lines, conduits, pipes,
mains, ducts, manholes, and other appurtenant and supporting facilities,
apparatus and structures as Landlord may now or from time to time deem necessary
for the operation of the transformer building, the chilled water plant and the
steam plant.
The precise location of the easements granted and reserved shall be
determined and confirmed by Landlord and Tenant upon the completion of the Plans
for the Cogeneration Plant. Landlord shall have the right to relocate such
easements from time to time provided such relocation does not unreasonably
interfere with Tenant's operation of the Cogeneration Plant.
A-2
<PAGE>
EXHIBIT 10.8
OPERATING AGREEMENT
BETWEEN
SYRACUSE UNIVERSITY
(OWNER)
and
PROJECT ORANGE ASSOCIATES, L.P.
(OPERATOR)
Dated: February 27, 1990
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS................................................................................2
Section 1.01 Definition of Terms.............................................................2
ARTICLE 2 EXISTING PLANT.............................................................................3
Section 2.01 Existing Plant..................................................................3
Section 2.02 Right to Operate................................................................3
Section 2.03 ................................................................................7
ARTICLE 3 TERM ................................................................................7
Section 3.01 ................................................................................7
Section 3.02 ................................................................................8
ARTICLE 4 USE OF EXISTING PLANT......................................................................10
Section 4.01 ................................................................................10
ARTICLE 5 USER CHARGE................................................................................10
Section 5.01 ................................................................................10
Section 5.02 ................................................................................12
Section 5.03 ................................................................................12
ARTICLE 6 OPERATION OF EXISTING PLANT................................................................16
Section 6.01 Operation by Operator...........................................................16
Section 6.02 Operating Agreements............................................................19
Section 6.03 Owner Training..................................................................19
ARTICLE 7 REPAIRS, MAINTENANCE AND ALTERATIONS.......................................................20
Section 7.01 Repairs and Maintenance.........................................................20
Section 7.02 Testing and Reports.............................................................29
Section 7.03 Alterations, Improvements and Additions.........................................30
ARTICLE 8 UTILITY EXPENSES...........................................................................31
Section 8.01 Utilities.......................................................................31
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 9 NET AGREEMENT..............................................................................31
Section 9.01 Net Agreement...................................................................31
Section 9.02 User Charge Not to Abate........................................................31
Section 9.03 Compliance with Environmental and Safety Laws
Laws........................................................................32
Section 9.04 Licensing Requirements..........................................................35
ARTICLE 10 REQUIREMENTS OF PUBLIC AUTHORITY...........................................................36
Section 10.01 Compliance by Operator..........................................................36
Section 10.02 Challenge to Validity...........................................................38
ARTICLE 11 COVENANT AGAINST LIENS.....................................................................38
Section 11.01 Operator's Obligations to Discharge.............................................38
Section 11.02 Right to Discharge..............................................................39
Section 11.03 No Implied Consent of Owner.....................................................40
ARTICLE 12 ACCESS TO EXISTING PLANT BY OWNER..........................................................40
Section 12.01 ................................................................................40
Section 12.02 ................................................................................41
ARTICLE 13 SURRENDER..................................................................................41
Section 13.01 Surrender of Operation..........................................................41
Section 13.02 ................................................................................42
Section 13.03 ................................................................................43
ARTICLE 14 INDEMNITY..................................................................................43
Section 14.01 Operator's Indemnification of Owner.............................................43
Section 14.02 Owner's Indemnification of Operator.............................................44
Section 14.03 Limitation of Owner's Indemnity.................................................45
Section 14.04 ................................................................................45
ARTICLE 15 INSURANCE..................................................................................46
Section 15.01 Casualty Insurance..............................................................46
Section 15.02 Other Insurance.................................................................46
Section 15.03 Evidence of Insurance and Possession of Policy..................................48
Section 15.04 Limitations Upon Concurrent Insurance...........................................49
Section 15.05 Disbursement of Proceeds........................................................49
</TABLE>
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<TABLE>
<S> <C>
Section 15.06 Notice of Cancellation..........................................................49
Section 15.07 Apportionment of Premiums Upon Expiration of Terms..............................50
ARTICLE 16 EMINENT DOMAIN.............................................................................50
Section 16.01 Termination of Agreement........................................................50
Section 16.02 Distribution of Condemnation Proceeds...........................................51
Section 16.03 Partial Taking..................................................................52
ARTICLE 17 RIGHTS OF EACH PARTY TO PERFORM COVENANTS
OF THE OTHER...............................................................................52
Section 17.01 ................................................................................52
Section 17.02 ................................................................................52
Section 17.03 ................................................................................53
ARTICLE 18 DAMAGE OR DESTRIBUTION.....................................................................53
Section 18.01 ................................................................................53
ARTICLE 19 LATE CHARGES...............................................................................57
Section 19.01 Past Due User Charges...........................................................57
ARTICLE 20 DEFAULT....................................................................................57
Section 20.01 Events of Default...............................................................57
Section 20.02 Remedies on Default.............................................................60
Section 20.03 ................................................................................65
Section 20.04 ................................................................................65
Section 20.05 ................................................................................65
Section 20.06 ................................................................................65
Section 20.07 ................................................................................66
ARTICLE 21 WAIVERS....................................................................................66
Section 21.01 Waivers.........................................................................66
ARTICLE 22 REPRESENTATIONS............................................................................67
Section 22.01 ................................................................................67
ARTICLE 23 FORCE MAJEURE..............................................................................67
Section 23.01 ................................................................................67
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 24 NOTICE ................................................................................68
Section 24.01 ................................................................................68
ARTICLE 25 GOVERNING LAW..............................................................................70
Section 25.01 ................................................................................70
ARTICLE 26 PARTIAL INVALIDITY.........................................................................70
Section 26.01 ................................................................................70
ARTICLE 27 INTERPRETATION.............................................................................71
Section 27.01 ................................................................................71
ARTICLE 28 BINDING EFFECT.............................................................................71
Section 28.01 ................................................................................71
ARTICLE 29 NO ORAL MODIFICATION - ENTIRE AGREEMENT....................................................71
Section 29.01 ................................................................................71
ARTICLE 30 HEADINGS AND TABLE OF CONTENTS.............................................................72
Section 30.01 ................................................................................72
Section 30.02 ................................................................................72
ARTICLE 31 WAIVER OF JURY TRIAL AND COUNTERCLAIMS.....................................................73
Section 31.01 ................................................................................73
ARTICLE 32 MEMORANDUM OF AGREEMENT....................................................................73
Section 32.01 ................................................................................73
ARTICLE 33 TERMINATION................................................................................73
Section 33.01 ................................................................................73
Section 33.02 ................................................................................73
Exhibits
- --------
</TABLE>
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<PAGE>
Exhibit A Map of Existing Plant
Exhibit B Supplemental Agreement
Exhibit C Existing Plant Operating Requirements
Exhibit D Schedule of Repair and Maintenance
Exhibit E Minimum Standards for Replacement Package Boilers
Exhibit F Guaranty of Approved Operator
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OPERATING AGREEMENT
THIS AGREEMENT (the "Agreement") made on February 27, 1990, between
SYRACUSE UNIVERSITY, a New York educational corporation having its principal
office at Syracuse, New York 13244 (the "Owner") and PROJECT ORANGE ASSOCIATES,
L.P., a Delaware limited partnership (the "Operator").
RECITALS
--------
1. Owner has entered into an agreement with Operator dated on the
date of this Agreement (the "Steam Contract") for the purchase of steam to be
produced by Operator from a cogeneration facility (the "Cogeneration Plant") to
be constructed and operated by Operator upon certain land owned by Owner and
leased to Operator pursuant to a Lease Agreement dated on the date of this
Agreement (the "Lease").
2. Pursuant to the Steam Contract, Operator has also undertaken to
install and operate certain steam, water, condensate, fuel, gas and electric
lines and related apparatus and equipment necessary or appropriate for the
operation of the Cogeneration Plant and delivery of steam to Owner which,
together with the Cogeneration Plant, constitute the "Facility."
3. Pursuant to the Steam Contract, Owner will purchase, on its own
behalf and on behalf of certain other institutional users located near the
premises of the Owner who from time to time share steam costs with the Owner
(the "Ancillary Customers"), its and the Ancillary Customers' requirements for
steam from the Operator.
4. A standby steam generating facility is necessary to provide an
alternate or supplemental source of steam to meet the steam requirements of
Owner and its Ancillary Customers.
5. The Operator desires to use and operate the Owner's existing steam
generation facility (as hereinafter more specifically described, the "Existing
Plant") or an
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Auxiliary System (as hereinafter more specifically described) which operator may
install in the Existing Plant, to provide the required alternate or supplemental
source of steam.
6. The Owner and a predecessor of the Operator have previously
entered into a certain Operating Agreement, dated as of December 28, 1987,
pertaining to the subject matter of this Agreement ("the Prior Agreement"). This
Agreement is intended to supersede the Prior Agreement which has been terminated
by contemporaneous separate agreement between the Owner and such predecessor.
NOW, THEREFORE, the parties agree as follows.
ARTICLE 1
DEFINITIONS
Section 1.01. Definition of Terms. For purposes of this Agreement,
all defined terms, as indicated by the capitalization of the first letter of
such term, shall have the meanings specified in the Steam Contract, unless the
context or use clearly indicates another meaning.
ARTICLE 2
EXISTING PLANT
Section 2.01. Existing Plant. The Owner's Existing Plant is a steam
generation facility which consists principally of 4 gas fired and oil fired
steam boilers and related apparatus, equipment and structures, which include the
Alco Plant, the Riley Plant and the gas house, and the underground oil storage
tanks, and provides the steam requirements of the Customer and its Ancillary
Customers, and the land on which it is located at 500 E. Taylor Street in the
City of Syracuse, New York, as shown on the map attached as Exhibit A.
Section 2.02. Right to Operate. Owner grants to Operator, upon and
subject to the terms, covenants, conditions and provisions of this Agreement,
the right to operate and use
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<PAGE>
the Existing Plant. No leasehold possessory rights to the Existing Plant are
granted to the Operator by this Agreement; however, Owner shall at all times
throughout the term provide to Operator and its permitted assigns full access to
the Existing Plant sufficient so that Operator may satisfy its obligations
hereunder. Owner reserves the right to the exclusive use of (i) the office on
the second floor of the Riley Plant for Owner's distribution system supervisory
and clerical employees, (ii) the office of the Owner's distribution system
supervisor on the second floor of the Alco Plant, and (iii) the locker, restroom
and shower facilities adjacent to the office described in (i) and those located
in the Alco Plant for Owner's distribution system hourly workers.
Owner reserves the right to the exclusive use of the electrical shop
on the first floor of the Alco Plant, to the exclusive use of a suitable space
on the first floor of the Alco Plant for Owner's welding operations, and to the
use of the elevator and hoist in the Alco Plant, provided such use shall not
unreasonably interfere with Operator's use of the Existing Plant.
Owner also reserves the right to the use of the Alco Plant for the
storage of equipment, parts, inventory and supplies used by Owner in its steam
distribution system, including, without limitation, the right to the storage of
fittings, blowers, pumps, valves and similar equipment and boiler and pipe
insulation on the first, second, and third floors of the Alco Plant, provided
such use shall not unreasonably interfere with Operator's use of the Existing
Plant.
Owner also reserves the right to use, in common with Operator, and
access at all times to, the electrical circuit breakers and switchgear and
related electrical apparatus and lines located in the Alco Plant and in the
Riley Plant ("the electrical service"), to the extent necessary for Owner's
operation of its chilled water plant. Operator shall not interrupt the
electrical service to the chilled water plant without the approval of Owner and
Owner shall not interrupt the electrical service to the Alco Plant or the Riley
Plant without the approval of Operator. Neither party shall modify the
electrical service without the approval of the other, which approval shall not
be unreasonably withheld.
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Owner reserves the right of access upon, over, across and under the
land constituting the Existing Plant (i) for the entry and passage of
pedestrians, vehicles and machines to and from the Existing Plant and Owner's
chilled water plant and transformer building located adjacent to the premises
leased by Owner to Operator pursuant to the Lease Agreement, (ii) for the
installation, repair, replacement and maintenance of lines for the transmission
of electrical power, communications, water, steam, condensate, fuel and other
utilities, consisting of overhead or underground poles, lines, conduits, pipes,
mains, ducts, manholes, and other appurtenant and supporting facilities,
apparatus and structures as Owner may now or from time to time deem necessary
for the operation of the chilled water plant and (iii) for the parking of five
vehicles in the area designated for parking on Exhibit A, provided that the use
described in clauses (i) and (ii) shall not unreasonably interfere with
Operator's use of the Existing Plant.
Owner shall install, at its cost and expense, (i) a new submeter, to
replace the existing submeter, in its chilled water plant to determine the
amount of electricity used by Owner in the operation of the chilled water plant
and (ii) a submeter in the Alco Plant to determine the amount of electricity
used by Owner in the operation of the equipment in its electrical shop and
welding shop (collectively "the submeters"). Owner daily shall read the
submeters and record the readings. Operator shall have access to the submeters
at reasonable hours upon advance notice to Owner for the purposes of reading and
testing the submeters.
Operator shall provide Owner with a copy of each electricity bill
received by Operator from Niagara Mohawk Power Corporation for electricity used
in the Existing Plant and the chilled water plant (the "electricity bill")
within ten (10) days of its receipt by Operator. Within fifteen (15) days after
Owner's receipt of the electricity bill from Operator, Owner shall reimburse
Operator for the cost (the "Owner's cost") of the electricity used by Owner in
the operation of its chilled water plant and in the operation of the equipment
used in its electrical shop and welding shop (collectively "Owner's electricity
usage") for the period covered by the electricity bill. The Owner's cost shall
be an amount equal to a fraction of the total electricity bill, the numerator of
which shall be the kilowatt hours attributable to Owner's electricity usage
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for the period covered by the electricity bill, as determined by the submeters,
and the denominator of which shall be the total kilowatt hours included in the
electricity bill. At the time of Owner's reimbursement of Owner's cost to
Operator, Owner shall also provide Operator with the cumulative daily kilowatt
hours readings from the submeters for the period covered by the electricity bill
together with a statement setting forth in reasonable detail the calculation of
Owner's cost.
Upon the termination of this Agreement by Owner or upon Owner's
assumption of operating control of the Existing Plant pursuant to the terms of
this Agreement, Operator shall, so long as the Lease Agreement shall remain in
effect, have the right to park five vehicles in the area designated for parking
on Exhibit A.
Section 2.03. Any transfer, sale or encumbrance of the Existing Plant
by Owner shall be subject to the rights of Operator under this Agreement.
ARTICLE 3
TERM
Section 3.01. The term of this Agreement (the "term") shall commence
on the date (the "Term Commencement Date") upon which the Operator shall have
commenced delivery of steam to the Owner (other than for testing purposes which
shall not extend beyond a reasonable period of time) as required pursuant to the
Steam Contract and shall continue for a period of 40 years, unless terminated
earlier pursuant to this Agreement; provided, however that in the event that the
Operator shall be obligated to provide steam to the Owner from the Existing
Plant commencing on October 1, 1991, pursuant to the second unnumbered paragraph
of Section 1.06 of the Steam Contract, the term of this Agreement shall commence
on October 1, 1991 and shall expire upon the expiration of the term of the Steam
Contract, unless terminated earlier pursuant to this Agreement. The parties
shall enter into a supplemental agreement, substantially
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in the form attached as Exhibit B, setting forth the commencement and expiration
dates of the term.
Section 3.02. During the period prior to the Term Commencement Date
(the "pre-term period"), Owner shall have full responsibility for the Existing
Plant, shall operate and maintain the Existing Plant in the manner that it has
prior to the execution of this Agreement and shall maintain the quantities and
kinds of materials, spare parts, supplies, tools and equipment for use primarily
or exclusively in connection with the Existing Plant that it has customarily
maintained from time to time prior to the execution of this Agreement. During
the pre-term period, Operator and its authorized representatives shall have
access, upon reasonable notice, to the Existing Plant during normal business
hours for the performance of such studies and work that may be necessary for the
construction of any interconnections between the Cogeneration Plant and the
Existing Plant. The interconnections shall be designed and constructed in a
manner that will permit the separate and independent operation of either the
Cogeneration Plant or the Existing Plant. Owner shall also during the pre-term
period provide Operator with such operating and maintenance literature with
respect to the Existing Plant as Owner has in its possession, shall provide
training to Operator's designated personnel in the operation and maintenance of
the Existing Plant and shall permit Operator's employees to operate the Existing
Plant for the purposes of training Operator's personnel under the supervision of
Owner's personnel, provided, however, that any additional costs incurred in
providing such training shall be borne by Operator. Owner and Operator shall
cooperate with one another in the completion of any necessary interconnections
between the Cogeneration Plant and the Existing Plant and in the orderly and
efficient transfer of operation of the Existing Plant to Operator. Upon
expiration of the pre-term period, Operator shall have the option to purchase
from Owner all, or any part of the materials, spare parts, supplies, tools and
equipment (other than fuel oil) maintained by Owner for use in connection with
the Existing Plant ("the inventory"), at Owner's cost, which shall be paid by
Operator upon expiration of the pre-term period. Owner shall provide Operator a
list of the inventory and related cost information at least sixty (60) days
prior to the expiration of the pre-
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term period. Operator shall purchase from Owner all fuel oil ("the fuel oil")
maintained by Owner for the operation of the Existing Plant at Owner's cost,
which shall be paid by Operator upon the expiration of the pre-term period. Upon
the expiration or termination of this Agreement, Owner shall have the option to
purchase the inventory and, if fuel oil is then being used to fuel the Existing
Plant, the obligation to purchase the fuel oil from Operator upon the same terms
and conditions applicable to their purchase by Operator from Owner.
ARTICLE 4
USE OF EXISTING PLANT
Section 4.01. The Existing Plant and the Auxiliary System shall be
used and operated by the Operator only as a steam generation facility to provide
an alternate or supplemental source of steam to meet the steam requirements of
Owner and its Ancillary Customers. Under no circumstances shall any steam
produced from the Existing Plant or the Auxiliary System be used by Operator for
the generation of electricity. Nothing in this Section shall diminish, alter or
modify Operator's obligations to supply the steam requirements of Owner and its
Ancillary Customers pursuant to the Steam Contract.
ARTICLE 5
USER CHARGE
Section 5.01.
(a) In consideration of its right to operate and use the
Existing Plant, and irrespective of its installation and use of the Auxiliary
System, but subject to the provisions of Section 5.03, the Operator shall pay to
the owner annually on each anniversary of the Term Commencement Date (or the
Commercial Operation Date, in the event the Operator shall be obligated to
provide steam to the Owner from the Existing Plant prior to the Commercial
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Operation Date pursuant to the second unnumbered paragraph of Section 1.06 of
the Steam Contract) and throughout the term of this Agreement the following
amounts ("the user charge"):
Anniversary Dates Annual Payment
----------------- --------------
First through Fifth $ 1.00
Sixth through fifteenth 1,250,000.00
Sixteenth through twentieth 1,350,000.00
Twenty-first through thirtieth 1,450,000.00
Thirty-first through thirty ninth 1,550,000.00
and a final payment of $1,550,000 on the first day of the last month preceding
the expiration of the term, except that if the Commercial Operation Date is
later than the Term Commencement Date, the payment on the twentieth anniversary
of the Commercial Operation Date shall be increased ("the increase") by the sum
of $104,167 for each full month from the Term Commencement Date to the
Commercial Operation Date.
(b) The Operator shall have the option to make the annual payment
in twelve equal monthly installments, commencing on the first day of the month
following each anniversary, together with interest at a rate equal to the prime
rate announced by Chase Manhattan Bank, at its principal office in the City of
New York, New York ("the prime rate"), plus 200 basis points, on the unpaid
portion of the annual payment. Interest shall accrue from the anniversary date
and shall be payable on the due date of each monthly installment, calculated by
the use of the prime rate in effect on the first day of the previous month.
Section 5.02. The term "user charge" shall include, in addition to
the amounts payable under Section 5.01, any other sums, costs, expenses or
amounts from time to time payable by Operator to Owner under this Agreement,
whether by way of indemnity or otherwise, each of which whether or not expressed
to be a user charge, shall be deemed to be a user charge, and Owner shall have
all remedies for the collection of them, when in arrears, as are available to
Owner for the collection of any other user charge in arrears.
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Section 5.03.
(a) The payment of the user charges to the Owner pursuant to Section
5.01(a) (exclusive of any amounts included or treated as a user charge solely by
reason of the provisions of Section 5.02) shall be subordinate (the
"Subordinated User Charge") (i) to the debt service on the initial debt in the
aggregate principal amount not exceeding $210,000,000 ("the initial debt"), and
on any additional debt up to $25,000,000 ("the additional debt"), incurred for
the purposes permitted for a Permitted Mortgage, as defined in Article 23 of the
Lease Agreement (except any debt incurred for the purchase or redemption of any
economic interest in the owner of the Facility) and any refinancing of such
initial debt and additional debt, (ii) to all amounts required to be and
actually paid by the Operator to the New York State Energy Research Development
Authority in repayment of loans made to Gas Alternative Systems, Inc. in
connection with the development of the Facility, provided that the principal
amount to be paid shall not exceed $1,500,000, (iii) to all amounts required to
be and actually paid for or in connection with the operation and maintenance of
the Facility and the Existing Plant, including amounts to be paid to suppliers
and transporters of consumables, except the payment of any bonuses to any
operators, any management fees to G.A.S. Orange Development, Inc. ("G.A.S."),
Adam H. Victor or to any entity controlled by, under common control with or
which controls either G.A.S. or Adam H. Victor, or any other similar payments or
fees, (iv) all charges required to be and actually paid in connection with the
debt to which the user charges shall be subordinate, including payments to any
reserve fund required by such debt financing (less all amounts released to the
Operator from any such reserve fund), except any voluntary prepayments of
principal and payments in the nature of additional interest determined as a
percentage of net income or revenues of the Operator or in any other manner
contingent upon the operations of the Operator, (v) all amounts required to be
paid and actually paid or set aside for payment of real property taxes (or
payments to municipal authorities in lieu thereof) with respect of all or part
of the Facility or with respect to gross receipts, franchise or other similar
taxes, and (vi) all amounts required to be and actually paid for Operator's
reasonable expenses of administration and
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overhead (other than to or for the benefit of G.A.S., Adam H. Victor or any
entity controlled by, under common control with or which controls either G.A.S.
or Adam H. Victor).
(b) Any Subordinated User Charge not paid when due by virtue of the
subordination provisions of paragraph (a) shall be deferred and shall be deemed
a Deferred User Charge. Failure to pay any Subordinated User Charge by reason
of such subordination and deferral shall not be a default hereunder, but no
payment shall be made by Operator by way of a return of its equity capital
(whether in the form of a redemption of equity or otherwise) or a distribution
with respect to such equity capital if and for so long as any Subordinated User
Charges are accrued and owing or any Deferred User Charges are outstanding.
(c) Any accrued Subordinated User Charge and any Deferred User Charges
are to be paid from the first cash available for payment ("first available
cash"), after the prior payment of all other Subordinated User Charges and shall
be paid in full no later than the twentieth anniversary of the Term Commencement
Date. The first available cash shall mean the excess (as determined with
respect to each calendar quarter) of (i) the sun of all amounts received by the
Operator from or relating to the operation of the Cogeneration Facility and
related facilities (as defined in the Lease Agreement) and the Existing Plant,
or any portion thereof, over (ii) the sum of all amounts described in paragraph
(a) of this Section 5.03 to which the user charge is subordinate. Interest on
the Deferred User Charges shall accrue daily at the prime rate plus 200 basis
points.
(d) The subordination of the payment of the user charge shall cease
(i) when the Cogeneration Facility is no longer encumbered by a Permitted
Mortgage, (ii) upon any further debt financing of the Facility or the related
facilities which is not a refinancing of the initial debt or the additional
debt, (iii) upon any payment by Operator by way of a return of its equity
capital (whether in the form of a redemption of equity or otherwise) or a
distribution made with respect to such equity capital (other than distributions
from cash flow derived from operating revenues or distributions out of proceeds
of other contributions to equity capital so long as the making of distributions
out of other contributions to equity capital does not result in
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any reduction in aggregate equity capital or, if any such distribution out of
other contributions to equity capital is made more than 30 days after the
earlier of the date upon which the initial debt is converted from a construction
loan to a term loan (the "conversion date") or 360 days after the Commercial
Operation Date, the aggregate of such distributions out of other contributions
to equity capital does not exceed the amount invested as equity capital by the
distributee) or (iv) the earlier of the twentieth anniversary of the conversion
date or the twenty-first anniversary of the Commercial Operation Date. For
purposes of this Section 5.03, a refinancing shall mean a refinancing as defined
in Section 23.01 of the Lease Agreement which does not result in any increase in
the principal amount outstanding of the initial debt or the additional debt.
(e) So long as any Subordinated User Charges are accrued and owing or
any Deferred User Charges are outstanding, then, on or before March 1st of each
calendar year, Operator shall furnish or cause to be furnished to Owner a
statement prepared by a nationally recognized independent certified public
accounting firm (the "auditors") designated by Operator, setting forth, in
reasonable detail, all amounts received by the Operator from or relating to the
operation of the Facility and the Existing Plant and all amounts described in
paragraph (a) of Section 5.03 to which the user charge is subordinate for the
preceding calendar year. Owner shall be entitled to obtain from the auditors, at
Operator's expense, such additional information with respect to the statement as
Owner may reasonably request.
ARTICLE 6
OPERATION OF EXISTING PLANT
Section 6.01. Operation by Operator.
(a) Except as expressly provided otherwise in this Section, the
Operator, at all times during the term of this Agreement, shall, with its own
work force and at its sole cost and expense, operate and maintain the Existing
Plant in a state of readiness to make available, and shall make available, an
alternate or supplemental source of steam to the Owner
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and its Ancillary Customers, at the pressures and temperature and meeting the
other requirements of the Steam Contract, within the shortest period of time
technically and reasonably possible, but in all events within no more than six
hours, after the interruption of the required supply of steam from the Facility,
provided, however, that Operator shall have satisfied the requirements of this
paragraph (a) if, within six hours following an interruption of the supply of
steam attributable to the involuntary outage of both gas turbines of the
Facility due to causes beyond the reasonable control of Operator, it shall have
commenced delivery of at least 250,000 pounds of steam per hour from the
Existing Plant and shall continue to fire additional boilers in the Existing
Plant to the extent necessary to meet the Owner's additional demands for steam
as promptly as is practical and consistent with the preservation and protection
of the boilers.
(b) Operator's obligations pursuant to this Section may be satisfied
by its installation and operation at the Existing Plant of new boilers and
related machinery, equipment and apparatus having a steam generation capability
at least equal to the capability of the Existing Plant and sufficient to provide
an alternate or supplemental source of steam to meet the steam requirements of
Owner and its Ancillary Customers ("the Auxiliary System"). The Auxiliary
System shall be approved by Owner, which shall not unreasonably withhold its
approval. Operator shall obtain, and maintain throughout the term of this
Agreement, good title to the Auxiliary System free and clear of any liens,
encumbrances, security interests or charges. As security for the performance of
Operator's obligations under this Agreement, Operator shall grant to Owner a
prior first security interest, or a security interest subordinate only to a
purchase money security interest, in the Auxiliary System ("the security
interest") and execute and deliver to Owner such documents as Owner may
reasonably request to evidence and perfect the security interest.
(c) Whenever and so long as Operator shall rely upon the Auxiliary
System to satisfy its obligations to provide an alternate or supplemental source
of steam to Owner and its Ancillary Customers in the manner required by
paragraph (a) of this Section (any such period "the Auxiliary Reliance Period"),
it shall, with its own work force and at its sole cost
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and expense operate and maintain the Auxiliary System and the Existing Plant in
the state of readiness required by paragraph (a).
(d) All steam supplied to the Owner by the Operator from the Existing
Plant or from the Auxiliary System shall be delivered in the manner and in
accordance with the requirements of Section 1.04 and Section 2.01 of the Steam
Contract and shall be purchased and sold at the price and in the manner stated
in Sections 2.01, 2.02 and 2.03 of the Steam Contract.
(e) For purposes of this Agreement, the term Existing Plant shall
include any replacements and additions and shall also include the Auxiliary
System unless the context or use clearly indicates its exclusion.
(f) Operator shall operate the Existing Plant, at a minimum, in
accordance with the requirements set forth in Exhibit C to this Agreement.
Section 6.02. Operating Agreements. Operator shall not enter into, amend,
modify, terminate or assign any operating agreement or other agreement for the
operation or use of the whole or any part of the Existing Plant nor assign this
Agreement without the prior written approval of Owner, provided, however, that
Operator may assign this Agreement (i) to the holder of a Permitted Mortgage or
(ii) to any corporation, partnership or other entity controlling, controlled by,
or under common control with the Operator. Any agreement entered into or
assignment made by Operator in violation of this paragraph shall be null and
void.
Section 6.03. Owner Training. Throughout the Term of this Agreement,
Operator, at its sole cost and expense, (i) shall provide Owner from time to
time complete and up to date operating manuals, instructions and other documents
and information relating to the operation and maintenance of the Auxiliary
System and the Existing Plant and (ii) shall provide training to employees of
Owner, designated by it from time to time, in the operation and maintenance of
the Auxiliary System and the Existing Plant by the Operator's personnel
regularly employed at the Existing Plant and the Facility.
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ARTICLE 7
REPAIRS, MAINTENANCE AND ALTERATIONS
Section 7.01. Repairs and Maintenance.
(a) Operator, at its sole cost and expense, shall manage, maintain and
promptly repair the Existing Plant including, without limitation, all machinery,
equipment, fixtures, apparatus, lines, pipes, sidewalks, passageways, roadways,
curbs, parking areas and landscaping, and all personal property used in the
operation of the Existing Plant, and shall keep them in as good condition,
ordinary wear and tear excepted, as they exist upon the Term Commencement Date
or upon their subsequent installation, as the case may be, provided, however,
that Owner shall be responsible for the maintenance and repair of the portions
of the Existing Plant (i) reserved for the exclusive use of Owner, but only to
the extent that such maintenance and repair is necessary principally because of
Owner's use, or (ii) which are damaged or require unusual or extraordinary
maintenance or repair as a result solely of Owner's use of the Existing Plant.
Without limiting the foregoing, Operator shall maintain the capability of the
Existing Plant to start up from a dead start, without utility power. "Repair"
shall include replacement, restoration and renewal when necessary. Operator's
obligations under this Article apply to all repairs, interior and exterior,
structural and non-structural, ordinary and extraordinary, and foreseen and
unforeseen. All repairs made by Operator shall be of good quality and class.
Operator shall do all necessary shoring of foundations and walls of any
structures of the Existing Plant and every other act or thing for the safety and
preservation of them and any other part of the Existing Plant which may be
necessary by reason of any excavation or other building operation upon any
adjoining property or street, alleyway or passageway. Operator shall manage and
maintain the Existing Plant as would a prudent owner and shall not commit, or
permit to be committed, any waste or any nuisance on them, or permit any part of
the Existing Plant to be used for any dangerous, noxious or offensive purpose,
and
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shall not permit any damaged improvement to remain at the Existing Plant for an
unreasonable period of time. Without limiting the generality of the foregoing
and the provisions of Section 7.02, Operator shall repair and maintain the
Existing Plant in accordance with the minimum requirements set forth in Exhibit
D attached to this Agreement.
(b) The steam boilers and related apparatus and equipment, and their
replacements, if any, shall be rebuilt whenever and to whatever extent
necessary. Rebuilding shall mean and include, without limitation, the
replacement of the fire and water tubes, replacement of refractory, replacement
of drums and frames, replacement of all burners, valves and related apparatus
and equipment and replacement of flues and duct work. If Owner and Operator
shall disagree as to the need for rebuilding, either party may notify the other
of the impasse and, within ten (10) days of giving the notice, a professional
consultant experienced in steam boiler maintenance and replacement (the
"consultant") shall be selected by Owner and Operator. The consultant shall
determine the need for rebuilding within thirty (30) days of his selection. If
Owner and Operator are unable to agree upon a mutually acceptable consultant,
within ten (10) days after the giving of the notice of impasse, each party
shall, within five (5) days after the expiration of the ten (10) day period,
select a consultant and the two consultants, within ten (10) days of their
selection, shall select a third consultant who, within thirty (30) days of his
selection, shall determine the need for rebuilding. The decision of the
consultant shall be binding upon the parties. Should the consultant determine
that any rebuilding is necessary, Operator shall promptly and diligently proceed
with the implementation of the consultant's determination. The fees and expenses
of each consultant in each determination made pursuant to this subparagraph or
pursuant to subparagraph (c) or subparagraph (d) of this Section shall be borne
as follows.
(i) the fees and expenses of the consultant, if any, mutually
acceptable to Owner and Operator shall be borne equally by Owner and
Operator;
(ii) if Owner and Operator are unable to agree upon a mutually
acceptable consultant, each party shall pay the fees and expenses of the
consultant it
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selects and the fees and expenses of the third consultant
shall be borne equally by Owner and Operator.
(c) Operator shall have the option to replace a boiler with a package
boiler if replacement of the boiler shall be more economic than rebuilding the
boiler. In determining whether replacement of a boiler is more economic than
rebuilding a boiler, factors to be considered shall include long term
maintenance and capital costs and fuel efficiency. The replacement package
boiler shall have a dual gas and No. 2 oil firing capability with a steam
production capability at least equal to that of the boiler replaced (including
minimum temperature and pressure requirements) and shall meet United States ASME
specifications, the requirements of New York State Boiler Code Rule 14, the
requirements of the New York State Energy Conservation Code and the minimum
standards set forth in Exhibit E. A replacement boiler shall not replace more
than one boiler so that at all times there shall be at least four boilers having
a steam production capability at least equal to the steam production capability
of each of existing boilers 3, 4, 6 and 7 (which in the aggregate equals 500,000
pounds of steam per hour). Operator shall bear the cost and expense of the
complete installation of the replacement boiler and of the removal of the boiler
replaced. The installation of the replacement boiler and the removal of the
boiler replaced shall be done in accordance with all provisions of this
Agreement. The replacement boilers shall be installed free and clear of any
liens, encumbrances, security interests or charges and, whether or not affixed
or moveable, shall upon installation become the property of Owner and part of
the Existing Plant. If Owner and Operator shall disagree on whether replacement
of a boiler with a package boiler is more economic than the rebuilding of a
boiler, either party may notify the other of the impasse and the issue shall be
determined by the consultant in accordance with the procedure set forth in
subparagraph (b) of this Section. The determination of the consultant shall be
limited solely to the economics of replacement.
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(d) Operator shall keep and maintain the Existing Plant and all
adjoining sidewalks, curbs, alleyways and passage ways in a clean and orderly
condition, free of dirt, rubbish, snow, ice and unlawful obstructions.
(e) Operator shall make available to Owner for its inspection at all
times during normal business hours all records and documents relating to the
operation, repair, maintenance and testing of the Existing Plant, including,
without limitation, all operating logs and records and reports of inspection and
testing maintained by the Operator in accordance with Exhibit D. Operator also
shall furnish to Owner copies of the annual New York State boiler inspection
report on the Existing Plant within thirty (30) days of issuance of the report
by the insurance carrier.
(f) Each of Operator's obligations to rebuild the steam boilers and
related apparatus and equipment and their replacements, if any, pursuant to this
Section 7.01 ("Operator's rebuilding obligations") which arises during the first
fifteen (15) years of this Agreement, or during the stated term, including any
renewals, of an operating and maintenance agreement between Operator and an
independent contractor approved by Owner (the "Approved Operator"), if greater
than fifteen (15) years, (in either case the "Initial Guaranty Period") shall be
secured by the guaranty of the Approved Operator in the form attached as Exhibit
F. Upon the expiration of the Initial Guaranty Period, or upon the termination
of the guaranty of the Approved Operator, in accordance with the terms set forth
in Exhibit F, prior to the expiration of the Initial Guaranty Period, Operator's
rebuilding obligations shall be immediately secured by either (i) the guaranty
by an entity ("the guarantor"), and in form, acceptable to Owner acting
reasonably, having at all times a minimum of net worth, based upon audited
financial statements by a firm of independent public accountants of recognized
standing reasonably acceptable to Owner ("audited financial statements") equal
to one hundred fifty percent (150%) of the cost of the replacement of all of the
steam boilers and related apparatus and equipment ("the boiler replacement
costs") or (ii) an irrevocable and unconditional letter of credit or other
comparable financial assurance acceptable to Owner acting reasonably in an
amount equal to one hundred
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percent (100%) of the boiler replacement costs, unless Operator shall, upon the
expiration of the Initial Guaranty Period, or upon the termination of the
guaranty of the Approved Operator, as the case may be, and at all times
thereafter, have a minimum net worth, based upon its audited financial
statements, equal to one hundred fifty percent (150%) of the boiler replacement
costs. If at any time during the Initial Guaranty Period the net worth of the
Approved Operator, based upon its audited financial statements, shall be less
than one hundred fifty percent (150%) of the boiler replacement costs,
Operator's rebuilding obligations shall also be secured by either (i) the
guaranty of an entity ("the additional guarantor") and in form, acceptable to
Owner acting reasonably, having at all times a minimum net worth, based upon its
audited financial statements, equal to one hundred fifty percent (150%) of the
boiler replacement costs or (ii) an irrevocable and unconditional letter of
credit or other comparable financial assurance acceptable to Owner acting
reasonably in an amount equal to one hundred percent (100%) of the boiler
replacement costs, unless Operator shall at all times during the remainder of
the Initial Guaranty Period have a minimum net worth, based upon its audited
financial statements, equal to one hundred fifty percent (150%) of the boiler
replacement costs.
Operator shall provide Owner annually with audited financial
statements (i) of Operator throughout the term of this Agreement and (ii) of the
Approved Operator and of any additional guarantor, during the Initial Guaranty
Period, within one hundred twenty (120) days following the end of the fiscal
year of each. At least 90 days, but no more than 180 days, prior to the
expiration of the Initial Guaranty Period, and at least thirty (30) days prior
to the termination of the guaranty of the Approved Operator, Operator shall
provide Owner with the audited financial statements of the guarantor, if any, to
succeed the guaranty of the Approved Operator for its most recent fiscal year
and thereafter, annually, audited financial statements within one hundred twenty
(120) days following the end of its fiscal year.
Notwithstanding anything to the contrary contained in this
subparagraph (f), the net worth requirement of the Approved Operator, the
guarantor or the Operator under this subparagraph (f) shall be no greater than
Twenty Million Dollars ($20,000,000) determined upon
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the book value of its assets, net of liabilities, or Sixty Million Dollars
($60,000,000) determined upon the fair market value of its assets, net of
liabilities, based upon appraisals of the assets acceptable to Owner acting
reasonably.
Owner and Operator agree that the current boiler replacement costs are
Eight Million Dollars ($8,000,000) for the replacement of boilers 3, 4, 6 and 7.
The boiler replacement costs shall be increased upon each anniversary of the
execution of this Agreement by five percent (5%) until the next determination of
the boiler replacement costs.
Owner and Operator shall use their best efforts to reach agreement on
a redetermination of the boiler replacement costs upon the fifth anniversary of
the Term Commencement Date and every fifth year thereafter. If Owner and
Operator shall disagree on the boiler replacement costs, either party may notify
the other of the impasse and the boiler replacement costs shall be determined by
a consultant in accordance with the procedure set forth in subparagraph (b) of
this Section. The boiler replacement costs as redetermined each fifth year shall
be increased upon each anniversary of the Term Commencement Date by five percent
(5%) (the "adjusted boiler replacement costs") until the next redetermination of
the boiler replacement costs. The adjusted boiler replacement costs shall also
be decreased ("the replacement cost decrease") by the undepreciated cost, as
certified by a firm of national independent certified public accountants
acceptable to Owner, of any replacement boilers installed by Operator (which for
the purpose of this Section 7.01 shall be based upon a depreciation of such
boilers over a period of 120 months on a straight line basis); provided,
however, that the adjusted boiler replacement costs (including the replacement
boilers) shall not be reduced, on a cumulative basis, by more than thirty-three
and one-third percent (33-1/3%). The replacement cost decrease shall become
effective when the replacement boilers shall have been installed in accordance
with each of the provisions of this Agreement and shall have become operational.
Upon each anniversary of the Term Commencement Date subsequent to the
installation of any replacement boiler by Operator, and upon each
redetermination of the adjusted boiler replacement costs every fifth year, the
adjusted boiler replacement costs shall be further adjusted to reflect the then
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undepreciated cost of any replacement boilers installed by Operator, determined
in the manner, and subject to the limitation of the reduction of the adjusted
boiler replacement costs by no more than thirty-three and one-third percent (33-
1/3%) on a cumulative basis, as provided in this subparagraph (f). All fees and
expenses of each consultant in each determination of the boiler replacement
costs pursuant to this subparagraph (f) shall be borne by Operator.
(g) Owner acknowledges and agrees that each of Becon Construction
Company, Inc. and Stewart and Stevenson Operations, Inc. is an Approved
Operator.
Section 7.02. Testing and Reports. Commencing on the first day of the month
following the end of the first seven full calendar months of the term of this
Agreement, and semi-annually thereafter, Operator shall provide Owner a report
of all major maintenance performed on the Existing Plant within the previous six
months and all major maintenance projected during the next six months. The
reports shall be in such form and detail as Owner reasonably may request.
Operator, at its sole cost and expense, shall at least twice during each
calendar year, at such time as Owner shall designate upon thirty (30) days prior
written notice to Operator, test the readiness and capability of the Existing
Plant, or the Auxiliary System during the Auxiliary Reliance Period, as
applicable, to furnish the steam requirements of the Owner and its Ancillary
Customers within six hours after the interruption of the supply of steam from
the Facility, by the operation of the Existing Plant, or the Auxiliary System,
as applicable, and the supply of Owner's and its Ancillary Customers' steam
requirements solely from the Existing Plant, or the Auxiliary system, as
applicable, for a period of at least eight (8) hours. Operator, at its sole cost
and expense, shall also perform, from time to time, such additional tests as
Owner reasonably may request to determine the status of the maintenance and
readiness of the Existing Plant, including the Auxiliary System.
Section 7.03. Alterations, Improvements and Additions. Except as otherwise
expressly provided in this Agreement, Operator shall not make any alterations,
improvements or additions to the Existing Plant, including the Auxiliary System
(collectively "alterations") without the prior written consent of Owner, which
consent shall not unreasonably be withheld.
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Operator's request to Owner for permission to make alterations shall be
accompanied by detailed plans and specifications, estimated costs and the
identity of the contractors which shall perform the work. Any alterations
permitted by Owner shall be of good quality and class and shall be made in
accordance with the requirements of Owner and all of the provisions of this
Agreement. No part of the Existing Plant or of the Auxiliary System shall be
removed without the prior written consent of the Owner. All alterations,
improvements and additions made to the Existing Plant, except the Auxiliary
System, and whether or not affixed or moveable, shall upon installation become
the property of the Owner. The Auxiliary system shall become the property of the
Owner upon the expiration or earlier termination of this Agreement in accordance
with its terms.
ARTICLE 8
UTILITY EXPENSES
Section 8.01. Utilities. Operator shall pay and discharge punctually
all sewer rents and charges for water, gas, electricity, light and power, and
any and all other services and utilities furnished to the Existing Plant.
ARTICLE 9
NET AGREEMENT
Section 9.01. Net Agreement. Except as otherwise expressly provided in
Section 9.03, the annual user charge payable by Operator pursuant to Section
5.01 under this Agreement shall be absolutely net to Owner, with the intent and
effect that all costs, expenses and obligations of every kind and nature
whatsoever relating to the Existing Plant, which may arise or become due
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during the term of this Agreement ("the expenses") shall be paid by the Operator
and Operator shall indemnify and save Owner harmless from and against the
expenses.
Section 9.02. User Charge Not to Abate. Operator's obligation to pay the
user charge under this Agreement shall not be affected by, nor shall it abate or
be diminished or reduced on account of any want of repair, destruction or damage
to the Existing Plant, regardless of the cause or extent of them, or for any
inconvenience, discomfort, interruption of business or
therwise arising from the making of alterations, changes, additions,
improvements or repairs to the Existing Plant, or because of any present or
future governmental laws, ordinances, requirements, orders, directives, rules or
regulations, or for any other cause or reason.
Section 9.03. Compliance with Environmental and Safety Laws.
(a) Prior to the execution of this Agreement, Operator shall caused to
be conducted at its expense, by an engineering firm acceptable to an
institutional lender providing financing for the Facility, an audit of the
Existing Plant, the scope and description of which shall have been approved by
Owner (the "audit"), for purposes of determining (i) the existence at the
Existing Plant of any circumstance or condition which does not comply with all
federal, state and local laws, codes and rules and regulations promulgated
pursuant to statutory authority (collectively, "Environmental Laws") governing
the production, generation, release, discharge, emission, disposal,
transportation, containment, storage or remediation involving any substance
which is hazardous or acutely hazardous to the public health or safety or which
could be the basis for or support a claim under any Environmental Laws (any such
substance, a "Hazardous Substance") and (ii) the Existing Plant's compliance
with the requirements of the Occupational, Safety and Health Act of 1970
("OSHA") and other applicable safety laws (collectively, "Safety Laws").
(b) If any liability shall be imposed upon the Operator, at any time
before or after the Term Commencement Date or the expiration or earlier
termination of this Agreement, under or by reason of any Environmental Laws, (i)
due to the existence of
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Hazardous Substances at or about the Existing Plant (except any liability
imposed upon the Operator because of any conditions caused by Operator, its
employees, agents, contractors and assigns (collectively "the Operators") during
the pre-term period or because of any aggravation by Operators after the Term
Commencement Date of any conditions disclosed by the audit), the existence of
which is determined prior to or as a result of the audit described in paragraph
(a) or (ii) occurs solely as a result of the acts or activities of Owner
subsequent to such audit or (iii) occurs solely as a result of the negligence of
Owner during the pre-term period, the Owner shall, at its sole cost and expense,
comply with all requirements of Environmental Laws relating to such Hazardous
Substances (other than asbestos which shall be governed exclusively by paragraph
(c)), including requirements relating to the removal or containment thereof, and
shall save, defend, indemnify and hold the Operators harmless from and against
any such liability, including without limitation, damages, fines, penalties,
reasonable legal fees and all other reasonable costs to the Operators in
connection therewith.
(c) Owner acknowledges the presence at the Existing Plant of asbestos
and represents and warrants that the condition of the asbestos in the Existing
Plant presently complies with the Environmental Laws. Owner further agrees that
all action necessary to remove or contain such asbestos in order to comply with
the requirements of Environmental Laws (i) at the Term Commencement Date (except
any removal or containment of asbestos necessary because of the acts or
activities of the Operators during the pre-term period) or (ii) thereafter, to
the extent that such removal or containment becomes necessary as a result solely
of Owner's acts or activities within the Existing Plant subsequent to the Term
Commencement Date, shall be effected by Owner at Owner's sole cost and expense.
Owner shall save, defend, indemnify and hold harmless the Operators from and
against any and all cost, liability, damage or expense (including reasonable
legal fees and expenses) which any of them may incur or to which any of them may
be subject by reason of the breach of the representation, warranty and agreement
made by Owner pursuant to this paragraph (c). It is expressly understood and
agreed that, except for the representation, warranty and agreement made by Owner
with respect to asbestos in the
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Existing Plant pursuant to this paragraph (c), Owner shall have no liability
whatsoever to the Operators from, and the Operators shall assume, any liability
which may be imposed for the continued existence of asbestos in the Existing
Plant after the Term Commencement Date.
(d) Owner shall, at its sole cost and expense, comply with all
requirements of the Safety Laws (i) to the extent that the audit described in
paragraph (a) determines that the Existing Plant is not in compliance with such
requirements, or (ii) to the extent that conditions in the Existing Plant change
after such audit as a result solely of Owner's acts or activities within the
Existing Plant. Owner shall also be responsible for compliance with changes in
the Safety Laws which become effective either (x) prior to the Term Commencement
Date or (y) thereafter to the extent such changes apply solely to Owner's acts
or activities within the Existing Plant.
(e) The indemnification provided by Owner to Operators, and the
remedies of Operators for any breach by Owner of any of the representations and
warranties made by Owner, under this Section 9.03 shall be the sole and
exclusive remedy of Operators against Owner with respect to the presence of
Hazardous Substances and asbestos at the Existing Plant and shall be in lieu of
any indemnification that might otherwise have been available to Operators
pursuant to Article 14 of this Agreement.
Section 9.04. Licensing Requirements. Owner shall upon request by Operator,
and at Operator's sole cost and expense, provide Operator from time to time, but
not more frequently than annually, until the Term Commencement Date with
evidence reasonably satisfactory to Operator that the Existing Plant is in
compliance with all applicable licensing requirements. From and after the Term
Commencement Date, Owner shall cooperate with Operator as necessary to obtain
and maintain all required licenses and permits for the operation of the Existing
Plant in the name of Owner, Operator, or both, if necessary, at Operator's sole
cost and expense.
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ARTICLE 10
REQUIREMENTS OF PUBLIC AUTHORITY
Section 10.01. Compliance by Operator.
(a) Except as otherwise provided in Section 9.03, from and after the
Term Commencement Date, Operator, at its sole cost and expense, shall promptly
comply with all present and future laws, ordinances, requirements, orders,
directives, rules and regulations of all federal, state, county, town and city
governments and of all other governmental authorities, departments, boards and
officers, and all orders, rules and regulations of the National and New York
Boards of Fire Underwriters or any other body or bodies which may exercise
similar functions, foreseen and unforeseen, ordinary and extraordinary,
applicable to the Existing Plant or any part of it or to its use, whether in
force at the Term Commencement Date or passed, enacted or directed in the
future, and whether or not compliance shall require structural changes
(collectively in this Article "the requirements"). Operator shall also comply
with all requirements to the extent of their application to Operator's use of
the Existing Plant during the pre-term period. Operator shall pay all costs,
expenses, liabilities, losses, damages, fines, penalties, claims and demands,
including reasonable counsel fees (collectively "the costs"), that may in any
manner arise from or be imposed because of the failure of Operator to comply
with this Article and shall indemnify, hold harmless and defend Owner of and
from the costs.
(b) Owner has not received any notice, and is not aware, of any
noncompliance of the Existing Plant with the requirements as of the date of this
Agreement, except as set forth in this paragraph (b). Owner has been informed
that an industrial wastewater discharge permit (the "discharge permit") will be
required from the Onondaga County Department of Drainage and Sanitation for the
discharges by the Existing Plant into the Onondaga County Sewer System. Owner is
finalizing plans for the modifications necessary for completion of its
application for the discharge permit. Owner has also undertaken various
corrective measures to assure the Existing Plant's compliance with OSHA ("the
compliance
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measures"). Owner shall diligently prosecute the application for the discharge
permit and the compliance measures and shall obtain the discharge permit and
complete the compliance measures prior to the Term Commencement Date. Owner
shall promptly notify Operator of any such notice received by Owner hereafter,
shall provide Operator with copies of all communications made or received by
Owner relating thereto, and shall, until the Term Commencement Date, comply with
all requirements in force prior to the Term Commencement Date to the same extent
as required of Operator thereafter. Owner shall indemnify Operator for any
liability imposed upon Operator for Owner's noncompliance with such requirements
before the Term Commencement Date (except to the extent that such liability
arises from Operator's use of the Existing Plant during the pre-term period).
(c) Operator shall comply with the requirements of all policies of
public liability, fire and all other policies of insurance in force with respect
to the Existing Plant.
Section 10.02. Challenge to Validity. Operator shall have the right, after
prior written notice to the Owner, to contest by appropriate legal proceedings
("the proceedings") diligently conducted in good faith, in the name of the
Operator, Owner, or both, if necessary, without cost or expense to Owner, the
validity or application of the requirements. If compliance with the requirements
may be delayed during the proceedings without the incurrence of any lien, charge
or liability of any kind against the Existing Plant that cannot be bonded and
without subjecting Operator or Owner to any liability, civil or criminal, for
failure to comply with them, Operator may delay compliance with them until the
final determination of the proceedings. Owner shall execute all documents
reasonably necessary for the proceedings.
ARTICLE 11
COVENANT AGAINST LIENS
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Section 11.01. Operator's Obligations to Discharge. Operator shall not
create or permit to be created and shall promptly discharge, any mechanic's,
laborer's, or materialman's lien, or any other charge which might be or become a
lien, encumbrance or charge upon the Existing Plant ("the lien"), except for any
lien that is being contested in good faith by appropriate proceedings and is
appropriately bonded or results from any act or omission for which Owner is
responsible pursuant to Section 7.01, Section 9.03, Section 10.01(b) or Owner's
acts or activities subsequent to the Term Commencement Date.
Section 11.02. Right to Discharge. If any lien included in Section
11.01 shall be filed against the Existing Plant, Operator, at its own cost and
expense, within 30 days after the filing of the lien, shall discharge it of
record or post a bond reasonably satisfactory to Owner to assure its discharge.
If Operator fails to discharge or bond the lien within 30 days after its filing,
Owner, in addition to any other right or remedy it may have, and without waiving
its right to declare a default, may discharge the lien of record or post a bond
to assure its discharge. Any amounts paid by Owner in the discharge or bonding
of the lien, including, but not limited to, penalties, interest, costs,
allowances and reasonable attorney's fees, together with interest at the rate of
l8% per annum, shall be paid by Operator to Owner on demand. Any amount paid by
Operator in the discharge or bonding of a lien which results from any act or
omission for which Owner is responsible pursuant to Section 9.03, including, but
not limited to penalties, interest, costs, allowances and reasonable attorney's
fees, together with interest at the rate of 18% per annum, shall be paid by
Owner to Operator on demand.
Section 11.03. No Implied Consent of Owner. Except to the extent of
the acknowledgement of an Approved Operator pursuant to Section 7.01 (g),
nothing in this Agreement shall be construed as the consent or request of Owner,
express or implied, by inference or otherwise, to any contractor, subcontractor,
laborer or materialman for the performance of any labor or the furnishing of any
materials for any improvement, alteration or repair of the Existing Plant.
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ARTICLE 12
ACCESS TO EXISTING PLANT BY OWNER
Section 12.01. In addition to the rights of use reserved by Owner
pursuant to Section 2.02, Owner and its authorized representatives shall
continue to have access, upon reasonable notice, to the Existing Plant at all
times during normal business hours for all purposes, including, without
limitation, inspection and testing of the Existing Plant and making any
necessary repairs or maintenance or performing any other work required to be
performed by Owner pursuant to Section 7.01 or that may be necessary because of
Operator's failure to make repairs or perform other work after written notice
from Owner, or at any time without notice in case of emergency. Owner shall also
have access to the Existing Plant at all times for the purpose of obtaining and
testing samples of the condensate return. Operator shall also provide to Owner
suitable space within the Existing Plant to enable Owner to test the condensate
return. Owner's right of access shall not imply any duty on its part to perform
any repairs or other work and Owner's performance of any repairs or work shall
not constitute a waiver of any default of Operator.
Section 12.02. During the progress of any work at the Existing Plant
by Owner pursuant to Section 12.01, Owner may store all necessary materials,
tools, supplies and equipment at the Existing Plant. Except as provided in
Section 9.03 or Section 14.02, Owner shall not be liable for any damage incurred
by Operator because of the performance of those repairs or work, or the storing
of materials, tools, supplies and equipment at the Existing Plant in connection
with such work.
ARTICLE 13
SURRENDER
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Section 13.01. Surrender of Operation. Upon the expiration or earlier
termination of the term of this Agreement, Operator shall surrender to Owner the
operation and use of the Existing Plant, including the Auxiliary System, without
delay, in as good condition and repair as it exists upon the Term Commencement
Date or upon the subsequent date of installation, as the case may be, except for
damage occasioned by Owner's acts or activities and for reasonable wear and tear
after the last necessary repair, replacement, restoration or renewal made by
Operator, and free and clear of all liens, encumbrances and charges other than
those resulting from any acts or activities for which Owner is responsible as
described in Section 11.01, without any payment or allowance by Owner on account
of any improvements to the Existing Plant, and all rights of Operator under this
Agreement and in the Existing Plant, including the Auxiliary System, shall
terminate. Notwithstanding the expiration or termination of this Agreement, each
of the parties shall remain liable to the other for any loss or damage suffered
by the other because of any default of such party. Upon surrender, Operator
shall assign to Owner all operating agreements and other agreements relating to
the operation or use of the Existing Plant, as Owner may request.
Section 13.02. Except as otherwise provided in the last sentence of
Section 3.02, any personal property of Operator remaining at the Existing Plant
after the 60 day period following expiration or earlier termination of this
Agreement, may, at the option of owner, be deemed to have been abandoned by
Operator and may be retained by Owner as its property, or disposed of, without
accountability, by Owner in such manner as it deems appropriate. In addition,
Owner, at its option, within thirty days after the expiration or earlier
termination of this Agreement, and upon ten days written notice to Operator, may
require Operator, at Operator's sole cost and expense, to remove from the
Existing Plant any fuel oil (other than fuel oil which Owner is obligated to
purchase pursuant to Section 3.02) from the underground oil storage tanks and
from any other storage area at the Existing Plant, any inventory not purchased
by Owner and any other personal property of Owner within thirty days of the
giving of notice by Owner.
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Section 13.03. The provisions of this Article shall survive the
expiration or earlier termination of this Agreement.
ARTICLE 14
INDEMNITY
Section 14.01. Operator's Indemnification of Owner. The Operator
shall indemnify and hold the Owner harmless from and against any and all
liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including, without limitation, reasonable fees of architects,
engineers, attorneys and other professionals and experts (collectively
"claims"), which may be imposed upon, incurred by or asserted against Owner
because of any of the following, unless the claims arise as a consequence of the
action or failure to act by the Owner pursuant to Section 9.03 or otherwise or
the Owner's use of the Existing
Plant:
(i) Any work or thing done in, on or about the Existing Plant;
(ii) Any use, non-use, occupation, condition, operation,
maintenance or management of the Existing Plant or any part of it;
(iii) Any act or omission of Operator or any of its agents,
contractors, servants, employees, licensees, or invitees; or
(iv) Any accident, injury or death to any person or damage to any
property occurring in, on or about the Existing Plant.
If any action or proceeding is brought against Owner because of any
one or more of the claims, Operator, at its sole cost and expense, upon written
notice from Owner, shall defend that action or proceeding by counsel approved by
Owner in writing.
Section 14.02. Owner's Indemnification of Operator. The Owner shall
indemnify and hold the Operator (including for this purpose any corporation,
partnership or other entity controlling, controlled by or under common control
with, the Operator) harmless from and
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against any and all claims which may be imposed upon, incurred by or asserted
against the Operator because of any of the following, unless the claims are
covered by Section 9.03 or by the Lease or arise as a consequence of the action
or failure to act by the Operator:
(i) any work or thing done in, on or about the premises of the
Owner (excluding the Existing Plant except to the extent covered by clause (v)
below);
(ii) any use, non--use, possession, occupation, condition,
operation, maintenance or management of the premises of the Owner (excluding the
Existing Plant except to the extent covered by clause (v) below);
(iii) any act or omission of the Owner or any of its agents,
contractors, servants, employees, licensees, or invitees;
(iv) any accident, injury or death to any person or damage to
property occurring in, on or about the premises of the Owner (other than the
Existing Plant except to the extent covered by clause (v) below); or
(v) any use of the Existing Plant by Owner.
If any action or proceeding is brought against Operator because of any
one or more of the claims, Owner, at its sole cost and expense, upon written
notice from Operator, shall defend that action or proceeding by counsel approved
by Operator in writing.
Section 14.03. Limitation of Owner's Indemnity. The indemnification of
Operator by Owner and of Owner by Operator pursuant to this Article shall in all
events be limited by the applicable provisions of Section 9.03.
Section 14.04. The provisions of this Article shall survive the
expiration or earlier termination of this Agreement.
ARTICLE 15
INSURANCE
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Section 15.01. Casualty Insurance. Operator, at its sole cost and expense,
shall keep the Existing Plant insured against loss or damage by fire or other
casualty, with such extended coverage as shall from time to time be customary
for premises similarly situated in the Syracuse, New York, area, with a
replacement cost endorsement, in amounts sufficient to prevent Owner or Operator
from becoming a co-insurer within the terms of the policy and in no event less
than one hundred percent (l00%) of the replacement value of the Existing Plant,
exclusive of the cost of foundations, excavations, and footings below the lowest
basement floor, without any deduction for depreciation. At the request of Owner,
and at the sole cost and expense of Operator, the replacement value shall be
determined from time to time, but not more frequently than once every two years,
by an appraiser acceptable to Owner.
Section 15.02. Other Insurance. Operator, at its sole cost and expense,
shall maintain:
(a) general public liability insurance against all claims for bodily
injury, death or property damage, occurring upon, in or about the Existing
Plant, and on or about any adjoining sidewalks and passageways, in the amount of
at least $5,000,000 for injury or death to any one person and $25,000,000 for
injury or death to more than one person in any one accident or occurrence and
$10,000,000 for damage to property or in such greater limits as may be required
by Owner;
(b) boiler and pressure vessel insurance, including pressure pipes,
upon all steam boiler and other pressure vessels and pipes in the Existing Plant
in an amount not less than the greater of $10,000,000 or the replacement value
of the boilers, pressure vessels and pipes;
(c) Worker's compensation insurance, disability benefits insurance and
all other insurance Operator is required by law to provide covering loss
resulting from injury, sickness, disability or death of all persons employed by
Operator or by Operator's contractors, subcontractors, or agents;
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(d) Contractual Coverage Insurance providing protection for Operator
and Operator's contractors, subcontractors and agents against damage claims that
may arise from operations under this Agreement, with limits in the amounts
required in paragraph (a) of this Section;
(e) business interruption insurance in an amount that can be obtained
by the payment of an annual premium of $10,000 during the Base Year and by the
payment of an additional $1,000 in each succeeding year. The maximum annual
premium shall not exceed $50,000; and
(f) such other insurance and in such amounts as may from time to time
be reasonably required by Owner.
Section 15.03. Evidence of Insurance and Possession of Policy.
(a) All insurance required by this Article shall be obtained by valid
and enforceable policies, issued by insurers of recognized responsibility and
licensed to do business in the State of New York. Prior to the Term Commencement
Date, Operator shall deliver to Owner certified copies of the policies of
insurance to be furnished by Operator. Thereafter, Operator shall furnish to
Owner, not less than thirty (30) days prior to the expiration dates of such
policies, certified copies of the renewal policies. Operator shall also deliver
to Owner evidence satisfactory to Owner of the payment in full of the premiums
on such policies (i) prior to the Term Commencement Date, for the period covered
by the initial policies and (ii) prior to the expiration dates of such policies
and any renewal policies, for the period covered by the renewal policies.
(b) Blanket Insurance. Operator may obtain the insurance required by
-----------------
this Article under a blanket insurance policy or policies ("the blanket
policies") covering the Existing Plant and other properties, provided:
(i) the blanket policies shall specify, or Operator shall furnish
Owner with a written statement from the insurers under the blanket policies
specifying, the
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amounts of the total insurance specifically allocated to the Existing Plant
which shall not be less than the amounts required by this Article;
(ii) the amounts specified shall be sufficient to prevent any one of
the assureds from becoming a co-insurer within the terms of the applicable
policy; and
(iii) the blanket policies shall in all respects comply with the
endorsements and coverage required by this Article.
Section 15.04. Limitations Upon Concurrent Insurance. Except the insurance
required by Section 15.02(a), neither Owner nor Operator shall obtain separate
insurance concurrent in form, or contributing in the event of loss, with the
insurance required by this Article, unless Owner and Operator are named
insureds, with loss payable as required by this Agreement, provided, however,
that Owner may obtain business interruption/extra expense insurance without
including Operator as a named insured. Each party shall immediately notify the
other of any such separate insurance and Operator shall deliver the policies to
Owner as required by Section 15.03.
Section 15.05. Disbursement of Proceeds.
(a) All policies of insurance required by this Article ("the
policies") shall name Owner and Operator as insureds as their interests may
appear. The loss, if any, under the policies shall be adjusted and the proceeds
disbursed as follows:
(i) If the damage or destruction does not exceed $250,000, the
loss shall be adjusted by Operator and the proceeds shall be paid to
Operator for the repair of the damage; and
(ii) If the damage or destruction exceeds $250,000, the loss
shall be adjusted by Owner and the proceeds shall be disbursed in
accordance with Article 18.
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(b) The policies shall provide that any loss shall be adjusted
and the proceeds paid as provided in this Agreement.
Section 15.06. Notice of Cancellation. The policies and certificates
evidencing the policies shall provide for thirty (30) days prior written notice
to Owner of any cancellation, reduction in amount or change in coverage.
Section 15.07. Apportionment of Premiums Upon Expiration of Term. Upon
the expiration of the term of this Agreement, all transferable policies shall,
at Owner's option, be transferred by Operator to Owner and the premiums on them
shall be apportioned between Owner and Operator if Operator is not in default
under this Agreement.
ARTICLE 16
EMINENT DOMAIN
Section 16.01. Termination of Agreement. If all or substantially all of the
Existing Plant shall be taken for any public or quasi-public use under any
statute, by right of eminent domain or by private purchase in lieu of a taking
(the "Condemnation Proceedings"), this Agreement shall automatically terminate
on the date title passes or possession is taken, whichever occurs first. If less
than all or substantially all of the Existing Plant is taken, this Agreement
shall continue in full force and effect as to the portions not taken. For
purposes of this Article substantially all of the Existing Plant shall be deemed
taken if the portions not taken shall be insufficient for its continued use for
the purpose stated in Section 4.01. The provisions of this Article shall survive
the termination of this Agreement.
Section 16.02. Distribution of Condemnation Proceeds. The net award for any
taking of the Existing Plant, after deducting all expenses and costs, including
attorneys fees ("the net award") shall be apportioned between Owner and Operator
as follows:
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(a) First, the amount which represents the then present value, at the
time of the taking, of the Owner's right to receive the then applicable annual
user charge provided in Section 5.01 for the remainder of the forty (40) year
term of this Agreement, calculated at a rate of interest of 8 percent per annum,
shall be paid to Owner;
(b) Second, from the balance of the net award, the amount of the
accrued Subordinated User Charges and Deferred User Charges, with interest,
shall be paid to the Owner;
(c) Third, from the remaining balance of the net award, the amount
which represents the Operator's undepreciated cost of the Auxiliary System,
determined in accordance with generally accepted accounting principles, shall be
paid to Operator;
(d) Fourth, the amount equal to that fraction of the then remaining
balance of the net award, the numerator of which is the remaining years of the
term of this Agreement and the denominator of which is forty (40), shall be paid
to the Operator and the remaining balance of the net award shall be payable to
Owner.
Section 16.03. Partial Taking. If less than substantially all of the
Existing Plant is taken (the "partial taking"), the condemnation proceeds shall
be payable to Owner and disbursed to Operator, who shall, to the extent of the
condemnation proceeds, promptly restore the Existing Plant to a complete
architectural unit and, to the extent reasonably practicable, as nearly like its
condition prior to the taking. The balance of the condemnation proceeds, if any,
remaining after the completion of the restoration shall belong to and be
retained by Owner.
ARTICLE 17
RIGHT OF EACH PARTY TO PERFORM
COVENANTS OF THE OTHER
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Section 17.01. If either party shall fail to perform any of its
obligations under this Agreement, the other party (the "curing party") may, at
its option, after ten (10) days' notice
to the defaulting party, or without notice in case of an emergency, perform any
of such obligations.
Section 17.02. Any moneys paid and all costs and expenses incurred by
the curing party, including reasonable attorneys' fees, in the performance of
the defaulting party's obligations under this Agreement, together with interest
at the rate of eighteen per cent (18%) per annum, shall be paid by the
defaulting party to the curing party on demand.
Section 17.03. The curing party's exercise of its rights under this
Article shall not constitute a waiver of any other rights or remedies it may
have because of the default of the other party.
ARTICLE 18
DAMAGE OR DESTRUCTION
Section 18.01.
(a) If the Existing Plant or any part of it shall be damaged or
destroyed by fire or otherwise, Operator shall promptly notify Owner, and, at
its sole cost and expense, and whether or not the insurance proceeds are
sufficient, restore, repair, replace, or rebuild the Existing Plant
(individually and collectively "restore" or "the restoration"), provided,
however, that if the insurance proceeds are insufficient for the restoration,
Operator's obligation to restore with funds other than insurance proceeds shall
be subject to Owner's obligation of indemnity to Operator, if any, and to the
extent required, under the Agreements or any of them, whether or not hereafter
expressly so stated. The restoration shall be at least equal in quality and
class to the original, and shall be performed pursuant to plans and
specifications approved by Owner acting
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reasonably and in accordance with all other provisions of this Agreement. The
restoration shall be commenced within ninety (90) days from the date of the
damage or destruction, provided, however, that Owner shall grant such extensions
of time for the adjustment of insurance and the preparation of the plans and
specifications as reasonably may be required. The architect or engineer in
charge of the restoration shall be selected by Owner, with the approval of
Operator, which approval shall not be unreasonably withheld. Operator shall
diligently complete the restoration.
(b) The insurance proceeds payable because of damage to or destruction
of the Existing Plant ("the insurance proceeds") shall be paid to Owner, except
as otherwise provided in Section 15.05(a)(i). The insurance proceeds, net of the
costs of adjustment and collection ("the net insurance proceeds"), shall be
disbursed in accordance with the following subparagraphs.
(c) The net insurance proceeds shall be disbursed to Operator for the
restoration, in installments equal to ninety per cent (90%) of the work
completed and materials furnished in the restoration, upon the written request
of Operator accompanied by the following:
(i) evidence, by an official search of a licensed title insurance
company doing business in Syracuse, New York, approved by Owner, that no
lien has been filed against the Existing Plant; and
(ii) a certificate signed and verified by Operator and the
architect or engineer in charge of the restoration, stating that:
A. the amount requested is justly due to contractors,
subcontractors, materialmen, engineers, architects or other persons who
have rendered services or furnished materials for the restoration, a
description of the services and materials and the amounts due each person,
and that no part of the amount requested has been included in any other
request by Operator;
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B. except for the amount requested, after due inquiry, no other
amounts are due on the date of the certificate for labor, wages, materials,
supplies or services in connection with the restoration;
C. the cost of labor and materials required to complete the
restoration will not exceed the net insurance proceeds remaining after
payment of the amount requested; and
D. the restoration is in substantial compliance with the plans
and specifications approved by Owner and has been performed in accordance
with all the provisions of this Agreement.
(d) Upon completion of the restoration, there shall be paid to
Operator, from, and only to the extent of, the net insurance proceeds, an amount
equal to 100% of the costs of work completed and materials furnished in the
restoration less the amounts previously disbursed to Operator, provided Operator
shall have complied with all the requirements and provisions of this Article and
shall have obtained an unconditional permanent certificate of occupancy, if
required, from the appropriate governmental authority.
(e) Upon receipt of evidence satisfactory to Owner that the
restoration has been completed in accordance with the provisions of this
Agreement and its cost paid in full and that there are no liens upon the
Existing Plant, the net insurance proceeds remaining, if any, shall be paid to
Operator, provided Operator is not in default under this Agreement.
(f) If this Agreement shall be terminated for any reason, Owner shall
be entitled to all insurance proceeds, and Operator shall have no interest in,
nor any right, title, or claim to them.
(g) No destruction or damage to the Existing Plant or any part of it
shall relieve Operator from its obligation to pay the user charge or from any of
its other obligations under this Agreement, subject, however, to Owner's
obligation of indemnity to Operator, if any, and to the extent required, under
the Agreements or any of them.
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ARTICLE 19
LATE CHARGES
Section 19.01. Past Due User Charges. Except as otherwise contemplated by
Section 5.03, if Operator shall fail to pay the user charge when due and
payable, Operator shall pay to Owner, as an additional user charge, an amount
calculated at a rate per year equal to 18% on the delinquent user charge, until
paid in full. Nothing in this section shall limit Owner's rights and remedies
under any other provision of this Agreement.
ARTICLE 20
DEFAULT
Section 20.01. Events of Default. Any one or more of the following events
shall constitute an event of default (an "event of default")
(a) Operator's failure to pay any user charges when due and payable
(otherwise than as permitted under Section 5.03) and the continuation of the
failure for sixty (60) days after written notice from Owner;
(b) Operator's failure to observe and perform any of the terms,
covenants, conditions, limitations or agreements under this Agreement on
Operator's part to be observed or performed (except the obligation described in
paragraph (a) of this Section) and the continuation of the failure for a period
of sixty (60) days after notice from Owner specifying the nature of the failure.
If the event of default is curable but Operator is unable, exercising due
diligence, to cure the default within sixty (60) days after such notice, so long
as Operator shall commence and diligently prosecute the curing of the default,
the Operator shall have a period of one hundred twenty (120) days from the date
notice of default shall have been given by Owner within which to cure the
default. Operator shall have such additional time for compliance with
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the requirements described in Article 10 as may be granted by the applicable
governmental authorities having jurisdiction, provided that Operator shall
proceed diligently and that compliance may be delayed without the incurrence of
any lien, charge or liability of any kind against the Existing Plant and without
subjecting Owner to any liability, civil or criminal. If Operator is unable,
exercising due diligence, to cure a default in the rebuilding of the steam
boilers and related apparatus and equipment within such 120 day period, Operator
shall have a period of one (1) year from the date notice of default shall have
been given by Owner (exclusive of delays caused by force majeure and other
reasons beyond the reasonable control of Operator) within which to cure the
default so long as Operator shall diligently prosecute the curing of the
default; provided, however, that delays caused by force majeure or by reasons
beyond the reasonable control of Operator shall not extend the period of cure
beyond two (2) years from the date notice of default shall have been given by
Owner to Operator.
(c) Operator shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the present or any future federal bankruptcy
code or any other present or future federal, state or other bankruptcy or
insolvency statute or law (collectively in this Article "insolvency laws"), or
shall seek, consent to or acquiesce in the appointment of any bankruptcy or
insolvency trustee, receiver or liquidator of Operator or of all or any
substantial part of its properties or the Facility;
(d) The commencement of any action, case or proceeding ("proceeding")
against Operator seeking (i) any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any insolvency
laws, or (ii) the appointment, without the consent or acquiescence of Operator,
of any trustee, receiver or liquidator of Operator or of all or substantially
all of its properties or the Facility, and the proceeding shall continue
undismissed or unstayed for a period of ninety (90) days;
(e) Operator shall abandon the Existing Plant;
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(f) The termination of the Steam Contract for any reason other
than the default of Owner; and
(g) The termination of the Lease Agreement for any reason other
than the default of Owner.
Each notice to Operator pursuant to this Section 20.01 shall also be given to
the holders of a Permitted Mortgage, as defined in Article 23 of the Lease
Agreement, who shall have been identified in a written notice by the Operator to
the Owner, at the address of the holder stated in the Operator's notice to
Owner.
Section 20.02. Remedies on Default.
(a) Upon any one or more events of default, Owner may, at its option,
at any time thereafter, give written notice to Operator specifying the event or
events of default and stating that this Agreement shall terminate on the date
specified in the notice, which shall be at least ten days after the giving of
the notice. The notice of termination shall also be given to the holders of a
Permitted Mortgage described in Section 20.01. Upon the date specified in the
notice, this Agreement and all rights of Operator under this Agreement shall
terminate. The termination of this Agreement by Owner shall not relieve Operator
of its liability under this Agreement, which shall survive.
(b) Upon termination of this Agreement pursuant to this Section,
Operator shall surrender the use and operation of the Existing Plant to Owner.
Owner, upon, or at any time after, the termination of this Agreement, without
additional notice and without prejudice to any other rights and remedies it
shall have at law or in equity, may occupy, use and operate the Existing Plant,
and remove from it Operator, its agents, employees, servants, licensees, and
other persons, firms or corporations and all or any of its or their property, by
force or otherwise, without being liable for damages for such action.
(c) Upon Owner's termination of this Agreement:
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(i) Operator, until the end of what would have been the term of
this Agreement in the absence of termination, shall be liable to Owner, for
damages for Operator's default, which shall include, without limitation,
all reoccupation costs, operating expenses, legal expenses and reasonable
attorneys' fees;
(ii) Owner shall be entitled to recover damages from Operator, by
separate action, actions or proceedings, annually or at such other time or
times when the annual user charges provided for in Section 5.01(a) would
have been payable under this Agreement if it were still in effect.
(d) Nothing in this Article shall limit or prejudice the right of
Owner to prove and obtain damages in an amount equal to the maximum allowed by
any statute or rule of law in effect at the time those damages are to be proved,
whether or not that amount is greater than the amount provided by this Article.
(e) Upon any one or more events of default, or whenever and for so
long as Owner, in its reasonable judgment, deems it necessary (whether or not an
event of "force majeure" exists) (i) to preserve its property and the property
of its Ancillary Customers, (ii) to avoid injury to persons or (iii) to permit
the continued comfortable use and occupation of its buildings and structures and
those of its Ancillary Customers which are supplied steam by the Operator (any
of the circumstances described in the preceding clauses (i), (ii) and (iii), an
"emergency"), Owner may also, at its option, at any time during the continuance
of such default or emergency, immediately assume operating control of the
Existing Plant and may continue operating control until the termination of such
default or emergency, Owner's election to discontinue operating control or
Owner's termination of the Agreement, whichever occurs first. Owner's election
to assume operating control of the Existing Plant shall be communicated to the
Operator by delivery of written notice or delivery of telephonic notice
confirmed in writing within 24 hours. Thereafter, Owner shall be entitled to the
immediate operation and use of the Existing Plant and Owner may occupy, use and
operate the Existing Plant and remove from it Operator, its agents, employees,
servants, licensees and other persons, firms or corporations and
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all or any of its or their property by force or otherwise, without being liable
for damages for such action.
Owner may at any time discontinue operating control of the Existing
Plant on 30 days written notice to the Operator stating the effective date of
its discontinuance. Upon the effective date of Owner's discontinuance of
operating control of the Existing Plant, Operator shall resume the operation of
the Existing Plant in accordance with the terms, conditions, covenants and
provisions of this Agreement. Owner may require, as a condition to Operator's
resumption of operation of the Existing Plant, that Operator shall have cured
all curable defaults and shall have provided Owner with the guaranty or other
security required by subparagraph (f) of Section 7.01.
Upon Owner's assumption of operating control of the Existing Plant or
upon its termination of this Agreement, Owner may, but shall not be obligated
to, operate the Existing Plant to supply its steam requirements and the steam
requirements of its Ancillary Customers. Owner's assumption of operating control
of the Existing Plant or Owner's termination of this Agreement shall not relieve
Operator of its obligations to Owner pursuant to the Steam Contract, except to
the extent such assumption prevents Operator from the performance of its
obligations under the Steam Contract.
All reasonable costs, expenses and obligations of every kind and
nature whatsoever relating to the Existing Plant, whether in its operation or in
its maintenance in the state of readiness required under this Agreement,
incurred by the Owner after its assumption of operating control of the Existing
Plant, or after its termination of this Agreement, shall (unless the Owner would
have been responsible for such costs under this Agreement regardless of whether
it assumed operating control) be offset against all sums or amounts, if any,
payable by Owner to Operator under the Steam Contract. If and to the extent that
Owner operates the Existing Plant to supply its steam requirements and the steam
requirements of its Ancillary Customers, its obligations to Operator, if any, to
pay for steam pursuant to the Steam Contract shall be reduced by the Owner's
production cost of steam available for the Owner's distribution
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system as it leaves the Existing Plant, excluding costs attributable to
distribution which will include but not be limited to the applicable salary,
operating, equipment, overhead and depreciation costs of such distribution
system, as conclusively determined by the Owner's independent certified public
accountants.
(f) Notwithstanding anything to the contrary contained in this Section
20.02, Owner (i) shall not have the right to assume operating control of the
Existing Plant because of non-material defaults in the operation and maintenance
of the Existing Plant and (ii) shall not have the right to terminate this
Agreement because of an event of default described in paragraph (b) of Section
20.01 (other than defaults which can be cured or satisfied by the payment of
money and any default in the rebuilding of the steam boilers and related
apparatus and equipment pursuant to Section 7.01) unless the default shall be a
material default; provided, however, that the limitation of Owner's remedies of
the assumption of operating control of the Existing Plant or the termination of
this Agreement imposed by this paragraph (f) shall not apply if the default of
Operator would subject Owner or its Ancillary Customers to any liability, costs,
fines or penalties under applicable law, including the requirements described in
Article 10.
Section 20.03. Upon any breach or threatened breach by Operator of any of
the agreements, terms, covenants or conditions contained in this Agreement,
Owner may enjoin the breach or threatened breach and may invoke any right and
remedy allowed at law, in equity, by statute, or otherwise.
Section 20.04. Each right and remedy under this Article shall be in
addition to every other right or remedy provided for in this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, for the
defaults enumerated in this Agreement or for any other breach of this Agreement,
including, without limitation, the right to recover damages for breach of this
Agreement, provided, however, that Owner shall have no right to terminate this
Agreement, the Steam Contract or the Lease Agreement (collectively the
"Agreements"), except as expressly provided in the Agreements. Each right and
remedy shall be cumulative and the
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exercise by Owner of any one or more of its rights or remedies shall not
preclude the simultaneous or later exercise by the Owner of any or all other
rights or remedies it may have.
Section 20.05. This Article shall survive any termination or
expiration of this Agreement.
Section 20.06. Owner may, at its option, from time to time, commence
actions to recover any user charges or damages and nothing in this Agreement
shall be deemed to require Owner to await the date this Agreement would have
expired had there been no default by Operator or no termination by owner.
Section 20.07. Owner and Operator agree to execute and deliver a
Consent and Agreement with respect to every Permitted Mortgage.
ARTICLE 21
WAIVERS
Section 21.01. Waivers. No failure by the Owner or the Operator to
insist upon the strict performance of any agreement, term, covenant or condition
of this Agreement or to exercise any right or remedy upon a breach of any of
them, and no acceptance of full or partial payment during the continuance of any
breach, shall constitute a waiver of the breach or of the agreement, term,
covenant or condition. No agreement, term, covenant or condition to be performed
or complied with by the Operator or the Owner, and no breach of any of them,
shall be waived, altered or modified except by a written instrument executed by
the Owner or the Operator, as the case may be. No waiver of any breach shall
affect or alter this Agreement, and each and every agreement, term, covenant and
condition of this Agreement shall continue in full force and effect with respect
to any other existing or subsequent breach.
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ARTICLE 22
REPRESENTATIONS
Section 22.01. Except as expressly provided in Sections 9.03, 9.04 and
10.01, no representation, statement, or warranty, express or implied, has been
made by Owner as to the condition of the Existing Plant, or its permitted use by
Operator for the purposes of this Agreement under applicable laws, ordinances
and regulations ("the regulations"). Except as expressly provided in Sections
9.03, 9.04 and 10.01, or except to the extent that the regulations are
applicable solely to the particular use of the Existing Plant by Owner after the
Term Commencement Date, Operator assumes all responsibility for compliance with
the regulations, and Owner shall have no liability or responsibility or any
defect in the Existing Plant or for any limitations upon the use of the Existing
Plant.
ARTICLE 23
FORCE MAJEURE
Section 23.01. If Owner or Operator shall be delayed, hindered in or
prevented from the performance of any act required under this Agreement by
reason of acts of God or a public enemy, strikes, lockouts, riots, injunctions
or other interference through legal proceedings, state, federal or local laws or
regulations or requisitions of any governmental authority ("force majeure"),
performance of that act shall be excused for the period of the delay and the
period for the performance of the act shall be extended for a period equivalent
to the period of the delay, provided the party delayed shall give the other
party written notice and full particulars of the force majeure within a
reasonable time after the event occurs. The provisions of this Article shall not
excuse Operator from the prompt payment of all user charges under this
Agreement.
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ARTICLE 24
NOTICE
Section 24.01. Every notice, request, demand, consent, approval,
objection, document or other communication authorized or required by this
Agreement shall be in writing and shall be deemed to be effective when delivered
personally or five days after deposited in the U.S. mails, registered or
certified mail, postage prepaid, return receipt requested, addressed to the
other party at the following address:
To Operator:
Project Orange Associates, L.P.
630 First Avenue, Suite 30C
New York, New York 10016
and
650 North Belt
Houston, Texas 77060
with a copy to:
Kronish, Lieb, Weiner & Hellman
1345 Avenue of the Americas
New York, New York 10105
Attention: Russell S. Berman, Esq. and
To the holders of a Permitted Mortgage identified, and at the
address stated, in a written notice by the Operator to the Owner
To any guarantor of Operator's obligations under Section 7.01 at
the address stated in a written notice by the guarantor to Owner
To Owner:
Syracuse University
Skytop Office Building
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Syracuse, New York 13244-5300
Attention: Senior Vice President for Business and Finance or
Successor
with a copy to:
Bond, Schoeneck & King
One Lincoln Center
Syracuse, New York 13202
Attention: Anthony R. Pittarelli, Esq.
or to such other address as either party may designate by notice given from time
to time in accordance with this Section. A notice to change an address shall be
effective upon receipt by the other party.
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ARTICLE 25
GOVERNING LAW
Section 25.01. This Agreement and the performance of it shall be
governed, interpreted, construed and regulated by the laws of the State of New
York.
ARTICLE 26
PARTIAL INVALIDITY
Section 26.01. If any term, covenant, condition or provision of this
Agreement, or the application of it to any person or circumstance, shall be
invalid or unenforceable, the remainder of this Agreement, or the application of
that term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected and every other term,
covenant, condition and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law.
ARTICLE 27
INTERPRETATION
Section 27.01. Wherever the singular number is used in this Agreement
the same shall include the plural, and the masculine gender shall include the
feminine and neuter genders, and vice versa, as the context shall require. This
Agreement may be executed in several counterparts, each of which shall be an
original, but all of which shall constitute one and the same instrument.
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ARTICLE 28
BINDING EFFECT
Section 28.01. Except as expressly provided otherwise in this
Agreement, the covenants, conditions and agreements contained in this Agreement
shall bind and inure to the benefit of Owner and Operator and their respective
successors and assigns.
ARTICLE 29
NO ORAL MODIFICATION - ENTIRE AGREEMENT
Section 29.01. All prior understandings and agreements between the
parties with respect to the subject matter of this Agreement (including the
Prior Agreement) are merged within this Agreement, which alone fully and
completely sets forth the understanding of the parties with respect to such
subject matter. Operator is not relying on any representation or agreement other
than those set forth in the Agreements. This Agreement may not be changed or
terminated orally or in any manner other than by a written agreement signed by
the party against whom enforcement is sought. No mutual termination or mutual
cancellation of this Agreement or termination of this Agreement by Operator
shall be of any force or effect unless approved in writing by the holders of a
Permitted Mortgage, as defined in Article 23 of the Lease Agreement.
ARTICLE 30
HEADINGS AND TABLE OF CONTENTS
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Section 30.01. The headings of the Articles and Sections of this
Agreement are for convenience of reference only and do not define, limit or
describe the intent of this Agreement or in any way affect this Agreement or the
interpretation of it.
Section 30.02. The table of contents preceding this Agreement is for
the purpose of convenience of reference only and is not to be deemed, construed
or interpreted in any way to be part of this Agreement.
ARTICLE 31
WAIVER OF JURY TRIAL AND COUNTERCLAIMS
Section 31.01. The parties waive a trial by jury of any and all issues
in any action or proceeding between them or their successors or assigns
connected with or arising out of this Agreement or any of its provisions.
ARTICLE 32
MEMORANDUM OF AGREEMENT
Section 32.01. The parties will, at the request of either one,
promptly execute duplicate originals of an instrument, in recordable form,
setting forth a description of the Existing Plant, the terms and any other
portions of this Agreement, except the user charges, as either party may
request.
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ARTICLE 33
TERMINATION
Section 33.01. If the guaranty by the Approved Operator required by
Section 7.01 of this Agreement shall not be delivered to Owner by March 15,
1990, Owner may, upon fifteen days written notice to Operator, terminate this
Agreement.
Section 33.02. The obligations of the parties under this Agreement are
contingent upon the approval of this Agreement by the Board of Trustees of
Owner. If such approval is not
granted by March 5, 1990, either party may terminate this Agreement upon fifteen
days written notice to the other.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers.
SYRACUSE UNIVERSITY
By: /s/ Louis Marcoccia
___________________________________
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Partners, L.P.,
its general partner
By: G.A.S. Orange Development, Inc.
its general partner
By: /s/ Adam Victor
___________________________________
Title: President
_______________________________
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STATE OF NEW YORK )
) ss.:
COUNTY OF ONONDAGA )
On this ____ day of February, 1990, before me personally came Louis G.
Marcoccia to me known, who being by me duly sworn, did depose and say that he
resides in Cazenovia, New York, that he is a Senior Vice President of SYRACUSE
UNIVERSITY, the corporation described in and which executed the above
instrument; that he knows the seal of the corporation; that the seal affixed to
the instrument is the corporate seal; and that he signed his name to the
instrument.
__________________________
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF _________)
On this ____ day of February, 1990, before me personally came ADAM
VICTOR to me known, who being by me duly sworn, did depose and say that he
resides in New York, New York, that he is the President of G.A.S. ORANGE
DEVELOPMENT, INC., the General Partner of G.A.S. Orange Partners, L.P., which is
the General Partner of Project Orange Associates L.P., the partnership described
in this instrument, and that he had authority to sign this instrument and he
acknowledged to me that he executed the instrument as the act and deed of the
partnership.
__________________________
Notary Public
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Exhibit 10.9
LEASE AGREEMENT
BETWEEN
SYRACUSE UNIVERSITY
(LANDLORD)
and
PROJECT ORANGE ASSOCIATES, L.P.
(TENANT)
Dated: February 27, 1990
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 - DEFINITIONS.................................................................. 2
Section 1.01. - Definition of Terms................................................. 2
ARTICLE 2 - PREMISES..................................................................... 2
Section 2.01. - Premises............................................................ 2
ARTICLE 3 - TERM......................................................................... 3
Section 3.01. - Definition of Terms................................................. 3
ARTICLE 4 - USE OF PREMISES.............................................................. 3
Section 4.01. - Use of Premises..................................................... 3
ARTICLE 5 - DEVELOPMENT OF FACILITY...................................................... 4
Section 5.01. - Tenant's Obligation to Construct. Install and Operate the Facility.. 4
Section 5.02. - Completion of Construction.......................................... 5
Section 5.03. - Covenants and Requirements of Construction.......................... 5
Section 5.04. - Completion of Facility.............................................. 7
Section 5.05. - Assignments to Landlord............................................. 8
Section 5.06. - Fuel Transmission Line Easement..................................... 9
ARTICLE 6 - RENT......................................................................... 9
Section 6.01........................................................................ 9
Section 6.02........................................................................ 10
ARTICLE 7 - OPERATION OF FACILITY........................................................ 10
Section 7.01. - Operation by Tenant................................................. 10
Section 7.02. - Operating Agreements................................................ 10
ARTICLE 8 - OWNERSHIP OF FACILITY........................................................ 11
Section 8.01. - Ownership of Improvements........................................... 11
ARTICLE 9 - REPAIRS, MAINTENANCE AND ALTERATIONS......................................... 12
Section 9.01. - Repairs and Maintenance............................................. 12
Section 9.02. - Alterations. Improvements and Additions............................. 13
ARTICLE 10 - TAXES AND UTILITY EXPENSES.................................................. 14
Section 10.01. - Taxes.............................................................. 14
Section 10.02. - Conversion of Assessments.......................................... 14
Section 10.03. - Time for Payments.................................................. 15
Section 10.04. - Tenant's Right to Contest Taxes.................................... 15
Section 10.05. - Tenant's Right to Refund of Taxes.................................. 15
Section 10.06. - Utilities.......................................................... 16
ARTICLE 11 - NET LEASE................................................................... 16
Section 11.01. - Net Lease.......................................................... 16
Section 11.02. - Rent Not to Abate.................................................. 16
Section 11.03. - Compliance With Environmental Laws................................. 17
ARTICLE 12 - REQUIREMENTS OF PUBLIC AUTHORITY............................................ 19
Section 12.01. - Compliance by Tenant............................................... 19
Section 12.02. - Challenge to Validity.............................................. 20
ARTICLE 13 - COVENANT AGAINST LIENS...................................................... 20
Section 13.01. - Tenant's Obligations to Discharge.................................. 20
</TABLE>
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<TABLE>
<S> <C>
Section 13.02. - Right to Discharge................................................. 21
Section 13.03. - No Implied Consent of Landlord..................................... 22
ARTICLE 14 - ENTRY ON PREMISES BY LANDLORD............................................... 22
Section 14.01....................................................................... 22
Section 14.02....................................................................... 23
Section 14.03....................................................................... 23
Section 14.04....................................................................... 23
ARTICLE 15 - ASSIGNMENT AND SUBLETTING................................................... 24
Section 15.01....................................................................... 24
ARTICLE 16 - HOLDING OVER................................................................ 26
Section 16.01....................................................................... 26
ARTICLE 17 - SURRENDER................................................................... 26
Section 17.01. - Surrender of Possession............................................ 26
Section 17.02....................................................................... 29
Section 17.03....................................................................... 29
ARTICLE 18 - SIGNS....................................................................... 29
Section 18.01....................................................................... 29
ARTICLE 19 - INDEMNITY................................................................... 30
Section 19.01. - Tenant's Indemnification of Landlord............................... 30
Section 19.02. - Landlord's Indemnification of Tenant............................... 31
Section 19.03. - Limitation of Landlord's Indemnity................................. 32
Section 19.04....................................................................... 32
ARTICLE 20 - INSURANCE................................................................... 33
Section 20.01. - Casualty Insurance................................................. 33
Section 20.02. - Other Insurance.................................................... 33
Section 20.03. - Evidence Of Insurance and Possession of Policy..................... 34
Section 20.04. - Limitations Upon Concurrent Insurance.............................. 36
Section 20.05. - Disbursement of Proceeds........................................... 36
Section 20.06. - Notice of Cancellation............................................. 37
Section 20.07. - Apportionment of Premiums Upon Expiration of Term.................. 37
Section 20.08. - Responsibility of Tenant During Construction....................... 37
ARTICLE 21 - EMINENT DOMAIN.............................................................. 39
Section 21.01. - Termination of Lease............................................... 39
Section 21.02. - Distribution of Condemnation Proceeds.............................. 39
Section 21.03. - Partial Taking..................................................... 40
ARTICLE 22 - RIGHT OF EACH PART TO PERFORM COVENANTS OF THE OTHER........................ 41
ARTICLE 23 - MORTGAGES................................................................... 42
Section 23.01. - Tenant's Right to Mortgage Leasehold Estate........................ 42
Section 23.02. "Permitted Mortgage"................................................. 42
Section 23.03. "Lending Institution"................................................ 44
Section 23.04. Required Provisions.................................................. 44
Section 23.05. - Interim Financing.................................................. 44
Section 23.06. - Indemnity.......................................................... 45
ARTICLE 24 - DAMAGE OR DESTRUCTION....................................................... 46
Section 24.01....................................................................... 46
</TABLE>
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ARTICLE 25 - LATE CHARGES................................................................ 50
Section 25.01. - Past Due Rent...................................................... 50
ARTICLE 26 - TITLE PROVISIONS............................................................ 51
Section 26.01. - Quiet Enjoyment.................................................... 51
Section 26.02 - Landlord's Title.................................................... 51
Section 26.03. - Landlord's Title Documents......................................... 51
Section 26.04. - Title Objections................................................... 51
ARTICLE 27 - DEFAULT..................................................................... 52
Section 27.01. - Events of Default.................................................. 52
Section 27.02. - Remedies on Default................................................ 54
Section 27.03....................................................................... 57
Section 27.04....................................................................... 58
Section 27.05....................................................................... 58
Section 27.06....................................................................... 58
Section 27.07....................................................................... 59
Section 27.08....................................................................... 59
ARTICLE 28 - WAIVERS..................................................................... 59
Section 28.01. - Waivers............................................................ 59
ARTICLE 29 - APPROVALS AND REPRESENTATIONS............................................... 60
Section 29.01. Approvals............................................................ 60
Section 29.02....................................................................... 61
ARTICLE 30 - FORCE MAJEURE............................................................... 61
Section 30.01....................................................................... 61
ARTICLE 31 - NOTICE...................................................................... 62
Section 31.01....................................................................... 62
ARTICLE 32 - CERTIFICATES................................................................ 63
Section 32.01....................................................................... 63
ARTICLE 33 - GOVERNING LAW............................................................... 64
Section 33.01....................................................................... 64
ARTICLE 34 - PARTIAL INVALIDITY.......................................................... 64
Section 34.01....................................................................... 64
ARTICLE 35 - MEMORANDUM OF LEASE......................................................... 65
Section 35.01....................................................................... 65
ARTICLE 36 - INTERPRETATION.............................................................. 65
Section 36.01....................................................................... 65
ARTICLE 37 - BINDING EFFECT.............................................................. 66
Section 37.01....................................................................... 66
ARTICLE 38 - NO ORAL MODIFICATION - ENTIRE AGREEMENT..................................... 66
Section 38.01....................................................................... 66
ARTICLE 39 - HEADINGS AND TABLE OF CONTENTS.............................................. 67
Section 39.01....................................................................... 67
Section 39.01....................................................................... 67
ARTICLE 40 - WAIVER OF JURY TRIAL AND COUNTERCLAIMS...................................... 67
Section 40.01....................................................................... 67
ARTICLE 41 - NO BROKER................................................................... 68
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Section 41.01....................................................................... 68
ARTICLE 42 - TERMINATION................................................................. 68
Section 42.01....................................................................... 68
Section 42.01....................................................................... 68
</TABLE>
EXHIBITS
Exhibit A Description of Leased Land
Exhibit B Supplemental Lease Agreement
Exhibit C Plans and Specifications for the Facility
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GROUND LEASE
THIS LEASE (the "Lease") made on February 27, 1990 between SYRACUSE
UNIVERSITY, a New York educational corporation having its principal office at
Syracuse, New York 13244 (the "Landlord") and PROJECT ORANGE ASSOCIATES, L.P., a
Delaware limited partnership (the "Tenant").
RECITALS
1. Landlord has entered into an agreement with Tenant dated the date of
this Agreement (the "Steam Contract") for the purchase of steam to be produced
by Tenant from a cogeneration facility (the "Cogeneration Plant") to be
constructed and operated by Tenant upon the land leased by this Lease.
2. Tenant has also undertaken to install and operate certain steam, water,
condensate, fuel, gas and electric lines and related apparatus and equipment
necessary or appropriate for the operation of the Cogeneration Plant and
delivery of steam to Landlord which, together with the Cogeneration Plant,
constitute the "Facility."
3. Landlord has also entered into an agreement with the Tenant dated the
date of this Lease ("the Operating Agreement") providing for the operation by
Tenant of Landlord's existing steam generation facility (the "Existing Plant").
4. Landlord and a predecessor of Tenant have previously entered into a
certain Lease Agreement, dated as of December 28, 1987, pertaining to the
subject matter of this Lease (the "Prior Agreement"). This Lease is intended to
supersede the Prior Agreement which has been terminated by contemporaneous
agreement between the Customer and such predecessor.
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In consideration of the mutual covenants of this Lease, Landlord and Tenant
agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definition of Terms. For purposes of this Lease all defined
------------ -------------------
terms, as indicated by the capitalization of the first letter of such term,
shall have the meanings specified in the Steam Contract, unless the context or
use clearly indicates another meaning.
ARTICLE 2
PREMISES
Section 2.01. Premises. Landlord leases to Tenant, and Tenant leases from
------------ --------
Landlord, upon and subject to the terms, conditions, covenants and provisions of
this Lease, the parcel of land situated in the City of Syracuse, County of
Onondaga, New York, and described in the attached Exhibit "A" made a part of
this Lease ("the Premises"), provided, however, that the underground oil storage
tanks are excluded from the Premises.
ARTICLE 3
TERM
Section 3.01. Definition of Terms. The term of this Lease shall commence
------------ -------------------
on the date of this Lease (the "Term Commencement Date") and shall expire on the
date the Steam Contract expires, unless terminated earlier pursuant to this
Lease. The parties shall enter into a supplemental agreement, substantially in
the form attached as Exhibit B, setting forth the commencement and expiration
dates of the term.
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ARTICLE 4
USE OF PREMISES
Section 4.01. The Premises shall be used by Tenant solely for the
------------
construction, installation and operation of the Cogeneration Plant and Facility
as provided in the Steam Contract.
ARTICLE 5
DEVELOPMENT OF FACILITY
Section 5.01. Tenant's Obligation to Construct, Install and Operate the
------------ ---------------------------------------------------------
Facility. Tenant shall obtain all of the approvals for the Facility described in
- --------
Article 29, at its sole cost and expense. If the approvals are denied, Tenant
shall have the right to terminate this Lease upon serving written notice on
Landlord within 30 days of any such denial. The Cogeneration Plant shall be
constructed on the Premises in accordance with the plans, specifications,
sitings and schedules of completion for the Facility prepared for Tenant (which
shall have been received by Landlord at least sixty (60) days prior to the
commencement of construction) and reasonably approved in writing by Landlord
("the Plans"). This Lease may be terminated by Landlord, at its option, upon 30
days' written notice (i) if Tenant shall not have closed the financing for the
Facility (the "financial closing") on or before June 30, 1990, or thereafter if
the Tenant fails to diligently pursue, subject to work stoppages not initiated
by Tenant, the completion of construction at the Facility as soon as reasonably
possible with a view towards completion of construction of the Facility and the
delivery of steam to Landlord by October 1, 1991 or (ii) if the Tenant abandons
the construction of the Facility. Any written notice of termination by Landlord
shall also be given to the holders of a Permitted Mortgage, as defined in
Article 23 of this Lease, who shall have been identified in a written notice by
Tenant to Landlord, at the address of the
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holder provided in the Tenant's notice to Landlord. The holders of any Permitted
Mortgage shall have a period of thirty (30) days from the giving of the notice
of termination within which to cure the default of the Tenant in the pursuit of
completion of the construction of the Facility. If the default of the pursuit of
completion of construction cannot be cured by the holders of the Permitted
Mortgage within such thirty (30) day period, the holders shall have an
additional period of ninety (90) days within which to cure the default, provided
the holders promptly commence and diligently pursue the curing of the default.
The documents constituting the Plans will be attached as Exhibit C and made a
part of this Lease.
Section 5.02. Completion of Construction. Tenant shall, at its sole cost
------------ --------------------------
and expense, fully complete, or cause the completion of, the construction and
installation of the Facility in accordance with the Plans and all provisions of
this Lease as soon as reasonably possible, subject to work stoppages not
initiated by Tenant, with a view toward completion of construction of the
Facility and the delivery of steam to Landlord by October 1, 1991.
Section 5.03. Covenants and Requirements of Construction. In the
------------ ------------------------------------------
construction and installation of the Facility (sometimes referred to as "the
Work"), Tenant:
(a) shall obtain all permits and approvals described in Article 29;
(b) shall comply with all requirements of public authorities described
in Article 12 applicable to the Work;
(c) shall have received Landlord's prior written approval of all
architects, engineers and the general contractor to be engaged in the
construction of the Facility, which approval shall not be unreasonably withheld;
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(d) shall perform the Work expeditiously, in strict compliance with
the Plans, in a good and workmanlike manner and of first-class quality, and in
accordance with all the provisions of this Lease;
(e) shall pay all proper accounts for work done or materials furnished
under all contracts which it has entered into relating to the Work, provided,
however, that Tenant may retain any amounts which Tenant's architect has not
certified to be due, or which are properly and reasonably retained to secure the
performance of any work or the correction of any defect or which, in the opinion
of the Tenant's architect, are reasonably retained in anticipation of damages
arising from any contractor's default, or which are required to be retained
under the provisions of the New York Lien Law;
(f) Tenant shall require performance and payment bonds to be furnished
by the general contractor and each major subcontractor of the Work naming
Landlord as co-obligee of the bonds in an amount equal to the total cost of the
construction, acquisition and installation of the Facility, which is presently
estimated to be $73,100,000, unless the requirement of a bond shall have been
waived in writing by Landlord. If the holders of a Permitted Mortgage shall not
require performance and payment bonds for the total cost of the Facility, the
contractors may provide performance and payment bonds for less than the total
cost of the Facility, but not less than eighty (80%) percent of the total cost
of the Facility, provided guarantees of completion and performance for the
balance of the cost of the Facility shall be provided by entities, and in form,
reasonably acceptable to Landlord;
(g) shall bear all costs incurred in the relocation, in a manner
reasonably satisfactory to Landlord, of all utilities and access servicing the
Existing Plant and the Landlord's
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chilled water plant which may be required to enable Tenant to construct the
Facility on the Premises.
Section 5.04. Completion of Facility. The Facility shall be deemed fully
------------ ----------------------
completed upon Landlord's receipt of evidence, in the form of certificates of
opinion of licensed architects or engineers employed by Tenant or by Landlord,
or in such other form as Landlord reasonably may require, that:
(a) the Facility shall have been completed in all respects in a good
and workmanlike manner and of first-class quality in accordance with the Plans;
(b) The Facility and each of its components, including, all machinery,
equipment, apparatus and lines, are operating in accordance with the Plans, are
available for use by Tenant and are capable of delivery of steam to the Landlord
to the interconnection points, in the Volumes and meeting the specifications
required by the Steam Contract;
(c) all building codes and other regulations and all requirements of
public authorities described in Article 12 have been complied with;
(d) all permits and permanent unconditional certificates of occupancy
which are required have been obtained;
(e) all approvals which are required for the operation of the Facility
and Tenant's performance of the Steam Contract have been obtained;
(f) the contract with the Contractor for the operation of the
Facility, as provided in Section 1.02 of the Steam Contact, shall be in full
force and effect and the Contractor shall have commenced the performance of its
duties as operator of the Facility;
(g) all parking areas are ready for use; and
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(h) all exterior areas, including easements and rights of way, are
adequately graded, landscaped, tidied up, and ready for use, and all other areas
are clean and all surplus building material and rubbish removed from the
Premises.
Section 5.05. Assignments to Landlord. All contracts entered into by
------------ -----------------------
Tenant for the construction, installation and operation of the Facility shall be
assignable, at Landlord's option, to Landlord or its designee, upon Tenant's
failure to perform any of its obligations under this Article, subject, however,
to the requirements of all Consents and Agreements and any assignments which may
be required by the holder of a Permitted Mortgage as defined in Article 23.
Section 5.06. Fuel Transmission Line Easement. Landlord shall, without
------------ -------------------------------
expense to Tenant, provide an easement for a transmission line for natural gas
and/or propane over the land owned by Landlord between Jamesville Avenue and
East Colvin Street and proceeding northerly from East Colvin Street along the
easterly boundary of Comstock Avenue to the northerly boundary of 1601 East
Colvin Street and along the easterly boundary of the 200 block of Fineview Place
within the City of Syracuse, New York, provided, however, that such easement
shall be restricted to the transmission only of fuel for the operation of the
Facility and the Existing Plant. The location of the easement shall be mutually
determined by Landlord and Tenant. The easement shall terminate upon the
expiration or sooner termination of this Lease and shall be in such form and
upon such other terms and conditions as shall be acceptable to Landlord acting
reasonably.
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ARTICLE 6
RENT
Section 6.01. Rent. Tenant shall pay Landlord an annual rent of One Dollar
------------ ----
($1.00) for the Premises, at the office of the Landlord, in advance on the Term
Commencement Date and on each anniversary of the Term Commencement Date.
Section 6.02. The term "rent" shall include the annual rent, the additional
------------
rent and any other sums, costs, expenses or amounts from time to time payable by
Tenant to Landlord under this Lease, whether by way of indemnity or otherwise,
and all of the foregoing, whether or not expressed to be rent, shall be deemed
to be rent, and Landlord shall have all remedies for the collection of them,
when in arrears, as are available to Landlord for the collection of any other
rent in arrears.
ARTICLE 7
OPERATION OF FACILITY
Section 7.01. Operation by Tenant. Tenant, at all times, shall operate, or
------------ -------------------
cause the operation of, the Facility in compliance with, and in a manner which
will enable it to fully perform its obligations to Landlord under the Steam
Contract.
Section 7.02. Operating Agreements.
------------ --------------------
(a) Tenant shall not enter into or terminate or assign (except for
assignments as security to the holders of a Permitted Mortgage as defined in
Article 23) any operating agreement or other agreement for the operation or use
of the whole or any substantial part of the Facility ("the agreements") without
the prior written approval of Landlord, which shall not be unreasonably
withheld, provided, however, that Tenant may, without such consent, assign such
agreement to any corporation, partnership or other entity controlling,
controlled by, or under
-8-
<PAGE>
common control with the Tenant. Any agreement entered into or assignment made by
Tenant in violation of this paragraph shall be null and void.
(b) Tenant shall cause the agreements to be assignable, at Landlord's
option, to Landlord or its designee, upon the termination of this Lease.
ARTICLE 8
OWNERSHIP OF FACILITY
Section 8.01. Ownership of Improvements. During the term of the Lease, the
------------ -------------------------
Facility shall be owned by Tenant. Upon the expiration or earlier termination of
this Lease in accordance with its terms, the Facility, together with all
personal property used in the operation of the Facility (except the property
excluded from surrender by Tenant to Owner pursuant to Section 17.01), and any
improvements to the Premises shall become the property of Landlord without any
further consideration by Landlord or any further act or deed required of either
the Landlord or the Tenant, provided, however, that the Tenant shall execute and
deliver to the Landlord such documents as the Landlord reasonably shall request
to evidence Landlord's ownership.
ARTICLE 9
REPAIRS, MAINTENANCE AND ALTERATIONS
Section 9.01. Repairs and Maintenance.
------------ -----------------------
(a) Tenant, at its sole cost and expense, shall manage, maintain and
promptly repair the Premises and the Facility including, without limitation, all
machinery, equipment, fixtures, apparatus, lines, pipes, sidewalks, passageways,
roadways, curbs, parking areas and landscaping, and all personal property used
in the operation of the Facility, and shall keep them in good order and
condition, and neat and clean. "Repair" shall include replacement, restoration
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and renewal when necessary. Tenant's obligations under this Article apply to all
repairs, interior and exterior, structural and non-structural, ordinary and
extraordinary, and foreseen and unforeseen. All repairs made by Tenant shall be
at least equal in quality and class to the original Work. Tenant shall do all
necessary shoring of foundations and walls of any structures on the Premises and
every other act or thing for the safety and preservation of them and any other
part of the Facility which may be necessary by reason of any excavation or other
building operation upon any adjoining property or street, alleyway or
passageway. Tenant shall manage and maintain the Premises and the Facility as
would a prudent owner and shall not commit, or permit to be committed, any waste
or any nuisance on them, or permit any part of the Premises or the Facility to
be used for any dangerous, noxious or offensive purpose, and shall not permit
any damaged improvement to remain on the Premises for an unreasonable period of
time.
(b) Tenant shall keep and maintain the Premises and the Facility and
all adjoining sidewalks, curbs, alleyways and passageways in a clean and orderly
condition, free of dirt, rubbish, snow, ice and unlawful obstructions.
Section 9.02. Alterations, Improvements and Additions. Upon completion of
------------ ---------------------------------------
the construction and installation of the Facility, Tenant shall not make any
alterations, improvements, or additions to the Premises or the Facility
(collectively "alterations") of a cost in excess of $250,000 with respect to any
single alteration without the prior written consent of Landlord, which shall not
unreasonably be withheld. Tenant's request to Landlord for permission to make
alterations shall be accompanied by detailed plans and specifications, estimated
costs and the identity of the contractors which shall perform the work. Any
alterations permitted by Landlord shall be at least equal in quality and class
to the original Work and shall be made in accordance with all of the provisions
applicable to the original Work and all of the provisions of
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this Lease. No part of the Facility shall be removed without the prior written
consent of the Landlord, except as required for the restoration, repair or
maintenance of the Facility or required to comply with requirements of public
authorities. Tenant shall not increase the electric generating capacity of the
Cogeneration Plant above 80 megawatts, net of electric consumption within the
Leased Premises, without the prior written consent of Landlord.
ARTICLE 10
TAXES AND UTILITY EXPENSES
Section 10.01. Taxes. Tenant shall, as additional rent, pay and discharge
------------- -----
punctually and before any fine, penalty, interest or cost may be added to them,
all taxes, assessments, water and sewer rents, rates and charges, vault license
fees or rentals, levies, license and permit fees and all other governmental
impositions and charges of every kind and nature whatsoever, extraordinary as
well as ordinary, foreseen and unforeseen, which shall be charged, levied, laid,
assessed, imposed upon, become due and payable out of or in respect of, or
become liens upon the whole or any part of, the Premises or the Facility,
together with all interest and penalties, under all present or future laws,
ordinances, requirements, orders, directives, rules or regulations of the
federal, state, county, and city governments and of all other governmental
authorities whatsoever (the "Taxes").
Section 10.02. Conversion of Assessments. To the extent permitted by law,
------------- -------------------------
Tenant or its designees shall have the right to apply for the conversion of any
assessment for local improvements assessed during the term of this Lease to
permit them to be payable in annual installments, and upon such conversion,
Tenant shall pay and discharge punctually the installments as they become due
and payable, provided the assessment shall be fully paid by Tenant before the
termination of this Lease. Landlord shall permit the application for the
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conversion to be filed in its name, if necessary, and shall execute all
documents reasonably required by Tenant for the conversion, provided Tenant
shall pay all of Landlord's costs, including a reasonable attorney's fee.
Section 10.03. Time for Payments. Tenant shall be deemed to have complied
------------- -----------------
with the covenants of this Article if the Taxes are paid within the period
allowed by law or by the governmental authority imposing them. Tenant shall
produce and exhibit to Landlord satisfactory evidence of payment within 5 days
of Landlord's request.
Section 10.04. Tenant's Right to Contest Taxes. Tenant shall have the
------------- -------------------------------
right to contest or review, in good faith, all Taxes by appropriate legal
proceedings, or in such other manner as may be appropriate, provided it shall
promptly pay all Taxes when due. Tenant shall conduct the proceedings
diligently, at its own cost and expense and free of any expense to Landlord.
Landlord shall execute all documents reasonably necessary for the proceedings.
Section 10.05. Tenant's Right to Refund of Taxes. Any refunds or rebates
------------- ---------------------------------
of the Taxes paid by Tenant shall belong to Tenant. Any refunds received by
Landlord shall be deemed trust funds and shall be received by Landlord in trust
for Tenant and paid to Tenant. Landlord shall, upon the request of Tenant, sign
any receipts reasonably required to obtain payment of any refund or rebate of
Taxes.
Section 10.06. Utilities. Tenant shall pay and discharge punctually all
------------- ---------
sewer rents and charges for water, gas, electricity, light and power, and any
and all other services and utilities furnished to the Premises or the Facility.
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ARTICLE 11
NET LEASE
Section 11.01. Net Lease. Except as otherwise provided in Section 11.03,
------------- ---------
the rent payable by Tenant under this Lease shall be absolutely net to Landlord,
with the intent and effect that all costs, expenses and obligations of every
kind and nature whatsoever relating to the Premises and the Facility, which may
arise or become due during the term of this Lease ("the expenses") shall be paid
by the Tenant and Tenant shall indemnify and save Landlord harmless from and
against the expenses.
Section 11.02. Rent Not to Abate. Tenant's obligation to pay rent under
------------- -----------------
this Lease shall not be affected by, nor shall the rent abate or be diminished
or reduced on account of any want of repair, destruction or damage to the
Premises or the Facility, regardless of the cause or extent of them, or for any
inconvenience, discomfort, interruption of business or otherwise arising from
the making of alterations, changes, additions, improvements or repairs to the
Premises or the Facility, or because of any present or future governmental laws,
ordinances, requirements, orders, directives, rules or regulations, or for any
other cause or reason. Tenant waives the provisions of any statute or rule of
law now or hereafter in effect contrary to this Section.
Section 11.03. Compliance With Environmental Laws.
------------- ----------------------------------
(a) Prior to the execution of this Agreement, Tenant shall cause to be
conducted at its expense, by an engineering firm acceptable to an institutional
lender providing financing for the Facility, an environmental audit of the
Premises, the scope and description of which shall have been approved by
Landlord, for purposes of determining the existence thereon of any circumstance
or condition which does not comply with all federal, state and local laws, codes
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and rules and regulations promulgated pursuant to statutory authority
(collectively, "Environmental Laws") governing the production, generation,
release, discharge, emission, disposal, transportation, containment, storage or
remediation involving any substance which is hazardous or acutely hazardous to
the public health or safety or which could be the basis for or support a claim
under any Environmental Laws (any such substance, a "Hazardous Substance").
(b) If any liability shall be imposed upon the Tenant, at any time
before or after the Term Commencement Date or the expiration or earlier
termination of this Lease, under or by reason of any Environmental Laws, (i) due
to the existence at or prior to the commencement of construction of the
Cogeneration Plant of Hazardous Substances on or about the Premises, the
existence of which is determined prior to or as a result of the environmental
audit described in paragraph (a) (except any liability imposed upon Tenant
because of any conditions caused by Tenant, its employees, agents, contractors
and assigns [collectively "the Tenants"] prior to the commencement of
construction of the Cogeneration Plant or because of any aggravation by Tenants
after the Term Commencement Date of any conditions disclosed by the
environmental audit described in paragraph (a)), or (ii) as a result solely of
the acts or activities of the Landlord subsequent to such audit, the Landlord
shall, at its expense, comply with all requirements of Environmental Laws
relating to such Hazardous Substances (including requirements relating to the
removal or containment thereof) and shall save, defend, indemnify and hold the
Tenants harmless from and against any such liability, including without
limitation, damages, fines, penalties, reasonable legal fees and all other
reasonable costs to the Tenants in connection therewith.
(c) The indemnification provided by Landlord to Tenants under this
Section 11.03 shall be the sole and exclusive remedy of Tenants against Landlord
with respect to the
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presence of Hazardous Substances at the Premises and shall be in lieu of any
indemnification that might otherwise have been available to Tenants pursuant to
Article 19 of this Agreement.
ARTICLE 12
REQUIREMENTS OF PUBLIC AUTHORITY
Section 12.01. Compliance by Tenant.
------------- --------------------
(a) Except as otherwise expressly provided in Section 11.03, Tenant,
at its sole cost and expense, shall promptly comply with all present and future
laws, ordinances, requirements, orders, directives, rules and regulations of all
federal, state, county, town and city governments and of all other governmental
authorities, departments, boards and officers, and all orders, rules and
regulations of the National and New York Boards of Fire Underwriters or any
other body or bodies which may exercise similar functions, foreseen and
unforeseen, ordinary and extraordinary, applicable to the Premises or the
Facility or any part of them or to their use, whether in force at the
commencement of the term of this Lease or passed, enacted or directed in the
future, and whether or not compliance shall require structural changes
(collectively in this Article "the requirements"). Tenant shall pay all costs,
expenses, liabilities, losses, damages, fines, penalties, claims and demands,
including reasonable counsel fees (collectively "the costs"), that may in any
manner arise from or be imposed because of the failure of Tenant to comply with
this Article and shall indemnify, hold harmless and defend Landlord of and from
the costs.
(b) Tenant shall comply with the requirements of all policies of
public liability, fire and all other policies of insurance in force with respect
to the Premises and the Facility. Tenant shall take immediate steps to remedy or
prevent any violation or attempted violation of the provisions of this Section
by any subtenant or other user of the Premises or the Facility.
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Section 12.02. Challenge to Validity. Tenant shall have the right, after
------------- ---------------------
prior written notice to the Landlord, to contest by appropriate legal
proceedings ("the proceedings") diligently conducted in good faith, in the name
of the Tenant, Landlord, or both, if necessary, without cost or expense to
Landlord, the validity or application of the requirements. If compliance with
the requirements may be delayed during the proceedings without the incurrence of
any lien, charge or liability of any kind against the Premises or the Facility
which cannot be bonded and without subjecting Tenant or Landlord to any
liability, civil or criminal, for failure to comply with them, Tenant may delay
compliance with them until the final determination of the proceedings. Landlord
shall execute all documents reasonably necessary for the proceedings.
ARTICLE 13
COVENANT AGAINST LIENS
Section 13.01. Tenant's Obligations to Discharge. Tenant shall not create
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or permit to be created and shall promptly discharge, any mechanic's, laborer's,
or materialman's lien, or any other charge which might be or become a lien,
encumbrance or charge upon the Premises, the Facility, or any part of either
("the lien") except for any lien that is being contested in good faith by
appropriate proceedings and is appropriately bonded or results from any act or
omission for which Landlord is responsible pursuant to Section 11.03.
Section 13.02. Right to Discharge. If any lien included in Section 13.01
------------- ------------------
shall be filed against the Premises, the Facility, or any part of either,
Tenant, at its own cost and expense, within 30 days after the filing of the
lien, shall discharge it of record or post a bond reasonably satisfactory to
Landlord to assure its discharge. If Tenant fails to discharge or bond the lien
within 30 days after its filing, Landlord, in addition to any other right or
remedy it may have, and without waiving its right to declare a default, may
discharge the lien of record or post a bond to
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assure its discharge. Any amounts paid by Landlord in the discharge or bonding
of the lien, including, but not limited to, penalties, interest, costs,
allowances and reasonable attorney's fees, together with interest at the rate of
18% per annum, shall constitute additional rent under this Lease and shall be
paid by Tenant to Landlord on demand. Any amounts paid by Tenant in the
discharge or bonding of a lien which results from any act or omission for which
Landlord is responsible pursuant to Section 11.03, including, but not limited
to, penalties, interest, costs, allowances and reasonable attorney's fees,
together with interest at the rate of 18% per annum shall be paid by Landlord to
Tenant on demand.
Section 13.03. No Implied Consent of Landlord. Nothing in this Lease shall
------------- ------------------------------
be construed as the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or materialman
for the performance of any labor or the furnishing of any materials for any
improvement, alteration or repair of the Premises, the Facility, or any part of
either.
ARTICLE 14
ENTRY ON PREMISES BY LANDLORD
Section 14.01 Tenant shall permit Landlord and its authorized
-------------
representatives to enter the Premises and the Facility upon reasonable notice at
all reasonable business times for the purposes of (a) inspecting them, or (b)
making any necessary repairs or performing any other work that may be necessary
because of Tenant's failure to make repairs or perform other work after written
notice from Landlord, or at any time without notice in case of emergency.
Landlord's right of entry shall not imply any duty on its part to perform any
repairs or other work and Landlord's performance of any repairs or work shall
not constitute a waiver of any default of Tenant. Any such inspection shall be
conducted at Landlord's sole risk and expense. In
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conducting any such inspection, Landlord shall comply with Tenant's reasonable
rules and Policies for security and safety.
Section 14.02. During the progress of any work on the Premises or in the
-------------
Facility by Landlord pursuant to Section 14.01, Landlord may store all necessary
materials, tools, supplies and equipment on the Premises and at the Facility.
Landlord shall not be liable for inconvenience, annoyance, disturbance, loss of
business or other damage incurred by Tenant or any subtenant because of the
performance of those repairs or work, or the storing of materials, tools,
supplies and equipment on the Premises or at the Facility during the progress of
such work.
Section 14.03. Landlord shall have the right to enter and take immediate
-------------
possession of the Premises and the Facility for the purpose of assuming
operating control of the Facility pursuant and subject to Section 3.03 of the
Steam Contract and all Consents and Agreements. The Landlord's right of
possession and control of the Premises and the Facility for this purpose shall
be for the period, and its liability while in possession and control shall be
limited, as provided in Section 3.0.3 of the Steam Contract and all Consents and
Agreements.
Section 14.04. Landlord shall have the right to enter the Premises and the
-------------
Facility upon reasonable notice at all reasonable times during usual business
hours within two years prior to the expiration of the term of this Lease for the
purpose of showing them to prospective purchasers, tenants or operators. Any
such entry shall be at Landlord's sole risk and expense and shall be conducted
in compliance with Tenant's reasonable rules and policies for security and
safety.
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ARTICLE 15
ASSIGNMENT AND SUBLETTING
Section 15.01.
-------------
(a) Tenant, without the prior written consent of Landlord, which shall
not unreasonably be withheld, shall not assign this Lease or sublet the whole or
any part of the Premises or the Facility, provided, however, that Tenant may
assign this Lease without the prior written consent of Landlord (i) to any
corporation, partnership or other entity controlling, controlled by, or under
common control with the Tenant or (ii) to the holders of a Permitted Mortgage,
defined in Article 23, for collateral security purposes only. For purposes of
this paragraph (a), an assignment shall include any transfer of this Lease,
whether voluntary or involuntary by operation of law, including any merger or
consolidation of the Tenant and any transfer, sale, assignment, pledge, or other
encumbrance, whether voluntary or involuntary or by operation of law, of more
than forty-nine percent (49%) of the stock of Tenant, except transfers upon
death or inter vivos among the shareholders of Tenant or to their immediate
families. Any attempted assignment or subletting in violation of this Section
shall be null and void.
(b) Any assignment or subletting permitted by Landlord shall be upon
the following conditions (unless waived by Landlord) and upon such other
conditions as Landlord at the time of permission reasonably may require:
(i) Tenant shall not be in default under this Lease;
(ii) The assignee, in a document satisfactory to Landlord and in
recordable form, shall agree to faithfully perform and be bound by all of
the terms, conditions, covenants, provisions and agreements of this Lease;
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(iii) Any sublease shall provide that it is subject to the terms
and conditions of this Lease and may, at Landlord's option, require the
sublessee to attorn to Landlord;
(iv) Neither the assignment nor any sublease, nor Landlord's
consent to either, shall release or discharge Tenant from any liability,
past or future, under the Lease.
(v) Tenant shall remain fully liable under this Lease without
notice from Landlord of any default under this Lease; and
(vi) Landlord's consent to any assignment or sublease shall not
constitute or be deemed its consent, nor constitute a waiver of the
requirement of its consent, to any subsequent assignment or sublease.
(c) Except as otherwise expressly permitted by this Lease,
Tenant shall not delegate any of its obligations nor assign any of its rights
under this Lease separate from any permitted assignment.
ARTICLE 16
HOLDING OVER
Section 16.01. If Tenant shall remain in occupation of the Premises or the
-------------
Facility after the expiration or earlier termination of this Lease, Tenant shall
be deemed to be a tenant from month to month under the terms and conditions of
this Lease, except that in lieu of the annual rent, Tenant shall pay a monthly
rent equal to $150,000. The monthly rent shall be paid in advance on the first
day of each month.
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ARTICLE 17
SURRENDER
Section 17.01. Surrender of Possession. Upon the expiration or earlier
------------- -----------------------
termination of the term of this Lease, Tenant shall quit and peacefully
surrender and deliver to Landlord the possession and use of the Premises and the
Facility, without delay, in good order, condition and repair, except for
reasonable wear and tear after the last necessary repair, replacement,
restoration or renewal made by Tenant, and free and clear of all liens,
encumbrances and charges, without any payment or allowance by Landlord on
account of any improvements on the Premises, and all rights of Tenant under this
Lease and in the Facility, shall terminate. Notwithstanding the expiration or
termination of this Lease, Tenant shall remain liable to Landlord for any loss
or damage suffered by Landlord because of any default of Tenant. Upon
surrender, Tenant shall assign to Landlord all operating agreements and other
agreements and rights, including any easements or rights-of-way, relating to the
operation or use of the Premises or the Facility, or Tenant's interest in them,
as Landlord may request, including the full and unencumbered use of any land
owned, leased or licensed by Tenant for the purpose of providing additional
parking, traffic, or other service facilities for use in connection with the
Premises or the Facility but excluding any properties, agreements, easements or
rights of way for the use or operation of, and rights of ownership or use with
respect to, pipelines, conduits, loading and storage facilities or other
properties, goods or equipment not regularly situated on the Premises or on the
easement referred to in Section 5.06 or on other easements located north of the
southerly commencement point of such easement. Notwithstanding the foregoing,
the rights to be so assigned shall include, but shall not be limited to, the
right to obtain transportation of natural gas to the Premises through any
natural gas pipeline constructed by or for Tenant for purposes of
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providing transportation of natural gas from either an interstate or intrastate
transporter of natural gas or a local distribution company to the Facility (a
"Project Pipeline") to the extent of the maximum daily quantities of natural gas
which (i) are then required for operation of the Facility and (ii) were, at any
time within 24 months preceding the last operation of the Facility prior to the
expiration or earlier termination of this Lease, transported through a Project
Pipeline. The right described in the preceding sentence shall continue (x) for
any remainder of the term of this Lease as originally fixed by Section 3.01 (the
"Term"), on the terms and at the rates that would have been applicable to tenant
if this Lease had not been terminated, and (y) thereafter on such terms and at
such rates as may be approved by the New York State Public Service Commission or
such other regulatory body as may then have jurisdiction, or if rates for such
transportation are not then subject to regulatory approval, at rates determined
in accordance with the methodology then most recently utilized by a regulatory
body having jurisdiction over the local transportation of natural gas in New
York State. Tenant shall not dispose of the rights to any Project Pipeline
except upon the conditions that (A) the acquiror of such rights shall be bound
to afford transportation of natural gas to the Facility to the extent described
in the preceding sentence, (1) for the remainder of the Term, on the terms and
at the rates described in clause (x) of such sentence, and (2) for five years
after the expiration of the Term, on the terms and at the rates described in
clause (y) of such sentence, and (B) if the acquiror elects to abandon or
decommission the Project Pipeline at any time within five years after the
expiration of the Term, it shall make such pipeline available for purchase by
Landlord at the then depreciated book value of such pipeline.
Section 17.02. Any personal property of Tenant remaining upon the Premises
-------------
or the Facility more than 60 days after the expiration or earlier termination of
this Lease, may, at the
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option of Landlord, be deemed to have been abandoned by Tenant and may be
retained by Landlord as its property, or disposed of, without accountability, by
Landlord in such manner as it deems appropriate. In addition, Landlord, at its
option, within thirty days after the expiration or earlier termination of this
Agreement, and upon ten days written notice to Tenant, may require Tenant, at
Tenant's sole cost and expense, to remove from the Premises any personal
property of Tenant within thirty days of the giving of notice by Landlord.
Section 17.03. The provisions of this Article shall survive the expiration
-------------
or earlier termination of this Lease.
ARTICLE 18
SIGNS
Section 18.01. Tenant shall not install or replace, nor permit the
-------------
installation or replacement by others, of any signs or advertising matter in,
upon or over the Premises or the Facility without the prior written consent of
Landlord. Tenant shall comply with all applicable requirements of governmental
authorities having jurisdiction and shall obtain all necessary approvals prior
to the installation or replacement of any sign or other advertising matter
permitted by Landlord.
ARTICLE 19
INDEMNITY
Section 19.01. Tenant's Indemnification of Landlord. Tenant shall
-------------
indemnify and hold the Landlord harmless from and against any and all
liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including, without limitation, reasonable fees of architects,
engineers, attorneys and other professionals and experts (collectively
"claims"), which may be imposed upon, incurred by or asserted against Landlord
because of any of the following,
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unless the claims arise as a consequence of the
action or failure to act by the Landlord (pursuant to Section 11.03 or
otherwise):
(i) Any work or thing done in, on or about the Premises or the
Facility;
(ii) Any use, non--use, possession, occupation, condition,
operation, maintenance or management of the Premises, the Facility or any
part of either, or any adjacent alley, sidewalk, curb, passageway or space;
(iii) Any act or omission of Tenant or any of its agents,
contractors, servants, employees, subtenants, licensees, or invitees; or
(iv) Any accident, injury or death to any person or damage to any
property occurring in, on or about the Premises or the Facility, or any
adjacent alley, sidewalk, curb, passageway or space.
If any action or proceeding is brought against Landlord because of any
one or more of the claims, Tenant, at its sole cost and expense, upon written
notice from Landlord, shall defend that action or proceeding by counsel approved
by Landlord in writing.
Section 19.02. Landlord's Indemnification of Tenant. The Landlord shall
------------- ------------------------------------
indemnify and hold the Tenant (including for this purpose any corporation,
partnership or other entity controlling, controlled by or under common control
with, the Tenant) harmless from and against any and all claims which may be
imposed upon, incurred by or asserted against the Tenant because of any of the
following, unless the claims are covered by Section 11.03 or arise as a
consequence of the action or failure to act by the Tenant:
(i) any work or thing done in, on or about the premises of the
Landlord (excluding the Premises and the Facility, except to the extent
covered by clause (v) below);
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<PAGE>
(ii) any use, non--use, possession, occupation, condition,
operation, maintenance or management of the premises of the Landlord
(excluding the Premises and the Facility, except to the extent covered by
clause (v) below);
(iii) any act or omission of the Landlord or any of its agents,
contractors, servants, employees, licensees, or invitees;
(iv) any accident, injury or death to any person or damage to
property occurring in, on or about the premises of the Landlord (excluding
the Premises and the Facility, except to the extent covered by clause (v)
below); or
(v) Any use of the Premises or the Facility by the Landlord after
the Term Commencement Date.
If any action or proceeding is brought against Tenant because of any
one or more of the claims, Landlord, at its sole cost and expense, upon written
notice from Tenant, shall defend that action or proceeding by counsel approved
by Tenant in writing.
Section 19.03. Limitation of Landlord's Indemnity. The indemnification of
------------- ----------------------------------
Tenant by Landlord and of Landlord by Tenant pursuant to this Article shall in
all events be limited by the applicable provisions of Section 11.03.
Section 19.04. The provisions of this Article shall survive the expiration
-------------
or earlier termination of this Lease.
ARTICLE 20
INSURANCE
Section 20.01. Casualty Insurance. Tenant, at its sole cost and expense,
------------- ------------------
shall keep the Facility insured against loss or damage by fire or other
casualty, with such extended coverage as shall from time to time be customary
for premises similarly situated in the Syracuse, New York,
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<PAGE>
area, with a replacement cost endorsement, in amounts sufficient to prevent
Landlord or Tenant from becoming a co-insurer within the terms of the policy and
in no event less than one hundred percent (100%) of the replacement value of the
Facility, exclusive of the cost of foundations, excavations, and footings below
the lowest basement floor, without any deduction for depreciation. At the
request of Landlord, and at the sole cost and expense of Tenant, the replacement
value shall be determined from time to time, but not more frequently than once
every two years, by an appraiser acceptable to Landlord.
Section 20.02. Other Insurance. Tenant, at its sole cost and expense,
------------- ---------------
shall maintain:
(a) general public liability insurance against all claims for bodily
injury, death or property damage, occurring upon, in or about the Premises or
the Facility, and on or about any adjoining sidewalks and passageways, in the
amount of at least $5,000,000 for injury or death to any one person and
$25,000,000 for injury or death to more than one person in any one accident or
occurrence and $10,000,000 for damage to property or in such greater limits as
may be reasonably required by Landlord;
(b) boiler and pressure vessel insurance, including pressure pipes,
upon all steam boiler and other pressure vessels and pipes in the Facility in an
amount not less than the greater of $10,000,000 or the full replacement value of
the boilers, pressure vessels and pipes;
(c) business interruption insurance in an amount that can be obtained
by the payment of an annual premium of $10,000 during the Base Year and by the
payment of an annual premium of $10,000 plus an additional $1,000 in each
succeeding year. The maximum annual premium shall not exceed $50,000.
(d) Worker's compensation insurance, disability benefits insurance and
all other insurance Tenant is required by law to provide covering loss resulting
from injury, sickness,
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disability or death of all persons employed by Tenant or by Tenant's
contractors, subcontractors, or agents;
(e) Contractual Coverage Insurance providing protection for Tenant and
Tenant's contractors, subcontractors and agents against damage claims that may
arise from operations under this Lease, with limits in the amounts required in
paragraph (a) of this Section; and
(f) such other insurance and in such amounts as may from time to time
be reasonably required by Landlord against other insurable hazards.
Section 20.03. Evidence Of Insurance and Possession of policy.
------------- ----------------------------------------------
(a) All insurance required by this Article shall be obtained by valid
and enforceable policies, issued by insurers of recognized responsibility and
licensed to do business in the State of New York. Upon the financial closing (as
defined in Section 1.06 of the Steam Contract) or at least five days prior to
the commencement of construction of the Facility, whichever occurs first, Tenant
shall deliver to Landlord certified copies of the policies of insurance to be
furnished by Tenant. Thereafter, Tenant shall furnish to Landlord, not less than
thirty (30) days prior to the expiration dates of such policies, certified
copies of the renewal policies. Tenant shall also deliver to Landlord evidence
satisfactory to Landlord of the payment in full of the premiums on such policies
(i) on the date required for delivery of the initial policies, for the period
covered by the initial policies and (ii) prior to the expiration dates of such
policies and any renewal policies, for the period covered by the renewal
policies.
(b) Blanket Insurance. Tenant may obtain the insurance required by
this Article under a blanket insurance policy or policies ("the blanket
policies") covering the Premises, the Facility and other properties, provided:
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(i) the blanket policies shall specify, or Tenant shall furnish
Landlord with a written statement from the insurers under the blanket
policies specifying, the amounts of the total insurance specifically
allocated to the Premises and the Facility, which shall not be less than
the amounts required by this Article;
(ii) the amounts specified shall be sufficient to prevent any one
of the assureds from becoming a co-insurer within the terms of the
applicable policy; and
(iii) the blanket policies shall in all respects comply with the
endorsements and coverage required by this Article.
Section 20.04. Limitations Upon Concurrent Insurance. Except the insurance
------------- -------------------------------------
required by Section 20.02(a), neither Landlord nor Tenant shall obtain separate
insurance concurrent in form, or contributing in the event of loss, with the
insurance required by this Article, unless Landlord and Tenant are named
insureds, with loss payable as required by this Lease, provided, however, that
Landlord may obtain business interruption/extra expense insurance without
including Tenant as a named insured. Each party shall immediately notify the
other of any such separate insurance and Tenant shall deliver the policies to
Landlord as required by Section 20.03.
Section 20.05. Disbursement of Proceeds.
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(a) All policies of insurance required by this Article ("the
policies") shall name Landlord and Tenant as insureds as their interests may
appear (except for the insurance required in Section 20.02(d) under which
landlord need not be named as an insured) and, except for the insurance required
by Section 20.02(a), shall also name the holder of any Permitted Mortgage, upon
request of the holder, as insureds as their interests may appear, by a standard
mortgagee clause. During the construction and after the completion of the
Facility pursuant to Article 5, the loss, if any, under the policies shall be
adjusted by Tenant. If the proceeds do not exceed
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$500,000, they shall be paid to Tenant for repair of the damage. If the proceeds
exceed $500,000, they shall be paid and disbursed in accordance with Article 24.
(b) The policies shall provide that any loss shall be adjusted and the
proceeds paid as provided in this Lease.
Section 20.06. Notice of Cancellation. The policies and certificates
------------- ----------------------
evidencing the policies shall provide for thirty (30) days prior written notice
to Landlord of any cancellation, reduction in amount or change in coverage.
Section 20.07. Apportionment of Premiums Upon Expiration of Term. Upon the
------------- -------------------------------------------------
expiration of the term of this Lease, all transferable policies shall be
transferred by Tenant to Landlord and the premiums on them shall be apportioned
between landlord and Tenant if Tenant is not in default under this Lease.
Section 20.08. Responsibility of Tenant During Construction. Prior to
------------- --------------------------------------------
commencement of the construction required under Article 5, Tenant at its own
expense shall obtain, furnish to Landlord, and maintain through completion of
construction the following policies of insurance in form reasonably acceptable
to Landlord:
(i) Worker's compensation insurance, disability benefits insurance
and all other insurance Tenant is required by law to provide covering loss
resulting from injury, sickness, disability or death of all persons
employed by Tenant or by Tenant's contractors, subcontractors, or agents;
(ii) Contractor's Public Liability and Property Damage Insurance
and Vehicle Liability Insurance with limits of at least $5,000,000 for
personal injury or death to any one person; $25,000,000 for personal injury
or death in any one accident and
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$10,000,000 for property damage, which shall insure the activities of
Tenant and Tenant's contractors, subcontractors and agents, including full
underground coverage;
(iii) Contractual Coverage Insurance providing protection for
Tenant and Tenant's contractors, subcontractors and agents against damage
claims that may arise from operations under this Lease, with limits in the
amounts required in paragraph (ii) of this Section;
(iv) An all-risk Builders' Risk Insurance, fire and extended
coverage, on a 100% completed value basis on the insurable portion of the
Facility; and
(v) Any other insurance Landlord reasonably may require.
ARTICLE 21
EMINENT DOMAIN
Section 21.01. Termination of Lease. If all or substantially all of the
------------- --------------------
Premises and the Facility shall be taken for any public or quasi-public use
under any statute, by right of eminent domain or by private purchase in lieu of
a taking (the "Condemnation Proceedings"), this Lease shall automatically
terminate on the date title passes or possession is taken, whichever occurs
first. If less than all or substantially all of the Premises and the Facility is
taken, this Lease shall continue in full force and effect as to the portions not
taken. For purposes of this Article substantially all of the Premises and the
Facility shall be deemed taken if the portions not taken shall not be sufficient
to enable Tenant to render substantial performance of its obligations to
Landlord under the Steam Contract. The provisions of this Article shall survive
the termination of this Lease.
Section 21.02. Distribution of Condemnation Proceeds. In the event of a
------------- -------------------------------------
taking, Landlord and Tenant shall cooperate in the prosecution of the
Condemnation Proceedings and
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shall request the court or board having jurisdiction of the Condemnation
Proceedings to determine the value of the Premises and the Facility separately.
The aggregate net award (the "net award") for the taking of the Premises and the
Facility, after deducting all expenses and costs, including attorneys' fees,
shall be payable to Landlord, Tenant, and the holder of any Permitted Mortgage
and distributed as follows:
(a) First, the amount determined in the Condemnation Proceedings to be
the value of the Premises taken, exclusive of all improvements, shall be paid to
Landlord. If this amount is not separately determined in the Condemnation
Proceedings, it shall be determined by agreement between Landlord and Tenant or,
if they do not agree, by a court having jurisdiction in the matter.
(b) Second, the balance of the net award shall be paid to the holder
of any Permitted Mortgage to the extent of the then unpaid amounts secured by
such mortgage.
(c) Third, from the remaining balance of the net award, the amount of
the accrued Subordinated User Charges and Deferred User Charges, with accrued
interest, under the Operating Agreement shall be paid to Landlord.
(d) The then remaining balance of the net award, if any, shall be
divided between Landlord and Tenant, in proportion to the relative present
values, at the time of the taking, of the Landlord's and the Tenant's interest
in the Facility, as determined by agreement between them or, if they do not
agree, by a court having jurisdiction in the matter.
Section 21.03. Partial Taking. If less than substantially all of the
------------- --------------
Premises and the Facility is taken (the "partial taking"), the balance of the
net award, after payment to Landlord for the amount determined to be the value
of the portion of the Premises taken, shall be paid to Tenant who promptly
shall, at its own cost and expense, restore the Facility to a complete
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architectural unit and, to the extent reasonably practicable, as nearly like its
condition prior to the taking. To the extent that the balance of the net award
exceeds the cost of restoration, it shall be paid as provided in paragraphs (b),
(c) and (d) of Section 21.02.
ARTICLE 22
RIGHT OF EACH PARTY TO PERFORM COVENANTS OF THE OTHER
Section 22.01. If either party shall fail to perform any of its
-------------
obligations under this Lease, the other party (the "curing party") may, at its
option, after ten (10) days' notice to the defaulting party, or without notice
in case of an emergency, perform any of such obligations.
Section 22.02. Any moneys paid and all costs and expenses incurred by the
-------------
curing party, including reasonable attorneys' fees, in the performance of the
defaulting party's obligations under this Lease, together with interest at the
rate of eighteen per cent (18%) per annum, shall be paid by the defaulting party
to the curing party on demand.
Section 22.03. The curing party's exercise of its rights under this
-------------
Article shall not constitute a waiver of any other rights or remedies the curing
party may have because of the default of the other party.
ARTICLE 23
MORTGAGES
Section 23.01. Tenant's Right to Mortgage Leasehold Estate. Tenant shall
------------- -------------------------------------------
have the right to mortgage its leasehold estate in the Premises and its interest
in the Facility, in accordance with the provisions of this Lease, and not
otherwise, by one or more "Permitted Mortgages" (as defined in Section 23.02)
and to renew, modify, consolidate, replace, extend and refinance (individually
and collectively "refinance or refinancing") any one or more Permitted Mortgages
to the extent permitted by Section 23.02. Tenant shall not assign, sell,
transfer, mortgage, pledge,
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or encumber its leasehold estate in the Premises or in the Facility, except as
expressly permitted under this Lease. Landlord agrees to execute and deliver a
Consent and Agreement with respect to each Permitted Mortgage at Tenant's sole
cost and expense.
Section 23.02. "Permitted Mortgage":
-------------
(a) A "Permitted Mortgage" shall mean a mortgage loan, obtained from a
lending institution, at least 100% of the proceeds of which are designated for
use in connection with the construction, development, improvement, expansion,
alteration, maintenance, repair, replacement, or operation, or for costs of the
development, of the Facility or the Existing Plant or any facilities which are
appurtenant to or are a necessary and integral part of the operation of the
Facility or the Existing Plant ("the related facilities"), including the
establishment of appropriate reserves required by the lending institution,
capitalized interest and other reasonable and necessary financing costs, or for
the purchase or redemption of any economic interest (whether characterized as
debt or equity) in Tenant (to the extent only of its ownership in the Facility
and the related facilities), and any refinancing of such mortgage loan by a
lending institution, provided at least 95% of the proceeds of any such
refinancing shall be applied for the foregoing purposes. The terms of any such
mortgage loan or refinancing shall require the full amortization of principal
prior to the expiration of the term of this Lease.
(b) Every Permitted Mortgage or encumbrance of all or any part of the
Premises and the Facility and any security interest granted with respect to any
part of the Facility shall expressly recognize (i) the rights of the Landlord
under this Lease, and in particular, the right of the Landlord to acquire
possession of the Premises and the possession of and title to the Facility upon
the expiration or earlier termination of this Lease and (ii) the rights of the
Landlord under Section 3.03 of the Steam Contract, except to the extent that
such rights may be modified,
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restricted or limited in any Consent and Agreement. Nothing in this Lease shall
authorize Tenant, or imply any consent or agreement on the part of Landlord, to
subject Landlord's estate and interest in the Premises to any Permitted
Mortgage, encumbrance or charge.
Section 23.03. "Lending Institution". The term "lending institution" shall
-------------
mean any one or more insurance companies, bank or trust companies, colleges,
universities, charitable institutions or unions, pension, profit or retirement
funds or trusts, governmental agencies or funds, real estate investment trusts,
or other financial or lending institutions.
Section 23.04. Required Provisions. Each Permitted Mortgage shall contain
------------- -------------------
the following provisions, among others:
(a) The obligation of the lending institution to release insurance and
condemnation proceeds to Landlord, Tenant, and the holder of any mortgage as
their interest may appear, for the purposes required by this Lease, as modified
by any Consent and Agreement;
(b) Both Landlord and Tenant shall receive all notices required or
desired to be given by the lending institution and, if any default is not cured
by Tenant within the period of time permitted under the mortgage, the lending
institution shall accept performance of the covenant in default by Landlord, if
it is performed within a reasonable specified time thereafter; and
(c) The lending institution shall give thirty (30) days' written
notice to Landlord prior to the commencement of any foreclosure proceedings
against the Tenant.
Section 23.05. Interim Financing. The terms "mortgage" and "Permitted
------------- -----------------
Mortgage" shall include both permanent mortgage financing and interim
construction mortgage financing and all advances under them.
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Section 23.06. Indemnity. Tenant shall make all payments of principal and
------------- ---------
interest under any Permitted Mortgage and shall pay all of the costs and
expenses incurred in connection with them, all of which shall be paid by Tenant
directly to the lending institution as and when they shall be due and payable
and shall comply with all other terms and conditions of any Permitted Mortgage.
Tenant shall indemnify, defend and hold harmless Landlord from any and all
liabilities, loss, costs, obligations, expenses, claims, demands, suits, causes
of action, or damages of any kind or character and by whomsoever claimed,
arising from or in any manner connected with or related to any Permitted
Mortgage, and Tenant shall pay to Landlord any and all reasonable attorneys'
fees incurred by Landlord in connection with the protection of Landlord's right,
title and interest in and to the Premises and Landlord's rights under the Steam
Contract, to the extent that they may be affected by claims arising out of or
related to any Permitted Mortgage. If Landlord shall perform any of the
obligations of Tenant to the lending institution under any Permitted Mortgage,
any sums expended by Landlord shall be repaid to Landlord as additional rent by
Tenant upon demand, together with interest at the rate of eighteen per cent
(18%) per annum.
ARTICLE 24
DAMAGE OR DESTRUCTION
Section 24.01.
-------------
(a) If the Facility or any part of it shall be damaged or destroyed by
fire or otherwise, Tenant shall promptly notify Landlord, and, at its sole cost
and expense, and whether or not the insurance proceeds are sufficient, restore,
repair, replace, or rebuild the Facility (individually and collectively
"restore" or "the restoration"). The restoration shall be at least equal in
quality and class to the original Work, and shall be performed pursuant to plans
and
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specifications approved by Landlord, which approval shall not be unreasonably
withheld or delayed, and the holder of any Permitted Mortgage and in accordance
with all provisions applicable to the Work and all other provisions of this
Lease. The restoration shall be commenced within ninety (90) days from the date
of the damage or destruction, provided, however, that Landlord shall grant such
extensions of time for the adjustment of insurance and the preparation of the
plans and specifications as reasonably may be required. The architect or
engineer in charge of the restoration shall be selected by Tenant and approved
in writing by Landlord, which approval shall not be unreasonably withheld or
delayed, and the holder of any Permitted Mortgage. Tenant shall diligently
complete the restoration.
(b) The insurance proceeds payable because of damage to or destruction
of the Facility ("the insurance proceeds") shall be paid to the holder of any
Permitted mortgage to be applied as required by the Permitted Mortgage and the
Consent and Agreement. If there is no Permitted Mortgage, the insurance proceeds
shall be payable to Landlord. In the event the insurance proceeds are payable to
Landlord, the insurance proceeds, net of the costs of adjustment and collection
("the net insurance proceeds"), shall be disbursed in accordance with the
following subparagraphs (c), (d) and (e).
(c) The net insurance proceeds shall be disbursed to Tenant for the
restoration, in installments equal to ninety per cent (90%) of the work
completed and materials furnished in the restoration, upon the written request
of Tenant accompanied by the following:
(i) evidence, by an official search of a licensed title insurance
company doing business in Syracuse, New York, approved by Landlord, that no
lien has been filed against the Premises or the Facility; and
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(ii) a certificate signed and verified by Tenant and the architect
or engineer in charge of the restoration, stating that:
A. the amount requested is justly due to contractors,
subcontractors, materialmen, engineers, architects or other persons who
have rendered services or furnished materials for the restoration, a
description of the services and materials and the amounts due each person,
and that no part of the amount requested has been included in any other
request by Tenant;
B. except for the amount requested, after due inquiry, no other
amounts are due on the date of the certificate for labor, wages, materials,
supplies or services in connection with the restoration;
C. the cost of labor and materials required to complete the
restoration will not exceed the net insurance proceeds remaining after
payment of the amount requested; and
D. the restoration is in compliance with the plans and
specifications approved by Landlord and has been performed in accordance
with the provisions applicable to the original Work.
(d) Upon completion of the restoration, there shall be paid to Tenant,
from, and only to the extent of, the net insurance proceeds, an amount equal to
100% of the costs of work completed and materials furnished in the restoration
less the amounts previously disbursed to Tenant, provided Tenant shall have
complied with all the requirements and provisions of this Article and shall have
obtained an unconditional permanent certificate of occupancy, if required, from
the appropriate governmental authority.
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(e) Upon receipt of evidence satisfactory to Landlord that the
restoration has been completed in accordance with the provisions of this Lease
and its cost paid in full and that there are no liens upon the Premises or the
Facility, the net insurance proceeds remaining, if any, shall be paid to Tenant,
provided Tenant is not in default under this Lease.
(f) Subject to the rights of the holders of any Permitted Mortgage, if
this Lease shall be terminated for any reason other than in accordance with this
Article or Article 21, Landlord shall be entitled to all insurance proceeds, and
Tenant shall have no interest in, nor any right, title, or claim to them.
(g) No destruction or damage to the Facility or any part of it shall
permit Tenant to surrender this Lease or shall relieve Tenant from its
obligation to pay rent or from any of its other obligations under this Lease.
Tenant waives any rights now or in the future conferred upon it by statute or
otherwise to quit or surrender this Lease or to any suspension, diminution,
abatement or reduction of rent on account of any destruction or damage to the
Facility or the Premises.
(h) If the Facility is damaged by fire or otherwise during the last
three (3) years of the term of this Lease and the cost of restoration will
exceed 50% of the then replacement value of the Facility, Tenant may elect to
terminate this Lease on at least thirty (30) days' notice to Landlord, given
within ninety (90) days after the damage. If Tenant elects to terminate, this
Lease shall end on the date specified in the notice, provided Tenant shall
restore the Premises to its condition prior to the commencement of the
construction of the Cogeneration Facility ("the restoration"), which restoration
shall be performed in accordance with all of the requirements of this Agreement
applicable to the original Work. Subject to the rights of the holder of any
Permitted Mortgage, all insurance proceeds shall first be made available for the
costs of
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restoration by Tenant and the balance shall be the sole property of Landlord,
and Tenant shall not have any right or claim to the insurance proceeds. The
termination of the Lease under this Section shall not release Tenant from its
obligation to pay rent or from any of its other obligations under this Lease
accrued or payable for the period prior to the effective date of termination.
ARTICLE 25
LATE CHARGES
Section 25.01. Past Due Rent. If Tenant shall fail to pay the rent when
------------- -------------
due and payable, Tenant shall pay to Landlord, as additional rent, an amount
calculated at a rate per year equal to 18% on the delinquent rent until paid in
full. Nothing in this section shall limit Landlord's right and remedies under
any other provision of this Lease.
ARTICLE 26
TITLE PROVISIONS
Section 26.01. Quiet Enjoyment. Tenant, upon payment of the rent and the
------------- ---------------
performance and observance of all covenants, warranties, agreements and
conditions of this Lease on its part to be kept, shall quietly have and enjoy
the Premises during the term of this Lease, without hindrance or molestation by
anyone claiming by, through or under Landlord.
Section 26.02 Landlord's Title. Landlord represents and warrants to Tenant
------------- ----------------
that it has fee simple title to the Premises and the power and authority to
execute and deliver this Lease and to carry out and perform all covenants to be
performed by it.
Section 26.03. Landlord's Title Documents. Upon execution of this Lease,
------------- --------------------------
Landlord shall deliver to Tenant such abstracts, maps, and title documents, as
it may have. Tenant shall
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return the title documents to Landlord within 90 days. Landlord shall also
provide Tenant a survey of the Premises.
Section 26.04. Title Objections. Within ninety (90) days after the
------------- ----------------
execution of this Lease, Tenant shall notify Landlord of any objections to the
title of Tenant's leasehold estate, which shall not include (a) liens for
current taxes not in default, (b) minor survey exceptions which do not adversely
affect the value of the Premises or prevent the use of the Premises for the
purposes contemplated by this Lease, (c) utility easements which do not
adversely affect the value of the Premises or prevent the use of the Premises
for the purposes contemplated by this lease and (d) liens and encumbrances which
do not materially adversely affect the value of the Premises or prevent the use
of the Premises for the purposes contemplated by this Lease. If Tenant does not
notify Landlord within that 90-day period, any objection to title Tenant may
have shall be deemed waived. Upon Landlord's failure to satisfy and discharge of
record the title objections within forty-five (45) days after its receipt of the
notice from Tenant, Tenant may, at its option, cancel this Lease by giving
Landlord written notice within ten (10) days after the expiration of the forty-
five (45) day period and the Lease shall terminate on the giving of notice. Upon
termination, neither party shall have any further rights or liabilities under
this Lease, except that Tenant shall remain liable to Landlord for any damages
caused by any default by Tenant.
ARTICLE 27
DEFAULT
Section 27.01. Events of Default. Any one or more of the following events
------------- -----------------
shall constitute an event of default (an "event of default"):
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(a) Tenant's failure to pay any rent when due and payable and the
continuation of the failure for sixty (60) days after written notice from
Landlord;
(b) Tenant's failure to observe and perform any of the terms,
covenants, conditions, limitations or agreements under Articles 10, 12, 20 and
23 of this Lease on Tenant's part to be observed or performed and the
continuation of the failure for a period of sixty (60) days after notice from
Landlord specifying the nature of the failure. If the Event of Default is
curable but is impossible to cure within sixty (60) days, so long as Tenant
shall commence and diligently prosecute the curing of the default, the Tenant
shall have a period of one hundred twenty (120) days from the date notice of
default shall have been given by Owner within which to cure the default;
(c) Tenant shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the present or any future federal bankruptcy
code or any other present or future federal, state or other bankruptcy or
insolvency statute or law (collectively in this Article "insolvency laws"), or
shall seek, consent to or acquiesce in the appointment of any bankruptcy or
insolvency trustee, receiver or liquidator of Tenant or of all or any
substantial part of its properties or of the Premises or the Facility;
(d) The commencement of any action, case or proceeding ("proceeding")
against Tenant seeking (i) any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any insolvency
laws, or (ii) the appointment, without the consent or acquiescence of Tenant, of
any trustee, receiver or liquidator of Tenant or
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of all or substantially all of its properties or of the Premises or the
Facility, and the proceeding shall continue undismissed for a period of ninety
(90) days;
(e) Tenant shall abandon or vacate the Premises or the Facility;
(f) A final judgment for the payment of money in excess of $100,000
shall be rendered against Tenant and shall remain undischarged for a period of
sixty (60) days during which execution shall not be effectively stayed; or
(g) The termination of the Steam Contract for any reason other than
the default of Landlord.
Section 27.02. Remedies on Default.
------------- -------------------
(a) Upon any one or more events of default, Landlord may, at its
option, at any time thereafter, give written notice to Tenant specifying the
event or events of default and stating that this Lease and the term demised
shall expire and terminate on the date specified in the notice, which shall be
at least ten days after the giving of the notice. Upon the date specified in
this notice, this Lease and the term demised and all rights of Tenant under this
Lease shall expire and terminate. The expiration or termination of this Lease by
Landlord shall not relieve Tenant of its liability and obligations under this
lease, which shall survive.
(b) Upon termination of this Lease pursuant to this Section, Tenant
shall quit and peacefully surrender the Premises, and Facility to Landlord.
Landlord, upon, or at any time after, the expiration or termination of this
Lease, without additional notice and without prejudice to any other rights and
remedies it shall have at law or in equity,
(i) may re-enter the Premises and the Facility, and remove from
them Tenant, its agents, employees, servants, licensees, and subtenants and
other persons, firms or corporations and all or any of its or their
property, either by summary dispossess
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proceedings or by any suitable action or proceeding at law or in equity, or
by force or otherwise, without being liable to indictment, prosecution or
damages for such action;
(ii) may repossess and have, hold and enjoy the Premises and the
Facility; and
(iii) shall have the right to receive all rental and other income
from the Premises and the Facility.
(c) Upon Landlord's termination of this Lease, reentry of the Premises
or dispossession of the Tenant by summary proceedings or otherwise:
(i) The rent shall become due and payable and be paid up to the
time of termination, re-entry, or dispossession;
(ii) Landlord at any time and from time to time may relet the
Premises and the Facility or any part or parts or either, either in the
name of Landlord or otherwise, for a term or terms which may, at Landlord's
option, be less than or exceed the period which would otherwise have
constituted the balance of the term of this Lease and on such conditions,
including, without limitation, concessions of free rent and alterations of
the Premises and the Facility, as Landlord, in its sole discretion may
determine, and Landlord may collect and receive all rents and income from
them;
(iii) Landlord shall not be responsible or liable for any failure
or refusal to relet the Premises and the Facility or any part of them, or
for any failure to collect any rent due upon any reletting of them;
(iv) Whether or not the premises or the Facility or any part of
them shall have been relet, Tenant, until the end of what would have been
the term of this Lease in the absence of expiration or termination, shall
be liable to Landlord, for damages for
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Tenant's default, which shall include, without limitation, all repossession
costs, brokerage commissions, legal expenses and reasonable attorneys'
fees;
(v) Landlord shall be entitled to recover damages from Tenant, by
separate action, actions or proceedings, monthly or at such other time or
times when the rent would have been payable under this Lease if it were
still in effect.
(d) Nothing in this Article shall limit or Prejudice the right of
Landlord to prove and obtain damages in an amount equal to the maximum allowed
by any statute or rule of law in effect at the time those damages are to be
proved, whether or not that amount, is greater than the amount provided by this
Article.
Section 27.03.
-------------
(a) Upon the occurrence of an event of default by Tenant, Landlord
shall also give written notice of the default, at the time written notice is
given to Tenant, to the holders of not more than two Permitted Mortgages ("the
Mortgagee") designated in writing by Tenant to Landlord.
(b) Upon the occurrence of an event of default by Tenant described in
paragraph (a) or (f) of Section 27.01 which shall not have been cured by Tenant
within the sixty (60) day period, the Mortgagee shall have an additional period
of thirty (30) days within which to cure the default.
(c) Upon the occurrence of an event of default by Tenant described in
paragraph (b) of Section 27.01 which shall not have been cured by Tenant within
the sixty (60) day period, the Mortgagee shall have an additional period of
thirty (30.) days within which to cure the default. If the event of default
described in paragraph (b) of Section 27.01 is curable but is impossible to cure
within sixty (60) days, so long as the Tenant or the Mortgagee shall
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commence and diligently prosecute the curing of the default, the Mortgagee shall
have a period of one hundred twenty (120) days from the date notice of default
shall have been given by Landlord within which to cure the default.
Section 27.04. Tenant expressly waives, to the extent permitted by law:
-------------
(a) the service of any notice of intention to re-enter provided by any
statute;
(b) for and on behalf of itself and all persons claiming through or
under it, including any leasehold mortgagee or other creditor, any and all right
of redemption or re--entry or re-possession in the event of:
(i) dispossession of Tenant by a judgment or by warrant of any
court or judge;
(ii) re-entry or re-possession by Landlord; or
(iii) any expiration or termination of this lease.
The terms "enter", "re-enter", "entry", or "re-entry" as used in this Lease are
not restricted to their technical legal meanings.
Section 27.05. Upon any breach or threatened breach by Tenant of any of
-------------
the agreements, terms, covenants or conditions contained in this Lease, Landlord
may enjoin the breach or threatened breach and may invoke any right and remedy
allowed at law, in equity, by statute, or otherwise as though re-entry, summary
proceedings, and the other remedies were not available under this Lease.
Section 27.06. Each right and remedy under this Lease shall be cumulative
-------------
and shall be in addition to every other right or remedy provided for in this
Lease or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise by Landlord of any one or
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more of those rights or remedies shall not preclude the simultaneous or later
exercise by Landlord of any or all other rights or remedies Landlord may have.
Section 27.07. This Article shall survive any termination, expiration or
-------------
cancellation of this Lease by the parties or as a result of any statute, law,
order or warrant.
Section 27.08. Landlord may, at its option, from time to time, commence
-------------
actions to recover any installment or installments of rents or damages, and
nothing in this Lease shall be deemed to require Landlord to await the date this
Lease would have expired had there been no default by Tenant or no termination
by Landlord.
ARTICLE 28
WAIVERS
Section 28.01. Waivers. No failure by Landlord to insist upon the strict
------------- -------
performance of any agreement, term, covenant or condition of this Lease or to
exercise any right or remedy upon a breach of any of them, and no acceptance of
full or partial rent during the continuance of any breach, shall constitute a
waiver of the breach or of the agreement, term, covenant or condition. No
agreement, term, covenant or condition to be performed or complied with by
Tenant, and no breach of any of them, shall be waived, altered or modified
except by a written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease, and each and every agreement, term, covenant
and condition of this Lease shall continue in full force and effect with respect
to any other existing or subsequent breach.
ARTICLE 29
APPROVALS AND REPRESENTATIONS
Section 29.01. Approvals. Except as otherwise provided in Section 1.03 of
------------- ---------
the Steam Contract, Tenant, at its sole expense, shall take all actions
necessary to obtain, and shall make
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and diligently prosecute applications ("the applications") for, all permits,
licenses, authorizations and other approvals (collectively "the approvals")
required from all governmental or administrative agencies or regulatory bodies
having jurisdiction, for the construction, installation and operation of the
Facility, including, without limitation, all site plan approvals, zoning
approvals, easement and franchise agreements, building permits, air emission
discharge permits, waste discharge permits, and all other licenses, permits and
permission to construct and maintain all on-site and off-site improvements,
curbcuts, roadway median cuts and utility lines and services. Landlord shall
cooperate with Tenant in the applications, without expense to Landlord, provided
the approvals sought are consistent with the provisions of this Lease.
Section 29.02. No representation, statement, or warranty, express or
-------------
implied, has been made by Landlord as to the condition of the Premises, or their
permitted use under applicable zoning, building, land use and similar laws,
ordinances and regulations ("use regulations"). Except to the extent otherwise
provided in Section 11.03 and in Section 1.03 of the Steam Contract, Tenant
assumes all responsibility for compliance with the use regulations, and Landlord
shall have no liability or responsibility for any defect in the Premises or for
any limitations upon the use of the Premises.
ARTICLE 30
FORCE MAJEURE
Section 30.01. If Landlord or Tenant shall be delayed, hindered in or
-------------
prevented from the performance of any act required under this Lease by reason of
acts of God or a public enemy, strikes, lockouts, riots, injunctions or other
interference through legal proceedings, state, federal or local laws or
regulations or requisitions of any governmental authority ("force majeure"),
performance of that act shall be excused for the period of the delay and the
period for the
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performance of the act shall be extended for a period equivalent to the period
of the delay, provided the party delayed shall give the other party written
notice and full particulars of the force majeure within a reasonable time after
the event occurs. The provisions of this Article shall not excuse Tenant from
the prompt payment of rent under this Lease.
ARTICLE 31
NOTICE
Section 31.01. Every notice, request, demand, consent, approval,
-------------
objections, document or other communication authorized or required by this Lease
shall be in writing and shall be deemed effective when delivered personally or
five days after deposited in the U.S. mails, registered or certified mail,
postage prepaid, return receipt requested, addressed to the other party at the
following address:
To Tenant:
Project Orange Associates, L.P.
630 First Avenue, Suite 30C
New York, New York 10016
and
650 North Belt
Houston, Texas 77060
with a copy to:
Kronish, Lieb, Weiner & Hellman
1345 Avenue of the Americas
New York, New York 10105
Attention: Russell S. Berman, Esq., and
To the holders of a permitted Mortgage identified, and at the
address stated, in a written notice by Tenant to Landlord
To Landlord:
Syracuse University
Skytop Office Building
Syracuse, New York 13244--5300
Attention: Senior Vice President for Business and Finance or
Successor
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with a copy to:
Bond, Schoeneck & King
One Lincoln Center
Syracuse, New York 13202
Attention: Anthony R. Pittarelli, Esq.
or to such other address as either party may designate by notice given from time
to time in accordance with this Section. A notice to change an address shall be
effective upon receipt by the other party.
ARTICLE 32
CERTIFICATES
Section 32.01. Either party shall, without charge, within ten (10) days
-------------
after written request of the other, certify, by written instrument duly executed
and acknowledged, to any mortgagee, purchaser, or proposed mortgagee or
purchaser, or to any other person, firm or corporation specified in the request,
the following matters:
(a) that this Lease has not been amended, or if it has, the substance
of the amendment;
(b) whether the Lease is in full force and effect;
(c) the existence of any default, set--off, counterclaim or defense on
the part of the other party;
(d) the commencement and expiration dates of this Lease;
(e) the dates to which rent has been paid; and
(f) any other matters that may reasonably be requested. The
certificate may be relied upon by the party requesting it and any other person,
firm or corporation to whom it may be exhibited or delivered, and the contents
of the certificate shall be binding on the party which executed it.
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ARTICLE 33
GOVERNING LAW
Section 33.01. This Lease and the performance of it shall be governed,
-------------
interpreted, construed and regulated by the laws of the State of New York.
ARTICLE 34
PARTIAL INVALIDITY
Section 34.01. If any term, covenant, condition or provision of this
-------------
Lease, or the application of it to any person or circumstance, shall be invalid
or unenforceable, the remainder of this Lease, or the application of that term
or provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected and every other term, covenant,
condition and provision of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
ARTICLE 35
MEMORANDUM OF LEASE
Section 35.01. The parties will, at the request of either one, promptly
-------------
execute duplicate originals of an instrument, in recordable form, which will
constitute a short form of Lease, setting forth a description of the Premises,
the terms of this Lease and any other portions of the Lease, except the rental
provisions as either party may request.
ARTICLE 36
INTERPRETATION
Section 36.01. Wherever the singular number is used in this Lease the same
-------------
shall include the plural and the masculine gender shall include the feminine and
neuter genders, and
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vice versa, as the context shall require. This Lease may be executed in several
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
ARTICLE 37
BINDING EFFECT
Section 37.01. Except as expressly provided otherwise in this Lease, the
-------------
covenants, conditions and agreements contained in this Lease shall bind and
inure to the benefit of Landlord and Tenant and their respective heirs,
successors, administrators and assigns.
ARTICLE 38
NO ORAL MODIFICATION - ENTIRE AGREEMENT
Section 38.01. All prior understandings and agreements between the parties
-------------
with respect to the subject matter of this Lease (including the Prior Agreement)
are merged within this Lease, which alone fully and completely sets forth the
understanding of the parties with respect to such subject matter. Tenant is not
relying on any representation or agreement other than those set forth in the
Agreements. This Lease may not be changed or terminated orally or in any manner
other than by a written agreement signed by the party against whom enforcement
is sought. No mutual termination or mutual cancellation of this Lease or
termination of this Lease by the Tenant shall be of any force or effect unless
approved in writing by the holders of a Permitted Mortgage, as defined in
Article 23.
ARTICLE 39
HEADINGS AND TABLE OF CONTENTS
Section 39.01. The headings of the Articles and Sections of this Lease are
-------------
for convenience and reference only and do not define, limit or describe the
intent of this Lease or in any way affect this Lease or the interpretation of
it.
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Section 39.02. The table of contents preceding this Lease is for the
-------------
purpose of convenience and reference only and is not to be deemed, construed or
interpreted in any way to be part of this Lease.
ARTICLE 40
WAIVER OF JURY TRIAL AND COUNTERCLAIMS
Section 40.01. The parties waive a trial by jury of any and all issues in
-------------
any action or proceeding between them or their successors or assigns connected
with or arising out of this Lease or any of its provisions, or Tenant's use and
occupation of the Premises or the Facility. In the event Landlord commences a
summary proceeding against Tenant to recover possession of the Premises and the
Facility, Tenant shall not interpose any counterclaim.
ARTICLE 41
NO BROKER
Section 41.01. The parties warrant and represent to each other that no
-------------
real estate broker or agent was instrumental or in any way responsible in
bringing about this Lease.
ARTICLE 42
TERMINATION
Section 42.01. If the guaranty by the Approved Operator required by
-------------
Section 7.01 of the Operating Agreement shall not be delivered to Landlord by
March 15, 1990, Landlord may, upon fifteen days written notice to Tenant,
terminate this Lease.
Section 42.02. The obligations of the parties under this Lease are
-------------
contingent upon the approval of this Lease by the Board of Trustees of Landlord.
If such approval is not granted by March 5, 1990, either party may terminate
this Lease upon fifteen days written notice to the other.
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IN WITNESS WHEREOF, the parties have caused this Lease to be executed by
their duly authorized officers.
SYRACUSE UNIVERSITY
By: /s/ Louis Marcoccia
_________________________________
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Partners, L.P., its general
partner
By: G.A.S. Orange Development, Inc., its
general partner
By: /s/ Adam Victor
_________________________________
Title: President
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STATE OF NEW YORK )
) ss:
COUNTY OF
On this ________ day of February, 1990, before me personally came ADAM
VICTOR to me known, who being by me duly sworn, did depose and say that he
resides in New York, New York, that he is the President of G.A.S. ORANGE
DEVELOPMENT, INC., the General Partner of G.A.S. Orange Partners, L.P., which is
the General Partner of Project Orange Associates L.P., the partnership described
in this instrument, and that he had authority to sign this instrument and he
acknowledged to me that he executed the instrument as the act and deed of the
partnership.
----------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF ONONDAGA )
On this day of February, 1990, before me personally came LOUIS G. MARCOCCIA
to me known, who being by me duly sworn, did depose and say that he resides in
Cazenovia, New York, that he is a Senior Vice President of SYRACUSE UNIVERSITY,
the corporation described in and which executed the above instrument; that he
knows the seal of the corporation; that the seal affixed to the instrument is
the corporate seal; and that he signed his name to the instrument.
----------------------------------
Notary Public
-54-
<PAGE>
Exhibit A
(Metes and bounds description of the leased premises. The leased
premises are shown on the map attached to this Exhibit A. A metes and
bounds description of the leased premises shall be inserted in this
Exhibit A as soon as it is available.]
Together with a non-exclusive easement to Tenant, its successors and
assigns, upon, over and across the premises of Landlord lying between the leased
premises and Landlord's existing steam plant ("the steam plant") for ingress and
egress to and from the leased premises and McBride Street.
Excepting and reserving from the leased premises the existing
transformers and the building in which they are housed (collectively "the
transformer building"), easements to Landlord, its successors and assigns upon,
over, across and under the leased premises (i) for the entry and passage of
pedestrians, vehicles and machines to and from Landlord's transformer building,
chilled water plant ("the chilled water plant") located adjacent to the leased
premises, and the steam plant, including, without limitation, an easement over
an area five feet in width along the west wall of the transformer building, an
area twenty feet in width along the north wall of the transformer building, and,
if Tenant shall not have constructed a common wall along the east and south
walls of the transformer building, an easement three feet in width along the
east and south walls of the transformer building, an easement over an area
fifteen feet in width along the west wall and the north wall of the chilled
water plant and an easement over an area at least ten feet in width, and,
depending on the final design of the Cogeneration Plant, as much as fifteen feet
in width, along the east wall of the Riley Plant, as indicated on the dotted
area on the map attached, and (ii) for the installation, repair, replacement and
maintenance of lines for the transmission of electrical power, communications,
water, steam, condensate, fuel and other utilities, consisting of overhead or
underground poles, lines, conduits, pipes, mains, ducts,
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<PAGE>
manholes, and other appurtenant and supporting facilities, apparatus and
structures as Landlord may now or from time to time deem necessary for the
operation of the transformer building, the chilled water plant and the steam
plant.
The precise location of the easements granted and reserved shall be
determined and confirmed by Landlord and Tenant upon the completion of the Plans
for the Cogeneration Plant. Landlord shall have the right to relocate such
easements from time to time provided such relocation does not unreasonably
interfere with Tenant's operation of the Cogeneration Plant.
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<PAGE>
EXHIBIT 10.10
THE CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY
AND
PROJECT ORANGE ASSOCIATES, L.P.
-------------------------------------------
LEASE AND SUBLEASE AGREEMENT
-------------------------------------------
Dated as of April 5, 1991
The City of Syracuse Industrial Development Agency (the "Issuer") has
Granted a Security Interest in Certain Rights of the Issuer Under This
Lease and Sublease Agreement and Certain Monies Due, and to Become
Due, to the Issuer Hereunder, Have Been Assigned to Algemene Bank,
Nederland, N.V., Cayman Islands Branch (the "Agent"), as Agent for the
benefit of the Banks ("Banks") pursuant to certain Mortgages (the
"Mortgages") each dated as of April 5, 1991, from the Issuer to the
Agent.
City of Syracuse Industrial Development Agency
1991 Taxable Industrial Development Revenue Bond
(Project Orange Associates, L.P. Project)
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I............................................................ 5
Definitions..................................................... 5
1.1 Definitions...................................... 5
1.2 Interpretation................................... 5
ARTICLE II........................................................... 7
Representations And Covenants................................... 7
2.1 Representations and Warranties of the Issuer..... 7
2.2 Representations and Warranties of the
Guarantor........................................ 9
2.3 Covenants of the Issuer.......................... 14
2.4 Covenants of the Guarantor....................... 15
ARTICLE III.......................................................... 17
3.1 Use of Project................................... 17
ARTICLE IV........................................................... 17
Construction and Operation of the Project; Loans from
Banks; Use of Loan Proceeds.................................... 17
4.1 Development, Acquisition, Construction and
Operation of the Project......................... 17
4.2 Guarantor to Obtain Loans........................ 18
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Page
----
4.3 Completion by Guarantor......................... 18
4.4 Remedies Against Contractors, Subcontractors,
Materialmen, and their Sureties................. 19
ARTICLE V............................................................ 20
Sublease of the Leased Premises and Outside Easements,
Lease of the City Easements and Construction of the
Project.................................................... 20
5.1 Lease and Sublease.............................. 20
5.2 Use and Operation of Project.................... 20
5.3 Incorporation of Ground Lease................... 21
ARTICLE VI........................................................... 21
Term of Lease; Conveyance of Project 21
6.1 Term............................................ 21
6.2 Earlier Conveyance of Project................... 21
6.3 Ultimate Conveyance of Project.................. 23
ARTICLE VII.......................................................... 25
Rental Obligations and Issuer's Fee 25
7.1 Rent............................................ 25
7.2 Issuer's Fee.................................... 26
7.3 Obligations of Guarantor Unconditional.......... 26
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Page
----
ARTICLE VIII......................................................... 28
Maintenance, Modifications, Taxes, and Insurance..................... 28
8.1 Maintenance and Operation of Project................. 28
8.2 Taxes, Assessments, and Utility Charges.............. 28
8.3 Insurance Required................................... 29
8.4 Application of Insurance Proceeds.................... 29
ARTICLE IX........................................................... 30
Damage, Destruction, and Condemnation................................ 30
9.1 Damage or Destruction................................ 30
9.2 Condemnation......................................... 31
9.3 Additions to Project................................. 31
9.4 Repairs and Restoration.............................. 32
ARTICLE X............................................................ 32
Special Covenants.................................................... 32
10.1 Covenant of Quiet Enjoyment.......................... 32
10.2 No Warranty of Condition or Suitability by
the Issuer; Acceptance "As Is."...................... 32
10.3 Indemnification...................................... 33
10.4 Right of Access to Project........................... 38
10.5 Maintenance of Existence............................. 38
10.6 Agreement to Provide Information..................... 38
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Page
----
10.7 Compliance With Orders, Ordinances, Etc............. 39
10.8 Liens and Encumbrances.............................. 40
10.9 Performance by Issuer of Guarantor's
Obligations......................................... 41
10.10 Compliance with Clean-Up Laws....................... 42
ARTICLE XI............................................................. 43
Assignments; Merger of Issuer..................................... 43
11.1 Assignment of Lease and Guarantor's
Interest in the Project............................. 43
11.2 Pledge and Assignment of Issuer's Interests
to the Agent........................................ 44
11.3 Merger of Issuer.................................... 44
11.4 Lease of Project; Sale of Equipment................. 45
ARTICLE XII............................................................ 46
Events of Default and Remedies.................................... 46
12.1 Events of Default Defined........................... 46
12.2 Remedies............................................ 46
12.3 No Additional Waiver Implied by One Waiver.......... 47
ARTICLE XIII........................................................... 47
Miscellaneous..................................................... 47
13.1 Notices............................................. 47
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Page
----
13.2 Binding Effect........................................ 48
13.3 Severability.......................................... 48
13.4 Amendments, Changes, and Modifications................ 49
13.5 Execution of Counterparts............................. 49
13.6 Applicable Law........................................ 49
13.7 Recording and Filing.................................. 49
13.8 Survival of Obligations............................... 50
13.9 Table of Contents and Section Headings Not
Controlling........................................... 50
13.10 No Recourse; Special Obligation....................... 51
13.11 Subordination To Ground Lease
and Mortgages......................................... 53
EXHIBIT A.............................................................. A-1
Description of the Leased Premises
v
<PAGE>
LEASE AND SUBLEASE AGREEMENT
LEASE AND SUBLEASE AGREEMENT, dated as of April 5, 1991 (this "Lease"), by
and between the CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY, a body corporate
and politic and a public instrumentality of the State of New York having its
principal office at 301 City Hall, Syracuse, New York (the "Issuer"), and
PROJECT ORANGE ASSOCIATES, L.P., a Delaware limited partnership having an office
at 6780 Northern Boulevard, Suite 501, East Syracuse, New York 13057 (the
`Guarantor").
W I T N E S S E T H:
-------------------
WHEREAS, the New York State Industrial Development Agency Act, constituting
Title I of Article 18-A of the General Municipal Law of the State of New York
(the "Enabling Act") was duly enacted into law as Chapter 1030 of the Laws of
1969 of New York State; and
WHEREAS, the Enabling Act authorizes and provides for the creation of
industrial development agencies for the benefit of the several counties, cities,
villages, and towns in the State of New York and empowers such agencies, among
other things, to acquire, construct, reconstruct, lease, improve, maintain,
equip, furnish and dispose of land and any buildings or other improvements, and
all real and personal properties, including, but not limited to, machinery and
equipment deemed necessary in connection therewith, whether or not now in
existence or under construction, which shall be suitable for manufacturing,
warehousing, research, commercial, industrial or civic purposes in order to
advance the job opportunities, health, general prosperity, and economic welfare
of the people of the State of New York and to improve their standard of living;
and
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WHEREAS, the Enabling Act further authorizes each such agency to lease or
sell any or all of its properties, to mortgage and pledge any or all of its
properties, whether then owned or thereafter acquired, and to pledge the
revenues and receipts from the lease or sale thereof; and
WHEREAS, the Issuer was created pursuant to and in accordance with the
provisions of the Enabling Act by Chapter 641 of the Laws of 1979 the State of
New York (collectively with the Enabling Act, the "Act") and is empowered under
the Act to undertake the Project; and
WHEREAS, the Issuer, by resolution adopted on November 15, 1990, (the
"Resolution"), resolved to undertake the Project; and
WHEREAS, the Guarantor has entered into a Lease Agreement, dated February
27, 1990, between Syracuse University (the "University"), as lessor, and the
Guarantor, as lessee (such Lease, as heretofore amended, the "Ground Lease"), a
memorandum of which is to be recorded immediately prior to the recording of this
Lease or a memorandum of this Lease, pursuant to which the University leased to
the Guarantor certain real property located in the City of Syracuse, New York,
as more particularly described in Exhibit A, attached hereto (the "Leased
---------
Premises"), upon which property the Guarantor plans to construct the Facility;
and
WHEREAS, the Issuer proposes to assist the Guarantor's construction and
equipping of the Project by (i) issuing its 1991 Taxable Industrial Development
Revenue Bonds (Project Orange Associates, L.P.) (the "Bonds") in the aggregate
amount of $204,300,000 pursuant to the Act to finance certain costs incurred by
the Guarantor (A) in the acquisition of the Easements and related improvements,
including the Pipeline to be located on the Easements, (B) in the
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<PAGE>
construction and development on the Leased Premises and the Easements of the
Facility and the Pipeline, (C) in the acquisition and installation of the
Equipment therein, (D) to obtain a prepaid supply of natural gas for the
Project, (E) to pay the expenses anticipated to be incurred in connection with
the issuance of the Bonds, and (F) to fund a reserve for the payment of debt
service on the Bonds; (ii) appointing the Guarantor as its agent to develop and
construct the Project and purchase and install the Equipment; (iii) accepting an
assignment of the Ground Lease; (iv) accepting a conveyance of the Easements
located within the City of Syracuse, New York (the "City Easements") from the
Guarantor; (v) leasing the Easements located outside of the City of Syracuse,
New York (the "Outside Easements") from the Guarantor; (vi) entering into the
Financing Agreement, dated as of April 5, 1991, between the Guarantor, the
Issuer, the Agent and the Banks (the "Financing Agreement"); (vii) granting a
first mortgage lien, a second mortgage lien and a third mortgage lien on and a
security interest in the Issuer's interest in the Project (including, without
limitation, the Issuer's interest in the Ground Lease, the Easements, the
Pipeline, the Facility and the Equipment) and this Lease to the Algemene Bank,
Nederland, N.V., Cayman Islands Branch (the "Agent"), as agent for the benefit
of the Banks, to secure the Bonds pursuant to the Financing Agreement; and
(viii) executing and delivering such other Financing Documents as are required
under the Financing Agreement; and
WHEREAS, the Guarantor has assigned all of its right, title and interest
under the Ground Lease and the City Easements to the Issuer, and the Guarantor
has leased the Outside Easements to the Issuer pursuant to the Assignment of
Lease, the Assignment of Easements and the Lease Agreement, respectively, each
dated as of April 5, 1991 and each between the Guarantor and the Issuer;
3
<PAGE>
WHEREAS, the Issuer proposes to sublet the Leased Premises and the Outside
Easements to the Guarantor and to lease the Facility and City Easements to the
Guarantor, and the Guarantor proposes to lease the Facility and the City
Easements, and sublease the Leased Premises and the Outside Easements from the
Issuer, pursuant to the terms and conditions herein set forth; and
WHEREAS, all things necessary to constitute this Lease as a valid and
binding agreement by and between the parties hereto in accordance with the terms
hereof have been done and performed, and the creation, execution, and delivery
of this Lease have, in all respects, been duly authorized;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto hereby formally covenant,
agree, and bind themselves as follows, to wit:
ARTICLE I
DEFINITIONS
1.1 Definitions.
Unless otherwise defined herein all capitalized terms used herein have the
meanings assigned to them in the Financing Agreement.
1.2 Interpretation.
In this Lease, unless the context otherwise requires:
4
<PAGE>
(a) The terms "hereby," "hereof," "herein," "hereunder," and any similar
terms as used in this Lease refer to this Lease; the term "heretofore" shall
mean before and the term "hereafter" shall mean after the date of this Lease;
(b) Words of masculine gender shall mean and include correlative words of
feminine and neuter genders, and words importing the singular number shall mean
and include the plural number and vice versa; and
(c) Any certificates, letters, or opinions required to be given pursuant to
this Lease shall mean a signed document attesting to or acknowledging the
circumstances, representations, opinions of law, or other matters therein stated
or set forth or setting forth matters to be determined pursuant to this Lease
unless otherwise agreed to in writing by the parties to this Lease.
(d) "Hazardous Substance" or "Hazardous Substances" means "hazardous
materials," "oil," and "petroleum products" as those terms are defined in the
Federal Resource Conservation and Recovery Act, the Federal Comprehensive
Environmental Response Compensation and Liability Act, the Federal Hazardous
Materials Transportation Act, the Federal Clean Water Act, and corresponding
state and local laws and ordinances, as such acts, laws or ordinances are
currently in effect, or from time to time amended, or as defined in any Federal,
state or local regulation currently in effect, or from time to time amended, as
adopted under such acts, laws or ordinances.
(e) "Unassigned Rights" means the rights of the Issuer and the members,
officers, agents and employees of the Issuer to indemnification from the
Guarantor under this Lease and
5
<PAGE>
under any other Operative Document and their rights, if any, under this Lease
and any other Operative Document, to insurance proceeds which represent
compensation for any loss any of them may personally suffer or any personal
liability any of them may incur on account of or in connection with the
ownership or operation of the Project or the Issuer's obligations under this
Lease or any other Operative Document. The Unassigned Rights include, without
limitation, the Issuer's rights under Sections 2.4(a) and 10.3 of this Lease.
(f) "Auxiliary System" and "Existing Plant" have the meanings assigned to
those terms in the Operating Agreement.
ARTICLE II
REPRESENTATIONS AND COVENANTS
The Issuer hereby represents and warrants to the Guarantor as follows:
(a) The Issuer is a corporate governmental agency constituting a body
corporate and politic and a public benefit corporation duly organized, existing,
and established under the laws of the State of New York (including the Act), and
is authorized and empowered to enter into this Lease and the transactions
contemplated herein and to carry out its obligations hereunder. Based upon the
representations of the Guarantor as to the utilization of the Project, the
Project will constitute a "project," as such quoted term is defined in the Act.
By proper official action of its members, the Issuer has duly authorized the
execution and delivery of this Lease and the Issuer's participation in the
transactions contemplated hereby.
6
<PAGE>
(b) Neither the execution and delivery of this Lease, the consummation of
the transactions contemplated hereby, nor the fulfillment of or compliance with
the provisions of the other Financing Documents to which the Issuer is a party
will conflict with or result in a breach by the Issuer of any of the terms,
conditions, or provisions of the Act, the By-Laws of the Issuer, or any order,
judgment, restriction, agreement, or instrument to which the Issuer is a party
or by which it is bound or will constitute a default by the Issuer under any of
the foregoing.
(c) The Issuer will cause the Project to be constructed and installed and
the Easements acquired and will sublease the Leased Premises and the Outside
Easements (including the Pipeline located on such Easements) to the Guarantor
and lease the Facility and the City Easements (including the Pipeline located on
such Easements) to the Guarantor pursuant to this Lease, all for the purpose of
advancing the job opportunities, health, general prosperity, and economic
welfare of the people of the State of New York and improving their standard of
living.
(d) By Resolution adopted on November 15, 1990, the Issuer determined that
based upon the review of the materials submitted, representations made by the
Guarantor relating to the Project and the findings statement (the "Findings
Statement") of the City of Syracuse, acting as lead agency pursuant to the New
York State Environmental Conservation Law (the "Lead Agency"), construction of
the Project would not have a "significant impact" on the environment within the
meaning of such quoted term under the New York State Environmental Quality
Review Act.
7
<PAGE>
(e) The Issuer is issuing the Bonds in order to finance the development,
acquisition and construction of the Project. The Bonds mature, bear interest,
are redeemable and have the other terms and provisions set forth in the
Financing Agreement.
(f) The Financing Documents constitute, or upon their execution and
delivery in accordance with the terms thereof will constitute, valid and legally
binding obligations of the Issuer, enforceable in accordance with their
respective terms.
(g) No suit, action or arbitration, or legal, administrative or other
proceeding is pending or has been threatened against the Issuer that would
materially and adversely affect the validity or enforceability of this Lease or
the ability of the Issuer to fulfill its commitments hereunder, or that could
result in any material adverse change in the business or financial condition of
the Issuer.
The Guarantor hereby represents and warrants to the Issuer as follows:
(a) The Guarantor is a limited partnership organized and existing under the
laws of the State of Delaware, is duly authorized to do business in the State of
New York, has the power and authority to enter into this Lease and the other
Financing Documents to which it is a party and to carry out its obligations
hereunder and thereunder, and has duly authorized the execution, delivery, and
performance of this Lease and the other Financing Documents.
8
<PAGE>
(b) The Financing Documents constitute, or upon their execution and
delivery in accordance with the terms thereof will constitute, valid and legally
binding obligations of the Guarantor, enforceable in accordance with their
respective terms.
(c) The Guarantor has caused the Ground Lease and the City Easements to be
assigned to the Issuer and has caused the Outside Easements to be leased to the
Issuer and will cause the Project to be constructed and improved all for the
purposes of promoting the prosperity and general welfare of all citizens of the
State of New York.
(d) Neither the execution and delivery of the Financing Documents to which
the Guarantor is a party, the consummation of the transactions contemplated
thereby, nor the fulfillment of or compliance with the provisions thereof will:
(1) Result in a breach of, or conflict with any term or provision in,
the Partnership Agreement or this Lease;
(2) Require any consent under (except for consents which have been
received) or result in a breach of or default under any credit agreement,
indenture, purchase agreement, mortgage, deed of trust, commitment,
guaranty, or other agreement or instrument to which the Guarantor is a
party or by which it or any interest of the Guarantor in any kind of
property or asset, whether real, personal or mixed, or tangible or
intangible (the "Property") may be bound or affected; or
(3) Conflict with or violate any existing law, rule, regulation,
judgment, order, writ, injunction, or decree of any Governmental Authority
having jurisdiction over the Guarantor or any of the Property of the
Guarantor.
9
<PAGE>
(e) No suit, action or arbitration, or legal, administrative or other
proceeding is pending or has been threatened against the Guarantor that would
materially and adversely affect the validity or enforceability of this Lease or
the ability of the Guarantor to fulfill its commitments hereunder, or that could
result in any material adverse change in the business or financial condition of
the Guarantor.
(f) The Issuer's execution and delivery of this Lease and its participation
in the transactions contemplated hereby, including its assistance in financing a
portion of the cost of the Project:
(1) Has been an important consideration in the Guarantor's decision to
construct and equip the Project in the City of Syracuse; and
(2) Will not result in the removal of an industrial or manufacturing
plant or commercial activity of any Project occupant, other than the
Guarantor, from one area of the State of New York to another area of the
State of New York or in the abandonment of one or more plants or facilities
of any user, occupant, or proposed user or occupant of the Project, other
than the Guarantor, located within the State of New York.
(g) So long as the Issuer owns the Facility and is the lessee under the
Ground Lease and has an interest in the Project, the Project is and will
continue to be a "project" (as such quoted term is defined in the Act), and the
Guarantor will not take any action (or omit to take any action required by the
Financing Documents or which the Issuer or the Agent, together with Issuer's
counsel, advise the Guarantor in writing should be taken), or allow any action
to be
10
<PAGE>
taken, which action (or omission) would in any way cause the Project not to
constitute a "project" (as such quoted term is defined in the Act).
(h) The City of Syracuse, acting as lead agency pursuant to the State of
New York's Environmental Conservation Law has issued a findings statement as
required by 6 NYCRR Part 617.9(c) stating that it has considered the draft
environmental impact statement, the supplemental environmental impact statement
and the final environmental impact statement prepared in connection with the
acquisition, construction and installation of the Project and has certified that
(i) the requirements of Article 8, New York State Environmental Conservation Law
and 6 NYCRR Part 617 have been met, (ii) consistent with social, economic and
other essential considerations from among the reasonable alternatives thereto,
the action approved is one which minimizes or avoids adverse environmental
effects to the maximum extent practicable, including the effects disclosed in
the environmental impact statement, and (iii) consistent with social, economic
and other essential considerations, to the maximum extent practicable, adverse
environmental effects revealed in the environmental impact statement process
will be minimized or avoided by incorporating as conditions to the Lead Agency's
decision forming the basis for the Findings Statement the mitigative measures
which were identified as practicable.
(i) The Project and the operation thereof will comply in all material
respects with all applicable building, zoning, environmental, planning, and
subdivision laws, ordinances, rules, and regulations of Governmental Authorities
having jurisdiction over the Project (the applicability of such being determined
both as if the Issuer were the owner of the Project and as if the Guarantor, and
not the Issuer, were the owner of the Project).
11
<PAGE>
(j) Except for the Outside Easements and that part of the Pipeline
constructed on the Outside Easements, after completion of the Project no part of
the Project will be located outside of the City of Syracuse, New York.
(k) Except as disclosed in Exhibit W to the Financing Agreement or in the
Hazardous Substance Reports, as of the date hereof the Guarantor has no
knowledge of hazardous, nuclear or toxic waste or substance contamination
affecting the Leased Premises which would require remedial action under any
Clean-Up Laws (as defined in Section l0.3(a)(7)). The Guarantor has exercised
due diligence to review the report dated December 1989 entitled "Environmental
Liability Assessment, Syracuse University Steam Station" prepared by O'Brien &
Gere Engineers, Inc. to ascertain whether the Leased Premises are or have been
affected by the presence of any Hazardous Substances that could necessitate
taking remedial or protective action or that could cause harm to persons,
property, the environment, or the Leased Premises.
(l) The Construction Contract obligates the Contractor to: (i) hire and
employ at the Leased Premises skilled workers from the local labor force, that
being residents of the City of Syracuse and Central New York, and to exhaust
that resource of workers before those from another geographic residence are
hired to perform work at the Leased Premises; (ii) report quarterly to the
Issuer until substantial completion of the Facility, the residence of workers
employed by the Contractor at the Leased Premises, such report to identify
workers only by the zip code of their residence; (iii) cause the local labor
force hired by the Contractor who work at the Leased Premises to comprise women
and minorities whenever and wherever it is deemed practicable; (iv) pay wages to
the local labor force hired by the Contractor for work at the Leased Premises at
the hourly rate established as "prevailing wages" for their work in the Syracuse
area;
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and (v) provide the local labor force hired by the Contractor for work at the
Leased Premises with health and welfare and pension benefits equivalent to those
established by the prevailing wage standard for their work in the Syracuse area.
The Guarantor shall use its best efforts to cause Mr. Adam Victor, or his
designee, to remain available as a liaison between the Issuer and the Contractor
to promote and create an amicable and harmonious relationship between the two to
insure that the Facility will be built within the prescribed time frame and
without disruption.
The Issuer, to the extent of its interest therein, shall not sell, assign,
transfer, encumber, or pledge as security the Project or any part thereof except
as contemplated or allowed by the terms of the Financing Documents.
(a) The Guarantor shall perform, or cause to be performed, for and on
behalf of the Issuer, each and every obligation of the Issuer, which is within
the control of the Guarantor, under and pursuant to the Operative Documents, and
shall defend, indemnify, and hold harmless the Issuer and its members, officers,
agents (other than the Guarantor) and employees from and against every expense,
liability, or claim arising out of the failure of the Guarantor to fulfill its
obligations under the provisions of this subsection 2.4(a).
(b) The Guarantor shall cause all notices as required by law to be given
and shall comply or cause compliance with all laws, ordinances, municipal rules,
and regulations and requirements of all Governmental Authorities applying to or
affecting the conduct of work on or the operation of the Project (the
applicability of such laws, ordinances, rules, and regulations to
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<PAGE>
be determined both as if the Issuer were the owner of the Project and as if the
Guarantor, and not the Issuer, were the owner of the Project) and the Guarantor
will defend and save the Issuer and its officers, members, agents (other than
the Guarantor), and employees harmless from all fines and penalties due to
failure to comply therewith.
(c) In the event of the termination of this Lease pursuant to Section 6.2,
10.10 or 12.2 hereof, the Guarantor agrees to purchase the Project in accordance
with the provisions of Section 6.3 hereof.
(d) The Guarantor shall not allow the manufacture (except to the extent, if
any, that such substances are a byproduct of the operation of the Project and
then only to the extent such manufacture is in compliance in all material
respects with applicable laws) or disposal of any Hazardous Substances on the
Leased Premises or otherwise at the Facility, and shall only allow the storage
or presence of Hazardous Substances on the Leased Premises or otherwise at the
Facility to the extent necessary in connection with the operation of the Project
and if such storage or presence is in compliance with applicable laws.
(e) The Issuer shall have the right at any time after the occurrence and
during the continuance of an Event of Default which results from a breach of
Section 2.4(d), but in no event more than once in any year, to conduct an
environmental audit of the Facility by an environmental consultant reasonably
acceptable to both the Issuer and the Guarantor (the "Environmental Consultant")
and the Guarantor shall cooperate in the conduct of the same. The cost of such
audits shall be borne by the Guarantor.
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(f) The Guarantor will not lease or sublease the whole or any portion of
the Project for an unlawful purpose.
(g) The Guarantor shall take all actions necessary to cause the Tenneco
Letter of Credit and any replacements thereof to be issued as required in the
Financing Agreement.
ARTICLE III
USE OF PROJECT
During the term of this Lease, the Guarantor shall be entitled to all of
the benefits from the use of the Project (including, but not limited to, the
Leased Premises, the Easements, the Facility and the Pipeline) in any manner not
otherwise prohibited by the Financing Documents, so long as such use does not
cause the Project to fail to qualify as a "project" under the Act.
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ARTICLE IV
CONSTRUCTION AND OPERATION OF THE PROJECT; LOANS FROM BANKS; USE OF LOAN
PROCEEDS
(a) Title to all materials, equipment, machinery, and any other property
acquired by the Guarantor and intended to be incorporated or installed in and to
become part of the Project shall vest in the Issuer immediately upon payment
thereof or incorporation or installation in the Project, whichever shall first
occur; provided, however, that all alterations, improvements and additions made
to the Existing Plant, other than the Auxiliary System, and whether or not
affixed or moveable, shall upon installation become the property of the
University to the extent required under the Operating Agreement. The Guarantor
shall execute, deliver, and record or file all instruments necessary or
appropriate to vest title to any such property (other than the property
described in the proviso to the preceding sentence) in the Issuer and shall take
all action necessary or appropriate to protect such title against claims of any
third Persons. The Issuer agrees that the Auxiliary System shall become the
property of the University upon the expiration or earlier termination of the
Operating Agreement in accordance with its terms.
(b) The Guarantor has given, or will give or cause to be given, all notices
and has complied, or will comply or cause compliance with, all existing laws,
ordinances, rules, regulations, and requirements of all Governmental Authorities
applying to or affecting the conduct of work on, or the operation of, the
Project (the applicability of such laws, ordinances, rules, and regulations to
be determined both as if the Issuer were the owner of the Project and as
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if the Guarantor, and not the Issuer, were the owner of the Project) and the
Guarantor will defend, indemnify, and save the Issuer and its officers, members,
agents (other than the Guarantor), servants, and employees harmless from all
fines and penalties due to failure to comply therewith.
Simultaneously with the delivery of this Lease, the Issuer will deliver the
Bonds in the aggregate principal amount of $204,300,000 under and pursuant to a
resolution adopted by the Issuer authorizing the issuance of the Bonds. The
proceeds of sale of the Bonds received by the Issuer shall be deposited in the
Construction Account and made available to the Guarantor in accordance with the
provisions of this Lease and the Financing Agreement. Pending application,
amounts so deposited may be invested as provided in the Financing Agreement.
In the event that the proceeds of the Bonds are not sufficient to pay in
full all costs of the development, acquisition, construction and equipping of
the Project, the Guarantor shall, to the extent required by the Financing
Agreement, complete such development, acquisition, construction and equipping
and pay all such sums as may be in excess of the proceeds of the Bonds. All
portions of the Project developed, acquired, constructed or equipped at the
Guarantor's cost shall immediately, upon such development, acquisition,
construction or equipping, be subject to the Liens of the Mortgages.
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In the event of a default by any contractor, subcontractor, or materialman
under any contract made by them in connection with construction, equipping,
operation or maintenance of the Project or in the event of a breach of warranty
or other liability with respect to any materials, workmanship, or performance
guaranty, the Guarantor may, in its discretion, proceed, either separately or in
conjunction with others, to enforce the remedies of the Guarantor and/or the
Issuer against the contractor, subcontractor, or materialman so in default and
against each surety for the performance of such contract. The Guarantor may
prosecute or defend any action or proceeding or take any other action involving
any such contractor, subcontractor, materialman, or surety which the Guarantor
deems reasonably necessary. The Guarantor shall advise the Issuer of any actions
or proceedings taken hereunder. No such suit shall relieve the Guarantor of any
of its obligations under this Lease.
ARTICLE V
SUBLEASE OF THE LEASED PREMISES AND OUTSIDE EASEMENTS, LEASE OF THE CITY
EASEMENTS, FACILITY AND PERSONAL PROPERTY, AND CONSTRUCTION OF THE PROJECT.
The Issuer hereby sublets to Guarantor the Leased Premises and the Outside
Easements (including the portion of the Pipeline located on such Easements) and
leases to Guarantor the Facility, the City Easements (including the portion of
the Pipeline located on such Easements) and all personal property acquired by
the Issuer for use in connection with the Project (the "Personalty"), and
Guarantor hereby leases or subleases, as the case may be, from the Issuer the
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Leased Premises, the Facility, the Pipeline, the Outside Easements, the City
Easements and the Personalty for and during the term provided herein and upon
and subject to the terms and conditions herein set forth.
The Guarantor shall construct the Project on the Leased Premises, the City
Easements and the Outside Easements pursuant to the Ground Lease and the
Financing Agreement, and shall use the Leased Premises to construct, operate and
maintain the Facility and for no other purpose or purposes. The Guarantor shall
not occupy, use or operate the Project or any part thereof to be occupied, used
or operated for any unlawful purpose or in violation of any certificate of
occupancy affecting the Project.
All of the terms, provisions, covenants and conditions contained in the
Ground Lease are in addition to the terms and conditions of this Lease and,
except as otherwise expressly provided herein and as may be provided by that
certain Consent and Agreement dated as of April 5, 1991 among the University,
the Agent, the Guarantor and the Issuer, such rights and obligations as are
granted to and imposed upon the lessee therein are, during the term of this
Lease, granted to or imposed upon the Guarantor.
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ARTICLE VI
TERM OF LEASE; CONVEYANCE OF PROJECT
The term of this Lease shall commence on the date that the term of the
Ground Lease commences and shall continue in full force and effect (unless
earlier terminated pursuant hereto) until the earlier of (i) the termination of
the Ground Lease, as the same may from time to time be extended, or (ii) the
termination or expiration of the term of the PILOT Agreement.
(a) Notwithstanding anything herein to the contrary, after the occurrence
and during the continuance of an "Event of Default" under the PILOT Agreement,
the Issuer may, with at least 15 days' prior written notice to the Agent and to
the Guarantor and provided that the Issuer is entitled to reconvey the Project
or its interest in any portion thereof to the Guarantor pursuant to Section 6.03
of the PILOT Agreement, terminate this Lease and reconvey and assign to the
Guarantor the Issuer's entire right, title and interest in the Project
(including but not limited to its interest under the Operative Documents (other
than the Unassigned Rights), the Ground Lease and its interest in the Facility,
the Pipeline, the Easements and the Personalty) in accordance with Section 6.03
of the PILOT Agreement. In the event that the Issuer exercises its right under
Section 6.03 of the PILOT Agreement to reconvey its interest in the Project to
the Guarantor, the Issuer shall also terminate this Lease and assign to the
Guarantor the Issuer's entire interest in all Operative Documents (except for
the Unassigned Rights), the Ground Lease, the Facility, the
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Pipeline, the Easements and the Personalty, in compliance with Section 6.3
hereof, except that the Liens of the Mortgages may remain outstanding.
(b) Notwithstanding anything herein to the contrary, the Guarantor shall
have the option, in its sole discretion and at any time, to terminate this Lease
upon giving the Issuer and the Agent written notice signed by an authorized
representative of the Guarantor stating the Guarantor's intention to do so
pursuant to this Section 6.2(b) and upon compliance with the requirements set
forth in Section 6.2(c) hereof.
(c) In the event the Guarantor exercises its option to terminate this Lease
in accordance with Section 6.2(b) hereof or the Issuer exercises its right to
terminate this Lease in accordance with Section 6.2(a), 10.10, or 12.2 hereof,
the following payments shall be made by the Guarantor:
(i) to the Agent, all amounts payable by the Issuer and/or the
Guarantor, if any, under the Financing Documents; provided, however,
that in lieu of making such payments the Guarantor may deliver to the
Issuer a release, in form reasonably satisfactory to the Issuer,
pursuant to which the Issuer is released by the Agent and the Banks
from its obligations under the Financing Documents;
(ii) to the Issuer, an amount certified by the Issuer sufficient
to pay all unpaid fees and expenses of the Issuer and of its members,
officers, employees and agents (other than the Guarantor) incurred
under this Lease and the Mortgages; and
(iii) to the Issuer or the City of Syracuse, as appropriate, all
amounts which are then due and unpaid under the PILOT Agreement.
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Upon the termination of this Lease pursuant to Section 6.2(a), 6.2(b),
10.10 or 12.2 or otherwise, or upon the expiration of the term of this Lease,
the Guarantor shall purchase from the Issuer and the Issuer shall convey to the
Guarantor, in consideration of one dollar ($1.00), the Issuer's entire right,
title and interest in the Project, including, without limitation, the Issuer's
rights and interest in, to and under the Ground Lease, the Facility, the
Pipeline, the Easements, the Personalty and the Operative Documents (other than
the Unassigned Rights). If the Guarantor is required to purchase the Project
pursuant to the preceding sentence, the Guarantor shall give written notice to
the Issuer and the Agent (i) declaring the Guarantor's election to purchase, and
(ii) fixing the date of the closing of such purchase, which shall not be later
than 30 days after any notice sent to the Guarantor pursuant to Section 6.2(a)
of the date on which this Lease is to be terminated (subject to any other
provision of this Lease or the PILOT Agreement which may require an earlier
closing). At the closing of the purchase of the Project pursuant to this Section
6.3, the Issuer shall deliver and request the Agent to deliver to the Guarantor
all necessary documents (a) to convey to the Guarantor all of the Issuer's
right, title and interest in and to the Project, as it exists, subject only to
(i) any Liens to which title to such Project was subject when conveyed to the
Issuer, (ii) any Liens created at the request of the Guarantor or to which the
Guarantor consented or in the creation of which the Guarantor acquiesced, (iii)
Permitted Liens, and (iv) any Liens resulting from the failure of the Guarantor
to perform or observe any of the agreements on its part contained in this Lease
or arising out of an Event of Default, (b) to release and convey to the
Guarantor all of the Issuer's right, title and interest in and to any rights of
action or any net proceeds of insurance or condemnation awards with respect to
the Project, and (c) to discharge and release any other Liens or encumbrances
held by the Issuer and not set forth
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above. Upon the due conveyance and assignment of all of the Issuer's right,
title and interest in the Project to the Guarantor, the Guarantor shall deliver
a release and agreement that the exculpation provisions and the obligations of
the Guarantor in Sections 2.4(a) and 10.3 hereof shall survive such conveyance
or purchase of the Project. Unless all amounts due to the Banks under the
Financing Documents shall have been paid in full, any conveyance of the Issuer's
interest in the Project to the Guarantor pursuant to this Section 6.3 shall be
subject to the Bank's security interests in and mortgages on the Project and the
various rights and interests comprising the Project.
ARTICLE VII
RENTAL OBLIGATIONS AND ISSUER'S FEE
(a) Until the obligations of the Issuer under the Bonds and the Financing
Agreement have been paid in full, the Guarantor shall pay rent under this Lease
in an amount which equals the principal of, interest on, any premium on, and all
other sums due on the Bonds, and all other sums the Issuer is required to pay
under the Financing Agreement, such rent hereunder to be due when the
corresponding amounts are due from the Issuer under the Bonds and the Financing
Documents and subject to the same grace periods, if any. Thereafter, the rent
under this Lease shall equal one dollar per annum and shall be due in arrears on
each December 31. Until the Issuer's obligations under the Bonds and the
Financing Agreement have been paid in full, all rental payments required under
this Section 7.1 shall be paid by the Guarantor directly to the
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Agent, and all such payments by the Guarantor to the Agent or made to the Agent
from any of the Accounts shall be credited against the Guarantor's obligations
to the Issuer hereunder.
(b) The Guarantor agrees to make the above-mentioned rental payments,
without any further notice, in lawful money of the United States of America as,
at the time of payment, shall be legal tender for the payment of public and
private debts.
In consideration of the Issuer entering into this Lease, the Financing
Agreement and certain Financing Documents, in addition to any other amounts
payable under this Lease the Guarantor shall pay to the Issuer a fee of
$500,000, which shall be paid on the Initial Funding Date under the Financing
Agreement.
(a) The obligations of the Guarantor to make the rental payments due under
this Lease and to perform and observe any and all of the other covenants and
agreements on its part contained herein are general obligations of the Guarantor
and are absolute and unconditional irrespective of any defense or any rights of
set-off, recoupment, or counterclaim it may otherwise have against the Issuer.
The Guarantor agrees that it will not suspend, discontinue, abate or be entitled
to any diminution of any rental required by, or fail to observe any of its other
covenants or agreements contained in this Lease, or terminate this Lease for any
cause whatsoever, including, without limiting the generality of the foregoing,
failure to complete the construction and equipping of the Project, any defect in
the title, design, operation, merchantability, fitness, or condition of the
Project, or any part thereof, or in the suitability of the Project, or any part
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thereof, for the Guarantor's purposes or needs, or failure of consideration for,
destruction of or damage to, or condemnation of title to, or the use of all or
any part of the Project, any change in the tax or other laws of the United
States of America or of the State of New York, or any political subdivision
thereof, or any failure of the Issuer to perform and observe any agreement,
whether express or implied, or any duty, liability or obligation arising out of
or in connection with this Lease.
(b) Nothing contained in this Section shall be construed to release the
Issuer from the performance of any of the agreements on its part contained in
this Lease, and in the event the Issuer should fail to perform any such
agreement, the Guarantor may institute such action against the Issuer as the
Guarantor may deem necessary to compel performance (subject to the provisions of
Section 13.10).
ARTICLE VIII
MAINTENANCE, MODIFICATIONS, TAXES, AND INSURANCE
During the term of this Lease, the Guarantor shall operate, maintain,
repair and restore the Project in the manner and to the extent required under
the Financing Agreement and the Operative Documents.
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(a) The Guarantor shall pay, or cause to be paid, the following, as the
same respectively become due unless the Guarantor is actively and in good faith
contesting any such taxes, assessments or other changes as permitted by Section
8.2(b):
(1) All taxes and governmental charges of any kind whatsoever which
may at any time be lawfully assessed or levied against or with respect to
the Project or any part thereof;
(2) All utility and other charges, including "service charges,"
incurred or imposed for the operation, maintenance, use, occupancy, upkeep,
and improvement of the Project, the non-payment of which would create, or
entitle the obligee to impose, a Lien on the Project;
(3) All assessments and charges of any kind whatsoever lawfully made
by any Governmental Authority against the Project for public improvements;
and
(4) All payments in lieu of taxes, required to be made to the Issuer
or the City of Syracuse under the terms of the PILOT Agreement.
(b) Notwithstanding anything in Section 8.2(a) to the contrary, the
Guarantor may in good faith actively contest any taxes, assessments and other
charges described in Section 8.2(a) (except that with respect to the PILOT
Agreement, the Guarantor shall not contest the validity of such agreement but
may only dispute, in good faith, the calculation of the amounts due thereunder),
provided that such action does not constitute an Event of Default under the
Financing Agreement.
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The Guarantor shall at all times maintain insurance with respect to the
Project against such risks and for such amounts as are customarily insured
against by businesses of like size and type, paying (as the same become due and
payable) all premiums with respect thereto; provided, however, that, if the
premiums are not timely paid, the Issuer may pay such premiums and the Guarantor
shall pay immediately upon demand all sums so expended by the Issuer. The
maintenance of such insurance as is required under Section 5.20 of the Financing
Agreement or as is otherwise acceptable to the Agent shall satisfy the
Guarantor's obligations under this Section 8.3.
All proceeds of insurance maintained pursuant to the Financing Agreement or
Section 8.3 of this Lease shall be applied in accordance with the terms of the
Financing Agreement until the obligations of the Issuer under the Bonds and the
Financing Agreement have been satisfied in full. Thereafter, all such proceeds
shall be payable to the Guarantor. Notwithstanding the foregoing, the proceeds
of any insurance required to be maintained by the Guarantor pursuant to the
Operating Agreement shall be applied as required under the terms of the
Operating Agreement.
ARTICLE IX
DAMAGE, DESTRUCTION, AND CONDEMNATION
(a) If the Project shall be damaged or destroyed, in whole or in part:
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(1) The Issuer shall have no obligation to replace, repair, rebuild,
or restore the Project, but the Issuer shall make all insurance proceeds
payable to it in connection with any such damage or destruction available
to the Guarantor to be applied in accordance with the terms of the
Financing Agreement;
(2) There shall be no abatement or reduction in the rent payable by
the Guarantor under this Lease (whether or not the Project is replaced,
repaired, rebuilt, or restored); and
(3) The Guarantor shall promptly give notice thereof to the Issuer.
(b) Subject to the provisions of the Financing Agreement, the Guarantor may
adjust all claims under any policies of insurance required by Section 5.20 of
the Financing Agreement.
(a) If title to, or the use of, less than substantially all of the Project
shall be taken by condemnation:
(1) The Issuer shall have no obligation to restore the Project, but
the Issuer shall make all proceeds of such condemnation payable to it
available to the Guarantor to be applied in accordance with the terms of
the Financing Agreement;
(2) There shall be no abatement or reduction in the rent payable by
the Guarantor under this Lease (whether or not the Project is restored);
and
(3) The Guarantor shall promptly give notice thereof to the Issuer and
the Agent.
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(b) Subject to the provisions of the Financing Agreement, the Guarantor
shall have sole control of any condemnation proceeding with respect to the
Project, or any part thereof, and may negotiate the settlement of any such
proceeding.
All replacements, repairs, rebuilding or restorations made to the Project,
whether or not requiring the expenditure of the Guarantor's own moneys, shall
automatically become part of the Project as if the same were specifically
described herein and title to such replacements, repairs, rebuilding or
restoration shall immediately vest in the Issuer; provided, however, that title
to any replacements, repairs, rebuilding or restoration of the Existing Plant
shall, to the extent required under the Operating Agreement, become vested in
the University.
Subject to the requirements of the Financing Agreement, the Guarantor shall
not have any obligation hereunder to repair, replace, restore or reconstruct the
Project in the event of any damage, destruction or condemnation of all or any
portion of the Project.
ARTICLE X
SPECIAL COVENANTS
The Issuer covenants and agrees that it has full right and lawful authority
to enter into this Lease for the full term hereof, and that, subject to the
terms and provisions of the Financing Documents, unless and until this Lease is
terminated by the Issuer or the Guarantor, the
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Guarantor shall have, hold and enjoy, during the term hereof, peaceful, quiet
and undisputed possession of the Project.
THE ISSUER IS NOT MAKING ANY WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE
CONDITION, TITLE, DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS OF THE PROJECT,
OR ANY PART THEREOF, OR AS TO THE SUITABILITY OF THE PROJECT OR ANY PART THEREOF
FOR THE GUARANTOR'S PURPOSES OR NEEDS. NO WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE OR MERCHANTABILITY IS MADE. IN THE EVENT OF ANY DEFECT OR DEFICIENCY OF
ANY NATURE, EITHER PATENT OR LATENT, THE ISSUER SHALL NOT HAVE ANY
RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO.
(a) The Guarantor hereby releases the Issuer and its members, officers,
agents (other than the Guarantor) and employees from, agrees that the Issuer and
its members, officers, agents (other than the Guarantor) and employees shall not
be liable for, and agrees to indemnify, defend, and hold the Issuer and its
members, officers, agents (other than the Guarantor) and employees harmless from
and against, any and all claims arising as a result of the Issuer's undertaking
the Project, including, but not limited to:
(1) Liability for loss or damage to property or bodily injury to or
death of any and all Persons that may be occasioned by any cause whatsoever
(including latent and
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patent defects) pertaining to the Project, or arising by reason of or in
connection with the occupation or the use thereof, or the presence on, in,
or about the Project;
(2) Liability arising from or expense incurred by the Issuer's owning,
selling, constructing or equipping of the Project, including, without
limiting the generality of the foregoing, all liabilities or claims arising
as a result of or in connection with the Issuer's obligations under the
Operative Documents;
(3) All claims arising from the exercise by the Guarantor of the
authority conferred upon it by the Agency Agreement of even date herewith
between the Issuer and the Guarantor;
(4) All costs incurred in connection with the maintenance, repair,
restoration, rebuilding and operation of the Project, or any portion
thereof, to the extent required under the Financing Agreement;
(5) All taxes of any kind (and by whomsoever imposed) assessed against
the Project or any portion thereof;
(6) All causes of action and attorneys' fees and other expenses
incurred in connection with any suits or actions which may arise as a
result of any of the foregoing or as a result of establishing a breach by
the Guarantor of the terms of any of the Operative Documents; and
(7) Any liability, loss, cost, damage or expense (including, without
limitation, reasonable attorneys' fees) arising from (i) the imposition or
recording of a lien by any
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Federal, state or local government or governmental agency or authority
pursuant to any Federal, state or local statute or regulation relating to
Hazardous Substances or the removal thereof ("Clean-Up Laws"); (ii) claims
of any private parties regarding violations of Clean-Up Laws; and (iii)
costs and expenses (including, without limitation, reasonable attorneys'
fees and fees incidental to the securing of repayment of such costs and
expenses) incurred by the Issuer in connection with its compliance with any
order issued pursuant to any Clean- Up Laws by any Federal, state or local
governmental agency or authority. The obligations of the Guarantor under
this paragraph (7) of this Section 10.3(a) shall not be limited by Section
13.10(c).
Subject to paragraph (c) of this Section 10.3, all of the foregoing indemnities
shall apply notwithstanding the fault or negligence (other than gross negligence
or willful misconduct) on the part of the Issuer or any of its officers,
members, agents or employees and irrespective of any breach of statutory
obligation or any rule of comparative or apportional liability.
(b) In the event of any claim against the Issuer or its members, officers,
agents (other than the Guarantor) or employees by any employee of the Guarantor,
or any contractor of the Guarantor, or anyone directly or indirectly employed by
any of them, or any one for whose acts any of them may be liable, the
obligations of the Guarantor hereunder shall not be limited in any way by any
limitation on the amount or type of damages, compensation, or benefits payable
by or for the Guarantor or such contractor under workers' compensation laws,
disability benefit laws, or other employee benefit laws.
(c) Notwithstanding any other provisions of this Lease, (i) the obligations
of the Guarantor pursuant to this Section 10.3 shall remain in full force and
effect after the termination
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of this Lease until the expiration of the period stated in the applicable
statute of limitations during which a claim, cause of action, or prosecution
relating to the matters herein described may be brought, and the payment in full
or the satisfaction of such claim, cause of action or prosecution, and the
payment of all expenses and charges incurred by the Issuer or its officers,
members, agents (other than the Guarantor) or employees, relating thereto, and
(ii) the Guarantor shall not have any obligation to indemnify the Issuer or its
members, officers, agents (other than the Guarantor) or employees for any loss,
liability, damage, expense or claims whatsoever arising from the gross
negligence or willful misconduct of any of such Persons (other than the
Guarantor).
(d) In order for the Issuer or any other Person who may be entitled to
indemnification from the Guarantor under this Section 10.3 or any other
provision of this Lease (each of the foregoing, an "Indemnitee") to be entitled
to indemnification with respect to any liability or claims against such
Indemnitee, such Indemnitee must notify the Guarantor in writing of any claim or
demand made against such Indemnitee within 10 business days after receipt by
such Indemnitee of written notice of such claim; provided, however, that the
failure of an Indemnitee to provide notice to the Guarantor of a claim or demand
within such 10 business day period shall not affect its right to indemnification
hereunder if such delay does not in any material way prejudice or impair the
Guarantor's ability to contest or defend against such claim or demand or to
assert an offset or counter-claim. Each Indemnitee shall also deliver to the
Guarantor copies of all notices and documents received by such Indemnitee
relating to any such claim or demand for which such Indemnitee is seeking
indemnification from the Guarantor. The Guarantor shall be entitled to
participate, at its expense, in the defense of any claim made against any
Indemnitee
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and, if it so chooses, to assume the defense thereof at its cost with counsel
selected by it who shall be reasonably acceptable to such Indemnitee. An
Indemnitee may, in any such case, retain its own counsel at its own expense to
participate in the defense of such claims. Each Indemnitee shall cooperate fully
in the defense and prosecution of any such claim. The Guarantor shall not be
obligated to indemnify any Indemnitee for the amount of any settlement paid by
such Indemnitee in connection with any claim unless the Guarantor has approved
the settlement in writing, the Guarantor agreeing that it will not unreasonably
withhold its consent to a proposed settlement which is approved by the affected
Indemnitee. An Indemnitee shall, at the Guarantor's request, agree to the terms
of any settlement of any claim for which the Indemnitee is entitled to
indemnification hereunder which is negotiated by the Guarantor so long as such
settlement involves only the payment of money which shall be paid by the
Guarantor at the time of settlement; settlement on any other terms shall require
the Indemnitee's written consent (which consent shall be conclusively presumed
by its execution of a settlement agreement or stipulation of settlement).
(e) Within 30 days after the Guarantor's receipt of demand therefor from
the Issuer, the Guarantor shall reimburse the Issuer for any expenses reasonably
incurred by the Issuer by reason of the Issuer's ownership, financing or leasing
of the Project or in connection with the performance of the Issuer's duties and
obligations under this Lease and the Operative Documents.
The Guarantor agrees that during the term of this Lease the Issuer and its
duly authorized agents shall have the right to enter upon and to examine and
inspect the Project during normal
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business hours and upon reasonable prior written notice to the Guarantor, and
provided that all such persons comply with applicable safety regulations and
insurance requirements.
During the term of this Lease, the Guarantor will maintain its existence,
will not dissolve or otherwise dispose of all or substantially all of its
assets, and will not consolidate with or merge into another legal entity or
permit one or more other legal entities to consolidate with or merge into it.
During the term of this Lease, the Guarantor shall, whenever requested by
the Issuer in writing, provide and certify, or cause to be certified, such
information concerning the Guarantor or its finances as the Issuer from time to
time reasonably considers necessary or appropriate, including, but not limited
to, such information as is necessary to enable the Issuer to make any reports
required by law or governmental regulation. The Issuer agrees that any
information provided to it by the Guarantor hereunder is confidential and
proprietary and the Issuer shall not permit the duplication, use or disclosure
of any such information to any Person (other than its attorneys, consultants,
employees or agents) unless authorized in writing by the Guarantor. Any
information provided by the Guarantor shall not be deemed confidential and
proprietary, and shall not be subject to the restrictions set forth in the
preceding sentence, if and to the extent that (i) at the time of disclosure,
such information is generally known by the public and any competitors of the
Guarantor, (ii) such information was in the Issuer's possession or available to
it on a non-confidential basis from a third party prior to its receipt of such
information from the Guarantor, (iii) such information is hereafter obtained by
the Issuer from a third party without
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obligation of confidentiality, or (iv) such information is legally required to
be disclosed, in the opinion of the Issuer's counsel; provided, however, that
before any determination is made by the Issuer that any information is not
confidential and proprietary for any of the foregoing reasons and before any
such information is disclosed by the Issuer, the Issuer shall give the Guarantor
reasonable notice and a reasonable opportunity to prevent or contest such
disclosure.
(a) The Guarantor agrees that it will, during any period in which the Bonds
remain unpaid, promptly comply in all material respects with all statutes,
codes, laws, acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, permits, licenses, authorizations, directions, and requirements of
all Governmental Authorities, foreseen or unforeseen, ordinary or extraordinary,
which now or at any time hereafter affect the Guarantor's obligations hereunder
or are applicable to the Project, or any part thereof, or to any use, manner of
use, or condition of the Project, or any part thereof, the applicability of the
same to be determined both as if the Issuer were the owner of the Project, and
as if the Guarantor and not the Issuer were the owner of the Project.
(b) Notwithstanding the provisions of subsection 10.7(a), the Guarantor
may, in good faith, actively contest the validity or the applicability of any
requirement of the nature referred to in said subsection 10.7(a), provided that
the Guarantor shall have first notified the Issuer of such contest. In such
event, the Guarantor may fail to comply with the requirement or requirements so
contested during the period of such contest and any appeal therefrom unless:
36
<PAGE>
(1) The Issuer shall notify the Guarantor that by failure to comply
with such requirement or requirements the Liens of the Mortgages as to the
Project may be endangered or the Project, or any part thereof, may be
subject to loss or forfeiture, in which case the Guarantor shall promptly
take such action with respect thereto as shall be reasonably satisfactory
to the Issuer; or
(2) The Issuer shall so notify the Guarantor that based on an opinion
of counsel to the Issuer, a copy of which must accompany such notice, the
Issuer or its members, officers, agents (other than the Guarantor), or
employees may be liable for prosecution for failure to comply therewith, in
which event the Guarantor shall promptly take such action with respect
thereto as shall be satisfactory to the Issuer.
(a) The Guarantor hereby represents and warrants that, except for Permitted
Liens, there are no Liens on the Project senior to the Mortgages.
(b) The Guarantor hereby represents and agrees not to create, or suffer to
be created, any Lien, except for Permitted Liens, on the Project, or any part
thereof.
(c) Notwithstanding the provisions of subsection 10.8(b), the Guarantor
may, in good faith, actively contest any such Lien, provided that the Guarantor
shall have first notified the Issuer of such contest. No action taken pursuant
to this Section 10.8 shall relieve the Guarantor from its obligation to make all
rental payments required by Section 7.1 hereof or any other payments required to
be made by the Guarantor, including, without limitation, payments due under the
PILOT Agreement.
37
<PAGE>
Should the Guarantor fail to make any payment or to do any act as herein
provided within 30 days after notice from the Issuer, then the Issuer may, but
need not, without releasing the Guarantor from any obligation herein, make or do
the same, including, without limitation, appearing in and defending any action
purporting to affect the rights or powers of the Guarantor or the Issuer and
paying all expenses, including, without limitation, reasonable attorneys' fees;
and the Guarantor shall pay immediately upon demand all sums so expended by the
Issuer under the authority hereof, together with the interest thereon at a rate
of ten (10%) percent per annum or the highest rate permitted by law, whichever
is lower.
The Issuer makes no representation or warranty, either express or implied,
as to any prior or current use of, or contamination by, Hazardous Substances at
or affecting the Project. In the event that, within 30 days (or such longer
period as the Issuer and the Agent, after consultation with the Environmental
Consultant, deem reasonable) after its receipt from the Issuer or the
Environmental Consultant of an environmental audit prepared by the Environmental
Consultant which reports a violation of any Clean-Up Laws due to a condition
existing with respect to the Project, the Guarantor fails to commence and
continue with reasonable diligence at least one of the alternative remediation
actions recommended by the Environmental Consultant or an alternative
remediation action otherwise agreed to by the Issuer and the Guarantor to cure
such violation and the Issuer obtains an opinion of counsel that the Issuer may
be liable for any fees, penalties or assessments or may have civil or criminal
liability as a result of such violation, then the Issuer shall have the option
to terminate this Lease and convey the Project to the Guarantor
38
<PAGE>
after the expiration of such 30-day period and after notice to the Guarantor and
the Agent, and the Guarantor shall have the obligation to accept such
conveyance, notwithstanding any other provision of this Lease. In the event of
such conveyance from the Issuer to the Guarantor, the Guarantor shall comply
with any other term or provision of this Lease, the Financing Agreement, the
Mortgages, or any of the Financing Documents which may become operative due to
such early conveyance of the Facility. Any such conveyance shall be subject to
the provisions of Section 6.3 and shall not terminate or limit the Agent's
rights in the Collateral or pursuant to the Financing Documents.
ARTICLE XI
ASSIGNMENTS; MERGER OF ISSUER
Notwithstanding anything in this Lease to the contrary, the Guarantor may
assign its rights and interests under this Lease and the other Operative
Documents and its rights and interests in the Project to any Person provided
that: (a) either (i) all amounts owed to the Banks under the Financing Documents
shall have been paid in full or (ii) such sale or assignment shall not
constitute a breach of the Financing Agreement or any Financing Documents which
has not been waived or consented to by the Agent; and (b) either (x) at the time
of such sale or assignment the Guarantor shall not be in default in the payment
of any amounts due to the Issuer under this Lease or the PILOT Agreement, or (y)
the Issuer shall have consented to such sale or assignment. Nothing in this
Lease shall prohibit the sale, assignment or encumbrance of all or
39
<PAGE>
any portion of the Project or the Guarantor's interest therein pursuant to the
Financing Documents or the granting or creation of a Permitted Lien.
The Issuer has pledged and assigned, pursuant to the terms of the
Mortgages, certain of its rights and interests in the Project and under and
pursuant to this Lease to the Agent on behalf of the Banks as security for the
payment of the principal of and interest on the Bonds. Such pledge and
assignment shall in no way impair or diminish any obligations of the Issuer
under this Lease. The Guarantor hereby acknowledges receipt of notice of, and
consents to, such pledge and assignment by the Issuer to the Agent on behalf of
the Banks and specifically agrees to perform for the benefit of the Agent on
behalf of the Banks all of its duties and undertakings hereunder.
(a) Nothing contained in this Lease shall prevent the consolidation of the
Issuer with, or merger of the Issuer into, or assignment by the Issuer of its
rights and interests hereunder to any other body corporate and politic and
public instrumentality of the State of New York, or political subdivision
thereof, which has the legal authority to perform the obligations of the Issuer
hereunder, provided that upon any such consolidation, merger, or assignment, the
due and punctual performance and observance of all the agreements and conditions
of this Lease and the Mortgages to be kept and performed by the Issuer shall be
expressly assumed in writing by the public instrumentality or political
subdivision resulting from such consolidation or surviving such merger or to
which the Issuer's rights and interests hereunder shall be assigned.
40
<PAGE>
(b) As of the date of any such consolidation, merger, or assignment, the
Issuer shall give notice thereof in reasonable detail to the Guarantor and the
Agent. The Issuer shall promptly furnish to the Agent and the Guarantor such
additional information with respect to any such consolidation, merger, or
assignment as the Agent and the Guarantor may reasonably request.
(a) During the term of this Lease, the Guarantor may not sublease the
Project, or any part thereof, without the prior written consent of the Issuer.
Notwithstanding the foregoing, the Guarantor may, without the Issuer's consent,
sublease portions of the Project in the ordinary course of its business,
provided that (i) no such lease shall relieve the Guarantor of its obligations
hereunder and (ii) the Guarantor shall, within 10 days after any such lease,
furnish the Issuer with a copy of the instruments effecting the same.
(b) Notwithstanding anything to the contrary in this Lease, if in any
instance the Guarantor determines that any item of Equipment has become
inadequate, obsolete, worn out, unsuitable, undesirable, or unnecessary, the
Guarantor may remove such item of Equipment and may sell, trade in, exchange, or
otherwise dispose of the same, in whole or in part, without the prior written
consent of the Issuer, provided that such removal will not constitute an Event
of Default under the Financing Agreement. At the request of the Guarantor, the
Issuer shall execute and deliver to the Guarantor all instruments necessary or
appropriate to enable the Guarantor to sell or otherwise dispose of any such
item of Equipment, free from the Lien of the Financing Documents. The Guarantor
shall pay all costs, including reasonable attorneys' fees, incurred in
transferring title to, and releasing from the Lien of the Financing Documents,
any item of Equipment removed pursuant to this Section 11.4.
41
<PAGE>
(c) Nothing in this Section 11.4 shall restrict the right of the Guarantor
to sell or assign all or any portion of its interest in the Project or its
interest in this Lease to the extent such sale or assignment is permitted under
Section 11.1.
ARTICLE XII
EVENTS OF DEFAULT AND REMEDIES
For purposes of this Lease, the term "Event of Default" shall mean an Event
of Default under the Financing Agreement which is not waived by the Agent (or
the Banks or the Required Banks, as the case may be, if their consent is
required for such waiver under the terms of the Financing Agreement), and the
term "Default" shall mean an Inchoate Default.
The Issuer may terminate this Lease in accordance with the provisions of
Section 6.3 hereof in the event that either (i) an Event of Default occurs and
is not cured within 60 days after written notice thereof from the Agent or the
Issuer to the Guarantor, or (ii) the Guarantor fails to pay any amount due to
the Issuer under this Lease within 60 days after written notice from the Issuer
that such amount is past due.
12.3 No Additional Waiver Implied by One Waiver.
In the event any agreement contained herein should be breached by the other
party and thereafter such breach be waived by the other party, such waiver shall
be limited to the particular breach so waived and shall not be deemed to waive
any other breach hereunder.
42
<PAGE>
ARTICLE XIII
MISCELLANEOUS
All notices, certificates, and other communications hereunder shall be in
writing, shall be sufficiently given, and shall be deemed given when (a) sent to
the applicable address stated below by registered or certified mail, return
receipt requested, or by such other means as shall provide the sender with
documentary evidence of such delivery, or (b) delivery is refused by the
addressee as evidenced by the affidavit of the Person who attempted to effect
such delivery. The addresses to which notices, certificates, and other
communications hereunder shall be delivered are as follows:
(a) If to the Issuer, to:
The City of Syracuse Industrial Development Agency
301 City Hall
Syracuse, New York
Attention: Chairman
(b) If to the Guarantor, to:
Project Orange Associates, L.P.
c/o NCP Syracuse, Inc.
1100 Town & Country Road, Suite 800
Orange, California 92668
Attention: President
With a copy to:
Project Orange Associates, L.P.
6780 Northern Boulevard, Suite 501
East Syracuse, New York 13057
Attention: Managing General Partner
43
<PAGE>
A duplicate copy of each notice, certificate, and other communication given
hereunder by the Issuer or the Guarantor shall be given to the Agent at its
address and in the manner specified in the Financing Agreement. The Issuer and
the Guarantor may, by notice given hereunder, designate any further or different
addresses to which subsequent notices, certificates, and other communications
shall be sent.
This Lease shall inure to the benefit of and shall be binding upon the
Issuer, the Guarantor and, as permitted by this Lease, by their respective
successors and assigns.
------------
Any provision of this Lease which is invalid or unenforceable shall be
ineffective to the extent of such invalidity or unenforceability without
affecting or invalidating the remaining provisions of this Lease.
This Lease may not be amended, changed, modified, altered, or terminated
except by an instrument in writing signed by the parties hereto.
This Lease may be executed in several counterparts, each of which shall be
an original and all of which shall constitute but one and the same instrument.
This Lease shall be governed by the laws of the State of New York.
44
<PAGE>
(a) The Mortgages, the financing statements perfecting the security
interests created and/or assigned by the Issuer Security Agreement, and this
Lease shall be filed by the Issuer, at the Guarantor's expense, in the Office of
the Clerk of the County of Onondaga, New York, or in such other office as may at
the time provided by the law as the proper place for the recordation or filing
thereof.
(b) The Issuer and the Guarantor shall execute and deliver all instruments
and shall furnish all information which the Agent may deem necessary or
appropriate to protect any Liens created or contemplated by the Mortgages or the
Security Agreements.
(a) The obligations of the Guarantor to provide the indemnity required by
Section 10.3 hereof shall survive the termination of this Lease, the full
payment of the Bonds and any conveyance of the Issuer's interest in the Project
to the Guarantor and payments on account of such indemnification obligations
after such termination shall be made upon demand of the party to whom such
payment is due.
(b) The obligations of the Guarantor with respect to the Unassigned Rights
shall survive the termination of this Lease until the expiration of the period
stated in the applicable statute of limitations during which a claim, cause of
action, or prosecution relating to the Unassigned Rights may be brought, and the
payment in full or the satisfaction of such claim, cause of action, or
prosecution, and the payment of all expenses and charges incurred by the Issuer
or its officers, members, agents (other than the Guarantor), or employees
relating thereto.
45
<PAGE>
The Table of Contents and the Section headings in this Lease have been
prepared for convenience of reference only and shall not control, affect the
meaning of, or be taken as an interpretation of any provision of this Lease.
(a) The obligations and agreements of the Issuer contained herein and in
the other Financing Documents and in any other instrument or document executed
in connection herewith or therewith, and any instrument or document supplemental
hereto or thereto, shall be deemed the obligations and agreements of the Issuer
and not of any member, officer, agent (other than the Guarantor), or employee of
the Issuer in his individual capacity; and the members, officers, agents (other
than the Guarantor), and employees of the Issuer shall not be liable personally
hereon or thereon or be subject to any personal liability or accountability
based upon or in respect hereof or thereof or of any transaction contemplated
hereby or thereby. The obligations and agreements of the Issuer contained herein
or therein shall not constitute or give rise to an obligation of the State of
New York or the County of Onondaga, and neither the State of New York nor the
County of Onondaga shall be liable hereon or thereon. Further, such obligations
and agreements shall not constitute or give rise to a general obligation of the
Issuer, but rather shall constitute limited obligations of the Issuer, payable
solely from the revenues of the Issuer derived, and to be derived from, the
lease, sale, or other disposition of the Project, except for revenues derived by
the Issuer with respect to the Unassigned Rights. No order or decree of specific
performance with respect to any of the obligations of the Issuer hereunder or
thereunder shall be sought or enforced against the Issuer unless:
46
<PAGE>
(i) The party seeking such order or decree shall first have requested the
Issuer in writing to take the action sought in such order or decree of specific
performance, and ten days shall have elapsed from the date of receipt of such
request, and the Issuer shall have refused to comply with such request (or if
compliance therewith would reasonably be expected to take longer than ten days,
shall have failed to institute and diligently pursue action to cause compliance
with such request) or failed to respond within such notice period; and
(ii) If the Issuer refuses to comply with such request and the Issuer's
refusal to comply is based on its reasonable expectation that it will incur fees
and expenses, the party seeking such order or decree shall have placed in an
account with the Issuer an amount or undertaking sufficient to cover such
reasonable fees and expenses; and
(iii) If the Issuer refuses to comply with such request and the
Issuer's refusal to comply is based on its reasonable expectation that it or any
of its members, officers, agents (other than the Guarantor), or employees shall
be subject to potential liability, the party seeking such order or decree shall
(1) agree to indemnify and hold harmless the Issuer and its members, officers,
agents (other than the Guarantor), and employees against any liability incurred
as a result of its compliance with such demand; and (2) if requested by the
Issuer, furnish to the Issuer satisfactory security to protect the Issuer and
its members, officers, agents (other than the Guarantor), and employees against
all liability expected to be incurred as a result of compliance with such
request.
(b) Any failure to provide notice, indemnity, or security to the Issuer
pursuant to this Section 13.10 shall not alter the full force and effect of any
Event of Default under this Lease.
47
<PAGE>
(c) Except to the extent otherwise expressly provided in Section
10.3(a)(7), the obligations and agreements of Guarantor contained herein and any
instrument or document supplemental hereto, shall be deemed the obligations and
agreement of the Guarantor (with recourse for such obligations and agreement
limited solely to the assets of the Guarantor) and not of any partner, member,
beneficial owner, officer, agent, or employee of Guarantor in his or its
individual capacity, and the partners, members, beneficial owners, officers,
agents and employees of the Guarantor shall not be liable personally hereon or
be subject to any personal liability or accountability based upon or in respect
hereof or of any transaction contemplated hereby.
This Lease (except for the Unassigned Rights) and all rights of the
Guarantor hereunder are, and shall be, subject and subordinate to the Ground
Lease, the Liens of the Mortgages, and to any mortgage or mortgages, whether fee
or leasehold mortgages, which may now or hereafter affect the Project or the
land under the Project, and to all renewals, modifications, consolidations,
replacements, and extensions thereof, and advances thereunder. The subordination
of this Lease to the Ground Lease and Mortgages shall be automatic, without
execution of any further subordination agreement by the Guarantor. Nonetheless,
if the Agent or the Issuer requires a further written subordination agreement,
the Guarantor agrees to execute, acknowledge, and deliver the same.
48
<PAGE>
The Guarantor's execution and delivery pursuant to the Financing Agreement
of the Project Orange Associates, L.P. Guaranty, has been relied upon by the
Issuer in its execution and delivery of this Lease and its participation in the
transactions contemplated hereby.
IN WITNESS WHEREOF, the Issuer and the Guarantor have caused this Lease to
be executed in their respective names by their duly authorized representatives,
as of the date first set forth above.
THE CITY OF SYRACUSE INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ William F. McIntyre
____________________________________
William F. McIntyre, Chairman
PROJECT ORANGE ASSOCIATES, L.P.
By NCP Syracuse, Inc.,
Managing General Partner
By: /s/ Kenneth M. Ross
____________________________________
Title: VP
49
<PAGE>
State of New York )
) SS.:
County of Onondaga )
On this 5th day of April l991 before me personally came William F.
McIntyre, to me known, who being by me duly sworn, did depose and say that he
resides in Syracuse, New York, that he is the Chairman of the City of Syracuse
Industrial Development Agency, a public benefit corporation of the State of New
York described in and which executed the foregoing Lease; and that he signed his
name thereto by order of the members of said corporation.
/s/ Theodore A. Trespasz, Jr.
_____________________________________
Notary Public
State of New York )
) SS.:
County of New York )
On this 11th day of April, 1991 before me personally came Kenneth M. Ross,
to me known, who being by me duly sworn, did depose and say that he resides at
_________________________________________; that he is the VP of NCP Syracuse,
Inc., a Delaware corporation which is the managing general partner of Project
Orange Associates, L.P., the Delaware limited partnership described in and which
executed the foregoing Lease (the "Partnership"); and that he signed his name
thereto by order of the board of directors of said corporation and as the
authorized and binding act and deed of the Partnership.
/s/ Doreen M. Midwinter
_____________________________________
Notary Public
50
<PAGE>
EXHIBIT A
Description of the Leased Premises
51
<PAGE>
EXHIBIT 10.11
EXECUTION COPY
--------------
COGENERATION FACILITY
OPERATION AND MAINTENANCE AGREEMENT
DATED AS OF NOVEMBER 1, 1998
BETWEEN
PROJECT ORANGE ASSOCIATES, L.P.
AND
GE ENERGY PLANT OPERATIONS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article I
Definitions..................................................................... 1
Article II
Engagement of GE and Description of Services.................................... 8
Section 2.01 - Operation and Routine Maintenance of Facility.................. 8
Section 2.02 - Certain Requirements Applicable to the Operation and
Maintenance of the Existing Facility and the Site................... 9
Section 2.03 - Certain Requirements Applicable to the Operation and
Maintenance of the Pipeline and Right of Way........................ 10
Section 2.04 - Repair and Overhaul of the Gas Turbine Packages................ 11
Section 2.05 - Liens.......................................................... 12
Section 2.06 - Personnel Standards............................................ 12
Section 2.07 - GE Plant Manager............................................... 12
Section 2.08 - Training....................................................... 12
Section 2.09 - Preventive Maintenance Program................................. 12
Section 2.10 - Inventory System............................................... 13
Section 2.11 - Operation and Maintenance Procedures........................... 13
Section 2.12 - Administrative Procedures Manuals.............................. 13
Section 2.13 - Warranty and Insurance Claims.................................. 13
Section 2.14 - Procurement and Inventories.................................... 13
Section 2.15 - Coordination with Electric Utility, ISO and Steam User......... 14
Section 2.16 - Emergency...................................................... 15
Section 2.17 - Claims and Litigation.......................................... 15
Section 2.18 - Permits and Other Governmental Approvals....................... 15
Section 2.19 - Recalibrations................................................. 15
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 2.20 - Major System Repairs and Insured Losses........................ 15
Section 2.21 - Review and Administration of Agreements........................ 16
Section 2.22 - Inspections.................................................... 16
Section 2.23 - Hazardous Substances........................................... 16
Section 2.24 - Other.......................................................... 16
Section 2.25 - Limitation on GE's Authority................................... 16
Section 2.26 - Affiliate Matters.............................................. 17
Section 2.27 - No Disruption of Steam User's Operations....................... 17
Section 2.28 - Site Access.................................................... 17
Section 2.29 - Liability for Payments......................................... 17
Section 2.30 - Alteration of Facility......................................... 17
Article III
POA Obligations................................................................. 18
Section 3.01 - General........................................................ 18
Section 3.02 - Information.................................................... 18
Section 3.03 - Sale of Electricity and Cogeneration Services.................. 18
Section 3.04 - POA Representative............................................. 18
Section 3.05 - Fuels and Utilities............................................ 18
Section 3.06 - Procurement.................................................... 18
Section 3.07 - Annual Management Audit........................................ 18
Section 3.08 - Leased Engine Program.......................................... 19
Section 3.09 - Liens.......................................................... 19
Section 3.10 - Access......................................................... 19
Section 3.11 - General, Office and Maintenance Facilities..................... 19
</TABLE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 3.12 - Spare Parts.................................................... 19
Article IV
Budgets, Procedures, Plans and Reporting........................................ 19
Section 4.01 - POA Administrative Procedures Manual........................... 19
Section 4.02 - POA Operation and Maintenance Procedures Manual................ 20
Section 4.03 - Training Plan.................................................. 20
Section 4.04 - Annual Budget and Operating Plan............................... 20
Section 4.05 - Accounts and Reports........................................... 21
Section 4.06 - Changes to Annual Budget and Annual Operating Plan............. 23
Article V
Compensation and Payment........................................................ 24
Section 5.01 - Payments to GE................................................. 24
Section 5.02 - Reimbursable Expenses.......................................... 25
Section 5.03 - Payroll Cost................................................... 25
Section 5.04 - Training Expenses.............................................. 25
Section 5.05 - Relocation Expenses............................................ 25
Section 5.06 - Subcontractor Expenses......................................... 26
Section 5.07 - Taxes.......................................................... 26
Section 5.08 - Handling Fee................................................... 26
Section 5.09 - Costs for Consumables and Parts and Tools...................... 26
Section 5.10 - Fired-Hour Fee................................................. 27
Section 5.11 - Spare Parts Fee................................................ 27
Section 5.12 - Operating Fee.................................................. 27
Section 5.13 - Interest....................................................... 27
</TABLE>
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 5.14 - Accounting and Audit Rights.................................... 27
Section 5.15 - Disputed Payments.............................................. 28
Section 5.16 - Escalation..................................................... 28
Article IV
Term ........................................................................... 29
Section 6.01 - Term........................................................... 29
Section 6.02 - Renewal....................................................... 29
Section 6.03 - Facility Condition at End of Term.............................. 29
Section 6.04 - Liabilities Accrued as of the End of Term...................... 30
Article VII
Events of Default and Termination............................................... 30
Section 7.01 - GE Events and Default.......................................... 30
Section 7.02 - POA Events of Default......................................... 32
Section 7.03 - Notice of Termination.......................................... 33
Section 7.04 - Force Majeure.................................................. 33
Section 7.05 - Repair and Overhaul Obligations after Termination.............. 34
Article VIII
Insurance....................................................................... 34
Section 8.01 - Coordination of Insurance...................................... 34
Section 8.02 - Certificates; Proof of Loss................................... 34
Section 8.03 - No Limitation on Liability..................................... 34
Article IX
Indemnification................................................................. 34
Section 9.01 - By GE.......................................................... 34
Section 9.02 - By POA......................................................... 35
</TABLE>
iv
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article X
Liabilities of the Parties...................................................... 35
Section 10.01 - No Consequential Damages...................................... 35
Section 10.02 - Limitation of Liabilities..................................... 36
Article XI
Dispute Resolution.............................................................. 36
Section 11.01 - Arbitration................................................... 36
Section 11.02 - Demand for Arbitration....................................... 36
Section 11.03 - Qualifications................................................ 36
Section 11.04 - Decisions Final............................................... 36
Section 11.05 - Compensation of Arbitrator.................................... 36
Section 11.06 - Performance to Continue....................................... 36
Section 11.07 - Agreement Controlling......................................... 36
Article XII
Confidentiality................................................................. 37
Section 12.01 - Nondisclosure................................................. 37
Section 12.02 - Permitted Disclosure......................................... 37
Section 12.03 - Term.......................................................... 37
Article XIII
Title, Documents and Data....................................................... 37
Section 13.01 - Materials and Equipment....................................... 37
Section 13.02 - Documents.................................................... 37
Section 13.03 - Proprietary Information....................................... 38
Article XIV
Miscellaneous Provisions........................................................ 38
Section 14.01 - Assignment.................................................... 38
</TABLE>
v
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 14.02 - Cooperation in Financing...................................... 38
Section 14.03 - Access........................................................ 38
Section 14.04 - Independent Contractor........................................ 39
Section 14.05 - Not for Benefit of Third Parties.............................. 39
Section 14.06 - Force Majeure................................................. 39
Section 14.07 - Amendments................................................... 39
Section 14.08 - Survival...................................................... 39
Section 14.09 - No Waiver..................................................... 40
Section 14.10 - Notices....................................................... 40
Section 14.11 - Representations and Warranties................................ 41
Section 14.12 - Counterparts.................................................. 42
Section 14.13 - Governing Laws................................................ 42
Section 14.14 - Partial Invalidity........................................... 42
Section 14.15 - Captions, Exhibits and the Table of Contents.................. 42
Section 14.16 - Entire Agreement.............................................. 42
Section 14.17 - Conflicting Provisions....................................... 42
Section 14.18 - Successors and Assigns........................................ 42
Section 14.19 - Opinion of Counsel............................................ 42
Section 14.20 - Performance During Legal Proceedings.......................... 42
Section 14.21 - Joint Effort................................................. 42
Section 14.22 - Disclaimer of Warranties...................................... 42
Section 14.23 - Standard of Reasonableness.................................... 43
</TABLE>
vi
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article XV
Maintenance of Inventory of Consumables and Parts and Tools..................... 43
Section 15.01 - Maintenance of Inventory of Consumables and
Parts and Tools........................................................ 43
Exhibit A-1 - Minimum Repair and Maintenance Requirements for the Existing Plant
Exhibit A-2 - Minimum Operating Requirements for the Existing Plant
Exhibit B - Minimum Pipeline Maintenance Requirements
Exhibit C - Organization Chart
Exhibit D - Budget for First Operating Year
Exhibit E - Insurance
Exhibit F - Gas Turbine Package Diagram
Exhibit G - LM5000 Lease Engine Program
Exhibit H - Maintenance Schedule
Schedule 1 - Initial Inventory of Spare Parts
Schedule 2 - Proprietary Documents
Schedule 3 - Approved Contractors
Schedule 4 - Termination Fee
</TABLE>
vii
<PAGE>
COGENERATION FACILITY
OPERATION AND MAINTENANCE AGREEMENT
This COGENERATION FACILITY OPERATION AND MAINTENANCE AGREEMENT (the "Agreement")
is made and entered into as of November 1, 1998, by and between PROJECT ORANGE
ASSOCIATES, L.P., a Delaware limited partnership ("POA"), and GE Energy Plant
Operations, Inc., a Delaware corporation ("GE", and together with POA, each a
"Party" and collectively the "Parties").
RECITALS
WHEREAS, POA owns a cogeneration facility in Syracuse, New York;
WHEREAS, POA and Stewart & Stevenson Operations, Inc., a Delaware corporation
"SSOI", entered into an 80MW Facility Operation and Maintenance Agreement, dated
as of April 5, 1991 (the "Prior Agreement"), under which GE, as SSOI's assignee,
operated, maintained and repaired POA's cogeneration facility prior to November
1, 1998;
WHEREAS, in connection with the acquisition by General Electric Company of the
gas turbine division of Stewart & Stevenson Services, Inc., SSOI assigned the
Prior Agreement to GE and GE assumed the obligations of SSOI thereunder;
WHEREAS, POA and GE have terminated the Prior Agreement, effective as of the
Commencement Date, as defined herein;
WHEREAS, POA desires to engage GE to continue to operate, maintain and repair
POA's cogeneration facility on and after the Commencement Date on the terms and
conditions set forth herein; and
WHEREAS, GE desires to so continue to operate, maintain and repair POA's
cogeneration facility on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, agree as follows:
ARTICLE I - DEFINITIONS
As used herein, the following terms shall have the indicated definitions:
"Additional Starts" shall have the meaning assigned to such term in Section
-----------------
5.10.
"Affiliate" shall mean, when used with reference to a specified Person, any
---------
other Person which directly or indirectly controls or is controlled by or is
under common control with the specified Person. For purposes of the foregoing,
"control", "controlled by" and "under common control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of
<PAGE>
the management and policies of such Person, whether through the ownership of
voting securities or by contract or otherwise.
"Annual Budget" shall have the meaning assigned to such term in Section 4.04
-------------
"Annual Operating Plan" shall have the meaning assigned to such term in Section
---------------------
4.04.
"Change" shall have the meaning assigned to such term in Section 4.06.
------
"Change in Law" shall mean amendments, modifications or changes in existing
-------------
Legal Requirements, including changes in the enforcement or application of Legal
Requirements, or the enactment of any new Legal Requirement.
"Change Order" shall have the meaning assigned to such term in Section 4.06.
-------------
"Change Order Budget Statement" shall have the meaning assigned to such term in
-----------------------------
Section 4.06.
"Commencement Date" shall mean November 1, 1998.
-----------------
"Constructor" shall mean Century Contractors West, Inc., as the engineering,
-----------
procurement and construction contractor for the Facility pursuant to the Amended
and Restated Cogeneration Facility Turnkey Construction Contract, dated as of
April 5, 1991, as amended.
"Consumables" shall mean lubricants, chemicals, fluids, oils, supplies, filters,
-----------
fittings, connectors, seals, gaskets, hardware, wires and other such materials
(other than Parts and Tools and Spare Parts) needed in the normal course of the
operation, maintenance and repair of the Facility.
"Consumer Price Index" shall mean the Consumer Price Index for All Urban
--------------------
Consumers For All Items, as published in Table 1 in the United States Department
of Labor, Bureau of Labor Statistic's monthly publication, CPI Detailed Report,
and as adjusted after initial publication, if applicable, or if such index is no
longer published or the method of computation thereof is substantially modified,
a mutually agreeable alternative index.
"Default Rate" shall mean a rate per annum equal to the lesser of: (i) the rate
------------
publicly announced by Citibank, N.A. as its prime lending rate plus two percent
(2%) or (ii) the maximum rate that can be charged under applicable law.
"Directed Starts" shall mean all successful starts of each gas turbine, except
---------------
starts which (i) follow outages which are scheduled or planned for maintenance,
repairs or overhauls, or (ii) result from the negligence or willful misconduct
of GE or a failure of GE to perform its obligations hereunder.
"Disapproved Contractor" shall have the meaning assigned to such term in Section
----------------------
2.20(c).
"Electric Utility" shall mean Niagara Mohawk Power Corporation and its
----------------
successors and assignees.
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"Electric Utility Interconnection" shall mean the electrical interconnection
--------------------------------
between the Facility and the Electric Utility's transmission system.
"EM&CP" shall mean the Environmental Management and Construction Plan, as
-----
amended from time to time, contemplated by the Pipeline Order.
"Emergency" shall mean any occurrence that requires, in the reasonable judgment
---------
of POA or GE, as the case may be, immediate action and which (i) constitutes a
serious hazard to the safety of persons or property, or (ii) may materially
interfere with the safe, economical, lawful or environmentally-sound operation
of the Facility.
"Equipment" shall mean the items of machinery, systems, and electrical and
---------
electronic components which comprise the Facility.
"Excess Liabilities" shall have the meaning assigned to such term in Section
------------------
2.01 (d)
"Excess Starts" shall have the meaning assigned to such term in Section 5.10.
-------------
"Existing Plant" shall mean the Steam User's steam generation facility
--------------
consisting principally of four gas and oil fired steam boilers and related
apparatus, equipment and structures, including the gas house, underground oil
storage tanks and the facilities known as the Alto Plant and the Riley Plant and
the land on which it is located at 500 E. Taylor Street in the City of Syracuse,
N.Y.
"Facility" shall mean: (i) POA's cogeneration facility for the production of
--------
steam and electric power located in Syracuse, N.Y. consisting of the two (2)
LM5000 gas turbines, process water treatment, related gas pipeline, steam and
electric handling installations and buildings and structures; (ii) all steam,
water and condensate lines, apparatus and equipment necessary or appropriate for
the supply of steam from the cogeneration facility to the Steam User's steam
system: (iii) all fuel lines, gas lines and electric transmission lines within
the Site (excluding all such items owned by any public utility); (iv) any
related apparatus necessary or appropriate for the operation of the cogeneration
facility; (v) the Existing Plant; (vi) the Pipeline; (vii) the Site; and (viii)
the Right-of-Way.
"Facility Agreements" shall mean collectively, as amended from time to time (i)
-------------------
this Agreement; (ii) the PPA and each other agreement that POA enters into for
the sale of electricity; (iii) the Steam Agreement; (iv) the Site Lease; (v) the
Interconnection Agreement; (vi) the Gas Transportation Agreement; (vii) the Gas
Purchase Agreement; and (viii) the Operating Agreement.
"Fired Hour Fee" shall have the meaning assigned to such term in Section 5.10.
--------------
"Force Majeure" shall mean an event or occurrence which is beyond the reasonable
-------------
control of the affected Party including: (i) acts of God; (ii) Changes in Law;
(iii) acts of war (whether or not declared), civil violence or disobedience,
sabotage or insurrection; (iv) floods, hurricanes, monsoons, earthquakes,
lightning, hail or other natural disasters; (v) explosions or fires; (vi)
accidents in transportation; (vii) injunctions or other interference through
action of a court; (viii) strikes, lockouts, walkout or similar labor
disturbance; (ix) a shortage or curtailment of utility service; or (x) the
fault, negligence, gross negligence, or willful misconduct of the other Party or
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<PAGE>
a third party not within the reasonable control of the affected Party; provided
however, that an event of Force Majeure shall not include (i) the inability of a
Party to meet its payment obligations, including an inability to obtain
financing for any obligations to be carried out hereunder; (ii) the economic
hardship of a Party or changes in market conditions; (iii) any strike, lockout,
walkout or similar labor disturbance limited to the affected Party's personnel;
(iv) an event or occurrence or the consequences of any event or occurrence which
are caused by or result from the fault, negligence, gross negligence or willful
misconduct of the affected Party or a third party within the reasonable control
of the affected Party; or (v) an event or occurrence or the consequences of any
event or occurrence which the affected Party could have reasonably foreseen and
avoided.
"GE" shall have the meaning assigned to such term in the first paragraph hereof.
--
"GE Event of Default" shall have the meaning assigned to such term in Section
-------------------
7.01
"GE Indemnified Parties" shall have the meaning assigned to such term in Section
----------------------
9.02.
"Gas Purchase Agreement" shall mean the Restated Gas Sale and Purchase
----------------------
Agreement, dated April 18, 1991, by and among POA, Noranda, Inc. and Canadian
Hunter Exploration Ltd., as amended.
"Gas Transportation Agreement" shall mean the Gas Transportation Agreement,
----------------------------
dated as of November 19, 1987, between Tennessee Gas Pipeline Company, a
division of Tennessee, Inc. and Gas Alternative Systems, Inc., as assigned to
POA and amended.
"Gas Turbine Packages" shall mean the two LM5000 gas turbines included in the
--------------------
Facility, together with the respective Brush generators, lube oil system and
equipment, start-up system and equipment, fuel and steam control valves and
systems and all auxiliary systems, equipment and enclosures associated with the
foregoing and designated as being included in the Gas Turbine Packages in
Exhibit F.
"Governmental Person" shall mean any Federal, state, county, municipal or other
-------------------
governmental authority, any political subdivision or any governmental, quasi-
governmental, judicial, public or statutory instrumentality, authority, body or
entity, or other regulatory bureau, authority, body or entity.
"Insured Loss" shall have the meaning assigned to such term in Section 2.04.
------------
"Interconnection Agreement" shall mean the Interconnection Agreement, dated as
-------------------------
of January 13, 1992, by and between POA and Electric Utility, as amended.
"ISO" shall mean the operator of the New York Power Pool or any other power
---
pool, transmission system or wholesale power exchange or market with which POA's
cogeneration facility is interconnected or into which POA sells or delivers
electricity generated by POA's cogeneration facility.
"ISO Rules" shall mean the rules and regulations of, or any agreement or
---------
agreements of POA with, the ISO.
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<PAGE>
"Leased Engine Program" shall have the meaning assigned to such term in Exhibit
---------------------
G.
"Legal Requirements" shall mean all laws, ordinances, rules, regulation, permits
------------------
and orders of all Governmental Persons, including the judicial or administrative
interpretation of any such laws, ordinances, rules, regulations, permits and
orders which are applicable to POA, GE, the Operation and Maintenance of the
Facility and/or the Facility.
"Maintenance Schedule" shall have the meaning assigned to such term in Section
--------------------
204(b).
"Major System Repair" shall mean the repair, replacement or overhaul of
------------------
Equipment, the cost of which exceeds $10,000 and is not included in the Annual
Budget. Notwithstanding the foregoing, Major System Repair shall not include (i)
Routine Maintenance (ii) repairs, replacements and overhauls required as a
result of the negligence or willful misconduct of GE or any failure of GE to
perform its obligations under this Agreement, or (iii) repairs, replacements or
overhauls included within the Repair and Overhaul of the Gas Turbine Packages.
"Minimum Electric Output" shall have the meaning assigned to such term in
-----------------------
Section 7.0l(a)(iv).
"On-Peak Capacity Factor" shall have the meaning assigned to such term in
-----------------------
Section 7.0l(a)(iv).
"Off-Peak Capacity Factor" shall have the meaning assigned to such term in
------------------------
Section 7.01 (a)(iv).
"Operate and Maintain the Facility" shall have the meaning assigned to such term
---------------------------------
in Section 2.01(a).
"Operating Agreement" shall mean the Operating Agreement between Steam User and
--------------------
Project Orange Associates, L.P., dated as of February 27, 1990, as amended.
"Operating Fee" shall have the meaning assigned to such term in Section 5.12.
-------------
"Operating Year" shall mean (i) with respect to the first Operating Year, that
--------------
period of time beginning on the Commencement Date and ending on December 31,
1999, (ii) with respect to subsequent Operating Years (other than the last
Operating Year), the calendar year commencing on January 1 and ending December
31, and (iii) with respect to the last Operating Year, that period of time from
January 1 and ending on the date of expiration or termination of this Agreement.
"Parts and Tools" shall mean all of the parts, materials, assemblies,
---------------
components, tools, supplies and equipment (other than Spare Parts) necessary to
Operate and Maintain the Facility and the Equipment as required by this
Agreement.
"Payroll Cost" shall have the meaning assigned to such term in Section 5.03.
------------
"Per-Hour Fee" shall have the meaning assigned to such term in Section 5.10.
------------
"Permits" shall mean all of the permits, licenses, certificates, rights,
-------
approvals and other similar requirements, including those issued by Governmental
Persons, including: (i) with respect to
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<PAGE>
GE, necessary to Operate and Maintain the Facility; and (ii) with respect to
POA, to build, own and operate and maintain the Facility and to perform its
obligations hereunder.
"Person" shall mean a natural person, corporation, partnership, limited
------
liability company, trust, Governmental Person or any other legal entity.
"Pipeline" shall mean the pipeline located upon the Right-of-Way and the Site
--------
for the transmission of natural gas from facilities of the Tennessee Gas
Pipeline Division of Tenneco, Inc. ("Tennessee") to the Facility, including the
interconnections to the Tennessee facilities and the Facility and associated
equipment such as odorization equipment, test points and other peripheral
equipment contemplated by the Pipeline Order.
"Pipeline Order" shall mean the opinion and order of the New York Public Service
--------------
Commission No. 89-17, issued June 5, 1989 in Case No. 88-T-082.
"Plant Manager" shall have the meaning assigned to such term in Section 2.07.
-------------
"POA" shall have the meaning assigned to such term in the first paragraph
---
hereof.
"POA Administrative Procedures Manual" shall have the meaning assigned to such
------------------------------------
term in Section 4.01.
"POA Event of Default" shall have the meaning assigned to such term in Section
--------------------
7.02,
"POA Indemnified Parties" shall have the meaning assigned to such term in
-----------------------
Section 9.01.
"POA Operation and Maintenance Procedures Manual" shall have the meaning
-----------------------------------------------
assigned to such term in Section 4.02.
"POA Representative" shall have the meaning assigned to such term in Section
------------------
3.04.
"PPA" shall mean the Power Put Agreement entered into as of September 19, 1986,
---
between POA and Electric Utility, which became effective on June 30, 1998.
"Preventive Maintenance Program" shall have the meaning assigned to such term in
------------------------------
Section 2.09.
"Prior Agreement" shall have the meaning assigned to such term in the second
---------------
WHEREAS clause in the preface hereto.
"Prudent Utility Practices" shall mean those practices, methods, equipment,
-------------------------
specifications, and standards of safety and performance which are commonly used
by operators of facilities similar to the Facility which, in the exercise of
reasonable judgment and in light of the facts known at the time the decision was
made, are considered good, safe and prudent practice in connection with the
operation and maintenance of such facilities.
"Records" shall have the meaning assigned to such term in Section 5.14.
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"Reimbursable Expenses" shall have the meaning assigned to such term in Section
---------------------
5.02.
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<PAGE>
"Relocation Expenses" shall have the meaning assigned to such term in Section
-------------------
5.05.
"Repair and Overhaul of the Gas Turbine Packages" shall have the meaning
-----------------------------------------------
assigned to such term in Section 2.04.
"Right-of-Way" shall mean the land across and through which the Pipeline passes,
------------
as more particularly described in Exhibit B to the Gas Pipeline Turnkey
Construction Agreement, dated as of April 5, 1991 between POA and OBG Technical
Services, Inc., as amended, and the Pipeline Order.
"Routine Maintenance" shall mean the inspection, cleaning and taking of other
-------------------
protective measures with respect to the Equipment (other than Equipment included
in the Gas Turbine Packages) to keep it in good working order and to prevent it
from prematurely deteriorating, breaking down or wearing out, including the
replacement of minor parts which (i) normally have a relatively short life, (ii)
can be expected to fail, deteriorate or wear out as a result of normal use of
the Equipment, or (iii) normally need to be replaced after dismantlement of the
Equipment, such as gaskets, seals, filters, fuses, bulbs and batteries.
"Site shall mean that certain parcel of land situated in the City of Syracuse,
----
County of Onondaga, State of New York, which has been leased to POA by the Steam
User pursuant to the Site Lease, together with the site of the Existing Plant.
"Site Lease" shall mean a lease agreement dated as of February 27, 1990 between
----------
POA and Steam User, as amended by letters dated May 1, 1990, June 22, 1990 and
August 29, 1990, and an amendment dated as of December 31, 1990, and as the same
may be further amended from time to time thereafter.
"Spare Parts" shall have the meaning assigned to such term in Section 2.14(c).
-----------
"Spare Parts Fee" shall have the meaning assigned to such term in Section 5.11.
---------------
"Steam Delivers Point" shall mean the point at which the steam delivery line or
--------------------
lines from the Facility interconnect with the Steam User's steam distribution
system.
"Steam Agreement" shall mean that certain Steam Contract, dated as of February
---------------
27, 1986, between POA and the Steam User, a copy of which has been provided to
GE, as amended from time to time.
"Steam User" shall mean Syracuse University, a New York educational corporation.
----------
"Subcontractor Expenses" shall have the meaning assigned to such term in Section
----------------------
5.06.
"Taxes" shall mean all levies, fees, charges, duties, tariffs and taxes,
-----
including sales taxes, value added taxes, use taxes, excise taxes and stamp
taxes, imposed by a Governmental Person.
"Term" shall have the meaning assigned to such term in Section 6.01.
----
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<PAGE>
"Training Expenses" shall have the meaning assigned to such term in Section
-----------------
5.04.
"Training Plan" shall have the meaning assigned to such term in Section 4.03.
-------------
"Transition Period" shall have the meaning assigned to such term in Section
-----------------
7.01(d).
"Wages" shall have the meaning assigned to such term in Section 5.03.
-----
ARTICLE II - ENGAGEMENT OF GE AND DESCRIPTION OF SERVICES
Section 2.01 Operation and Routine Maintenance of the Facility. (a) Beginning
on the Commencement Date and continuing throughout the Term, GE shall
continuously operate the Facility and perform all required Routine Maintenance
on a 24 hours/day, 7 days/week, 365 days/year basis (collectively, "Operate and
Maintain the Facility"). GE shall Operate and Maintain the Facility in
accordance with POA's instructions and the standards set forth in subsection
(viii) below so as to:
(i) cause POA to fully perform its obligations under the Facility
Agreements;
(ii) minimize the costs and expenses incurred by POA for, or in
connection with, the ownership, operation, maintenance, repair,
overhaul and replacement of the Facility and the Equipment and the
parts thereof;
(iii) cause all warranties and guarantees of the Facility and the
Equipment to remain in effect and coverage thereof not to be
reduced;
(iv) maximize the useful life of the Facility;
(v) cause the maintained portions of the Facility to be at least equal
in quality and class to the quality and class of such portions of
the Facility prior to the damage or wear and tear which necessitated
such maintenance;
(vi) cause all insurance coverage applicable to the Facility and to POA
to remain in effect;
(vii) cause the Facility and the operation thereof to comply with and
conform to all Legal Requirements; and
(viii) cause the Facility and the operation, maintenance, repair and
overhaul thereof to conform to Prudent Utility Practice, the IS0
Rules, the Operation and Maintenance Procedures Manual, the
Administrative Procedures Manual, the Annual Operating Plan, the
Annual Budget and all operating and maintenance manuals,
instructions and recommendations for the Facility and the Equipment.
(b) To the extent that GE's obligations under clauses (i) through (vii) in
paragraph (a) above, conflict, GE shall perform such obligations with relative
priorities as established by POA from time to time.
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<PAGE>
(c) In the event any mode or method of operation of the Facility proposed or
directed by POA would, in GE's reasonable opinion, have any adverse effect on
the Facility or its operation, maintenance, repair or overhaul, including,
without limitation, (i) any reduction in the efficiency of the Facility, (ii)
any increase in the cost of operating the Facility or any increase in the cost
or frequency of maintenance, repairs or overhauls, (iii) any inability or
failure of the Facility to comply with Legal Requirements, or (iv) any breach of
any Facility Agreement, then GE shall promptly so inform POA.
(d) Notwithstanding the foregoing, in the event GE reasonably believes that its
Operation and Maintenance of the Facility in a manner directed by POA would
result in GE incurring liabilities in excess of the liabilities GE would
otherwise incur in connection with its Operation and Maintenance of the Facility
in accordance with this Agreement ("Excess Liabilities"), then GE shall promptly
so inform POA and shall include in such notice a description of Excess
Liabilities in reasonable detail. Provided such notice is given, GE shall have
no obligation to Operate and Maintain the Facility in such manner unless and
until POA shall have entered into an agreement with GE, in form and substance
reasonably satisfactory to GE, to indemnify, defend, and hold GE harmless from
and against Excess Liabilities which arise from such Operation and Maintenance,
whether or not described in such notice.
Section 2.02 Certain Requirements Applicable to the Operation and Maintenance
of the Existing Facility and the Site. Subject to payment when due by POA of the
Reimbursable Expenses associated therewith, GE shall
(i) maintain the Existing Plant, except the portions of the Existing
Plant described in clause (ix) below, in as good a condition as it
exists upon the Commencement Date, ordinary wear and tear excepted,
and operate and maintain the Existing Plant in a state of readiness
to make available an alternate source of steam to the Steam User at
the pressures and temperature and meeting the other requirements of
the Steam Agreement within the shortest period of time technically
and reasonably possible, but in all events within no more than six
(6) hours after the interruption of the supply of steam from the
Facility;
(ii) when the Existing Plant includes all equipment necessary to start up
from a dead start without utility power, maintain such capability;
(iii) operate, maintain and promptly repair the Existing Plant in
accordance with the minimum requirements set forth in Exhibit A and
the requirements of the Operating Agreement;
(iv) do all shoring of foundations and walls of any structures on the
Site and every other act or thing which may be necessary for the
safety and preservation thereof and any part of the Facility by
reason of any excavation or other building operation upon any
adjoining property or street, alleyway or passageway, to the extent
that GE has actual notice of such excavation or other building
operation or the circumstances thereof are such that a reasonable
person in the position of the GE would have had knowledge thereof;
(v) as and to the extent required and approved by POA, promptly repair
and overhaul the steam boilers and related apparatus and equipment
of the Existing
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<PAGE>
Plant, and their replacements, if any as contemplated under Section
7.01 of the Operating Agreement;
(vi) at least twice during each calendar year, at such time as POA may
designate upon at least 15 days' prior written notice, test the
readiness and capability of the Existing Plant to meet the steam
supply requirements of the Steam User within six (6) hours after the
interruption of the supply of steam from the Facility by operating
the Existing Plant for a period of at least eight (8) hours, and
also perform, from time to time, such additional tests as POA may
reasonably request to determine the status of the maintenance and
readiness of the Existing Plant. POA shall promptly deliver to GE a
copy of any notice from Steam User designating the time for any
tests;
(vii) not commit, or permit to be committed, any waste or any nuisance on
the Site or permit any part of the Site to be used for any
dangerous, noxious or offensive purpose, not permit any damaged
improvement to remain on the Site for an unreasonable period of
time, not allow the manufacture (except to the extent that toxic or
hazardous substances are generated or produced in connection with
the Operation and Maintenance of the Facility in accordance with
this Agreement) or disposal of any toxic or hazardous substances on
the Site or otherwise at the Facility and shall only allow the
storage or presence of toxic or hazardous substances at the Site to
the extent necessary in connection with the operation of the
Facility and if such storage or presence is in compliance with all
Legal Requirements;
(viii) except as otherwise expressly permitted in the Operating Agreement,
use and operate the Existing Plant only as an alternate source of
steam to meet the steam requirements of the Steam User pursuant to
the Steam Agreement;
(ix) provide the Steam User with the exclusive use of (A) the office on
the second floor of the Existing Plant for the Steam User's
distribution system supervisory and clerical employees, and (B) the
locker, restroom and shower facilities adjacent to the office
described in the preceding clause (A) for the Steam User's
distribution system hourly employees;
(x) provide to POA and the Steam User (A) from time to time the
operating manuals, instructions and other documents and information
for, and relating to, the operation and maintenance of the Existing
Plant then being used by GE, and (B) training of employees of the
Steam User in the operation and maintenance of the Existing Plant;
and
(xi) make available to POA and the Steam User for their inspection at all
times during normal business hours all records and documents
relating to the operation, repair, maintenance and testing of the
Existing Plant, including, without limitation, all operating logs
and records and reports of inspection and testing maintained by GE
in accordance with Exhibit A and also furnish to POA and the Steam
User copies of the annual New York State boiler inspection report on
the Existing Plant within thirty (30) days of issuance of such
report.
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<PAGE>
Section 2.03 Certain Requirements Applicable to the Operation and Maintenance
of the Pipeline and Right of Way. GE's obligation to operate, maintain and
repair the Pipeline and the Right-of-Way, shall include, but is not limited to:
(i) all action required under the Pipeline Order, including the EM&CP;
(ii) inspection of the odorization equipment and provision of odorization
chemicals, as required by the Pipeline Order;
(iii) visual inspection of the Pipeline and Right-of-Way as required by
the Pipeline Order and correction of all dangerous conditions and
conditions existing thereon which might disturb the Pipeline or
interfere with its operation such as fallen trees, exposure of the
Pipeline, vandalism and the presence or deposition on the Right of
Way of toxic or hazardous substances;
(iv) all actions set forth in Exhibit B, including "smart pigging" the
Pipeline as required by prudent industry practices, the Pipeline
Order, or the Operating and Maintenance procedures contemplated
thereby; and
(v) all other actions reasonably required to prudently operate the
Pipeline and maintain the Right-of-Way and to cause the operation
and maintenance thereof to comply with all Legal Requirements.
Section 2.04 Repair and Overhaul of the Gas Turbine Packages.
(a) GE shall perform all labor and provide all supervision; all
procurement, administration and other support services; all tools
and equipment; all parts, assemblies and systems; all Consumables
(other than lubricants), materials and supplies; all services of
subcontractors and consultants; and all testing, inspection and
start-up services necessary to perform all repairs, replacements,
overhauls and maintenance of the Gas Turbine Packages needed during
the Term, whether scheduled or unscheduled, planned or unplanned,
and whether included in the Annual Budget or not (collectively, the
"Repair and Overhaul of the Gas Turbine Packages"). Notwithstanding
the foregoing, repair of damage, to the extent such damage
constitutes a loss or damage covered under POA's Property All Risk
Insurance ("Insured Loss"), shall not be included in the repairs GE
is required to perform under this Section 2.04, provided however,
-------- -------
that GE shall pay to POA (subject to Article X) an amount equal any
deductible amount applicable to any Insured Loss, to the extent such
Insured Loss is caused by GE's negligence, willful misconduct or
failure to perform its obligations under this Agreement.
(b) All Preventative Maintenance and Servicing Checks of the Gas Turbine
Packages shall be performed in accordance with applicable
manufacturers' recommendations as revised, amended and updated from
time to time, including, but not limited to, General Electric Marine
and Industrial Engines and Service Division On-Site Operation and
Maintenance Manual for Industrial Gas
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<PAGE>
Turbines, LM5000 G Series and P Series (GEK 72550) "Preventative
Maintenance and Servicing Checks"; General Electric Marine and
Industrial Engines and Service Division Technical Manual for Power
Turbines (GEK 95450); Brush Electrical Machines Limited Service
Manual for Cylindrical Rotor A.C. Generator; Stewart 8, Stevenson
Services, Inc. Gas Turbine Products Division Manual GEK 72550
(latest revision) and the schedule ("Maintenance Schedule") attached
hereto as Exhibit H. Where the Maintenance Schedule requires
maintenance, replacements or overhauls more often or sooner than
would be required by applicable manufacturers' recommendations, the
Maintenance Schedule shall govern, except to the extent waived by
POA in its sole discretion. Replacement and overhauls of the Gas
Turbine Packages, including but not limited to Hot Section/Combustor
overhaul or replacement and/or Power Turbine overhaul or
replacement, will be performed when necessary as determined by
borescope inspection (or visual inspection if the unit is open for
other reasons), conducted in accordance with manufacturer's
guidelines described above, by the original equipment manufacturer
or other qualified, independent inspectors.
Section 2.05 Liens. Except to the extent liens arise as a result of any
failure by POA to perform its payment obligations hereunder, GE shall not
create, permit or suffer to exist by, through or under GE, any liens or
encumbrances on the Facility. Any such lien or encumbrance by, through or under
GE and not resulting from POA's failure to perform its payment obligations under
this Agreement shall be discharged by GE within thirty (30) days of GE's receipt
of notice thereof.
Section 2.06 Personnel Standards.
(a) GE shall provide and make available as necessary, in accordance with
the GE Organizational Chart attached hereto as Exhibit C, all such
operational, professional, supervisory and managerial personnel as
are required to Operate and Maintain the Facility. Such personnel
shall be qualified, licensed (to the extent required by Legal
Requirements) and experienced in the duties to which they are
assigned. Each personnel's qualifications shall conform to the
position descriptions which are part of the POA Operations and
Maintenance Procedures Manual.
(b) Not later than 10 days prior to GE's assignment of any person to
perform work at the Site, GE shall notify POA of the assignment of
such person to perform work at the Site.
Section 2.07 GE Plant Manager. GE shall appoint a Plant Manager and shall
cause a Plant Manager to be assigned to the Facility at all times during the
Term. Appointment of the first Plant Manager and each successor Plant Manager
shall be subject to the reasonable approval of POA.
Section 2.08 Training, GE shall provide all training required for personnel
assigned to Operate and Maintain the Facility. Such training shall be conducted
in accordance with the Training Plan.
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Section 2.09 Preventive Maintenance Program. GE shall implement and maintain a
program of preventive maintenance for the Facility (the "POA Preventive
Maintenance Program"). The POA Preventive Maintenance Program shall include, but
not be limited to, the regular inspection, testing, calibration and servicing of
the Facility and the Equipment and shall be implemented in accordance with the
instructions and recommendations of the Constructor and the suppliers,
manufacturers and vendors of the Equipment. As a minimum, the POA Preventive
Maintenance Program shall include the scheduling (on a forward looking basis) of
preventive maintenance for a period of eighteen (18) months and shall establish
a reporting system which shall include: (i) the scheduling and tracking of work
to be performed; (ii) documenting any problems encountered; and (iii)
documenting the work performed in a manner satisfactory to POA. The POA
Preventive Maintenance Program may be based on GE's standard preventive
maintenance program, but shall incorporate such additions and revisions thereto
which are required by the characteristics of the Facility and/or reasonably
requested by POA.
Section 2.10 Inventory System. GE has developed and is utilizing, and POA has
approved, a tracking and control system for all Consumables, Spare Parts and
Parts and Tools. GE shall utilize such system throughout the Term. A monthly
report of Consumables, Spare Parts and Parts and Tools added or removed from
inventory and the cost incurred in connection therewith shall be provided to
POA. A complete physical inventory of all items in inventory shall be taken
annually and a report thereof issued to POA within 14 days of its completion,
including a reconciliation with the preceding inventory, all in accordance with
Prudent Utility Practice and generally accepting auditing standards. Safe,
secure and segregated storage facilities shall be maintained for all items held
in inventory.
Section 2.11 Operation and Maintenance Procedures. GE shall implement and
administer the POA Operation and Maintenance Procedures Manual.
Section 2.12 Administrative Procedures Manuals. GE shall implement and
administer the POA Administrative Procedures Manual.
Section 2.13 Warranty and Insurance Claims. GE shall notify POA as soon as
reasonably practicable of any defect or other deficiency in the Facility
discovered by GE. If requested by POA, GE shall assist POA in preparing and
prosecuting warranty claims with respect to any defects or deficiencies in the
Facility or the Equipment. The prosecution of all warranty claims shall be
controlled by POA. POA, subject to the provisions of this Agreement, shall not
hold GE responsible for any lost revenues associated with a warranty claim. GE
shall assist POA in preparing and prosecuting claims against any insurance
carrier for payment of losses incurred in connection with the Facility or the
operation thereof.
Section 2.14 Procurement and Inventories.
(a) Consumables. GE shall purchase and cause to be delivered to the Site
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such Consumables as are required to Operate and Maintain the Facility
in accordance with this Agreement and to keep a reasonable inventory
of Consumables at the Site.
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(b) Parts and Tools. On behalf of POA. GE shall purchase and cause to be
---------------
delivered to the Site all Parts and Tools required to Operate and
Maintain the Facility in accordance with this Agreement.
(c) Spare Parts. At all times during the Term, GE shall keep the parts,
-----------
systems and assemblies listed on Schedule 1 (the "Spare Parts") at the
Site or at a location within 12 miles of the Facility. Schedule 1
shall be reviewed annually by the Parties and may be changed as the
Parties mutually agree. All right, title and interest in each Spare
Part shall remain in GE or an Affiliate of GE until such time as such
Spare Part is used or incorporated into the Facility or is paid for in
full by POA. Each Spare Part withdrawn from inventory and used or
incorporated into the Facility shall be replaced by GE as promptly as
practicable. Spare Parts in such inventory which are or become
unserviceable, including, without limitation, such items which are or
become defective, exceed their useful shelf-life or become
unserviceable due to modification of the Facility, shall be replaced
immediately upon, or prior to, becoming unserviceable if such
unserviceability was or reasonably should have been anticipated by GE,
otherwise as promptly as practicable.
(d) Quality of Consumables, Parts and Tools and Spare Parts. All
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Consumables, Parts and Tools and Spare Parts shall be of a quality at
least equal to the corresponding item they are intended to replace or
if not intended for replacement, of good quality and shall be
sufficient and adequate for the intended purpose in conformity with
applicable instructions or recommendations of equipment manufacturers,
vendors or suppliers and Prudent Utility Practice. All such items
shall be warranted in accordance with usual or typical practice. All
such items shall be inspected as appropriate upon receipt and non-
conforming items shall be rejected and returned at no cost to POA.
(e) Procurement by, or from Vendors Designated by, POA. Notwithstanding
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the foregoing, POA may elect, by written notice to GE, to (i) procure
directly any or all Consumables and Parts and Tools or other goods and
services which would otherwise be procured by GE hereunder, or (ii)
designate the vendors or suppliers from whom GE shall procure such
goods and services. POA shall provide reasonable advance notice to GE
of its intent to so procure such goods or services or designate the
vendors or suppliers from whom GE shall procure such goods and
services.
GE may object to the use of Consumables and Parts and Tools or other
goods and services procured directly by POA or procured from vendors
designated by POA. Such objection shall not be unreasonable, shall be
made in writing and shall set forth in reasonable detail the reasons
for such objection. Thereafter, GE shall have no liability arising out
of any failure to perform its obligations hereunder to the extent such
failure is caused by deficiencies in the quality of such Consumables
and Parts and Tools or other failures of the vendors thereof to
perform their obligations under the applicable purchase agreements
which were included in the reasons for GE's objection to the use of
such Consumables and Parts and Tools or the procurement thereof from
vendors designated by POA. To the extent such POA vendors' costs are
greater than that which GE
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would have paid its own vendors, such excess shall not be considered
in calculating any budget excesses under Section 7.01(a)(v).
Section 2.15 Coordination with Electric Utility, ISO and Steam User. GE shall,
at the request of POA, interface and cooperate fully with the Electric Utility
and the ISO on all matters relating to the generation, sale and delivery of
electricity from POA's cogeneration facility and the agreements under which such
sales and deliveries are made, including without limitation the PPA and the ISO
Rules. Such interface and cooperation shall include, without limitation: (i)
review and inspection of the Facility and the Electric Utility Interconnection;
(ii) assistance with, and coordination of, Electric Utility repair, maintenance
and calibration of the Electric Utility Interconnection; (iii) providing notice
of, and schedules for, scheduled and unscheduled outages, and (iv) scheduling of
the generation of electricity in accordance with the orders and directions of
the Electric Utility, the ISO and POA. Further, pursuant to the requirements of
the Steam Agreement, GE, at the request of POA, shall interface and cooperate
fully with the Steam User concerning all matters relating to the Steam Agreement
including, without limitation: (i) notification and coordination of scheduled
Facility shutdowns; and (ii) notification of unscheduled shutdowns.
Section 2.16 Emergency. GE shall report all Emergencies, including GE's response
thereto, to POA. GE shall comply with all notification procedures as then in
effect.
Section 2.17 Claims and Litigation. Subject to the provisions of Section 2.25,
at the request of POA, GE shall reasonably assist POA in connection with all
claims and causes of action alleged against or accruing in favor of POA which
are connected with or related to the operation, maintenance, repair or overhaul
of the Facility.
Section 2.18 Permits and Other Governmental Approvals. At the request of POA, GE
shall assist POA in obtaining, maintaining or renewing any Permits and providing
any information required by any Governmental Person.
Section 2.19 Recalibrations. At the request of POA, but in any event no less
frequently than specified in the Operation and Maintenance Procedures Manual
and/or the Facility Agreements, or Prudent Utility Practice if required more
frequently thereby, GE shall arrange for the testing and recalibration of all
scales, meters, gauges and other measuring devices in accordance with Prudent
Utility Practices at the Facility and the Steam Delivery Point.
Section 2.20 Major System Repairs and Insured Losses.
(a) GE shall, unless otherwise directed in writing by POA, solicit
bids for any required Major System Repairs or repairs required
due to the occurrence of Insured Losses, review and advise POA
with respect to such bids and assist in administering any
contracts entered into for the performance of or otherwise in
connection with any Major System Repairs or repairs required due
to the occurrence of Insured Losses.
(b) GE may, at its option, submit bids or proposals to perform any
Major System Repair and any repairs required due to the
occurrence of Insured Losses. POA shall evaluate such bids or
proposals on a basis consistent with its evaluation of bids and
proposals received from third parties.
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(c) In the event any contractor selected by POA to perform any Major
System Repair or any repairs required due to the occurrence of an
Insured Loss is not included among, or affiliated with one of,
the contractors listed in Schedule 3 hereto or, if not so
included or affiliated, is not approved by GE for performance of
the planned work, then GE may object to the selection of such
Contractor (a "Disapproved Contractor"). Such objection shall not
be unreasonable, shall be in writing, shall be provided not later
than 10 days after POA's request for approval of any contractor
and shall specify in reasonable detail the reasons for GE's
objection. Thereafter, GE shall have no liability arising out of
any failure to perform its obligations hereunder to the extent
any such failure is attributable to any deficiency in any
Disapproved Contractor which was identified as a reason for its
objection to the selection of such Disapproved Contractor in an
objection provided in accordance with this Section.
Section 2.21 Review and Administration of Agreements. GE shall review the
Facility Agreements to familiarize itself with all provisions thereof affecting
or relating to the Operation and Maintenance of the Facility. GE shall, from
time to time at the request of POA, assist POA in administering and performing
under the Facility Agreements.
Section 2.22 Inspections. GE shall, from time to time, as and to the extent
reasonably requested by POA, perform and provide the results of inspections of
any portion of the Facility or any of the Consumables, Parts and Tools and Spare
Parts which have been purchased on behalf of POA or which are kept at the Site
or kept available for use in connection with the Operation and Maintenance of
the Facility pursuant to Section 2.14 or otherwise, and GE shall notify POA of
any defects or other deficiencies observed by GE.
Section 2.23 Hazardous Substances. As the agent of POA, GE shall arrange for the
management, transportation and/or disposal of all hazardous and toxic substances
generated or produced in connection with the operation, maintenance, repair and
overhaul of the Facility. Such management, transportation and/or disposal shall
be performed by third party independent contractors; provided, that GE shall
only retain those contractors who are properly licensed in accordance with
applicable Legal Requirements. Copies of all contracts, purchase orders, reports
and other documents prepared in connection with the management, transportation
and/or disposal of hazardous and toxic substances shall be provided to POA.
Section 2.24 Other. Consistent with the requirements of this Agreement, GE shall
provide such other assistance, services and work reasonably required or
requested by POA in connection with the Operation and Maintenance of the
Facility, including without limitation, all reporting and documentation as set
forth in Article IV.
Section 2.25 Limitation on GE's Authority. Notwithstanding any provision in this
Agreement to the contrary, the following acts may not be done or taken, or
caused to be done or taken, by GE, or by any agent, representative or contractor
of GE, without the prior written approval of POA:
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(i) settle, compromise, assign, pledge, transfer or release any claim,
suit, debt, demand or judgment against, or accruing in favor of, POA;
(ii) submit any claim, dispute or controversy to arbitration or judicial
process, or stipulate to any judgment with respect thereto, or agree
or consent to do any of the foregoing;
(iii) engage in any transaction on behalf of POA except as, and then only
to the extent specifically authorized herein, or take or agree to
take any action at variance with the applicable Annual Operating Plan
or Annual Budget; or
(iv) make or incur any cost or expense which is a capital expenditure or
for any capital improvement.
Section 2.26 Affiliate Matters. The terms of any agreement between GE and any
Affiliate of GE under which payments will be made which will be Reimbursable
Expenses shall be not less favorable than the terms available from unaffiliated
Persons.
Section 2.27 No Disruption of Steam User's Operations. GE hereby acknowledges
that the Steam User operates the university adjacent to the Site, and GE hereby
agrees to Operate and Maintain the Facility so as to not interfere with the
operations or business of the Steam User except as is contemplated by the Steam
Agreement. Recognizing that the operation of the Facility poses potential risks
to surrounding persons and property and that the proper operation and
maintenance of such facilities is of significant importance in mitigating such
potential risks, GE agrees to Operate and Maintain the Facility so as to not
adversely affect the safety of the Steam User or any Persons adjacent to or in
the vicinity of the Site.
Section 2.28 Site Access. POA, authorized representatives of POA and any other
persons authorized in writing by POA shall at all times have reasonable access
to the Facility and all records retained in connection therewith. All such
persons shall have the right to be present during any maintenance or repair
work. If any such Party desires access to any places where maintenance or repair
work is being performed or from which Parts and Tools or Spare Parts are being
obtained for the Facility, GE shall use reasonable efforts to facilitate or
arrange reasonable access thereto. GE shall permit any such Party to inspect and
review all such work. POA shall hold harmless and indemnify GE for and against
all claims made against GE due to (i) injury to or death of POA's personnel or
POA's invitees (other than GE) or (ii) damage to or destruction of property,
including the Facility, or any part thereof, in either case arising from the
exercise of inspection rights under this Section 2.28, except to the extent
caused by the negligence or willful misconduct of GE.
Section 2.29 Liability for Payments. Anything in this Agreement to the contrary
notwithstanding, GE shall not be responsible for making any payments required to
be made by POA pursuant to any Facility Agreements, or any other agreement, with
respect to the Facility and/or the Site. In the event POA shall become liable or
obligated to pay any fine or penalty due to the violation of any Legal
Requirement or Permit then GE shall reimburse and indemnify POA but only to the
extent such liability or obligation results from the negligence or willful
misconduct of GE or any failure by GE to perform its obligations hereunder.
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Section 2.30 Alteration of Facility. GE shall not alter, improve or add to the
Facility if such alteration, improvement or addition will change the outside
appearance of the Facility without the prior written consent of POA, which may
be granted or withheld in POA's sole discretion, regardless of whether such
alteration, improvement or addition is included in the Annual Budget.
ARTICLE III - POA OBLIGATIONS
Section 3.01 General. POA shall furnish to GE, at POA's expense, the
information, services, materials and other items described in this Article III.
All such items shall be made available at such times and in such manner as may
be required for the expeditious and orderly operation, maintenance, repair and
overhaul of the Facility by GE.
Section 3.02 Information. POA shall (i) provide all technical, operational and
other information relating to the Facility which is in the possession, or under
the control, of POA; and (ii) use its best efforts to obtain such information
from third parties, as may be reasonably required by GE in the performance of
its obligations under this Agreement.
Section 3.03 Sale of Electricity and Cogeneration Services. POA shall be
responsible for the billing and collection of amounts due for electricity and
steam and/or thermal energy in other forms sold by POA, based upon Facility
operating data supplied by GE and reports received by GE.
Section 3.04 POA Representative. Within thirty (30) days of the Commencement
Date, POA shall designate a representative (the "POA Representative") who shall
be authorized to act on behalf of POA and with whom GE may consult at all
reasonable times. Whenever this Agreement requires or provides for the approval,
consent or some other action of POA, GE may rely on the approval, consent or
other action of the POA Representative. POA may change the POA Representative at
any time and from time to time by written notice to GE.
Section 3.05 Fuels and Utilities. POA shall provide and pay for all natural gas,
fuel oil, purchased electricity, water and other utilities used by the Facility,
as well as the costs of managing, transporting and/or disposing of solid and
liquid waste and toxic and hazardous substances.
Section 3.06 Procurement. In accordance with Section 2.14(e), POA may elect, by
written notice to GE, to (i) procure directly any or all Consumables and Parts
and Tools or other goods or services which would otherwise be procured by GE
hereunder, or (ii) designate the vendors or suppliers from whom GE shall procure
such items, systems or assemblies. POA shall provide reasonable advance notice
to GE of its intent to procure Consumables and/or Parts and Tools or other goods
or services.
Section 3.07 Annual Management Audit. Subject to Section 2.28, POA may at its
discretion institute an annual management audit of the Facility. Auditors shall
be selected by POA. Annual management audits may focus on areas of concern to
POA, assess overall performance of the Services or identify areas where
improvements may be warranted. GE shall be provided a copy of audit reports for
review, comment, refutation or corrective action as applicable. Specific
subjects for audits may include, but are not limited to:
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(i) trends, deficiencies or opportunities for improvement in Facility
operations;
(ii) adherence to this Agreement;
(iii) appropriateness of Facility organization and staffing;
(iv) major equipment problems encountered and progress in resolution;
(v) potential Facility capital improvements;
(vi) regulatory compliance:
(vii) accounting, procurement and inventory management practices;
(viii) maintenance effectiveness; and
(ix) energy efficiency.
Section 3.08 Leased Engine Program. POA and GE shall commence their
participation in the Leased Engine Program, as defined and on the terms and
conditions set forth in Exhibit G, as of the Commencement Date.
Section 3.09 Liens. POA shall not create, permit or suffer to exist by, through
or under POA, any liens or encumbrances on any property owned by GE or its
contractors, including the Spare Parts. Any such lien or encumbrance by, through
or under POA and not resulting from GE's default under this Agreement shall be
discharged by POA within thirty (30) days of POA's receipt of notice thereof or
POA shall otherwise provide reasonable protection for GE against any adverse
consequences of such lien.
Section 3.10 Access. From the Commencement Date, POA shall provide and ensure
GE total and unrestricted access to the Facility.
Section 3.11 General, Office and Maintenance Facilities. During the Term, POA
shall continue to provide GE with the use of office facilities located at the
Site substantially the same as or equal to the facilities being provided
immediately prior to the Commencement Date.
Section 3.12 Spare Parts. POA, at GE's request, will execute and deliver such
financing statements and other instruments as GE may reasonably request to
demonstrate and protect GE's right, title and interest in the Spare Parts,
provided however, that POA shall have no obligation to file financing statements
or other instruments with respect to any property in which POA has any ownership
interest.
ARTICLE IV - BUDGETS, PROCEDURES, PLANS AND REPORTING
Section 4.01 POA Administrative Procedures Manual. GE shall promptly, but in no
event later than six (6) months from the date hereof, prepare and submit to POA
for approval (which shall not be unreasonably withheld or delayed) an updated
administrative procedures manual (the "POA Administrative Procedures Manual")
which shall contain administrative information regarding the administrative
procedures to be followed in the operation, maintenance, repair and overhaul of
the Facility, including without limitation: (i) the organization of GE's
corporate personnel and their reporting requirements; (ii) correspondence and
review procedures; (iii) limits of authority; (iv) procurement and contracting
procedures: (v) accounting, bookkeeping and record keeping systems; (vi)
personnel procedures; and (vii) procedures for the receipt and implementation of
POA-issued directives relating to this Agreement and the operation, maintenance,
repair and overhaul of the Facility. The POA Administrative Procedures Manual
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may be based on GE's standard manual, but shall include such additions,
deletions and revisions as may reasonably be required by the characteristics of
the Facility and as may reasonably be requested by POA. POA shall have the right
to require GE to make reasonable modifications from time to time to the POA
Administrative Procedures Manual that are not inconsistent with Legal
Requirements, Prudent Utility Practices, insurance policies or any Facility
Agreement. GE shall give prompt written notice to POA of any revision to the POA
Administrative Procedures Manual.
Section 4.02 POA Operation and Maintenance Procedures Manual. GE shall promptly,
but in no event later than 6 months after the date hereof, prepare and submit to
POA for its review and approval (which shall not be unreasonably withheld or
delayed) an updated manual setting forth the procedures GE will follow in
operating, maintaining, repairing and overhauling the Facility (the "POA
Operation and Maintenance Procedures Manual"). The POA Operation and Maintenance
Procedures Manual shall include, among other things, an operating program,
operating procedures, a maintenance and materials management system, maintenance
program, emergency operating procedures, an energy management program, record-
keeping procedures, reporting procedures, a safety program, a security plan,
problem identification and root cause determination procedures and position
descriptions for each person who will operate, maintain, repair and overhaul the
Facility. The Operation and Procedures Manual shall provide, among other things,
that GE shall (i) maintain accurate and detailed accident and injury reports and
shall inform its employees of safety practices and the requirements of GE's
safety program and submit a copy of those reports to POA; (ii) require all of
its employees, agents and representatives, when at the Facility, to abide by the
most current version of the GE safety procedures manual; (iii) maintain a supply
of suitable safety equipment (including fire extinguishers) and shall train its
employees in the use of such equipment; (iv) promptly take all precautions that
are reasonable to safeguard against risks of fire, injury to or death of persons
on the Site and damage to property, including the Facility; (v) make regular
safety inspections of the Facility, and, (vi) keep records of, and provide
notification to POA, of all unusual operating conditions as needed by POA to
prepare and file reports required under applicable Legal Requirements. The POA
Operation and Maintenance Procedures Manual may be based on GE's standard
manual, but shall be consistent with the operation and maintenance manuals used
at the Facility as of the date hereof and shall include such additions,
deletions and revisions as may reasonably be required by the characteristics of
the Facility and as may reasonably be requested by POA. POA shall have the right
to require GE to make reasonable modifications from time to time to those
provisions of the POA Operation and Maintenance Procedures Manual that are not
inconsistent with Legal Requirements, Prudent Utility Practices, insurance
policies or any Facility Agreement. GE shall give prompt notice to POA of any
revisions to the POA Operation and Procedures Manual.
Section 4.03 Training Plan. GE shall submit a training plan (the "Training
Plan") to POA promptly after the execution of this Agreement. The Training Plan
shall describe the minimum qualifications and experience for trainees, training
to be conducted by GE and trainee evaluation criteria. The Training Plan shall
be subject to POA's approval, which shall not be unreasonably withheld or
delayed.
Section 4.04 Annual Budget and Operating Plan.
(a) Approval of the Annual Budget. At least one hundred eighty (180) days
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before the start of each Operating Year, GE shall submit a proposed
operating plan for
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such Operating Year (each, an "Annual Operating Plan"). The Annual
Operating Plan shall be reviewed by POA and agreed to in principle
prior to submittal of the Annual Budget. At least one hundred eighty
(180) days before the start of each Operating Year, other than the
first Operating Year, GE shall prepare and submit to POA a proposed
budget for such Operating Year (each, an "Annual Budget"). POA shall
promptly review GE's proposed Annual Budget and Annual Operating Plan
and may, upon written notice to GE, propose changes, additions,
deletions and modifications thereto. If GE accepts any changes
proposed by POA, the proposed Annual Operating Plan and proposed
Annual Budget as modified shall be adopted. If GE does not agree with
any of the changes proposed by POA, then the Parties shall meet and
work in good faith to agree upon an Annual Operating Plan and Annual
Budget. Once the Parties are in agreement, copies of the Annual
Operating Plan and the Annual Budget shall be approved in writing by
both Parties no later than one hundred fifty (150) days before the
start of the Operating Year. Once approved, the Annual Operating Plan
and the Annual Budget shall remain in effect throughout the applicable
Operating Year, subject to such change, revision, amendment and
updating in accordance with this Agreement. The Annual Budget for the
first Operating Year is attached hereto as Exhibit D.
(b) Failure to Agree Upon Annual Budget. If the Parties cannot reach
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agreement on the Annual Budget for an Operating Year prior to 120 days
before the start of such Operating Year, then, until such time as
agreement is reached or the dispute is resolved, the Annual Budget for
such Operating Year shall be based on the amounts contained in the
Annual Budget for the preceding Operating Year, as adjusted with
respect to expense items to reflect the net change, if any, between
the most recently published Consumer Price Index available on the
first day of the Operating Year in question and the corresponding
Consumer Price Index in effect at the start of the immediately
preceding Operating Year.
(c) Failure to Agree Upon Annual Operating Plan. If the Parties cannot
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reach agreement on the Annual Operating Plan for an Operating Year
prior to 120 days before the start of such Operating Year, then, until
such time as agreement is reached or the dispute is resolved, the
Annual Operating Plan for such Operating Year shall be the same as the
Annual Operating Plan for the prior Operating Year, subject to
adjustment as required for the safe operation of the Facility and as
required under the applicable Facility Agreements.
Section 4.05 Accounts and Reports. From and after the Commencement Date, GE
shall furnish to POA the following reports:
(a) Weekly Reports. On the first business day of each week, GE shall
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furnish to POA a report on the following events or occurrences which
occurred during the preceding week: (i) significant events related to
the operation and maintenance of the Facility; (ii) events which
adversely affected the safety of persons or property; (iii) any injury
to persons or damage to property; (iv) events which did or, in the
reasonable opinion of GE, could have had environmental significance,
including events which did or could have caused the Facility or its
operation to fail to comply with any Legal Requirement, and submittals
made which were
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required by or made pursuant to any Legal Requirement; (v) inspections
or visits to the Facility by any representative, employee or agent of
any Governmental Person; (vi) status of training; (vii) visitors to
the Facility; (viii) operating statistics, including electric energy
generated, electric energy exported, steam generated, steam exported,
fuel consumed, hours of operation of the gas turbines and similar
information; (ix) events within the foregoing categories scheduled or
planned to occur within the 30 days following such week, and (x) such
other events or occurrences with respect to which POA may reasonably
request GE to include in its report.
(b) Monthly Reports. Within fifteen (15) days after the end of each
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calendar month, GE shall submit to POA: (i) a monthly report in
reasonable detail covering activities conducted during such calendar
month with respect to operation and maintenance of the Facility
(including information regarding electric energy generated, electric
energy exported, steam generated, steam exported, fuel consumption,
capacity factor, availability, heat rate, and rolling average
qualifying facility status on a calendar year basis) compared to the
Annual Operating Plan for the specific month and the year to date
total, the percent of the year's Annual Operating Plan amount for such
items and any budget deviations indicated with a statement of any
individual line items of the Annual Operating Plan that have been
exceeded; capital improvements, labor relations, inventory activity,
other significant matters and any other matters with respect to which
POA may reasonably request GE to submit its report, which report shall
include a list of any significant operating problems encountered by GE
together with the remedial actions planned by GE (particularly with
respect to Major System Repair items) and a brief summary of major
activities planned over the next two (2) calendar months; (ii) a
statement setting forth all Reimbursable Expenses paid or incurred
during the month, which statement shall (A) itemize in reasonable
detail the computation of such amounts, (B) provide a summary of the
Reimbursable Expenses incurred for the specific month and the year to
date total, the percent of the Operating Year's Annual Budget amount
for such items and any budget deviations indicated and (C) a statement
of any individual line items of the Annual Budget that have been
exceeded: (iii) a summary of (A) the BTUs of steam provided to the
Steam User, (B) the BTUs of condensate returned by the Steam User (as
well as the remedial actions taken by GE with respect to condensate
returned to the Facility that failed to meet the parameters provided
in the Steam Agreement) and (C) the scheduled and unscheduled outages
of the Facility and their duration, and other data needed for thermal
billing; (iv) a summary statement of emissions data needed by POA for
any required submittal pursuant to the Permits and operation of the
Facility and a written record of Electric Utility and ISO notices and
any notices or any other reports or documents POA is required to
provide pursuant to the Facility Agreements; and (v) a statement of
any known accidents, injuries or violations of any Permits or other
Legal Requirements and any safety procedures. Notwithstanding the
foregoing, the statement required by clause (iii) of this paragraph
(b) shall be delivered to POA within two (2) business days of the end
of the calendar month.
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(c) Operating Year Annual Reports. Within thirty (30) days after the end
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of each Operating Year, GE shall submit to POA: (i) a summary report
covering the performance of the Facility and operation and maintenance
activities conducted during the previous Operating Year, including
without limitation, information regarding (A) total kW hour of
electric energy generation and export, (B) average annual capacity and
capacity factor, (C) average on-peak capacity factor, (D) total fuel
consumption for natural gas and fuel oil, (E) average annual heat
rate, (F) number of BTUs of steam generated and exported, (G) number
of BTUs of condensate returned, (H) capital improvements made, (I)
base and overtime labor expended for both operation and maintenance,
(J) operation, maintenance, safety and other personnel training
performed, (K) any other significant matters, and (L) any other
matters with respect to which POA may reasonably request GE to submit
in its report, which report shall include a listing of any significant
operating or other problems encountered by GE along with the remedial
actions planned by GE (particularly in relation to Major System Repair
items and a summary report of major activities planned over the next
Operating Year; and (ii) a statement, certified as to its truth and
accuracy by an officer of GE, setting forth all Reimbursable Expenses
paid or incurred, which statement shall itemize and include in
reasonable detail the computation of such amounts, including a summary
of Reimbursable Expenses for the previous Operating Year and any
deviations from the Annual Budget or Annual Operating Plan for the
previous Operating Year and the reasons for such deviations.
(d) Reports and Notices Required in Connection with Electricity Generation
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and Sales. As directed by POA, GE shall prepare and provide to the
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Electric Utility, the ISO and/or any other purchaser of electricity
from POA, such schedules, notices, reports and other information
regarding electricity generation, Facility outages and the status of
the Facility as is required under the PPA and/or the ISO Rules.
(e) Litigation: Permit Lapses. Upon obtaining actual knowledge thereof,
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each Party shall, as soon as reasonably practicable, submit written
notice to the other Party of: (i) any pending or threatened
litigation, disputes, actions or other material actions concerning the
Facility or the operation thereof; (ii) any lapse, modification,
termination or expiration of any Permit issued, obtained or required
for the Facility or the operation thereof; (iii) any violation of any
Permit or Legal Requirement; (iv) any refusal to grant, renew or
extend any Permit the stated reasons therefor and a summary of the
actions taken; and (v) any dispute with any Governmental Person that
may have an adverse effect on the operation of the Facility.
Notwithstanding the foregoing, POA shall only be obligated to notify
GE of matters which may either impact upon POA's performance of its
obligations under this Agreement, may result in liability of POA to GE
or for which GE may be liable.
(f) Assistance. GE shall maintain accurate and complete Facility operating
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records, maintenance reports and metering data. GE shall cooperate
with POA's accountants, auditors and other representatives (i) in the
preparation of the reports required to meet all Legal Requirements and
to perform POA's obligations under the Facility Agreements, and (ii)
in the preparation of POA's
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periodic financial statements and reports and the Federal, state
and local income tax returns of POA and its partners.
(g) Other Information. GE shall promptly submit to POA (i) any other
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material information which in the reasonable opinion of GE concerns
new or significant aspects of the Facility or the operation,
maintenance, repair or overhaul thereof; and (ii) such other
information concerning the Facility or the operation, maintenance,
repair and overhaul thereof reasonably requested by POA.
Section 4.06 Changes to Annual Budget and Annual Operating Plan.
(a) Proposal of a Change to the Annual Budget and Operating Plan. The
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Parties recognize that changes to a previously approved Annual
Budget and Annual Operating Plan (each, a "Change") may be
required. POA and GE may by a written notice to the other Party
propose a Change. The written notice shall describe the proposed
Change in reasonable detail and the reasons therefor.
(b) Change Order Budget Statement. The written notice of a Change
-----------------------------
proposed by GE shall be accompanied by a Change Order Budget
Statement which shall include (a) the direct cost or cost savings
to POA of the proposed Change; (b) the time anticipated to
implement the proposed Change; (c) the indirect costs or cost
savings of the proposed Change including any loss of electricity
revenues and any increased or decreased insurance, operating,
maintenance or other costs during or following the implementation
of the proposed Change; (d)) changes in the operating efficiency of
the Facility; and (e) any other material effect on the Operation
and Maintenance or efficiency of the Facility. Upon receipt by GE
of any proposed Change from POA, GE shall use its best efforts to
prepare and submit to POA a Change Order Budget Statement with
respect to such proposed Change within 30 days of the receipt of
POA's proposed Change. No proposed Change shall be implemented
until an agreement has been executed by both Parties ("Change
Order") approving the Change and the related Change Order Budget
Statement; provided, however, that GE shall be entitled to
implement a proposed Change without the prior approval of POA if
such Change is required due to an Emergency.
(c) Agreement on Change Order. POA and GE shall diligently and in good
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faith endeavor to reach agreement upon any proposed Change and the
related Change Order Budget Statement: (i) within 30 days after the
date of the receipt of a proposed Change and related Change Order
Budget Statement from GE or (ii) within 45 days after the date of
the receipt of a proposed Change and related Change Order Budget
Statement from POA. If a Change is required as a result of an
Emergency, then GE shall provide to POA, as soon as practicable,
notice of such Change, together with a statement describing the
Emergency. Within thirty (30) days of completion of a Change due to
an Emergency, GE shall provide POA with a Change Order and a Change
Order Budget Statement. If a Change due to an Emergency causes the
Annual Budget to be exceeded and POA believes that an Emergency did
not exist, then POA shall have the right to dispute the Change. If
POA and GE do not agree as to the resolution of such
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dispute, then either Party may submit the dispute for resolution
in accordance with Article XI.
ARTICLE V - COMPENSATION AND PAYMENT
Section 5.01 Payments to GE. In consideration for the performance by GE of its
obligations hereunder, POA shall pay to GE, in the manner and at the times
specified in this Article V, the Reimbursable Expenses, the Fired-Hour Fee, the
Spare Parts Fee and the Operating Fee. GE shall render bills monthly and shall
include with its bills such original invoices, purchase orders and other
contracts and other documentation as may be reasonably required by POA to verify
the amount of, and incurrence by GE, of Reimbursable Expenses included in the
respective bill.
Section 5.02 Reimbursable Expenses.
(a) Reimbursable Expenses shall consist of Payroll Costs, Training
Expenses, Relocation Expenses, Subcontractor Expenses, Taxes and the
Handling Fee and, subject to the limitations set forth herein, the
costs incurred by GE for the purchase and delivery to the Site of
Consumables and Parts and Tools.
(b) GE shall invoice POA for Reimbursable Expenses as follows: No later
than fifteen (15) days following the end of each month after the
Commencement Date, GE shall submit to POA an invoice for all
Reimbursable Expenses actually incurred by GE during such month. Each
invoice shall be payable by POA promptly within 30 days of POA's
receipt thereof.
Section 5.03 Payroll Cost. Payroll Cost shall be the sum of (a) the amount of
all wages and salary which GE pays directly to its employees for labor and
services performed at the Site for or in connection with the Operation,
excluding all overtime associated with the overhaul of the Gas Turbine Packages,
and Maintenance of the Facility and the Repair and Overhaul of the Gas Turbine
Packages, up to, in any Operating Year, an amount equal to the product of 1.02
and the amount set forth in the Annual Budget for such Operating Year for wages
("Wages"), (b) an amount equal to 40% of the sum of (i) Wages paid to employees
who do not receive additional Wages for overtime and the Wages for non-overtime
hours paid to employees who receive additional Wages for overtime and, and (ii)
the straight-time portion of Wages paid for overtime hours paid to employees who
receive additional Wages for overtime, to cover GE's salary related costs, such
as benefits, payroll taxes and employment-related insurance premiums, and (c) an
amount equal to 10% of the sum of (i) Wages paid to employees who do not receive
additional Wages for overtime, (ii) Wages paid for non-overtime hours and the
straight-time portion of Wages paid for overtime hours paid to employees who
receive additional Wages for overtime, to cover GE's allocable general and
administrative costs.
Section 5.04 Training Expenses. The actual, direct costs and expenses
reasonably incurred by GE for training ("Training Expenses") shall be
Reimbursable Expenses, except that, for purposes of calculating the amount of
Reimbursable Expenses, an amount equal to such costs and expenses incurred for
training any person who is, for any reason within the control of GE, no longer
assigned full-time to the Operation and Maintenance of the Facility within 12
months of the completion of such training shall be deducted from such costs and
expenses incurred for
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training any person to replace such person no longer assigned full-time to
Operate and Maintain the Facility.
Section 5.05 Relocation Expenses. The actual, direct costs and expenses
reasonably incurred by GE for the relocation of employees to the Syracuse, NY
area who are assigned full-time to the Operation and Maintenance of the Facility
("Relocation Expenses") shall be Reimbursable Expenses, except that, for
purposes of calculating the amount of Reimbursable Expenses, an amount equal to
such costs and expenses incurred to relocate any employee who is, for any reason
within the control of GE, no longer assigned full-time to the Operation and
Maintenance of the Facility within 12 months of his relocation shall be deducted
from such costs and expenses incurred in connection with the relocation of any
person to replace such person no longer assigned full-time to Operate and
Maintain the Facility. Relocation Expenses for any individual transferring to
the Facility will be limited to those authorized within GE's relocation policy
and those costs reasonably incurred for travel within the continental United
States.
Section 5.06 Subcontractor Expenses. The actual, direct costs and expenses
incurred by GE for the services of subcontractors and consultants including
subcontractors engaged to manage, transport and dispose of hazardous and toxic
substances, ("Subcontractor Expenses"), shall be Reimbursable Expenses, provided
however, that such costs shall include only reasonable costs reasonably incurred
and shall exclude (i) such costs incurred in connection with the Repair and
Overhaul of the Gas Turbine Packages, and (ii) such costs properly allocable to
GE's general and administrative costs or which are incurred for services for
which POA is obligated to compensate GE pursuant to Section 5.08 or otherwise
hereunder.
Section 5.07 Taxes. All Taxes (other than GE's franchise taxes, state, local
or federal income taxes or any other Taxes measured by GE's income) incurred by
GE under this Agreement shall be a Reimbursable Expense.
Section 5.08 Handling Fee.
(a) A fixed annual fee of $50,000 shall be a Reimbursable Expense in
consideration for all labor and services provided by GE in connection
with the purchasing of Consumables and Parts and Tools. Within fifteen
(15) days following the end of each calendar month after the
Commencement Date, GE shall submit to POA an invoice for one-twelfth
(1/12th) of the Handling Fee. POA shall pay GE the full amount of each
such invoice promptly within thirty (30) days after receipt of such
invoice, subject to the provisions of Section 5.15.
(b) A fee equal to 10% of the price paid by POA for Consumables, Parts and
Tools, and labor procured by GE for or in connection with the
performance of capital improvements, Major System Repairs or repairs
required as a result of the occurrence of Insured Losses which are not
performed by GE, shall be a Reimbursable Expense.
Section 5.09 Costs for Consumables and Parts and Tools.
(a) Consumables. The actual, direct costs incurred by GE for the purchase
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of Consumables and the delivery thereof to the Site shall be
Reimbursable
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Expenses, provided however, that such cost shall be limited to the
reasonable cost of Consumables which are reasonably required by GE to
Operate and Maintain the Facility. Notwithstanding the foregoing, the
cost of Consumables (other than lubricants) used for or in connection
with the Repair and Overhaul of the Gas Turbine Packages shall not be
included in Reimbursable Expenses.
(b) Parts and Tools. The actual, direct costs incurred by GE for the
---------------
purchase of Parts and Tools and the delivery thereof to the Site shall
be included in Reimbursable Expenses, provided however, that such cost
shall be limited to the reasonable cost of Parts and Tools which are
reasonably required by GE to Operate and Maintain the Facility. The
cost of Spare Parts used at or incorporated into the Facility and
included in Reimbursable Expenses shall be equal to GE's actual,
direct cost incurred to purchase such part and have it delivered to
the Site, at the time it was added to the inventory of Spare Parts.
Notwithstanding the foregoing, the cost incurred for (i) Spare Parts,
and (ii) Parts and Tools which are used for or in connection with the
Repair and Overhaul of the Gas Turbine Packages shall not be included
in Reimbursable Expenses.
Section 5.10 Fired-Hour Fee and Directed Starts. In consideration of GE's
Repair and Overhaul of the Gas Turbine Packages, POA shall pay to GE a monthly
fee (the "Fired-Hour Fee") in an amount equal to the product of $88 (the "Per-
Hour Fee") and the number of hours in the respective month each gas turbine in
the Facility operates and burns fuel at firing temperatures not exceeding 1410
degrees F. The Per-Hour Fee shall increase to $92 for each hour of operation of
a gas turbine during which such gas turbine is operated, at POA's request, for
20 minutes or more at firing temperatures in excess of 1410 degrees F, up to
1430 degrees F, and shall increase to $97 for each such hour during which such
temperatures are greater than 1430 degrees F, up to 1450 degrees F, for 20
minutes or more. POA shall not require operation of either gas turbine at firing
temperatures in excess of 1450 degrees F. There shall be added to the Fired-Hour
Fee an amount equal to the product of $600 and the number of Additional Directed
Starts which occurred in the respective month, and an amount equal to the
product of $1,200 and the number of Excess Directed Starts which occurred in the
respective month. "Additional Directed Starts" shall mean the fifty-sixth
through seventy-fifth Directed Starts which occur in each Operating Year.
"Excess Directed Starts" shall mean the Directed Starts in excess of 75 which
occur in each Operating Year. POA shall not require more than 100 Directed
Starts of either gas turbine during any Operating Year.
Section 5.11 Spare Parts Fee. In consideration of GE's purchasing, delivering
and maintaining the inventory of Spare Parts as required under Section 2.14(c),
POA shall pay to GE an annual fee of $50,000 ("Spare Parts Fee"). Within
fifteen (15) days following the end of each calendar month after the
Commencement Date, GE shall submit to POA an invoice for one-twelfth (1/12th) of
the Spare Parts Fee. POA shall pay GE the full amount of each such invoice
promptly within thirty (30) days afler receipt of such invoice, subject to the
provisions of Section 5.15.
Section 5.12 Operating Fee. For each Operating Year, POA shall pay to GE an
Operating Fee for the Operation and Maintenance of the Facility. The amount of
the Operating Fee shall be three hundred fifty thousand dollars ($350,000) per
Operating Year or a pro rata portion of such amount for Operating Years which
consist of less than 12 months. Within fifteen (15) days following the end of
each calendar month after the Commencement Date, GE shall submit
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to POA an invoice for one-twelfth (l/12th) of the Operating Fee. POA shall pay
GE the full amount of each such invoice promptly within thirty (30) days after
receipt of such invoice, subject to the provisions of Section 5.15.
Section 5.13 Interest. Except for any amounts in dispute as provided for in
Section 5.15, any amount owed to one Party by the other Party after the date
such amount is due shall accrue interest each day from such date that such
amount is not paid at the Default Rate. Such accrual shall take place
automatically, and no failure or delay by any Party to invoice the other Party
for such interest shall be deemed a waiver of the right to collect such
interest.
Section 5.14 Accounting and Audit Rights. GE shall keep and maintain, in
accordance with generally accepted accounting principles consistently applied,
receipts, memoranda, vouchers, inventories and accounts of every kind and nature
pertaining to the Reimbursable Expenses, as well as complete summaries and
reports setting forth all reimbursable man-hours expended, payroll costs
incurred and the monthly salary and hourly rate of each and every employee whose
wages constitute a Reimbursable Expense hereunder (collectively "Records")
sufficient to reflect accurately and completely all Reimbursable Expenses. GE
shall keep and preserve the Records for a period of at least three (3) years
from and after the close of the Operating Year in which such costs were
incurred. POA, its representatives and any firm of independent auditors
appointed by POA shall have access, upon reasonable advance written notice to
GE, to the Records maintained by GE for the purposes of auditing and verifying
the Reimbursable Expenses. POA shall have the right to reproduce all or part of
the Records. If, pursuant to any audit and review, it is determined that any
amount previously paid by GE did not constitute a Reimbursable Expense due and
payable by POA, then POA may recover such amount from GE with interest thereon
from the date of payment to the date of repayment at the Default Rate.
Section 5.15 Disputed Payments. If a Party disputes any amounts included in
any invoice provided to such Party by the other Party, such Party shall give
written notice to the other Party of each disputed amount and shall pay the full
amount of such invoice that is not in dispute within the time periods set forth
herein for such payment, The Parties shall endeavor diligently and in good faith
to resolve any issue with respect to the amount remaining in dispute within
thirty (30) days after the date of the other Party's receipt of the notice of
disputed amount. If an agreement is not reached within such thirty (30) day
period, the Parties will continue to try to resolve such dispute: provided,
however, that either Party may instead submit the dispute to resolution pursuant
to Article XI. If as a result of the dispute resolution a Party is required to
pay moneys to the other Party, then such moneys shall accrue interest at the
Default Rate as of the date originally due.
Section 5.16 Escalation. Each of the Operating Fee, Fired-Hour Fee, Handling
Fee, Spare Parts Fee and the fees for Directed Starts set forth in Section 5.10
shall be increased annually. For each Operating Year after the first Operating
Year, the escalated fee shall be equal to the product of (i) the ratio of the
Consumer Price Index in effect as of January 1st of the preceding Operating Year
over such index for the next preceding January 1st, and (ii) the fee for the
then-expiring Operating Year.
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ARTICLE VI -TERM
Section 6.01 Term.
(a) GE shall Operate and Maintain the Facility beginning on the
Commencement Date and continuing until April 1, 2008, unless such
date is extended or this Agreement is terminated as provided herein
(the period of time during which GE is so obligated to Operate and
Maintain the Facility being referred to herein as the "Term"),
provided however, subject to Sections 7.01(c), 7.03 and 7.05, GE's
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obligation to Repair and Overhaul each Gas Turbine Package shall
continue until the completion of the next major overhaul thereof
following April 1, 2008 and POA's obligation to pay the Fired-Hour Fee
with respect to each Gas Turbine Package shall continue until the
completion of each such respective major overhaul.
(b) Notwithstanding the foregoing, in the event a major overhaul of a Gas
Turbine Package is completed on or after June 30, 2005, at POA's
option, POA may terminate payment of the Fired Hour Fee with respect
to such Gas Turbine Package upon the completion of such major
overhaul, and in such event, GE's obligation to Repair and Overhaul
such Gas Turbine Package shall terminate upon the completion of such
major overhaul.
Section 6.02 Renewal. POA may extend the Term for up to eight (8) additional
consecutive years by providing notice of such extension to GE at any time prior
to January 1, 2008.
Section 6.03 Facility Condition at End of Term.
(a) GE shall leave the Facility, or cause the Facility to be left at the
end of the Term, in the same condition as on July 1, 1992, normal wear
and tear and any other degradation for which GE is not responsible
excepted. All Consumables and Parts and Tools for which POA has paid
shall be left at the Facility. All Consumables, Parts and Tools,
operating and maintenance manuals, files, programs, texts, procedures
and any other items furnished as a Reimbursable Expense will be left
at the Facility and will become or remain, subject to Article III, the
property of POA without additional charge. POA also shall have the
right, but not the obligation, in its sole discretion, to directly
assume and become liable for any contracts or obligations that GE may
have undertaken with third parties in connection with the Operation
and Maintenance of the Facility by GE. GE shall execute all documents
and take all other reasonable steps requested by POA that may be
required to assign to and vest in POA, and POA shall execute all
documents and take all other reasonable steps requested by GE that may
be required to release GE from all rights, benefits, interests and
title in connection with such contracts or obligations.
(b) Upon the expiration or other termination of this Agreement, GE shall,
without charge or cost to POA, transfer to POA and leave at or deliver
to the Site a supply of Spare Parts which would reasonably be required
thereafter in connection with the operation and maintenance of POA's
cogeneration facility
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having a then fair market value of not less than $250,000,
escalated from June 1992 to the date of such expiration or
termination in accordance with the change over such period in the
Consumer Price Index.
Section 6.04 Liabilities Accrued as of the End of Term. Liabilities or
obligations of the Parties which have accrued on or prior to any termination or
expiration of this Agreement shall not be affected thereby, and this Agreement
shall remain in effect, notwithstanding such termination or expiration, to the
extent required to enable each Party to enforce its rights hereunder.
ARTICLE VII - EVENTS OF DEFAULT AND TERMINATION
Section 7.01 GE Events of Default.
(a) Any one or more of the following events shall constitute a GE Event of
Default hereunder:
(i) The failure of GE to pay any amount due POA hereunder for
thirty (30) days after written notice specifying the amount to
be paid, or a failure by GE to substantially perform any of its
material obligations under this Agreement which failure
continues for thirty (30) days after written notice from POA
specifying (A) in detail the default complained of, and (B)
that such notice is a notice of default pursuant to this
Section 7.01; provided, however, that if the default is curable
but impracticable to cure within thirty (30) days, as long as
GE shall commence and diligently prosecute the curing of the
default to completion, GE shall have such period of time as
reasonably necessary to cure the default, but in no event more
than one hundred twenty (120) days from the date notice of
default shall have been given by POA.
(ii) GE files a voluntary petition in bankruptcy or is adjudicated a
bankrupt or insolvent, or files any petition or answer seeking
any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the present or
future Federal, state or other bankruptcy or insolvency statute
or law, or seeks, consents to or acquiesces in the appointment
of any bankruptcy or insolvency trustee, receiver or liquidator
of GE or of all or any substantial part of its properties.
(iii) The commencement of any action, case or proceeding against GE
seeking (A) any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
any insolvency laws, or (B) the appointment, without the
consent or acquiescence of GE, of any trustee, receiver or
liquidator of GE or of all or substantially all of its
properties, which proceeding or appointment shall continue
unstayed for a period of sixty (60) days.
(iv) Except to the extent caused by Force Majeure, Utility
interruption, or POA direction, in any Operating Year On-Peak
Capacity Factor is less than
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88% or Off-Peak Capacity Factor is less than 88%. On-Peak
Capacity Factor and Off-Peak Capacity Factor shall be
fractions, expressed as percentages, the numerators of which
shall be the number of kwhrs actually generated by the Facility
during the respective Operating Year during On-Peak Hours and
Off-Peak Hours, respectively, excluding kwhrs generated during
ramp-up and ramp-down periods within the limitations thereof
set forth in the POA Operations and Maintenance Procedures
Manual, and the denominator of which shall be the number of
kwhrs the Facility would have generated during such Operating
Year during On-Peak Hours and Off-Peak Hours, respectively, if
the Facility had operated during all hours (excluding hours
included in ramp-up and ramp-down periods within the
limitations thereof set forth in the POA Operations and
Maintenance Procedures Manual) when operation was requested by
POA, at the output level specified by POA (within the
limitations of the cogeneration facility). On Peak Hours and
Off-Peak Hours shall be the hours defined as such in the PPA.
For purposes hereof, POA may not require operation of the
Facility during the times when maintenance or overhauls which
would preclude operation are scheduled to be performed in the
Annual Operating Plan or otherwise as agreed in writing between
GE and POA.
(v) Except to the extent caused by Force Majeure, the performance
of the Major System Repairs or resulting from excess POA vendor
costs under Section 2.14(e), the Reimbursable Expenses actually
paid by POA with respect to any Operating Year, net of any
insurance proceeds allocable to payment of such Reimbursable
Expenses which are received by POA or paid on behalf of POA,
exceed the amount budgeted therefore in the respective Annual
Budget, as changed from time to time pursuant to Section 4.06
hereof, by more than 10%.
(vi) GE fails to deliver steam from the Facility in accordance with
the Steam Agreement at the levels of production required by the
Steam User for a period of ten (10) consecutive days or a total
of thirty (30) days in any Operating Year.
(vii) GE takes any action, or fails to take any reasonable action,
which action or failure to act has a material adverse effect on
the status of the Facility as a QF.
(viii) GE incurs liabilities to POA hereunder in any Operating Year,
(net of any amounts recoverable under any policies of insurance
or from third parties as a result of the events which have
given rise to such liabilities) which, in the aggregate, are
equal to or exceed the maximum liability of GE under Section
10.02 hereof; provided, however, that such liabilities shall
not include any liabilities to the extent resulting from POA's
failure to perform any of its obligations hereunder.
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(ix) GE takes any action, or fails to take any reasonable action,
and such action or failure to act results in the breach of any
Facility Agreement by POA.
(b) The Operating Fee shall remain payable with respect to any cure
periods applicable to any GE Event of Default, provided that during
such cure periods GE continues to substantially perform its
obligations hereunder, including actual operation, maintenance and
repair of the Facility, otherwise the Operating Fee shall not be
payable with respect to such cure periods.
(c) Upon the occurrence of any GE Event of Default and the failure of GE
to cure such GE Event of Default within the applicable cure period, if
any, POA may terminate this Agreement upon (5) five days written
notice to GE, Without prejudice to any claim for damages POA may have
against GE for GE's breach of this Agreement, or any other claim POA
may have against GE, GE shall remain liable to POA for all outstanding
amounts due to POA hereunder at the time of such termination. Upon the
termination of this Agreement pursuant to the previous, POA may take
possession of and utilize any materials, plant, tools, equipment and
property of any kind furnished by GE to the Facility (excluding (A)
the Spare Parts (B) any materials, plant, tools, equipment and
property furnished under the Leased Engine Program, and (C) any
materials, plant, tools, equipment and property furnished pursuant to
GE's performance of its obligations under Section 7.05) and necessary
to operate, maintain or repair the Facility. GE shall be and shall
remain liable for (i) the amount by which the sum of all reasonable
costs incurred by POA in performing the obligations of GE hereunder
exceed the amounts which would have been payable to GE hereunder, and
(ii) all actual losses, costs, claims and damages incurred by POA in
connection with GE's default (exclusive of any incidental or
consequential damages, for which GE shall not be liable); provided
however, that (x) the operation, maintenance and/or repair of the
Facility thereafter by or on behalf of POA is carried out in
accordance with the provisions of this Agreement to the extent such
provisions relate to such operation and/or maintenance and/or repair
and (y) the maximum liability of GE shall not exceed the amount set
forth in Section 10.02.
(d) Notwithstanding the foregoing, at POA's option, GE shall continue to
operate and maintain the Facility after a termination of this
Agreement as a result of an GE Event of Default for such period of
time (the "Transition Period") as POA may direct, up to 180 days,
according to the terms of this Agreement.
Section 7.02 POA Events of Default.
(a) Any one or more of the following events shall constitute a POA Event
of Default hereunder:
(i) The failure of POA to pay any amount due to GE hereunder which
failure continues for thirty (30) days after written notice
from GE specifying (A) the amount required to be paid, and (B)
that such notice is a notice of default pursuant to this
Section 7.02. Notwithstanding the foregoing,
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interest on any past due amounts shall accrue beginning on the
day after the original date such amount was due;
(ii) If POA fails to substantially perform any of its material
obligations under this Agreement (other than the obligation to
make any payment due hereunder) which failure continues for
thirty (30) days after written notice from GE specifying (A) in
detail the default complained of, and (B) that such notice is a
notice of default pursuant to this Section 7.02; provided,
however, that if the default is curable but impracticable to
cure within thirty (30) days, as long as POA shall commence and
diligently prosecute the curing of the default to completion,
POA shall have such period of time reasonably necessary to cure
the default not to exceed one hundred twenty (120) days from
the date notice of default shall have been given by GE;
(iii) POA files a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition
or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
the present or future Federal, state or other bankruptcy or
insolvency statute or law, or seeks, consents to or acquiesces
in the appointment of any bankruptcy or insolvency trustee,
receiver or liquidator of POA or of all or any substantial part
of its properties; or
(iv) The commencement of any action, case or proceeding against POA
seeking (A) any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
any insolvency laws, or (B) the appointment, without the
consent or acquiescence of POA, of any trustee, receiver or
liquidator of POA of all or substantially all of its
properties, which proceeding or appointment shall continue
unstayed for a period of sixty (60) days.
(b) Upon the occurrence of a POA Event of Default, GE may, by written
notice to POA, terminate this Agreement immediately with respect to a
POA Event of Default pursuant to Section 7.02(a)(i) hereof, and with
respect to any other POA Event of Default, as of a date set forth in
such notice which shall be not less than thirty (30) days from the
date of such notice. Without prejudice to any claim for damages GE may
have against POA for POA's breach of this Agreement, or any other
claim GE may have against POA, POA shall remain liable to GE for all
outstanding amounts due to GE hereunder at the time of such
termination.
Section 7.03 Notice of Termination. POA may terminate this Agreement at any
time in its sole discretion, provided however, that upon such termination, POA
shall pay GE a fee (the "Termination Fee") equal to the applicable sum or pro-
rated annual portion thereof set forth on the attached Schedule 4. POA and GE
agree that the sums set forth in Schedule 4 represent reasonable compensation to
GE for POA's termination of this Agreement.
Section 7.04 Force Majeure. In the event of the occurrence of a Force Majeure
which results in (i) the total interruption of operation of the cogeneration
facility, (ii) the reduction of electric
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output of the cogeneration facility by 20 MW or more, (iii) an increase in the
heat rate of the cogeneration facility by 25% or more, in any case for a
continuous period of one hundred eighty (180) days or more, without limiting its
rights hereunder, POA shall have the option, exercisable on thirty (30) days
advance written notice to GE, to suspend operation of the Facility and suspend
performance by both Parties of this Agreement for the duration of such Force
Majeure, during which suspension, GE shall have no continuing obligations with
respect to the Facility, and POA shall have no payment or other obligation to
GE. Periods during which POA requests that the cogeneration facility not be
operated shall not be excluded from periods during which any condition specified
in clause (i), (ii) or (iii) exists for purposes of determining the duration and
continuity of such condition under the preceding sentence. In the event of any
such suspension, GE shall promptly take such actions as are reasonably necessary
to secure the Facility from deterioration for the duration of such Force
Majeure, the parties shall pay to each other within fifteen (15) days after the
effective date of such suspension any sums due pursuant to the other provisions
of this Agreement, and, within fifteen (15) days after receipt of a properly
documented invoice therefor, POA shall pay to GE GE's accountable costs of
suspending operation of and securing the Facility, including reasonable employee
relocation and/or severance arrangements and other demobilization costs. POA
shall give GE thirty (30) days advance written notice of POA's intention to lift
any suspension of the Parties' obligations pursuant to this Section 7.04.
Section 7.05 Repair and Overhaul Obligations after Termination.
Notwithstanding the provisions of Section 7.01 and 7.03, in the event POA
terminates this Agreement pursuant thereto (i) GE shall remain obligated to
Repair and Overhaul, in accordance with the terms of this Agreement otherwise
applicable thereto, each Gas Turbine Package through the completion of its next
major overhaul after the effective date of such termination, and (ii) POA shall
remain obligated to pay the Fired Hour Fee for each Gas Turbine Package through
the completion of its next major overhaul after the effective date of such
termination.
ARTICLE VIII - INSURANCE
Section 8.01 Coordination of Insurance. POA and GE shall obtain and maintain
in effect insurance coverages of the types, in the amounts, with the deductibles
and as otherwise provided in Exhibit E.
Section 8.02 Certificates; Proof of Loss. On or before the date or dates on
which insurance coverages are required to become effective hereunder, each Party
shall furnish certificates of insurance to the other Party evidencing the
insurance coverage required of such Party pursuant to this Agreement. The Party
maintaining each insurance policy hereunder shall make all proofs of loss under
each such policy and shall take all other action reasonably required to ensure
collection from insurers for any loss covered under any such policy.
Section 8.03 No Limitation on Liability. Neither the requirement to provide
nor the provision of any insurance coverage hereunder shall limit the liability
of either Party to the other Party under this Agreement.
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ARTICLE IX - INDEMNIFICATION
Section 9.01 By GE. To the maximum extent permitted by law and subject to the
limitations set forth in Article X, GE shall indemnify, defend and hold harmless
POA and its partners, shareholders, officers, directors, employees,
representatives and agents (the "POA Indemnified Parties"), from and against any
and all suits, actions, liabilities, legal proceedings, claims, demands, losses,
costs and expenses of every kind and character whatsoever, including without
limitation, reasonable attorneys' fees and expenses, for injury to or death of
third parties or loss or damage to property of third parties to the extent
arising out of or in connection with (i) any failure on the part of GE to
perform its obligations under this Agreement or (ii) any negligent acts or
omissions, willful misconduct or violations of Steam User's safety procedures by
GE, its employees, agents, representatives or independent contractors or any
other person acting for or on behalf of GE (other than a POA Indemnified Party).
It is understood and agreed by the Parties that any costs or expenses incurred
by GE pursuant to its indemnity obligations under this Section 9.01, including
without limitation, the cost of deductibles with respect to the insurance
maintained by GE or POA pursuant to Article VIII, shall not constitute
Reimbursable Expenses.
Section 9.02 By POA. To the maximum extent permitted by law, and subject to
the limitations set forth in Article X, POA shall indemnify, defend and hold
harmless GE, its shareholders, officers, directors, employees, agents and
representatives (the "GE Indemnified Parties"), from and against any and all
suits, actions, liabilities, legal proceedings, claims, demands, loses, costs
and expenses of every kind or character whatsoever, including without
limitation, reasonable attorneys' fees and expenses for injury to or death of
third parties or loss or damage to property of third parties to the extent
arising out of or in connection with (i) any failure on the part of POA to
perform its obligations under this Agreement or (ii) any negligent acts or
omissions or willful misconduct of POA or anyone acting on POA's behalf (other
than an GE Indemnified Party) or (iii) except to the extent arising out of any
failure of GE to properly handle and arrange for the disposal of hazardous
substances by independent third party contractors as provided in Section 2.23
any liability arising in connection with the transportation and disposal of
hazardous substances.
ARTICLE X - LIABILITIES OF THE PARTIES
Section 10.01 No Consequential Damages. (a) Notwithstanding any provision
contained in this Agreement to the contrary, neither Party nor its partners,
shareholders, officers, directors, principals, agents, subcontractors, vendors,
employees or its Affiliates shall be liable to the other Party hereunder for
consequential, incidental, special or indirect loss or damage, including without
limitation, cost of capital, loss of goodwill, loss of revenue or cost of
replacement power. The Parties further agree that the waivers and the
disclaimers of liability, indemnities, releases from liability and limitations
on liability expressed in this Agreement shall survive the termination or
expiration and shall apply (unless otherwise expressly indicated), whether in
contract, equity, tort or otherwise, even in the event of the fault, negligence
(including without limitation, the sole negligence), strict liability or breach
of warranty of the Party indemnified, released or whose liabilities are limited,
and shall extend to the officers, directors, principals, partners, agents,
subcontractors, vendors, employees or Affiliates of such Party.
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(b) Neither the cost of repairing or replacing the Facility or any part
thereof, or any Equipment or any parts thereof, which are damaged due to the
negligence or willful misconduct of GE or any failure of GE to perform its
obligations hereunder, nor fines or penalties imposed on POA as a result of the
failure of the Facility or the operation thereof, or of POA, to conform to or
comply with any environmental permit or operating permit requirements due to the
negligence or willful misconduct of GE shall be deemed to be consequential,
incidental, special or indirect damage.
Section 10.02 Limitation of Liabilities. Notwithstanding any provision
contained in this Agreement to the contrary, for any Operating Year, GE shall
not be liable to POA (whether by contract, warranty, tort or otherwise) for any
amount that exceeds the amount of the Operating Fee for the Operating Year in
which the claim is made. If a claim(s) is made after the end of the Term, then
the claim(s) shall be deemed to have been made in the last Operating Year of the
Term.
ARTICLE XI - DISPUTE RESOLUTION
Section 11.01 Arbitration. If there is a dispute arising under, out of or in
connection with the making, performance or execution of this Agreement, then the
dispute shall be submitted to the American Arbitration Association in New York,
New York for arbitration. Any such arbitration shall be conducted in accordance
with the principles set forth in this Article XI and the rules of the American
Arbitration Association.
Section 11.02 Demand for Arbitration. Upon written demand of either Party, the
Parties shall meet and attempt to appoint a single arbitrator. If the Parties
are unable to agree on a single arbitrator, or if one of the Parties fails to
meet within ten (10) days of a written demand being forwarded, then either Party
may apply to have the arbitrator appointed by the American Arbitration
Association.
Section 11.03 Qualifications. The arbitrator selected to act hereunder shall be
qualified by education or training to pass upon the particular question or
questions in dispute. No arbitrator shall be an officer, director, employee,
agent or consultant of either Party or any of its respective Affiliates.
Section 11.04 Decisions Final. The decision of the arbitrator shall be in
writing and signed by the arbitrator and shall be final and binding upon the
Parties as to any question or questions so submitted to arbitration and the
Parties shall be bound by such decision and perform the terms and conditions
thereof.
Section 11.05 Compensation of Arbitrator. The compensation and expenses of the
arbitrator (unless determined by the arbitrator to be payable by the non-
prevailing Party or in some other manner) shall be paid in equal proportions by
GE and POA.
Section 11.06 Performance to Continue. All performance required by either Party
under this Agreement shall continue during arbitration proceedings.
Section 11.07 Agreement Controlling. In all respects not provided for elsewhere
in this Article XI, the rules of the American Arbitration Association shall
govern any dispute hereunder
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submitted to arbitration. If there is a conflict between the provisions of this
Agreement and such rules, the provisions of this Agreement shall prevail.
ARTICLE XII - CONFIDENTIALITY
Section 12.01 Nondisclosure. Neither Party shall disclose to third parties any
information regarding the business affairs, finances, technology or processes
received from the other Party pursuant to or in connection with this Agreement
or the Facility Agreements without the express written consent of the other
Party. This restriction shall not apply to information that (i) was already in
the possession of the receiving Party prior to receipt from the disclosing
Party, (ii) now or hereafter becomes a part of the public domain through no
fault of the receiving Party, (iii) corresponds in substance to information
heretofore or hereafter furnished by third Parties without restriction on
disclosure or (iv) with respect to any disclosure by POA, any information which
is or becomes the property of POA pursuant to this Agreement. Each Party will
release, indemnify and hold harmless the other Party from any and all liability
arising from its improper use or dissemination of confidential or proprietary
information protected hereunder.
Section 12.02 Permitted Disclosure. Any Party required by law to disclose
information that is otherwise required to be maintained in confidence pursuant
to Section 12.01, or where disclosure is required in connection with the
assertion of any claim or defense in judicial or administrative proceedings
involving a Party, may make disclosure notwithstanding the provisions of Section
12.01; provided, however, that the Party making the disclosure shall immediately
notify the other Party of the requirement and the terms thereof prior to the
submission and shall cooperate to the maximum extent practicable to minimize the
disclosure of the information. The Party disclosing such information shall use
its reasonable efforts to obtain proprietary or confidential treatment of such
information by the third party to whom the information is disclosed, and will,
to the extent such remedies are available, seek protective orders limiting the
dissemination and use of the information. This Agreement does not alter the
rights of either Party to challenge any law requiring the disclosure.
Section 12.03 Term. The confidentiality obligation of the Parties pursuant to
Section 12.01 shall remain in full force and effect for a period of five (5)
years after the date of the expiration or termination of this Agreement.
ARTICLE XIII -TITLE, DOCUMENTS AND DATA
Section 13.01 Materials and Equipment. Title to all Consumables, Parts and
Tools and other items purchased or obtained by GE, the cost of which is a
Reimbursable Expense, shall pass and vest in POA upon payment or reimbursement
of the cost thereof by POA to GE; provided, however, that such transfer of title
shall in no way affect GE's obligations as set forth in the other provisions of
this Agreement. GE shall execute and deliver such bills of sale and other
documents reasonably requested by POA to effect and confirm transfer of title to
Consumables, Parts and Tools and such other items as provided hereby.
Section 13.02 Documents. Except for the materials and documents listed in
Schedule 2, GE shall grant POA a royalty-free license to use at the Facility all
materials and documents prepared or developed by or on behalf of GE in
connection with the Facility or the performance of the Services, including
without limitation, all manuals, data, designs, drawings, plans,
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computer software, specifications, reports and accounts, and for which GE has
been compensated. All such materials and documents, together with any materials
and documents furnished by POA to GE or to its employees, representatives,
agents or contractors, shall be delivered to POA upon expiration or termination
of this Agreement and before final payment is made to GE. In addition, all such
materials and documents shall be available for review by POA at all reasonable
times during development of, and promptly upon completion of, such materials and
documents. All such materials and documents required to be submitted for the
approval of POA shall be prepared and processed in accordance with the
requirements and specifications set forth in the Administrative Procedures
Manual. However, POA's approval of materials and documents submitted by GE shall
not relieve GE of its responsibility for the correctness thereof or of its
obligation to meet all the requirements of this Agreement.
Section 13.03 Proprietary Information. Where materials or documents prepared or
developed by GE or its employees, agents, representatives or contractors contain
proprietary information, systems, techniques or know-how previously known to GE
or its employees, agents, representatives or contractors or previously acquired
by GE or its contractors from third Parties, GE or its employees, agents,
representatives or contractors shall have the unrestricted right to use or
dispose of such information, systems, techniques or know-how as they see fit.
However, where such information, systems, techniques or know-how are
specifically developed, created or acquired by GE or its employees, agents,
representatives or contractors in the performance of the Services at the
Facility, then GE and its employees, agents, representatives or contractors
shall have the right to use in the performance of the Services, but not to
disclose to others, such information, systems, techniques or know-how, unless
approved by POA in writing, while POA shall have the unrestricted right to use
and disclose to others any and all such information, systems, techniques and
know-how. GE agrees that it shall take all reasonable steps in order that its
employees, representatives, agents and contractors adhere to the provisions of
this Article XIII. Appropriate clauses to carry out the purpose and intent of
this Article XIII shall be included in all contracts and agreements entered into
by GE in connection with the performance of this Agreement.
ARTICLE XIV - MISCELLANEOUS PROVISIONS
Section 14.01 Assignment. Except as set forth below, no assignment of this
Agreement by either Party may be made without the prior written approval of the
other Patty; provided, however, that this Agreement may be assigned by POA
without the consent of GE in connection with any financing or refinancing of the
Facility. Any assignment that does not comply with the provisions of this
Section 14.01 shall be null and void.
Section 14.02 Cooperation in Financing. GE will, at POA's request, execute and
deliver such consents, assignments, memoranda and other instruments as POA may
reasonably require in connection with any financing or refinancing of the
Facility on a project finance sale/leaseback basis, including without
limitation, instruments to ensure that the Facility and its components are not
subject to the interests of GE's creditors and to otherwise enable POA to create
and perfect security interests in the Facility and this Agreement.
Section 14.03 Access. For purposes of inspection and review, POA and its
respective representatives at all reasonable times shall have access to the
Facility, all Facility operation and documents, materials, records and accounts
relating to the operation, maintenance and repair of the Facility including
Overhaul of the Gas Turbine Packages other than GE's personnel
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files and accounting information related solely to GE's financial condition or
transactions which do not affect the amount of Reimbursable Expenses. During any
such inspection or review of the Facility, POA and its invitees and
representatives shall comply with all of GE's safety and security procedures,
and POA and its respective representatives shall conduct such inspection and
reviews in such a manner as to cause minimum interference with GE's activities.
GE also shall cooperate with POA in allowing other visitors access to the
Facility under conditions mutually agreeable to the Parties.
Section 14.04 Independent Contractor. Except as otherwise expressly set forth
in this Agreement, GE shall be an independent contractor with respect to the
performance of this Agreement. Neither GE nor its employees, agents,
subcontractors, vendors or suppliers or the employees of any such parties
employed in the Operation and Maintenance of the Facility shall be deemed to be
agents, representatives, employees or servants of POA, except to the extent of
any express agency created hereunder pursuant to the authority granted to GE
under Article II. Except as otherwise expressly provided herein, this Agreement
shall not constitute GE as the legal representative or agent of POA, nor shall
GE have the right or authority to assume, create or incur any liability or
obligation, express or implied, against, in the name of or on behalf of POA.
This Agreement is not intended to create, and shall not be construed to create a
relationship of partnership or an association for profit between POA and GE.
Section 14.05 Not for Benefit of Third Parties. Except as otherwise expressly
provided herein, this Agreement and each and every provision is for the
exclusive benefit of the Parties hereto and is not for the benefit of any third
party.
Section 14.06 Force Majeure. In the event that a Party is rendered unable, by
reason of an event of Force Majeure, to perform, wholly or in part, any
obligation or commitment set forth in this Agreement, then, provided such Party
gives prompt written notice describing the particulars of such event, including
the nature of the occurrence and its expected duration, and continues to furnish
daily reports with respect thereto during the period of the Force Majeure, the
obligations of such Party shall be suspended to the extent and for the period
such Party is rendered unable to perform such obligations by such Force Majeure
condition; provided, however, that (i) the suspension of such obligations shall
be of no greater scope and of no longer duration than is required by the Force
Majeure and (ii) the Party whose performance is being excused shall use its
reasonable efforts to perform its obligations hereunder and use its reasonable
efforts to remedy its inability to perform. The Force Majeure event will not
excuse either Party from making payments to the other Party. If a Force Majeure
continues for more than six (6) consecutive months, either Party may terminate
this Agreement, upon one hundred eighty (180) days' prior written notice,
provided such notice may not be given prior to the end of such six (6) month
period.
Section 14.07 Amendments. Neither this Agreement nor any of the terms may be
terminated, amended, supplemented, waived or modified orally, but only by an
instrument in writing signed by the Party against which the enforcement of the
termination, amendment, supplement, waiver or modification is sought.
Section 14.08 Survival. Notwithstanding any provisions contained herein to the
contrary, the indemnity obligations set forth in Article IX, the limitations on
liabilities set forth in Article X, the dispute resolution provisions set forth
in Article XI and the confidentiality obligations set forth in Article XII shall
survive in full force the expiration or termination of this Agreement.
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Section 14.09 No Waiver. It is understood and agreed that any delay, waiver or
omission by a Party to exercise any right or power arising from any breach or
default by the other Party with respect to any of the terms, provisions or
covenants of this Agreement shall not be construed to be a waiver by the non-
defaulting Party of any subsequent breach or default of the same or other terms,
provisions or covenants on the part of the defaulting Party.
Section 14.10 Notices. Any notice, demand, offer or other written instrument
required or permitted to be given pursuant to this Agreement shall be in writing
signed by the Party giving such notice and shall be hand delivered or sent by
overnight courier, registered mail or telefax to the other Party at the address
for such Party set forth below.
If delivered to POA:
Project Orange Associates, L.P.
c/o GPU International, Inc.
One Upper Pond Road
Parsippany, NJ 07054
Attention:
Vice President - Business Management
Telephone: (973) 263-6950
Telefacsimile: (973) 263-6447
with copies to:
Manager of Operations
(Address same as above)
and
Business Manager
(Address same as above)
If delivered to GE:
GE Energy Plant Operations, Inc.
4200 Windy Hill Road
Atlanta, Georgia 30339
Attention: General Manager of Operations
Telephone: (770) 859-7785
Telefacsimile: (770) 859-7767
with a copy to:
Division Counsel
(Address same as above)
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Each Party shall have the right to change the place to which notice shall be
sent or delivered by similar notice sent in like manner to the other Party.
Without limiting any other means by which a Party may be able to prove that a
notice has been received by the other Party, a notice shall be deemed to be duly
received:
(a) if sent by hand, the date when left with a responsible persons at the
address of the recipient;
(b) if sent by registered mail or overnight courier, the date of delivery
to the address specified herein; or
(c) if sent by facsimile, upon receipt by the sender of an acknowledgment
or transmission report generated by the machine from which the
facsimile was sent indicating that the facsimile was sent in its
entirety to the recipient's facsimile number specified herein.
Section 14.11 Representations and Warranties. Each Party represents and
warrants to the other Party that: (i) such Party has the full power and
authority to execute, deliver and perform its obligations under this Agreement
and to carry out the transactions contemplated hereby; (ii) the execution and
delivery of this Agreement by such Party and the carrying out by such Party of
the transactions contemplated hereby have been duly authorized by all requisite
corporate action or partnership action, as the case may be, and this Agreement
has been duly executed and delivered by such Party and constitutes the legal,
valid and binding obligation of such Party, enforceable against it in accordance
with its term, subject, to limitations imposed by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
enforcement of creditors' rights generally and to general principles of equity;
(iii) no authorization, consent, approval or order of, notice to or
registration, qualification, declaration or filing with any governmental
authority is required for the execution, delivery and performance by such Party
of this Agreement or the carrying out by such Party of the transactions
contemplated hereby, other than regulatory and similar approvals needed with
respect to the operation of the Facility; and (iv) none of the execution,
delivery and performance by such Party of this Agreement, the compliance with
the terms and provisions, and the carrying out of the transactions contemplated
hereby, conflict with or result in a breach or violation of any of the terms,
conditions or provisions of any law in existence on the date or the charter
documents or partnership agreement, as amended, or by-laws, as amended, of such
Party in existence on the date, or any applicable order, writ, injunction,
judgment or decree of any court or administrative or regulatory agency or body
against such Party or by which it or any of its properties is bound, or any loan
agreement, indenture, mortgage, bond, note, resolution, contract or other
agreement or instrument to which such Party is a party or by which it or any of
its properties is bound or constitutes a default thereunder or will result in
the imposition of any lien, mortgage or other encumbrance upon any of its
properties.
Section 14.12 Counterparts. The Parties may execute this Agreement in two (2)
or more counterparts, all of which taken together shall constitute one and the
same instrument and each of which shall be deemed an original instrument as
against any Party who has signed it.
Section 14.13 Governing Law. This Agreement shall be governed by and enforced
in accordance with the laws of the State of New York, except the conflict of
laws principles thereof.
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Section 14.14 Partial Invalidity. If any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided, however, that if such severability materially changes the
economic benefits of this Agreement to either Party, the Parties shall negotiate
in good faith an equitable adjustment in the provisions of this Agreement.
Section 14.15 Captions, Exhibits and the Table of Contents. Titles or captions
of Sections contained in this Agreement are inserted only as a matter of
convenience and for reference, and in no way define, limit, extend, describe or
otherwise affect the scope or meaning of this Agreement or the intent of any
provision. All Exhibits attached hereto shall be considered a part of this
Agreement as though fully set forth herein.
Section 14.16 Entire Agreement. This Agreement sets forth the full and complete
understanding of the Parties relating to the subject matter herein, and
supersedes any and all negotiations, agreements and representations made or
dated prior thereto.
Section 14.17 Conflicting Provisions. In the event of any conflict between this
document and any Exhibit hereto, the terms and provisions of this document, as
amended from time to time, shall control. In the event of any conflict among the
Exhibits, the Exhibit of latest date shall control.
Section 14.18 Successors and Assigns. The terms and provisions of this
Agreement and the respective rights and obligations hereunder of GE and POA
shall be binding upon, and inure to the benefit of, their respective successors
and permitted assigns.
Section 14.19 Opinion of Counsel. At the request and expense of POA, GE shall
provide to POA an opinion of GE's counsel in appropriate form as to the
representations and warranties made by GE in Section 14.11.
Section 14.20 Performance During Legal Proceedings. All performance required by
either Party under this Agreement shall continue during any legal proceedings.
Section 14.21 Joint Effort. Preparation of this Agreement has been a joint
effort of the Parties and the resulting document shall not be construed more
severely against one of the Parties than against the other.
SECTION 14.22 DISCLAIMER OF WARRANTIES. EXCEPT FOR WARRANTIES EXPRESSED HEREIN,
GE HEREBY DISCLAIMS ALL WARRANTIES OF ANY KIND, WHETHER STATUTORY, ORAL,
WRITTEN, EXPRESS OR IMPLIED, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, AND ALL WARRANTIES ARISING FROM COURSE OF
DEALING OR USAGE OF TRADE.
Section 14.23 Standard of Reasonableness. Except as expressly stated to be
within the sole discretion of any Party, all consents or approvals required of
either Party shall not be unreasonably withheld or delayed.
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ARTICLE XV -MAINTENANCE OF INVENTORY OF
CONSUMABLES AND PARTS AND TOOLS
Section 15.01 Maintenance of Inventory of Consumables and Parts and Tools.
(a) On and after the date hereof, and continuing until the Commencement
Date, GE shall keep and maintain at the Facility site an inventory of
Consumables and Parts and Tools which is consistent with the inventory
of such Consumables and Parts and Tools which GE has maintained at the
Site while operating, maintaining and repairing the Facility pursuant
to the Prior Agreement. GE shall also keep all personal property
(other than the Spare Parts) at the Site which GE owns and has used
solely in connection with operating, maintaining and repairing the
Facility pursuant to the Prior Agreement.
(b) Title to all Consumables, Parts and Tools and all other personal
property located at the Site on the date hereof (other than the Spare
Parts) for use in connection with the operation, maintenance and
repair of the Facility under the Prior Agreement or this Agreement, to
the extent not previously transferred to POA, shall become vested in
POA as of the Commencement Date at no charge or cost to POA. GE shall
execute and deliver such bills of sale and other documentation
reasonably requested by POA to effect such transfer of title.
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IN WITNESS WHEREOF, the Parties have executed this Cogeneration Facility
Operation and Maintenance Agreement through their duly authorized officers or
representatives as of the date first above written.
PROJECT ORANGE ASSOCIATES, L.P.
By: NCP Syracuse, Inc., Managing General Partner
By: NCP Energy, Inc., Attorney-in-Fact
By: /s/ Beth Matheson
---------------------------------------
Name: Beth Matheson
Title: Vice President
GE ENERGY PLANT OPERATIONS, INC.
By: /s/ Kevin Walsh
---------------------------------------
Name: Kevin Walsh
Title: General Manager of Operations
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EXHIBIT A-I
MINIMUM REPAIR AND MAINTENANCE REQUIREMENTS
FOR THE EXISTING PLANT
Including but not limited to:
Hourly:
------
Walk through inspection of entire plant every hour and log readings every
three hours per Schedule I
Daily:
-----
Test makeup, condensate, and feedwater for chemical and other readings
required per Schedules 2 and 3 and adjust as needed. Test more often if
necessary.
Monthly:
-------
Inspect, add water, clean and charge switchgear storage batteries for
proper gravity level.
Check all chemical inventories.
Grease governor bearings on 1,000 K.W. turbine generator.
Quarterly:
---------
Have steam purity test performed by independent laboratory.
Yearly:
------
Inspect boilers according to New York State boiler code regulations and
standards and correct all deficiencies resulting from inspection.
Pack all valves, replace or repair any valves with problems.
Inspect, repair or replace all traps and strainers.
Clean, repair and grease all reducing valves. Replace if necessary.
Inspect and clean all safety valves, repair or replace as required.
Inspect 1,000 K.W. turbine generator, replace oil, clean and grease
couplings, bearings and replace any needed parts.
Inspect and clean all electrical breakers and switchgear.
Inspect two stacks, bricks, lighting rods and pointing, repair as
required.
-1-
<PAGE>
EXHIBIT A- I, Continued
MINIMUM REPAIR AND MAINTENANCE REQUIREMENTS
FOR THE EXISTING PLANT
Inspect two main air compressors including dryers and filters and repair
as required. Air system shall be kept free of oil and water contamination.
Every Three Years:
-----------------
Have all switch relays tested and cleaned by manufacturer.
Every Five Years:
----------------
Perform internal structural inspection of two stacks and repair if
necessary.
Sonic test two oil tanks and three deareaters.
INSTRUMENTATION
---------------
Common Equipment. Both Plants:
-----------------------------
At least Yearly: Check all auxiliary transmitters, recorders and
integrators for calibration: house steam, treated water, condensate flow,
condensate temperature end feedwater temperature.
Riley Plant:
-----------
Tests performed on 3 and 4 boilers, and their replacements, if any, in
late spring and summer.
Complete calibration check and repairs, parts replaced as needed on the
following:
(a) recorders and integrators
(b) pneumatic and electronic relays
(c) pneumatic and electronic selector stations
(d) draft and pressure gauges
(e) valve and control drive positioners
(f) pneumatic and electronic transmitters
(g) oxygen and combustible analyzers
Clean forced draft fans and inducted draft fans and make sure vanes and
associated linkage work freely.
-2-
<PAGE>
EXHIBIT A- I, Continued
MINIMUM REPAIR AND MAINTENANCE REQUIREMENTS
FOR THE EXISTING PLANT
Loop check combustion, feedwater and boiler draft system. Check for
pneumatic leaks.
Run combustion tests on all boilers at least once a year.
Alto Plant:
----------
Tests performed on 6 and 7 boilers and their replacements, if any, in
winter and early spring.
Complete calibration check and repairs, parts replaced as needed on the
following:
(a) recorders and integrators
(b) pneumatic relays, pressure and combustion system
(c) pneumatic selector stations
(d) draft and pressure gauges
(e) valve and control drive positioners
(f) pneumatic and electronic transmitters, pressure, flow, and
temperature
(g) oxygen and combustion analyzer.
Clean forced draft and induced draft fans and make sure linkage is not
binding and moves freely.
Loop check combustion, feedwater and boiler draft system. Check for
pneumatic leaks.
Run combustion tests on all boilers at least once a year.
-3-
<PAGE>
EXHIBIT A-2
MINIMUM OPERATING REQUIREMENTS FOR THE EXISTING PLANT
Modifications:
-------------
A 300 lb./hr. 100 psig steam coil will be installed in the mud drums of
each of the two Riley boilers pursuant to the terms of the Construction
Contract. An attemperator will be provided, as required, to let down 300
psig steam to 100 psig.
Lay-Up Procedure - Alto Boilers:
-------------------------------
The following lay-up procedure is to be performed on each boiler one at a
time, and shall be followed for each boiler.
(a) All water walls are blown under pressure.
(b) Boiler is drained, opened, and inspected.
(c) System is purged and pressurized with dry nitrogen.
(d) Heat lamps are installed and operated to keep boiler walls warm and
refractories dry.
(e) System is monitored daily, checking for proper nitrogen pressure and
for proper operation of heat lamps.
(f) Annually, prior to the summer season, each Alto Boiler will be
operated in full temperature and pressure to ensure proper operation.
After successful testing steps (a) through (e) above will be
followed.
Standby Operation - Riley Boilers
---------------------------------
(a) Approximately 300 lbs./hr of 100 psig steam will be circulated
continuously through the steam coils in the mud drum of each of the
Riley boilers, maintaining 50 psig and 300 degrees F. in the drums.
(b) To prevent condensation and to drive off any moisture in the
refractory, pilots will be operated periodically as required to keep
the refractory dry.
(c) To avoid feeding cold water to the boiler, condensate from the steam
coils will be routed to the generators, maintaining the boiler feed
water above 150 degrees F.
(d) Once a day, the water chemistry will be checked and adjustments made
as necessary.
(e) To demonstrate the operability of the system, once a month each
boiler will be brought to operating temperature and pressure held for
three hours.
-4-
<PAGE>
EXHIBIT B
MINIMUM PIPELINE MAINTENANCE REQUIREMENTS
Pipeline maintenance shall include, in addition to any other requirements
included in the Agreement, the following services:
. Labor, vehicle, and supervision to provide the daily monitoring and
maintenance activity over the entire route of the Pipeline.
. Services would be provided in accordance with New York State Public
Service Commission Rules And Regulations Part 255 GAS Utilities.
. Labor would be provided to perform the following:
(a) Conduct Pipeline patrolling.
(b) Maintain Right of Way 20 feet-wide (10 feet either side of the
Pipeline) as required.
(c) Monitor Pipeline pressure.
(d) Maintain/inspection of vegetative cover.
(e) Maintain marking as provided in Right of Way.
(f) Maintain access to valves.
(g) Update location of transmission valves.
(h) Contact and communication with local emergency, rescue, fire and
police within Pipeline jurisdiction.
(i) Report to Owner with respect to leaks and emergency service
performed.
(j) Assistance in event of emergency.
(k) Conduct and assist in electrical measurements and inspection of
cathodic protection system.
(l) Odorization of Pipeline - inspection and maintenance of daily
records of adequacy of odorization.
(m) Maintain daily log of activities performed.
(n) Provide assistance to others in locating Pipeline.
(0) Conduct gas detection survey of Pipeline with combustible gas
instruments.
(p) Right of Way brush removal.
-5-
<PAGE>
EXHIBIT B, Continued
MINIMUM PIPELINE MAINTENANCE REQUIREMENTS
. Supervision would be provided by Operator for the following:
(a) Develop inspection plan.
(b) Update Owner of Right of Way maintenance.
(c) Provide record of emergency contacts.
(d) Supervise daily activities.
(e) Coordinate outside services.
(f) Direct contact with Owner.
(g) Annual leak Report summary.
. Operator will provide the following equipment as Operator deems
necessary as part of the above proposal:
(a) Four wheel drive vehicle (including fuel, maintenance and
insurance).
(b) Combustible gas instrument.
(c) Miscellaneous equipment (chain saw, shovels, rakes, toolbox,
gloves, hard hats, uniforms and small hand tools).
. Operator will provide the Mercaptan compound to be used as the
odorizer in the natural gas for purposes of leak detection.
. "Smart pigging" and cleaning of the pipeline shall be performed as
required, based on the operating history and prudent industry
practices.
-6-
<PAGE>
EXHIBIT C
PROJECT ORANGE ORGANIZATION
<TABLE>
<S> <C>
---------------
Plant Manager
---------------
------------------------
Administrative Assistant
------------------------
-----------------------
Assistant Plant Manager
-----------------------
---------------------- ----------------
Maintenance Supervisor Pipeline Manager
---------------------- ----------------
---------------- ------------------- ----------------
I & E Technician I & E Technician Pipeline Manager
---------------- ------------------- ----------------
---------------- -------------------
Plant Mechanic Plant Mechanic
---------------- -------------------
---------------- -------------------
Plant Mechanic Mechanic Apprentice
---------------- -------------------
-------------------------------------------------------------------------
------------------ ------------------ ------------------ ------------------
Shift Supervisor Shift Supervisor Shift Supervisor Shift Supervisor
------------------ ------------------ ------------------ ------------------
---------------- ---------------- ---------------- ----------------
Plant Operator Plant Operator Plant Operator Plant Operator
---------------- ---------------- ---------------- ----------------
</TABLE>
-7-
<PAGE>
EXHIBIT D
BUDGET FOR FIRST OPERATING YEAR
<TABLE>
<CAPTION>
----------------- -----------------------------------------------------------------------------
Nov-98 Dec-98 Jan-98 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99
----------------- -----------------------------------------------------------------------------
Operations and Maintenance
- ------------------------------
GE Fees
- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Fee 29,167 29,167 29,167 29,167 29,167 29,167 29,167 29,167 29,167 29,167
Spare Parts Carrying Fee 4,167 4,167 4,167 4,167 4,167 4,167 4,167 4,167 4,167 4,167
Leased Engine Fee 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000
Handling Fee 4,167 4,167 4,167 4,167 4,167 4,167 4,167 4,167 4,167 4,167
Gas Turbine Overhaul Fee 126,192 130,418 129,888 117,216 129,888 125,664 112,288 125,664 129,888 129,888
Directed Starts Fee 0 0 0 0 0 0 0 0 0 0
----------------- -----------------------------------------------------------------------------
Total GE Fees 185,692 192,916 192,388 179,716 192,388 188,164 174,788 188,164 192,388 192,388
Total Engine Hours On Line 1,434 1,482 1,476 1,332 1,476 1,428 1,276 1,428 1,476 1,476
x $88 per hour 88 88 88.0 88.0 88.0 88.0 88.0 88.0 88.0 88.0
----------------- -----------------------------------------------------------------------------
=Gas Turbine Overhaul Fee 126,192 130,416 129,888 117,216 129,888 125,664 112,288 125,664 129,888 129,888
Cumulative Directed Starts 14 14 16 18 20 22 26 28 30 32
Total Directed Starts * 56 @ $600 0 0 0 0 0 0 0 0 0 0
Total Directed Starts * 75 @ $1200 0 0 0 0 0 0 0 0 0 0
----------------- -----------------------------------------------------------------------------
Directed Starts Fee 0 0 0 0 0 0 0 0 0 0
Plant Personnel Compensation
- ----------------------------
Salaried Supervision 22,333 22,333 20,692 20,692 20,692 20,692 20,692 20,692 20,692 20,692
Hourly 66,642 66,642 58,350 58,350 58,350 58,350 58,350 58,350 58,350 58,350
Hourly Overtime 16,926 16,926 13,129 13,129 13,129 13,129 13,129 13,129 13,129 13,129
Fringe Benefits 42,045 42,045 35,840 35,840 35,840 35,840 35,840 35,840 35,840 35,840
Salaries G&A 10,105 10,105 12,544 12,544 12,544 12,544 12,544 12,544 12,544 12,544
----------------- -----------------------------------------------------------------------------
Total Plant Personnel Comp 158,051 158,051 140,555 140,555 140,555 140,555 140,555 140,555 140,555 140,555
Plant Operating Expense
- -----------------------
Plant Upkeep 751 750 1,286 1,286 1,286 1,286 1,286 1,286 1,286 1,286
Emmission Testing 4,000 0 3,269 3,269 3,269 3,269 3,269 3,269 3,269 3,269
Water Treatment 23,540 24,040 21,053 21,053 21,053 21,053 21,053 21,053 21,053 21,053
Consumables/lub/filler 1,989 1,989 1,354 1,354 1,354 1,354 1,354 1,354 1,354 1,354
----------------- -----------------------------------------------------------------------------
Total Plant Operating Expense 30,280 26,779 26,962 26,962 26,962 26,962 26,962 26,962 26,962 26,962
Plant Administrative Expense
- ----------------------------
Vehicle Expense 292 292 542 542 542 542 542 542 542 542
Outside Service 8,459 8,459 2,417 2,417 2,417 2,417 2,417 2,417 2,417 2,417
Equipment Rental 833 833 1,788 1,788 1,788 1,788 1,788 1,788 1,788 1,788
Phone 0 0 1,792 1,792 1,792 1,792 1,792 1,792 1,792 1,792
Administrative 3,458 3,458 4,657 4,657 4,657 4,657 4,657 4,657 4,657 4,657
----------------- -----------------------------------------------------------------------------
Total Plant Administrative Exp 13,041 13,041 11,194 11,194 11,194 11,194 11,194 11,194 11,194 11,194
Plant Employee Services
- -----------------------
Travel and Subsistance 420 420 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Safety Training 125 125 333 333 333 333 333 333 333 333
Equipment Training 1,292 292 1,167 1,167 1,167 1,167 1,167 1,167 1,167 1,167
----------------- -----------------------------------------------------------------------------
Total Plant Employee Services 1,837 837 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500
Plant Maintenance Materials
- ---------------------------
Heat Recovery Boiler 1,600 1,600 3,037 3,037 3,037 3,037 3,037 3,037 3,037 3,037
Electrical Interconnect 667 667 2,958 2,958 2,958 2,958 2,958 2,958 2,958 2,958
Water Treatment, Demin. 750 750 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250
Tools & Shop Equipment 333 333 1,183 1,183 1,183 1,183 1,183 1,183 1,183 1,183
Effluent Control 708 708 1,512 1,512 1,512 1,512 1,512 1,512 1,512 1,512
Emmission Controls 542 542 878 878 878 878 878 878 878 878
Plant Aux, & Misc. 2,333 2,333 7,350 7,350 7,350 7,350 7,350 7,350 7,350 7,350
----------------- -----------------------------------------------------------------------------
Total Maintenance Materials 6,933 6,933 18,168 18,168 18,168 18,168 18,168 18,168 18,168 18,168
Total O&M Expenses 398,834 398,557 391,767 379,095 391,767 387,543 374,167 387,543 391,767 391,767
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<CAPTION>
-------------------------------------------------
Sep 99 Oct-99 Nov-99 Dec-99 Total-99
-------------------------------------------------
Operations and Maintenance
- ------------------------------
GE Fees
- -------
<S> <C> <C> <C> <C> <C>
Operating Fee 29,167 29,167 29,167 29,167 350,000
Spare Parts Carrying Fee 4,167 4,167 4,167 4,167 50,000
Leased Engine Fee 25,000 25,000 25,000 25,000 300,000
Handling Fee 4,167 4,167 4,167 4,167 50,000
Gas Turbine Overhaul Fee 108,768 129,888 125,664 129,888 1,494,592
Directed Starts Fee 0 0 0 0 0
-------------------------------------------------
Total GE Fees 171,268 192,388 188,164 192,386 2,244,592
Total Engine Hours On Line 1,236 1,476 1,428 1,476 16,984
x $88 per hour 88.0 88.0 88.0 88.0 88.0
-------------------------------------------------
=Gas Turbine Overhaul Fee 108,768 129,888 125,664 129,888 1,494,592
Cumulative Directed Starts 36 38 40 42 42
Total Directed Starts > 56 @ $600 0 0 0 0 0
Total Directed Starts > 75 @ $1200 0 0 0 0 0
-------------------------------------------------
Directed Starts Fee 0 0 0 0 0
Plant Personnel Compensations
- -----------------------------
Salaried Supervision 20,692 20,692 20,692 20,692 248,307
Hourly 58,350 58,350 58,350 58,350 700,203
Hourly Overtime 13,129 13,129 13,129 13,129 157,546
Fringe Benefits 35,840 35,840 35,840 35,840 430,080
Salaries G&A 12,544 12,544 12,544 12,544 150,528
-------------------------------------------------
Total Plant Personnel Comp 140,555 140,555 140,555 140,555 1,686,684
Plant Operating Expenses
- ------------------------
Plant Upkeep 1,286 1,286 1,286 1,286 15,431
Emmission Testing 3,269 3,269 3,269 3,269 39,223
Water Treatment 21,053 21,053 21,053 21,053 252,634
Consumables/lub/filler 1,354 1,354 1,354 1,354 16,250
-------------------------------------------------
Total Plant Operating Expense 26,962 26,962 26,962 26,962 323,538
Plant Administrative Expense
- ----------------------------
Vechicle Expense 542 542 542 542 6,500
Outside Services 2,417 2,417 2,417 2,417 29,000
Equipment Rental 1,788 1,788 1,788 1,788 21,450
Phone 1,792 1,792 1,792 1,792 21,500
Administrative 4,657 4,657 4,657 4,657 55,879
-------------------------------------------------
Total Plant Administrative Exp 11,194 11,194 11,194 11,194 134,329
Plant Employee Services
- -----------------------
Travel and Subsistance 1,000 1,000 1,000 1,000 12,000
Safety Training 333 333 333 333 4,000
Equipment Training 1,167 1,167 1,167 1,167 14,000
-------------------------------------------------
Total Plant Employee Services 2,500 2,500 2,500 2,500 30,000
Plant Maintenance Materials
- ---------------------------
Heat Recovery Boiler 3,037 3,037 3,037 3,037 36,446
Electricial Interconnect 2,958 2,958 2,958 29,958 35,500
Water Treatment, Denmin. 1,250 1,250 1,250 1,250 15,000
Tools & Shop Equipment 1,183 1,183 1,183 1,183 14,200
Effluent Con???? 1,512 1,512 1,512 1,512 18,142
Emmission Controls 878 878 878 878 10,530
Plant Aux, & Misc. 7,350 7,350 7,350 7,350 88,200
-------------------------------------------------
Total Maintenance Materials 18,168 18,168 18,168 18,168 218,018
Total O & M Expenses 370,647 391,767 367,543 391,767 4,637,141
------- ------- ------- ------- ---------
</TABLE>
* represents >
-8-
<PAGE>
EXHIBIT E
INSURANCE
GE shall maintain and cause to be maintained by its subcontractors, at no
expense to POA, during the Term, for the protection of GE and such
subcontractors, Workers Compensation insurance, Employers Liability insurance in
an amount not less than $5,000,000 applicable to the Operation and Maintenance
of the Facility and the performance of this Agreement only, Disability Benefits
insurance and all other insurance GE or any such subcontractor is required by
law to provide covering loss resulting from injury, sickness, disability or
death of all persons employed by GE or its subcontractors or agents. GE and such
subcontractors shall also provide Automobile Liability insurance, including
uninsured/underinsured motorists protection, for all owned, non-owned and hired
autos in an amount not less than $5,000,000. GE shall require all subcontractors
coming onto the Facility site or the Right-of-Way to maintain Commercial General
Liability insurance coverage in an amount of not less than $l,000,000. Policy
forms ad insurers shall be reasonably acceptable to POA and Steam User. GE will
furnish certificates of insurance to POA and Steam User evidencing such
insurance and providing that such insurance shall not be canceled or reduced in
amount except upon thirty (30) days' prior written notice to POA and Steam User.
All policies of GE and subcontractors required by this Agreement, except Workers
Compensation and Employers Liability insurance, shall name POA and Steam User as
additional insureds. Coverage supplied by GE and subcontractors shall be primary
and waive the rights of subrogation against POA and Steam User. If requested by
POA, GE shall furnish to POA copies of the original policies of insurance
required to be carried by GE hereunder.
GE and its subcontractors shall be responsible for any loss of or damage to
their own property, including, without limitation, tools, equipment and
vehicles, but excluding materials to be included in the Facility, and shall
waive all rights of subrogation against POA and Steam User.
POA shall maintain, at its expense, during the Term, the following insurance:
(1) Workers Compensation providing coverage required by statute.
(2) Employer's Liability insurance in an amount not less than $5,000,000
applicable to the Facility
(3) Commercial General Liability insurance coverage with respect to the
Facility, with a deductible of not more than $100,000, or such higher
deductible as may be permitted by POA, in an amount not less than
$5,000,000 combined single-limit coverage, which shall insure the
activities of GE, including contractual coverage, products and completed
operations, broad form property damage and removal of the XCV exclusion.
(4) All Risk Property insurance, including Boiler and Machinery and Pressure
Vessel insurance coverage in the amount of the full replacement value of
the Facility and the Existing Plant for machinery breakdown including
all Equipment used in the operation and/or maintenance of the Facility
and/or the Existing Plant, including property damage, repair or
replacement.
-9-
<PAGE>
EXHIBIT E, Continued
INSURANCE
(5) Such Business interruption and Extra Expense insurance as is required by
Steam User.
(6) Umbrella Liability insurance with policy coverage of not less than
twenty million dollars ($20,000,000).
Each such policy of insurance (other than worker's compensation and Employer's
Liability) shall name GE as an additional Named Insured, and all insurance
policies shall be endorsed to waive subrogation against GE and shall be primary
with respect to any other insurance, except that it shall be deemed to be excess
coverage hereunder. POA shall furnish to GE copies of the original policies of
insurance required to be carried by POA hereunder. Each such policy of insurance
shall provide that such insurance shall not be canceled or reduced in amount, or
have its terms and conditions modified, except upon thirty (30) days' prior
written notice to GE.
POA shall be responsible for payment of deductible amounts under the policies to
be provided by POA, except to the extent that the loss insured arises from the
gross negligence or willful misconduct of GE or its subcontractors or the
failure of GE to perform its obligations hereunder, in which event, the
deductibles with respect to losses which result therefrom shall be paid by GE.
All of the aforesaid insurance to be provided by GE and POA hereunder shall
provide the indicated coverage amounts on an annual aggregate basis applicable
to the Facility only.
-10-
<PAGE>
EXHIBIT F
GAS TURBINE PACKAGE DIAGRAM
[DIAGRAM APPEARS HERE]
-11-
<PAGE>
EXHIBIT G
LM5000 LEASE ENGINE PROGRAM
I. ENGINE SUPPORT PROGRAM
For as long as the Agreement is in effect, the Parties shall participate
in the LM5000 ENGINE SUPPORT PROGRAM (the "Leased Engine Program") under
which POA shall pay to GE an Annual Lease Engine Fee, and the fixed Weekly
Use Rate Fees identified in Article IIIB below of this Exhibit, and GE
shall lease LM5000 Gas Turbine equipment under the terms and conditions
described in this Exhibit. In addition, the Parties shall continue their
participation in the Leased Engine Program until the completion of the
last major overhaul of any Gas Turbine Package required to be performed by
GE under Section 2.04 after the expiration of the Term or termination of
this Agreement, provided however, that in the event such continued
-------- -------
participation is required due to GE's continuing obligation to Repair and
Overhaul only one Gas Turbine Package, or in the event that, during such
continued participation, GE's Repair and Overhaul obligation becomes
applicable to only one Gas Turbine Package, then the Annual Lease Engine
Fee shall be reduced by 50% pro rata for all periods thereafter until the
termination of such participation.
II. GE's OBLIGATIONS UNDER THIS AGREEMENT
A. GE guarantees, during the Parties' participation in the Leased Engine
Program, to provide one operable leased LM5000 Gas Turbine on board a
carrier, at the Site (hereby established as the Delivery Point) and
qualified technical direction for its installation and removal within
seventy-two (72) hours of oral or written confirmation by POA of
notification of need, provided such oral notice to the Regional
Manager, GE Atlanta, Georgia or his delegated representative shall be
effective when received.
1. In the event a leased unit becomes inoperative during the term of
its lease due to causes reasonably determined by GE to be within
its control, GE will either repair the unit on-site within
seventy-two (72) hours or deliver a replacement unit at the
Delivery Point at GE's expense. If GE determines that a
replacement unit is required, it will be provided within
seventy-two (72) hours.
B. The Leased Engine Program terms assume that scheduled hot section
refurbishment of POA's engine will be accomplished on-site without the
need for a leased engine and use of a leased engine during an off-site
scheduled hot section refurbishment is specifically excluded from the
Leased Engine Program. If the User desires a leased engine while his
engine is undergoing scheduled off-site hot section refurbishment, POA
agrees to pay the non-member non-exclusive lease engine rates in
effect at that time. The Leased Engine Program does apply to the
scheduled gas generator overhaul, anticipated to occur at
approximately 50,000 hours of operation.
-12-
<PAGE>
EXHIBIT G, Continued
LM5000 LEASE ENGINE PROGRAM
C. Except to the extent caused by Force Majeure, should GE fail to
deliver a lease unit per Article IIA above, GE will be liable for late
delivery penalties of $850.00 per hour or $20,400.00 per day up to the
maximum liability which is equal to the total Annual Lease Engine Fee.
Penalties assessed against GE by virtue of such late delivery will be
in the form of a credit memorandum to be applied against the
subsequent Weekly Use Rate payments to be made to GE by POA. Any
unliquidated credit due User at the expiration or termination of the
Program shall be paid to POA within thirty (30) days.
III. USER'S OBLIGATIONS UNDER THIS AGREEMENT
A. Subject to Article I, above, User agrees to pay an Annual Lease Engine
Fee of $300,000 dual coverage for engines. Such Annual Lease Engine
Fee shall be effective for the first Operating Year and shall be
escalated for each Operating Year thereafter, based on the change in
the U.S. Department of Labor Consumer Price Index for December of the
preceding Operating Year, from such index for the next preceding
December.
B. POA further agrees to pay a Weekly Use Rate Fee for each week or, pro-
rata for any fraction thereof, for leased unit use which commences on
the date the lease unit arrives at the Site and ends when the lease
unit is ready to be removed from the Site. The Weekly Use Rate Fee is
as follows:
Weekly Use Rate Fee - Contiguous Weekly Charge
1-10 Weeks Over 10 Weeks
Gas Turbine $23,800 $37,900
Gas Generator $16,460 $26,740
Power Turbine $ 5,200 $ 8,490
Such Weekly Use Rate Fees shall be effective for the first Operating
Year and shall be escalated thereafter, based on the change in the
U.S. Department of Labor Consumer Price Index for December of the
Operating Year preceding the Operating Year in which the leased unit
is used, from such index for the next preceding December.
C. POA is responsible for notifying GE when a leased unit is required. At
the first opportunity, GE will orally identify to POA the (i) serial
number of the leased unit, (ii) carrier and estimated date and hour of
arrival at the Delivery Point and (iii) the Stated Value of the leased
equipment to be insured by POA. Within seventy-two (72) hours of POA
oral request for the leased unit, POA will confirm his request in
writing to GE and identify the existence of adequate insurance for the
Stated
-13-
<PAGE>
EXHIBIT G, Continued
LM5000 LEASE ENGINE PROGRAM
Value of the leased unit by providing GE with a valid Certificate of
Insurance for the leased equipment. Notwithstanding the foregoing, POA
shall have no obligation to provide insurance coverage for losses
occurring during transportation. GE shall have all risk of loss during
transportation of the leased unit to and from the Delivery Point.
D. POA agrees to allow GE to utilize any hardware from POA's engines
(including engine-mounted kits) at no charge on the leased unit during
the period the leased unit is operated at the Site. Kits include, but
are not limited to, fuel nozzles, manifolds and piping, starters,
temperature and pressure sensing and indicating systems.
E. GE will be responsible for the costs of providing GE technical
direction for leased unit installation and removal and for all normal
wear and tear of the leased unit during its intended use at the POA's
installation. POA is responsible for damage to the lease unit due to
operation at POA's request above the T44 required to produce the power
provided by POA's unit prior to its removal (the "Site Rating").
F. Should POA call for a leased unit per Article IIIC and subsequently
determine that a leased unit is not required, POA will reimburse GE for
the actual transportation costs incurred by GE as a result of this
redetermination.
G. Should POA elect to defer the re-installation of its repaired Engine
(and continue operations with the GE leased engine) beyond one (1) week
after POA's engine has arrived at the Site and is available for re-
installation, POA shall pay GE at the Weekly Use Rate. These rates will
extend through each week or fraction of a week that the leased engine
remains unavailable to GE beyond the one-week period.
IV. AGREEMENT ADDENDUM
A. GE reserves the right to prospectively reprice the Leased Engine Fee
when POA's engine is operated, at POA's request, at a gas temperature
(T44) in excess of the Site Rating. The maximum price increase for this
cause is 10% of the Leased Engine Fee.
-14-
<PAGE>
EXHIBIT H
MAINTENANCE SCHEDULE
1.1 SCOPE
The following maintenance instructions provide a guide to operator-level
maintenance of the LM5000 turbine generator set located at Project Orange
Associates Cogeneration Facility.
1.2 GENERAL MAINTENANCE CONCEPT
1.2.1 On-Condition Maintenance: The maintenance concept for the Stewart &
------------------------
Stevenson turbine-powered package is generally referred to as "on-condition"
maintenance, which eliminates scheduled overhaul based on operating hours. Under
the on-condition concept, turbine-driven equipment and ancillary equipment are
inspected on a regular schedule and repaired as necessary to restore the unit to
operational serviceability. The extent of repairs under this concept is
determined by two basic factors:
1. Correction of the primary cause of failure and/or discrepancy and any
resultant secondary damage.
2. Replacement or repair of parts that do not meet the established
inspection criteria as defined in their respective product manuals,
1.2.2 On-Site Maintenance: On-site maintenance falls into two categories: (a)
-------------------
preventive (scheduled) maintenance and (b) corrective (unscheduled) maintenance.
(a) Preventive maintenance includes those scheduled maintenance actions which
are performed based on operating hours, calendar time, or a combination
of operating hours, calendar time, and condition monitoring.
(b) Corrective maintenance includes those maintenance actions performed for
cause, either as a result of failure or an impending failure detected by
inspection and/or condition monitoring.
1.2.3 During operation, the following items are monitored: gas generator speed,
power turbine speed, gas generator, and exhaust gas temperature, engine and
driven equipment vibration, oil pressure, oil temperature, and operating time.
1.2.4 Under the "on-condition" maintenance concept, scheduled maintenance
actions requiring shutdown can be accomplished concurrently at intervals of
4,000 hours (or 6 months) and 8,000 hours (or 12 months).
1.2.5 The most significant item of these scheduled inspections is a turbine
borescope check, which provides specific information on the condition of the
engine's compressor and hot gas path. The turbine, therefore, has a number of
ports specifically located to facilitate borescope inspections. It is standard
practice to monitor the condition of internal parts and schedule on-condition
maintenance intervals based on borescope inspections.
-15-
<PAGE>
EXHIBIT H, Continued
MAINTENANCE SCHEDULE
1.2.6 For support of the turbine-powered, overall maintenance is divided into
three basic levels according to shop capability.
1.2.7 On-Site External - Level 1: On-site external maintenance encompasses the
--------------------------
following two categories of maintenance tasks:
(a) Preventive: Tasks which are scheduled on the basis of equipment run hours
or calendar time.
(b) Corrective: Tasks which are unscheduled and accomplished as a result of a
problem.
1.2.8 The work scopes for these tasks cover all work on the exterior of
installed equipment plus scheduled inspections, turbine gas generator cleaning
(water wash), gas generator/power turbine changeout (when necessary), and
changeout of components of driven equipment.
1.2.9 Off-Site or Off-Site Level 2 Repair: This level of maintenance includes
-----------------------------------
complete teardown and rebuild of a gas generator and/or power turbine by
subassemblies. Replacement of major subassemblies is within the capability of
this maintenance level.
1.2.10 Off-Site Level 3 or Level 4 Repair: This scope of work provides for all
----------------------------------
levels of maintenance, plus complete repair of gas generator, power turbine, or
driven equipment parts. A test cell is required for a Level 3 or Level 4
facility.
1.2.11 Maintenance Schedule: Normal maintenance of each Stewart & Stevenson
--------------------
LM5000 turbine generator set during the initial 3 years of operation (at 8,000
hours per unit per year) will require only a weekly Visual inspection of turbine
and driven equipment exteriors. None of these inspections will require equipment
removal or disassembly.
-16-
<PAGE>
SCHEDULE 1
INITIAL INVENTORY OF SPARE PARTS
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ---------- ----------- ---------- ----------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
010101003 BEARING BUSH (N.E.E.) S&S A03137751-01 SU--SEC 1.00 26540.27 C
010101004 BEARING BUSH (E.E) S&S B3128079-01 SU--SEC 1.00 23471.63 C
010102012 FUSE S&S E1327747-04 SU--SECC2 4.00 158.16 C
010102013 DIODE BRIDGE 30MI20 S&S 28278-818 SU--SECD2 2.00 83.82 C
010102014 FUSE S&S E3127032-00 SU--SECC2 23.00 1923.49 C
010105011 VOLTAGE MONITER CARD S&S 9602947 SU--MCCCABD 1.00 1968.34 C
010105012 POTENTIOMETER DRIVE UNIT S&S 266661014 SU--SECC2 1.00 1470.49 C
010105013 CONTROL CARD S&S 9611592/00 SU--MCCCABD 3.00 5640.66 C
010107001 IEFAN01 CABINET FAN ASSEMBLY, BAILEY IEFAN01 SU--MCCCABA 1.00 465.50 C
120VAC
010107002 NIAI02 TERM MODULE, BAILEY NIAI02 SU--MCCCABA 1.00 143.50 C
THERMOCOUPLE INPUT
010107003 INNIS01 INTERFACE SLAVE BAILEY INNIS01 SU--MCCCABA 1.00 3461.50 C
010107006 NICS01 TERM MODULE, CONTROL BAILEY NICS01 SU--MCCCABA 1.00 94.50 C
I/O
010107007 NIAI04 TERM MODULE ANALOG BAILEY NIAI04 SU--MCCCABA 1.00 150.50 C
INPUT
010107008 NIDI01 TERMINATION MODULE BAILEY NIDI01 SU--MCCCABA 1.00 70.00 C
010107010 IMCIS02 CONTROL I/O SLAVE BAILEY IMCIS02 SU--MCCCABA 1.00 612.50 C
010107013 NKTM01-20 CABLE BAILEY NKTM01-20 SU--MCCCABA 1.00 60.20 C
010107015 NICL01 TERMINATION MODULE, BAILEY NICL01 SU--MCCCABA 1.00 213.50 C
COMM LINK
010107016 INDSI02 MODULE, DIGITAL INPUT BAILEY INDSI02 SU--MCCCABA 1.00 518.00 C
SLAVE
010107017 IMASI02 ANALOG INPUT SLAVE BAILEY IMASI02 SU--MCCCABA 1.00 630.00 C
010107018 1948564A1 POWER SUPPLY, BAILEY 1948564A1 SU--MCCCABA 1.00 755.00 C
SWITCHING
010107019 IMDS004 MODULE, DIGITAL OUTPUT BAILEY IMDS004 SU--MCCCABA 1.00 486.50 C
SLAVE
010107020 NTMU01 TERM. MTG, UNIT, REAR BAILEY NTMU01 SU--MCCCABA 1.00 119.00 C
MOUNT
010108003 ELECTRIC HEATER S&S 25281-528 SU--SECC1 1.00 205.89 C
010108004 ELECTRIC CART. TYPE HEATER S&S 25281-714 SU--SECC2 1.00 146.02 C
010109012 GENERATOR L/O PUMP, COUPLING S&S 3142638101 SU--SECC5 1.00 3767.16 C
010109013 GENERATOR LUBE OIL TANK TEMP S&S 100TC5-4CC615 SU--MCCCABD 1.00 454.60 C
SWITCH
010109014 GENERATOR AUXILLARY LUB OIL S&S 300 5CCIG-CC SU--SECO4 1.00 521.97 C
PUMP
010109015 GENERATOR LUBE OIL SUPL TEMP S&S 78F25NOOA025T34 SU--MCCCABD 1.00 189.81 C
SENSOR
010109016 OIL SEAL RING (C/W) W/SPRING S&S 83135309-01 SU--SECD4 8.00 15892.24 C
3128497/01
010109017 GENERATOR L/O PUMP (MECH) S&S 314089901 SU--SEC03 1.00 4485.19 C
010109019 GASKET, L.O. COOLER, HEAD, BASCO 031G10A-6 SU--SECA3 4.00 24.00 C
OUTER SEAL, 6"
010109020 G-RING, L.O. COOLER, REVERSING BASCO 080G0106 SU--SECA3 4.00 16.00 C
END, 6"
010109021 SWITCH, PRESSURE, L.O.HI/LO S&S 132p4s129-1 SU--MCCCABD 1.00 238.81 C
010201005 INSULATION TUBE S&S E3130399-17 SU--SECC1 39.00 687.18 C
010201006 INSULATION WASHER S&S E3116456-52 SU--SECC1 39.00 686.40 C
0?????001 DIODE BRIDGE FOR BRUSH S&S 3124865/00 SU--SECC1 3.00 305.22 C
</TABLE>
Page 1
-17-
<PAGE>
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ---------- ----------------------------- ---------- --------------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
GENERATOR
010202002 LINK, FUSE TO DIODE S&S 3124863/01 SU--SECC1 6.00 339.84 C
010202003 EARTHING BRUSH HOLDER S&S E1174392-01 SU--SECC1 2.00 225.68 C
010202004 EARTHING BRUSH S&S E3116682-01 SU--SECC1 10.00 581.80 C
010202005 RECTIFIER 28239-078 S&S E3121182-01 SU--SECC1 12.00 6639.00 C
010202006 RECTIFIER 28239-079 S&S E3121182-02 SU--SECC1 12.00 6639.00 C
010203001 GASKET S&S D3135356-01 SU--SECC1 8.00 4391.92 C
010205002 ASSY.PF CONTROL CD HIW S&S 9602943/00 SU--MCCCABD 1.00 1796.21 C
010205003 EXCITATION LIMITER CARD S&S 9608470/00 SU--MCCCABD 1.00 1981.19 C
010205005 EXCITATION MONITOR CARD S&S 9608488/00 SU--MCCCABD 1.00 2012.60 C
010205006 AUTOMATIC POWER CARD S&S 9602933/00 SU--MCCCABD 1.00 1129.38 C
010205007 RELAY VP/2 S&S 25771-148 SU--SECD2 4.00 195.64 C
010205008 FUSE 500MA SIZE 0, 1/2 AMP S&S 25715-006 SU--SECD2 6.00 35.52 C
010205009 FUSE 2A SIZE 0 S&S 25715-010 SU--SECD2 4.00 20.96 C
010205010 FUSE 20ET S&S 25711-249 SU--SECD2 3.00 91.92 C
010205012 POTENTIOMETER FOR 500R + 500R S&S 26632-032 SU--SECD2 1.00 169.92 C
010205013 ELEC CONTROL BOARD S&S 9607087/00 SU--MCCCABD 1.00 2377.86 C
010205014 FUSE 4F21 S&S 25711-012 SU--SECD2 4.00 28.36 C
010205015 FUSE 250MA SIZE 0 S&S 25715-005 SU--SECD2 3.00 17.49 C
010205017 THYRISTOR NO 5400/122 S&S 28428-187 SU--SECD2 2.00 95.14 C
010205018 RELAY 125VDC 3P S&S 25771-167 SU--SECD2 2.00 142.32 C
010407001 SIEMENS TYPE AVB-O, 115KV WESTIN SEIMN-TP-AVB-O- SU--MEZ 2.00 950.00 C
PORCELAIN INSULATOR
010501084 ASSY. SLIDING CONTACT POWELL 50956-G1P SU--MCCCABC 1.00 200.00 C
010501085 ARM ASM, RIGHT HAND POWELL 50925-G1P SU--MCCCABC 1.00 80.00 C
010501086 ARM ASM, LEFT HAND POWELL 50924-G1P SU--MCCCABC 1.00 80.00 C
010501087 MOTOR SW ASSY POWELL 50756-G3P SU--MCCCABC 1.00 150.00 C
010501088 CT/ITI 300/5A POWELL 780-301 SU--MCCCABC 1.00 150.00 C
010501089 CT/ITI 3000/5A POWELL 780-302 SU--MCCCABC 1.00 150.00 C
010501090 ASM, COMM ROD SHORT POWELL 50729-G3P SU--MCCCABC 2.00 110.00 C
010501091 ANGLE, BARRIER SUPPORT POWELL 50607-P1 SU--MCCCABC 6.00 120.00 C
010501092 125VDC CLOSING COIL POWELL 50026-G3P SU--MCCCABC 1.00 230.00 C
010501093 125VDC TC ASSY POWELL 50027-G2P SU--MCCCABC 1.00 230.00 C
010501094 SWBO PNL LAMP POWELL 011686708G3 SU--MCCCABC 1.00 25.00 C
010501095 CLF/CLE-2 15 KV/85KAIC POWELL 439D482G06 SU--SEC15 3.00 1530.00 C
010501096 PT/ITI 14.4KV/12OV POWELL PT5-110-143FF SU--SEC15 1.00 900.00 C
010501097 SET OF 3 CLE-2 5 + 15KV POWELL 9078A15G09 SU--SEC15 1.00 360.00 C
010501098 MICRO SWITCH POWELL BA-2RV2-A2 SU-MCCCABC 1.00 50.00 C
010502001 CS42 FUSE EDWARD 25424-21120 SU-MCCCABC 10.00 1518.60 C
010502002 CS42 RECTIFIER EDWARD 27907-34101 SU-MCCCABC 1.00 20.24 C
010502003 CS42 REACTOR EDWARD 52911-064-50 SU-MCCCABC 1.00 35.15 C
010502004 CS42 FUSE EDWARD 25416-10141 SU-MCCCABC 1.00 20.71 C
010502006 DS416HM TRIP RESET SPRING EDWARD 795A077HOI(B) SU-MCCCABC 1.00 22.80 C
010502007 DS416HM TRIP RESET SPRING EDWARD 795A077HOI(A) SU-MCCCABC 1.00 22.80 C
010502008 CS42 FUSE EDWARD 25425-90500 SU-MCCCABC 1.00 31.88 C
010502009 COIL EDWARD 51034-059-50 SU-MCCCABC 1.00 81.38 C
010502010 CS42 TRANSFORMR EDWARD 52911-025-52 SU-MCCCABC 1.00 2123.51 C
010502011 CS42 COIL EDWARD 9998-PD2C-110A SU-MCCCABC 11.00 318.78 C
010502013 DS416HM TRIP RETURN SPRING EDWARD 4368621H05 SU-MCCCABC 1.00 26.60 C
010502014 CS42 RELAY EDWARD 8501-PH40EV02 SU-MCCCABC 1.00 41.40 C
010502015 CS42 FUSE EDWARD 25419-60160 SU-MCCCABC 1.00 22.61 C
010502016 SHUNT TRIP COIL EDWARD 151D786G04 SU--MCCCABC 1.00 106.40 C
010502017 SPRING RELEASE COIL EDWARD 151D786G02 SU--MCCCABC 1.00 106.40 C
010502018 DS416HM ARCHING SPRING EDWARD 50380237H01 SU--MCCCABC 1.00 22.80 C
010502019 MOTOR KIT EDWARD 449D431G01 SU--MCCCABC 1.00 891.10 C
010502020 ANTI-PUMP RELAY EDWARD 140D930H01 SU--MCCCABC 1.00 142.50 C
010504022 OSCILLATOR RESET EDWARD 5038601H11 SU--MCCCABC 1.00 22.80 C
010504045 480120V TRANSFORMER BALDWI 500VA SU--MCCCABC 1.00 245.92 C
010504046 OVERLOAD BALDWI 3UA58-00-2P SU--MCCCABC 1.00 67.06 C
010504047 OVERLOAD BALDWI 3UA58-00-2V SU--MCCCABC 2.00 134.12 C
010504048 OVERLOAD BALDWI 3UA62-00-2X SU--MCCCABC 2.00 330.00 C
010504050 LIGHT SOCKET BALDWI 3SB14-00-2B SU--MCCCABC 4.00 89.44 C
010504051 480120V TRANSFORMER BALDWI 150VA SU--MCCCABC 1.00 149.79 C
010504052 OVERLOAD BALDWI 3UA59-00-1G SU--MCCCABC 2.00 178.88 C
010504053 480120V TRANSFORMER BALDWI 200VA SU--MCCCABC 1.00 167.67 C
010504054 OVERLOAD BALDWI 3UA52-00-1K SU--MCCCABC 2.00 76.00 C
010504055 OVERLOAD BALDWI 3UA52-00-1D SU--MCCCABC 2.00 76.00 C
010504056 OVERLOAD BALDWI 3UA59-00-1F SU--MCCCABC 2.00 169.90 C
010504057 OVERLOAD BALDWI 3UA59-00-1D SU--MCCCABC 2.00 169.90 C
010504059 OVERLOAD BALDWI 3UA58-00-2C SU--MCCCABC 2.00 134.12 C
010504060 OVERLOAD BALDWI 3UA58-00-2E SU--MCCCABC 2.00 134.12 C
010504061 OVERLOAD BALDWI 3UA58-00-2D SU--MCCCABC 2.00 138.12 C
010504062 OVERLOAD BALDWI 3UA54-00-2A SU--MCCCABC 2.00 91.86 C
010504065 BREAKER, MCC, 25 AMP BALDWI ED63A025 SU--MCCCABC 1.00 260.30 C
010516001 FUSE 400A 250 VAC SBM1 EXPERT 03-752413-00 SU--MCCCABC 3.00 199.59 C
010516002 XSTR 16BT MODULE 400A 600V EXPERT 03-657002-00 SU--MCCCABC 1.00 770.50 C
010516003 FUSE 400A 150 VAC SBM1 EXPERT 03-751423-00 SU--MCCCABC 1.00 53.33 C
010516004 SCR 600 AAU6 800V 200US EXPERT 03-619411-00 SU--MCCCABC 2.00 461.50 C
010516005 UPS FAN W/ALARM SOLIDS 03-471004-00 SU--MCCCABD 1.00 415.26 C
010517001 PILOT LIGHT NBON 125V AMBER EXPERT 03-770000-00 SU--MCCCABC 3.00 16.29 C
010517002 DIODE SENS 300228 SU--MCCCABA 9.00 135.00 C
010517003 SCR SENS 201757 SU--MCCCABA 3.00 225.00 C
010517004 FUSE 5A 250V 1/4 X 1-1/4 EXPERT 03-750501-00 SU--MCCCABC 1.00 1.41 C
010517005 MULTI ALARM SENS 203471 SU--MCCCABA 1.00 225.00 C
010517006 DISPLAY BOARD SENS 204491 SU--MCCCABA 3.00 225.00 C
010517007 RELAY TO 120VAC COIL 5 AMP @ EXPERT 03-740108-00 SU--MCCCABC 1.00 204.35 C
250VAC
010517008 PILOT LIGHT NEON 125V RED EXPERT 03-770001-00 SU--MCCCABC 3.00 16.29 C
010517009 PILOT LIGHT NEON 125V GREEN EXPERT 03-770003-00 SU--MCCCABC 3.00 30.96 C
010517010 RELAY 4PDT 3 AMP 120VAC EXPERT 03-740001-00 SU--MCCCABC 1.00 18.43 C
010517011 SHUNT SENS 204491 SU--MCCCABA 3.00 90.00 C
010517012 DIODE 100AMP 400V FRD EXPERT 03-600102-00 SU--MCCCABC 1.00 42.88 C
010517013 DC METER SENS 703221 SU--MCCCABA 1.00 45.00 C
010517014 CIRCUIT BREAKER SENS 702522 SU--MCCCABA 3.00 135.00 C
010517015 AMP-METER SENS 703234 SU--MCCCABA 1.00 45.00 C
010517016 RIBBON CABLE ASSY SENS 808953 SU--MCCCABA 3.00 30.00 C
010517017 FUSE 5A 250V 1/4 X 1-1/4 EXPERT 03-750521-00 SU--MCCCABC 1.00 2.61 C
010517018 SCR 235AMP 500V 80VS EXPERT 03-612305-00 SU--MCCCABC 2.00 278.06 C
010701034 POWER MODULE AC INPUT SYSTEM BAILEY IEPAS01 SU--MCCCABA 1.00 1351.00 C
POWER IEPASO1
010701051 1948002A4 85 MB HARD DISK BAILEY 1948002A4 SU--MCCCABA 1.00 851.00 C
DRIVE (OPTIONAL)
</TABLE>
<PAGE>
SCHEDULE 1, Continued
12-09-97 Syracruse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QDH at Loc Total Cost ABC Flag
- ---------- ----------- ---------- ----------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
010701054 IMMFP01 BAILEY IMMFP01 SU--MCCCABA 1.00 7315.00 C
010701055 IEMMOUI MODULE MOUNTING UNIT BAILEY IEMMUOI SU--MCCCABA 1.00 364.00 C
010702001 ANNUCIATOR DISPLAY PANEL (ADP) BAILEY IIADP02 SU--MCCCABA 1.00 2225.00 C
010705001 ISOLATOR, 4-20/4-20MA ACI SC 2302-1 SU--MCCCABA 3.00 716.79 C
010705002 SWITCH, H.O.A. CITYEL SWP-126 SU--MCCCABD 1.00 53.23 C
010705003 SELECTOR, SWITCH, HOA CITYEL 0205871-2 SU--MCCCABD 1.00 26.68 C
020401001 SHAFT SLEEVE GOULDS 73705X-2229 SU--SECP3 2.00 279.80 C
020403002 PACKING SET, STD SQUARE, NOONEY 24244.516 SU--SECN5 1.00 59.29 C
PEGGING STM
020403003 GUIDE, BRONZE, PACKING, 1.12 NOONEY 1107.433 SU--SECN5 2.00 209.92 C
STM
020403004 SPACER, PACKING, 1.12 STEM NOONEY 2499-150 SU--SECN5 1.00 173.60 C
PEGGING STEM
020404002 3196 CASING GASKET ESTABR 70782-20-5127 SU--SECP4 1.00 8.36 C
020404003 3196 O.B. OIL SEAL ESTABR 8690-1120 SU--SECP3 1.00 4.12 C
020404004 3196 I.B. OIL SEAL ESTABR 8690-17645 SU--SECP4 1.00 8.52 C
020404005 3196 BRG HSG O-RING ESTABR CO2495A245-5302 SU--MEZZP3 1.00 5.55 C
020404006 3196 ADAPTER GASKET ESTABR 73078-5130-0001 SU--SECP4 2.00 6.70 C
020404007 3196 TFE IMPELLER O-RING ESTABR CO2495A28-6359 SU--SECP3 1.00 8.36 C
020406002 4" SAFETY RELIEF VALVE DELTAK 0100743309 SU--MEZG3 1.00 2243.08 C
020407002 55" GAUGE GLASS DELTAK 0100743317 SU--SECL5 1.00 2224.00 C
020408001 STEM GUIDE DELTAK 0100743361SG SU--SECR1 1.00 103.40 C
020408002 GASKET DELTAK 0100743361GT SU--SECR1 1.00 44.00 C
020408003 SPRING DELTAK 0100743361SP SU--SECR1 1.00 88.00 C
020408004 STEM DELTAK 0100743361SM SU--SECR1 1.00 88.00 C
020408005 DISC DELTAK 0100743361DC SU--SECR1 1.00 55.00 C
020501005 #5 CARBON INSERT W/ SEALIN Y5FQ1625AAF SU--SECQ3 7.00 434.00 C
MVSR2125333 & MVSR2875333
VITON O-RINGS (141964)
020501006 TUNG CARBIDE 62-6 SEAL RING SEALIN KU3T1625333 SU--SECQ3 3.00 1134.00 C
(141964)
020501007 MECHANICAL SEAL (PTO 1.626") SEALIN 3310H-144726 SU--SECQ2 3.00 3825.00 C
020501009 O-RING, BALANCE BUSHING GOULDS 244328 SU--SECP5 1.00 37.40 C
020501010 O-RING, PRESS RED SLEEVE GOULDS 241958 SU--SECP2 1.00 8.80 C
020501011 O-RING, CASING GOULDS 083112 SU--SECP2 5.00 88.00 C
020501012 DIFFUSER RING GOULDS 209184 SU--SECP5 4.00 1216.60 C
020501013 SHAFT SLEEVE, THRUST GOULDS 282636 SU--SECP5 2.00 2523.00 C
020501014 SHAFT SLEEVE, COUPLING GOULDS 282635 SU--SECP5 1.00 1261.50 C
020501016 DISK, COUNTER BALANCE GOULDS 034428 SU--SECP2 1.00 1645.80 C
020501017 BALANCE DISK GOULDS 034452 SU--SECP5 1.00 930.60 C
020501018 WEAR RING GOULDS 035306 SU--SECP2 5.00 1677.50 C
020501019 HP BFW PUMP COUPLING ESTABR FALK 1060T31 SU--SECL2 1.00 714.00 C
020501020 BFP O.B. SPACER GOULDS 257375 SU--SECP4 5.00 2203.00 C
ESTABR H257375
020501021 BFP O.B. SPACER SNAP RING GOULDS 044782 SU--SECP4 13.00 39.00 C
020522062 BEARING LOCKNUT, CPLG. SIDE GOULDS 136A-075966 SU--SECP5 4.00 116.20 C
020522064 OIL SEAL, SMALL SEALIN 332-274684 SU--SECP5 3.00 17.19 C
020522070 BEARING LOCKWASHER GOULDS 382A-008096 SU--SECP5 10.00 32.35 C
020522072 PUMP COUPLINGS IP/LP BFW GOULDS FALK 1050T31 SU--SECL2 1.00 603.00 C
020522073 BEARING FRAME GOULDS 2286 SU--SECP4 1.00 2561.00 C
020522074 GLASS WINDOW, FLOW INDICATOR ACI 83-440372-01 SU--SECI2 2.00 10.00 C
020502075 IMPELLERS, FLOW INDICATOR ACI 410549-02 SU--SECI2 2.00 6.00 C
020502076 GASKET KIT, FLOW INDICATOR ACI 83-100331-00 SU--SECI2 2.00 12.00 C
020502077 COOLING WATER SIGHT FLOW BURNSB 1/2SF SU--SECI2 1.00 45.00 C
INDICATOR
BURNSC 1/2SF
020502080 COVER, BLR FD PMP STUFFING BOX ESTABR H289288 SU--SECP4 1.00 2503.25 C
020503003 REPAIR KIT FISHER RPACKX00112 SU--SECH5 1.00 78.75 C
020503008 REPAIR KIT FISHER R667X000502 SU--SECH5 1.00 5.04 C
020503009 SEAL BUSHING FISHER 1E845714012 SU--SECH5 1.00 28.35 C
020503010 DIAPHRAGM FISHER 2E859602202 SU--SECH5 1.00 59.85 C
020503013 REPAIR KIT FISHER R83LX000012 SU--SECH5 1.00 14.18 C
020503017 REPAIR KIT FISHER R67AFRX0012 SU--SECH5 1.00 12.92 C
020503021 3" BPR 1500LBM 130 GPM AGI 3"BPR 1500LB 13 SU--SECL4 1.00 790.00 C
020503023 ROTARY HEAD ASSY AGI SSV10-3"/300#-1 SU--SECL1 2.00 4280.00 C
020503024 SPRING AGI SSV10-3"/95.1-3 SU--SECL1 2.00 280.00 C
020503025 SEAL SET AGI SSV10-3"/300#-7 SU--SECL1 1.00 110.00 C
020503028 ROTARY HEAD ASSY AGI SSV10-3"/900#-1 SU--SECL1 1.00 2438.00 C
020503029 PLUG CVSALE 21423.150 SU--SECN3 1.00 1266.53 C
020503030 BONNET GASKET CVSALE 1224.868 SU--SECN3 1.00 31.96 C
020503031 SEAT GASKET CVSALE 1228.868 SU--SECN3 2.00 71.38 C
020503036 SEAT GASKET CVSALE 1027.868 SU--SECN3 2.00 71.38 C
020503037 PKNG SET CVSALE 24242.929 SU--SECN4 2.00 83.06 C
020503038 PKNG SET CVSALE 24246.929 SU--SECN4 1.00 40.54 C
020503039 BONNET GASKET, HP REG VLV CVSALE 1240.868 SU--SECN3 2.00 140.84 C
NOONEY 1240.868
020503040 PKNG SET CVSALE 24238.929 SU--SECN4 2.00 65.24 C
020503041 CHECK VALVE CVSALE 19231.402 SU--SECN4 1.00 34.95 C
020503043 PILOT VALVE CVSALE 17396.999 SU--SECN4 1.00 54.67 C
020503044 SWITCHING VALVE CVSALE 4873.999 SU--SECN3 1.00 312.51 C
020503045 POSITIONER CVSALE 62910.999 SU--SECN3 1.00 873.08 C
020503046 SEAT RING CVSALE 8246.150 SU--SECN4 1.00 1042.16 C
020503047 O-RING YOKE AND PISTON CVSALE 1313.650 SU--SECN3 3.00 45.81 C
020503049 SEAT RING CVSALE 1383.150 SU--SECN5 1.00 131.58 C
020503050 PILOT VALVE CVSALE 2744.999 SU--SECN5 1.00 39.89 C
020503051 ADJ SCRW GASKET CVSALE 1631.655 SU--SECN5 3.00 3.69 C
020503054 BYPASS ASSEMBLY, SSV10-300# AGI BYPASS ASSY-SSV SU--SECL1 2.00 3120.00 C
020503055 THROTTLE, SSV1--3"-300# AGI THROTTLE-3"-300 SU--SECL1 2.00 996.00 C
020503056 GASKET, VELAN, H.P. BFREG VLV NUWAY 6" VELAN SOFTIR SU--SECN4 5.00 248.30 C
OUTLET
020503057 GASKET SET, FISHER VALVE, HP NORCON 1287100X032 SU--SECN4 1.00 56.60 C
BFW.
020503058 PACKING KIT, HP FISHER VLV NORCON RPACKX00032 SU--SECN4 1.00 38.40 C
020503059 I/P CONVERTER REPAIR KIT, NORCON R582X000012 SU--SECN4 1.00 10.80 C
FISHER CONT VLVS
020503060 1/4 PRESSURE REG REPAIR KIT NORCON R67AFRX0012 SU--SECN4 1.00 18.80 C
020504001 D/P GAUGE, BFP ACI 120-AC-12-00 SU--MCCCABC 1.00 135.00 C
020601004 O-RING & SEAL KIT ROTORK 11A/3 SU--SEC03 1.00 245.00 C
020604001 BONNET GASKET CVSALE 2615.868 SU--SECN2 1.00 122.33 C
020604003 PKG. SET CVSALE 24250.370 SU--SECN5 1.00 91.61 C
020604004 SEAT GASKET CVSALE 2616.868 SU--SECN2 1.00 110.00 C
020604005 SEAT GASKET CVSALE 2382.868 SU--SECN2 1.00 84.74 C
</TABLE>
<PAGE>
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ---------- ----------------------------- ---------- ----------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
020604006 BACKUP RINGS CVSALE 54509.791 SU--SECN2 2.00 920.00 C
020604007 BACKUP RINGS CVSALE 74257.791 SU--SECN2 2.00 353.64 C
020604008 SLEEVE GASKET CVSALE 21362.868 SU--SECN2 1.00 82.21 C
020604009 SLEEVE GASKET CVSALE 2381.868 SU--SECN2 2.00 220.00 C
020604010 SEAT GASKET CVSALE 1231.868 SU--SECN5 1.00 40.07 C
020604041 HANDWHEEL SPINNER KIT LIMITO L120-10-186 SU-- 2.00 2.00 C
020608001 3/4" DRAIN UNION ASSEMBLY GARYHO DUA 3/4" NPT SU--SECN4 2.00 236.00 C
(.031) ORIFICE / 100#
SYSTEM DRAIN
020608002 3/4" DRAIN UNION ASSEMBLY GARYHO 3/4" DUA NPT SU--SECN3 2.00 236.00 C
(.025) ORIFICE / 275# SYSTEM
020608004 ORIFICE STM TRAP GASKET SET GARYHO 6184200 SU--SECN4 4.00 90.56 C
020608005 STEAM TRAP, HIGH PRESS ORIFICE RLSTON MOD-3/4-421-5/1 SU--SECN3 1.00 521.00 C
020703001 GUIDE LINERS CVSALE 5388.927 SU--SECN5 4.00 65.32 C
020703004 BONNET GASKET CVSALE 2716.925 SU--SECN5 1.00 31.61 C
020703005 POSITIONER CVSALE 63931.999 SU--SECN3 1.00 873.80 C
030103001 REPLACE AGGLO MESH PADS DELTAK 0100743395RA SU--SECR1 22.00 836.80 C
TOP/CYCLONES
030105001 DIAPHRAGM, FISHER, DESUP VLV NORCON 2E800002202 SU--SECM5 1.00 41.60 C
030106001 STUD - 1 NC X 11 LG DELTAK 12030392 SU--SECR1 2.00 16.20 C
030106002 NUT - 1 NC HEX DELTAK 24010111 SU--SECS1 5.00 3.30 C
030106003 BOLT - 3/4 NC X 6 LG SQ HD DELTAK 12030369 SU--SECS1 7.00 35.00 C
030106004 NUT - 3/4 NC HEAVY HEX DELTAK 24010020 SU--SECS1 7.00 1.68 C
030106005 4" FISHER CONTROL VALVE NORTH RPACKX00112 SU--SECN3 1.00 1.00 C
REPAIR KIT
030106007 4" FISHER CONTROL VALVE NORTH R83LX000012 SU--SECN3 1.00 1.00 C
REPAIR KIT
030106009 3/4" FLAT WASHER, HARDENED DELTAK 33010050 SU--SECS1 12.00 2.88 C
030106011 L.P. & DEA VALVE, GAGE GLASS DARREL 32120005 SU--SECS1 2.00 880.00 C
403-RS (250 PSI)
030106098 GASKET DELTAK 2642-050 SU--SECQ1 4.00 41.28 C
030106101 PACKING SET DELTAK 2592-001 SU--SECQ1 2.00 68.00 C
030106112 H.P. VALVE, GAGE GLASS SG-854 CLARKR 32120006* SU--SECS2 2.00 763.82 C
NOREAS 32120006*
030106113 I.P. VALVE, GAGE GLASS 404-RS DARREL 404-RS (450 PSI SU--SECR1 2.00 880.00 C
(450 PSI)
030106115 ELECTRO-PNEUMATIC I/P NORTH TYPE 546 SU--MCCABD 1.00 600.60 C
TRANSDUCER TYPE 546
030106116 LP DRUM TUBE SNUBBER BEND DELTAK 30040020 SU--RILEY 1.00 95.00 C
JOINT
030107001 PACKING SEAL COPESV 187058 SU--SECM4 1.00 2.76 C
030107002 AIR FILTER REGULATOR COPESV 271777 SU--SECM4 1.00 80.34 C
030107003 STEM GUIDE BUSHING COPESV 184686H SU--SECM4 1.00 45.15 C
030107004 DIAPHRAGM COPESV 185989 SU--SECM4 1.00 90.53 C
030107005 GROMMET COPESV 264362 SU--SECM4 1.00 3.70 C
030107006 BODY/GAGE GASKET COPESV 262600 SU--SECM4 1.00 1.89 C
030107007 ACTUATOR GASKET COPESV 187031 SU--SECM4 1.00 11.23 C
030107008 SEAL BUSHING COPESV 187018 SU--SECM4 1.00 91.73 C
030107009 STEM CONNECTING ASSEMBLY COPESV 186996 SU--SECM4 1.00 169.74 C
030107010 GAUGE, O-100 COPESV 130599 SU--SECM4 1.00 14.70 C
030107011 ACTUATOR STEM COPESV 186007 SU--SECM4 1.00 289.00 C
030107013 PACKING COPESV 186201 SU--SECM4 1.00 59.41 C
030107014 CONNECTING LINK ASSEMBLY COPESV 333333 SU--SECM4 1.00 77.31 C
030107015 POSITIONER COPESV 333301H SU--SECN5 1.00 1052.48 C
030109001 1.5" SAFETY RELIEF VALVE DELTAK 0100743305 SU--MEZG3 1.00 2218.46 C
030109003 2" SAFETY RELIEF VALVE DELTAK 0100743307 SU--MEZG3 1.00 906.15 C
030109005 2.5" PRESSURE SAFETY RELIEF DELTAK 0100743302 SU--MEZG3 1.00 5775.38 C
VALVE 900#A
030109006 1.5" SAFETY RELIEF VALVE DELTAK 0100743304 SU--MEZG3 1.00 2218.46 C
030109008 2.5" SAFETY RELIEF VALVE DELTAK 0100743308 SU--MEZG3 1.00 1126.15 C
030109009 VALVE, BOTTOM BLOW, H.P. FWWEBB FIG-B6771 SU--SECO5 1.00 1786.00 C
STRAIGHT
030109010 VALVE, BOTTOM BLOW, H.P. FWWEBB FIG-B6761 SU--MEZ 1.00 1786.00 C
ANGLE
030110001 PACKING KIT DELTAK 0100743357PK SU--SECR1 1.00 99.22 C
030110002 STEM/DISK ASSEMBLY DELTAK 0100743356SD SU--SECR1 1.00 1058.40 C
030110003 BONNET GASKET DELTAK 0100743359BG SU--SECR1 3.00 79.38 C
030110004 YOKE BUSHING DELTAK 0100743357YB SU--SECR1 1.00 91.80 C
030110005 BONNET GASKET DELTAK 0100743363BG SU--SECR1 3.00 74.64 C
030110006 BONNET GASKET DELTAK 0100743357BG SU--SECR1 3.00 151.20 C
030110007 STEM/DISK ASSEMBLY DELTAK 0100743362SD SU--SECR1 1.00 549.98 C
030110008 YOKE BUSHING DELTAK 0100743362YB SU--SECR1 1.00 64.44 C
030110009 PACKING KIT DELTAK 0100743358PK SU--SECR1 1.00 99.22 C
030110010 PACKING KIT DELTAK 0100743359PK SU--SECR1 1.00 99.22 C
030110011 PACKING KIT DELTAK 0100743363PK SU--SECR1 1.00 88.84 C
030110012 STEM/DISK ASSEMBLY DELTAK 0100743357SD SU--SECR1 1.00 1058.40 C
030110013 YOKE BUSHING DELTAK 0100743356YB SU--SECR1 1.00 91.80 C
030110014 BONNET GASKET DELTAK 0100743362BG SU--SECR1 2.00 49.76 C
030110015 PACKING KIT DELTAK 0100743356PK SU--SECR1 1.00 99.22 C
030110016 BONNET GASKET DELTAK 0100743358BG SU--SECR1 1.00 26.40 C
030110017 BONNET GASKET DELTAK 0100743356BG SU--SECR1 3.00 151.20 C
030110018 PACKING KIT DELTAK 0100743362PK SU--SECR1 1.00 88.84 C
030115001 GASKET,GAS SIDE ACCESS DOOR DELTAK 0100743395GS SU--SECS1 4.00 81.36 C
030117012 LAMP SOCKET, EYE-HI COLOR CLARKR GI-40-23 SU--MCCCABB 16.00 241.92 C
CHANGE
NOREAS GI-40-23
030117013 REPAIR KIT DELTAK 0100743380 SU--SECQ1 2.00 179.08 C
030117014 GAGE PRESSURE TRANSMITTER ROSEMT 115GP7E12B1 SU--MCCCABB 1.00 693.00 C
030117016 PRESSURE TRANSMITTER ROSEMT 115OP4522M1B3 SU--MCCCABB 1.00 991.20 C
030117017 TEMP TRANS TYPE K
THERMOCOUPLE INPUT ROSEMT 0444TJ1U1A2NA SU--MCCCABB 1.00 437.75 C
030117018 TEMP TRANS TYPE K
THERMOCOUPLE INPUT ROSEMT 0444TK2U1A2NA SU--MCCCABB 1.00 437.75 C
030117019 PRESSURE TRANSMITTER ROSEMT 1151GP8S22M1B3 SU--MCCCABB 1.00 903.00 C
030117020 PRESSURE TRANSMITTER ROSEMT 1151GP6522M1B3 SU--MCCCABB 1.00 903.00 C
030117021 T PROBE DELTAK 0100743313 SU--SECQ1 2.00 254.60 C
030117022 V PROBE DELTAK 0100743311 SU--SECQ1 3.00 546.00 C
030117023 REPLACEMENT MODULES (SET OF 7) DELTAK 0100743315 SU--SECQ1 7.00 1359.40 C
030117024 TEMPERATURE TRANSMITTER ROSEMT 3044CA1B4M5E5 SU--MCCCABB 1.00 783.00 C
030117025 PRESSURE TRANSMITTER ROSEMT 1151GP9S22M1B3 SU--MCCCABB 1.00 978.60 C
030117026 REPLACEMENT MODULES (SET DELTAK 0100743316 SU--SECQ1 10.00 2040.00 C
OF 10)
</TABLE>
<PAGE>
SCHEDULE 1, Continued
12-09-97
Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- -------------- ------------------------------ ------------- ---------------- ------------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
030117029 REPAIR KIT DELTAK 0100743379 SU--SECQI 2.00 636.48 c
030117030 T PROBE DELTAK 0100743312 SU--SECQI 3.00 381.90 c
030117033 REFLECTOR LAMP (SET OF 6) DELTAK 0100743318 SU--SECR1 2.00 129.36 c
030117034 GAGE PRESSURE TRANSMITTER ROSEMT 1151GP8E1281 SU--MCCCABB 1.00 693.00 c
030117035 DIFFERENTIAL PRESSURE ROSEMT 1151DP3E1281 SU--MCCCABB 1.00 831.60 c
TRANSMITTER
030117036 DEAERATOR THERMOCOUPLE ACI J49G-260H-100-L SU--SECS4 2.00 221.00 c
030117037 1/2" SYPHON ACI 71342 SU--SECH3 2.00 65.14 c
030117038 LIQUID 0-600 PSI GAUGE 6" ACI 132531 SU--MCCCABB 2.00 436.12 c
030117041 MULITANGLE BI-NET THERMOCOUPLE ACI BA5118E180 SU--SECL2 2.00 152.00 c
030117042 THERMOWELL ACI 304ss-1"260HL-U SU--SECS4 2.00 40.18 c
030117043 THERMOWELL ACI 304ss-1"260HL-U SU--SECS4 2.00 75.88 c
030117044 THERMOWELL ACI 304ss-1"260HL-U SU--SECS4 2.00 36.26 c
030117045 LIQUID 0-160 PSI GAUGE 6" ACI 150224 SU--MCCCABB 2.00 436.12 c
030117046 STEAM OUTLET THERMOCOUPLE ACI K49G-260s-100-L SU--SECS4 1.00 134.25 c
030117047 THERMOWELL ACI 1"-260HL-013 SU--SECS4 2.00 130.00 c
030117048 H.P. STEAM OUTLET THERMOCOUPLE ACI K49G-260H-100LO SU--SECS4 2.00 243.00 c
030117049 LIQUID 0-1500 PSI GAUGE 6" ACI 132534 SU--MCCCABB 2.00 454.32 c
030117053 1/2" GAUGE COCK ACI PG6-T-SS-F4M4 SU--SECK2 2.00 192.00 c
030117054 LEVEL SWITCH JOBELL CB-300-4-ZD3W SU--SECS3 1.00 341.10 c
030117055 VORTEX FLOW METER NICE VBAR-FV-02-2-40 SU--SECH1 1.00 2795.00 c
030117056 VORTEX FLOW METER NICE VBAR-FV-06-2-40 SU--SECH1 1.00 2795.00 c
030117057 VORTEX FLOW METER NICE VBAR-FV-03-2-40 SU--SECH1 1.00 2795.00 c
030117093 SIMPLIPORT MODULES CLARKR PW-24B SU--SECS1 5.00 629.00 c
NOREAS PW-24B
030117094 SIMPLIPORT NUT ASSEMBLY CLARKR PW-27R SU--SECS1 5.00 418.10 c
NOREAS PW-27R
030123001 EYE-HI PROBES CLARKR V-020 SU--SECS1 13.00 1636.51 c
NOREAS V-020RK
030123002 3/4"00 X6"L X3/8"NPT CLARKR PG4-6 SU--SECR1 4.00 69.12 c
SIGHTGLASS ADAP.
030123003 IP/LP SIGHTGLASS PACKING DARREL SG454-10 SU--SECS1 10.00 22.20 c
WASHER
NOREAS SG454-10
030123004 EYE-HI PROBE GASKETS NOREAS E10-10 SU--SECS1 29.00 234.13 c
030123005 RELAY, EYE-HI PROBES GRNGER 3A986 SU--MCCCABC 2.00 27.06 c
030123006 RELAY, TRIP PROBES RLSTON 1D1DO SU--MCCCABC 3.00 262.65 c
030204003 INSULATOR, ELECTRODE IGNITION COEN 1501-031-02 SU--MCCABC 1.00 45.00 c
WIRE
030204004 5/32" WIRE, ELECTRODE TO SPARK COEN 5001-350-03 SU--MCCABC 2.00 22.00 c
PLUG X 11"
030204005 CABLE HIGH TEMP SPARK PLUG TO COEN 3570-009-01 SU--MCCABC 2.00 60.00 c
XFMER
030204006 GROMHET, SPARK PLUG CABLE COEN 3560-199-01 SU--MCCABC 2.00 30.00 c
030204007 SPARK PLUG, S1 - 140 COEN 3550-159-01 SU--MCCABC 3.00 196.50 c
030204009 COUPLING, SPARK PLUG CABLE COEN 1501-234-01 SU--MCCABC 3.00 33.00 c
030204010 CONNECTOR, WIRE TO SPARK PLUG COEN 1501-233-01 SU--MCCABC 1.00 47.00 c
030204011 ELECTRODE ASSEMBLY IGNITION COEN 1501-237-07 SU--MCCABC 1.00 100.00 c
030204012 HEAD ASSEMBLY, PILOT SET COEN 1500-100-01 SU--MCCABC 1.00 449.00 c
030204013 IGNITION TRANSFOMER COEN 3530-006-01 SU--MCCABC 2.00 208.00 c
030204014 PILOT GAS FLEX HOSE, 3/8"NPT X COEN 4110-053-01 SU--MCCABC 2.00 130.00 c
16"
030204015 PILOT GAS CHECK VALVE FWWEBB #583-3/8-D63 SU--MCCCABC 5.00 512.15 c
030205001 DC POWER SUPPLY NIAGRA 61-3356 SU--MCCABC 1.00 108.12 c
030205002 FLAME SCANNER NIAGRA UV-1A6 SU--MCCABC 4.00 382.88 c
030205003 UV AMPLIFIER NIAGRA 61-3359 SU--MCCABC 3.00 871.02 c
030205006 NIPPLE, 1/2 X 1-1/2", 580 PART COEN 7000-003-02 SU--MCCABC 6.00 24.00 c
OF LENS MOD. KIT #2401-480-05
030205007 UNION, #60-1290, PART OF LENS COEN 2401-186-01 SU--MCCABC 2.00 448.96 c
MOD. KIT #2401-480-05
NIAGAR 60-1290
030205008 4" MAXON VALVE MAXON 15-43325 SU--SECE4 1.00 3048.30 c
030205009 LENS, FIRE-EYE, MAGNIFYING, NIAGAR 46-58 SU--MCCCABC 4.00 223.00 c
DUCT BURNER
030208004 700-F400-A1 CONTROL RELAY BALDWI 700-F400-A1 SU--MCCCABA 1.00 34.62 c
030208005 700-F310-A1 CONTROL RELAY BALDWI 700-F310-A1 SU--MCCCABA 1.00 34.62 c
030208037 SWITCH, HIGH TEG TEMP 800-1800 COEN 2430-143-01 SU--MCCABC 2.00 886.00 c
DEGREES F
030208038 FLAME SIGNAL METER COEN 2411-447-03 SU--MCCABC 1.00 152.00 c
030208039 SWITCH, LOW GAS CPICON B432VXFM 06-30 SU--MCCCABC 1.00 168.00 c
030208040 SWITCH, LOW INSTRUMENT AIR CPICON B432VXFM 100 PS SU--MCCCABC 1.00 270.00 c
030208041 VALVE, LOW FIRE, PROGRAMMING COEN 4540-184-01 SU--MCCABC 1.00 122.00 c
030208042 WATCHDOG TIMER COEN 3520-096-02 SU--MCCCABC 1.00 325.00 c
030208043 SWITCH, LOW SCANNER AIR CPICON B424VXFM 60-WC SU--MCCCABC 1.00 249.00 c
030208044 REPAIR KIT FISHER RPACKX00022 SU--SECM5 1.00 18.27 c
030208045 GASKET SET FISHER RGASKETX362 SU--SECL5 1.00 21.42 c
030208046 SEAT RING FISHER 1U222946172 SU--SECM5 1.00 129.15 c
030208047 I/P TRANSDUCER FISHER 35821-3FMI SU--SECM5 1.00 847.30 c
NORCON 35821-3FMI
030208048 CAGE, EQ% FISHER 2U236333272 SU--SECL5 1.00 522.90 c
030208049 RING, PISTON FISHER 1U239105092 SU--SECM5 1.00 15.44 c
030208050 PLUG/STEM BALANCED FISHER 1V6581X0042 SU--SECM5 1.00 217.35 c
030208093 SLC 500 MEMORY MODULE BALDWI 1747-N2 SU--MCCCABA 1.00 189.53 c
030208094 SLC500 POWER SUPPLY BALDWI 1746-P2 SU--MCCCABA 1.00 236.08 c
030208095 SLC500 PROCESSOR UNIT BALDWI 1747-L514 SU--MCCCABA 1.00 319.20 c
030308096 SLC500 INPUT MODULE BALDWI 1746-IA16 SU--MCCCABA 1.00 169.58 c
030208097 SLC500 OUTPUT MODULE BALDWI 1746-OW16 SU--MCCCABA 1.00 172.90 c
030208098 SLC500 OUTPUT MODULE BALDWI 1746-OA16 SU--MCCCABA 1.00 247.12 c
030209002 BUSHING, 1.125" TUTHIL 23532-6 SU--SEC04 1.00 7.00 c
030209004 BLOWER REBUILD KIT TUTHIL 27305 SU--SEC04 4.00 900.00 c
ELECLAB 27305
030209005 BUSHING, 1.375 TUTHIL 23128-6 SU--SEC04 1.00 8.00 c
030209006 DRIVE V-BELT TUTHIL 28210-16 SU--SEC04 4.00 32.00 c
030209007 GASKET, PORT, #39 TUTHIL 7932 SU--SEC04 7.00 14.00 c
ELECLAB 7932
030314005 RELAY KIT, HITE 71 DAHLCO 9071-99-0000 SU--RILEY 2.00 170.00 c
030601006 4" FISHER CONTROL VALVE REPAIR CVSALE R4190X00C12 SU--SECN3 1.00 1.00 c
KIT
040202001 MILTON ROY PUMP EFR 111-15 SHRIER EFR-111-15 SU-- 1.00 1853.00 c
040202002 REBUILD KIT FOR MILT ROY PUMP SHRIER 336-0013-011 SU--SECM2 1.00 271.00 c
040401029 GASKET, RND, 2-1/4, X 1/32 TIDE A-5375 SU--SECQ5 1.00 3.18 c
0????1030 GASKET, SOR, 5-7/8 X 5-7/8 TIDE B-0421 SU--SECQ5 1.00 3.03 c
</TABLE>
<PAGE>
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ---------- ----------- ---------- ----------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
X1/32
040401031 O-RING, VT, 6.645 O.D.X.210 TIDE A-0724 SU--SECQ5 4.00 62.72 C
040401032 PACKING KIT, PRIMING PUMP TIDE B-0425-K SU--SECQ5 1.00 6.28 C
040401033 DISCHARGE VALVE ASSEMBLY HOERBI B-1376-L SU--SECR4 8.00 3005.64 C
TIDE B-1376-L
040401034 UNL, PISTON RING, 5-1/4 O.D. TIDE A-0475 SU--SECR4 2.00 82.90 C
040401035 GASKET,RET,23-1/2X20-5/16X1/32 TIDE B-0844 SU--SECR3 2.00 56.66 C
040401036 O-RING,VT,2.012 O.D.X.139 TIDE A-3507 SU--SECQ5 2.00 7.04 C
040401037 O-RING,VT,2.762 O.D.X.139 TIDE A-3508 SU--SECQ5 1.00 4.54 C
040401038 STL, GASKET, 3.855 X 3.537 X30 TIDE A-2084 SU--SECR4 10.00 35.10 C
040401039 GASKET, RET TIDE B-1032 SU--SECQ5 2.00 13.66 C
10-13/16X6-3/4X1/32
040401040 O-RING, VT, 1.318 O.D.X.103 TIDE A-3512 SU--SECQ5 6.00 7.20 C
040401041 LUBE OIL PUMP JGW:R:J/4, HEK/2 TIDE D-0292 SU--SECS2 1.00 847.98 C
040401042 SUCTION VALVE ASSEMBLY HOERBI B-1418-L SU--SECR4 8.00 3005.64 C
TIDE B-1418-L
040401043 SPXT,RLR,CHAIN, IDLER, #40-15T TIDE A-0523 SU--SECR3 1.00 17.95 C
040401044 COMPRESSION SPRING, UNIVERSAL TIDE A-0629 SU--SECR3 2.00 14.72 C
040401045 STAT-O-SEAL, 1/2 DIA. TIDE FW0550GA SU--SECQ5 2.00 1.06 C
040401046 DUST SEAL, TEFLON, JGH:EIK TIDE A-0245-8 SU--SECR3 1.00 169.72 C
040401047 GASKET, NST, 17-3/4 TIDE B-0835 SU--SECR3 2.00 30.36 C
X15-7/8X1/64
040401048 O-RING, VT, 2.756 O.D.X.103 TIDE A-0745 SU--SECQ5 1.00 2.22 C
040401049 ROLLER CHAIN, 40-1X114, JGH:EIK TIDE A-3884 SU--SECR3 1.00 20.17 C
040401050 O-RING,VT, 2.625 O.D.X.139 TIDE A-0010 SU--SECQ5 1.00 2.55 C
040401051 DIST, BLOCK, 12T*-12T-9T TIDE A-2584 SU--SECR4 1.00 313.68 C
040401052 O-RING, VT, 3.887 O.D.X. 139 TIDE A-1812 SU--SECQ5 4.00 31.76 C
040401053 SPKT, RLR, CHAIN, L.D. PUMP, TIDE A-3874 SU--SECR3 1.00 101.86 C
28T
040401054 GASKET, RND, 22-1/2 X 1/64 TIDE B-1042 SU--SECR4 2.00 53.12 C
040401055 STL, GASKET, 7.375 X 7.750 X60 TIDE A-2087 SU--SECQ5 2.00 10.94 C
040401056 STAT-O-SEAL, 3/4 DIA., BLACK TIDE FW05501A SU--SECQ5 9.00 8.55 C
040401057 VALVE PACKING UNIVERSAL TIDE A-0639 SU--SECR3 2.00 46.46 C
040401059 GASKET,RND,12-13/16, X 1/32 TIDE A-3875 SU--SECQ5 1.00 15.18 C
040401060 GASKET,RND, 2-1/4, X 18 TIDE A-5376 SU--SECQ5 1.00 3.54 C
040401062 GASKET, SO, TIDE B-0779 SU--SECQ5 1.00 5.06 C
5-15/16X5-15/16X1/32
040401063 GASKET, RET, TIDE B-0832 SU--SECQ5 2.00 30.36 C
15-5/16X10-13/16X32
040401064 O-RING,VT, 3.887 O.D.X.139 TIDE A-1812 SU--SECQ5 8.00 63.52 C
040401065 SIGHT GLASS, 2" LENS TIDE A-5374 SU--SECQ5 1.00 2.52 C
040401066 FGC RM VENT FAN MOTOR AUBURN USEM 5HP, 1800R SU-- 1.00 169.71 C
040402002 FILTER ELEMENT TIDE GC80360E03B SU--MEZ12 1.00 198.00 C
040402003 FUEL FILTER ELEMENTS (FG-366) PERRY 11724 SU--MEZ12 20.00 410.33 C
040402004 O-RING, CLOSURE GASKETS PERRY 14973 SU--SECQ2 2.00 47.76 C
040402005 O-RING TIDE ORC12B SU--SECQ5 2.00 43.30 C
040402006 FILTER ELEMENT PLENTY 10273K99 SU--MEZ12 3.00 594.00 C
040402007 FILTER O-RING PLENTY 001-161 SU--MEZ12 2.00 48.00 C
040403028 L.O. PRESS, GAUGE, NIKA TIDE A-0261 SU--SECS2 3.00 58.74 C
040403029 NO FLOW SWITCH TIDE A-0505 SU--SECR3 1.00 453.74 C
?????3032 CONTROLLER ASSEMBLY - FGC NIBSCO 487369 SU--SECR3 1.00 1725.00 C
</TABLE>
Page 10
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ---------- ----------- ---------- ----------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
RECYCLE VALVE
040405001 HEAT EXCHANGER END GASKETS TIDE KIT18023 SU--SECR3 2.00 792.00 C
040405002 GASKET 5" X 3-9/16" X 1/32" NEWELL TC-080-G2 SU--SECR4 1.00 5.00 C
040405003 GASKET 5" X 3-9/16" X 1" NEWELL TS-080-N SU--SECR4 1.00 5.00 C
NEOPRN
040405004 GLASS DISC T-BORO 5" X 1/2" NEWELL TW-223-T SU--SECR4 1.00 114.00 C
040407001 REPAIR KIT FOR VALVE/ACT TIDE 18014 SU--SECR5 1.00 849.75 C
040407002 BOOT-PEAKING VALVE CJNOLT 355-02002-740 SU--SECS3 1.00 420.75 C
040407003 ACTUATOR REPAIR KIT-RECYCLE NIBSCO 433214 ACTUATOR SU--SECS3 2.00 130.00 C
VALVE
040407004 ACTUATOR SPRING-RECYCLE VALVE NIBSCO 415295 ACTUATOR SU--SECS3 2.00 174.00 C
040407005 RECYCLE VALVE/ NUT-HEXLOCK NIBSCO 485543 SU--SECS3 1.00 6.60 C
3/8-24
040407006 RECYCLE VALVE/ NIBSCO 485544 SU--SECS3 1.00 29.30 C
LEVER-POSITIONER
040407007 RECYCLE VALVE/ PIN STROKE NIBSCO 485545 SU--SECS3 2.00 64.00 C
ADJUSTING
040407008 RECYCLE VALVE/ NUT HEXLOCK NIBSCO 485546 SU--SECS3 2.00 18.00 C
1/4-28
040407009 RECYCLE VALVE/ BRACKET-MOTION NIBSCO 425872 SU--SECS3 2.00 39.00 C
FRONT
040407010 RECYCLE VALVE, ACTUATOR STEM NIBSCO 411978 - NORRIS SU--SECS3 1.00 110.00 C
LOWER
040408001 SHAFT OIL SEAL TIDE A-3911 SU--SECQ5 1.00 3.31 C
????08002 SWITCH, LUBE OIL NO FLOW TIDE 815-S SU--SECR3 1.00 160.00 C
????08003 DISCH. PRESSURE SWITCH TIDE 9012-GCW-1 SU--MCCCABC 1.00 140.61 C
040408004 TERMINAL CHECK VALVE TIDE A-0281 SU--SECQ5 2.00 46.32 C
040408005 DISCH. TEMPERATURE SWITCH TIDE 9025-GKW5-A12 SU--MCCCABC 1.00 142.76 C
040408006 OIL TEMPERATURE SWITCH TIDE 9025-GKW3-A12 SU--MCCCABC 1.00 130.00 C
040408007 F.F. LUBE SLOT COVER GASKET TIDE A-5255 SU--SECQ5 2.00 36.54 C
040408008 BLOW-OUT ASSY, SPECIFY DISC TIDE A-0080 SU--SECQ5 1.00 8.04 C
040408009 F.F. LUBRICATOR PUMP 1/4 TRABON TIDE A-1764 SU--SECR3 1.00 172.21 C
040408010 BLOW-OUT DISC, 3250 PSIG, TIDE A-0124 SU--SECQ5 7.00 8.05 C
PURPLE
040408011 VIBRATION SWITCH TIDE VS-2 SU--MCCCABC 1.00 86.00 C
040408014 SPKT, RLR, CHAIN, F.F.LUBR, 28T TIDE A-3873 SU--SECR3 1.00 134.11 C
040408015 OIL PRESSURE SWITCH TIDE 9012-GAW-2 SU--MCCCABC 1.00 71.38 C
040408020 DIRECT CURRENT ALARM RITEC DCA/2X4-20HA/DH SU--MCCCABD 1.00 405.00 C
040408021 END CAP, L.O. COOLER - FGC GLAUBE 41831 SU--SECR3 1.00 59.00 C
040501001 SUPPLY GAS REG - ESDV-1 NORTH 1301F-2 SU--SECL5 1.00 97.20 C
040501003 CONTROL VALVE FOR ESDV-1 PHENIX VAP-3301-316-33 SU--SECL5 1.00 519.20 C
040501004 CONTOL-SOLONOID VALVE, ESDV-1 PHENIX VGA-3422-316-35 SU--SECL5 1.00 702.30 C
040501005 CONTROL VALVE, 320PSI SET, CJNOLT 10-1081-0778 32 SU--SECL5 1.00 329.00 C
ESDV-1
040501006 RELIEF VALVE, ESDV-1 CJNOLT B8CPA-2-125 125 SU--SECL5 1.00 47.00 C
040501007 MICRO-KLEAN FILTER CARTRIDGE, NORTH 1F966406992 SU--SECL5 1.00 11.52 C
ESDV-1
040501009 CP TEST STATION, BIG FINK, 3", FALCON 300-B5-ORANGE SU--SECL5 10.00 249.50 C
SINGLE
040503001 PLUG CVSALE 3840.150 SU--SECN3 1.00 504.75 C
????03002 PKG SET CVSALE 55865.925 SU--SECN5 1.00 24.65 C
</TABLE>
Page 11
<PAGE>
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ------------ ------------------ ---------- --------------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
040503003 GASKET, NONMETALIC CVSALE 1886.925 SU--SECN5 1.00 6.38 C
040503004 GDE LINERS CVSALE 5386.927 SU--SECN5 2.00 18.42 C
040503005 PISTON BACKUP RING CVSALE 64273.925 SU--SECN5 2.00 123.36 C
040503006 O-RING, UPR SLEEVE CVSALE 5412.651 SU--SECN5 2.00 127.44 C
040503007 SOFT SEAL CVSALE 71885.976 SU--SECN5 1.00 74.12 C
040503008 SOLENOID 24VDC CVSALE 78001.999 SU--SECN4 2.00 438.96 C
040503009 O-RING, YOKE BUSHING CVSALE 1181.650 SU--SECN5 2.00 2.28 C
040503010 CAP LINER CVSALE 1885.676 SU--SECN4 1.00 52.86 C
040503011 O-RING, YOKE BSHG CVSALE 1337.650 SU--SECN5 2.00 2.80 C
040503012 SEAT GASKET CVSALE 1794.925 SU--SECN5 2.00 21.16 C
040503013 GASKET METAL CVSALE 1824.606 SU--SECN5 5.00 6.15 C
040503014 SEAT RING CVSALE 1210.150 SU--SECN4 1.00 204.57 C
040503015 SEAT GASKET CVSALE 1944.925 SU--SECN5 1.00 27.86 C
040503016 GASKET NON-METALLIC CVSALE 49671.813 SU--SECN5 1.00 20.78 C
040503017 POSITIONER CVSALE 63934.999 SU--SECN3 1.00 465.68 C
040503018 O-RING, ADAPTOR CVSALE 43102.651 SU--SECN5 1.00 5.23 C
040503019 SLDG SEAL ASSY CVSALE 62471.990 SU--SECN5 1.00 108.97 C
040503020 SEAT RING CVSALE 4682.150 SU--SECN4 1.00 204.57 C
040503021 GUIDE LINER CVSALE 6340.927 SU--SECN4 2.00 114.38 C
040503022 O-RING, YOKE CVSALE 1182.650 SU--SECN5 2.00 19.40 C
040503023 O-RING, STEM CVSALE 1183.650 SU--SECN4 2.00 1.40 C
040503024 BONNET GASKET CVSALE 1943.925 SU--SECN4 1.00 30.76 C
040503025 O-RING, YOKE BUSHING CVSALE 1113.650 SU--SECN4 2.00 1.68 C
040503026 SEAT RING CVSALE 3468.150 SU--SECN4 1.00 172.70 C
040503027 O-RING, YOKE HANDWHEEL CVSALE 5494.650 SU--SECN4 1.00 1.23 C
040503028 SEAT GASKET CVSALE 1704.925 SU--SECN4 1.00 8.14 C
040503029 PLUG CVSALE 1664.150 SU--SECN3 1.00 628.11 C
040503030 BONNET GASKET CVSALE 1705.925 SU--SECN4 1.00 11.38 C
040503031 O-RING, YOKE BUSHING CVSALE 1718.650 SU--SECN4 3.00 4.62 C
040503032 PLUG CVSALE 1510.150 SU--SECN3 1.00 628.11 C
040503033 PKG SET CVSALE 20746.925 SU--SECN4 1.00 10.20 C
040503034 PKNG SET CVSALE 20758.925 SU--SECN4 1.00 25.36 C
040503035 SEAT GASKET CVSALE 2717.925 SU--SECN4 2.00 46.22 C
040503036 O-RING, SLEEVE CVSALE 5442.651 SU--SECN4 1.00 46.00 C
040503037 ADJ SCREW GASKET CVSALE 1435.655 SU--SECN4 1.00 1.05 C
040503038 ADJ SCREW GASKET CVSALE 1501.655 SU--SECN4 1.00 .67 C
040503039 SEAT RING CVSALE 2027.150 SU--SECN4 1.00 886.14 C
040503040 AIR FILTER CVSALE 78245.999 SU--SECN4 2.00 136.02 C
040503041 VALVE, 3-WAY CVSALE 34747.402 SU--SECN4 1.00 106.67 C
040503042 PISTON BACK UP RING CVSALE 55220.925 SU--SECN4 1.00 15.39 C
040503043 O-RING, YOKE AND PISTON CVSALE 1114.650 SU--SECN4 8.00 47.84 C
040503044 O-RING, ACT STEM CVSALE 1312.650 SU--SECN4 3.00 2.88 C
040503045 PLUG CVSALE 30224.150 SU--SECN3 1.00 1586.20 C
040503046 SEAT RING CVSALE 54812.419 SU--SECN5 2.00 187.10 C
040504005 Y-STRAINER - OOORANT STREAM T600SS-0050, 80 SU--SECL5 1.00 49.20 C
040506001 PRESSURE SWITCH (1000 psi) CPICON PPS-N7-G-S-07-X SU--MCCCABC 1.00 396.50 C
050101001 CEM PANEL COOLING FAN NEWARK 026165 SU--MCCCABA 1.00 88.83 C
050101002 MUFFLER, PUREGAS HEATLESS MOBILE P-400-399 SU--MCCCABA 1.00 16.50 C
DRYER
050102001 GRAPHITE FERRULES (PACK OF 10) ENVIRO 335-00757 SU--MCCCABA 10.00 420.00 C
050102002 PROBE RETAINER SPRING ENVIRO 335-00028 SU--MCCCABA 1.00 10.54 C
</TABLE>
Page 12
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- --------- ---------------------------- ---------- ------------ ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
050102003 QUARTZ WOOL (LOT) ENVIRO 510-00021 SU--MCCCABA 1.00 9.00 C
SHAMRO 400P-0009
050102004 ANTI-SEIZE COMPOUND (SILVER) ENVIRO 220-00509 SU--MCCCABA 1.00 225.58 C
050102006 PROBE FILTER SCREEN ENVIRO 355-00029 SU--MCCCABA 1.00 21.48 C
050102007 ORIFICE, 150ml ENVIRO 340-00769 SU--MCCCABA 2.00 982.00 C
SHAMRO 400-0036-150ML
050104003 PRECISION REGULATOR ENVIRO 410-00385 SU--MCCCABA 1.00 242.00 C
050104004 3-WAY PURGE SOLENICO ENVIRO 430-00057 SU--MCCCABA 1.00 141.85 C
050104005 COIL 53, VOC ENVIRO 405-03468 SU--MCCCABA 1.00 184.51 C
050104006 PRESSURE REGULATOR ENVIRO 410-00037 SU--MCCCABA 1.00 63.84 C
050104008 0.5m FILTER (M16-02-FMO) ENVIRO 395-00387(M16-0 SU--MCCCABA 1.00 74.98 C
050104009 O.5m FILTER (M10-02-FOO) ENVIRO 395-00387(M10-0 SU--MCCCABA 1.00 74.98 C
050104010 2-WAY CAL SOLENOID ENVIRO 430-02351 SU--MCCCABA 4.00 230.50 C
POWERQ 5220165NGB 120/
050104017 0.5m IN-LINE FILTER (47mm ENVIRO 210-00233 SU--MCCCABA 9.00 10.95 C
GLASS)
050104018 0.5m IN-LINE FILTER (47mm SHAMRO 400P-0011 SU--MCCCABA 5.00 450.00 C
TEFLON)
050104019 FILTER, WILKERSON, CEM GRNGER 6ZC89 SU--MCCCABA 6.00 34.44 C
050106002 O-RING (PKG OF 10) ENVIRO 115-01510 SU--MCCCABA 1.00 14.21 C
050106003 THREE WAY SOLENOID VALVE ENVIRO 115-03234 SU--MCCCABA 1.00 417.28 C
050106004 CAPILLARY (0.08ml OZONE) ENVIRO 055-01272 SU--MCCCABA 1.00 47.91 C
050106007 SAMPLE PUMP ENVIRO 048-03296 SU--MCCCABA 1.00 1365.00 C
050106008 OZONATOR ASSEMBLY ENVIRO 048-03416 SU--MCCCABA 1.00 644.42 C
050106009 3-WAY SAMPLE SELECT SOLENOID ENVIRO 430-00055 SU--MCCCABA 1.00 639.56 C
050107001 CAPILLARY, 18 mil ENVIRO 015-01154 SU--MCCCABA 1.00 48.92 C
050107002 SAMPLE PUMP ENVIRO 360-00524 SU--MCCCABA 2.00 969.58 C
050107003 FUSE, 2 amp S/B (PKG/5) ENVIRO 140-00066 SU--MCCCABA 5.00 20.50 C
050107004 FUSE ENVIRO 025-01970 SU--MCCCABA 5.00 25.00 C
050107005 KNF INTERNAL PUMP ENVIRO 015-01237 SU--MCCCABA 1.00 280.00 C
THERMO KNF-8550
050107006 SOURCE, IR ENVIRO 015-01245 SU--MCCCABA 2.00 66.00 C
THERMO 7361
050107007 RESISTOR ENVIRO 015-01234 SU--MCCCABA 1.00 633.86 C
050107008 P.C. BOARD, INPUT ENVIRO 015-01226 SU--MCCCABA 1.00 1264.41 C
050107009 P.C. BOARD, D/A ENVIRO 015-01224 SU--MCCCABA 1.00 570.46 C
050109001 OMRON SWITCHING RELAY RLSTON 0MRON MK3P5-S 1 SU--MCCCABA 2.00 29.50 C
050109002 11 PIN OCTAL BASE FOR OMRON RLSTON 11 PIN OCTAL BA SU--MCCCABA 1.00 10.00 C
MK3P5-S
060103022 RO 2.125" SEAL SEALIN 341OM-127727 SU--SECQ2 2.00 946.00 C
060103025 RETAINING RING GOULDS 58102-118 SU--SECP4 1.00 1.75 C
060103026 BALL BEARING I.B. ESTABR 8050-20760 SU--SECP4 1.00 12.81 C
060103027 SLEEVE NUT GOULDS RBO1015A-1203 SU--SECP3 2.00 379.40 C
060103028 SHAFT SLEEVE GOULDS COO457A-1203 SU--SECP3 2.00 635.60 C
060103029 WEAR RING GOULDS CO1293A06-1000 SU--SECP3 2.00 228.00 C
060103032 GLAND GASKET GOULDS A01437A08-5162 SU--SECP3 2.00 24.22 C
060103033 BALL BEARING O.B. GOULDS 8049-30600 SU--SECP3 2.00 103.60 C
060103034 CITY WATER PUMP COUPLING GOULDS REXNORD E30 SU--SECL3 1.00 352.00 C
060103035 OILER, #5, 8 OX. CAP GOULDS 072531-14-8683 SU--SECP3 1.00 76.88 C
060104001 PKG SET CVSALE 56138.925 SU--SECN5 1.00 12.11 C
060104002 POSITIONER CVSALE 63939.999 SU--SECN3 1.00 873.80 C
</TABLE>
Page 13
<PAGE>
Suracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ---------- ----------- ---------- ----------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
060104003 SEAT GASKET CVSALE 64345.925 SU--SECN5 1.00 25.39 C
060104004 O-RING, ADAPTOR CVSALE 32395.925 SU--SECN4 1.00 3.08 C
060104005 SOFT SEAT INSERT CVSALE 50956.925 SU--SECN5 1.00 58.63 C
060111001 TURBIDITY CELL ROSEMT 2120 SU--MCCCABB 1.00 301.00 C
060206002 BURHANS SHARPE MIXER (PILOTED BURHAN 1.938E SU--SEC03 2.00 420.00 C
BEARING)
060207001 DA-M/UP PUMP COUPLING GOULDS REXNORD ES10 SU--SECL2 1.00 181.00 C
060208024 1" SPIDER COMPRESSOR AQUATE A484IC SU--SECQ2 1.00 14.00 C
060208025 SPIDER TO STEM PIN RMNEWE 2497 SU--SECQ3 2.00 18.00 C
060208026 TUBE NUT KEY, 6" VLV RMNEWE 1742 SU--SECQ3 3.00 21.00 C
060208027 NUT, TUBE NUT, 6" VLV RMNEWE 2707 SU--SECQ3 3.00 36.00 C
060208028 2" SPIDER COMPRESSOR RMNEWE 1057 SU--SECQ2 1.00 25.00 C
060208030 6" SPIDER COMPRESSOR RMNEWE 1735 SU--SECQ2 4.00 488.00 C
060208031 #12 ACTUATOR DIAPHRAM RMNEWE 21115 SU--SECQ2 1.00 20.00 C
060208032 BONNET GASKET CVSALE 1233,868 SU--SECN5 1.00 44.72 C
060208034 3/4" VITON DIAPHRAM REPAIR KIT RMNEWE 13457 SU--SECQ2 1.00 38.00 C
060208035 O-RING, YOKE CVSALE 1184,650 SU--SECN5 2.00 14.34 C
060208037 4" EPDM DIAPHRAM REPAIR KIT RMNEWE 1464 SU--SECQ3 2.00 138.00 C
060208038 6" EPDM DIAPHRAM REPAIR KIT RMNEWE 1649 SU--SECQ3 1.00 198.00 C
060208040 #101 ACTUATOR DIAPHRAM RMNEWE 2835 SU--SECQ3 1.00 147.00 C
060208041 4" VITON DIAPHRAM REPAIR KIT RMNEWE 1448 SU--SECQ3 1.00 365.00 C
060208043 6" BUTTERFLY VLV RMNEWE RS105ELH SU--SECP1 1.00 137.50 C
060208044 3" VITON DIAPHRAM REPAIR KIT RMNEWE 1259 SU--SECQ3 4.00 1040.00 C
060208045 2" VITON DIAPHRAM REPAIR KIT RMNEWE 890 SU--SECQ2 1.00 140.00 C
060208047 1" VITON DIAPHRAM REPAIR KIT RMNEWE 5971 SU--SECQ2 1.00 63.00 C
AQUATE A1795IC
060208049 1.5" VITON DIAPHRAM REPAIR KIT RMNEWE 669 SU--SECQ2 1.00 61.00 C
060208052 #75 ACTUATOR DIAPHRAM RMNEWE 4994 SU--SECQ3 1.00 101.00 C
060208056 #50 ACTUATOR DIAPHRAM RMNEWE 1928 SU--SECQ3 1.00 79.00 C
060208058 2" TEMP REG VALVE RITEC MARK 802 SU--SECS4 1.00 2033.50 C
060208062 BUTTERFLY VALVE 2" JTLYNN S30/114-2" SU--SECQ4 1.00 90.60 C
060208063 BUTTERFLY VALUE 3" JTLYNN S30/114-3" SU--SECQ4 2.00 224.00 C
060208064 PNEUMATIC ACTUATOR 4" JTLYNN 91-1004-21310-5 SU--SECQ4 1.00 697.00 C
060208065 BUTTERFLY VALVE 4" JTLYNN S30/114-4" SU--SECQ4 2.00 278.00 C
060208066 PNEUMATIC ACTUATOR 3" JTLYNN 91-0805-21310-5 SU--SECQ4 1.00 560.00 C
060208067 PNEUMATIC ACTUATOR 2" JTLYNN 91-0605-21310-5 SU--SECQ4 1.00 438.00 C
060208068 4", 3", & 6" SIGHT GLASS, ITT RMNEWE 2145 SU--SECQ3 3.00 9.00 C
VALVES
060208069 1 1/2" SIGHT GLASS, ITT VALVES RMNEWE 2144 SU--SECQ3 6.00 18.00 C
060208070 3", 4", & 6" CAGE, ITT VALVES RMNEWE 2027 SU--SECQ3 5.00 80.00 C
060208071 1 1/2" CAGE, ITT VALVE RMNEWE 2026 SU--SECQ3 6.00 84.00 C
060208076 SEAT, VALVE, 2" BUTTERFLY AQUATE A200292801461IC SU--SECQ4 1.00 55.00 C
060209001 CAUSTIC DRIVE ACC/DEC DRIVE EXTRON 181-T SU--MCCCABA 4.00 360.00 C
CARD
060209002 ACID DRIVE ACC/DEC DRIVE CARD EXTRON 182-T SU--MCCCABA 2.00 192.00 C
060209003 ACID/CAUSTIC INPUT/OUTPUT CARD EXTRON 1817-0410 SU--MCCCABA 2.00 256.00 C
060209004 O-15# D/P SWITCH ACI 1405-A-00-FA SU--MCCCABC 2.00 775.00 C
060209037 ISOLATED INPUT MODULE BALDWI 1771-ID SU--MCCCABC 1.00 137.97 C
060209039 120 VAC DI CARD BALDWI 1771-IAD SU--MCCCABC 1.00 236.52 C
060209040 SERIES B REMOTE I/O ADAPTER BALDWI 1771-ASB SU--MCCCABC 1.00 689.85 C
060209041 PH XMITTER ROSEMT SCL-P014-M2 SU--MCCCABB 1.00 710.00 C
060209042 DELTA P IND SWITCH ACI 140-SA-00-FA SU--MCCCABC 1.00 452.50 C
060209043 COMMUNICATIONS I/F MODULE BALDWI 1785-KE SU--MCCCABC 1.00 1780.47 C
060209044 ANALOG OUTPUT MODULE BALDWI 1771-0FE SU--MCCCABC 1.00 916.52 C
060209045 ISOLATED OUTPUT MODULE BALDWI 1771-DD SU--MCCCABC 1.00 197.10 C
060209046 O-RING & SEAL KIT ROTORK 118/3 SU--SECO3 1.00 317.00 C
060209047 ANALOG INPUT MODULE BALDWI 1771-IFE SU--MCCCABC 1.00 916.52 C
060209048 120 VAC DO CARD BALDWI 1771-DAD SU--MCCCABC 1.00 328.50 C
060209049 EXTERNAL POWER SUPPLIER BALDWI 1771-P7 SU--MCCCABC 1.00 597.87 C
060209050 CONDUCTIVITY METER ROSEMT SCL-C001-M2 SU--MCCCABB 1.00 675.00 C
060209051 TEMP IND SWITCH ACI 802-6BS-S101-M3 SU--MCCCABB 1.00 426.55 C
060209053 VSPH ELECTRODE ROSEMT VSPH SU--MCCCABB 2.00 520.00 C
060209054 CONCENTRATION PROBE ROSEML CEL-470 SU--MCCCABB 1.00 455.00 C
060209055 CAUSTIC LEVEL TRANSMITTER ROSEMT 1151LT-5EA//QA1 SU--MCCCABB 1.00 1071.00 C
060209056 ACID LEVEL TRANSMITTER ROSEMT 1151LT-5EC//QA1 SU--MCCCABB 1.00 1092.25 C
060209082 CONDUCTIVITY CELL (IN-LINE) ROSEMT 05010784263 SU--MCCCABB 2.00 590.00 C
STEAMP 05010784263
060209086 0-10% CONCENTRATION PROSE ROSEMT CEL-470 SU--MCCCABB 2.00 910.00 C
060209087 LINK, FOXBORO CONTROLLER FOXBOR X0101BE SU--MCCCABA 1.00 29.00 C
060212002 O-RING, BEARING HOUSING NEWELL 131-SBR SU--SECP1 1.00 8.00 C
ADAPTER
060212003 MECH SEAL DURAMET MOO P-50, SEALIN 149699 SU--SECP1 1.00 718.00 C
B/H 149699, 1 7/8"
060212004 BEARING O.B. NEWELL 121-STEEL SU--SECP1 1.00 117.00 C
060212005 REAR COVER GASKET NEWELL 107-NAH SU--SECP1 1.00 13.00 C
060212006 OIL SEAL O.B. NEWELL 129-TFSR SU--SECP1 1.00 19.00 C
060212007 OIL SEAL I.B. NEWELL 118-TFSR SU--SECP1 1.00 15.50 C
060212008 BEARING I.B. NEWELL 120-STEEL SU--SECP1 1.00 50.00 C
060212009 IMPELLER GASKET NEWELL 104-TFR SU--SECP1 1.00 18.00 C
060212010 O-RING, BRG CARR NEWELL 2018-NITRILE SU--SECP1 2.00 8.00 C
060214002 PULSEFEEDER FOR 7660 SIEWER KPGBCBTAEEE SU--SECM3 2.00 3310.00 C
060214004 TEFLON DIAPHRAGM-7660 SIEWER W096323-TFE SU--SECM3 1.00 240.40 C
060214005 TEFLON O-RINGS 7440\7660 SIEWER W202966-TFE SU--SECM3 21.00 366.93 C
060214006 AUTO BLEEDER VLV (NUT & SIEWER W203594-000 SU--SECM3 1.00 3.10 C
FERRULE)
060215002 KOPKIT FOR 7440 SIEWER KPFBABRAACC SU--SECM3 2.00 1643.00 C
060215004 TEFLON DIAPHRAGM 7440 SIEWER WO94691-TFE SU--SECM3 1.00 222.10 C
060215005 7660 RELIEF VALVE CASINGS SIEWER W203376-000 SU--SECM3 2.00 2.00 C
060216001 TUBE BUNDLE AND GASKETS (HEAT RMNEWE 19108 SU--MEZ 1.00 2050.00 C
EXCHANGER)
060217002 CENTERLINE CHECK VALVE SPRINGS L&S 125-31674/38307 SU--SECM2 3.00 66.00 C
060217003 CENTERLINE CHECK VALVE WASHERS L&S 126-29482-17 SU--SECM2 11.00 13.75 C
060217004 PLATES, CHECK VLV, 316SS L&S 122-29002-74 SU--SECM2 2.00 480.00 C
SET(2)
060217008 GASKET, IMPELLER NEWELL 2Z104 SU--SECM2 1.00 16.00 C
060217009 GASKET, REAR COVER, 8" NEWELL AC107 SU--SECM2 1.00 16.00 C
060217011 SEAL, OIL, O.B. NEWELL 2Z129 SU--SECM2 1.00 17.00 C
060217012 O-RING, BEARING CAP NEWELL 2K201B SU--SECM2 2.00 8.00 C
060306002 DIAPHRAGMS, FIRE SPRINKLER DAVISU 06675A SU--SEC13 4.00 560.00 C
060801001 DISC, BRONZE,(2 HALVES) PIPING 6-71-DISC-BRON SU--SECM2 1.00 130.65 C
060801002 SHAFT, 316SS, CHECK VALVE PIPING 6-71-SHAFT-316S SU--SECM2 3.00 33.15 C
060805001 O-RING, ADAPTOR CVSALE 32396.925 SU--SECN4 1.00 3.58 C
</TABLE>
<PAGE>
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location OOH at Loc Total Cost ABC Flag
- ---------- ------------------------------- ---------- ---------------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
060805002 SOFT SEAT INSERT CVSALE 53753.925 SU--SECN5 1.00 124.96 C
060805003 O-RING, ADAPTOR CVSALE 43102.925 SU--SECN4 1.00 4.83 C
060805004 PKG. SET CVSALE 56142.925 SU--SECN4 1.00 21.34 C
060805005 SEAT GASKET CVSALE 64335.925 SU--SECN5 1.00 97.82 C
060805006 SEAT GASKET CVSALE 64414.925 SU--SECN5 1.00 39.51 C
060805007 SOFT SEAT INSERT CVSALE 53865.925 SU--SECN5 1.00 150.09 C
060805008 SLDG SEAL ASSY CVSALE 55586.999 SU--SECN5 1.00 121.30 C
060805010 BACKUP RING CVSALE 64006.925 SU--SECN5 2.00 85.46 C
060805011 BONNET GASKET CVSALE 1793.925 SU--SECN5 2.00 43.18 C
061001001 TEFLON DIAPHRAGM 880 SIEWER W094392-TFE SU--SECN3 2.00 186.80 C
061001002 TEFLON O-RINGS 880 SIEWER W078200-TFE SU--SECN3 6.00 28.80 C
061001003 880 STORKE ADJ KNOB SIEWER W208477-000 SU--SECN3 3.00 27.00 C
061001005 880 STROKE ADJ O-RING SIEWER W049855-MTR SU--SECN3 3.00 1.20 C
061001006 STROKE ADJ BARRELS FOR 880 SIEWER W24323-625 SU--SECN3 3.00 3.00 C
061001007 STROKE ADJ SCREWS FOR 880 SIEWER W211327-000 SU--SECN3 3.00 3.00 C
061003001 CHEMICAL MIXER, IMPELLER NEPTUN 000514 SU--SECN3 1.00 25.00 C
061003002 CHEMICAL MIXER, COUPLING NEPTUN SU--SECN3 1.00 1.00 C
061003003 CHEMICAL MIXER IMPELLER, 5/8" NEPTUN 000539 SU--SECN3 1.00 81.70 C
061004001 PULSEFEEDER FOR 880 SIEWER KPDRABFACCC SU--SECN3 2.00 927.67 C
061101001 PH ELECTRODE FOR JOHNSON MARSH CYCLOP 2772527 SU--MCCCABA 4.00 357.14 C
SAMPLE PANEL
061101013 L&N D.O. SENSOR AFTA CAT#7931-30 SU--SECI4 1.00 696.00 C
061101014 L&N PH SENSOR JOHMAR 1648-20 SU--MCCCABA 1.00 1009.38 C
061101015 L&N PH SENSOR(PROBE) AFTA 117486 SU--MCCCABA 1.00 149.00 C
CYCLOP 2772527
061101016 L&N PROBE MOUNT (D.O. SENSOR) AFTA 063336 SU--SECI3 1.00 40.00 C
061102003 CONDUCTIVITY SENSOR JOHMAR 1648-24 SU--SECI3 2.00 680.60 C
061102004 SAMPLE COOLER GASKETS MODEL JOHMAR 1648-11 SU--SECJ3 1.00 3.25 C
25040
061102005 ROTANETER 20-300 CC/MIN ACI 2-RMA-34-SSV SU--SECJ3 7.00 149.80 C
061102006 SS-4C-50 NUPRO RELIEF VALUE JOHMAR 1648-5 SU--SECJ3 1.00 62.40 C
061102007 NUPRO FILTERS JOHMAR 1648-6 SU--SECJ3 1.00 9.90 C
061102011 ASCO REPAIR KIT JOHMAR 1648-15 SU--SECJ3 1.00 38.20 C
061102013 SAMPLE COOLER GASKETS MODEL JOHMAR 1648-10 SU--SECJ3 1.00 3.55 C
37540
061102016 CONDUCTIVITY SENSOR JOHMAR 1648-25 SU--SECI3 3.00 1016.40 C
061102017 ASCO HIGH TEMP SWITCH JOHMAR 1648-16 SU--SECR2 1.00 249.15 C
061102021 CONDUCTIVITY SENSOR JOHMAR 1648-23 SU--SECI3 2.00 676.10 C
061102029 SAMPLE CELL LIGHT SHIELD HACH 45994-00 SU--DEMIN 3.00 25.50 C
061102030 SAMPLE CELLCOVER ASSEMBLY HACH 45427-50 SU--DEMIN 3.00 111.38 C
061103002 RELIEF VALUE FISHER H202-35 SU--SECL5 1.00 54.00 C
061103003 PRESSURE, REGULATOR FISHER 67AFR-226 SU--SECL5 1.00 61.20 C
061103004 PRESSURE, REGULATOR FISHER 95L-4 SU--SECL5 1.00 219.60 C
061103005 PRESSURE, REGULATOR FISHER 1301F-1 SU--SECL5 1.00 90.00 C
061103007 2 WAY DIAPHRAM SOLENOID VLV, HACH 44948-00 SU--MCCCABA 1.00 62.97 C
SILICA ANALYZER
061202001 O-RING, PUMP COVER GOULDS C02495A358-5308 SU--SECP4 1.00 39.90 C
061202002 IMP O-RING GOULDS C02495A28-5308 SU--SECP4 1.00 10.92 C
061202004 BEARING LOCKNUT GOULDS 8601-0006 SU--SECP4 1.00 4.06 C
061202005 U CUP GOULDS 402108811 SU--SECP3 1.00 16.10 C
061202006 COLUMN ASSEMBLY BEARINGS GOULDS 0802056A03-6470 SU--SECP3 4.00 1162.80 C
061202007 O-RING, BRG MSG GOULDS C02495A236-5302 SU--SECP3 1.00 1.82 C
061202008 CHEM SUMP MOTOR HUB MIDWAY 6JX1HUB SU--SECL1 1.00 9.58 C
061202009 CHEM SUMP MOTOR HUB MIDWAY 6JX1 1/BHUB SU--SECL1 1.00 9.58 C
061202010 CHEM SUMP COUPLING INSERT MIDWAY 6JE INSERT SU--SECL1 1.00 10.00 C
061202011 VALUE, ANGLE TEMP RELIEF, FWWEBB WATTS40XL-3/4-T SU--SECI4 2.00 109.32 C
SAMPLE COOLER
061204003 CONVERTOR, PULSE/ANALOG TRANS ACT 13080 SU--MCCCABB 1.00 265.00 C
SEWER FLOW COGEN
070204001 BEARING, BALL 3196 PMP ESTABR 8049-30600 SU--SECM3 1.00 .00 C
070204003 DIAPHRAGN, M-15 WILDEN PUMP GLAUBE 15-1010-51 SU--SECM1 2.00 70.00 C
070204004 BALLS, VALVE GLAUBE 15-1080-51 SU--SECM1 4.00 44.00 C
070204005 SEAT, VALVE, M15 GLAUBE 15-1120-51 SU--SECM1 4.00 25.20 C
070204006 SHAFT, PUMP GLAUBE 15-3800-09 SU--SECM1 1.00 38.00 C
070204007 O-RING, SHAFT GLAUBE 15-3200-52 SU--SECM2 14.00 7.00 C
070206002 SHAFT STUD GLAUBE T61F SU--SECM2 5.00 5.00 C
GLAUBE T61F
070206003 MUFFLER GLAUBE 70A SU--SECM2 1.00 20.50 C
GLAUBE 70A
070206005 BALL GLAUBE BN71 SU--SECM2 4.00 27.20 C
GLAUBE BN71
070206008 AIR VALVE GASKET GLAUBE P608 SU--SECM2 1.00 1.00 C
GLAUBE P608
071001001 O-RING, FILTER SEPARATOR TRIL 0663716800 SU--SECR5 4.00 150.72 C
071001002 SEPARATOR ELEMENT FILTER TRIL 1202741900 SU--SECR5 1.00 287.28 C
071001005 MOISTURE SEPARATOR O-RING TRIL 0663-7147-00 SU--SECR5 2.00 10.90 C
071001007 FITTING, NIPPLE TRIL 1079-5840-10 SU--SECR5 2.00 6.44 C
071001008 HOSE ASSEMBLY TRIL 0574-8231-21 SU--SECR5 1.00 27.84 C
071001012 TRANSDUCER, PRESSURE, PLANT TRIL 1089-0515-04 SU--SECR5 1.00 230.10 C
AIR COMPRESSOR
071001013 FUSE, 100 AMP RIL/ALCO AIR CITYEL TRS-100R SU--MCCCABC 5.00 88.00 C
COMPRESSOR
071004001 DEW POINT SENSOR COSA SHI9049 SU--MCCCABA 1.00 1200.00 C
071004002 KIT, O-RING, OIL SYSTEM TRIL 2910-6011-00 SU--SECR5 1.00 47.06 C
071004003 GASKET, OIL DRAIN PLUG TRIL 0661-1049-00 SU--SECR5 3.00 6.06 C
071004998 O-RING (WATER SEPERATOR) TRIL 0663714700 SU--SECR5 4.00 21.80 C
071005001 AFTERFILTER, PARTICULATE TRIL 511E SU--SECR2 2.00 258.50 C
071005002 OIL STOP VALVE SERVICE KIT TRIL 2901006400 SU--SECR2 1.00 15.13 C
071005003 MINIMUM PRESSURE VALVE SERVICE TRIL 2901006500 SU--SECR2 1.00 39.18 C
KIT
071005005 OIL FILTER TRIL 1613610500 SU--SECR2 10.00 244.44 C
071005006 INTAKE FILTER ELEMENT TRIL 1619279800 SU--SECR5 4.00 394.62 C
071005008 SOLENOID VALVE TRIL 1089050507 SU--SECR2 1.00 178.06 C
071005009 UNLOADING VALVE SERVICE KIT TRIL 2901007600 SU--SECR2 1.00 91.97 C
071005010 BUSHING FISHER 1E398535132 SU--SECM5 1.00 6.62 C
071005011 95M REPAIR KIT FISHER R95HX000042 SU--SECM5 1.00 130.00 C
071005012 REPAIR KIT FISHER R95LX000012 SU--SECM5 1.00 24.57 C
071005013 AIR TEK TP7715 EXHAUST VLV KIT TRIL IP7715 SU--SECN3 1.00 26.48 C
071005015 JOY AIR COMP OIL FILTER TRIL 01228337-001 SU--SECR4 9.00 130.34 C
071005019 JOY COMPRESSOR VALVE COVER TRIL 25BC505 SU--SECR4 8.00 28.80 C
GASKET
HOERBI 05937B05562X0
</TABLE>
<PAGE>
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ------------- ---------------------------- ---------- ----------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
071005023 GASKET, VALVE SEAT, JOY TRIL 25BC544 SU--SECR4 8.00 21.68 C
COMPRESSOR
HOERBI 25BC544
071005025 HEAD GASKET, RILEY COMPRESSOR TRIL 211JGY715 SU--SECR5 2.00 110.67 C
HOERBI 211JGY715
071005026 HEAD GASKET, ALCO AIR TRIL 211JGY715 SU--SECR5 2.00 168.66 C
COMPRESSOR
071005028 PLATE, REACTION, JOY VALVE TRIL 01605076-002 SU--SECR4 8.00 30.72 C
HOERBI 01605076-002
071005029 PLATE, REACTION, JOY VALVE TRIL 01605076-001 SU--SECR4 8.00 20.40 C
HOERBI 01605076-001
071005030 GASKET, CAP NUT TRIL 25BC479 SU--SECR2 8.00 6.80 C
HOERBI 25BC479
071005031 SPRING, OUTER TRIL 01604843-0042 SU--SECR2 12.00 83.64 C
HOERBI 010604843-042
071005032 SPRING, MIDDLE TRIL 010604843-0041 SU--SECR2 12.00 55.08 C
HOERBI 010604843-0041
071005033 SPRING, INTER TRIL 01604843-0039 SU--SECR2 16.00 34.56 C
HOERBI 01604843-0039
071005034 DIAPHRAGM, SUCTION TRIL 01249294 SU--SECR2 4.00 34.00 C
HOERBI 01249294
080000002 WASHER 1ST STAGE HPT BORESCOPE S&S 9609M43P01 SU--SECB2 5.00 1.30 C
080000004 WASHER 2ND STAGE HPT BORESCOPE S&S 9609M43P02 SU--SECB2 5.00 1.30 C
PLUG
080000005 EXCITER, IGNITION S&S L21454P04 SU--SECB2 1.00 5441.80 C
080000006 PLUG, LPC BORESCOPE S&S 9697M19P01 SU--SECA2 2.00 70.50 C
080000007 PLUG BORESCOPE (COMBUSTOR) S&S 9135M62P01 SU--SECB2 3.00 134.60 C
080000008 PLUG 1ST STAGE HPT S&S 1622M24P01 SU--SECB2 1.00 373.00 C
080000009 PLUG, VSV, CFF BORESCOPE S&S 9686M80P01 SU--SECB2 3.00 204.75 C
080000010 GASKET LPC/HPC BOLESCOPE PLUG S&S MS9373-021 SU--SECA2 2.00 4.04 C
080000011 PLUG, 2ND STAGE HPT S&S 9680M73G03 SU--SECA3 1.00 439.16 C
080000012 WASHER COMBUSTOR BORESCOPE S&S 9609M43P03 SU--SECB2 5.00 1.30 C
080000013 CABLE, POWER S&S L24932P01 SU--MCCCABD 2.00 3150.00 C
080000014 PLUG IGNITER S&S 9101M37P72 SU--MCCCABD 1.00 423.57 C
080101003 LPC STAGE 3 BUSHING S&S 1301M88G03 SU--SECB2 115.00 293.25 C
080101004 LPC STAGE 4 BUMPERS S&S 9128M47P02 SU--SECB2 115.00 311.65 C
080103003 SENSOR, CIT (VG CONTROL) S&S L25061P01 SU--SECA2 1.00 12346.56 C
080103005 O-RING, RTD S&S J221P904-(A) SU--SECA3 4.00 1.60 C
080103006 O-RING, VSV FITTINGS S&S J221P908 SU--SECA3 24.00 11.52 C
080103007 VARIABLE GEOMETRY CONTROL S&S L24913P15 SU--SECA4 1.00 67797.19 C
080103009 O-RING, VSV FITTINGS S&S J221P906 SU--SECA2 24.00 9.36 C
080103010 GASKET, VG CONTROL S&S L28004P01 SU--SECA3 1.00 357.97 C
080103011 CONDITIONER, SIGNAL S&S 9040M58P02 SU--SEC B2 1.00 2960.15 C
080103013 VSV ACTUATOR BOLT S&S 9628M16P02 SU--SECA2 4.00 15.56 C
080103014 VSV ACTUATOR BRACKET NUT S&S 635E901P01 SU--SECA2 3.00 24.99 C
080103015 CONDITIONER, SIGNAL, VSV/VBV S&S 9040M58P02 SU--MCCCABD 1.00 1469.70 C
080104001 ACTUATOR VARIABLE BLEED VALVE S&S 9042M12P06 SU--SECB2 1.00 1958.04 C
080104002 VSV, BLACKET,/GROMMET, RUBBER S&S 9054M35P01 SU--SECA3 2.00 8.62 C
080104004 VSV DOOR NUTS GE 9629M48P06 SU--A4 14.00 80.50 C
080104006 TRANSMITTER, VSV ISOLATOR, S&S SCT/O-5VDC/4-20 SU--MCCCABD 1.00 355.20 C
XDCR-5842
080104007 CABLE, FEEDBACK, VBV S&S L24986P01 SU--SECA3 1.00 1263.05 C
080104008 CABLE, FEEDBACK, VSV S&S L24979P01 SU--SECA3 1.00 1674.32 C
080201001 SEAL, FUEL NOZZLE SEALIN 9016M30P02 SU--SECA3 67.00 2861.57 C
S&S
080201002 FUEL NOZZLE S&S L31736G09 SU--SECB2 4.00 17240.36 C
080201003 TMF SPLIT-LINE BOLTS GE J648P28A SU--SECA4 4.00 63.00 C
080202002 FILTER, WTR WASH S&S U20A10S SU--SECB3 2.00 12.66 C
080402005 COMBUSTION LINER S&S 9016M26G49 SU--SECB3 1.00 122694.00 C
080403002 RTD, FUEL GAS TEMP S&S 78R25C60A025T34 SU--MCCCABD 2.00 505.98 C
080403004 NUT, SHLDR BOLT S&S 9629M48P04 SU--SECB2 6.00 7.98 C
080403006 BOLT, SHLDR, ROD END BEARING S&S J864P019A SU--SECB2 5.00 .00 C
080403007 TUBE,J, FUEL NOZZLE S&S L35220G01 SU--SECA2 20.00 7772.80 C
080403008 BOLT, FUEL NOZZLE S&S J644P08O SU--SECA3 2.00 13.50 C
080403009 BOLT, FUEL NOZZLE S&S J644P060 SU--SECB2 7.00 47.25 C
080403010 PACKING, STIG (FUEL GAS) S&S J221P129 SU--SECA2 20.00 23.20 C
080403011 FUEL GAS MANIFOLD TURNBUCKLE S&S L24983GO5 SU--SECB2 8.00 1618.24 C
(BEARING ROD END
(R))L24983G05)
080403012 FUEL GAS MANIFOLD TURNBUCKLE S&S L24983GO6 SU--SECB2 7.00 1415.96 C
(BEARING ROD END(L))
L24983G06)
080403013 FUEL GAS MANIFOLD TURNBUCKLE S&S J864P018A ROD E SU--SECB2 14.00 355.46 C
(BOLT SHOULDER) J864P018A ROD
END
080403014 RTD, FUEL GAS TEMP, ROSEMT S&S 7SR25N00A020T34 SU--SECB2 2.00 404.92 C
080403016 BOLT, GAS/NOZZLE S&S MS9492-24 SU--SECB2 6.00 .00 C
080403017 WASHER, GAS/NOZZLE BOLT S&S AN96OC616 SU--SECB2 6.00 .00 C
080403018 BEARING, ROD END, GAS S&S L24983G01 SU--SECB2 3.00 .00 C
080403019 BRACKET, GAS MANIFOLD S&S L24972P03 SU--SECA3 2.00 .00 C
080403020 BRACKET, GAS MANIFOLD S&S L24972P04 SU--SECA3 4.00 .00 C
080403021 TUBE, J, NOZZLE STEAM S&S L35238GO1 SU--SECA2 6.00 4351.20 C
080501001 299987 S&S KIT (EXHAUST S&S 299987 S&S KIT SU--SECA4 1.00 4197.73 C
COLLECTOR ROPE SEAL)
080501003 TUBE, RIGHT, AIR, 7TH STAGE S&S L24750G02 SU--SECA4 4.00 9116.00 C
080601003 O-RING, RTD S&S J221P904 SU--SECA2 23.00 9.66 C
080603019 X-100 1.875" SEAL SEALIN 3196MT-109961 SU--SECQ2 2.00 2138.00 C
080603020 PUMP REPAIR KIT ESTABR R196MTPRKO SU--SECM2 1.00 191.67 C
080603021 GLYCOL PUMP COUPLING GOULDS REXNORD ES-4 SU--SECL2 1.00 104.00 C
080604001 PKG SET CVSALE 24244.516 SU--SECN4 1.00 45.92 C
080604002 RING, PISTON FISHER 1U23420512 SU--SECM5 1.00 25.20 C
080604003 BELLOWS, ASSEMBLY FISHER 16A6953XO12 SU--SECM5 1.00 30.87 C
080604004 SEAT RING FISHER 1U222846172 SU--SECM5 1.00 97.65 C
080604005 CAGE, WHISPER FISHER 2V502733272 SU--SECL5 1.00 1392.30 C
080604006 GASKET SET FISHER RGASKETX202 SU--SECM5 1.00 36.54 C
080604008 GAUGE, PRESSURE FISHER 1188577X012 SU--SECM5 1.00 9.80 C
080604009 PLUG/STEM FISHER 1V6579X0092 SU--SECM5 1.00 233.10 C
080604010 IND. CONTROLLER FISHER R4190X00C12 SU--SECM5 1.00 8.19 C
080604011 FLAPPER ASSEMBLY FISHER 29A9518X012 SU--SECM5 1.00 27.72 C
080701032 HYDRAULIC STARTER S&S 272127 SU--SECE5 1.00 1846.12 C
080701036 O-RING, HYD STARTER HOSE S&S MS9388-219 SU--SECA2 1.00 2.89 C
080701037 CHARGE PUMP VACUUM SWITCH S&S 180P4-4C6 SU--MCCCABD 1.00 258.24 C
</TABLE>
<PAGE>
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ---------- ----------- ---------- ----------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
080701038 HYDRAULIC PUMP CTRL PRESS S&S 100P4-4C6R SU--MCCCABO 1.00 221.61 C
SWITCH
080701039 GASKET HYD STARTER S&S MS9139-01 SU--SECB2 1.00 1.90 C
080701040 O-RING, PACKING HYD STARTER S&S J221P222 SU--SEC82 50.00 69.00 C
080701041 CASE HIGH TEMPERATURE SWITCH S&S 100TC5-4C6 SU--MCCCABD 1.00 398.44 C
080701042 HYDRAULIC PUMP S&S AA4V125ELIR3C20 SU--SECC5 1.00 4658.30 C
080701043 FLUID FILTER ASSEMBLY (HMK05) S&S P165973 SU--SECD3 1.00 63.88 C
080701045 D/P VISUAL INDICATOR S&S P16-2696 SU--SECD2 1.00 10.40 C
080701046 CLUTCH, STARTER S&S 6601-01-019-C SU--SECC4 1.00 2378.66 C
HILLIA
080702003 LUBE OIL SUCTION STRAINER S&S RD35234 SU--SECB2 1.00 513.24 C
080702006 LUBE OIL MAGNETIC PLUG S&S MS9015-05 SU--SECA2 2.00 1060.50 C
080702009 L.O.COOLER ZINC ANODES, GTG BASCO 5W02X 3/4 SU--SECA3 4.00 116.00 C
COOLER
080702010 GASKETS, COOLER HEAD, INTER BASCO 030G10A-8 SU--SECA3 1.00 7.00 C
SEAL, 8"
080702011 GASKETS, LO COOLER, OUTER SEAL, BASCO 031G10A-8 SU--SECA3 2.00 16.00 C
8"
080702012 O-RING, L.O. COOLER, REVERSING BASCO 080G01D-8 SU--SECA3 2.00 10.00 C
END, 8"
080702014 VALVE, DRAGON, 3-WAY DRAGON 1053V3 SU--SECA2 23.00 1334.00 C
080702028 TURBINE LUBE OIL (HYD) FILTER S&S HC9600FUN82 SU--SECC5 3.00 227.25 C
ELEMENTS
080702041 RTD 100 OHM (DUAL ELEMENT) S&S L35166P01 SU--MCCCABD 1.00 699.38 C
080702042 TURBINE LUBE OIL TANK TEMP S&S 100TC5-4CC6 SU--MCCCABD 1.00 465.69 C
SWITCH
080702044 TURBINE LUBE OIL SCAV PRES S&S 132P4-1C68 SU--MCCCABD 1.00 167.98 C
SWITCH
080702045 O-RING, P.T. FINGER FILTERS S&S J221P924 SU--SECA3 10.00 18.29 C
080702046 TURBINE LUBE OIL DIF PRES S&S 160P4-S36 SU--MCCCABD 1.00 306.55 C
SWITCH
080702047 TURBINE LUBE OIL TRANSMITTER S&S 1151GP7E2282D3 SU--MCCCABD 1.00 886.61 C
080702048 O-RING, FINGER FILTER SCREENS S&S M83248-1-910 SU--SECA3 14.00 3.49 C
080702049 O-RING, FINGER FILTER SCREENS S&S M83248-/1-121 SU--SECA2 43.00 101.66 C
080702050 PUMP, LUBE OIL AND SCAVENGE S&S C21289P01 SU--SECA3 1.00 17058.92 C
080702051 O-RING FINGER FILTER SCREENS S&S M83248-1-912 SU--SECA3 19.00 25.08 C
080702052 O-RING FINGER FILTER SCREEN S&S M83248/1-905 SU--SECA2 21.00 12.71 C
080702053 GASKET S&S 9013H28P02 SU--SECA3 1.00 35.13 C
080702055 TURBINE LUBE OIL TANK LEVEL S&S KC-F-307BEP SU--SECE4 1.00 397.99 C
SWITCH
080702056 TURBINE LUBE OIL SUPL PRES S&S 132P4-8C68 SU--MCCCABD 2.00 352.04 C
SWITCH
080702057 O-RING, P.T. FINGER FILTERS S&S J221P905 SU--SECA2 3.00 1.20 C
080702058 TURBINE LUBE OIL DIF PRES S&S 160P4-S43 SU--MCCCABD 1.00 302.57 C
SWITCH
080702060 O-RING S&S J221P240 SU--SECA2 3.00 11.97 C
080702061 OIL/AIR SEPARATOR FILTER S&S 95-115 SU--SECA4 2.00 2886.30 C
(95-115)
080702062 OIL/AIR SEPARATOR FILTER S&S 95-116 SU--SECE1 2.00 874.80 C
(95-116)
080702064 OIL/AIR SEPARATOR HOLD DOWN S&S 1330745 SU--SECE2 1.00 259.20 C
</TABLE>
<PAGE>
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Fl:
- ---------- ------------------------------------ ---------- ----------- ----------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
KIT
080702068 PT OIL PUMP DISCHARGE TUBE S&S L35155G01 SU--SECA3 1.00 1136.20 C
GE L35155G01
080702070 GASKET, OIL TUBE SUPPLY S&S 9057M32P01 SU--SECA3 22.00 60.72 C
080702071 OIL TUBE, "C" SUMP SUPPLY S&S L24748G01 SU--SECA2 1.00 530.35 C
080702072 THERMOSTATIC CONTROL VALVE S&S 1125P120-F SU--SECA2 1.00 200.57 C
TEMPERATURE ELEMENT SET 2
120F.
080702073 THERMOSTATIC CONTROL VALVE S&S 917OX011 SU--SECA2 2.00 43.36 C
VITON O-RING KIT
080702074 INTEGRAL CABLE, C-SUMP RTD OIL INTEGR ICI51DQ/17 SU--MCCCABD 1.00 835.00 C
080702075 INTEGRAL CABLE PT OIL TEMP RTD INTEGR ICI51DQ/10 SU--MCCCABD 1.00 800.00 C
080702076 BOSS FOR INTEGRAL CABLES INTEGR ICI-51QB SU--MCCCABD 1.00 25.00 C
080704026 REGULATOR BODY FUEL GAS S&S 310-SP SU--SECF5 1.00 7396.45 C
080704027 GASKET, SEAL (FUEL MANIFOLD) S&S L35246P02 SU--SECA3 1.00 472.80 C
080704028 FLOW TRANSDUCER 2" FUEL GAS S&S YF105-NNNA2A-S3 SU--SECD5 1.00 1484.63 C
080704029 FUEL VALVE, NATURAL GAS S&S 8915-123 SU--SECE5 1.00 20315.61 C
080704030 TURBINE FUEL GAS PRESSURE S&S 132P4-4C6B SU--MCCCABD 1.00 176.53 C
SWITCH
080704031 Y-STRAINER SCREEN, (316ss 150 S&S 764-SS-100M SU--SECD2 1.00 90.87 C
MESH)
080704032 YF011 SIGNAL CABLE S&S YF011-1-0030F*E SU--SECD5 5.00 555.00 C
080704033 VORTEX FLOW CONVERTER S&S YFA11-AUPA-08*E SU--MCCCABD 1.00 743.70 C
080705006 GASKET S&S 9608M12P02 SU--SECA2 3.00 2.91 C
080705022 HYDRAULIC SUPPLY PUMP S&S 8580-017 SU--MCCCABD 1.00 2551.95 C
080705023 GASKET, HYD PUMP S&S L21803P01 SU--SECA2 1.00 4.87 C
080707001 CDP CHECK VALVE, 3INCH S&S 3"G60CPFN34 SU--SECD3 1.00 1091.13 C
080707002 CDP STM CONTROL VLV 3" S&S 8915-367 SU--MEZ 1.00 21834.75 C
080707007 PROXIMITY LIMIT SWITCH, CDP S&S 21-11524-A3 SU--MCCCABD 1.00 207.29 C
PREHEAT
080707011 CLAMP 0.250" S&S J1153G04 SU--SECA2 3.00 4.32 C
080707012 GASKET METAL O-RING S&S MS9373-029 SU--SECA2 1.00 4.19 C
(AIR-TUBING)
080707013 GASKET, METAL O-RING (AIR S&S NS9373-051 SU--SECA2 3.00 9.74 C
TUBING)
080707014 CLAMP 0.375" S&S J1153G06 SU--SECB2 5.00 16.65 C
080707015 HP RECOUP BLOCK GE L31265P10 SU--SECA2 2.00 300.00 C
080707016 HP RECOUP ORIFICE PLUG GE AN933S0 SU--SECA2 4.00 40.00 C
080707017 HP RECOUP RETAINER SEAL GE L216118P04 SU--SECA2 4.00 40.00 C
080707018 HP RECOUP GASKET, MTL GE MS9373-051 SU--SECA2 1.00 22.50 C
080708011 MICRO 550 CONTROLLER S&S 362-550-048 SU--MCCCABD 1.00 590.52 C
080708012 INPUT MODULE S&S IM SU--MCCCABD 1.00 579.42 C
080708013 525 RELEASE MODULE S&S 13B041088 SU--MCCCABD 2.00 1076.70 C
080708014 FAULT MODULE S&S FM SU--MCCCABD 1.00 294.15 C
080708015 ALARM MODULE S&S AM SU--MCCCABD 2.00 1061.16 C
080708016 GAS SENSOR TRANSMITTER S&S 361-236-01 SU--MCCCABD 3.00 1325.34 C
080708018 FUSE SOMA S&S 1335 SU--MCCCABC 5.00 16.10 C
080708019 FUSE 2A S&S 1328 SU--MCCCABC 5.00 17.20 C
080708020 FUSE 0.1A S&S 1310 SU--MCCCABC 5.00 16.10 C
080708021 FUSE 4A S&S 1269 SU--MCCCABC 10.00 49.40 C
080708022 FUSE 31MA S&S 1308 SU--MCCCABC 5.00 36.10 C
</TABLE>
Page 21
<PAGE>
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ------------- -------------------------------- ---------- ---------------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
080708025 PRINTED CIRCUIT BOARD STROBE S&S 700-K-24 SU--SECB2 1.00 276.39 C
080708026 FLASHTUBE FOR STROBE LIGHT S&S 3001 SU--SECB2 1.00 47.73 C
080708027 COMBUSIBLE SENSOR S&S 360-610-01 SU--MCCCABD 2.00 1047.84 C
080708028 PRINTED CIRCUIT BOARD HORN S&S 1002-24-PCB-S5 SU--SECB2 1.00 213.12 C
080708030 GAS SENSOR PROTECTIVE COVER DELPHI 360-733-01 SU--SECB2 4.00 48.00 C
080709003 TEMP SENSOR ASSY ENCL TEMP'S S&S 78F25N00N120 SU--MCCCABD 1.00 144.85 C
PLAT RTD
080709004 FLOW SWITCH MONITOR DELTA-P S&S FR72-4-1 1/4" SU--MCCCABD 1.00 1304.50 C
080710001 STEAM PIPE TEMPERATURE SENSOR S&S 2511A SU--MCCCABD 1.00 155.22 C
080710003 STEAM PRESSURE TRANSMITTER S&S 1151GP8E22B2D3 SU--MCCCABD 2.00 1539.57 C
080710004 GASKET, COP STEAM S&S L35579P02 SU--SECB2 1.00 465.60 C
080710005 GASKET, STEAM (NOZZEL) S&S L35437P03 SU--SECB2 2.00 167.08 C
080710006 FLOW TRANSDUCER #4" CDP STEAM S&S YF110-NNNA3A-S3 SU--SECC5 1.00 3360.53 C
080710008 MANIFOLD STEAM TEMP SENSOR S&S 305-01BH-D-6-C- SU--MCCCABD 2.00 484.00 C
080710012 NOZZLE STEAM GIMBLE (RIGHTHAND S&S 43360 SU--SECA1 1.00 10560.54 C
#1 GTG)
080710013 LEFT-HANDED HIGH PRESSURE S&S SU--SECA2 1.00 10000.00 C
EXPANSION JOINT
080712076 7200 SRS SGL PLANE VIB MON W/ S&S 72200-XX-XX-XX- SU--MCCCABD 2.00 2727.94 C
MOO 154646-01
080712125 ACCELEROMETER, CRF VIBROM 303-032 ACCELER SU--MCCCABD 1.00 2156.00 C
080712127 VSV LEVER ARM S&S 9673M66G13 SU--SECB2 2.00 1998.00 C
080712128 DC REMOTE POWER SUPPLY S&S 45606-01 SU--MCCCABD 1.00 919.08 C
080712129 POWER SUPPLY CONDITIONING UNIT S&S 45607-01 SU--MCCCABD 1.00 807.19 C
080712131 DUAL TRACKING FILTER PWA S&S 41590-XX SU--MCCCABD 2.00 2470.42 C
080712132 INTEGRAL VIBRATION CABLE, 25 INTEGR 1U-1655-34/25 SU--MCCCABD 1.00 1322.00 C
FT.
080712133 RELAY MODULE, ALARM S&S 72130-02 SU--MCCCABD 1.00 255.74 C
080712134 ACCELEROMETER INTERFACE MODULE S&S 77772-01-00-00 SU--MCCCABD 5.00 2770.55 C
080712135 PROXIMITY EXTENSION CABLE S&S 21747-085-01 SU--MCCCABD 1.00 126.65 C
080712137 7200 PROXIMITOR S&S CA18745-03 SU--MCCCABD 1.00 336.55 C
080712138 7200 PROXIMITOR S&S CA18745-04 SU--MCCCABD 1.00 360.53 C
080712139 RELATIVE PROBE HOUSING S&S CA21000-05-05-0 SU--MCCCABD 2.00 564.76 C
ASSEMBLY
080712140 ACCELEROMETER EXTENSION CABLE S&S 45358-09 SU--MCCCABD 1.00 1088.91 C
080712143 SEQUENCER CARD 8 CHANNEL RTD S&S 5461-654 SU--MCCCABD 1.00 2756.13 C
080712144 PROXIMETER PROBE S&S CA21508-02-12-0 SU--MCCCABD 1.00 126.98 C
080712158 SPEED SENSOR, GG S&S L21131P02 SU--SECA3 2.00 1117.84 C
080712159 ACCELEROMETER S&S L34246P03 SU--MCCCABD 1.00 2593.79 C
080712160 ACTUATOR, VARIABLE STATOR VANE S&S 9691M29P08 SU--SECB2 1.00 1948.47 C
080712163 O-RING, VSV ACTUATOR S&S J221P904 SU--SECA3 20.00 7.00 C
080712172 SECONDARY POWER SUPPLY FUEL S&S 5462-750 SU--MCCCABD 1.00 2200.57 C
CONTROL
080712178 POWER SUPPLY, LOW VOLTAGE S&S 5461-975 SU--MCCCABD 1.00 4018.75 C
080712180 POWER AUXILIARY MODULE (FUEL S&S 5463-034 SU--MCCCABD 1.00 1049.78 C
CONTROL SYSTEM)
080712181 DPDT RELAY, BENTLEY NEVEDA S&S 01200024 SU--MCCCABD 2.00 148.08 C
080712182 SIO VER 4.4, FUEL CONTROL S&S 5461-644 SU--MCCCABD 1.00 3196.24 C
080712200 DISCRETE OUTPUT, FUEL CONTROL S&S 5462-758 SU--MCCCABD 1.00 1829.24 C
080712201 DPS 3/DT, FUEL CONTROL S&S 5462-944 SU--MCCCABD 1.00 3196.24 C
080712202 DUAL TRACKING FILTER W/ MOO S&S 41590-XX-(A) SU--MCCCABD 2.00 2470.42 C
154647-01
080712203 AUX MEMORY MODULE, SEQ S&S 5463-564 SU--MCCCABD 2.00 1875.90 C
080712204 DSC MASTER CO-CPU, FULE CONT. S&S 5463-562 SU--MCCCABD 2.00 5284.69 C
080712205 TRANSCEIVER, SEQ. S&S 5461-648 SU--MCCCABD 1.00 1002.88 C
080712206 GASKET, HP SPEED PICK-UP S&S J219PO4A SU--SECA3 2.00 14.24 C
080712207 HARNESS, T44 TOP RIGHT S&S L35167P01 SU--SECA3 2.00 14201.88 C
080712208 4-20 CURRENT OUTPUT FUEL S&S 5463-482 SU--MCCCABD 1.00 2471.70 C
CONTROL
080712209 CABLE ACCELEROMETER S&S L28255PO1 SU--MCCCABD 1.00 5418.00 C
080712210 CABLE ACCELEROMETER S&S L28255PO2 SU--MCCCABD 1.00 5418.00 C
080712211 GASKET, CIT SENSOR S&S L28124PO1 SU-SECA2 1.00 8.30 C
080712212 SIGHT GUAGE, FLAME VIEW POC. S&S L3600OG02 SU--MCCCABD 3.00 2902.19 C
080712213 MASTER CPU (SEQ), SEQ S&S 5463-563 SU--MCCCABD 1.00 4108.94 C
080712214 PROXIMITY EXTENSION CABLE 4.5 S&S 21747-045-01 SU--MCCCABD 1.00 73.70 C
METERS
080712216 SPEED SENSOR, L.P. ROTOR S&S 9303M65P01 SU--SECA2 1.00 3760.24 C
080712217 HIGH TEMPERATURE ACCEL EXT S&S 83387-100 SU--MCCCABD 1.00 2564.10 C
CABLE
080712219 LABEL-MODULE IDENT A-O THRU S&S 3081-275 SU--MCCCABD 1.00 4.50 C
A-16
080712220 7200 SERIES DUAL PLANE VIB MON S&S 72850-01-04-01- SU--MCCCABD 1.00 1065.82 C
080712221 7200 SERIES SINGLE PLANE VIB S&S 72200-XX-XX-XX- SU--MCCCABD 2.00 2355.70 C
MON WITH L.P.C
080712222 B CHANNEL INPUT, SEQ. S&S 5463-581 SU--MCCCABD 1.00 3344.94 C
080712223 TRANSDUCER VSV & VBV (LVDT) S&S 9153M75P02 SU--SECB2 1.00 3791.23 C
080712224 DISCRETE INPUT, FUEL CONTROL S&S 5462-757 SU--MCCCABD 1.00 1598.12 C
080712226 SENSOR, FLAME S&S L28490P02 SU--SECA2 1.00 5749.64 C
080712227 4 CHANNEL FINAL DRIVER FUEL S&S 5463-305 SU--MCCCABD 1.00 2420.63 C
CONTROL
080712228 HIGH TEMPERATURE ACCEL EXT. S&S 83387-065 SU--MCCCABD 1.00 .00 C
CABLE
080712229 8 CHANNEL T/L, FUEL CONTROL S&S 5462-948 SU--MCCCABD 1.00 4172.07 C
080712230 SPEED SENSOR, FUEL CONTROL S&S 5462-718 SU--MCCCABD 1.00 4172.07 C
080712231 GASKET T44 HARNESS S&S 1030M59P01 SU--SECA3 4.00 116.40 C
080712232 TRANSDUCER, SPEED P/U S&S L31225P03 SU--SECB2 1.00 9705.48 C
080712233 HARNESS, T44 BOTTOM LEFT S&S L35173P01 SU--SECA3 1.00 6391.20 C
080712234 DSC MASTER CPU, FUEL CONTROL S&S 5463-561 SU--MCCCABD 2.00 8268.21 C
080712235 GASKET, CIT SENSOR'S S&S 9053M62P02 SU--SECA3 1.00 1.65 C
080712236 LABELL-MODULE IDENT 1-17 THU S&S 3060-18 SU--MCCCABD 1.00 5.00 C
A32
080712237 HARNESS, T44 BOTTOM RIGHT S&S L35169P01 SU--SECA3 2.00 12782.40 C
080712238 7200 SRS SGL PLANE VIB MON S&S 72200-XX-XX-XX- SU--MCCCABD 2.00 2490.89 C
W/MOD 154378-01
080712240 SHIM LP SPEED SENSOR S&S 9107H55P01 SU--SECA2 2.00 21.72 C
080712241 FUSE 15A BALDWI OT15 SU--MCCCABD 10.00 5.50 C
080712242 FUSE 1-8/10 A BALDWI TRM1-8/10 SU--MCCCABD 2.00 3.38 C
080712243 FUSE 35A BALDWI OT35 SU--MCCCABD 10.00 9.00 C
080712244 FUSE 5A BALDWI ATH5 SU--MCCCABD 2.00 8.24 C
080712245 FUSE 20A BALDWI ATHR20 SU--MCCCABD 8.00 32.88 C
080712246 FUSE S&S KTK-10 SU--MCCCABD 3.00 14.04 C
080712247 FUSE 1A BALDWI ATH1 SU--MCCCABD 2.00 3.38 C
</TABLE>
<PAGE>
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ---------- ----------- ---------- ----------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
080712248 FUSE 5-6/10 A BALDWI TRM5-6/10 SU--MCCCABC 9.00 15.21 C
080712251 FUSE 3-2/10 A BALDWI TRM3-2/10 SU--MCCCABC 10.00 16.90 C
080712252 FUSE S&S KTK-8 SU--MCCCABC 10.00 46.80 C
080712253 FUSE 7A BALDWI TRS7R SU--MCCCABC 10.00 42.50 C
080712254 FUSE 2A BALDWI BBS-2 SU--MCCCABC 9.00 15.75 C
080712255 FUSE 1-6/10 A BALDWI ATQ1-6/10 SU--MCCCABC 10.00 45.70 C
080712256 FUSE 2A BALDWI KLDR-2 SU--MCCCABC 8.00 43.20 C
080712257 FUSE 12A BALDWI ATM12 SU--MCCCABC 10.00 37.00 C
080712258 FUSE 20A BALDWI OT20 SU--MCCCABC 3.00 1.65 C
080712259 FUSE S&S KTK-20 SU--MCCCABC 9.00 43.65 C
080712260 FUSE 15A BALDWI TRM15 SU--MCCCABC 20.00 31.60 C
080712261 FUSE 15A BALDWI ATM15 SU--MCCCABC 10.00 37.00 C
080712262 FUSE 10A BALDWI ATM10 SU--MCCCABC 10.00 37.00 C
080712263 FUSE 1-1/2A BALDWI KLDR-1-1/2 SU--MCCCABC 10.00 54.00 C
080712264 FUSE 1/2A BALDWI 3AB1/2A326 SU--MCCCABC 7.00 8.75 C
080712265 FUSE 4A BALDWI KLDR-4 SU--MCCCABC 5.00 29.00 C
080712266 FUSE .5A BALDWI TRM.5 SU--MCCCABC 4.00 6.76 C
080712267 FUSE 20A BALDWI TRM20 SU--MCCCABC 9.00 14.22 C
080712268 FUSE S&S KTK-2 SU--MCCCABC 6.00 28.08 C
080712269 FUSE 3A BALDWI KLDR-3 SU--MCCCABC 10.00 54.00 C
080712270 FUSE 2-1/4 A BALDWI TRM2-1/4 SU--MCCCABC 10.00 16.90 C
080712271 FUSE 3-1/2 A BALDWI TRM3-1/2 SU--MCCCABC 6.00 10.14 C
080712272 FUSE 3A BALDWI TRM3 SU--MCCCABC 10.00 16.90 C
080712273 FUSE S&S KTK-5 SU--MCCCABC 4.00 18.72 C
080712274 FUSE 7A BALDWI TRM7 SU--MCCCABC 10.00 15.80 C
080712275 FUSE 8A BALDWI ATM8 SU--MCCCABC 10.00 37.00 C
080712276 FUSE 2A BALDWI TRM2 SU--MCCCABC 9.00 15.21 C
080712277 FUSE 2.5A BALDWI TRM2.5 SU--MCCCABC 10.00 16.90 C
080712278 FUSE 3A BALDWI OT3 SU--MCCCABC 8.00 4.64 C
080712279 T 2.5 OFF-ENGINE CABLE, TC S&S L43013P02 SU--MCCCABD 1.00 3149.38 C
(20FT)
GE L43013P02
080712280 GASKET, FLAME SENSOR S&S 9609M43P05 SU--SECB2 4.00 1.28 C
SIGHTGLASS
080712281 GASKET, T3 SENSOR S&S MS9372-029 SU--MCCCABD 5.00 14.45 C
080712282 WOODWARD BUFFER BOARD 5500-558 S&S 5500-558 SU--MCCCABD 1.00 333.00 C
080712283 GASKET, FLAME SENSOR S&S L43073P01 SU--SECA2 3.00 43.71 C
080714002 CARTRIDGE FILTER S&S LM0105-3/4 SU--SECL3 3.00 31.98 C
080714003 REPAIR KITS, FISHER S&S R1066SRX752 SU--SECD1 5.00 155.48 C
080714005 OFF LINE WTR WASH TANK S&S 951101MA SU--SECL3 1.00 344.10 C
PRESSURE RELIEF VALVE
080717001 RADIAL DRIVE BOOT L43641P02 S&S RADIAL DRIVE BO SU--SECA4 1.00 795.20 C
080717002 ACC GRBX HAND JACK COVER S&S J221P134 SU--SECA4 4.00 5.32 C
GASKET
080717006 O-RING (FUEL GAS MANIFOLD) S&S J221P019 SU--SECA2 29.00 11.75 C
080717016 SHAFT SEAL ASSEMBLY, TGB S&S L21431G01 SU--SECB2 1.00 229.36 C
090107001 VORTEX FLOW METER NICE VBAR-FV-08-1-40 SU--SECH1 1.00 2195.00 C
090107002 VORTEX FLOW METER NICE VBAR-FV-08-1-40 SU--SECH1 1.00 2195.00 C
090107003 VORTEX FLOW METER NICE VBAR-FV-06-2-40 SU--SECH1 1.00 2895.00 C
090107004 VORTEX FLOW METER NICE VBAR-FV-06-1-40 SU--SECH1 1.00 2195.00 C
090107004 DWYER #2005 MAGNEHELIC ACI DWYER #2005 SU--MCCCABB 1.00 44.90 C
</TABLE>
SCHEDULE 1, Continued
12-09-97 Syracuse University Inventory Catalog
<TABLE>
<CAPTION>
Spare Part Description Supplier # Supp Part # Location QOH at Loc Total Cost ABC Flag
- ---------- ----------- ---------- ----------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
GUAGE/RANGE 0-5" WC
090202006 1/2" L.M. SPEC. #150026 ACI 4-1/2" USG 1981 SU--MCCCABB 2.00 178.20 C
090202007 1/2" L.M. SPEC. #150027 ACI 4-1/2" USG 1981 SU--MCCCABB 1.00 83.24 C
090202021 1/2" L.M. SPEC. #150009 ACI 4-1/2" USG 1980 SU--MCCCABB 3.00 150.15 C
090202022 1/2" L.M. SPEC. #150034 ACI 4-1/2" USG 1981 SU--MCCCABB 2.00 193.70 C
090202023 1/2" L.M. SPEC. #150029 ACI 4-1/2" USG 1981 SU--MCCCABB 2.00 166.48 C
090202026 BELLOFRAM TYPE 50 ACI #241-960-069-00 SU--MCCCABB 2.00 77.20 C
REGULATOR/DRIPWELL 0-120 PSI
090202031 BELLOFRAM TYPE 50 ACI #241-960-067-00 SU--SECK3 1.00 38.60 C
REGULATOR/DRIPWELL 0-30 PSI
090202032 1/4" L.M. SPEC. #47104 ACI 2-1/2" USG V500 SU--MCCCABB 2.00 19.46 C
090202033 BELLOFRAM TYPE 50 ACI #241-960-068-00 SU--SECK3 2.00 77.20 C
REGULATOR/DRIPWELL 0-60 PSI
090202039 1/2" L.M. SPEC. #150024 ACI 4-1/2" USG 1981 SU--MCCCABB 2.00 166.48 C
090202044 1/4" STAINLESS BONNET VALVE ACI 4Z-V6LR-G-SS SU--SECH3 1.00 92.00 C
090202054 1/2" STAINLESS VALVE ACI 8Z-B8LJ-SSP-OZ SU--SECH3 1.00 135.99 C
090202055 1/2 STAINLESS NEEDLE VALVE ACI 8ZV8L NSS SU--SECH3 2.00 120.96 C
090202056 1/2" STAINLESS VALVE ACI 8Z8LJSSPKY SU--SECH3 1.00 120.88 C
090405003 LAMP ASSEMBLY, SILICA ANALYZER HACH 4011.33 SU--MCCCABA 1.00 14.66 C
090503044 2.5" GUAGE, 0-2000 PSI, PHOS ACI 147197 SU--RILEY 6.00 161.46 C
PHP
954683.70
</TABLE>
Page 24
<PAGE>
SCHEDULE 2
PROPRIETARY DOCUMENTS
1. Maintenance Software "Gpmate"
2. Training Software "Tris"
3. Performance Tracking Software "PPIMS"
4. Vibration Analysis Software "Entek Monitor"
5. Chemistry Trending Software "Vantage"
6. LM 5000 Training Program "TSI Energy"
7. GE Safety and Regulatory Compliance Manual
8. GE Predictive Maintenance Manual
9. GE Training Manual
10. GE Administrative Manual
11. GE Transportation Directory
12. GE Employee Handbook
-18-
<PAGE>
SCHEDULE 3
APPROVED CONTRACTORS
Gas Generator
- -------------
1. Air New Zealand
2. IHI
3. General Electric Company
4. MTU Motoren-und Turbinen-Union
Power Turbine
- --------------
1. European Gas Turbines Ltd. Industrial Products
2. S&S Energy Products
3. General Electric Company
-19-
<PAGE>
SCHEDULE 4
TERMINATION FEE
------------------------------------------------------
NPV of POA
Date of Termination O&M CONTRACT
------------------------------------------------------
6/30/98 $6,972,537
------------------------------------------------------
6/30/99 $6,366,003
------------------------------------------------------
6/30/00 $5,741,181
------------------------------------------------------
6/30/01 $5,097,428
------------------------------------------------------
6/30/02 $4,434,070
------------------------------------------------------
6/30/03 $3,750,401
------------------------------------------------------
6/30/04 $3,045,678
------------------------------------------------------
6/30/05 $2,319,120
------------------------------------------------------
6/30/06 $1,569,906
------------------------------------------------------
6/30/07 $ 797,170
------------------------------------------------------
4/1/08 $ 0
------------------------------------------------------
-20-
<PAGE>
EXHIBIT 10.12
March 20, 1991
THE CITY OF SYRACUSE
and
CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY
and
PROJECT ORANGE ASSOCIATES, L.P.
PAYMENT IN LIEU OF TAX AGREEMENT
Dated: April 5, 1991
<PAGE>
THIS AGREEMENT, dated April 5, 1991, by and among the CITY OF SYRACUSE, a
municipal corporation of the State of New York with an office at 301 City Hall,
Syracuse, New York 13202 (hereinafter referred to as the "Municipality'), the
CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY, a corporate governmental agency
constituting a body corporate and politic and a public benefit corporation
organized and existing under the laws of the State of New York, having an office
at 217 Montgomery Street, Syracuse, New York 13202 (hereinafter referred to as
the "Agency") and PROJECT ORANGE ASSOCIATES, L.P., a Delaware limited
partnership with an office at 6780 Northern Boulevard, Suite 501, East Syracuse,
New York 13507 (hereinafter referred to as the "Company").
WITNESSETH:
WHEREAS, the New York State Industrial Development Agency Act, being Title
1 of Article 18-A of the General Municipal Law, Chapter 24 of the Consolidated
Laws of the State of New York, as amended (hereinafter referred to as the
"Enabling Act") authorizes the creation of industrial development agencies for
the benefit of the several counties, cities, villages and towns in the State of
New York and empowers such agencies, among other things, to acquire, construct,
reconstruct, lease, improve, maintain, equip and furnish real and personal
property, whether or not now in existence or under construction, which shall be
suitable for, among others, manufacturing, warehousing, research, commercial or
industrial purposes, in order to advance the job opportunities, health, general
prosperity and economic welfare of the people of the State of New York and to
improve their recreation opportunities, prosperity and standard of living; and
WHEREAS, the Enabling Act further authorizes each such agency to lease its
projects, to charge and collect rent therefor, to issue its bonds for the
purpose of carrying out any of its corporate purposes and, as security for the
payment of the principal and redemption price of, and interest on, any such
bonds, to mortgage any or all of its facilities and to pledge the revenues and
receipts therefrom to the payment of such bonds; and
WHEREAS, pursuant to and in accordance with the provisions of the Enabling
Act, Chapter 641 of the 1979 Laws of the State of New York as amended (said
chapter and the Enabling Act being hereinafter collectively referred to as the
"Act") the Agency was created for the benefit of the City of Syracuse and the
inhabitants thereof; and
WHEREAS, the Agency proposes to acquire the interests of the Company in a
ground lease dated February 27, 1990 between the Company as lessee and SYRACUSE
UNIVERSITY as lessor (the "Ground Lease") for a certain parcel of real property
located in the City of Syracuse and more particularly described in Exhibit "A"
attached hereto (the "Land"), and certain related agreements, including
agreements relating to the operation of the existing Syracuse University steam
plant located at the same site (the "Existing Plant"), to lease (and grant an
option to purchase) or sell a certain facility to be constructed thereon
described in the second following paragraph to the Company under a Lease and
Sublease Agreement bearing even date herewith by and between the Agency and the
Company (the "Facility Agreement") and to reassign the interests of the Company
in the Ground Lease and such related agreements back
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<PAGE>
to the Company upon the fulfillment of the Company's obligations under the
Facility Agreement; and
WHEREAS, the Agency proposes to lease the interests of the Company in
certain easements, permits and rights of way, including the easements, permits
and rights of way described in Exhibit "B" attached hereto (collectively, the
"Easement") and to sublease (and grant an option to purchase) or sell to the
Company such interests and certain improvements and structures to be developed
therein, thereon and thereunder, as described in the following paragraph, under
the Facility Agreement and to terminate the interests of the Agency in the
Easement upon fulfillment of the Company's obligations under the Facility
Agreement; and
WHEREAS, the Agency will hold various interests in or with respect to the
Land, the buildings erected thereon (the "Buildings"), the equipment installed
herein (the "Equipment") and the Easement, together with the improvements and
structures to be developed therein, thereon and thereunder (the "Pipeline") for
use by the Company as a steam and electric generation facility, and the Existing
Plant (such interests in or with respect to the Land, Building, Easement,
Equipment, Pipeline and Existing Plant being hereinafter referred to
collectively as the "Facility"); and
WHEREAS, under the present provisions of the Act and Section 412-a of the
Real Property Tax Law of the State of New York, the Agency is not required to
pay taxes or assessments upon any of the property acquired by it or under its
jurisdiction or supervision or control; and
WHEREAS, the Agency has expressed its reluctance to enter into the Facility
Agreement unless the Company shall agree to make payments in lieu of real
property taxes to the Municipality with respect to the portion of the Facility
lying within the boundaries of the Municipality; and
WHEREAS, the Company is desirous that the Agency enter into the Facility
Agreement, and the Company is willing to enter into this Payment in Lieu of Tax
Agreement in order to induce the Agency to enter into the Facility Agreement;
NOW, THEREFORE, in consideration of the matters above recited and in order
to induce the Agency to enter into the Facility Agreement, the parties hereto
formally covenant, agree and bind themselves as follows, to wit:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company does hereby represent and warrant as follows:
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<PAGE>
(a) Power: The Company is a limited partnership duly organized and
-----
validly existing under the laws of the State of Delaware, and by proper action
of its general and limited partners has been duly authorized to execute, deliver
and perform this Agreement.
(b) Authorization: The Company is authorized and has the power to
-------------
enter into this Agreement and the transactions contemplated hereby and to
perform and carry out all covenants and obligations it is to perform under and
pursuant to this Agreement. The Company has duly authorized the execution,
delivery and performance of this Agreement and the consummation of the
transactions herein contemplated. The Company is not prohibited from entering
into this Agreement and discharging and performing all covenants and obligations
it is to perform under and pursuant to this Agreement by (and the execution,
delivery and performance of this Agreement, the consummation of the transactions
contemplated hereby and the fulfillment of and compliance with the provisions of
this Agreement will not conflict with or violate or constitute a breach of or a
default under) the terms, conditions or provisions of its Agreement of Limited
Partnership or any other restriction or any law, rule, regulation or order of
any court or other agency or authority of government, or any contractual
limitation, restriction or outstanding indenture, deed of trust, mortgage, loan
agreement, other evidence of indebtedness or any other agreement or instrument
to which the Company is a party or by which it or any of its property is bound,
and neither the Company's entering into this Agreement nor the Company's
discharging and performing all covenants and obligations on its part to be
performed under and pursuant to this Agreement will be in conflict with or
result in a breach of or constitute (with due notice and/or lapse of time) a
default under any of the foregoing, or result in the creation or imposition of
any lien of any nature upon any of the property of the Company under the terms
of any of the foregoing, and this Agreement is the legal, valid and binding
obligation of the Company enforceable in accordance with its terms.
(c) Governmental Consent: Any and all consents, (including but not
--------------------
limited to the consents required by Section 854(4) of the General Municipal Law)
approvals or authorizations of, or filings, registrations or qualifications
with, any governmental or public authorities on the part of the Company, which
are required as a condition to the execution, delivery or performance of this
Agreement by the Company or as a condition to the validity of this Agreement
have been received or made by the Company and are in full force and effect and
the Company has no notice of any condition with respect to such consents,
approvals, authorizations, filings, registrations or qualifications which would
prevent, preclude or otherwise render impossible the Company's execution,
delivery or performance hereunder.
The Municipality does hereby represent and warrant as follows:
(a) Authorization: The Municipality has secured all approvals of
-------------
appropriate officers, boards and bodies of the Municipality necessary to duly
authorize the
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<PAGE>
execution, delivery and performance of this Agreement by the Municipality and
the performance by the Municipality of its obligations hereunder.
(b) Validity: The Municipality is not prohibited from entering into
--------
this Agreement and discharging and performing all covenants and obligations on
its part to be performed under and pursuant to this Agreement by the terms,
conditions or provisions of any law, any order of any court or other agency or
authority of government, or any agreement or instrument to which the
Municipality is a party or by which the Municipality is bound. This Agreement is
the legal, valid and binding obligation of the Municipality, enforceable in
accordance with its terms.
The Agency does hereby represent and warrant as follows:
(a) Existence and Power: The Agency has been duly established under
-------------------
the provisions of the Act and has the power to enter into the transactions
contemplated by this Agreement and to carry out its obligations hereunder.
(b) Intentions: The Agency presently intends to take an assignment or
----------
lease of the Company's interests under the Ground Lease and the Easement,
participate in financing the construction and equipping of the Facility and
lease or sell the Facility to the Company pursuant to the provisions of the
Facility Agreement.
(c) Authorization: The Agency is authorized and has the corporate
-------------
power under the Act, its by-laws and the laws of the State of New York to enter
into this Agreement and the transactions contemplated hereby and to perform and
carry out all the covenants and obligations on its part to be performed under
and pursuant to this Agreement. By proper corporate action on the part of its
members, the Agency has duly authorized the execution, delivery and performance
of this Agreement and the consummation of the transactions herein contemplated.
(d) Validity: The Agency is not prohibited from entering into this
--------
Agreement and performing all covenants and obligations on its part to be
performed under and pursuant to this Agreement by the terms, conditions or
provisions of the Act, any other law, any order of any court or other agency or
authority of government, or any agreement or instrument to which the Agency is a
party or by which the Agency is bound.
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<PAGE>
ARTICLE II
COVENANTS AND AGREEMENTS
------------------------
(a) Assessment of Facility: Pursuant to Section 874 of the General
----------------------
Municipal Law and Section 412-a of the Real Property Tax Law, the parties hereto
are agreed that upon acquisition of interests in the Facility by the Agency as
provided for in the Facility Agreement, and for so long thereafter as the Agency
shall retain such interests in the Facility, the portion of the Facility lying
within the boundaries of the Municipality shall be assessed by the Municipality
as exempt upon its assessment rolls prepared subsequent to the acquisition by
the Agency of such interests in the Facility. The parties hereto are further
agreed that the Facility shall be entitled to such exempt status on the tax
rolls of the Municipality from the date of the Facility Agreement entered into
by the parties. Pursuant to the provisions of the Facility Agreement, the
Company will be required to pay on behalf of the Agency all taxes and
assessments lawfully levied and/or assessed against the Facility, including
taxes and assessments levied for the current tax year (commencing with the date
of this Agreement) and all subsequent tax years except and to the extent the
Facility shall be entitled to exempt status on the tax rolls of the
Municipality.
(b) Special Assessments: The parties hereto are agreed that the tax
-------------------
exemption extended to the Agency by Section 874 of the General Municipal Law and
Section 412-a of the Real Property Tax Law does not entitle the Agency to
exemption from special assessments and special ad valorem levies. Pursuant to
the Facility Agreement and this Agreement, the Company shall pay on behalf of
the Agency all special assessments and special ad valorem levies lawfully levied
and/or assessed against the Facility.
(c) Manner of Assessment: The Facility will be assessed in the same
--------------------
manner as other similar properties in the City of Syracuse in accordance with
the Real Property Tax Law. As long as the Agency retains the interests in the
Facility or contemplated by the Facility Agreement, such assessment will or may
appear upon the tax rolls under "exempt properties."
(d) Notice of Chance of Assessments: The Municipality shall provide
-------------------------------
the Company with advance notice, in the same manner as it notifies any other
taxpayer in the City of Syracuse, of any change in assessment with respect to
the Facility.
(e) Right to Receive Services: The Municipality shall provide all
-------------------------
services to the Facility which it would have provided if the Facility was
subject to the payment of full taxes and all assessments.
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<PAGE>
The Company shall enter into simultaneously herewith and shall comply
with the terms and conditions of a certain Host Community Agreement among the
Company, the Municipality and the Syracuse Housing Authority, and particularly
shall make each and every payment required thereby.
ARTICLE III
PAYMENTS IN LIEU OF TAXES
-------------------------
As used in this Agreement the following terms have the meanings
set forth below:
"Annual Base PILOT Amount" for 1992 means $500,000 and for any PILOT
------------------------
Year after 1992 means the Annual PILOT Amount payable with respect to the
immediately preceding PILOT Year, including any adjustments to the prior year's
Annual PILOT Amount, as determined in accordance with this Article III.
"Annual Change in Tax Rate" for any PILOT Year means the change (an
-------------------------
increase being a positive change and a decrease being a negative change) in the
Tax Rate in effect for that PILOT Year compared to such Tax Rate in effect for
the immediately preceding PILOT Year. The Annual Change in Tax Rate shall be
calculated to three decimal places. For example, if the Tax Rate for the 1993
PILOT Year were $100.00 per thousand dollars of assessed valuation and the Tax
Rate for the 1994 PILOT Year were $104.50 per thousand, the Annual Change in Tax
Rate for the 1994 PILOT Year would be .045.
"Annual PILOT Amount" for any PILOT Year means the total payments in
-------------------
lieu of taxes payable by the Company to the Municipality with respect to that
PILOT Year pursuant to this Agreement but without regard to any Electric
Interconnect Credits.
"Base Increment Condition" means the First Base Increment
------------------------
Condition or the Second Base Increment Condition.
"Electric Energy Purchaser" means Niagara Mohawk Power
-------------------------
Corporation and its successors or assigns.
"Electric Interconnect Credit" means, for any PILOT Year, an amount
----------------------------
equal to 50% of the amount paid with respect to that PILOT Year, by the Company
to the Electric Energy Purchaser as reimbursement for any special franchise tax
payments with respect to the electrical interconnect between the Facility and
the Electric Energy Purchaser's grid, as more particularly described on Exhibit
"C" hereto.
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<PAGE>
"Electric Tariff Rate" means at any point in time, and for the
--------------------
purposes of determining the occurrence of a Base Increment Condition and the
Annual PILOT Amount, the time weighted Peak and Off Peak Rate payable by the
Electric Energy Purchaser to the Company for one kilowatt hour of electricity
delivered by the Company to the Electric Energy Purchaser, as determined by
reference to the Electric Energy Purchaser's then effective tariff approved by
the Public Service Commission of the State of New York ("PSC") for payment to
qualifying on-site generation suppliers (currently Service Classification No. 6
of PSC No. 207 Electricity and herein, as from time to time amended or replaced,
the "SC-6 Tariff"). The Company shall calculate the Electric Tariff Rate
annually on March 31st and additionally upon the effectiveness, following
approval by the PSC, of a change in the SC-6 Tariff or any replacement or
modification thereof.
The time weighted Peak and Off-Peak Rate shall be determined by
calculating from the SC-6 Tariff the percentage of each twenty-four (24) hour
period to which Peak and Off-Peak rates apply (disregarding any holiday or other
variations provided in the SC-6 Tariff); it being the intent of this provision
that the total of Peak and Off-Peak percentages shall equal one hundred percent.
Each percentage thus determined shall then be multiplied by the SC-6 Tariff rate
per kilowatt hour applicable thereto and to the sum of these two calculations
shall be added the average monthly fuel adjustment per kilowatt hour applicable
to the Company's deliveries to the Electric Energy Purchaser for the immediately
preceding calendar year as determined by reference to the Electric Energy
Purchaser's monthly statements for electricity delivered during the immediately
preceding calendar year. The result shall be the Electric Tariff Rate which
shall be effective until the next succeeding Electric Tariff Rate calculation,
if any.
"First Base Increment Amount" means one hundred thousand dollars
---------------------------
($100,000).
"First Base Increment Condition" means the first time during the PILOT
------------------------------
Term that the Electric Tariff Rate exceeds eight cents per kilowatt hour.
"Guaranteed PILOT Amount" means, for each PILOT Year commencing prior
-----------------------
to Substantial Completion of the Facility, an amount equal to the lesser of the
Annual PILOT Amount for that PILOT Year or Five Hundred Thousand Dollars
($500,000.00), (ii) for the first PILOT Year commencing after Substantial
Completion of the Facility, the sum of (x) Five Hundred Thousand Dollars
($500,000.00) and (y) the product of Five Hundred Thousand Dollars ($500,000.00)
multiplied by the Annual Change in Tax Rate for that PILOT Year (which product
will be a negative number if there was a decrease in the Tax Rate), and (iii)
for each PILOT Year thereafter, the sum of (x) the Guaranteed PILOT Amount for
the preceding PILOT Year and (y) the product of the Guaranteed PILOT Amount for
the preceding PILOT Year multiplied by the Annual Change in Tax Rate for that
PILOT Year (which product will be a negative number if there was a decrease in
the Tax Rate); provided, however, that the Guaranteed PILOT Amount shall not be
--------- -------
less than Five Hundred Thousand Dollars ($500,000.00) for any PILOT Year
commencing after Substantial Completion of the Facility. By way of illustration,
if Substantial Completion of the Facility occurs in 1992 and the Annual Change
in Tax Rate for 1993 is an increase of 6%, for 1994 is an increase of 5%, and
for 1995 is a decrease
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<PAGE>
of 2%, then the Guaranteed PILOT Amount for 1993 will be $530,000.00 ($500,000
plus the product of $500,000 times 6%), the Guaranteed PILOT Amount for 1994
will be $556,500.00 ($530,000 plus the product of $530,000 times 5%), and the
Guaranteed PILOT Amount for 1995 will be $545,370.00 ($556,500 minus the product
of $556,500 times 2%).
"Maximum Electrical Output" means, at any given time, the lower of (x)
-------------------------
the maximum permitted net electric generating capacity of the Facility allowed
under the terms of the Ground Lease and the PSD Permit with respect to the
Facility which was issued by the New York State Department of Environmental
Conservation on December 18, 1989 as hereafter replaced, modified, or amended,
or (y) the actual electric generating capacity of the Facility net of in-
Facility use ("Net Electric Generating Capacity") as determined by an
independent engineer agreeable to the parties.
"PILOT Term" means the period commencing upon the effective date of
----------
the Facility Agreement and ending twenty years after Substantial Completion of
the Facility.
"PILOT Year" means any calendar year during the PILOT Term.
----------
"Second Base Increment Amount" means three hundred thousand
----------------------------
dollars ($300,000).
"Second Base Increment Condition" means the first time during the
-------------------------------
PILOT Term that the Electric tariff rate exceeds ten cents per kilowatt hour.
"Substantial Completion" means the date on which the Facility delivers
----------------------
both steam to Syracuse University and electricity to the Electric Energy
Purchaser.
"Tax Rate" shall mean, for any given year, the combined City of
--------
Syracuse, County of Onondaga, City School District and County Water District,
real property tax rate used for calculating other combined City/County real
property taxes owed by private owners of real property situated in the City of
Syracuse, New York during that year.
(a) Generally: The Annual PILOT Amount for 1990 shall be zero and the
---------
Annual PILOT Amount for 1991 shall be $25,000. The Annual PILOT Amount with
respect to each PILOT Year after the 1991 PILOT Year shall equal the sum of (i)
the Annual Base PILOT Amount for that PILOT year and (ii) the product of the
amount in clause (i) multiplied by the Annual Change in Tax Rate for that PILOT
Year (which product will be a negative number if there was a decrease in the Tax
Rate); provided, however, that until Substantial Completion of the Facility the
--------- -------
Annual PILOT Amount for each PILOT year after 1991 shall be an amount equal to
the product of (1) the sum of (x) Five Hundred Thousand Dollars ($500,000) and
(y) the product of Five Hundred Thousand Dollars ($500,000) multiplied by the
Annual Change in Tax Rate; multiplied by (2) the percentage to which Facility
construction is complete on December 31st of the previous PILOT Year. Such
percentage of completion shall be determined by the
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<PAGE>
Municipality based upon inspection of the Facility site and review of Company
records related to the construction thereof.
The Annual PILOT Amount will be further adjusted as provided in
paragraphs (b)-(e) of this Section 3.02.
As soon as practicable after a change in the SC-6 Tariff becomes
effective the Company shall provide the Municipality with (i) the Company's
calculation of the Electric Tariff Rate and (ii) a copy of the portions of the
SC-6 Tariff used by the Company in calculating the Electric Tariff Rate. In
March of each year the Company shall provide the Municipality with copies of the
Electric Energy Purchasers monthly statements for the immediately preceding
calendar year.
(b) Changes in Electric Tariff Rate: If any change in the Electric
-------------------------------
Tariff Rate becomes effective during the PILOT Year, the Annual PILOT Amount for
that year will be adjusted upwards (for an increase in the Electric Tariff Rate)
or downwards (for a decrease in the Electric Tariff Rate) as follows:
(1) For each change of one cent per kilowatt hour in the Electric
Tariff Rate the Annual PILOT Amount for that year will be adjusted (i) Seventy-
five Thousand Dollars ($75,000) to the extent that the change causes the
Electric Tariff Rate to fluctuate between six cents per kilowatt hour and eight
cents per kilowatt hour, (ii) One Hundred and Fifty Thousand Dollars ($150,000)
to the extent that the change causes the Electric Tariff Rate to fluctuate
between eight cents per kilowatt hour and ten cents per kilowatt hour, and (iii)
Three Hundred Thousand Dollars ($300,000) to the extent that the change causes
the Electric Tariff Rate to fluctuate in a range above ten cents per kilowatt
hour; provided, that for any increment of increase or decrease in the Electric
--------
Tariff Rate of less than one full cent remaining after application of provisions
(b)(l)(i) and (ii), there shall be a pro rata adjustment at the rate per
--- -----
kilowatt hour applicable to the next higher or lower full cent of Electric
Tariff Rate change; and provided, further, that if the change first becomes
--------- -------
effective on a day ("the Effective Day") after the first day of any PILOT Year,
the amount of the adjustment to the Annual PILOT Amount for that PILOT year
resulting from that change shall equal the product of the amount calculated as
provided above multiplied by a fraction having a numerator equal to the number
of days in that PILOT Year remaining from and after the Effective Day and a
denominator equal to 365. Any increase pursuant to this paragraph 3.02(b)(l) to
the Annual PILOT Amount for any PILOT Year in which the Electric Tariff Rate is
increased shall be payable, subject to Article IV, on the earlier of January 31
of the following PILOT Year or 30 days after the Company receives a bill for
such increase from the Municipality. Any decrease pursuant to this paragraph
3.02(b)(l) to the Annual PILOT Amount for any PILOT Year in which the Electric
Tariff Rate is decreased shall be credited against the payments due from the
Company to the Municipality hereunder on the next quarterly payment dates until
the entire amount of the credit has been used.
(2) If there is any change in the Electric Tariff Rate which becomes
effective after January 1 of a PILOT year (the "reference PILOT Year"), then the
amount determined by subtracting (i) the total adjustments to the Annual PILOT
Amount for the reference PILOT Year calculated pursuant to paragraph 3.02(b)(1)
from (ii) the amount by which
- ----
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<PAGE>
the Annual PILOT Amount for the reference PILOT Year would have been adjusted if
the net change between the Electric Tariff Rate in effect on December 31 of the
immediately preceding PILOT Year and the Electric Tariff Rate in effect on
December 31 of the reference PILOT Year had been effective on January 1 of the
reference PILOT Year and no other changes in the Electric Tariff Rate had
occurred during the reference PILOT Year, shall be added to the Annual PILOT
Amount for the PILOT Year immediately following the reference PILOT Year. If
such difference shall be a negative number, it shall nonetheless be added to the
Annual PILOT Amount for the next PILOT Year, in which case it will result in a
reduction of such Annual PILOT Amount.
(3) The following are illustrations of how the parties intend that the
adjustments described in the preceding paragraphs (1) and (2) shall be
calculated (all four examples disregard any adjustments to the Annual PILOT
Amount which are required by paragraphs 3.02(c), (d), or (e)): (i) if the
Electric Tariff Rate at the beginning of a PILOT Year is $.06/kwh and effective
July 1 of that PILOT Year the Electric Tariff Rate is increased to $.075/kwh,
then the Annual PILOT Amount for that PILOT Year would be increased by
$56,712.33 (1.5 x $75,000 x 184/365 = $56,712.33), and if the Annual PILOT
Amount for that PILOT Year was $556,712.33 then the Annual Base PILOT Amount for
the next PILOT Year would, by operation of paragraph 3.02(b)(2), be increased to
$612,500; (ii) if the Electric Tariff Rate is increased from $.07/kwh to
$.0925/kwh effective January 1 of a PILOT Year, then the Annual PILOT Amount for
that PILOT Year will be increased by S262,500 (1 x $75,000 + (1.25 x $150,000))
and the Annual PILOT Amount for that PILOT Year would become the Annual Base
PILOT Amount for the next PILOT Year; (iii) if the Electric Tariff Rate on
January 1 of a PILOT Year is $.85/kwh and effective April 1 of that PILOT Year
is increased to $.1025/kwh, then the Annual PILOT Amount for that PILOT Year
will be increased by $226,027.38 ((1.5 x $150,000) + (.25 x $300,000) x
275/365), and if the Annual PILOT Amount for that PILOT Year was $950,000 then
the Annual Base PILOT Amount for the next PILOT Year would, by operation of
paragraph 3.02(b)(2), be increased to $1,025,000; and (iv) if the Electric
Tariff Rate on January 1 of a PILOT Year is $.1025/kwh and effective April 1 of
that PILOT Year is decreased to $.085/kwh, then the Annual PILOT Amount for that
PILOT Year will be decreased by $226,027.38 ((-1.5 x $150,000)+ (-.25 x
$300,000) x 275/365), and if the Annual PILOT Amount for that year was $800,000
then the Annual Base PILOT Amount for the next PILOT Year would, by operation of
paragraph 3.02(b) (2), be decreased to $725,000.
(c) Base Increment Adjustments: In the PILOT Year in which a Base
----------------------------
Increment Condition occurs, the Annual PILOT Amount for that PILOT Year shall be
increased by an amount equal to the product of (i) the First or Second Base
Increment Amount, whichever is applicable, multiplied by (ii) a fraction having
a numerator equal to the number of days remaining in that PILOT Year after the
applicable Base Increment Condition occurred and a denominator equal to 365. Any
increase pursuant to this paragraph 3.02(c)to the Annual PILOT Amount for any
PILOT Year during which a Base Increment Condition occurs shall be payable,
subject to Article IV, on the earlier of January 31 of the following PILOT Year
or 30 days after the Company receives a bill for such increase from the
Municipality. The excess, if any, of the First or Second Base Increment Amount,
whichever is applicable, over the increase to the Annual PILOT Amount pursuant
to this paragraph 3.02(c) for the PILOT Year in which a Base
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<PAGE>
Increment Condition occurs shall be added to the Annual PILOT Amount for the
next PILOT Year. The Annual PILOT Amount for the PILOT Year in which a Base
Increment Condition occurs, as adjusted by the addition of the excess pursuant
to the preceding sentence, shall become the Annual Base PILOT Amount for the
following PILOT Year.
(d) Exhaustion of Initial Gas Supply: The Annual Base PILOT Amount
--------------------------------
for the PILOT Year which is the later of (x) the year 2008 or (y) the PILOT Year
during which the Company's initial prepaid gas supply from Noranda, Inc.
pursuant to a Restated Gas Sales and Purchase Agreement dated March ____, 1991
(the "Gas Supply Agreement"), is exhausted, shall be adjusted by subtracting
from such amount 50% of the portion, if any, of the Annual Base PILOT Amount
for that PILOT Year that is attributable to the occurrence of the Second Base
Increment Condition (that is 50% of the Second Base Increment Amount as adjusted
for changes in the Tax Rate subsequent to the PILOT Year, if ever, in which the
Second Base Increment Condition occurred); provided, however, that the
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adjustment provided in this paragraph 3.02(d) shall not be made if the Company
shall have entered into an extension or replacement of the Gas Supply Agreement
at the same or more favorable cost per delivered decatherm.
(e) Increased Generating Capacity: In the event that at any time
-----------------------------
during the PILOT Term the Maximum Electrical Output is increased above 80
Megawatts (and this Agreement is not terminated pursuant to Section 9.01), then
the Annual PILOT Amount for that PILOT Year will be increased by an amount equal
to the product of (i) the Annual PILOT Amount for that PILOT Year as calculated
before giving effect to the adjustment provided for in this paragraph multiplied
by (ii) a fraction having a numerator equal to the excess of (A) the new Maximum
Electrical Output over (B) the higher of 80 megawatts and the Maximum Electrical
Output immediately prior to such increase, and a denominator equal to 80
megawatts; provided, however, that if the Maximum Electrical Output is increased
--------- -------
after the first day of a PILOT Year, then the amount of the adjustment to the
Annual PILOT Amount for that PILOT Year shall equal the product of the amount
calculated as provided above multiplied by a fraction having a numerator equal
to the remaining number of days in that PILOT Year and a denominator equal to
365. The Annual Base PILOT Amount for any PILOT Year following a PILOT Year
during which the Maximum Electrical Output was first increased above 80
megawatts, shall be calculated as if the Maximum Electrical Output was increased
on January 1 of the PILOT Year in which the Maximum Electrical Output was
increased. By way of illustration, assuming that the Annual PILOT Amount for the
1995 PILOT Year were $1,000,000 (as calculated prior to June 30 of that year)
and that the Maximum Electrical Output is increased from 80 megawatts to 100
megawatts on June 30 of that PILOT Year, then by operation of this paragraph
3.02(e) the Annual PILOT Amount for the 1995 PILOT Year would be increased by
$125,000 ($1,000,000 x (100-80)/80 x 154/365) but the Annual Base Amount for the
1996 PILOT Year would be $1,250,000 calculated based on an adjustment due to the
increase in the Maximum Electrical Output for the 1995 PILOT Year of $250,000,
because for this purpose the increase in Maximum Electrical Output would be
assumed to have occurred on January 1, 1995, not on June 30, 1995, and thus
there would be no allocation of the adjustment based on the number of remaining
months in 1995.
-11-
<PAGE>
ARTICLE IV
METHOD OF MAKING PILOT PAYMENTS
-------------------------------
As used in this Agreement the following terms have the meanings
specified:
"Agent" means one or more Banks or other financial institutions or
-----
other entities designated to act as agent for the Banks with respect to Senior
Debt, which shall be identified to the Agency by notice from the Company and the
Agent.
"Bank" or "Banks" means the lenders who advance Senior Debt or to whom
---- -----
Senior Debt is from time to time owing as assignee of a lending bank.
"Construction Loan" means that certain construction and term loan
-----------------
indebtedness of the Company to one or more banks secured by a mortgage or other
appropriate security interest in the Agency's interest in the Facility, 100% of
the proceeds of which are designated for use in connection with the
construction, development, improvement, expansion, alteration, maintenance,
repair, replacement, operation, or for costs of the development, of the Facility
or the Existing Plant or any facilities which are appurtenant to or are a
necessary and integral part of the operation of the Facility or the Existing
Plant, including the establishment of appropriate reserves required by the
banks, capitalized interest and other reasonable and necessary financing costs,
having an initial maturity of approximately sixteen (16) years from Substantial
Completion of the Facility.
"Deferred Obligation" means any unpaid balance of the amounts
-------------------
calculated pursuant to Sections 4.03(b) and 4.03(d).
"Mandatory Costs" means, with respect to each calendar quarter during
---------------
the PILOT term, the aggregate of the amounts which are due and payable or
required to be set aside for payment by the Company during such quarter pursuant
to the terms of the governing instruments or transactions and are actually paid
or properly set aside for payment during such quarter, for each of the
following:
(i) Installments of debt service and other charges required to be paid
in accordance with the terms of the instruments governing Senior Debt, including
payments to any reserve fund required by the terms of Senior Debt (whether or
not the proceeds of such reserve fund may subsequently be available for payment
of principal and interest) but excluding amounts due solely as a result of the
exercise by any holder of Senior Debt of its rights to accelerate the maturity
of all or part of the principal thereof by reason of the occurrence of a default
or an event of default under the terms of the instruments governing such Senior
Debt,
(ii) All other reasonable and necessary costs of the operation and
maintenance of the Facility, including insurance premiums and amounts owing to
suppliers and
-12-
<PAGE>
transporters of consumables with respect to current deliveries, but excluding,
-------------
(1) Subordinated PILOT Obligations, (2) bonuses to any operators of the
Facility, (3) user charges payable to Syracuse University with respect to the
Existing Plant, (4) any management fees due to G.A.S. or Adam H. Victor, or any
entity controlled by, under common control with or which controls either G.A.S.
or Adam H. Victor, or any other similar payments or fees, and (5) all other
charges for the operation or administration of the Facility not expressly
identified in this definition which are by their terms, directly or indirectly,
subject to subordination or deferral to the extent necessary to permit the prior
payment of Senior Debt, and
(iii) All amounts required to be paid or set aside for payment of
real property taxes and with respect to the Facility, payments to municipal
authorities in lieu thereof (including the Guaranteed PILOT Amount to be paid
pursuant to this Agreement) or with respect to gross receipts, franchise or
other similar taxes, but excluding any Subordinated Obligations, and
(iv) All amounts required to be paid for the Company's actual
reasonable expenses of administration and overhead (other than to or for the
benefit or profit of G.A.S., Adam H. Victor or any entity controlled by, under
common control with, or which controls either G.A.S. or Adam H. Victor),
including payment or reimbursement of costs and expenses incurred by the
managing general partner of the Company to the extent payment of such expenses
is permitted under the instruments governing Senior Debt prior to the payment of
installments of debt service on Senior Debt.
"Net Cash Flow" shall mean, with respect to each calendar quarter, the
-------------
excess of the gross revenues directly or indirectly generated by the Company
from operation or ownership of the Facility, or otherwise (including without
limitation all revenues derived by the Company from the sale of steam to
Syracuse University), over the Mandatory Costs actually paid or properly set
aside for payment during such quarter.
"Senior Debt" means the Construction Loan, plus additional debt in the
-----------
aggregate outstanding principal amount on any date of not more than twenty five
million dollars ($25,000,000) incurred by the Company for the sole purpose of
financing the debt service on the Construction Loan, or paying Mandatory Costs,
provided, however, that Senior Debt shall include debt incurred by the Company
- --------- -------
upon a refinancing or extension of the payment term of the Construction Loan,
whether or not the refinancing or extension is arranged with the original
lending institution, so long as the aggregate amounts payable in each quarter
for installments of debt service which are Mandatory Costs do not exceed the
amounts that would have been payable in such quarter for installments of debt
service on the Construction Loan if such refinancing or extension had not
occurred. The principal amount of the Construction Loan shall not exceed two
hundred thirty five million dollars ($235,000,000). The principal amount of the
Senior Debt after equity contribution, however, shall not exceed Two Hundred
Million Dollars ($200,000,000).
"Subordinated PILOT Amount" means, with respect to any calendar
-------------------------
quarter within any PILOT Year, the excess, if any, of that portion of the Annual
PILOT Amount
-13-
<PAGE>
for that PILOT Year which is due in respect of that calendar quarter in excess
of 25% of the Guaranteed PILOT Amount for that PILOT Year.
"Subordinated PILOT Obligations" means Subordinated PILOT Amounts
------------------------------
and Deferred Obligations.
Subject to the deferral provisions of Section 4.03, the Company agrees
to pay to the Municipality the annual PILOT Amount for each PILOT Year in four
equal installments (except to the extent that adjustments are made to the Annual
PILOT Amount during a PILOT Year) which shall be due and payable in arrears with
respect to the prior quarter on April 15, July 15, and October 15 of each PILOT
Year and on January 15 of the following PILOT year. All payments shall be in
lawful money of the United States of America. The Company shall be entitled to
receive receipts for all such payments.
Section 4.03. Deferral of Subordinated PILOT Amounts
(a) Priority: The Subordinated PILOT Obligations shall be subordinate
--------
and junior in right of payment to the Senior Debt on the terms and subject to
the conditions stated in this Section 4.03.
(b) Payment of Subordinated PILOT Amounts: Except as otherwise
-------------------------------------
provided in this Section 4.03, Subordinated PILOT Amounts shall be due and
payable to the fullest extent of Net Cash Flow (as determined separately for
each calendar quarter) after, and subject only to, the prior payment of any
Deferred Obligations and interest thereon, as further provided in this Section
4.03. In the event that the balance of Net Cash Flow remaining after payment of
Deferred Obligations and interest thereon is less than the Subordinated PILOT
Amount, the obligation to pay the difference (a "Deferred Obligations") shall be
deferred and such obligation shall be payable as provided in paragraph (c) of
this Section 4.03.
(c) Payment of Deferred Obligations: The aggregate of all Deferred
-------------------------------
Obligations shall be due and payable quarterly on the same dates as installments
of the Annual PILOT Amount, to the extent of the first available Net Cash Flow
after the payment of current interest on Deferred Obligations, and, in all
events, shall be paid in full upon the last day of the initial PILOT Term.
(d) Interest on Deferred Obligations: Interest on Deferred Obligations
--------------------------------
shall accrue at the rate provided for in Section 10.02 and the interest so
accrued as of the end of each calendar year shall be added to the balance of
Deferred Obligations. Interest on Deferred Obligations shall be due and payable
quarterly (on the same dates as installments of the Annual PILOT Amount) to the
extent of the first available Net Cash Flow prior to the payment of Deferred
Obligations and in all events shall be paid in full not later than the last day
of the initial PILOT Term.
-14-
<PAGE>
(e) Company to Provide Accounting Statement: So long as any
---------------------------------------
Subordinated PILOT Amounts are accrued and owing or any Deferred Obligations are
outstanding, then, on or before March 31st of each PILOT Year, the Company shall
furnish or cause to be furnished to the Municipality a statement prepared by a
nationally recognized firm of independent certified public accountants
designated by the Company, setting forth, in reasonable detail, a computation of
Net Cash Flow for the preceding year by quarters and the application thereof.
(f) No Payment of Other than Mandatory Costs: If and for so long as
----------------------------------------
any Deferred Obligations are outstanding, the Company shall not make any
distribution or payment otherwise than on account of Mandatory Costs.
(g) Limitation on Deferred Payment of Subordinated Amounts: The
--------------------------------------------------------
provisions of this Section 4.03 and the Municipality's agreement to defer
receipt of Subordinated PILOT Amounts shall be effective from the date hereof
until the first to occur of any of the following events:
(i) The expiration of the PILOT Term;
(ii) The Senior Debt is paid or otherwise satisfied;
(iii) The Electric Tariff Rate first equals or exceeds $.085;
(iv) The Maximum Electrical Output first equals or exceeds 80
Megawatts per hour; or
(v) The transfer by the Company of its rights under the
Agreement (otherwise than pursuant to or in lieu of the
exercise by any holder of Senior Debt of any right of
assignment or foreclosure available under the instruments
governing the Senior Debt).
From and after occurrence of the first to occur of the foregoing events ("the
Subordination Termination Event") (i) the right of the Company hereunder to
defer payment of portions of subsequent Annual PILOT Amounts shall terminate and
be of no further force and effect, so that all Annual PILOT Amounts then or
thereafter accrued and owing (other than any such amounts constituting Deferred
Obligations as of the time of the Subordination Termination Event) shall be due
and payable quarterly, as herein provided; and (ii) any remaining Net Cash Flow
(as calculated without adjustment for Subordinated PILOT Amounts) shall be
applied by the Company first to the interest on Deferred Obligations and
thereafter to the principal of Deferred Obligations.
(h) Rights of Senior Debt to Enforce Subordination: No present or
----------------------------------------------
future holder of any Senior Debt shall be prejudiced in the right to enforce
subordination of any Subordinated PILOT Obligations by any act or failure to
act on the part of the Company.
-15-
<PAGE>
(a) Company's Right to Electric Interconnect Credit The Company shall
-----------------------------------------------
be entitled to receive for each PILOT Year an Electric Interconnect Credit which
shall be available as a credit against the Annual PILOT Amounts due hereunder,
in accordance with this Section 4.04.
(b) Method of Claiming Credits: To claim the Electric Interconnect
--------------------------
Credit, the Company shall provide to the Municipality a copy of the Electric
Energy Purchaser's invoice to the Company reflecting its charge for the special
franchise tax bill applicable to the electric connection between the Facility
and the Electric Energy Purchaser's grid (the "Facility Electric Interconnect")
and evidence of the Company's payment thereof. Such payment by the Company may
be effected by a credit or deduction taken by the Electric Energy Purchaser
against charges owing by it for electricity purchased from the Company. The
Municipality's approval of the Electric Interconnect Credit amount for each year
shall be conclusively presumed unless the Municipality objects in writing within
30 days of the date on which such invoice with respect to that year is received
by the Municipality.
(c) How and When Credit is Applied: The amount of each Electric
------------------------------
Interconnect Credit shall be equal to fifty percent (50%) of the special
franchise tax charges actually paid by the Company for the Facility Electric
Interconnect. The Electric Interconnect Credit shall accrue each year as of the
time the payment of such special franchise tax charges is made by the Company or
credited by the Electric Energy Purchaser against amounts otherwise payable by
it to the Company. From and after the time of its accrual, the Electric
Interconnect Credit shall be applied on each quarterly date on which any
installment of the Annual PILOT Amount is due, first to reduce any Subordinated
PILOT Amount; then to pay interest on Deferred Obligations; then to reduce
Deferred Obligations; then to reduce the Guaranteed PILOT Amount, but not (i) by
an amount which would cause the aggregate of such reductions for any PILOT Year
to exceed 36% of the total Electric Interconnect Credit for that PILOT Year or
(ii) to a level below $125,000 for any quarter; and finally, any balance shall
be carried forward and shall be available for application on the next quarterly
date, in the same order and subject to the same limitations. In no event shall
the Municipality or the Agency be obligated to reimburse the Company if the
Electric Interconnect Credit has not been applied in full during the term of
this Agreement in accordance with the provisions of this Section 4.04(c).
ARTICLE V
SECURITY
--------
(a) In the following events:
-----------------------
(i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other
-16-
<PAGE>
liquidation, reorganization, readjustment, composition
or other similar proceeding relating to the Company,
or its property,
(ii) any proceeding for the liquidation, dissolution, or
any winding up of the Company, voluntary or
involuntary, whether or not involving insolvency or
bankruptcy proceedings,
(iii) any assignment by the Company for the benefit of
creditors, or
(iv) any other marshalling of the assets of the Company,
then, all Senior Debt (including any interest thereon accruing at the default
rate after the commencement of any such proceedings and any additional interest
that would have accrued thereon but for the commencement of such proceedings,
whether or not in each case such interest is allowed as a claim in such
proceedings) shall first be paid in full before any payment or distribution,
whether in cash, securities or other property, shall be made with respect to any
Subordinated PILOT Obligations.
(b) Payments to Senior Debt: Any payment or distribution whether in
-----------------------
cash, securities or other property, which would otherwise (but for these
subordination provisions) be payable or deliverable in respect of Subordinated
PILOT Obligations shall be paid or delivered directly to the holders of Senior
Debt in accordance with the priorities then existing among such holders until
all Senior Debt (including any interest thereon accruing at the default rate
after the commencement of any such proceedings) shall have been paid in full.
(c) Transfer of Payments Received on Behalf of Senior Debt: From and
------------------------------------------------------
after Agency or Municipality receipt of notice of an event of default with
regard to Senior Debt, if any payment or distribution of any character or any
security, whether in cash, securities or other property, shall be received by
any person on account of Subordinated PILOT Obligations in contravention of any
of the terms hereof and before all Senior Debt shall have paid in full, such
payment or distribution or security shall be received in trust for the benefit
of, and shall be paid and delivered and transferred to, the holders of Senior
Debt at the time outstanding in accordance with priorities then existing among
such holders for application to the payment of all Senior Debt remaining unpaid,
to the extent necessary to pay all Senior Debt in full. In the event of the
failure of any person receiving payment on account of any Subordinated PILOT
Obligations to endorse or assign any such payment, distribution or security,
each holder of Senior Debt is hereby irrevocably authorized to endorse or sign
the same.
In addition to any other provisions of this Agreement pertaining to
the priority of payments to the Municipality, upon payment in full of Senior
Debt the Municipality
-17-
<PAGE>
shall be subrogated to all of the rights of any holders of Senior Debt to
receive any further payments or distributions applicable to Senior Debt until
such time as the Subordinated PILOT Obligations shall have been paid in full,
and, for the purposes of the Municipality's subrogation hereunder, payments or
distributions received by the holders of Senior Debt of cash, securities or
other property to which the Municipality is entitled under these subrogation
provisions shall, as between the Company and its creditors other than the
holders of Senior Debt, on the one hand, and the Municipality, on the other, be
deemed to be payment or distribution by the Company to or on account of
Subordinated PILOT Obligations.
ARTICLE VI
DEFAULT/REMEDIES
----------------
Any one or more of the following events shall constitute an event of
default under this Agreement, and the terms "Event of Default" or "Default"
shall mean, whenever they are used in this Agreement, any one or more of the
following events:
(a) Failure to Pay Amounts Due During Subordination: Prior to the
-----------------------------------------------
occurrence of the Subordination Termination Event, any failure of the Company to
pay to the Municipality within thirty (30) days of the date on which payment is
due and the continuance of such failure for thirty (30) days after written
notice by the Municipality to the Company, any portion of (i) the Guaranteed
PILOT Amount, (ii) any Subordinated PILOT Amount (unless payment of that amount
shall be deferred in accordance with Section 4.03), or (iii) any payment
required under the Host Community Agreement referenced in Section 2.02.
(b) Failure to Pay Amounts Due After Termination of Subordination:
-------------------------------------------------------------
Subsequent to the occurrence of the Subordination Termination Event, any failure
of the Company to pay to the Municipality or the Agency within thirty (30) days
of the date on which payment is due and the continuance of such failure for
thirty (30) days after written notice by the Municipality to the Company, any
amount required to be paid by the Company to the Agency or Municipality under
this Agreement or any payment required under the Host Community Agreement
referenced in Section 2.02.
(c) Failure to Perform: Failure of the Company to observe and perform
------------------
any other covenant, condition or agreement on its part to be observed and
performed (other than as referred to in paragraph (a) or (b) above) and the
continuance of such failure for a period of thirty (30) days after written
notice by the Municipality to the Company specifying the nature of such failure
and requesting that it be remedied (unless the failure is not susceptible of
being cured within 30 days, in which case there shall be no default arising from
such failure so long as the Company takes all reasonable steps to cure such
failure within 30 days after such notice and is diligently continuing to take
appropriate steps to cure such failure).
-18-
<PAGE>
(d) False Representation: Any warranty or representation by or on
--------------------
behalf of the Company contained in this Agreement shall prove to have been false
or incorrect in any material respect on the date when made.
(e) Exercise of Remedies by Senior Debt: Exercise by any holder of
-----------------------------------
Senior Debt of any right of assignment or foreclosure of the Facility or of any
other remedy which causes the Company to transfer, assign or terminate its
interests in the Facility as a consequence of any default or event of default on
the part of the Company under the instruments governing the Senior Debt, unless
such transfer, assignment or foreclosure complies with the requirements of
Section 8.01(b).
(f) Liquidation, Bankruptcy, and Insolvency: The Company shall file a
---------------------------------------
voluntary petition in bankruptcy or shall be adjudicated a bankrupt or
insolvent, or shall file any petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy code or any other
present or future federal, state or other bankruptcy or insolvency statute or
law, or shall seek, consent to or acquiesce in the appointment of any bankruptcy
or insolvency trustee, receiver or liquidator of all or any substantial part of
its properties or the Facility.
(a) Termination of Right of Deferral: Whenever an Event of Default
--------------------------------
shall occur as set forth in Section 6.01(a), and such default shall not have
been cured following notice as provided for in Section 8.01(a), at the option of
the Municipality, effective upon written notice by the Municipality to the
Company and the Agent, the Company's right to defer payment of Subordinated
PILOT Amounts in accordance with Section 4.03(b) shall terminate and be of no
further effect, but the exercise of the remedy described in this paragraph (a)
shall not accelerate the maturity of, or otherwise affect the nature of the
Company's obligation to pay Deferred Obligations and interest thereon in
accordance with Sections 4.03(c) and 4.03(d).
(b) Acceleration of Deferred Obligations: Whenever an Event of
------------------------------------
Default shall occur as set forth in Section 6.01(b), and such default shall not
have been cured following notices as provided in Section 8.01(a), or an Event of
Default shall occur as set forth in Section 6.01 (c), (d), (e) or (f) the
Municipality may (i) at its election, effective upon written notice by the
Municipality to the Company and the Agent, declare all Deferred Obligations
together with the accrued interest thereon to be immediately due and payable and
terminate the Company's rights to limit payment of previously Deferred
Obligations and the accrued interest thereon to Net Cash Flow, in accordance
with Sections 4.03(c) and 4.03(d), subject nevertheless to the continuing
subordination of Deferred Obligations to the prior payment in full of Senior
Debt to the extent and in the manner provided in Section 4.03, (ii) take
whatever action at law or in equity may appear necessary or desirable to collect
the amount then in default or to enforce the performance and observance of the
obligations, agreements and covenants of the Company under this Agreement,
subject always to the rights of the holders of Senior Debt to receive prior
payment in full of the Senior Debt, or (iii) request that the Agency comply with
the provisions of Section 6.03 terminating this Agreement.
-19-
<PAGE>
Whenever any Event of Default shall have occurred with respect to this
Agreement, except a default pursuant to Section 6.01(a), and shall be
continuing, the Agency may, and upon the written request of the Municipality
shall, record a deed and any other necessary documents (including an assignment
of lease with respect to the Ground Lease) in the appropriate County Clerk's
Office conveying the Land, the Building, and/or the Equipment to the Company or
such other person or persons as may be required. The recording of the deed and
any other documents shall constitute delivery of such to the Company. In order
to facilitate transfer of title, the Company hereby appoints the Chairman of the
Agency as its agent, with full authority to execute and deliver all documents
necessary to effect the transfer of title to the Facility from the Agency to the
Company. Notwithstanding anything to the contrary in the foregoing, the Company
and the Agency agree that in the event of the occurrence of an Event of Default
specified in Section 6.01(f), the transfer of title to the Facility from the
Agency to the Company shall be deemed to occur simultaneously with the happening
of such event (and without prior notice to the Company) and the deed and other
documents necessary to evidence such transfer shall be executed, delivered and
recorded forthwith, with copies to the Company and the Municipality.
If the Company should default in performing any of its obligations,
covenants and agreements under this Agreement and the Agency or the Municipality
should employ attorneys or incur other expenses for the collection of any
amounts payable hereunder or for the enforcement of performance or observance of
any obligation or agreement on the part of the Company herein contained, the
Company agrees that it will, on demand therefor, pay to the Agency or the
Municipality, as the case may be, the reasonable fees and disbursements of such
attorneys and such other reasonable expenses so incurred.
Each notice by the Municipality to the Company pursuant to any
provision of this Article VI shall also be given to the Agent.
ARTICLE VII
LIMITED OBLIGATION OF THE PARTIES
---------------------------------
(a) No Recourse: All covenants, stipulations, promises, agreements and
-----------
obligations of the Agency contained in this Agreement shall be deemed to be the
covenants, stipulations, promises, agreements and obligations of the Agency and
not of any member,
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<PAGE>
officer, agent, servant or employee of the Agency in his or her individual
capacity, and no recourse under or upon any obligation, covenant or agreement
contained in this Agreement, or otherwise based or in respect of this Agreement,
or for any claim based thereon or otherwise in respect thereof, shall be had
against any past, present or future member, officer, agent, servant or employee,
as such, of the Agency or any successor public benefit corporation or political
subdivision or any person executing this Agreement on behalf of the Agency,
either directly or through the Agency or any successor public benefit
corporation or political subdivision or any person so executing this Agreement.
It is expressly understood that this Agreement is a corporate obligation, and
that no such personal liability whatever shall attach to, or is or shall be
incurred by, any such member, officer, agent, servant or employee of the Agency
or of any successor public benefit corporation or political subdivision or any
person so executing this Agreement under or by reason of the obligations,
covenants or agreements contained in this Agreement or implied therefrom. Any
and all such personal liability of, and any and all such rights and claims
against, every such member, officer, agent, servant or employee under or by
reason of the obligations, covenants or agreements contained in this Agreement
or implied therefrom are, to the extent permitted by law, expressly waived and
released as a condition of, and as a consideration for, the execution of this
Agreement.
(b) Limited Obligation of Agency: The obligations and agreements of
----------------------------
the Agency contained herein shall not constitute or give rise to an obligation
of the State of New York or the City of Syracuse, New York, and neither the
State of New York nor the City of Syracuse, New York shall be liable thereon.
Furthermore, such obligations and agreements shall not constitute or give rise
to a general obligation of the Agency, but rather shall constitute limited
obligations of the Agency payable solely from the revenues of the Agency derived
and to be derived from the lease, sale or other disposition of the Facility.
(c) Further Limitation: Except as provided in Section 6.03, the Agency
------------------
shall not be obligated to take any action pursuant to any provision hereof
unless (i) the Agency shall have been requested to do so in writing by the
Municipality or the Company and (ii) if compliance with such request is
reasonably expected to result in the incurrence by the Agency (or any of its
members, officers, agents, servants or employees) of any liability, fees,
expenses or other costs, the Agency shall have received from the Company
security or indemnity reasonably satisfactory to the Agency for protection
against all such liability, and for the reimbursement of all such fees, expenses
and other costs.
Anything in this Agreement to the contrary notwithstanding, none of
the Municipality, the Agency or their successors and assigns, shall have any
claim, remedy or right whatsoever to proceed (at law or in equity) against any
of the partners of the Company (including, without limitation, any past, present
or future partner of the Company) for the payment of any sums owing under or on
account of this Agreement, or for the payment or performance of any liability
arising under this Agreement (but excluding sums recoverable from partners of
the Company under applicable law); and the Municipality and the Agency, by
entering into this Agreement, hereby waive and release any liability of the
partners of the
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<PAGE>
Company (including, without limitation, any past, present or future partners of
the Company) for and on account of such indebtedness or such liability,
provided, however, that nothing herein contained shall limit, restrict or impair
- --------- -------
the rights of the Municipality or the Agency to bring suit and obtain judgment
against the Company (provided that no partner of the Company shall have any
personal liability on such judgment).
ARTICLE VIII
RIGHTS OF BANKS
---------------
(a) Notice Prior to Termination: The Municipality agrees that,
---------------------------
notwithstanding any right it may have under this Agreement or otherwise, at law
or in equity, it shall not terminate this agreement or exercise any other right
or remedies by reason of an Event of Default arising under Section 6.01(a), (b),
(c) or (e), unless it shall have given the Agent at least 30 days' prior written
notice (15 days in the case of an Event of Default arising under Section
6.01(a)) of its intent to terminate this Agreement or exercise such other
remedies and the Agent or the Banks shall not have cured the condition giving
rise to such right of termination within such time period.
(b) Waiver of Consent to Foreclosure: Foreclosure of the Facility
---------------------------------
pursuant to the exercise of any right of the Agent or the Banks under Senior
Debt, or any sale or other transfer, assignment or termination of the Company's
rights therein by the Agent or any Bank, whether by judicial proceeding or any
power of sale, or any transfer, assignment or conveyance by the Company in lieu
thereof shall not require the consent of the Municipality or the Agency or
constitute an Event of Default under or pursuant to Section 6.01(e) provided
that:
(w) the Bank or transferee, including any parent of
the Bank or transferee, is not in arrears on any
tax obligation to the Municipality,
(x) the Municipality receives written notice of the
proposed transfer including the identity of the
proposed Bank or transferee and certifying the
satisfaction of each of the conditions (w) through
(y) in this Section 8.01(b), at least 30 days
prior to the effective date of the transaction,
(y) the Bank or transferee accepts and ratifies in
writing all the terms and conditions of this
Agreement, and
(z) acceptance of the Bank or transferee by the
Municipality does not violate any properly
-22-
<PAGE>
published and adopted rules or policy of the
Agency or Municipality.
(c) Assignment on Notice by Company: The Company may assign its
--------------------------------
rights and interests under this Agreement to any purchaser or transferee of the
Facility provided that there are no Deferred Obligations outstanding at the time
of the transaction; or (ii) all Deferred Obligations together with the accrued
interest thereon are paid at the time of the transaction; or (iii) the
transferee has demonstrated to the satisfaction of the Agency and the
Municipality a plan for and intention to pay all Deferred Obligations, and the
conditions of items (w) through (z) of Section 8.01(b) are met.
(d) Assignment on Notice by Bank: In the event the Agent or the Banks
-----------------------------
shall acquire any interest in the Facility as permitted by Section 8.01(b), they
may assign their interests subject to further compliance with items (w) through
(z) of Section 8.01(b).
(a) The Company will not enter into, amend, terminate, waive or
supplement this Agreement or any provision hereof without the prior written
consent of the Banks (or such number of percentage of the Banks as may be
required under the terms of the relevant agreements governing Senior Debt).
(b) In the event that the Agreement is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding, and if, within
45 days after such termination, the Banks or their successors or assigns shall
so request, the Municipality will execute and deliver to the Banks a new
agreement, which shall be on the same terms and conditions as this Agreement for
the remaining term of this Agreement before giving effect to such termination.
(c) In the event Agent or its designee or assignee elects to perform
the Company's obligations under the Agreement or to enter into a new Agreement
as provided in Section 8.01(b) or Section 8.02(b) or otherwise, the Agent and
the Banks, and their designees and assignees, shall not have personal liability
to the Municipality for the performance of such obligations, and the sole
recourse of the Municipality in seeking the enforcement of such obligations
shall be to such parties' interest in the Facility.
ARTICLCE IX
TERMINATION
-----------
In the event that at any time during the PILOT Term the Maximum
Electrical Output of the Facility shall exceed 80 Megawatts per hour then (i)
the Company shall
-23-
<PAGE>
have the right, within thirty (30) days of the first occurrence of such event to
terminate this Agreement upon thirty (30) days prior written notice to the other
parties and (ii) the Municipality shall have the right, within thirty (30) days
of the receipt of written notice by the Company of the first occurrence of such
event, to terminate this Agreement upon thirty (30) days prior written notice to
the other parties. If neither party shall exercise the above right to terminate
within the period provided above, the Annual PILOT Amount shall be increased in
the manner provided in Section 3.02(e).
Anything herein to the contrary notwithstanding, this Agreement shall
terminate and be of no further force and effect upon the first to occur of the
following:
(i) expiration of the Initial PILOT Term; or
(ii) termination of the Facility Agreement.
ARTICLE X
MISCELLANEOUS
-------------
This Agreement shall become effective and the obligations of the
Company shall arise absolutely and unconditionally upon the execution and
delivery hereof and shall continue to remain in effect until terminated in
accordance with Article IX hereof.
If the Company shall fail to make any payment required by this
Agreement when due, within the applicable grace period, or shall defer any
payment pursuant to Section 4.03 hereof, its obligation to make the payment
defaulted upon or deferred shall continue as an obligation of the Company and
shall bear interest, until paid, at the rate and in the manner the Municipality
charges from time to time for delinquent property taxes.
Where the Company is required to do or accomplish any act or thing
hereunder, and the Company causes the same to be done or accomplished such act
or thing shall have the same force and effect as if done or accomplished by the
Company.
-24-
<PAGE>
So long as the Facility shall be entitled to exemption from real
property taxes as provided in Section 2.01(a) hereof, the Agency agrees, to the
extent permitted by law, that it shall not, without the prior written consent of
the Municipality, make any agreement regarding the leasing or sale of the
Facility which does not require that payments in lieu of taxes be paid to the
Municipality in the amounts set forth in Article III hereof.
Except as otherwise provided herein this Agreement may be amended,
changed, modified, altered or terminated only by a written agreement duly
approved and executed by the parties hereto and in the case of the Municipality
with the written concurrence of the governing bodies of the Municipality
affected by such amendment, modification, alteration or termination.
(a) No Remedy Exclusive: No remedy herein conferred upon or reserved
-------------------
to the Agency or the Municipality is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Agreement or now
or hereafter existing at law or in equity or by statute.
(b) Delay: No delay or omission in exercising any right or power
-----
accruing upon the occurrence of any Event of Default hereunder shall impair any
such right or power or shall be construed to be a waiver thereof but any such
right or power may be exercised from time to time and as often as may be deemed
expedient.
(c) Notice Not Required: In order to entitle the Agency or the
-------------------
Municipality to exercise any remedy reserved to it in this Agreement, it shall
not be necessary to give any notice, other than such notice as may be expressly
required in this Agreement.
(d) No Waiver: In the event any provision contained in this Agreement
---------
should be breached by any party and thereafter duly waived by the other party so
empowered to act, such waiver shall be limited to the particular breach so
waived and shall not be deemed to be a waiver of any other breach hereunder. No
waiver, amendment, release or modification of this Agreement shall be
established by conduct, custom or course of dealing.
In addition to any other notices required to be provided hereunder,
the Company shall provide on the schedule indicated the following information to
the officer or officers designated by the Municipality for receipt thereof:
-25-
<PAGE>
(a) the applicable Electric Tariff Rate and the effective date
thereof (March 1, June 1, September 1, December 1).
(b) any change in the Maximum Electrical Output and the effective
date thereof (when received by Company).
(c) the remaining decatherms of prepaid gas supply pursuant to
the Gas Supply Agreement (December 1);
(d) an annual financial statement, prepared by a nationally
recognized firm of independent certified public accountants designated by
the Company (commencing April 1, 1992); and
(e) copies of each and every lease or sublease for the Facility
within 10 days of the execution of said lease or sublease.
The Municipality will provide the Agency, the Agent and the Company
with statements of the Annual PILOT Amount at the same time tax bills are mailed
to the owners of privately owned property and quarterly thereafter together with
a statement of Deferred Obligations and the interest thereon compounded to the
date of the statement. Quarterly statements of the adjusted Annual PILOT Amounts
will be provided to the Company, the Agent and Agency. Each statement will
reflect payments received 10 days prior to the date of the statement. The
statements will indicate each step used to calculate the Annual PILOT Amount and
the date or dates on which payment of the quarterly amount is due.
All notices, certificates or other communications hereunder shall be
in writing and shall be sufficiently given and shall be deemed given (i) when
hand delivered physically (by personal service, recognized express delivery
service or facsimile transmission), (ii) three days after mailed by United
States registered or certified mail, or (iii) delivered by postage prepaid,
return receipt requested, to the Municipality, Agency, the Company or the Agent,
as the case may be, at their respective addresses as follows:
(a) To the Municipality
-------------------
City of Syracuse
301 City Hall
Syracuse, New York 13202
Attention: Corporation Counsel
(b) To the Agency
-------------
-26-
<PAGE>
City of Syracuse Industrial
Development Agency
217 Montgomery Street
Syracuse, New York 13202
Attention: Chairman
(c) To the Company
--------------
Project Orange Associates, L.P.
Suite 800
1100 Town & Country Road
Orange, California 92668
With a copy to:
--------------
Kronish, Lieb, Weiner & Hellman
1345 Avenue of the Americas
New York, New York 10105
Attention: Russell S. Berman, Esq.
(d) To the Agent:
-------------
At the address stated on the notice provided
by the Company as contemplated by
Section 4.01
provided, that the Agency, the Company, the Agent and the Municipality may, by
notice given hereunder to each of the others, designate any further or different
addresses to which subsequent notices, certificates or other communications to
them shall be sent.
Section 10.10. Binding Effect
This Agreement shall inure to the benefit of, and shall be binding
upon the Municipality, the Agency, the Company and their respective successors
and assigns.
Section 10.11. Severability
If any article, section, subdivision, paragraph, sentence, clause,
phrase, provision or portion of this Agreement shall for any reason be held or
adjudged to be invalid or illegal or unenforceable by any court of competent
jurisdiction, such article, section, subdivision, paragraph, sentence, clause,
phrase, provision or portion so adjudged invalid, illegal or unenforceable shall
be deemed separate, distinct and independent and the remainder of this Agreement
shall be and remain in full force and effect and shall not be invalidated or
rendered illegal or unenforceable or otherwise affected by such holding or
adjudication unless the effect of
-27-
<PAGE>
such invalidity, illegality or unenforceability would be to deprive any party
hereto of the material benefits intended to be conferred upon it by this
Agreement.
Section 10.12. Counterparts
This Agreement may be simultaneously executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument.
Section 10.13. Applicable Law
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
-28-
<PAGE>
IN WITNESS WHEREOF, the Municipality, the Agency and the Company have
caused this Agreement to be executed in their respective names, all being done
as of the date first above written.
<TABLE>
<CAPTION>
CITY OF SYRACUSE
<S> <C>
Attest: /s/ Robert J. Visser By: /s/ Thomas G. Young
_______________________________ _______________________________
Robert J. Visser Thomas G. Young, Mayor
City Clerk
CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY
By: /s/ William F. McIntyre
_______________________________
Attest: /s/ William F. McIntyre, Chairman
_______________________________
Secretary
<S> <C>
PROJECT ORANGE ASSOCIATES, L.P.
By: NCP Syracuse, Inc.
Managing General Partner
By: /s/ Kenneth Ross
_______________________________
Vice President
</TABLE>
-29-
<PAGE>
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) ss:
CITY OF SYRACUSE )
On this 4th day of April, 1991, before me personally came THOMAS G. YOUNG,
Mayor of the City of Syracuse with whom I am personally acquainted, who, being
by me duly sworn, did depose and say: That he resides in the City of Syracuse,
New York; that he is the Mayor of the City of Syracuse, the corporation
described in and which executed the within instrument; that he knows the
corporate seal of said City and it was so affixed pursuant to the Charter of the
City; that he signed said instrument as Mayor of said City of Syracuse by like
authority; that said THOMAS G. YOUNG further says that he is acquainted with
Robert J. Visser and knows him to be the City Clerk of said City of Syracuse;
that the signature of Robert J. Visser was thereto subscribed pursuant to said
Charter.
/s/ David H. Neff
____________________________________
Notary Public
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) ss:
CITY OF SYRACUSE )
On this 3rd of April, 1991, before me personally came WILLIAM F. McINTYRE,
to me personally known, who, being by me duly sworn, did depose and say that he
resides at 218 Hancock Drive, Syracuse, New York, and he is the Chairman of CITY
OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY, the public benefit corporation named
in and which executed the foregoing instrument; and that he signed his name
thereto by authority of the members of said public benefit corporation.
/s/ David H. Neff
____________________________________
Notary Public
STATE OF NEW YORK )
)
COUNTY OF NEW YORK ) ss:
On this 11th day of April, 1991, before me personally came Kenneth Ross, to
me personally known, who being by me duly sworn, did depose and say that he
resides at _____________________________; that he is the Vice President of NCP
SYRACUSE, INC., which is the managing general partner of Project Orange
Associates, L.P., the limited partnership described in and which executed the
annexed Agreement, that he had due authority to sign the foregoing instrument on
behalf of said corporation as the act and deed of said limited partnership; and
he duly acknowledged to me that he executed the foregoing instrument as the act
and deed of said limited partnership.
-30-
<PAGE>
/s/ Doreen M. Midwinter
____________________________________
Notary Public
-31-
<PAGE>
SCHEDULE A
All that tract or parcel of land situate in the City of Syracuse, County of
Onondaga and State of New York, being Lots 116 and 117 and part of Lots 115,
118, 120 and 121 on Block 259 in said City and being more particularly described
as follows:
Beginning at a point in the southerly boundary of Taylor Street at its
intersection with the northerly prolongation of the easterly wall of the
existing "Riley Steam Plant", said point being N 86(Degrees) 26' 30" E, a
distance of 135.63 feet, measured along said southerly street boundary, from the
easterly boundary of South McBride Street; running thence N 86(Degrees) 26' 30"
E along said southerly boundary of Taylor Street, a distance of 222.07 feet to
its intersection with the westerly boundary of lands of The People of the State
of New York (Almond Street); thence along said westerly boundary the following 4
courses and distances:
1) S 8 (degrees) 17' 15" E, 69.45 feet to a point of curvature;
2) southerly, following a curve to the right having a radius of 2449.30
feet, an arc distance of 48.51 feet;
3) S 6 (degrees) 47' 25" E, 30.03 feet to a point of curvature;
4) southerly, following a curve to the right having a radius of 2449.30
feet, an arc distance of 9.42 feet to its intersection with the easterly
prolongation of the northerly wall of the existing "Chilled Water
n
Plant";
thence S 84(degrees) 10' 14" W along said easterly prolongation and along
existing northerly wall, a distance of 90.82 feet to the northwesterly corner of
the "Chilled Water Plant"; thence S 5(degrees) 56' 15" E along the existing
westerly wall of the "Chilled Water Plant" and its southerly prolongation, a
distance of 155.84 feet to its intersection with the northerly boundary of Burt
Street; thence S 85(degrees) 57' 50" W along said northerly boundary of Burt
Street, a distance of 133.23 feet to its intersection with lands formerly of the
Delaware-Lackawanna & Western Railroad Company, now Conrail; thence N 4(degrees)
02' 10" W along said Railroad boundary, a distance of 44.43 feet to its
intersection with the westerly prolongation of the southerly wall of the
existing "Transformer Building"; thence N 87(degrees) 37' 50" E along said
westerly prolongation and along said existing southerly wall, a distance of
37.15 feet to the southeasterly corner of said "Transformer Building"; thence N
2(degrees) 22' 10" W along the easterly wall of said Building, a distance of
24.00 feet to the northeasterly corner thereof; thence S 87(degrees) 37' 50" W
along the northerly wall of said building, a distance of 34.50 feet to the
northwesterly corner thereof; thence S 2(degrees) 22' 10" E along the westerly
wall of said "Transformer Building", a distance of 5.29 feet to a point; thence
S 87(degrees) 57' 50" W, a distance of 3.20 feet at an angle point in the
boundary of lands formerly of the Delaware-Lackawanna & Western Railroad
Company, now Conrail; thence
<PAGE>
N 66(degrees) 32' 30" W along said Railroad boundary, a
distance of 17.48 feet to its intersection with the southerly prolongation of
the easterly wall of the existing "Riley Steam Plant"; thence N 3(degrees) 31'
46" W along said southerly prolongation, a distance of 246.40 feet to the point
of beginning.
Excepting and Reserving a Permanent Easement for Ingress and Egress, 5 feet
in width, lying westerly of and adjoining the westerly wall of the existing
"Transformer Building"; 20 feet in width, lying northerly of and adjoining the
northerly wall of said Building; 3 feet in width, lying easterly and southerly
of and adjoining the easterly and southerly wall of said existing "Transformer
Building".
Also, excepting and reserving a Permanent Easement for Ingress and Egress,
15 feet in width, lying westerly and northerly of and adjoining the westerly and
northerly wall of the existing "Chilled Water Plant", extending easterly from
the northwesterly corner of said building, a distance of 77 feet and extending
southerly from the northwesterly corner of said building, a distance of 78 feet.
Also, excepting and reserving a Permanent Easement for Ingress and Egress,
10 feet in width, lying easterly of and adjoining the easterly wall of the
existing "Riley Steam Plant" and extending southerly, from the southerly
boundary of Taylor Street, a distance of 114 feet.
<PAGE>
EXHIBIT "A-3"
LIST OF CITY EASEMENT AGREEMENTS
EASEMENTS WITHIN THE LIMITS OF THE CITY OF SYRACUSE,
ASSIGNED BY PROJECT ORANGE ASSOCIATES, LP.
TO CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY
-------------------------------------------------
1. Permanent Easement from Oakwood Cemeteries of Syracuse to O'Brien & Gere
Engineers, Inc., dated as of November 1, 1990, recorded January 7, 1991 in
the Onondaga County Clerk's Office in Deed Book 3671 at Page 157, as
modified by amendment dated April 3, 1991, recorded April 18, 1991 in the
Onondaga County Clerk's Office in Deed Book 3689 at Page 160. [707-16]
2. Permanent Easement from Syracuse University to Project Orange Associates,
L.P., dated as of November 1, 1990, to be recorded in the Onondaga County
Clerk's Office prior to this agreement. [707-14, 15, 17]
<PAGE>
Exhibit 10.13
December 6, 1999
Mr. Adam Victor
Project Orange Associates, L.P.
630 First Avenue
New York, N.Y. 10016
Re: Project Management/Administration Services for Project Orange
Dear Adam:
The purpose of this letter ("Asset Management Agreement") is to confirm the
understanding between Project Orange Associates, L.P. ("POA") and Niagara Mohawk
Energy Marketing, Inc. ("NMEM") with respect to the performance of project
management services for POA by NMEM.
POA owns an 80MW cogeneration plant located in Syracuse, New York (the
"Facility"). POA has requested NMEM, and NMEM agrees to provide certain services
described below for the purpose of managing the administrative affairs of POA.
Accordingly, the Parties agree to the following terms and conditions:
1. POA hereby appoints NMEM as its exclusive agent with respect to the
administration of the "POA Contracts" contained in Attachment A and to
accomplish certain accounting and project management service as set
forth in this Asset Management Agreement, and as maybe defined , with
more specificity in procedures that may be developed by the Parties from
time to time and incorporated into and made apart of this Asset
Management Agreement.
2. In addition to acting as POA's agent as described in Paragraph 1 above,
the functions that NMEM shall perform will include:
a. Administer and monitor performance under and advise POA of its rights
and responsibilities under the POA Contracts. NMEM's contract
administration duties shall also include negotiation of new energy
supply, purchase or transportation agreements and tariffs for POA's
signature.
b. In performing contract-related functions, NMEM may encounter
questions concerning the POA Contracts or related documents or other
questions that require advice of legal counsel. In the event of such
questions, NMEM shall consult with POA's legal counsel, designated by
POA from time to
<PAGE>
time, and may rely on any advice obtained from POA's counsel or other
advisors in fulfilling its duties under this Agreement.
c. Perform all routine accounting-related functions including
reconciling with counter-parties, rendering invoices, tendering
payments from POA's designated account, managing accounts
receivable/payable, and providing budgets and reports. NMEM shall not
be responsible for the failure of any POA counterparty to pay;
however, NMEM will work with POA's attorneys or consultants to assist
in any collection efforts or billing disputes that may arise. NMEM is
not obligated to use any of its funds to satisfy any POA obligation
that may arise. In performing the accounting related functions
described herein, NMEM shall work closely with POA's auditors and tax
consultants to provide such auditors and consultants with information
that will be needed for financial reports and tax filing as soon as
is reasonably possible. POA acknowledges and agrees that complete
information relating to the purchase and sale and transportation of
electricity and natural gas may not be available on a monthly basis
and that it may receive estimates from NMEM that will be trued-up as
soon as is practicable. The Parties will enter into a limited power
of attorney or similar agreement that will permit NMEM to accept and
disburse funds though a POA bank account to be designated by POA.
NMEM and POA will enter into the appropriate documentation with POA's
bank to permit such activity. NMEM's authority to accept and disburse
funds shall be limited to the purposes of administering the contracts
described herein. To the extent NMEM will manage funds of POA, NMEM
shall manage such funds with the same standard of care that it would
use in managing its own assets.
d. Recommend and, with POA's consent, implement or assist in the
implementation of cost reduction and revenue enhancement strategies.
e. NMEM will provide energy management services to POA pursuant to a
certain Asset Management Agreement dated December 6, 1999.
3. POA shall make available to NMEM, at POA's expense, its professional
legal counsel to assist NMEM in performing its duties hereunder.
4. POA shall maintain adequate working capital in order to allow NMEM to
perform its duties hereunder. NMEM will advise POA if it believes more
working capital is needed to perform the duties described herein.
5. So long as POA is a "Qualifying Facility" under PURPA, or an Exempt
Wholesale Generator under PUHCA, the parties agree to cooperate to
ensure that NMEM's actions hereunder are consistent with maintenance of
POA's Qualifying Facility status or if POA converts to an exempt
wholesale generator, the requirements for such EWG status.
<PAGE>
6. NMEM's compensation under this Asset Management Agreement shall include
the sum of the following items:
a. A fixed monthly payment of $22,750 per month, commencing on the first
month in which services are provided. Beginning January 1, 2001 and
on January 1 of each year thereafter, this fee shall increase at the
rate commensurate with the Consumer Price Index,
b. The actual cost incurred by NMEM, including NMEM employee expenses
and time at standard hourly rates, related to extraordinary,
unforeseen events such as required or requested assistance in any
regulatory or judicial proceedings involving POA or in the
renegotiation of any POA Contract.
7. This Asset Management Agreement shall be effective on the date first
written above and the services provided shall commence on December 6,
1999. POA may terminate this Asset Management Agreement upon sixty (60)
days prior written notice to NMEM, subject to acceptance by U.S. Bank
Trust National Association, as agent for POA pursuant to a Financing
Agreement between POA and U.S. Bank Trust National Association, as
trustee, and NMEM may terminate this Asset Management Agreement upon six
(6) month's prior written notice to POA.
8. Following the beginning of each calendar month, NMEM shall prepare and
deliver an invoice to POA for services provided under this Asset
Management Agreement each month. The amount stated in such invoice shall
be payable by wire transfer on or before the 25th of the month following
the month of service unless the invoice is not received by the 15/th/,
in which case it shall be due ten (10) days after receipt by POA.
Interest on unpaid amounts or on refunds due shall accrue daily from the
due date of such unpaid amount or refund until the date paid at a rate
equal to the prime interest rate per annum of Citibank, New York, New
York, or its successor, plus 2%. In the event that payment of such
amount is not received on or before the due date, NMEM shall be
entitled, in addition to any other rights and remedies available to NMEM
at law or equity, upon forty-five (45) days prior written notice to POA
to suspend and/or terminate performance, of its obligations hereunder
provided POA shall not have fully cured such non-payment within the
forty-five (45) day notice period. In such event, NMEM shall not be
required to resume performance until all outstanding obligations due
NMEM are made current. If the event of default or breach by POA is a
default or breach other than non-payment, POA shall have a reasonable
period of time to cure such default or breach, so long as POA commences
and diligently and continuously pursues to cure such default or breach
within ninety (90) days of the date of notice of such default or breach.
9. NMEM shall not be responsible for any liability or damages associated
with the ownership or operation of the Facility and POA shall indemnify,
defend and hold harmless NMEM, its officers, directors, employees or
representatives for any claims, liabilities, costs or expense, including
reasonable attorney's fees arising from or related
<PAGE>
to its ownership and operation of the Facility, including liabilities
based on environmental claims or Hazardous Waste to the fullest extent
permitted by law, except for claims based upon the negligence, gross
negligence or willful misconduct of NMEM, which NMEM shall be fully
liable and not subject to indemnification hereunder.
10. This Asset Management Agreement is not intended to create and shall not
create any relationship of joint venture, or partnership, or any other
association of like kind or type between the Parties or to impose any
obligation or liability upon either Party other than those explicitly
provided for herein. Consistent with NMEM's obligations hereunder, NMEM
shall be POA's attorney-in-fact and agent for the explicit purposes
stated herein.
11. In the event of a breach of NMEM's obligations under this Asset
Management Agreement, NMEM's total liability for any claims, including
claims for indemnity is limited to fees paid to NMEM under this
Agreement. If no remedy or measure of damages is expressly provided,
the liability of the non-performing party shall be limited to direct
damages only and all other damages and remedies are waived. Except as
provided in Paragraph 9, in no event shall either Party be liable to
the other Party for consequential, incidental, punitive, exemplary or
indirect damages in tort, for contract or otherwise.
12. This Asset Management Agreement shall be governed by the laws of the
State of New York without reference to conflict of law principles.
Venue for any claims based on this Asset Management Agreement shall be
in New York State Courts in Onondaga County or the United States
District Court for the Northern District of New York.
13. Neither Party may assign this Asset Management Agreement nor any of its
rights or responsibilities hereunder without the prior written consent
of the other Party; such consent shall not be unreasonably withheld.
Notwithstanding the foregoing, NMEM may assign payments to a third-
party as collateral security for financing purposes or it may assign
the Asset Management Agreement to an affiliate without the prior
consent of POA; and POA may assign its rights hereunder to a third
party for financing purposes or it may assign the Asset Management
Agreement in the event of the sale of substantially all of the assets
or equity interests of POA. Any such assignment shall be binding upon
such successors and assignors.
14. Neither NMEM nor POA intends by the provision of this Asset Management
Agreement to create rights enforceable by anyone who is not a Party or
a successor assignee of a Party to the Asset Management Agreement.
15. NMEM warrants that the services will be performed in conformance with
professional standards prevailing in the applicable industry at the
time of NMEM's performance. This warranty shall not apply where the
failure to meet the warranty is the result of acts or omissions of
persons other than NMEM, or of accidents not solely caused by NMEM.
This express warranty is exclusive and no other warranties of any kind,
<PAGE>
whether statutory, written, oral or implied (including warranties of
merchantability or fitness for use or for a particular purpose) shall
apply to the services, all of which other warranties are expressly
disclaimed.
16. To the fullest extent permitted by law, NMEM agrees to indemnify and
hold POA, its directors, officers, employees or representatives
harmless from and against any and all damages, costs, expenses,
including reasonable attorney's fees, claims or liabilities arising out
of NMEM's failure to perform under this Asset Management Agreement,
except to the extent that such damages, costs, expenses, claims or
liabilities arc attributable to the negligence or willful misconduct of
POA. To the fullest extent permitted by law, POA agrees to indemnify
and hold NMEM, its directors, officers, employees and representatives
harmless from and against any and all damages, costs, expenses,
including reasonable attorney's fees claims or liabilities arising out
of or based on NMEM's performance under this Asset Management Agreement
to the extent that such damages, costs, expenses, claims or liabilities
are not caused by the negligence or willful misconduct of NMEM. The
indemnification, provided for in this Asset Management Agreement shall
survive for a period of two (2) years from the termination of this
Asset Management Agreement,
17. Both Parties represent and warrant to each other that they are duly
organized, validly existing and in good standing under the laws of the
State of incorporation or formation and any jurisdiction which such
Party is required to have authority to conduct business and that each
Party has full authority to execute this Asset Management Agreement and
to perform its obligations under this Asset Management Agreement.
NMEM's and POA's signatories, to this Asset Management Agreement hereby
represent and warrant to each other that they are fully authorized to
act on behalf of each entity, such that this Asset Management
Agreement, upon execution by such signatories, will constitute the
legal, valid and binding obligation of NMEM and POA, enforceable
against each in accordance with its terms. Each Party represents to the
other the execution and delivery of this Asset Management Agreement and
the performance of its obligations will not violate any provision of
any existing law or regulation applicable to it, or any existing order,
judgment, award or decree of any court, arbitrator or governmental
authority applicable to it.
18. Notwithstanding anything to the contrary herein, NMEM agrees to
subordinate its fees and any payments due hereunder from POA to NMEM
pursuant to a certain Consent and Agreement among NMEM, POA and U.S.
Bank Trust, National Association, as trustee and collateral agent, in
form and substance as set forth on Exhibit "B" attached hereto.
<PAGE>
If the terms and conditions accurately reflect our understanding, please sign
below and return an executed original to me.
Very truly yours,
/s/ James Cifaratta
James Cifaratta
Vice President Business Development
ACCEPTED AND AGREED BY PROJECT ORANGE ASSOCIATES, L.P.:
By G.A.S. Orange Associates, L.L.C., Its Managing General Partner;
By: /s/ Adam Victor
______________________________
Adam Victor, President
<PAGE>
ATTACHMENT A
LIST OF PROJECT ORANGE ASSOCIATES,, L.P. CONTRACTS TO BE ADMINISTERED BY NIAGARA
MOHAWK ENERGY MARKETING, INC.
1. Restated Gas Sale and Purchase Agreement dated March 18, 1991
between Project Orange Associates, L.P., Noranda Inc. and
Canadian Hunter Exploration Ltd.
2. Gas Transportation Agreement dated June 26, 1992 between
Tennessee Gas Pipeline Company and Project Orange Associates,
L.P.
3. Firm Natural Gas Transportation Agreement dated March 29, 1991
between Tennessee Gas Pipeline Company and Project Orange
Associates, L.P.
4. Gas Transportation Agreement dated November 19, 1987 between
Tennessee Gas Pipeline Company and Gas Alternative Systems, Inc.
5. Firm Service Contract dated October 11, 1990 between Transcanada
Pipelines Limited and Canadian Hunter Exploration Ltd.
6. ISDA (International Swap Dealers Association, Inc.) Master
Agreement dated June 30, 1998.
7. Power Put Agreement dated September 19, 1986 between Project
Orange Associates, L.P. and Niagara Mohawk Power Corporation.
8. Steam Contract, dated February 27, 1990, between Project Orange
Associates, L.P. and Syracuse University.
9. Operating Agreement, dated February 27, 1990, between Syracuse
University and Project Orange Associates, L.P.
10. Lease Agreement, dated February 27, 1990, between Syracuse
University and Project Orange Associates, L.P.
11. Cogeneration Facility Operation and Maintenance Agreement dated
November 1, 1998 between Project Orange Associates, L.P. and GE
Energy Plant Operations, Inc.
<PAGE>
EXHIBIT "B"
-----------
CONSENT AND AGREEMENT
---------------------
<PAGE>
Exhibit 10.14
December 6, 1999
Mr. Adam Victor
Project Orange Associates, L.P.
630 First Avenue
New York, NY 10016
Re: Contract Optimization/Energy Marketing Services for Project Orange
Dear Adam:
The purpose of this letter ("Marketing Agreement") is to confirm the
understanding between Project Orange Associates, L.P. ("POA") and Niagara Mohawk
Energy Marketing, Inc. ("NMEM") with respect to the performance of certain
dispatch and contract optimization services for POA by NMEM.
POA owns an 80MW cogeneration plant located in Syracuse, New York (the
"Facility"). POA has requested NMEM, and NMEM agrees to provide certain services
described below for the purpose of assisting POA in maximizing its economic
performance under certain of its contracts. Accordingly, the Parties agree to
the following terms and conditions:
1. The "POA Contracts" that NMEM will assist in managing are as follows:
a. Restated Gas Sale and Purchase Agreement dated March 18, 1991
between Project Orange Associates, L.P., Noranda Inc. and Canadian
Hunter Exploration Ltd.
b. Gas Transportation Agreement dated June 26, 1992 between Tennessee
Gas Pipeline Company and Project Orange Associates, L.P.
c. Firm Natural Gas Transportation Agreement dated March 29, 1991
between Tennessee Gas Pipeline Company and Project Orange
Associates, L.P.
<PAGE>
d. Gas Transportation Agreement dated November 19, 1987 between
Tennessee Gas Pipeline Company and Gas Alternative Systems, Inc.
e. Firm Service Contract dated October 11, 1990 between Transcanada
Pipelines Limited and Canadian Hunter Exploration Ltd.
f. ISDA (International Swap Dealers Association, Inc.) Master
Agreement dated June 30, 1998.
g.. Power Put Agreement dated September 19, 1986 between Project
Orange Associates, L.P. and Niagara Mohawk Power Corporation.
h. Steam Contract, dated February 27, 1990, between Project Orange
Associates, L.P. and Syracuse University.
i. Operating Agreement, dated February 27, 1990, between Syracuse
University and Project Orange Associates, L.P.
2. POA will appoint NMEM as its exclusive agent for the purpose of
allowing NMEM to acquire and sell electric and natural gas supplies as
well as transmission and transportation and related services on behalf
of the Facility. The Parties will work together to develop trading
procedures and to define NMEM's authority, NMEM shall use its best
efforts to assist POA in maximizing the value of its electric and
natural gas assets. The functions that NMEM shall perform will
include, but are not limited to:
a. Establish seasonal, monthly and daily plans that seek profit
opportunities in the forward power and natural gas markets and
manage risk.
b. Directing the dispatch of the Facility, and the boilers owned by
Syracuse University, to their most economic level subject to the
constraints identified by POA. Through its day-ahead and real
time trading operations, NMEM will continuously evaluate and
maximize the market opportunities and options contained within
POA'S portfolio, This would include continuous redispatch of the
Facility as well as continuous reconfiguration of energy
transactions and transmission/transportation rights.
c. Market the electricity produced by the Facility. This will
include entering into bilateral transactions and/or submitting
bids into the New York Independent System Operator ("NYISO")
markets for capacity, energy and ancillary services. The Parties
will jointly develop a marketing strategy that will not
compromise the Facility's ability to hedge the Indexed Swap
Agreement.
d. Remarketing any natural gas and transportation owned by POA. In
addition,
<PAGE>
NMEM will economically nominate, within contract constraints,
natural gas volumes with pipelines and LDCs.
e. Exercising the options contained in the Facility's Power Put
agreement with NMPC. NMEM will also provide the notices and
schedules required in Paragraph 3 the Power Put Agreement.
f. Advise and assist in the remarketing of the Facility's emissions
credits.
3. POA represents and warrants that it shall designate a representative
that can authorize NMEM to implement transactions on behalf of POA on
a timely basis. Confirmations for such transactions may be made via
taped telephone conversation and followed-up with a written
confirmation, Neither party shall object to the introduction into
evidence of any legal proceeding or arbitration of taped telephone
conversations for the purpose of confirming transactions centered into
by NMEM on behalf of POA. POA will execute all reasonable
documentation required for it to obtain transmission and
transportation services and acquire or sell electric supplies
recommended to it by NMEM. Except as specifically set forth in the
Asset Management Agreement between the parties, POA shall be
responsible for billing, credit and collection matters associated with
transactions arranged by NMEM for POA, NMEM will provide POA with the
necessary information for such functions. NMEM does not assume any
financial responsibility nor should POA represent that NMEM will
assume such responsibility for any transactions. Notwithstanding the
foregoing, NMEM may enter into electricity or natural gas transactions
with POA as provided in Paragraph 6.
4. It is NMEM's objective to enhance the financial performance of the
Facility and POA contracts by assisting POA in the management of its
contracts and dispatch of its Facility so that POA obtains more Net
Revenue, as defined below, than it would have obtained by simply
selling the generating output of its Facility to NMPC under the Power
Put Agreement with NMPC. Accordingly, the incremental Net Revenue
created by NMEM as a result of its performance hereunder shall be
called "Optimization Revenue". Such Optimization Revenue shall be
defined as the actual net revenues realized by POA less the
theoretical net revenues that would have been realized by POA under a
mode of operation where, (i) the Facility is operated as a base loaded
plant, and (ii) for each hour that the Facility is available, the
Facility is operated and the electricity generated by the Facility is
sold to NMPC, in amounts up to the maximum allowed under the Power Put
Agreement between POA and NMPC.
5. NMEM's compensation under this Marketing Agreement shall be limited to
an incentive fee, The incentive fee shall equal to a percentage of the
Optimization Revenue realized by POA in each Contract Year. A Contract
Year shall be defined as the twelve consecutive month period
commencing January 1, 2000 and each succeeding twelve-month
consecutive month period. POA shall compensate NMEM on a monthly basis
<PAGE>
pursuant to Paragraph "8" below, based upon NMEM's performance under
the following schedule in each Contract Year:
Optimization Revenue NMEM Compensation
-------------------- -----------------
First $2 Million 0%
Next $2 Million 5%
Amount above S4 million 10%
6. In order to implement some of the activities set forth in paragraph 2
or any additional recommendations of NMEM, NMEM may, from time to
time, enter into natural gas or electricity purchase or sale
transactions with POA. Any such transactions may be provided at NMEM's
cost and made under the terms of a Power Purchase and Sale Agreement
("Power Agreement") or a Natural Gas Purchase and Sale Agreement
("Natural Gas Agreement") between NMEM and POA.
7. This Marketing Agreement shall commence on December 6, 1999. Either
Party may terminate this Marketing Agreement upon forty-five (45) days
prior written notice to the other Party; provided however, that the
termination of this Marketing Agreement shall not affect the Power
Agreement or the Natural Gas Agreement, termination of such agreements
and any transactions thereunder shall be governed by the terms of such
agreements. In the event this Marketing Agreement is terminated prior
to the end of any Contract Year, then NMEM's compensation determined
pursuant to paragraph "5" shall be determined on a pro rata basis to
the date of termination and for purposes of such calculation, the
Optimization Revenue and the thresholds contained in paragraph "5"
shall also be pro rated to the date of termination.
8. Following the beginning of each calendar month, NMEM shall prepare and
deliver an invoice to POA for services provided under this Marketing
Agreement each month. Such invoice shall include information
concerning transaction activity in sufficient detail to demonstrate
amounts due under the incentive fee. The amount stated in such invoice
shall be payable by wire transfer on or before the 25th of the month
following the month of service, unless the invoice is not received by
the 15/th/, in which case it shall be due ten (10) days after receipt
by POA. POA reserves the right to audit NMEM's records relating to the
calculation of the invoice. Interest on unpaid amounts (other than
amounts reasonably in dispute) or on refunds due shall accrue daily
from the due date of such unpaid amount or refund until the date paid
at a rate equal to the prime interest rate per annum of Citibank, New
York, New York, or its successor, plus 2%. In the event that payment
of such amount is late, NMEM shall he entitled, in addition to any
other rights and remedies available to NMEM at law or equity, upon
forty-five (45) days prior written notice to POA to suspend and/or
terminate performance, of its obligations hereunder provided POA shall
not have fully cured such non-payment within the forty-five (45) day
notice period. In such event, NMEM shall not be
<PAGE>
required to resume performance until all outstanding obligations due
NMEM are made current. If the event of default or breach by POA is a
default or breach other than non-payment, POA shall have a reasonable
period of time to cure such default or breach, so long as POA
commences and diligently and continuously pursues to cure such default
or breach within ninety (90) days of the date of notice of such
default or breach.
9. NMEM shall not be responsible for any liability or damages associated
with the ownership or operation of the Facility and POA shall
indemnify, defend and hold harmless NMEM, its officers, directors,
employees or representatives for any claims, liabilities, costs or
expense, including reasonable attorney's fees arising from or related
to its ownership and operation of the Facility, including liabilities
based on environmental claims or Hazardous Waste to the fullest extent
permitted by law, except for claims based upon the negligence, gross
negligence or willful misconduct of NMEM, which NMEM shall be fully
liable and not subject to indemnification hereunder.
10. This Marketing Agreement is not intended to create and shall not
create any relationship of joint venture, or partnership, or any other
association of like kind or type between the Parties or to impose any
obligation or liability upon either Party other than those explicitly
provided for herein. Consistent with NMEM's obligations hereunder,
NMEM shall be POA's attorney-in-fact and agent for the explicit
purposes stated herein.
11. In the event of a breach of NMEM's obligations under this Marketing
Agreement, NMEM's total liability for any claims, including claims for
indemnity is limited to fees paid to NMEM under this Agreement. If no
remedy or measure of damages is expressly provided, the liability of
the non-performing party shall be limited to direct damages only and
all other damages and remedies are waived. Except as provided in
Paragraph 9, in no event shall either Party be liable to the other
Party for consequential, incidental, punitive, exemplary or indirect
damages in tort, for contract or otherwise.
12. This Marketing Agreement shall be governed by the laws of the State of
New York without reference to conflict of law principles. Venue for
any claims based on this Marketing Agreement shall be in New York
State Courts in Onondaga County or the United States District Court
for the Northern District of New York.
13. Neither Party may assign this Marketing Agreement nor any of its
rights or responsibilities hereunder without the prior written consent
of the other Party; such consent shall not be unreasonably withheld.
Notwithstanding the foregoing, NMEM may assign payments to a third-
party as collateral security for financing purposes or it may assign
the Marketing Agreement to an affiliate without the prior consent of
POA; and POA may assign its rights hereunder to a third party for
financing purposes or it may assign the Marketing Agreement in the
event of the sale of substantially all of the assets or equity
interests of POA. Any such assignment shall be binding upon such
<PAGE>
successors and assignors.
14. Neither NMEM nor POA intends by the provision of this Marketing
Agreement to create rights enforceable by anyone who is not a Party or
a successor assignee of a Party to the Marketing Agreement.
15. NMEM warrants that the services will be performed in conformance with
professional standards prevailing in the applicable industry at the
time of NMEM's performance. This warranty shall not apply where the
failure to meet the warranty is the result of acts or omissions of
persons other than NMEM, or of accidents not solely caused by NMEM.
This express warranty is exclusive and no other warranties of any
kind, whether statutory, written, oral or implied (including
warranties of merchantability or fitness for use or for a particular
purpose) shall apply to the services, all of which other warranties
are expressly disclaimed.
16. To the fullest extent permitted by law, NMEM agrees to indemnify and
hold POA, its directors, officers, employees or representatives
harmless from and against any and all damages, costs, expenses,
including reasonable attorney's fees, claims or liabilities arising
out of NMEM's failure to perform under this Marketing Agreement,
except to the extent that such damages, costs, expenses, claims or
liabilities arc attributable to the negligence or willful misconduct
of POA. To the fullest extent permitted by law, POA agrees to
indemnify and hold NMEM, its directors, officers, employees and
representatives harmless from and against any and all damages, costs,
expenses, including reasonable attorney's fees claims or liabilities
arising out of or based on NMEM's performance under this Marketing
Agreement to the extent that such damages, costs, expenses, claims or
liabilities are not caused by the negligence or willful misconduct of
NMEM. The indemnification, provided for in this Marketing Agreement
shall survive for a period of two (2) years from the termination of
this Marketing Agreement,
17. Both Parties represent and warrant to each other that they are duly
organized, validly existing and in good standing under the laws of the
State of incorporation or formation and any jurisdiction which such
Party is required to have authority to conduct business and that each
Party has full authority to execute this Marketing Agreement and to
perform its obligations under this Marketing Agreement. NMEM's and
POA's signatories, to this Marketing Agreement hereby represent and
warrant to each other that they are fully authorized to act on behalf
of each entity, such that this Marketing Agreement, upon execution by
such signatories, will constitute the legal, valid and binding
obligation of NMEM and POA, enforceable against each in accordance
with its terms. Each Party represents to the other the execution and
delivery of this Marketing Agreement and the performance of its
obligations will not violate any provision of any existing law or
regulation applicable to it, or any existing order, judgment, award or
decree of any court, arbitrator or governmental authority applicable
to it.
<PAGE>
If the terms and conditions accurately reflect our understanding, please sign
below and return an executed original to me.
Very truly yours,
/s/ James Cifaratta
-------------------------
James Cifaratta
Vice President Business Development
ACCEPTED AND AGREED BY PROJECT ORANGE ASSOCIATES, L.P.:
By G.A.S. Orange Associates, L.L.C., Its Managing General Partner;
By: /s/ Adam Victor
-------------------------
Adam Victor, President
<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
Exhibit 10.15
THE CITY OF SYRACUSE
and
PROJECT ORANGE ASSOCIATES, L.P.
and
SYRACUSE HOUSING AUTHORITY
AGREEMENT
---------
Dated: April 5, 1991
---------------------
<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
THIS AGREEMENT, dated as of April 5, 1991, by and between PROJECT ORANGE
ASSOCIATES, L.P., a Delaware limited partnership, its successors and assigns
(hereinafter referred to as the "Company"), developer of the proposed Syracuse
University Co-Generation Facility at Syracuse, New York, whose office is located
at 6780 Northern Boulevard, Suite 501, East Syracuse, New York 13057; CITY OF
SYRACUSE (hereinafter referred to as the "City"), a municipal corporation duly
formed and operating pursuant to the Laws of the State of New York, having an
office at City Hall, Syracuse, New York 13202; and the SYRACUSE HOUSING
AUTHORITY (hereinafter referred to as "SHA"), a municipal housing authority
formed and operating pursuant to the Public Housing Law of the State of New
York, with offices located at 516 Burt Street, Syracuse, New York 13202;
WITNESSETH:
WHEREAS, it is the intention of the Company to build and operate a natural
gas co-generation facility of up to 80 megawatts (hereinafter referred to as the
"Project") at the present site of the Syracuse University steam plant at Taylor
and McBride Streets, Syracuse, New York; and
WHEREAS, the residents of the area surrounding the Project are expected to
bear the burden and inconvenience of the development and operation of the
Project; and
WHEREAS, the Company recognizes its responsibility and obligations to the
health, safety and welfare of the residents of the neighborhoods surrounding the
Project; and
WHEREAS, many of those residents are tenants of the SHA and are housed and
otherwise assisted by the SHA; and
-2-
<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
WHEREAS, the City has agreed to assist the Company, through one of its
agencies (the Syracuse Industrial Development Agency), with the development of
the Project; however, the City desires to minimize the impact of the Project
upon its citizens and especially the residents of the neighborhoods surrounding
the Project; and
WHEREAS, the parties to this Host Community Agreement (hereinafter referred
to as the "Agreement") have agreed that the best way to minimize the disruption
and inconvenience caused to the residents of the area surrounding the Project is
by the construction of a multi--purpose community center (hereinafter referred
to as the "Center");
NOW, THEREFORE, in consideration of the matters above recited and in order
to induce the City to allow its agency, the Syracuse Industrial Development
Agency, to continue to assist the Company, the parties hereto formally covenant,
agree and bind themselves as follows, to wit:
ARTICLE I
---------
REPRESENTATIONS AKD WARRANTIES
------------------------------
Section 2.02. Representations and Warranties by Company
-----------------------------------------
The Company does hereby represent and warrant as follows:
(a) Power: The Company is a limited partnership duly organized
-----
and validly existing under the laws of the State of Delaware, and is authorized
by all required action of its partners to execute, deliver and perform this
Agreement.
(b) Authorization: The Company is authorized and has the power
-------------
under the laws of the State of Delaware and its partnership agreement to enter
into this Agreement and the transactions contemplated hereby and to perform and
carry out all covenants and obligations it is to perform under and pursuant to
this Agreement. The Company is not prohibited from entering
-3-
<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
into this Agreement and discharging and performing all covenants and obligations
it is to perform under and pursuant to this Agreement by (and the execution,
delivery and performance of this Agreement, the consummation of the transactions
contemplated hereby and the fulfillment of and compliance with the provisions of
this Agreement will not conflict with or violate or constitute a breach of or a
default under) the terms, conditions or provisions of its Certificate or
Agreement of Limited Partnership, or any other restriction or any law, rule,
regulation or order of any court or other agency or authority of government, or
any contractual limitation, restriction or outstanding indenture, deed of trust,
mortgage, loan agreement, other evidence of indebtedness or any other agreement
or instrument to which the Company is a party or by which it or any of its
property is bound, and neither the Company's entering into this Agreement nor
the Company's discharging and performing all covenants and obligations on its
part to be performed under and pursuant to this Agreement will be in conflict
with or result in a breach of or constitute (with due notice and/or lapse of
time) a default under any of the foregoing, or result in the creation or
imposition of any lien of any nature upon any of the property of the Company
under the terms of any of the foregoing, and this Agreement is the legal, valid
and binding obligation of the Company enforceable in accordance with its terms.
Section 1.02. Representations and Warranties by Municipality
----------------------------------------------
The Municipality does hereby represent and warrant as follows:
(a) Authorization: The Municipality has secured all approvals
-------------
of appropriate officers, boards and bodies of the Municipality necessary to duly
authorize the execution, delivery and performance of this Agreement by the
Municipality and the performance by the Municipality of its obligations
hereunder.
-4-
<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
(b) Validity: The Municipality is not prohibited from entering
--------
into this Agreement and discharging and performing all covenants and obligations
on its part to be performed under and pursuant to this Agreement by the terms,
conditions or provisions of any law, any order of any court or other agency or
authority of government, or any agreement or instrument to which the
Municipality is a party or by which the Municipality is bound.
Section 1.03. Representations and Warranties by SHA
-------------------------------------
The SHA does hereby represent and warrant as follows:
(a) Existence and Power: The SHA has been duly established under
-------------------
the provisions of the Public Housing Law of the State of New York and has the
power to enter into the transactions contemplated by this Agreement and to carry
out its obligations hereunder.
(b) Authorization: The SHA is authorized and has the power under
-------------
the Public Housing Law of the State of New York, its by-laws and the laws f the
State of New York to enter into this Agreement and the transactions contemplated
hereby and to perform and carry out all the covenants and obligations on its
part to be performed under and pursuant to this Agreement. By proper action on
the part of its governing board, the SHA has duly authorized the execution,
delivery and performance of this Agreement and the consummation of the
transactions herein contemplated.
(c) Validity: The SHA is not prohibited from entering into this
--------
Agreement and performing all covenants and obligations on its part to be
performed under and pursuant to this Agreement by the terms, conditions or
provisions of the Public Housing Law of the State of New York, any other law,
any order of any court or other agency or authority of government, or any
agreement or instrument to which the SHA is a party or by which the SHA is
bound.
-5-
<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
ARTICLE II
COVENANTS AND AGREEMENTS
------------------------
Section 2.01. Payments by Company.
-------------------
(a) Payment of Initial Amount. At the time that the Company
-------------------------
commences the construction of the Project, it shall pay to the SHA the sum of
One Hundred Thousand Dollars ($100,000.00), said money to be held by the SHA as
a fund to commence the development of the Center, at a site mutually agreeable
to both the City and the SHA and of a type and construction that will benefit
the residents of the neighborhoods surrounding the Project.
(b) Annual Maintenance and Operations Payments. Following the
------------------------------------------
commencement of the Project, on an annual basis for a period of forty (40)
years, the Company shall pay to the SHA, on January 1st of each year, commencing
January 1, 1992, a sum of money that the SHA shall hold to use solely for the
operation and maintenance of the Center. This annual sum shall be Ten Thousand
Dollars ($10,000.00) in the first year, payable on the first day of January
immediately following the commencement of the construction on the Project.
Following this first payment, the annual amount shall be increased by five per
cent (5%) per year, which increase will compound yearly over the life of the
forty (40) year payment period (Ex. The Year 2 payment shall be $10,500.00, and
the Year 3 payment shall be $11,025.00).
(c) Annual Payments to the City. The Company shall pay to the
---------------------------
City, commencing on June 1, 1992, and continuing for a period of nineteen (19)
years thereafter, a sum of money that the City shall deposit in its general fund
as an offset to any interest that the City may be required to pay on bonds or
other financing that the City undertakes on behalf of the development or
construction of the Center. This annual sum shall be Ten Thousand Dollars
-6-
<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
($10,000.00) in the first year, payable on the 1st day of June, 1992. Following
this first payment, the annual amount shall be increased by five per cent (5%)
per year, which increase will compound yearly over the life of the twenty (20)
year payment period (Ex. The 2nd Year's payment, payment due on June 1, 1993,
shall be $10,500.00; the 3rd Year's payment, due on June 1, 1994, shall be
$11,025.00).
These payments to the City shall be in addition to all other
payments required to be made to the City, including but not limited to Payments
in Lieu of Taxes due the City under a separate agreement between the City, the
City of Syracuse Industrial Development Agency, and Project Orange Associates,
L.P.
Section 2.02. Payments by SHA and the City.
----------------------------
(a) Funds to be Contributed by SHA. The SHA shall provide a sum
------------------------------
of Two Hundred Fifty Thousand Dollars ($250,000.00) from such sources as the SHA
shall designate for the Centers design costs, construction costs, and such other
costs as the SHA incurs in outfitting the Center.
(b) SHA to Consult. Prior to and throughout the development of
--------------
the Center, to the extent it is feasible, the SHA covenants and agrees that it
shall seek the advice and counsel of the tenants and governing bodies of,
Pioneer Homes, Almus Oliver Towers, Central Village, The Toomey Abbott Towers
Committee, and the Board of Directors of the Citywide Council of Syracuse Low
Income Housing Residents, in all matters pertaining to the design, construction,
outfitting and equipping of the Center. Once plans and specifications for the
Center have been developed, SHA will present said plans and specifications in a
prompt and timely manner to the Citywide Council of Syracuse Low Income Housing
Residents for their review.
-7-
<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
The SHA further covenants and agrees that it will manage and operate
the Center as, and to the standards of, other SHA facilities of similar types
and construction. Management of the operations and programming for the Center
shall be provided by a Board of Directors composed of: the Director of the SHA,
two (2) designees of the Director of the SHA, the Chairperson of the Citywide
council of Syracuse Low Income Housing Residents, and five (5) other
representatives selected from among the residents of Pioneer Homes, Almus Oliver
Towers, Central Village, and Toomey Abbott Towers by the Board of Directors of
the Citywide Council of Syracuse Low Income Housing Residents. The organization
of the Board of Directors for the Center shall be as set forth in the By-Laws to
be developed by the Board of Directors.
(c) The SHA Shall Fund Staff and Expenses for the Center. The SHA
----------------------------------------------------
covenants and agrees that following construction of the Center and for the life
of said Center, it will provide all necessary funding, exclusive of the Company
a payments and any City financing, for the operating expenses of the Center,
including but not limited to utility expenses, supplies, insurance and
maintenance expenses for the Center, as well as all salaries and wages necessary
to fully staff the Center and implement the policies and directives of the
Center's Board of Directors.
(d) City's Participation in the Center. Upon the selection of a site
----------------------------------
for the Center, and upon the approval of the requisite capital expenditure, the
City agrees to seek bonding or other suitable financing for the development and
construction costs of the Center in excess of those funds provided by the
Company and the SHA. Following completion of the Center, the City further agrees
that it will lease the Center to the SHA for a period not to exceed the term of
the City's capital financing vehicle for the Center. The lease terms shall
require that
-8-
<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
SHA make an annual lease payment of One Dollar ($1.00) to the City and that the
SHA shall purchase the Center from the City at the end of the lease term.
ARTICLE III
LIMITED OBLIGATION 0F THE CITY AND THE SHA
------------------------------------------
Section 3.01. No Recourse; Limited Obligation of the City and the SHA.
-------------------------------------------------------
(a) No Recourse. All covenants, stipulations, promises, agreement
-----------
and obligations of the City and the SHA contained in this Agreement shall be
deemed to be the covenants, stipulations, promises, agreements and obligations
of the City and the SHA and not of any member, officer, agent, servant or
employee of the City and the SHA in his individual capacity, and no recourse
under or upon any obligation, covenant or agreement contained in this Agreement,
or otherwise based or in respect of this Agreement, or for any claim based
thereon or other- wise in respect thereof, shall be had against any past,
present or future member, officer, agent, servant or employee, as such, of the
City or the SHA or any successor public benefit corporation or political
subdivision or any person executing this Agreement on behalf of the City or the
SHA, either directly or through the City or the SHA or any successor public
benefit corporation or political subdivision or any person so executing this
Agreement. It is expressly understood that this Agreement is a corporate
obligation, and that no such personal liability whatever shall attach to, or is
or shall be incurred by, any such member, officer,
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NEFF GAS-SHA.AGR April 4, 1991
agent, servant or employee of the City or the SHA or of any successor public
benefit corporation or political subdivision or any person so executing this
Agreement under or by reason of the obligations, covenants or agreements
contained in this Agreement or implied therefrom. Any and all such personal
liability of, and any and all such rights and claims against, every such member,
officer, agent, servant or employee under or by reason of the obligations,
covenants or agreements contained in this Agreement or implied therefrom are, to
the extent permitted by law, expressly waived and released as a condition of,
and as a consideration for, the execution of this Agreement.
(b) Limited Obligation. The obligations and agreements of the
------------------
City or the SHA contained herein shall not constitute or give rise to an
obligation of the State of New York. Furthermore, such obligations and
agreements shall not constitute or give rise to a general obligation of the City
or the SHA, but rather shall constitute limited obligations of the City or the
SHA payable solely from. the funds of the City and the SHA specifically obtained
and earmarked for the development and construction of the Center.
ARTICLE IV
EVENTS OP DEFAULT
-----------------
Section 4.01. Events of Default.
-----------------
Any one or more of the following events shall constitute an event
of default under this Agreement, and the terms "Event of Default" or "Default"
shall mean, whenever they are used in this Agreement, any one or more of the
following events:
(a) Failure of the Company to pay any amount due and payable by
it pursuant to this Agreement.
(b) Any warranty, representation or other statement by or on
behalf of the Company contained in this Agreement shall prove to have been false
or incorrect in any material respect on the date when made or on the effective
date of this Agreement.
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<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
Section 4.02. Remedies on Company Default.
---------------------------
Whenever any Event of Default under Sections 4.01(a) or 4.01(b)
shall have occurred with respect to this Agreement, the City or the SHA may take
whatever action at law or in equity as may appear necessary or desirable to
collect the amount then in default or to otherwise enforce the performance, or
the covenants or obligations of the Company under this Agreement.
Section 4.03. Payment of Attorney's Fees and Expenses.
---------------------------------------
If the Company should default in performing any of its
obligations, covenants and agreements under this Agreement and the City or the
SHA should employ attorneys or incur other expenses to enforce that performance
or for the collection of any amounts payable by the Company, the Company agrees
that it will, on demand therefor, pay to the City or the SHA the fees and
disbursements of such attorneys and such other expenses so incurred.
Section 4.04. Remedies: Waiver and Notice.
---------------------------
(a) No Remedy Exclusive. No remedy herein conferred upon or
-------------------
reserved to the City and the SHA is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Agreement or now
or hereafter existing at law or in equity or by statute.
(b) Delay. No delay or omission in exercising any right or power
-----
accruing upon the occurrence of any Event of Default hereunder shall impair any
such right or power or shall be construed to be a waiver thereof, but any such
right or power may be exercised from time to time and as often as may be deemed
expedient.
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<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
(c) Notice Not Required. In order to entitle the City or the SHA
-------------------
or both to exercise any remedy reserved to it in this Agreement, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Agreement.
(d) No Waiver. In the event any provision contained in this
---------
Agreement should be breached by any party and thereafter duly waived by the
other party so empowered to act, such waiver shall be limited to the particular
breach so waived and shall not be deemed to be a waiver of any other breach
hereunder. No waiver, amendment, release or modification of this Agreement shall
be established by conduct, custom or course of dealing.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.01. Term of Agreement.
-----------------
(a) General. This Agreement shall become effective and the
-------
obligations of the City, the SHA and the Company shall arise absolutely and
unconditionally upon the execution and delivery of this Agreement.
Section 5.02. Company Acts.
------------
Where the City, the SHA or the Company is required to do or
accomplish any act or thing hereunder, the City, the SHA or the Company may
cause the same to be done or accomplished with the same force and effect as if
done or accomplished by the City, the SHA or the Company.
Section 5.03. Damage or Destruction.
---------------------
In the event that all or substantially all of the Center shall be
damaged or destroyed, the construction or the opening of the Center is delayed
and/or the Center is
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NEFF GAS-SHA.AGR April 4, 1991
temporarily or permanently closed for any reason, the
payments due under this Agreement shall continue and the City and the SHA shall
be entitled to use those funds at their sole discretion.
Section 5.04. Interest.
--------
If the Company shall fail to make any payment required by this
Agreement when due, its obligation to make the payment so in default shall
continue as an obligation of the Company until such payment in default shall
have been made in full, and the Company shall pay the same, together with
interest thereon, to the extent permitted by law, at eighteen per cent (18%) per
annum.
Section 5.05. Amendment of Agreement.
----------------------
This Agreement may not be amended, changed, modified, altered or
terminated unless such amendment, change, modification, alteration or
termination (i) is in writing and signed by the City, the SHA and the Company,
and (ii) in the case of any amendment, change, modification or alteration of
this Agreement, unless the City, the SHA and the Company, and their successors
and assigns, shall assume in writing the obligations of such amended, changed,
modified or altered Agreement.
Section 5.06. Notices.
-------
All notices, certificates or other communications hereunder shall
be in writing and shall be sufficiently given and shall be deemed given when
mailed by United States registered or certified mail, postage prepaid, return
receipt requested, to the City, the SHA, the Company, as the case may be,
addressed as follows:
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<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
(a) To the City:
-----------
City of Syracuse
City Hall
Syracuse, New York 13202
Attention: Mayor
Attention: Corporation Counsel
(b) To the SHA:
----------
Syracuse Housing Authority
516 Burt Street
Syracuse, New York 13202
Attention: Frederick Murphy, Director
(c) To the Company:
--------------
Project Orange Associates, L.P.
c/o North Canadian Power, Inc.
1100 Town & Country Road
Orange, California 92668
Attention: President
provided, that the City, the SHA and the Company may, by notice given hereunder
to each of the others, designate any further or different addresses to which the
subsequent notices, certificates or other communications to them shall be sent.
Section 5.07. Binding Effect.
--------------
This Agreement shall inure to the benefit of, and shall be
binding upon the City, the SEA and the Company, and their respective successors
and assigns.
Section 5.08. Severability.
------------
If any article, section, subdivision, paragraph, sentence,
clause, phrase, provision or portion of this Agreement shall for any reason be
held or adjudged to be invalid or illegal or unenforceable by any court of
competent jurisdiction, such article, section, subdivision, paragraph, sentence,
clause, phrase, provision or portion so adjudged invalid, illegal or
unenforceable shall be deemed separate, distinct and independent and the
remainder of this
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<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
Agreement shall be and remain in full force and effect and shall not be
invalidated or rendered illegal or unenforceable or otherwise affected by such
holding or adjudication.
Section 5.09. Counterparts.
------------
This Agreement may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 5.10. Applicable Law.
--------------
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
IN WITNESS WHEREOF, the City, the SHA and the Company have caused this
Agreement to be executed in their respective names on this the 5th day of
April, 1991.
ATTEST: CITY OF SYRACUSE
/s/ Robert J. Visser
___________________________ By: /s/ Thomas G. Young
Robert J. Visser ___________________________
City Clerk Thomas G. Young, Mayor
SYRACUSE HOUSING AUTHORITY
By: /s/ Frederick Murphy
___________________________
Frederick Murphy, Director
PROJECT ORANGE ASSOCIATES, L.P.
By NCP SYRACUSE, INC., ITS
MANAGING GENERAL PARTNER
By: /s/ Kenneth Ross
___________________________
Vice President
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<PAGE>
NEFF GAS-SHA.AGR April 4, 1991
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) SS
CITY OF SYRACUSE )
On this 10th day of April, 1991, before me personally came THOMAS G.
YOUNG, Mayor of the City of Syracuse, with whom I am personally acquainted, who,
being by me duly sworn, did depose and say: That he resides in the City of
Syracuse, New York; that he is the Mayor of the City of Syracuse, the
corporation described in and which executed the within instrument; that he knows
the corporate seal of said City and it was so affixed pursuant to the Charter of
the City; that he signed said instrument as Major of said City of Syracuse by
like authority; and that said THOMAS G. YOUNG further says that he is acquainted
with Robert J. Visser and knows him to be the Municipality Clerk of said City of
Syracuse; that the signature of Robert J. Visser was thereto subscribed pursuant
to said Charter.
/s/ David H. Neff
___________________________
Notary Public
STATE OF NEW YORK )
) SS
COUNTY OF ONONDAGA )
On this 4th day of April, 1991, before me personally came FREDERICK
MURPHY, to me personally known, who, being by me duly sworn, did depose and say
that he resides in the City of Syracuse, New York; and he is the Director of the
SYRACUSE HOUSING AUTHORITY, a municipal housing authority formed and operating
pursuant to the Public Housing Law of the State of New York, named in and which
executed the foregoing instrument and that he signed his name thereto by
authority of the members of said municipal housing authority.
/s/ David H. Neff
___________________________
Notary Public
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) SS
CITY OF SYRACUSE )
On the 11th day of April, 1991, before me personally came Kenneth Ross,
to me known and known to me, and he being duly sworn, did depose and say: That
he resides at _______________________________; that he is the Vice-President of
NCP SYRACUSE, INC., the corporation which is the Managing General Partner of
PROJECT ORANGE ASSOCIATES, L.P., the Limited Partnership described in and which
executed the within instrument; that he knew the seal of said corporation; that
the seal affixed to said instrument was such corporate seal; that it was so
affixed to said instrument by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
/s/ Doreen M. Midwinter
___________________________
Notary Public
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<PAGE>
EXHIBIT 10.16
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
DAVIS POLK & WARDWELL
450 Lexington Avenue
New York, NY 10017
ATTN: Bernadette Sullivan
Legal Assistant
CONSENT AND AGREEMENT
---------------------
1. Reference is made to the Steam Contract dated as of February 27,
1990 (as amended and in effect from time to time, the "Steam Contract"), between
Project Orange Associates, L.P. (the "Borrower") and Syracuse University
("Syracuse"), the Lease Agreement dated as of February 27, 1990 (as amended and
in effect from time to time, the "Lease"), the Operating Agreement dated as of
February 27, 1990 (as amended and in effect from time to time, the "Operating
Agreement"), the Easement Agreement dated as of November 1, 1990, the Easement
Agreement dated as of November 2, 1990 (collectively as amended and in effect
from time to time the "Easement Agreement") between the Borrower and Syracuse.
The Steam Contract, the Lease, the Operating Agreement and the Easement
Agreement, as the same are modified by this Consent and Agreement, are
collectively the "Syracuse Documents." Reference is also made to (i) that
certain Indenture dated as of December 6, 1999 (the "Financing Agreement"),
among the Borrower, and U.S. Bank Trust National Association ("U.S. Bank
Trust"), as trustee for the holders of the Borrowers.% Senior Secured Notes
due 2007 (the "Trustee") and together with the holders of such Senior Secured
Notes, the "Secured Parties"), and (ii) the Collateral Documents and the other
Financing Documents (as such terms are defined in the Financing Agreement).
References herein to the "Agent" shall mean U.S. Bank Trust in its capacity as
collateral agent under the Collateral Documents and reference herein to the
"Issuer" shall mean the City of Syracuse Industrial Development Authority.
Anything in the Syracuse Documents to the contrary notwithstanding, the parties
agree as follows:
2. References herein to the Financing Agreement, the Collateral
Documents and the other Financing Documents refer to such agreement and
documents as the same are modified by this Consent and Agreement and as they may
hereafter be supplemented or amended in accordance with their terms.
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<PAGE>
Unless otherwise defined herein, all terms used herein which are defined in the
Syracuse Documents shall have their respective meanings set forth therein.
3. Syracuse hereby acknowledges notice and receipt of the Financing
Agreement and the Collateral Documents (other than the Consents), and agrees
that the Collateral Documents (other than the Consents) as in force on the date
of this Consent and Agreement constitute a "Permitted Mortgage" for purposes of
the Syracuse Documents. Syracuse consents to the assignment of the Syracuse
Documents to the Agent and the assignment of certain Syracuse Documents to
Issuer. Nothing herein shall imply any consent or agreement on the part of
Syracuse to subject the estate and interest of Syracuse in the Premises (as
defined in the Lease Agreement and as described on Exhibit "A" hereto) or in the
Easements (as defined in the Easement Agreement) to any mortgage, security
interest, encumbrance or charge. Syracuse has been advised that sales by the
Borrower of energy and capacity transacted through the New York Independent
System Operator and Power Exchange, constitute sales to a "public utility" for
the purposes of Section 2.01(C) of the Steam Contract.
4. Syracuse will pay all moneys due and to become due to the Borrower
under the Syracuse Documents directly to the Agent for deposit in the Project
Orange Operating Account, or to such other person or in such other manner as the
Agent may from time to time specify in writing to Syracuse.
5. Except as otherwise expressly provided herein or in any Syracuse
Document to which the Agent or any Secured Party shall be or become a party,
neither the Agent nor the Secured Parties shall be liable for the performance or
observance of any of the obligations or duties of the Borrower under the
Syracuse Documents, nor shall any assignment of any Syracuse Document to the
Agent or the Secured Parties give rise to any duties or obligations whatsoever
on the part of the Agent or the Secured Parties owing to Syracuse except that,
insofar as the Agent or the Secured Parties exercise their rights under the
Syracuse Documents or the Financing Documents or make any claims with respect to
any payments, deliveries or other obligations under the Syracuse Documents, the
terms and conditions of the Syracuse Documents applicable to such exercise of
rights or such claims shall apply to the Agent and the Secured Parties to the
same extent as the Borrower.
6. The Borrower and Syracuse will not amend, terminate, waive or
supplement any Syracuse Document without the prior written consent of the
Secured Parties (or such number of percentage of the Secured Parties as may be
required under the terms of the Financing Agreement, the Collateral Documents
and the other Financing Documents).
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<PAGE>
7. Syracuse will furnish to the Agent at its address at 100 Wall
Street, Suite 1600, New York, New York 10005, Attention: Corporate Trust
Administration, concurrently with the delivery thereof to the Borrower, a copy
of each notice or demand delivered by Syracuse to the Borrower under any
Syracuse Document.
8. (a) Syracuse agrees that, notwithstanding any right it may have
under any Syracuse Document, it shall not terminate any Syracuse Document unless
it shall have given the Agent at least 120 days, prior written notice of its
intent to terminate such Syracuse Document and the Agent or the Secured Parties
shall not cure within such time period the condition giving rise to such right
of termination. Syracuse's right to exercise remedies as a secured creditor
against Borrower shall be limited by the provisions of Section 10 hereof.
If the Secured Parties are prohibited by any process or injunction issued
by any court or by reason of any action by any court having jurisdiction of any
bankruptcy or insolvency proceedings involving Borrower, from commencing or
prosecuting foreclosure or other appropriate proceedings in the nature thereof,
the times specified in this subparagraph for commencing or prosecuting such
foreclosure or other proceedings shall be extended for the period of such
prohibition.
(b) Syracuse agrees that the provisions of subsection (3) of Section
3.03C of the Steam Contract entitling Syracuse to assume operating control of
the Facility under certain circumstances shall not be construed or enforced so
as to limit or restrict the exercise of any rights or remedies available to the
Agent or the Secured Parties in their capacities as secured creditors under the
Financing Documents and the Collateral Documents so long as there exists any
default or event of default (as defined under the Financing Agreement or such
documents) which permits or with the passage of time or the giving of notice or
both would permit the holder of any indebtedness of the Borrower to the Agent or
any Secured Party under the Financing Agreement or any of such documents to
accelerate the maturity of such indebtedness. Syracuse acknowledges that (i)
such rights and remedies of the Agent or the Secured Parties include the rights
(in its own name or through an agent, assignee or designee) to take possession
of or obtain entry to the Facility, to assume and exercise operating control of
the Facility, and to foreclose upon and sell and transfer Borrower's interest in
the Facility and the Syracuse Documents, (ii) in so assuming or exercising
operating control of the Facility the Agent or the Secured Parties may exclude
or prevent Syracuse from assuming or exercising operating control of the
Facility, and (iii) the assumption or exercise of operating control of the
Facility by the Agent or the
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<PAGE>
Secured Parties in the exercise of any of such rights and remedies shall not
in and of itself give rise to any liability or obligation to Syracuse on the
part of the Agent or the Secured Parties. In the event the Agent or the Secured
Parties shall assume or exercise operating control of the Facility as
contemplated by clause (ii) above and in so doing shall exclude or prevent
Syracuse from assuming or exercising operating control of the Facility, then
Syracuse shall be entitled to give written notice to the Agent of its intent to
exercise its right of termination of the Steam Contract pursuant to Section
3.03C(2) thereof if reimbursement to Syracuse as required thereunder is not made
within eight months after the interruption of service, so that the requirement
of prior written notice to the Agent pursuant to subparagraph (a) of this
Section 8 shall not extend or delay the passage of time required prior to the
exercise of such right of termination as set forth in said Section 3.03C(2).
Nothing in this Section 8(b) shall be deemed to limit or restrict any of the
other rights and remedies available to Syracuse under the Syracuse Documents
including, without limitation, the right of Syracuse to assume and exercise
operating control of the Existing Plant pursuant to Section 20.02(e) of the
Operating Agreement. The Agent and the Secured Parties (or their agent, assignee
or designee) shall exercise their rights to exclude or prevent Syracuse from
assuming or exercising operating control of the Facility by delivering written
notice to Syracuse that the Secured Parties intend to exercise their rights
under the Collateral Documents and then diligently exercising such rights.
If Syracuse shall exercise any rights it may have including its rights
under Section 3.03(C)(3) of the Steam Contract to assume possession or operating
control of the Facility, Syracuse shall use its reasonable efforts to operate
the Facility in accordance with the Syracuse Documents and the Power Purchase
Contract (as defined in the Financing Agreement) and not knowingly operate the
Facility so that its net electrical output exceeds 75 megawatts.
(c) If a default under any Syracuse Document is of such nature that it
cannot practicably be cured without first taking possession of or obtaining
entry to the Facility or if such default is of such a nature that it is not
susceptible of being cured by the Agent or the Secured Parties then Syracuse
shall not be entitled to terminate any Syracuse Document by reason of such
default if and so long as the Agent or the Secured Parties (or their agent,
assignee or designee) shall proceed diligently to obtain possession of or entry
to the Facility pursuant to the rights of the Agent and the Secured Parties
under the Financing Documents (including possession or entry by a receiver), and
upon obtaining such possession the Agent and the Secured Parties (or their
agent, assignee or designee) shall proceed diligently to cure such default if
such default is susceptible of being cured by the Agent and the Secured Parties.
In the event the Agent or the Secured Parties (or their agent, assignee or
designee) elect to perform Borrower's obligations under
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<PAGE>
the Syracuse Documents or to enter into new Syracuse Documents as provided in
subparagraph 8(f) below, such entity or person shall not have personal liability
to Syracuse for the performance of such obligations (other than indemnity claims
under Article 5 of the Steam Contract, Article 19 of the Lease and Article 14 of
the Operating Agreement) and the sole recourse of Syracuse shall be to the
Secured Parties' interests in the Facility and the Collateral (as defined in the
Financing Agreement). The Agent and the Secured Parties' determination that a
default under the Syracuse Documents is of such a nature that it cannot
practicably be cured without first taking possession of or obtaining entry to
the Facility shall, if reasonably made in good faith, be binding on Syracuse,
the Agent and the Secured Parties (and their agents, assignees or designees).
(d) Neither the Agent nor the Secured Parties shall be required to
continue to proceed to obtain possession or entry, or to continue in possession
of the Facility, pursuant to the foregoing subparagraph (c) if and when such
default shall be cured. If the Agent, any Secured Party or any nominee, or a
purchaser at the foreclosure sale, shall acquire title to the Facility and shall
cure all defaults which are susceptible of being cured by the Agent, a Secured
Party or such purchaser, as the case may be, then any default of the Borrower
which is not susceptible of being cured by the Agent, a Secured Party or such
purchaser, as the case may be, shall no longer be deemed to be a default under
any Syracuse Document; provided, however, that nothing in this Section 8(d)
shall be deemed to be a waiver by Syracuse of any rights or remedies it may have
against the Borrower for any such defaults which are not susceptible of cure,
subject, however, to the limitations on the exercise of such remedies provided
in this Consent and Agreement.
(e) The Secured Parties may assign their rights and interests and the
rights and interests of Borrower under the Syracuse Documents to any purchaser
or transferee of the Facility, upon notice to Syracuse, if such purchaser or
transferee is reputable and solvent, will not be rendered insolvent by such
assumption, and assumes the obligations of Borrower under the Syracuse
Documents. Syracuse hereby acknowledges, consents to and shall be bound by any
such assignment and assumption which does not by its terms modify the provisions
of the Syracuse Documents. Upon such assignment and assumption, the Secured
Parties shall be relieved of all obligations arising under the Syracuse
Documents after such assignment and assumption. If the purchaser or transferee
of Borrower's interest under the Syracuse Documents shall execute and deliver to
the Secured Parties a mortgage and/or a security agreement with respect to such
purchaser or transferee's interests in the Facility, the Syracuse Documents and
the Premises, this Consent and Agreement shall remain in full force and effect,
and such new mortgage and or security agreement (if their substantive terms are
the
-5-
<PAGE>
same as those comprising the Collateral Documents) shall be deemed to be the
Collateral Documents hereunder.
(f) In the event that any Syracuse Document is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding or terminates
prior to the date it would otherwise expire, for any reason other than with the
consent of the Agent, and if, within ninety (90) days after such rejection or
termination, the Secured Parties or their designee(s) shall so request, Syracuse
will, upon cure of all defaults under the rejected or terminated Syracuse
Documents (other than those no longer deemed to be defaults by virtue of the
provisions of Sections 8(c) and 8(d) above), execute and deliver to the Secured
Parties or such designee(s), a new Syracuse Document, which shall be for the
balance of the remaining term under the original Syracuse Document before giving
effect to such rejection or termination and shall contain the same conditions,
agreements, terms, provisions and limitations as the original Syracuse Document
(except for any requirements which have been fulfilled by Borrower prior to such
rejection or termination). References in this Consent and Agreement to any
"Syracuse Document" shall be deemed also to refer to such new Syracuse Document.
(g) Foreclosure of any Collateral Document, or any sale thereunder by
the Agent or any Secured Party, whether by judicial proceeding or any power of
sale, or any conveyance from the Borrower in lieu thereof, shall not require the
consent of Syracuse or constitute a breach of any Syracuse Document. Upon
receipt of notice of such foreclosure, sale or conveyance, Syracuse shall
recognize the Secured Parties or their transferee, as the case may be, as the
party to the relevant Syracuse Document, subject, however, to the assumption by
such party of the obligations of the Borrower under the Syracuse Documents and
to compliance with the provisions of Section 8(e) above.
9. The parties hereto acknowledge and agree that the subordination of
the user charge (as defined in the Syracuse Documents) is terminated and no
longer effective, including without limitation for purposes of Section 5.03 of
the Operating Agreement.
10. Anything herein to the contrary notwithstanding, Syracuse shall not
exercise any remedy as a secured creditor (whether at equity or law) without
first providing the Agent not less than thirty (30) days prior written notice of
its intent to take such action and the reasons therefore, nor shall Syracuse
take any such action if the Borrower or the Agent shall provide Syracuse
additional security,
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<PAGE>
reasonably satisfactory to Syracuse, for the Borrower's obligations under the
University Security Documents (as defined in the Financing Agreement).
11. Except as otherwise expressly provided in Section 17 below,
application of insurance or condemnation proceeds, proceeds from surety bonds or
similar obligations relating to the Facility or from damage claims arising from
any contract relating to the Facility, and decisions to sue, compromise, settle
or release claims arising from or related to any of the foregoing shall be made
by the Agent pursuant to the terms of the Collateral Documents. Notwithstanding
the express provisions of any surety bond, insurance policy or other similar
obligation wherein or whereby Syracuse may be named as a co-obligee or
additional insured, Syracuse shall have no interest or other right in respect of
any of the foregoing matters until all Senior Debt shall be paid in full, except
with respect to its rights as to the application of any proceeds thereof as
provided in Section 17. Syracuse shall execute all such releases, waivers and
other instruments as the Agent may reasonably request to further evidence or
implement the intent or carry out the purposes of this Section 11.
12. In the event that any conflict shall exist between the terms of
this Consent and Agreement and the terms of any Syracuse Document, the terms of
this Consent and Agreement shall prevail. Except as otherwise expressly provided
herein and in that certain Subordination Agreement dated as of the date hereof
among Syracuse, Agent and Borrower, (i) this Consent and Agreement shall not
limit or restrict the availability to or exercise by Syracuse of any of its
rights and remedies under the Syracuse Documents and (ii) nothing in the
Financing Documents shall be construed to amend, modify, alter, waive, restrict
or limit any of the terms, conditions or provisions of any of the Syracuse
Documents or increase the obligations or diminish the rights of Syracuse under
the Syracuse Documents.
13. Syracuse shall not be released from its obligations under the
Syracuse Documents pursuant to any assignment or transfer (including by reason
of a merger, consolidation, sale of substantially all of its assets or
otherwise) unless the Agent shall have previously consented in writing to such
release.
14. (a) Anything in this Consent and Agreement, the Financing
Documents, the Collateral Documents and the other Financing Documents to the
contrary notwithstanding, and so long as Syracuse shall not be in default under
any of its obligations established by this Consent and Agreement or by the
Syracuse Documents which is susceptible of cure by Syracuse, or if in default,
so long as it is proceeding diligently to cure such default, the Agent and the
Secured Parties shall not exercise any of the rights or remedies available to
them under any
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<PAGE>
of such documents or otherwise, in such manner so as to cause the removal from
the Premises of all of the Facility or any portion of the Facility material to
its operation; provided, however, that this provision shall not be construed to
impose upon the Agent or the Secured Parties any affirmative obligation to
preserve, protect or maintain the Facility; provided, further, that prior to the
Commercial Operation Date (as defined in the Steam Contract), if (i) following
an Event of Default (as defined in the Financing Agreement) with respect to
which the Secured Parties (or their agent, assignee or designee) accelerate the
Borrower's obligations under the Financing Agreement, the Secured Parties (or
their agent, assignee or designee) determine not to acquire the Facility by way
of foreclosure of their lien or otherwise under the Financing Documents and the
Collateral Documents or (ii) the Secured Parties (or their agent, assignee or
designee) determine to remove any or all of the Facility from the Premises
(Syracuse hereby agreeing that the Secured Parties, their agent, assignee or
designee shall have such right to remove the Facility), then the Agent shall
give Syracuse forty-five (45) days prior written notice of their intent to do so
and offer Syracuse the opportunity to purchase the Facility or any portion
thereof or any of the Collateral (but excluding accounts and general intangibles
(other than contract rights, permits and the rights of a like nature),
instruments and money as defined in the UCC) (the "Purchased Assets"), in cash,
"as is," "where is," for the lesser of the Purchased Assets' fair market value
or original purchase price (the "Purchase Price"); provided, however, that the
purchase price for that certain Restated Gas Sales and Purchase Agreement (the
"Gas Sales Agreement") dated March 18, 1991 between Borrower and Noranda, Inc.
("Noranda") shall be the greater of its fair market value, the price Noranda is
required to pay Borrower pursuant to the terms of the Gas Sales Agreement or
Eighty-Eight Million Dollars ($88,000,000). Agent's offer shall specify the fair
market value and original purchase price of the Purchased Assets, and, subject
to the last paragraph of this Section 14(a), Syracuse shall have thirty (30)
days to notify the Agent in writing of whether it accepts the Secured Parties'
offer. If Syracuse accepts the Secured Parties' offer, the parties will
consummate the purchase and sale of the Purchased Assets within sixty (60) days
by the Bank's delivery to Syracuse of a bill of sale covering the Purchased
Assets and Syracuse's delivery of the Purchase Price to the Agent. For purposes
of this section, "fair market value" shall be determined by taking into account
any liens, charges and encumbrances on the Purchased Assets other than those
liens, charges and encumbrances of the Secured Parties or Syracuse.
If Syracuse objects to the Agent's determination of fair market value, then
within ten (10) days of Agent's receipt of written notice thereof, a
professional consultant experienced in operation of cogeneration facilities and
valuation of natural gas supply and transportation agreements (the "consultant")
shall be selected by Agent and Syracuse. If Agent and Syracuse are unable to
agree upon a
-8-
<PAGE>
mutually acceptable consultant, Agent and Syracuse within five (5) days after
expiration of the ten (10) day period, shall each select a consultant and the
two consultants, within ten (10) days of their selection, shall select a third
consultant who shall be the consultant.
Upon the first available opportunity, the consultant shall have access to
the Purchased Assets for the purpose of determining (the "determination") the
fair market value of the Purchased Assets. Agent and Syracuse shall cooperate
with the consultant and shall provide him with such records and information
relating to the Purchased Assets that are within their possession or available
to them. The consultant shall make his determination as soon as reasonably
practical, but no later than thirty (30) days after his selection. The
consultant's determination shall be binding upon the Secured Parties and
Syracuse. The fees and expenses of each consultant in each determination made
pursuant to this Section shall be borne as follows:
(i) the fees and expenses of the consultant, if any, mutually
acceptable to the Secured Parties and Syracuse shall be borne equally by
the Secured Parties and Syracuse;
(ii) if the Secured Parties and Syracuse are unable to agree upon a
mutually acceptable consultant, each party shall pay the fees and expenses
of the consultant it selects and the fees and expenses of the third
consultant shall be borne equally by the Secured Parties and Syracuse.
Syracuse shall have thirty (30) days following its receipt of the Secured
Parties' consultant's determination to notify the Agent in writing of whether it
accepts the offer (fair market value under such circumstances being the fair
market value as determined by the consultant pursuant to the preceding
paragraph). If Syracuse accepts the Secured Parties' offer, the parties will
consummate the purchase and sale of the Purchased Assets within sixty (60) days
by the Secured Parties' delivery to Syracuse of a bill of sale covering the
Purchased Assets and Syracuse's delivery of the Purchase Price (fair market
value under such circumstances being the fair market value as determined by the
consultant pursuant to the preceding paragraph) to the Agent.
(b) From the date hereof, (i) if an Event of Default occurs and is
continuing under the Financing Documents or a breach or default occurs and is
continuing under any of the Syracuse Documents and upon written notice from
Syracuse to Agent or Agent to Syracuse or (ii) if the Secured Parties shall have
determined to sell or otherwise dispose of all or any part of the Collateral
(except (i) in the ordinary course of business of the operation of the Facility
as contemplated by the Operative Documents (as defined in the Financing
-9-
<PAGE>
Agreement) (so long as such sale or disposition does not involve assets valued
in excess of $50,000 in any instance, or increase the value of all assets
transferred within a one year period to greater than $200,000) and (ii)
obsolete, worn out or replaced property not useful in the business of the
Facility) and, prior to such sale or other disposition, the Secured Parties have
not theretofore undertaken or offered to undertake negotiations with Syracuse in
the nature of those set forth below with respect to the particular Collateral to
be disposed of or sold, then the Agent shall give notice to Syracuse and, in
each such event, the Agent on behalf of the Secured Parties and Syracuse shall
undertake in good faith, exclusive negotiations for a period of forty-five (45)
days after such written notice (the "Negotiation Period") whereby Syracuse may
offer to purchase and Agent may agree to sell at a price and on terms and
conditions mutually acceptable to Syracuse and the Secured Parties, any or all
of the Gas Contracts and the other Collateral (but excluding accounts and
general intangibles (other than contract rights, permits and rights of a like
nature), instruments and money as defined in the UCC). Nothing in this Section
14(b) shall be construed to permit the Agent or the Secured Parties to remove or
to cause the removal from the Premises of all of the Facility or any portion of
the Facility material to its operation.
In the event that the Secured Parties agree to sell and Syracuse agrees to
purchase any or all of the Secured Parties' interests under the Gas Contracts or
other Collateral (but excluding accounts and general intangibles (other than
contract rights, permits and rights of a like nature), instruments and money as
defined in the UCC) Syracuse shall: (i) purchase the Gas Contracts or such other
Collateral, as the case may be, "as is", "where is" and pay to Agent the
aggregate purchase price for the Gas Contracts or such other Collateral, as the
case may be, in cash, (ii) enter into any and all reasonable documentation
required to transfer the Gas Contracts or such other Collateral, as the case may
be. Any and all negotiation(s) between Agent and Syracuse shall terminate on
the day after the last day of the Negotiation Period; provided however, that the
Negotiation Period may be extended by the mutual written consent of the Agent
and Syracuse. For purposes of this Section 14(b) the term "Gas Contracts" shall
mean the Noranda Agreements and the Tenneco Agreements (as defined in the
Financing Agreement).
If the Secured Parties sell any or all of the Secured Parties' interests in
the Gas Contracts or such other Collateral to a party other than Syracuse, then,
promptly following the consummation of such sale, the Agent shall notify
Syracuse in writing of, and only of (i) the occurrence of such sale, (ii) the
Disposition Price (as hereinafter defined), and (iii) the party to whom the
Secured Parties sold the Gas Contracts and/or such other Collateral; provided,
however, that, in connection with such disclosure, Syracuse agrees to execute
such
-10-
<PAGE>
confidentiality agreements as the purchaser of the Gas Contracts and/or such
other Collateral, the Agent and/or the Secured Parties may reasonably request.
(c) Syracuse hereby covenants and agrees that any lien, charge or
encumbrance that Syracuse has on or with respect to the Gas Contracts pursuant
to the Syracuse Documents or the University Security Documents (as defined in
The Financing Agreement) (the "Lien") shall be limited to an amount equal to any
then due but unpaid user charges plus interest and any accrued user charges
pursuant to Article 5 of the Operating Agreement plus any Excess Steam Payments
plus interest then due and unpaid under Article 3 of the Steam Sale Agreement.
Syracuse further covenants and agrees to release and discharge the Lien if the
Disposition Price the Secured Parties can obtain for the Gas Contracts is less
than or equal to all amounts then due and owing to the Secured Parties under the
Financing Agreements. For purposes of this Section 14(c) "Disposition Price"
shall mean an amount equal to the net proceeds realized by the Secured Parties
from any sale or other transfer (by foreclosure or otherwise) of any or all of
the Gas Contracts.
(d) Syracuse shall have the right upon reasonable advance notice to
inspect the books and records of the Agent and Borrower as they relate to the
Purchased Assets.
(e) Nothing in this Section 14 shall be construed to restrict the rights
of the Agent or the Secured Parties to terminate the Gas Sales Agreement
pursuant to Section 12.1 thereof on account of Seller's (as defined in the Gas
Sales Agreement) default thereunder.
15. Syracuse hereby represents and warrants that (i) it is an
educational corporation duly organized, validly existing and in good standing
under the laws of New York, (ii) each of the Syracuse Documents is in full force
and effect on the date hereof and constitutes a valid and binding obligation of
Syracuse, enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and by general
principles of equity, (iii) no consent, license, approval or authorization of,
or filing, registration or declaration with, or exemption by, any governmental
body, bureau or agency or any other person is required in connection with the
execution, delivery and performance by Syracuse of any Syracuse Documents or
this Consent and Agreement other than those which have been duly obtained and
are in full force and effect, (iv) the representations and warranties of
Syracuse contained in each Syracuse Document are true and correct on the date
hereof with the same effect as if made on and as of the date hereof, (v) no
event of default, or event with which
-11-
<PAGE>
notice or lapse of time would become an event of default, exists and is
continuing under any Syracuse Document and (vi) Syracuse has duly complied with
all agreements and conditions contained in the Syracuse Documents required to be
performed or complied with by it prior to the date hereof.
16. This Consent and Agreement is for the benefit of Syracuse, the
Agent and the Secured Parties and no other party shall derive any rights by the
execution of this Consent and Agreement; provided, however, that Syracuse agrees
that the provisions of Section 3 of this Consent and Agreement shall also be for
the benefit of the Issuer and the Borrower.
17. (a) In the event of any damage to or destruction of the Facility,
the Agent and the Secured Parties will consider in good faith the application of
the use of proceeds of any insurance policy for the reconstruction of the
Facility and will in any event permit the application of such proceeds for
rebuilding or reconstruction if and for so long as (i) there exists no default
or event of default (as defined under the Financing Agreement, the Collateral
Documents or the Financing Documents) which permits or with the giving of notice
or the passage of time or both would permit the holders of any indebtedness of
the Borrower to the Agent or any Secured Party under the Financing Agreement,
the Collateral Documents and the other Financing Documents, to accelerate the
maturity of such indebtedness, (ii) the aggregate of such proceeds and all other
funds available for such rebuilding or reconstruction are sufficient to complete
such rebuilding or reconstruction within a reasonable time, and (iii) either (x)
the conduct of such rebuilding or reconstruction or the operation of the
Facility after completion of such rebuilding or reconstruction are not likely in
the reasonable judgment of the Agent to give rise to such a default or event of
default or (y) the amount of insurance proceeds required to effect such
rebuilding or reconstruction does not exceed the greater of (i) 35% of the
replacement value of the Facility or (ii) the replacement cost of one of the gas
turbines comprised in the Facility.
(b) In the event of any taking of the Premises or the Facility by
Condemnation Proceedings, Syracuse, Borrower and Agent shall cooperate in the
prosecution of the Condemnation Proceedings and the condemnation proceeds shall
be made available to, and shall be applied by, Syracuse, Borrower and Agent, as
the case may be, in the manner provided in Article 21 of the Lease Agreement.
18. This Consent and Agreement shall be binding upon, and shall inure
to the benefit of, Syracuse, the Agent and the Secured Parties and their
respective successors and assigns.
-12-
<PAGE>
19. (a) If the Secured Parties succeed to Borrower's interests in the
Lease or any of the Syracuse Documents pursuant to the Collateral Documents or
if the Secured Parties shall acquire a new Lease pursuant to this Agreement the
Secured Parties and their designee shall not be required to cure any defaults by
Borrower under the first and last sentences of Section 23.06 or Section 27.01(f)
of the Lease.
(b) Syracuse acknowledges that the provisions of Sections 27.05 and
27.06 of the Lease are subject to the limitation set forth in Section 3.03 of
the Steam Contract that Syracuse shall have no right to terminate any of the
Syracuse Documents except as expressly provided in such Syracuse Documents.
(c) Syracuse acknowledges and agrees and covenants that notwithstanding
the union of the fee simple title and the leasehold estate created under the
Lease or the merger of any other Syracuse Document in Syracuse, the Borrower,
the Secured Parties, or any other person or entity, either by purchase,
foreclosure or otherwise, it is the declared intention of the parties hereto
that the separation of the fee simple estate and the leasehold estate in the
Lease and the separation of the parties' interests in the other Syracuse
Documents shall be maintained and a merger shall not take place without the
prior written consent of the Secured Parties; provided, however, that nothing in
this paragraph shall limit or restrict in any manner the right of Syracuse to
terminate any of the Syracuse Documents in accordance with their terms and the
terms hereof.
-13-
<PAGE>
This Consent and Agreement is dated as of December 6th, 1999.
SYRACUSE UNIVERSITY
---------------------------------------
By: /s/ Louis G. Marcoccia
___________________________
Name: Louis G. Marcoccia
Title: Senior Vice President for Business
Finance and Administrative Services
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Associates, LLC
general partner
---------------------------------------
By: /s/ Douglas Corbett
____________________________
Name: Douglas Corbett
Title: Vice President
U.S BANK TRUST NATIONAL
ASSOCIATION
as Collateral Agent
---------------------------------------
By: /s/ Ward A. Spooner
____________________________
Name: Ward A. Spooner
Title: Vice President
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On the 2nd day of December in the year 1999 before me, the undersigned, a notary
public in and for said state, personally appeared Louis G. Marcoccia,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
/s/ Joseph Zagraniczny
______________________
Notarial Officer
(Seal, if any)
____________________
Title (and rank)
My commission expires: 12/31/2001
<PAGE>
POA Acknowledgment
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On the 3rd day of December in the year 1999 before me, the undersigned, a notary
public in and for said state, personally appeared Douglas Corbett, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual(s) whose name(s) is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
/s/ Bernadette M. Sullivan
__________________________
Notarial Officer
(Seal, if any)
____________________
Title (and rank)
My commission expires: 6/30/00
<PAGE>
Collateral Agent Acknowledgment
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On the 3rd day of December in the year 1999 before me, the undersigned, a notary
public in and for said state, personally appeared Ward A. Spooner, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual(s) whose name(s) is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
/s/ Bernadette M. Sullivan
_________________________
Notarial Officer
(Seal, if any)
____________________
Title (and rank)
My commission expires: 6/30/00
<PAGE>
EXHIBIT A
DESCRIPTION OF THE PREMISES
[attached]
<PAGE>
EXHIBIT 10.17
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Bernadette M. Sullivan
Legal Assistant
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT ("Agreement") dated as of December 6, 1999 among
SYRACUSE UNIVERSITY, a New York educational corporation having an office at
Skytop Office Building, Syracuse, New York 13244-5300 (together with its
successors and assigns, the "University"), U.S. BANK TRUST NATIONAL ASSOCIATION,
a national banking association having an office at 100 Wall Street, Suite 1600,
New York, New York 10005, Attention: Corporate Trust, as Collateral Agent for
the Secured Parties (together with its successors and assigns as such Collateral
Agent, the "Collateral Agent"), and PROJECT ORANGE ASSOCIATES, L.P., a Delaware
limited partnership having an office at c/o NCP Syracuse, Inc., 90 Presidential
Plaza, Syracuse, New York 13209 (together with its successors and assigns the
"Borrower").
W I T N E S S E T H:
WHEREAS, reference is hereby made to the Mortgage and Security Agreement
(First Mortgage) dated as of the date hereof given by the City of Syracuse
Industrial Development Agency ("SIDA") and the Borrower, as mortgagors, to the
Collateral Agent, as mortgagee (the "Senior Mortgage"), to be recorded in the
Office of the Clerk of Onondaga County, New York (the "Clerk's Office")
contemporaneously with the recording of this Agreement, relating to the Project
known as the Project Orange Associates, L.P. Cogeneration Facility and Pipeline
located on the Leased Site and the Easements described in Exhibits A-1 through
A-5 inclusive attached hereto and incorporated herein;
WHEREAS, reference is also hereby made to the Security Agreement dated as
of the date hereof given by the Borrower, as grantor, to the Collateral Agent,
as secured party, and the Security Agreement dated as of the date hereof given
by SIDA, as grantor, to the Collateral Agent, as secured party, each relating to
the Project (said Security Agreements being collectively the "Senior Security
Agreements"; the Senior Mortgage, the Senior Security Agreements and the
financing statements and the continuation statements relating thereto being
collectively the "Senior Collateral Documents");
WHEREAS, reference is also hereby made to (a) the Mortgage and Security
Agreement dated as of April 5, 1991 recorded in the Clerk's Office on May 3,
1991 in Book 5857 at Page 221, as amended by the First Amendment of Mortgage and
Security Agreement (A) dated as of
<PAGE>
December 24, 1992 recorded in the Clerk's Office on January 7, 1993 in Book 6731
at Page 254, given by the Borrower and SIDA, as mortgagor, to the University, as
mortgagee (collectively "University Mortgage A"), and (b) the Mortgage and
Security Agreement dated as of April 5, 1991 recorded in the Clerk's Office on
May 3, 1991 in Book 5857 at Page 249, as amended by the First Amendment of
Mortgage and Security Agreement (B) dated as of December 24, 1992 recorded in
the Clerk's Office on January 7, 1993 in Book 6731 at Page 274, given by the
Borrower and SIDA, as mortgagor, to the University, as mortgagee (collectively
"University Mortgage B"; University Mortgage A and University Mortgage B being
herein collectively the "Subordinate Mortgages"), each relating to the Project
located on the Leased Site and Easements described in Exhibit A-1 through A-5
inclusive attached hereto and incorporated herein;
WHEREAS, reference is also hereby made to the two Security Agreements dated
as of April 5, 1991 given by the Borrower and SIDA, as grantors, to the
University, as secured party, relating to the Project (said Security Agreements
being collectively the "Subordinate Security Agreements"; the Subordinate
Mortgages, the Subordinate Security Agreements and the financing statements and
continuation statements relating thereto being collectively the "Subordinate
Collateral Documents"); and
WHEREAS, the Collateral Agent has requested that the University execute and
deliver this Agreement to acknowledge, to recognize and to confirm the
subordination of the Subordinate Collateral Documents to the Senior Collateral
Documents.
NOW THEREFORE, in consideration of the foregoing, to induce the Collateral
Agent to accept the Senior Collateral Documents, in consideration of the
agreements hereinafter set forth, and intending to be bound hereby, the parties
hereto hereby agree as follows:
1. (a) Capitalized terms used in this Agreement but not otherwise
defined herein shall have the respective meanings ascribed thereto in or by
reference in the Senior Mortgage.
(b) Unless otherwise specified herein, as used in this Agreement, the
terms "University Mortgage A", "University Mortgage B", "Subordinate Mortgages",
"Subordinate Security Agreements" and "Subordinate Collateral Documents" shall
include all supplements, amendments and other modifications now or hereafter in
effect.
(c) In this Agreement, unless otherwise specified, singular words
include the plural and plural words include the singular; words imparting any
gender include the other genders, the word "person" means an individual,
corporation, partnership, association, trust or other entity or organization,
including a government or political subdivision, agency or instrumentality
thereof, the word "successors", when it refers to an individual, includes the
heirs, devisees, legatees, executors, administrators and personal
representatives of such individual; the words "include", "including" and similar
words are deemed to be followed by the words "without limitation"; the words
"hereto", "herein", "hereof", "hereunder" and similar words refer to this
Agreement in its entirety; the words "foreclose", "foreclosure", or similar
words
2
<PAGE>
shall include transfers in lieu of foreclosure; and references to paragraphs are
to the paragraphs in this Agreement.
2. The University hereby acknowledges, confirms and agrees that:
(a) Each and all of the Subordinate Collateral Documents and the
mortgages, liens and security interests created or arising thereunder are and
shall be deemed to be and remain subject and subordinate in all respects to each
and all of the Senior Collateral Documents and the mortgages, liens and security
interests created or arising thereunder, notwithstanding the times or order of
the granting thereof; and
(b) Notwithstanding the union of the fee simple title and the
leasehold estate created under the Ground Lease or the merger of any other
Syracuse Document (as defined in the Consent and Agreement dated as of the date
hereof among the University, the Collateral Agent and the Borrower (the
"University Consent and Agreement") in the University, the Borrower, the
Collateral Agent, the Secured Parties or any other person or entity, either by
purchase, foreclosure or otherwise, it is the declared intention of the parties
hereto that the separation of the fee simple estate and the leasehold estate in
the Ground Lease and the separation of the parties' interests in the other
Syracuse Documents shall be maintained and a merger shall not take place without
the prior written consent of the Secured Parties; provided, however, that
nothing in this paragraph shall limit or restrict in any manner the right of the
University to terminate the Ground Lease or the other Syracuse Documents in
accordance with their terms and the terms of the University Consent and
Agreement.
3. The University and the Borrower hereby acknowledge, confirm and agree
that:
(a) All references in the Subordinate Collateral Documents (i) to a
"Consent and Agreement" shall be deemed to refer to the "Consent and Agreement
dated as of the date hereof among the University, the Collateral Agent and the
Borrower and (ii) to the "Power Purchase Contract" shall mean the Power Put
Agreement and the Indexed Swap Agreement.
(b) After the Collateral Agent's request therefor the University and
the Borrower shall, within a reasonable period of time, at the Borrower's
expense, take all such further actions and execute, acknowledge and deliver all
such further instruments and documents as the Collateral Agent shall from time
to time reasonably request to acknowledge, confirm and effectuate the provisions
of, and carry out the intent of, the provisions of this Agreement.
4. The University represents and warrants that it is the owner of its
interests under the Syracuse Documents; it is the owner of the mortgagees' and
secured parties' interests under the Subordinate Collateral Documents; it has
the sole and unencumbered right and power to enter into this Agreement; and this
Agreement has been duly authorized, executed and delivered by it.
5. The Collateral Agent represents and warrants that it is the mortgagee
and secured party under the Senior Collateral Documents; it has the right and
power as Collateral Agent to
3
<PAGE>
enter in this Agreement; and this Agreement has been duly authorized, executed
and delivered by it as Collateral Agent.
6. The Borrower hereby consents to this Agreement and agrees to be bound
by the provisions hereof. The Borrower hereby represents and warrants that it
has the sole and unencumbered right and power to execute this Agreement for such
purposes; and that this Agreement is duly authorized, executed and delivered by
it.
7. Any notice or other communication given under this Agreement shall be
in writing and shall be delivered personally, or mailed by United States first
class mail (registered or certified, postage paid by the sender), or sent by
overnight courier guaranteeing next business day delivery (courier charge paid
by the sender), addressed to the relevant party at its address set forth above.
Any party may by notice to the other parties designate additional or different
addresses for subsequent notices and communications. A notice or other
communication shall be deemed given when received by the party to whom addressed
or, if delivery is refused, when delivery is refused. If a notice or other
communication is mailed or sent in a manner provided above within the time
prescribed, it shall be deemed duly given, whether or not the addressee receives
it within such time.
8. If any provision of this Agreement shall be held to be unenforceable
against any person or in any circumstance, such unenforceability shall not
affect the enforceability of the other provisions of this Agreement against
other persons or in other circumstances.
9. This Agreement shall not be modified, waived or terminated, except by
an agreement in writing executed by the party against whom enforcement of such
modification, waiver or termination is sought.
10. This Agreement and the provisions hereof shall be deemed to be
covenants running with the land and shall be binding upon the University, the
Collateral Agent and the Borrower and their respective successors and assigns
and shall inure to the benefit of the University and the Collateral Agent and
their respective successors and assigns.
11. This Agreement shall be construed in accordance with and governed by
the laws of the State of New York.
12. 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
and hereto were upon the same instrument.
[Signatures on next page.]
[The rest of this page intentionally left blank.]
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
University
SYRACUSE UNIVERSITY,
a New York educational corporation
By: /s/ Louis G. Macoccia
------------------------------
Name: Louis G. Macoccia
Title: Senior Vice President for
Business, Finance and
Administrative Services
Collateral Agent
U.S. BANK TRUST NATIONAL ASSOCIATION,
a national banking association,
as Collateral Agent
By: /s/ Ward A. Spooner
------------------------------
Name: Ward A. Spooner
Title: Vice President
Borrower
PROJECT ORANGE ASSOCIATES, L.P.
a Delaware limited partnership
By: G.A.S. Orange Associates, LLC
general partner
By: /s/ Douglas Corbett
--------------------------
Name: Douglas Corbett
Title: Vice President
<PAGE>
Acknowledgment for:
University
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) ss.:
On this 2nd day of December, in the year 1999, before me, the
undersigned, personally appeared Louis G. Marcoccia, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/ Joseph Zagraniczny
-----------------------
Notary Public
<PAGE>
Acknowledgment for:
Collateral Agent
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 3rd day of December, in the year 1999, before me, the undersigned,
personally appeared Ward A. Spooner, personally known to me or proved to me on
the basis of satisfactory evidence to be the individual(s) whose name(s) is
(are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/ Bernadette M. Sullivan
__________________________
Notary Public
<PAGE>
Acknowledgment for:
Borrower
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 3rd day of December, in the year 1999, before me, the
undersigned, personally appeared Douglas Corbett, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/ Bernadette M. Sullivan
______________________
Notary Public
<PAGE>
Exhibit A-1
-----------
Property Description
--------------------
Leased Site
-----------
<PAGE>
Exhibit A-2
-----------
Property Descriptions
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City Easements
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Exhibit A-3
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List of City Easement Agreements
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Exhibit A-4
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Property Descriptions
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Outside Easements
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Exhibit A-5
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List of Outside Easement Agreements
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EXHIBIT 10.18
Execution Copy
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Bernadette M. Sullivan
Legal Assistant
CONSENT AND AGREEMENT
1. (a) Reference is made to that certain Lease and Sublease Agreement
dated as of April 5, 1991 between the City of Syracuse Industrial Development
Agency (the "Issuer"), as issuer and landlord, and Project Orange Associates,
L.P. (the "Guarantor"), as guarantor and tenant, a memorandum of which dated as
of April 5, 1991 was recorded in the Office of the Clerk of Onondaga County, New
York (the "Clerk's Office"), on May 3, 1991 in Book 3693 at Page 149
(collectively as amended and in effect from time to time, the "Master Lease";
together with the Ground Lease, City Easement Agreements, Outside Easement
Agreements and Easement Lease described in the First Mortgage (defined in
paragraph 1(b) below) collectively as in effect from time to time (the "Lease
Documents").
(b) Reference is also made to (i) that certain Indenture dated as of
December 6, 1999 (the "Financing Agreement") between the Guarantor and U.S. Bank
Trust National Association, as trustee for the holders of the Guarantor's __%
Senior Secured Notes due 2007 (the "Trustee"; together with the holders of such
Senior Secured Notes, the "Secured Parties"), (ii) that certain Mortgage and
Assignment of Rents (First Mortgage) dated as of December 6, 1999 from the
Guarantor, as mortgagor, to U.S. Bank Trust National Association, as collateral
agent, as mortgagee (the "First Mortgage"), and the other Collateral Documents
and the other Financing Documents (as such terms are defined in the Financing
Agreement). References herein to the "Agent" shall mean U.S. Bank Trust,
National Association in its capacity as collateral agent under the Collateral
Documents and its successors and assigns in such capacity. References herein to
the Financing Agreement, First Mortgage, other Collateral Documents and other
Financing Documents shall refer to the same as amended and in effect from time
to time. Capitalized terms used herein without definition shall have the
meanings given such terms in the Financing Agreement.
(c) The Lease Documents and First Mortgage relate to certain real property
in Onondaga County, New York described on Exhibit A, attached hereto and
incorporated herein.
Anything in the Lease Documents to the contrary notwithstanding, the
parties agree as follows:
2. The Issuer hereby (i) acknowledges notice and receipt of the Financing
Agreement, First Mortgage and other Collateral Documents (other than the
Consents);
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(ii) consents to the First Mortgage and other Collateral Documents (other than
the Consents); (iii) acknowledges that Syracuse University (the "University")
has agreed (pursuant to the Consent and Agreement dated as of the date hereof
among the University, the Collateral Agent and the Guarantor (the "University
Consent")) that the First Mortgage and other Collateral Documents (other than
the Consents) shall be deemed to constitute a "Permitted Mortgage" (as defined
in the Ground Lease) for the purposes of the Ground Lease; and (iv) agrees that
the First Mortgage and other Collateral Documents (other than the Consents)
shall be deemed to constitute a "Permitted Mortgage" for the purposes of the
provisions of the Ground Lease that are incorporated by reference in and
applicable under the Master Lease.
3. In the event the Issuer shall owe any sums to the Guarantor under the
Lease Documents, the Issuer shall pay all such sums directly to the Agent for
deposit in the Project Orange Operating Account, or to such other person or in
such other manner as the Agent may from time to time specify in writing to the
Issuer.
4. Except as otherwise expressly provided herein or in the Lease
Documents should the Agent or the Secured Parties or any designee of the Agent
or the Secured Parties become a party thereto by foreclosure or assignment in
lieu thereof, neither the Agent nor the Secured Parties nor such designee shall
be liable for the performance or observance of any of the obligations or duties
of the Guarantor under the Lease Documents, nor shall any assignment of the
Lease Documents to the Agent, the Secured Parties or such designee give rise to
any duties or obligations whatsoever on the part of the Agent, the Secured
Parties or such designee owing to the Issuer, except that, insofar as the Agent,
the Secured Parties or such designee exercise their rights with respect to the
Lease Documents under the First Mortgage or other Collateral Documents or make
any claims with respect to any payments, deliveries or other obligations under
the Lease Documents, except to the extent provided in this Consent and
Agreement, the terms and conditions of the Lease Documents applicable to such
exercise of rights or such claims shall apply to the Agent, the Secured Parties
or such designee, as they case may be, to the same extent as the Guarantor.
5. The Guarantor and the Issuer shall not amend, surrender, terminate,
waive, supplement or otherwise modify any Lease Document, or consent thereto,
without in each case the prior written consent of the Agent; and any amendment,
surrender, termination, waiver, supplement or other modification of any Lease
Document, or consent thereto, by the Issuer or the Guarantor without in each
case the prior written consent of the Agent shall be void. Whenever any consent
or other action of the Agent or the Secured Parties is required under this
Consent and Agreement, such consent or action shall be given, taken or withheld
only with the consent of the number or percentage of the Secured Parties as may
be required under the terms of the Financing Agreement, Collateral Documents and
other Financing Documents.
6. (a) The Issuer shall furnish to the Agent at its address set forth in
or pursuant to paragraph 17 below, concurrently with the delivery thereof to the
Guarantor, a copy of each notice or demand delivered by the Issuer to the
Guarantor under any Lease Document.
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(b) The Issuer shall accept performance of the Guarantor's obligations
under the Lease Documents by the Agent, the Secured Parties or their
designee(s).
7. (a) The Issuer agrees that, notwithstanding any right it may have
under any Lease Document, it shall not terminate any Lease Document unless it
shall have given the Agent at least 120 days prior written notice of its intent
to terminate such Lease Document and the Agent or the Secured Parties shall not
cure within such time period the condition giving rise to such right of
termination.
(b) If the Agent or the Secured Parties are prohibited by any process or
injunction issued by any court, or by reason of any action by any court having
jurisdiction of any bankruptcy or insolvency proceedings involving Guarantor,
from commencing or prosecuting any cure or foreclosure or other appropriate
proceedings in the nature thereof, the times specified in this paragraph 7 for
commencing or prosecuting such cure or such foreclosure or other proceedings
shall be extended for the period of such prohibition.
(c) If a default under any Lease Document is of such nature that it cannot
practicably be cured without first taking possession of or obtaining entry to
the Facility (as defined in the Financing Agreement), or if such default is of
such a nature that it is not susceptible of being cured by the Agent or the
Secured Parties, then the Issuer shall not be entitled to terminate any Lease
Document by reason of such default if and so long as the Agent or the Secured
Parties (or their agent, assignee or designee) shall proceed diligently to
obtain possession of or entry to the Facility pursuant to the rights of the
Agent and the Secured Parties under the First Mortgage and other Collateral
Documents (including possession or entry by a receiver), and upon obtaining such
possession the Agent and the Secured Parties (or their agent, assignee or
designee) shall proceed diligently to cure such default, if such default is
susceptible of being cured by the Agent and the Secured Parties. In the event
the Agent or the Secured Parties (or their agent, assignee or designee) elect to
perform Guarantor's obligations under any Lease Document or to enter into new
Lease Document as provided in subparagraph 7(f) below, such person shall not
have personal liability to the Issuer for the performance of such obligations
and the sole recourse of the Issuer shall be to the Secured Parties' interests
in the Facility and other Collateral (as defined in the Financing Agreement).
The Agent's and the Secured Parties' determination that a default under any
Lease Document is of such a nature that it cannot practicably be cured without
first taking possession of or obtaining entry to the Facility shall, if
reasonably made in good faith, be binding on the Issuer, the Agent and the
Secured Parties (and their agents, assignees or designees).
(d) Neither the Agent nor the Secured Parties shall be required to
continue to proceed to obtain possession or entry, or to continue in possession
of the Facility, pursuant to the foregoing subparagraph 7(c). If the Agent, any
Secured Party or any nominee, or a purchaser or transferee at or in lieu of a
foreclosure sale, shall acquire title to or possession of the Facility and shall
cure all defaults which are susceptible of being cured by the Agent and the
Secured Parties or by such purchaser, as the case may be, then any default of
the Guarantor which is not susceptible of being cured by the Agent and the
Secured Parties or such purchaser, as the case
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may be, shall no longer be deemed to be a default under the Lease Document in
question; provided, however, that nothing in this subparagraph 7(d) shall be
deemed to be a waiver by the Issuer of any rights or remedies it may have
against the Guarantor for any such defaults which are not susceptible of cure,
subject, however, to the limitations on the exercise of such remedies provided
in this Consent and Agreement.
(e) The Agent and the Secured Parties may assign their rights and
interests hereunder, and (after foreclosure or by assignment in lieu of
foreclosure) the rights and interests of Guarantor under the Lease Documents, to
any purchaser or transferee of the Facility, upon notice to the Issuer, if such
purchaser or transferee is reputable and solvent and will not be rendered
insolvent by such assumption, the proposed use by such purchaser or transferee
shall not cause the Project to fail to qualify as a "Project" under the Act, and
such purchaser or transferee assumes the obligations of Guarantor under the
Lease Documents. The Issuer hereby acknowledges, consents to and shall be bound
by any such assignment and assumption which does not by its terms modify the
provisions of the Lease Documents. Upon such assignment and assumption, the
Agent and the Secured Parties shall be relieved of all obligations arising under
the Lease Documents after such assignment and assumption. If the purchaser or
transferee of Guarantor's interest under the Lease Documents shall execute and
deliver to the Agent or the Secured Parties a mortgage and/or a security
agreement with respect to such purchaser or transferee's interests in the
Facility and the Lease Documents, this Consent and Agreement shall remain in
full force and effect, and such new mortgage and or security agreement (if their
substantive terms are substantially the same as those comprising the First
Mortgage and other Collateral Documents) shall be deemed to be the First
Mortgage and other Collateral Documents hereunder.
(f) In the event that any Lease Document is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding or terminates
prior to the date it would otherwise expire for any reason other than with the
consent of the Agent, and if, within ninety (90) days after the Agent receives
notice of such rejection or termination, the Agent or the Secured Parties or
their designee(s) shall so request, the Issuer shall, upon cure of all defaults
of the Guarantor under the rejected or terminated Lease Document (other than
those no longer deemed to be defaults by virtue of the provisions of
subparagraphs 7(c) and 7(d) above), execute and deliver to the Agent or the
Secured Parties or such designee(s), a new Lease Document, which shall be for
the balance of the remaining term under the original Lease Document before
giving effect to such rejection or termination and shall contain the same
conditions, agreements, terms, provisions and limitations as the original Lease
Document (except for any requirements which have been fulfilled by Guarantor
prior to such rejection or termination or that are not susceptible of being
performed by the Agent or the Secured Parties or such designee(s)). References
in this Consent and Agreement to any "Lease Document" shall be deemed also to
refer to such new Lease Document.
(g) Foreclosure of the First Mortgage or any other Collateral Document, or
any sale thereunder by the Agent or any Secured Party, whether by judicial
proceeding or any power of sale, or any conveyance from the Guarantor in lieu
thereof, shall not require the consent of the
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Issuer or constitute a breach of any Lease Document. Upon receipt of notice of
such foreclosure, sale or conveyance, the Issuer shall recognize the Agent or
the Secured Parties or their designee or their transferee, as the case may be,
as the party to the relevant Lease Document, subject, however, to the assumption
by such party of the obligations of the Guarantor under the Lease Document as
provided in, and to compliance with the provisions of, subparagraph 7(e) above.
(h) Notwithstanding anything to the contrary in Master Lease or the PILOT
Agreement (defined in the Master Lease), in the event the Issuer or the
Guarantor has any right or obligation to convey and assign the Issuer's
interests in the Facility Project pursuant to Section 6.2, Section 6.3 or any
other section of the Master Lease, Section 6.03 or any other section of the
PILOT Agreement or otherwise (each a "Reconveyance Option"), (i) the Issuer and
the Guarantor shall not exercise any Reconveyance Option without the prior
written consent of the Agent, and any attempted exercise without such consent
shall be void; (ii) the Issuer and the Guarantor shall not close on any
Reconveyance Option (except such deemed transfer of title), unless and until the
Guarantor shall have furnished to the Agent, such instruments, documents,
opinions of counsel and endorsements to the Agent's title insurance policy as
the Agent shall request, and in form and substance reasonably satisfactory to
the Agent, granting and/or confirming the liens and security interests of the
First Mortgage and the other Security Documents on the reconveyed interests (or,
in the case of a reconveyance directly to the Agent or its designee(s) pursuant
to clause (v) below, the Agent's or such designee(s) title to the reconveyed
interests); (iii) at the option of the Agent, the Issuer shall grant such liens
and security interests of the First Mortgage and other Security Documents to the
Agent before the reconveyance; provided that the Issuer's obligation to grant
such liens and security interests to the Agent is subject to such approval of
the Issuer's board as may be required at such time, if any (provided that the
Issuer agrees to bring such matter before its board to be considered in good
faith by the board, if such board approval is required); (iv) in the case of a
Reconveyance Option exercisable by the Guarantor, the Agent shall have the right
to require the Guarantor to exercise such Reconveyance Option on behalf of the
Guarantor as provided in Section 2.08 of the First Mortgage, and the Issuer
shall accept such exercise by the Agent and close with the Agent or its
designee(s) pursuant thereto; (v) if an Event of Default or Default under the
Financing Agreement is continuing, or if the Agent has entered into or is
entitled to a new Master Lease pursuant to this Consent and Agreement or a new
Ground Lease pursuant to the University Consent, at the option of the Agent, the
reconveyance of the Issuer's interests in the Project pursuant to any
Reconveyance Option shall be directly to the Agent or its designee(s); (vi) if
the Agent shall request that the Guarantor execute any instrument or document in
connection with the foregoing and provide the same to the Guarantor, the
Guarantor shall promptly execute and deliver the same; (vii) if the Guarantor
shall not promptly execute and deliver the same, the Agent or its designee(s)
shall have the right and power to execute, acknowledge and deliver the same on
behalf of the Guarantor, and the Issuer shall accept the same as executed by the
Agent or its designee(s) on behalf of the Guarantor. Without limiting the
foregoing, in the event that the Guarantor acquires any or all of the Issuer's
interests in the Facility pursuant to Section 6.2, Section 6.3 or any other
section of the Master Lease pursuant to Section 6.03 or any other section of the
PILOT Agreement or otherwise, then (A) immediately upon and simultaneously with
the
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transfer of title or deemed transfer) of the Issuer's interests in the Facility
to the Guarantor, all of the Guarantor's interests so transferred to the
Guarantor shall be deemed to be mortgaged and granted to the Agent as mortgagee
under the First Mortgage to the same extent as if originally set forth therein;
and (B) the Guarantor shall promptly deliver to the Agent the instruments,
documents, opinions and endorsements referred to in clause (ii) above.
(i) The Issuer hereby unconditionally assigns, transfers and sets over to
the Agent any and all of the Issuer's claims and rights (other than the
Unassigned Rights) to the payment of damages arising from any rejection of any
Lease Document by any party (including, without limitation, the Issuer) to any
Lease Document pursuant to the Bankruptcy Code. The Agent shall have the right
to proceed in its own name or, if an Event of Default has occurred and is
continuing, in the name of the Issuer, in respect of any claim, suit, action or
proceeding relating to the rejection of any Lease Document, including, without
limitation, the right to file and prosecute, to the exclusion of the Issuer, any
proofs of claim, complaints, motions, applications, notices and other documents,
in any case in respect of such party under the Bankruptcy Code. This assignment
constitutes a present, irrevocable and unconditional assignment of the foregoing
claims, rights and remedies, but shall continue in effect until the termination
of the First Mortgage and other Collateral Documents. Any amounts received by
the Issuer as damages arising out of the rejection of the Master Lease as
aforesaid (other than with respect to the Unassigned Rights) shall be applied
and paid as set forth in the First Mortgage and other Collateral Documents.
(j) The Issuer shall not, without the Agent's prior consent, elect to
treat any Lease Document as terminated under Section 365(h)(1) of the Bankruptcy
Code. Any such election made without the Agent's prior consent shall be void.
(k) If pursuant to Section 365(h)(1) of the Bankruptcy Code, the Issuer
seeks to offset against the rent or other charges reserved in any Lease Document
the amount of any damages caused by the non-performance by any party (other than
Issuer) to such Lease Document of any of the its obligations under such Lease
Document after the rejection by such party of such Lease Document under the
Bankruptcy Code, the Issuer shall, prior to effecting such offset, notify the
Agent of its intention to do so, setting forth the amounts proposed to be so
offset and the basis therefor. The Agent shall have the right, within 30 days
after receipt of such notice from the Issuer, to reasonably object to all or any
part of such offset, and, in the event of such reasonable objection, the Issuer
shall not effect any offset of the amounts so objected to by the Agent for a
period of 30 days after the Agent has delivered its objection notice to the
Issuer, during which time the Agent shall have the right to bring its objections
to the attention of any court supervising the bankruptcy of such party. If (i)
the Agent has failed to object as aforesaid within the 30 days after notice from
the Agent or (ii) the court fails to render its decision within the above-
mentioned 30-day period, the Issuer may proceed to effect such offset in the
amounts set forth in the Issuer's notice.
(l) If any action, proceeding, motion or notice shall be commenced or
filed in respect of the Mortgaged Property in connection with any case under the
Bankruptcy Code (other than a
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case under the Bankruptcy Code commenced with respect to the Issuer), the Agent
shall have the option, exercisable upon notice to the Issuer, to participate in
any such litigation with counsel of the Agent's choice. If an Event of Default
shall have occurred and be continuing, the Agent shall have the option of
assuming the control of any such litigation and may proceed in its own name or
in the name of the Issuer in connection with any such litigation, and the Issuer
agrees to execute any and all powers, authorizations, consents and other
documents required by the Agent in connection therewith. The Issuer shall not
commence any action, suit, proceeding or case, or file any application or make
any motion, in respect of any Lease Document in any such case under the
Bankruptcy Code (other than a case under the Bankruptcy Code commenced with
respect to the Issuer) without the prior consent of the Agent.
(m) The Issuer shall, promptly after obtaining knowledge thereof, notify
the Agent of any and all filings by or against any party (including the Issuer)
under any Lease Document of a petition under the Bankruptcy Code. The Issuer
shall thereafter forthwith give notice of such filing to the Agent, setting
forth any information available to the Issuer as to the date of such filing, the
court in which such petition was filed, and the relief sought therein. The
Issuer shall, promptly after receipt thereof, deliver to the Agent any and all
notices, summonses, pleadings, applications and other documents received by the
Issuer in connection with any such petition and any proceedings relating
thereto.
(n) If there shall be filed by or against the Issuer a petition under the
Bankruptcy Code, and the Issuer, as a party under any Lease Document, shall
determine to reject any Lease Document pursuant to Section 365(a) of the
Bankruptcy Code, then the Issuer shall give the Agent not less than 30 days'
prior notice of the date on which the Issuer shall apply to the bankruptcy court
for authority to reject such Lease Document. The Agent shall have the right,
but not the obligation, to serve upon the Issuer within such 30-day period a
notice stating that (i) the Agent demands that the Issuer assume and assign such
Lease Document to the Agent pursuant to Section 365 of the Bankruptcy Code and
(ii) the Agent covenants to cure or provide adequate assurance of prompt cure of
all defaults and provide adequate assurance of future performance of the
Issuer's obligations under such Lease Document. If the Agent serves upon the
Issuer the notice described in the preceding sentence, the Issuer shall not seek
to reject such Lease Document and shall seek court approval to comply with the
demand provided for in clause (i) of the preceding sentence within 30 days after
the notice shall have been given, subject to the performance by the Agent of the
covenant provided for in clause (ii) of the preceding sentence.
(o) Effective upon the entry of an order for relief in respect of the
Issuer under the Bankruptcy Code, the Issuer hereby assigns and transfers to the
Agent a non-exclusive right to apply to the bankruptcy court under Section
365(d)(4) of the Bankruptcy Code for an order extending the period during which
any Lease Document may be rejected or assumed.
8. The Issuer shall not assign or transfer (including, without
limitation, by merger, consolidation, sale of assets or otherwise), or mortgage,
pledge, grant a security interest in or otherwise encumber, in each case whether
directly or indirectly, by operation of law or otherwise, its interest in or
under any Lease Agreement, without the prior written consent of the
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Agent, except for (i) a transfer in accordance with subparagraph 7(h) above
pursuant to a Reconveyance Option, or (ii) a merger, consolidation or assignment
of the Issuer pursuant to Section 11.3 of the Master Lease; and any such
assignment or other transfer, and any such mortgage, pledge grant of a security
interest or other encumbrance, made by Issuer without the consent of the Agent
(except as provided in clause (i) or (ii) above) shall be void.
9. The Issuer shall not exercise any remedy under the Lease Documents
against the Guarantor as a secured creditor (whether at equity or law) without
first providing the Agent not less than thirty (30) days prior written notice of
its intent to take such action and the reasons therefore, nor shall the Issuer
take any such action if the Guarantor or the Agent shall provide the Issuer
additional security, reasonably satisfactory to the Issuer, for the Guarantor's
obligations that are so secured.
10. The application of insurance or condemnation proceeds, proceeds from
surety bonds or similar obligations relating to the Facility or from damage
claims arising from any contract relating to the Facility, and decisions to sue,
compromise, settle or release claims arising from or related to any of the
foregoing (other than any Unassigned Rights) shall be made by the Agent pursuant
to the terms of the Collateral Documents. Notwithstanding the express
provisions of any surety bond, insurance policy or other similar obligation
wherein or whereby the Issuer may be named as a co-obligee or additional
insured, the Issuer shall have no interest or other right in respect of any of
the foregoing matters (other than with respect to any Unassigned Rights) until
the Secured Obligations under the First Mortgage and the other Collateral
Documents shall be paid in full. The Issuer shall execute all such releases,
waivers and other instruments as the Agent may reasonably request to further
evidence or implement the intent or carry out the purposes of this paragraph 9.
11. In the event that any conflict shall exist between the terms of this
Consent and Agreement and the terms of any Lease Document, the terms of this
Consent and Agreement shall govern. Except as herein otherwise expressly
provided, this Consent and Agreement shall not limit or restrict the
availability to or exercise by the Issuer of any of its rights and remedies
under the Lease Documents.
12. The Guarantor represents and warrants that (i) the Facility and
Project have been constructed and completed; (ii) the proposed actions described
in the WHEREAS clauses of the Master Lease have been taken; and (iii) the
"Financing Agreement", "Bonds", "Mortgages", other "Collateral Documents", other
"Financing Documents" and "Secured Obligations" originally described or referred
to in the Master Lease have been fully paid, satisfied, discharged and released.
13. The Issuer and the Guarantor agree that the Master Lease shall be and
hereby is amended as follows: (i) all references therein to the "Financing
Agreement" shall be deemed to refer to the Financing Agreement described in
paragraph 1(b) above; (ii) all references therein to the "Financing Documents"
and "Collateral Documents" shall be deemed to refer to the Financing Documents
and Collateral Documents described in the Financing Agreement
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described in paragraph 1(b) above; (iii) all references therein to the "Agent"
shall be deemed to refer to the Agent described in the Financing Agreement
described in paragraph 1(b) above; (iv) all references therein to the "Banks"
and the "Required Banks" shall be deemed to refer respectively to the Secured
Parties and the Required Secured Parties described in the New Financing
Agreement; (v) all references therein to the "Mortgages", "First Mortgage",
"Second Mortgage" and "Third Mortgage" shall be deemed to refer to the First
Mortgage described in the Financing Agreement described in paragraph 1(b) above;
(vi) all references therein to the "Bonds" shall be deemed to refer to the
Senior Secured Notes described in the Financing Agreement described in paragraph
1(b) above, (vii) all other capitalized terms used in the Master Lease without
definition shall have the meanings given such terms in the Financing Agreement
described in paragraph 1(b) above; (viii) the paragraph on the cover thereof
which begins with the words "The City" and ends with the words "the Agent" is
hereby deleted; (ix) Sections 2.1(e) and (f) thereof are hereby deleted; (x)
Section 2.4(g) thereof is hereby deleted; (xi) Section 4.2 thereof is hereby
deleted; (xii) the reference in Section 5.3 thereof to the Consent and Agreement
dated as of April 5, 1991 shall be deemed to refer to this Consent and
Agreement; (xiii) Section 7.1(a) thereof is hereby amended in its entirety to
read as follows:
"7.1 Rent.
"(a) The rent under this Lease shall equal one dollar per annum
and shall be due in arrears on each December 31";
(xiv) Section 7.2 thereof is hereby deleted; (xv) in line 9 of Section 8.3
thereof, the phrase "Section 5.20 of" is hereby deleted; (xvi) in line 2 of
Section 9.1(b) thereof and line 4 of Section 9.2(b) thereof, the word "may" is
hereby changed to read "shall have the sole right to"; (xvii) in line 3 of
Section 9.1(b) thereof the phrase "Section 5.20 of" is hereby deleted; (xviii)
in line 3 of Section 9.1(b) and line 4 of Section 9.2(b) thereof, the phrase
"and collect the proceeds thereof" is hereby added to the end of the line
(before the period; (xix) in Section 10.1 thereof, the phrase ", subject to the
terms and provisions of the Financing Documents," is hereby deleted; (xx) in
Section 12.2 thereof, clause (i) is hereby deleted; (xxi) Section 13.12 thereof
is hereby deleted; and (xxii) Section 13.11 thereof is hereby amended in its
entirety to read as follows:
"13.11 Subordination To Ground Lease.
"This Lease and all rights of the Guarantor hereunder (except for
the Unassigned Rights) are, and shall be, subject and subordinate to
the Ground Lease, all renewals, modifications, consolidations,
replacements, and extensions thereof."
14. If the Agent shall reasonably require that the Guarantor execute any
instrument or document (including any security agreement , financing statement,
continuation statement, supplemental mortgage, assignment or certificate of
title) that is necessary or advisable so that the Agent and the Secured Parties
may obtain the full benefit of the liens, security interests, rights and powers
intended to be created by the First Mortgage and other Collateral Documents
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with respect to the Issuer's interest in the Ground Lease and other Mortgaged
Property, the Guarantor shall have the right and power to execute, acknowledge,
deliver and file the same pursuant to Section 5.3 of the Master Lease and this
paragraph 14. If the Agent shall provide the Guarantor with any such instrument
or document, the Guarantor shall promptly execute, acknowledge and deliver the
same. If the Guarantor shall not promptly execute and deliver the same, the
Agent shall have the right and power to execute, acknowledge, deliver and file
the same acting on behalf of the Guarantor for the Issuer. The Agent shall have
the right and power to execute, acknowledge and file financing statements and
continuation statements acting on behalf of the Guarantor for the Issuer.
15. The Issuer hereby represents and warrants that (i) it is a public
benefit corporation duly organized, validly existing and in good standing under
the laws of New York; (ii) each of the Lease Documents executed by the Issuer
and this Consent and Agreement is in full force and effect on the date hereof
and constitutes a valid and binding obligation of the Issuer, enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity; (iii) no
consent, license, approval or authorization of, or filing, registration or
declaration with, or exemption by, any governmental body, bureau or agency or
any other person is required in connection with the execution, delivery and
performance by the Issuer of any Lease Documents or this Consent and Agreement
other than those which have been duly obtained and are in full force and effect;
(iv) the representations and warranties of the Issuer contained in the Lease
Documents are true and correct on the date hereof with the same effect as if
made on and as of the date hereof; (v) the Issuer is the owner and holder of the
lessor's interest under the Master Lease, the lessee's interest under the Ground
Lease, the grantee's interest under the City Easements, the lessee's interest
under the Easement Lease, and by virtue of the Easement Lease, the grantee's
interest under the Outside Easements; (vi) to Issuer's knowledge, (A) each Lease
Document is in full force and effect; (B) each Lease Document has not been
amended, supplemented or otherwise modified or assigned, except as described in
paragraph 1(a) above or the First Mortgage; (C) all conditions to the
commencement and continuing effectiveness of each Lease Document have been
satisfied and remain satisfied as of the date hereof; and (D) all payments
required to be made by the Guarantor under the Master Lease as of the date
hereof have been made; (vii) the term of the Master Lease commenced on April 5,
1991 and is scheduled to expire on _______________; (viii) the Issuer has not
entered into any amendment, supplement, or other modification or assignment of
any Lease Document, except as described in paragraph 1(a) above or in the First
Mortgage; (ix) the Issuer has duly complied with all agreements, conditions and
provisions contained in the Lease Documents required to be performed or complied
with by it prior to the date hereof; and (x) to the knowledge of the Issuer, no
default or event of default by the Guarantor or any other party (or event which
with notice or lapse of time or both would become such a default or event of
default) is continuing under any Lease Document.
16. (a) If the Agent, the Secured Parties or their designee(s) succeed to
Guarantor's interests in the Master Lease pursuant to the Collateral Documents
or if the Agent, the Secured
-10-
<PAGE>
Parties or their designee(s) shall acquire a new Master Lease pursuant to this
Consent and Agreement the Agent, the Secured Parties and their designee(s) shall
not be required to cure any defaults by Guarantor under the first and last
sentences of Section 23.06 or Section 27.01(f) of the Ground Lease as
incorporated in the Master Lease.
(b) The Issuer and the Guarantor acknowledge and agree and covenant that
notwithstanding the union of the fee simple title and the leasehold estate under
the Ground Lease, or the lessor's/grantor's and lessee's/grantee's under any
other Lease Document, in the Issuer, the Guarantor or any other Person, either
by purchase or otherwise, it is the declared intention of the parties hereto
that the separation of the fee simple estate and the leasehold estate in the
Ground Lease, and the separation of the lessor's/grantor's and
lessee's/grantee's interests under the other Lease Documents shall be maintained
and a merger shall not take place without the prior written consent of the
Agent; provided, however, that nothing in this paragraph shall limit or restrict
in any manner the right of the Issuer to terminate any Lease Document in
accordance with its terms upon a default or event of default thereunder, subject
to the provisions of this Consent and Agreement.
(c) The Issuer and the Guarantor agree that the Subordination Agreement,
dated as of April 5, 1991, by the Issuer and the Guarantor, not recorded in the
Clerk's Office, as modified by that certain First Amendment to Subordination
Agreement dated as of December 24, 1992 by the Issuer and the Guarantor,
recorded in the Clerk's Office on December __, 1992 in Book 6711 at Page 001, is
hereby terminated in its entirety.
17. (a) All notices and other communications hereunder shall be in
writing. Any notice or other communication addressed to the Agent, the Secured
Parties, the SIDA/Issuer, or the Borrower/Guarantor, as the case may be, shall
be delivered personally, or mailed by United States first class mail (registered
or certified, return receipt requested, postage paid by the sender), or sent by
overnight courier guaranteeing next Business Day delivery (courier charge paid
by the sender), or sent by facsimile (answerback confirmation received),
addressed as follows:
(i) if to the Agent or Secured Parties:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, New York 10005
Attention: Corporate Trust Administration
Telephone: (212)
Facsimile: (212)
(ii) if to the Issuer:
The City of Syracuse Industrial Development Agency
233 Washington Street
-11-
<PAGE>
Syracuse, New York 13202
Attention: Chairman
Telephone: (315) 448-4800
Facsimile: (315) 448-8036
(iii) if to the Guarantor:
Project Orange Associates, L.P.
c/o G.A.S. Orange Associates, L.L.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Attention: President
Telephone: (315) 471-8111
Facsimile: (315) 471-1355
A duplicate copy of each notice or other communication given hereunder or
under any Lease Document by the Issuer or the Guarantor shall be simultaneously
given to the Agent. Any party may, by notice to the other parties designate
additional or different addresses for subsequent notices or communications. All
notices and communications shall be deemed to have been given when received by
the party to whom it is addressed or, if delivery is refused, when delivery is
refused. If a notice or communication is mailed or sent in the manner provided
above within the time prescribed, it is deemed duly given whether or not the
addressee receives it within such time.
18. Nothing contained herein shall be construed to limit the rights and
benefits in favor of the Issuer under Sections 10.3 and 13.10 of the Master
Lease.
19. The Agent hereby agrees and acknowledges that the PILOT Amounts (as
defined in the PILOT Agreement) payable under the PILOT Agreement (other than
the Subordinated PILOT Obligations, as defined in the PILOT Agreement) shall be
treated as having a Lien on the Project superior in rank to the liens under the
First Mortgage and the other Collateral Documents.
20. This Consent and Agreement shall be binding upon, and shall inure to
the benefit of, the Issuer, the Guarantor, the Agent and the Secured Parties and
their respective successors and assigns. No other party shall derive any rights
by reason of this Consent and Agreement.
21. This Consent and Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
22. This Consent and Agreement may be signed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute but one and the same instrument.
[Signatures on next page.]
[Balance of this page intentionally left blank.]
-12-
<PAGE>
This Consent and Agreement is dated as of December 6, 1999.
Issuer
CITY OF SYRACUSE INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Vito Sciscioli
_____________________________
Name: Vito Sciscioli
Title: Vice Chairman
Guarantor
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Associates, LLC
General Partner
By: /s/ Douglas Corbett
_____________________________
Name: Douglas Corbett
Title:
Agent
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Collateral Agent
By: /s/ Ward A. Spooner
_____________________________
Name: Ward A. Spooner
Title: Vice President
-13-
<PAGE>
Acknowledgment for:
Issuer
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) ss.:
On this 2nd day of December, in the year 1999, before me, the
undersigned, personally appeared Vito Sciscioli, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/ Jean K. Sehl
_________________________
Notary Public
-14-
<PAGE>
Acknowledgment for:
Guarantor
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 3rd day of December, in the year 1999, before me, the
undersigned, personally appeared Douglas Corbett, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/ Bernadette M. Sullivan
__________________________
Notary Public
[Notary Seal]
-15-
<PAGE>
Acknowledgment for:
Agent
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 3rd day of December, in the year 1999, before me, the
undersigned, personally appeared Ward A. Spooner, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/ Bernadette M. Sullivan
__________________________
Notary Public
[Notary Seal]
-16-
<PAGE>
Exhibit A
---------
Part 1
------
Property Description
--------------------
Leased Site
-----------
-17-
<PAGE>
Part 2
------
Property Description
--------------------
City Easement Parcels
---------------------
-18-
<PAGE>
Part 3
------
List of City Easement Agreements
--------------------------------
-19-
<PAGE>
Part 4
------
Property Description
--------------------
Outside Easement Parcels
------------------------
-20-
<PAGE>
Part 5
------
List of Outside Easement Agreements
-----------------------------------
-21-
<PAGE>
EXHIBIT 10.19
Execution Copy
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Bernadette M. Sullivan
Legal Assistant
CONSENT AND AGREEMENT
1. (a) Reference is made to that certain Payment in Lieu of Tax
Agreement dated April 5, 1991 among the City of Syracuse (the "Municipality"),
the City of Syracuse Industrial Development Agency (the "Agency") and Project
Orange Associates, L.P. (the "Company"), not recorded in the Office of the Clerk
of Onondaga County, New York (as amended and in effect from time to time, the
"PILOT Agreement".
(b) Reference is also made to (i) that certain Indenture dated as of
December 6, 1999 (the "Financing Agreement") between the Company and U.S. Bank
Trust National Association, as trustee for the holders of the Company's _%
Senior Secured Notes due 2007 (the "Trustee"; together with the holders of such
Senior Secured Notes, the "Secured Parties"), (ii) that certain Mortgage and
Assignment of Rents (First Mortgage) dated as of December 6, 1999 from the
Company, as mortgagor, to U.S. Bank Trust National Association, as collateral
agent, as mortgagee (the "First Mortgage"), and the other Collateral Documents
and the other Financing Documents (as such terms are defined in the Financing
Agreement). References herein to the "Agent" shall mean U.S. Bank Trust,
National Association in its capacity as collateral agent under the Collateral
Documents and its successors and assigns in such capacity. References herein to
the Financing Agreement, First Mortgage, other Collateral Documents and other
Financing Documents shall refer to the same as amended and in effect from time
to time. Capitalized terms used herein without definition shall have the
meanings given such terms in the Financing Agreement.
(c) The PILOT Agreement and First Mortgage relate to certain real property
in Onondaga County, New York described on Exhibit A, attached hereto and
incorporated herein.
Anything in the PILOT Agreement to the contrary notwithstanding, the
parties agree as follows:
2. Each of the Municipality and the Agency hereby certifies that (i) the
PILOT Agreement contains the entire agreement of the parties thereto with
respect to payments in lieu of taxes with respect to the Facility (except to the
extent of references in the Master Lease obligating Guarantor to make PILOT
payments); (ii) the PILOT Agreement is in full force and
<PAGE>
effect; (iii) the PILOT Agreement has not been amended, supplemented or
otherwise modified or assigned; (iv) all conditions for the commencement and
continuing effectiveness of the PILOT Agreement and the rights and obligations
of the parties thereto thereunder have been and remain satisfied as of the date
hereof; (v) the PILOT Term commenced on April 5, 1991 and is scheduled to end on
July __, 2012; (vi) all payments required to be made by the Company under the
PILOT Agreement as of the date hereof have been made; (vii) there are no
Deferred Obligations, Subordinated PILOT Amounts or Subordinated PILOT
Obligations (as such terms are defined in the PILOT Agreement) outstanding as of
the date hereof; (viii) each of the Municipality and the Agency have duly
complied with all agreements, conditions and provisions contained in the PILOT
Agreement required to be performed by it prior to the date hereof; and (ix) to
the knowledge of the Municipality and the Agency, no Default or Event of Default
(as such terms are defined in the PILOT Agreement) by the Company (or event
which with notice or lapse of time or both would become such a Default or Event
of Default) is continuing under the PILOT Agreement.
3. Each of the Municipality and the Agency acknowledges notice and
receipt of the Financing Agreement, First Mortgage and other Collateral
Documents (other than the Consents). The Municipality also acknowledges notice
and receipt of the Consent and Agreement dated as of the date hereof by the
Agency (the "Agency Consent"), relating to (among other things) the Facility
Agreement (as defined in the PILOT Agreement) (defined in the Agency Consent as
the Master Lease).
4. Each of the Municipality and the Agency agrees that, as long as the
Financing Agreement, First Mortgage and other Collateral Documents remain
outstanding, notwithstanding anything to the contrary in the PILOT Agreement:
(i) all references in the PILOT Agreement to "Senior Debt" and "Construction
Loan" shall be deemed to refer to the Senior Secured Notes issued under the
Financing Agreement and secured by the First Mortgage and other Collateral
Documents; (ii) all references in the PILOT Agreement to the "Agent" shall be
deemed to refer to the Agent described in paragraph 1(b) above; (iii) all
references in the PILOT Agreement to the "Banks" shall be deemed to refer to the
Secured Parties described in paragraph 1(b) above, and all references to a
"Bank" shall be deemed to refer to a "Secured Party"; (iv) the last sentence of
Section 6.03 of the PILOT Agreement shall be deemed deleted from said Section;
(v) the phrase "The Municipality" in line 1 of Section 8.01(a) of the PILOT
Agreement is deemed amended to read "Each of the Municipality and the Agency;
(vi) the phrase "(including, without limitation, the rights under Sections 6.03
and 9.01)" is deemed added in line 3 of Section 8.01(a) of the PILOT Agreement
after the word "remedies"; (vii) the reference in line 4 of Section 8.01(a) of
the PILOT Agreement to "Section 6.01(a), (b), (c) or (e)" shall be deemed
changed to read "Section 6.01(a), (b), (c), (d), (e) or (f)"; (viii) the
following sentences shall be deemed added to the end of Section 8.01(a):
"If the Event of Default is curable by the Agent or the Banks but cannot
reasonably be cured by them within said 30-day (or 15-day) period, so long
as the Agent, the Banks or their designee(s) shall promptly commence and
diligently prosecute the curing of such Event of Default, the Agent, the
Banks or their designee(s) shall have a period of 120
-2-
<PAGE>
days from the date of notice to the Agent of such Event of Default within
which to cure the same. If the Event of Default is curable by the Agent or
the Banks but cannot reasonably be cured without obtaining possession of
the Facility, or if such event of Default is not susceptible of being cured
by the Agent or the Banks (i.e., an Event of Default under Section 6.01(d)
or (f)), then the Municipality and the Agency shall not be entitled to
terminate this Agreement or exercise such other remedies so long as the
Agent, the Banks or their designee(s) shall proceed diligently to obtain
possession of or entry to the Facility pursuant to the rights of the Agent
or the Banks under their mortgage(s) and other security documents, and upon
obtaining such possession shall proceed diligently to cure such Event of
Default, if it is susceptible of being cured by the Agent or the Banks. If
an Event of Default is not susceptible of being cured by the Agent or the
Banks, the Agent, the Banks and their designee(s) shall not be required to
cure the same upon obtaining such possession or otherwise.";
(ix) lines 2 through 5 of Section 8.02(b) of the PILOT Agreement are hereby
amended to read as follows:
"* * * trustee or debtor-in-possession in any bankruptcy or insolvency
proceeding or terminates prior to the date it would otherwise expire for
any reason other than with the consent of the Banks (or such member or
percentage of the Banks as may be required under the terms of the relevant
agreements governing Senior Debt), and if, within 90 days after the Agent
receives notice of such rejection or termination, the Agent, the Banks,
their designee(s) or their successors or assigns shall so request, the
Municipality and the Agency will execute and deliver to the Agent, the
Banks, their designee(s) or their successors or assigns, a new agreement
which shall be on the same terms and conditions as this * * *";
(x) all rights provided under the PILOT Agreement (as amended as provided
above) to the Agent and the Banks shall hereafter inure to the benefit of the
Agent and the Secured Parties described in paragraph 1(b) above; (xi) all rights
provided under the PILOT Agreement (as so amended) to the Senior Debt and the
holders of the Senior Debt shall hereafter inure to the benefit of the Senior
Secured Notes described in paragraph 1(b) above and the holders thereof; (xii)
all references in the PILOT Agreement to the "Facility Agreement" (referred to
in the Agency Consent as the Master Lease) shall be deemed to include any new
Facility Agreement (referred to in the Agency Consent as a new Master Lease)
granted to the Agent, the Secured Parties or their designee pursuant to
paragraph 7(f) of the Agency Consent; (xiii) the Municipality consents to, and
shall be bound by, the provisions of paragraph 7(h) of the Agency Consent; (xiv)
without limiting the foregoing, (A) each of the Municipality and the Agency
shall give a copy of each notice that it gives to the Company to the Agent at
its address provided in or pursuant to paragraph 6 below simultaneously with the
giving thereof to the Company; (B) each of the Municipality and the Agency shall
exercise its right to terminate the PILOT Agreement and its other remedies
thereunder (including, without limitation, its rights under Section 6.03) only
as provided in Section 8.01(a) of the PILOT Agreement (as so amended); (C) each
of the Municipality and the Agency shall exercise its rights under Section 6.03
of the PILOT
-3-
<PAGE>
Agreement only in accordance with paragraph 7(h) of the Agency Consent; (D) each
of the Municipality and the Agency shall enter a new PILOT Agreement with the
Agent, the Secured Parties, their designee(s) or their successors or assigns
pursuant to Section 8.02(b) of the PILOT Agreement (as so amended) in the event
of a termination of the PILOT Agreement as provided therein; and (E) the
Municipality and the Agency shall accept performance of the Company's
obligations under the PILOT Agreement by the Agent, the Secured Parties or their
designee(s) in lieu of the Company's performing such obligations.
5. Each of the Municipality and the Agency agrees that from the date
hereof and throughout the term of that certain ISDA Master Agreement between
Electric Energy Purchaser (as defined under the PILOT Agreement) and the Company
dated as of June 30, 1998 (the "Indexed Swap Agreement"), the definition of
"Electric Tariff Rate" under Section 3.01 of the PILOT Agreement shall be deemed
to refer to the "Indexed Contract Price" as calculated for any calendar year
pursuant to Schedule 1 to the Confirmation dated June 30, 1998 to the Indexed
Swap Agreement which forms a part thereof. The Municipality and the Agency each
acknowledge receipt of a copy of said Schedule 1.
6. (a) All notices and other communications hereunder and under the
PILOT Agreement by or to the Agent or the Secured Parties shall be in writing
and shall be addressed to the Agent, the Secured Parties, Agency, the City or
the Company, as the case may be, shall be delivered personally, or mailed by
United States first class mail (registered or certified, return receipt
requested, postage paid by the sender), or sent by overnight courier
guaranteeing next Business Day delivery (courier charge paid by the sender), or
sent by facsimile (answerback confirmation received), addressed as follows:
(i) if to the Agent or Secured Parties:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, New York 10005
Attention: Corporate Trust Administration
Facsimile: (212) 809-5459
(ii) if to the Municipality:
City of Syracuse
301 City Hall
Syracuse, New York 13202
Attention: Corporation Counsel
Telephone: (315) 448-8400
Facsimile: (315) 448-8381
-4-
<PAGE>
(iii) if to the Agency:
City of Syracuse Industrial Development Agency
233 Washington Street
Syracuse, New York 13202
Attention: Chairman
Telephone: (315) 448-8100
Facsimile: (315) 448-8036
(iv) if to the Company:
Project Orange Associates, L.P.
c/o G.A.S. Orange Associates, L.L.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Attention: President
Telephone: (315) 471-8111
Facsimile: (315) 471-1355
(b) A duplicate copy of each notice or other communication given hereunder
or under the PILOT Agreement by the Agency, the City or the Company shall be
simultaneously given to the Agent. Any party may, by notice to the other parties
designate additional or different addresses for subsequent notices or
communications. All notices and communications shall be deemed to have been
given when received or, if delivery is refused, when delivery is refused. If a
notice or communication is mailed or sent in the manner provided above within
the time prescribed, it is deemed duly given whether or not the addressee
receives it within such time.
7. In the event of a conflict between the terms of this Consent and
Agreement and the terms of the PILOT Agreement, the terms of this Consent and
Agreement govern.
8. This Consent and Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and the Secured Parties and their respective
successors and assigns. No other party shall derive any rights by reason of this
Consent and Agreement.
9. This Consent and Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
10. This Consent and Agreement may be signed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute but one and the same instrument.
-5-
<PAGE>
This Consent and Agreement is dated as of December 6, 1999.
Municipality
CITY OF SYRACUSE
By: /s/ Roy A. Bernardi
_________________________
Name: Roy A. Bernardi
Title: Mayor
Agency
CITY OF SYRACUSE INDUSTRIAL
DEVELOPMENT AGENCY
By: /s/ Vito Sciscioli
_________________________
Name: Vito Sciscioli
Title: Vice Chairman
Company
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Associates, LLC
general partner
By: /s/ Douglas Corbett
_________________________
Name: Douglas Corbett
Title: Vice President
Agent
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Collateral Agent
By: /s/ Ward A. Spooner
_________________________
Name: Ward A. Spooner
Title: Vice President
-6-
<PAGE>
Acknowledgment for:
Municipality
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) ss.:
On this 2nd day of December, in the year 1999, before me, the
undersigned, personally appeared Roy A. Bernardi, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/ Jean K. Sehl
___________________________
Notary Public
-7-
<PAGE>
Acknowledgment for:
Agency
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) ss.:
On this 2nd day of December, in the year 1999, before me, the
undersigned, personally appeared Vito Sciscioli, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/ Jean K. Sehl
___________________________
Notary Public
-8-
<PAGE>
Acknowledgment for:
Company
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 3rd day of December, in the year 1999, before me, the
undersigned, personally appeared Douglas Corbett, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/ Bernadette M. Sullivan
___________________________
Notary Public
[Notary Seal]
-9-
<PAGE>
Acknowledgment for:
Agent
UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 3rd day of December, in the year 1999, before me, the
undersigned, personally appeared Ward A. Spooner, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
/s/ Bernadette M. Sullivan
___________________________
Notary Public
[Notary Seal]
-10-
<PAGE>
Exhibit A
---------
Part 1
------
Property Description
--------------------
Leased Site
-----------
-11-
<PAGE>
Part 2
------
Property Description
--------------------
City Easement Parcels
---------------------
-12-
<PAGE>
Part 3
------
List of City Easement Agreements
--------------------------------
-13-
<PAGE>
Part 4
------
Property Description
--------------------
Outside Easement Parcels
------------------------
-14-
<PAGE>
Part 5
------
List of Outside Easement Agreements
-----------------------------------
-15-
<PAGE>
EXHIBIT 10.20
CONSENT
-------
Niagara Mohawk Power Corporation (the "Undersigned"), acknowledges that
nothing contained in the Power Put Agreement (as amended, the "Power Put
Agreement") dated as of September 19, 1986 between the Undersigned and Project
Orange Associates, L.P., a Delaware limited partnership (the "Company") or the
agreement consisting of the ISDA Master Agreement and the related Confirmation,
each dated as of June 30, 1998 (the "Indexed Swap Agreement" and collectively
with the Power Put Agreement, the "Amended Power Purchase Agreement") between
the Undersigned and the Company which were entered into pursuant to the Master
Restructuring Agreement, dated as of July 9, 1997 among the Undersigned and the
independent power producers party thereto, to replace and amend and restate the
Power Purchase Agreement dated September 19, 1989 between the Undersigned and
the Company precludes assignment of the Amended Power Purchase Agreement from
the Company to U.S. Bank Trust National Association, as collateral agent (the
"Agent") on behalf of certain financing parties and further acknowledges that
the Amended Power Purchase Agreement has been assigned by the Company to the
Agent pursuant to a Security Agreement, dated as of December 6, 1999, between
the Company and the Agent, the foregoing assignment being hereby consented to by
the Undersigned.
The Undersigned further agrees as follows:
1. The Undersigned will not terminate the Amended Power Purchase
Agreement by reason of any default or breach of the Company thereunder without
written notice to the Agent, and first providing to the Agent (i) thirty (30)
days from the date on which notice of default or breach is delivered to Agent to
cure such default if such default is the failure to pay amounts to the
Undersigned which are due and payable under the Amended Power Purchase Agreement
or (ii) a reasonable time as is necessary to cure such default if the breach or
default cannot be cured by the payment of money to the Undersigned so long as
the Company or the Agent has commenced to cure the default within a sixty (60)
day period from the date on which notice of default or breach is delivered to
Agent and thereafter diligently pursue such cure to completion and continue to
perform any monetary obligations under the Amended Power Purchase Agreement and
all other obligations under the Amended Power Purchase Agreement are performed
by the Company or the Agent. If possession of the cogeneration facility to which
the Amended Power Purchase Agreement relates is necessary to cure such breach or
default, and the Agent declares the Company in default and commences foreclosure
proceedings, the Agent will be allowed a reasonable period to complete such
proceedings. If the Agent is prohibited by any court order or bankruptcy or
insolvency proceedings from curing the default or from commencing or prosecuting
foreclosure proceedings, the foregoing time periods shall be extended by the
period of such prohibition.
-1-
<PAGE>
2. The Undersigned will accept performance by Agent or its designee or
assignee, in lieu of the Company's performance of such obligations.
3. Upon written notice from the Agent and so long as the Amended Power
Purchase Agreement has been assigned to the Agent or has been assumed by the
Agent, its designee(s) or assignee(s), the Undersigned, if requested by the
Agent, shall make all payments due under the Amended Power Purchase Agreement to
such account as the Agent may designate in writing to the Undersigned.
4. The Undersigned hereby represents and warrants to the Agent that (i)
the Amended Power Purchase Agreement is a valid and enforceable agreement, (ii)
there has been no prior assignment of the Amended Power Purchase Agreement of
which the Undersigned has notice or is aware other than the assignments
described herein, (iii) neither the Undersigned, nor to the Undersigned's best
knowledge, without investigation, the Company is in default under the Amended
Power Purchase Agreement, and (iv) to the Undersigned's best knowledge, without
investigation, all covenants, conditions and agreements have been performed as
required in the Amended Power Purchase Agreement except those not due to be
performed until after the date hereof.
5. The Undersigned acknowledges and agrees that as of the date hereof
the Undersigned has no existing cause to terminate the Amended Power Purchase
Agreement and the merger of Project Orange Funding, L.P. with and into the
Company and the Company's assumption of the obligations of Project Orange
Funding, L.P. as a consequence thereof does not constitute a "Credit Event Upon
Merger" within the meaning of such term under the Indexed Swap Agreement.
6. The address where the Undersigned may send notices to Agent is as
follows:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, New York 10005
Attention: Corporate Trust Administration
Fax: (212) 809-5459
Dated as of 12/2/99
NIAGARA MOHAWK POWER CORPORATION,
a New York corporation
By: /s/ Clement E. Nadeau
__________________________
Clement E. Nadeau
Vice President - Electric Delivery
-2-
<PAGE>
EXHIBIT 10.21
------------------------------------------------------------------
CONSENT AND AGREEMENT
(Cogeneration Facility Operation and Maintenance Agreement)
Dated as of December 6, 1999
by
GENERAL ELECTRIC INTERNATIONAL, INC.
------------------------------------------------------------------
CONSENT AND AGREEMENT
(Operation and Maintenance Agreement)
1. General Electric International, Inc., a Delaware corporation (the
"Undersigned") hereby acknowledges that pursuant to the Security Agreement dated
as of December 6, 1999 ("Security Agreement"), between Project Orange
Associates, L.P., a Delaware limited partnership ("Borrower"), and U.S. Bank
Trust, National Association ("Agent"), as collateral agent for the benefit of
the Secured Parties, and that Indenture dated as of December 6, 1999 (the
"Financing Agreement"), between Borrower and U.S. Bank Trust National
Association, as Trustee (the "Trustee") on behalf of and for the benefit of the
holders of the Borrower's 10.5% Senior Secured Notes due 2007 (the "Holders"
and, together with the Trustee, the "Secured Parties"), Borrower has assigned
its interest under that certain Cogeneration Facility Operation and Maintenance
Agreement, dated as of November 1, 1998 (the "Contract"), between the
Undersigned, as successor to GE Energy Plant Operations, Inc. ("GEEPO"), and
Borrower, to the Agent for the benefit of the Secured Parties. The Undersigned
consents to such assignment and agrees with the Agent as follows:
(a) Unless otherwise defined, all terms used herein which are
defined in the Contract shall have their respective meanings as defined
therein.
<PAGE>
(b) From the time of receipt of notice by Agent to the Undersigned
to the effect that the Agent and not the Borrower will be entitled to
exercise such rights, and until the receipt of further notice, if any, from
the Agent indicating that the Borrower may again exercise such rights, the
Undersigned agrees that the Agent shall be entitled to exercise all rights
and to cure any defaults of the Borrower under the Contract. Upon receipt
of notice from the Agent, the Undersigned agrees to accept such exercise
and cure by the Agent and to render all performance due by it under the
Contract and this Consent and Agreement to the Agent. The Undersigned
agrees to make all payments (if any) to be made by it under the Contract
directly to Agent upon receipt of Agent's written instructions.
(c) The Undersigned will not, without the prior written consent of
the Agent (such consent not to be unreasonably withheld), (i) cancel or
terminate the Contract except as provided in the Contract and in accordance
with paragraph l(d) hereof, or consent to or accept any cancellation or
termination thereof by the Borrower, (ii) sell, assign or otherwise dispose
(by operation of law or otherwise) of any part of its interest in the
Contract, or (iii) amend or modify the Contract in any material respect.
The Undersigned will deliver duplicates or copies of all notices delivered
under or pursuant to the Contract to the Agent promptly upon receipt
thereof and will advise the Agent of any material amendments to the
Contract.
(d) The Undersigned will not terminate the Contract on account of
any default or breach of Borrower thereunder without written notice to the
Agent and first providing to the Agent (i) forty-five (45) days from the
date on which notice of default or breach is delivered to Agent to cure
such default if such default is the failure to pay amounts to the
Undersigned which are due and payable under the Contract or (ii) a
reasonable time as is necessary to cure such default if the breach or
default cannot be cured by the payment of money to the Undersigned so long
as they have commenced to cure the default within a ninety (90) day period
from the date on which notice of default or breach is delivered to Agent
and thereafter diligently pursue such cure to completion and continue to
perform any monetary obligations under the Contract and all other
obligations under the Contract are performed by the Borrower or the Agent.
If possession of the Project is necessary to cure such breach or default,
and the Agent declares Borrower in default and commences foreclosure
proceedings, the Agent will be allowed a reasonable period to complete such
proceedings. If the Agent is prohibited by any court order or bankruptcy or
insolvency proceedings from curing the default or from commencing or
prosecuting foreclosure proceedings, the foregoing time periods shall be
extended by the period of such prohibition. The Undersigned consents to
the transfer of Borrower's interest under the Contract to the Agent, for
the benefit of the Secured Parties, or a purchaser or grantee at a
foreclosure sale by judicial or nonjudicial foreclosure and sale or by a
conveyance by Borrower in lieu of foreclosure and agrees that upon such
foreclosure, sale or
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<PAGE>
conveyance, the Undersigned shall recognize the Agent or any other
purchaser or grantee as the applicable party under the Contract.
(e) In the event that the Contract is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding, or if the
Contract is terminated for any reason other than a default which could have
been but was not cured by the Agent as provided in paragraph 1(d) above,
and if, within 45 days after such termination, the Agent or its successors
or assigns shall so request, the Undersigned will execute and deliver to
the Agent a new contract ("New Contract"), which New Contract shall be on
the same terms and conditions as the original Contract for the remaining
term of the Contract before giving effect to such termination.
(f) In the event Agent elects to perform Borrower's obligations
under the Contract or to enter into a New Contract as provided in
subparagraph (d) or (e) respectively above, the Agent and the Secured
Parties shall not have personal liability to the Undersigned for the
performance of such obligations, and the sole recourse of the Undersigned
in seeking the enforcement of such obligations shall be to such parties'
interest in the Project. In the event Agent succeeds to the Borrower's
interest under the Contract, or performs any of Borrower's obligations
under the Contract, Agent shall cure any defaults for failure to pay
amounts owed under the Contract, but shall not otherwise be required to
perform (or be subject to any defenses or offsets by reason of) any of the
Borrower's other obligations under the Contract that were unperformed at
such time. Agent shall have the right to assign all or part of its
interest in the Contract or a New Contract entered into pursuant to
subparagraph (e) to a person or entity to whom the Project is transferred,
provided such transferee assumes the obligations of the Borrower (or the
Agent) under the Contract and has a financial capability at least
equivalent to that of Borrower on the date hereof. Upon such assignment,
the Agent (including its agents, employees and contractors) shall be
released from any further liability thereunder to the extent of the
interest assigned.
(g) The Undersigned hereby acknowledges and agrees that Borrower
has satisfied any and all of its obligations under the Contract due as of
the date hereof. The Undersigned hereby waives any rights to terminate the
Contract, any right to an equitable adjustment in the Operating Fee, Fired-
Hour Fee, Per-Hour Fee, or Spare Parts Fee (each as defined in the
Contract) or any other fee under the Contract, and any rights to reduce,
extend the time for or suspend its performance under the Contract or
hereunder, for any failure of Borrower to meet any obligations under such
contract due as of the date hereof to the extent that Undersigned knows or
reasonably should know of such failure as of said date.
(h) The Undersigned hereby acknowledges that it has authorized and
directed one or more of its Attesting Secretaries to issue a certificate
of the Undersigned to Agent
-3-
<PAGE>
with respect to the signature authority of the individual who signs this
Consent and Agreement on behalf of the Undersigned, and agrees that Agent
and the Secured Parties may rely on such certificate.
2. The Undersigned hereby represents and warrants that (a) the
Undersigned is the successor to all of GEEPO's right, title and interest in and
to the Contract and has assumed all of GEEPO's obligations under the Contract;
(b) the execution, delivery and performance by the Undersigned of the Contract
and this Consent and Agreement have been duly authorized by all necessary
corporate action, and do not require any further consents or approvals to the
date of this Consent and Agreement which have not been obtained, or violate any
provision of any law, regulation, order, judgment, injunction or similar matters
or materially breach any agreement presently in effect with respect to or
binding on the Undersigned; (c) this Consent and Agreement and the Contract are
legal, valid and binding obligations of the Undersigned enforceable against the
Undersigned in accordance with their terms, subject to bankruptcy laws,
principles of equity, and other laws affecting creditor rights generally; (d)
all government approvals necessary for the execution, delivery and performance
by the Undersigned of its obligations under the Contract to the date of this
Consent and Agreement have been obtained and are in full force and effect; (e)
as of the date hereof, the Contract is in full force and effect, has not been
amended, supplemented or modified and the Undersigned has no reason to expect
that any necessary governmental approvals required in the future may not be
obtained without undue delay or expense; (f) to the best of the Undersigned's
knowledge, Borrower has fulfilled all of its obligations under the Contract; and
there are no breaches or unsatisfied conditions presently existing (or which
would exist after the passage of time and/or giving of notice) under the
Contract; and (g) the Undersigned has authorized and directed one or more of its
Attesting Secretaries to render a certificate of the Undersigned of even date
herewith to the Agent.
3. All Notices required or permitted hereunder shall be in writing and
shall be effective (i) upon receipt if hand delivered, (ii) when the appropriate
answer back is received if sent by telex and (iii) if otherwise delivered, upon
the earlier of receipt or two (2) Business Days after being sent registered or
certified mail, return receipt requested, with proper postage affixed thereto,
or by private courier or delivery service with charges prepaid, and addressed as
specified below:
If to the Undersigned:
General Electric International, Inc.
4200 Wildwood Parkway
Atlanta, GA 30339
Attn: General Manager of Operations, GE Contractual Services
FAX: (770) 859-7767
-4-
<PAGE>
If to Agent:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, New York 10005
Attn: Corporate Trust Administration
FAX: (212) 809-5459
For purposes of this Consent and Agreement, the term "Business Day" shall
mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the City of New York are authorized by law, regulation or
executive order to remain closed.
4. This Consent and Agreement shall be binding upon and benefit the
successors and permitted assigns of the Undersigned, the Borrower, the Agent,
and their respective successors, permitted transferees and permitted assigns.
No termination, amendment, variation or waiver of any provisions of this Consent
and Agreement shall be effective unless in writing and signed by the
Undersigned, the Agent and the Borrower. This Consent and Agreement shall be
governed by the laws of the State of New York.
-5-
<PAGE>
IN WITNESS WHEREOF, the Undersigned by its officer thereunto duly authorized,
has duly executed this Consent and Agreement as of the date set forth below.
Dated: December 6, 1999
GENERAL ELECTRIC INTERNATIONAL INC.,
a Delaware corporation
By:/s/ Kevin C. Walsh
_________________________________
Name: Kevin C. Walsh
Title: GM-Operations
Accepted:
U.S. BANK TRUST NATIONAL ASSOCIATION,
for itself and as Agent for the benefit of
the Secured Parties
By: /s/ Ward A. Spooner
_______________________________
Name:
Title:
By: /s/ John Bowman
_______________________________
Name:
Title:
PROJECT ORANGE ASSOCIATES, L.P.,
a Delaware limited partnership
By: G.A.S. ORANGE ASSOCIATES, LLC
a Delaware limited liability company
By: /s/ Adam Victor
______________________________
Name: Adam Victor
Title: President
-6-
<PAGE>
EXHIBIT 10.22
CONSENT AND AGREEMENT
(Restated Gas Sale and Purchase Agreement)
Dated December 6, 1999
by
Canadian Hunter Exploration Ltd.,
an Alberta corporation
CONSENT AND AGREEMENT
(Restated Gas Sale and Purchase Agreement)
1. Canadian Hunter Exploration Ltd., an Alberta corporation ("Canadian
Hunter"), as successor by assignment to Noranda Inc. ("Noranda") under the
Contract (as defined herein), hereby acknowledges that pursuant to the Security
Agreement dated as of December 6, 1999 ("Security Agreement"), between Project
Orange Associates, L.P., a Delaware limited partnership ("Borrower"), and U.S.
Bank Trust National Association, ("Agent"), as collateral agent for the benefit
of the Secured Parties, and that certain Indenture ("Financing Agreement") dated
as of December 6, 1999, between Borrower and U.S. Bank Trust National
Association, as Trustee (the "Trustee") on behalf and for the benefit of the
holders of the Borrower's 10.5% Senior Secured Notes due 2007 (the "Holders"
and, together with the Trustee, the "Secured Parties"),
-1-
<PAGE>
Borrower has assigned its interest under that certain Restated Gas Sale and
Purchase Agreement dated as of March 18, 1991 (the "Contract") to the Agent for
the benefit of the Secured Parties. Canadian Hunter consents to such assignment.
Canadian Hunter, Borrower and Agent hereby agree as follows:
(a) Unless otherwise defined, all terms used herein which are defined in
the Security Agreement or, if not defined therein, in the Financing Agreement,
shall have their respective meanings as defined therein.
(b) Canadian Hunter agrees that the Agent shall be entitled to exercise
all rights and to cure any defaults of Borrower under the Contract. Upon receipt
of notice to that effect from the Agent, Canadian Hunter agrees to accept such
exercise and cure by the Agent and to render all performance due by it under the
Contract and this Consent and Agreement to the Agent. Canadian Hunter agrees to
make all payments (if any) to be made by it under the Contract directly to Agent
upon receipt of Agent's written instructions to that effect. Canadian Hunter is
hereby irrevocably authorized by Borrower to accept and act upon any notice,
instruction, representation or curative act by the Agent, and shall not in any
way be bound to inquire into the authorization or legitimacy of the same.
(c) Canadian Hunter will not, without the prior written consent of the
Agent (such consent not to be unreasonably withheld), (i) cancel or terminate
the Contract except as provided in the Contract and in accordance with paragraph
1(d) hereof, or consent to or accept any cancellation or termination thereof by
the Borrower, (ii) sell, assign or otherwise dispose (by operation of law or
otherwise) of any part of its interest in the Contract, or (iii) amend or modify
the Contract in any material respect. Borrower will not purport to cancel or
terminate the Contract, and Canadian Hunter will not be bound or entitled to
accept any cancellation or termination of the Contract purported to be made by
Borrower, unless Borrower has first obtained and delivered to Canadian Hunter
such written consent of Agent. Borrower acknowledges that no cancellation,
termination, material amendment or material modification of the Contract will be
effective until written consent of Agent is received. Canadian Hunter will
deliver duplicates or copies of all extraordinary notices delivered under or
pursuant to the Contract to the Agent promptly upon receipt or delivery thereof
and will advise the Agent of any material amendments to the Contract. If the
consent of the Agent as contemplated in Section 1(c) has been requested by
Canadian Hunter, and the Agent has not within 30 days after receiving such
request notified Canadian Hunter in writing that it refuses to give its consent,
the Agent shall have been deemed to have given its written consent to the
cancellation, termination, amendment, modification, sale, assignment or
disposition, as the case may be, in respect of which its consent was so
requested.
-2-
<PAGE>
(d) The termination of the Contract resulting from an election by Canadian
Hunter to terminate the Contract on account of any default or breach by Borrower
thereunder will not be effective until the later of the date on which such
termination is to be effective in accordance with the terms of the Contract and
(i) in the case of a default or breach which is the failure to pay amounts of
money to Canadian Hunter which are due and payable under the Contract, thirty
days from the date on which notice of default or breach is delivered to Agent to
cure such default, or (ii) if the breach or default cannot be cured by the
timely or late payment of money to Canadian Hunter, at the end of such a
reasonable period of time as is necessary to cure the default, so long as Agent
has commenced to cure the default within thirty days from the date on which
notice of default or breach is delivered to Agent and thereafter diligently
pursues such cure to completion and continues to perform any monetary
obligations under the Contract and all other obligations under the Contract are
performed by Borrower or Agent. If the breach or default cannot be cured by the
payment of money to Canadian Hunter, and possession of the Project is necessary
to cure such breach or default, and Agent declares Borrower in default and
commences foreclosure proceedings, Agent will be allowed a reasonable period of
time to complete such proceedings, provided it pursues such proceedings
diligently and without delay. Canadian Hunter hereby:
(A) consents to the transfer of Borrower's interest under the
Contract to the Agent, for the benefit of the Secured Parties, or
a purchaser or grantee at a foreclosure sale by judicial or non-
judicial foreclosure and sale or by a conveyance by Borrower in
lieu of foreclosure; and
(B) agrees that upon such foreclosure, sale or conveyance, it shall
recognize the Agent or such other purchaser or grantee as the
Buyer under the Contract;
provided that the Agent or any purchaser or grantee (1) has stockholders' equity
of not less than U.S. $150,000,000 unless Canadian Hunter otherwise consents
(such consent not to be unreasonably withheld), (2) assumes and agrees pursuant
to a written instrument reasonably satisfactory to Canadian Hunter to perform
all of the obligations of the Borrower under the Contract, other than past
obligations which do not constitute or relate to the payment of money and are
not reasonably capable at the time of being performed and (3) is the owner of
the Project. Nothing in this paragraph or elsewhere in this Consent and
Agreement shall in any way affect the rights or ability of Canadian Hunter to
suspend deliveries of natural gas (x) during any period when it is permitted to
do so under Sections 2.4,
-3-
<PAGE>
3.7(m), 6.2, 9.2 and 11.1 of the Contract or (y) if the Unconsumed Entitlement
is reduced to zero.
(e) Canadian Hunter will forthwith notify the Agent of each single
reduction of the Unconsumed Entitlement (as defined in the Contract) pursuant to
subsection 12.2(a) thereof if the particular single reduction exceeds 2,000,000
MMBtu's and of any such single reduction of the Unconsumed Entitlement if the
particular reduction, together with all previous reductions pursuant to
subsection 12.2(a), aggregates more than 2,000,000 MMBtu's.
(f) In the event that the Contract is rejected by a trustee or debtor-
in-possession in any bankruptcy or insolvency proceeding, or if the Contract is
terminated for any reason other than a default which could have been but was not
cured by the Agent as provided in paragraph 1(d) above, and if, within 45 days
after such termination, the Agent or its successors or assigns shall so request,
Canadian Hunter will execute and deliver to the Agent a new contract ("New
Contract"), which New Contract shall be on the same terms and conditions as the
original Contract as in effect on the date of termination of the Contract,
including rights and remedies of the parties and the Unconsumed Entitlement on
such date and the New Contract shall terminate on the same date as the Contract
would have terminated in accordance with the provisions thereof had it remained
in force, the only effect of the New Contract being effectively a reinstatement
of the Contract substituting a different party as Buyer thereunder.
(g) In the event Agent or its designee or assignee elects to perform
Borrower's obligations under the Contract or to enter into a New Contract as
provided in paragraph 1(d) or 1(f) respectively above, the Agent, the Secured
Parties and their designees and assignees, shall not have personal liability to
Canadian Hunter for the performance of such obligations, and the sole recourse
of Canadian Hunter in seeking the enforcement of such obligations shall be to
such parties' interest in the Project. In the event Agent succeeds to the
Borrower's interest under the Contract, or performs any of Borrower's
obligations under the Contract, Agent shall cure any defaults for failure to pay
amounts owed under the Contract, but shall not otherwise be required to perform
(or be subject to any defenses or offsets by reason of) any of the Borrower's
other obligations under the Contract that were unperformed at such time. Agent
shall have the right to assign all or part of its interest in the Contract or a
New Contract entered into pursuant to paragraph 1(f) to a person or entity to
whom the Project is transferred, provided such transferee satisfies the
conditions contained in clauses 1(d)(1), (2) and (3). Upon such assignment and
assumption, the Agent (including its agents, employees and contractors) shall be
released from any further liability thereunder to the extent of the interest
assigned.
-4-
<PAGE>
(h) If Borrower pays or causes the payment of the proceeds of the
"Deferral Account" (as defined in the Contract) as of the date hereof to
Canadian Hunter, then Canadian Hunter agrees that Borrower may terminate the
Deferral Account and all provisions relating thereto, including, without
limitation, Section 3.7, shall be of no further effect.
2. Canadian Hunter hereby represents and warrants that:
(a) Canadian Hunter is the successor to all of Noranda's right, title and
interest in and to the Contract and has assumed all of Noranda's obligations
under the Contract;
(b) the execution, delivery and performance by it of the Contract and this
Consent and Agreement have been duly authorized by all necessary corporate
action on its part, and do not and will not require any further consents or
approvals to be obtained by Canadian Hunter which have not been obtained, or
violate any provision of any law, regulation, order, judgment, injunction or
similar matters or materially breach any agreement presently in effect with
respect to or binding on Canadian Hunter;
(c) the Contract and this Consent and Agreement constitute legal, valid
and binding obligations of Canadian Hunter enforceable against Canadian Hunter
in accordance with their respective terms;
(d) all government approvals necessary to be obtained by Canadian Hunter
for the execution, delivery and performance by Canadian Hunter of its
obligations under the Contract have been obtained and are in full force and
effect;
(e) as of the date hereof, the Contract is in full force and effect and
Canadian Hunter has no reason to expect that any necessary governmental
approvals required to be obtained by Canadian Hunter in the future may not be
obtained without undue delay or expense, and, as of the date hereof, the
Contract has not been amended, supplemented or modified other than pursuant to
(i) this Consent and Agreement, (ii) that certain letter agreement dated March
18, 1991 between Borrower and Noranda relating to the calculation and payment of
interest pursuant to the Contract and (iii) that certain Assignment, Amendment
and Release Agreement dated as of December 6, 1999 among Noranda, Canadian
Hunter and Borrower; and
(f) to the best of Canadian Hunter's knowledge, Borrower has fulfilled all
of its obligations heretofore having arisen under the Contract and there are no
breaches or unsatisfied conditions presently existing under the Contract.
-5-
<PAGE>
3. Borrower hereby represents and warrants that:
(a) the execution, delivery and performance by it of the Contract and this
Consent and Agreement have been duly authorized by all necessary corporate
action, and do not and will not require any further consents or approvals which
have not been obtained, nor will they violate any provision of any law,
regulation, order, judgment, injunction or similar matters or materially breach
any agreement presently in effect with respect to or binding on the Borrower;
(b) the Contract and this Consent and Agreement constitute legal, valid
and binding obligations of Borrower enforceable against the Borrower in
accordance with their respective terms;
(c) all government approvals necessary for the execution, delivery and
performance by Borrower of its obligations under the Contract have been obtained
and are in full force and effect;
(d) as of the date hereof, the Contract is in full force and effect and
Borrower has no reason to expect that any necessary governmental approvals
required in the future may not be obtained without undue delay or expense, and,
as of the date hereof, the Contract has not been amended, supplemented or
modified; and
(e) to the best of Borrower's knowledge, Canadian Hunter has fulfilled all
of its obligations heretofore having arisen under the Contract and there are no
breaches or unsatisfied conditions presently existing under the Contract.
4. All Notices required or permitted hereunder shall be in writing and
shall be effective (i) upon receipt if hand delivered and (ii) if otherwise
delivered, upon the earlier of receipt or two (2) Business Days after being sent
registered or certified mail, return receipt requested, with proper postage
affixed thereto, or by private courier or delivery service with charges prepaid,
and addressed as specified below:
If to Canadian Hunter:
Canadian Hunter Exploration Ltd.
2800, 605 5/th/ Ave. S.W.
Calgary, Alberta T2P 3H5
Attn: Vice President, Marketing
FAX: (403) 260-1146
-6-
<PAGE>
If to Agent:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, New York 10005
Attn: Corporate Trust Administration
FAX: (212) 809-5459
If to Borrower:
Project Orange Associates, L.P.
c/o G.A.S. Orange Associates, LLC
90 Presidential Plaza
Syracuse, New York 13202
Attn: Richard S. Scolaro, Esq.
FAX: (315) 471-1355
5. This Consent and Agreement shall be binding upon and benefit the
successors and assigns of Canadian Hunter, the Borrower, the Agent, and their
respective successors, transferees and assigns. No termination, amendment,
variation or waiver of any provisions of this Consent and Agreement shall be
effective unless in writing and signed by Canadian Hunter, the Agent and the
Borrower. The Agent and Borrower acknowledge that Canadian Hunter is not
obligated to inquire into the entitlement of the Agent to act or exercise any of
the Secured Parties' rights under the Security Agreement, the Financing
Agreement or this Consent and Agreement or otherwise. This Consent and Agreement
shall be governed by the laws of the State of New York.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto by their respective officers
thereunto duly authorized, have duly executed this Consent and Agreement as of
the date set forth below.
Dated December 6, 1999
CANADIAN HUNTER EXPLORATION LTD.,
an Alberta corporation
By: /s/ John Kowal
______________________________________________________
Name: John Kowal
Title: Treasurer
By: /s/ Murray Lueke
______________________________________________________
Name: Murray Lueke
Title: VP, Engineering
U.S. BANK TRUST NATIONAL ASSOCIATION,
for itself and as Agent for the benefit of the Secured
Parties
By: /s/ Ward A. Spooner
______________________________________________________
Name:
Title:
By: /s/ John Bowman
______________________________________________________
Name:
Title:
PROJECT ORANGE ASSOCIATES, L.P.,
a Delaware limited partnership
By: G.A.S. ORANGE ASSOCIATES, LLC,
a Delaware limited liability company,
General Partner
By: /s/ Douglas Corbett
____________________________________________________
Name: Douglas Corbett
Title: Vice President
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<PAGE>
EXHIBIT 10.23
=====================================================================
CONSENT AND AGREEMENT
(Interruptible Gas Transportation Agreement,
Firm Gas Transportation Agreement,
Hot Tap Reimbursement Agreement
and Letter of Credit Drawing Agreement)
Dated as of December 6, 1999
by
Tennessee Gas Pipeline Company,
a Delaware corporation
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CONSENT AND AGREEMENT
(Interruptible Gas Transportation Agreement,
Firm Gas Transportation Agreement,
Hot Tap Reimbursement Agreement
and Letter of Credit Drawing Agreement)
1. Tennessee Gas Pipeline Company, a Delaware corporation (the
"Undersigned") has been informed that pursuant to the Security Agreement dated
as of December 6, 1999 ("Security Agreement"), between Project Orange
Associates, L.P., a Delaware limited partnership ("Borrower"), and U.S. Bank
Trust National Association ("Agent"), as agent for the benefit of the Secured
Parties to that certain Indenture ("Financing Agreement") dated as of December
6, 1999, between U.S. Bank Trust National Association, as Trustee for the
benefit of the holder's of the Borrower's 10.5% Senior Secured Notes due 2007
(the "Holders") and, together with Trustee, the "Secured Parties") has assigned
its interest under (i) that certain Gas Transportation Agreement between the
Undersigned and Borrower dated as of November 11, 1999 relating to interruptible
gas transportation services (the "Interruptible Gas Transportation Contract");
(ii) that certain Firm Natural Gas Transportation Agreement between the Borrower
and the Undersigned, dated March 29, 1991 (the "Firm Gas Transportation
Contract"); (iii) that certain Letter of Credit Drawing Agreement dated as of
March 29, 1991 between the Undersigned and Borrower, as amended by that certain
Amendment No. 1 to Letter of Credit Drawing Agreement dated as of June 26, 1992
(the "Letter of Credit Drawing Agreement"); and (iv) that certain agreement
relating to installation of a Hot Tap, Measurement and DAC (the "Reimbursement
Agreement") between G.A.S. Orange Development, Inc., a New York corporation
("Development") and the Undersigned dated May 25, 1988, as amended by that
certain amendatory letter dated August 11, 1988, and as assigned to Borrower
pursuant to an Assignment and Assumption Agreement between Development and
Borrower dated November 30, 1990 (collectively referred to as the "Contracts")
to Agent for the benefit of the Secured Parties. The Undersigned consents to
such assignment (including the assignments, described in the respective
descriptions of the Contracts above) and agrees with the Agent for the benefit
of the Secured Parties as follows:
(a) Unless otherwise defined, all terms used herein which are
defined in the Security Agreement or, if not defined therein, in the
Financing Agreement, shall have their respective meanings as defined
therein.
(b) The Undersigned agrees that Agent shall be entitled to
exercise all rights and to cure any defaults of the Borrower under the
Contracts in the manner and within the times allowed to Borrower under the
Contracts. Upon receipt of notice from Agent, the Undersigned agrees to
accept such exercise and cure by Agent and to render all performance due by
it under the Contracts and this Consent and Agreement to Agent. The
Undersigned agrees to make all payments (if any) to
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be made by it under the Contracts directly to Agent upon receipt of Agent's
written instructions. Borrower agrees to the foregoing provisions of this
paragraph 1(b) and agrees that the Undersigned shall under no circumstances
incur liability to Borrower as a result of honoring notices and accepting
cure from, and rendering performance under the Contracts to, the Agent.
(c) The Undersigned will not, without using reasonable efforts to
obtain the prior written consent of Agent (such consent not to be
unreasonably withheld) (i) cancel or terminate any of the Contracts except
as provided in the Contracts and, if such cancellation or termination will
result in breach or default thereof by Borrower, in accordance with
paragraph 1(d) hereof, or consent to or accept any cancellation or
termination thereof by Borrower, (ii) sell, assign or otherwise dispose (by
operation of law or otherwise) of any part of its interest in the Contracts
except as provided in the Contracts and unless the purchaser or assignee of
the Contracts agrees to be bound by the terms hereof or (iii) amend or
modify the Contracts in any material respect; provided, however, that (A)
nothing in this Consent and Agreement shall prevent the Undersigned from
proposing or making any modification or amendment to the Undersigned's gas
tariff or the rates or charges payable to the Undersigned pursuant to such
tariff and (B) nothing in this Consent and Agreement shall prevent the
Undersigned from making any modification or amendment of the Contracts
necessary, in the Undersigned's good faith judgment, to conform with the
requirements of any governmental or regulatory authority having
jurisdiction.
The Undersigned will use reasonable efforts to deliver duplicates
or copies of all notices of default or breach delivered under or pursuant
to the Contracts to Agent promptly upon receipt thereof and will use
reasonable efforts to advise Agent of any material amendments to the
Contracts. Failure or delay by the Undersigned to deliver any such notice
to Agent shall not constitute a waiver of any breach or default by Borrower
under the Contracts, provided that this sentence shall not affect the
operation of paragraph 1(d) hereof.
(d) The Undersigned will not terminate any of the Contracts on
account of any default or breach of Borrower thereunder without first
providing to Agent (i) thirty (30) days from the date notice of default or
breach is delivered to Agent to cure such default if such default is the
failure to pay amounts to the Undersigned which are due and payable under
such Contracts or (ii) a reasonable opportunity, but not fewer than ninety
(90) days, to cure such breach or default if the breach or default cannot
be cured by the payment of money to the Undersigned so long as Agent or its
designee shall have commenced to cure the breach or default within such 90
day period and thereafter diligently pursues such cure to completion and
continues to perform any monetary obligations under the Contracts and all
other
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obligations under the Contracts are performed by Borrower or Agent. If
possession of the Project is necessary to cure such non-monetary breach of
default, and Agent declares Borrower in default and commences foreclosure
proceedings, Agent will be allowed a reasonable period to complete such
proceedings. If Agent is prohibited by any court order or bankruptcy or
insolvency proceedings from curing the default or from commencing or
prosecuting foreclosure proceedings, the foregoing time periods shall be
extended by the period of such prohibition. The Undersigned consents to the
transfer of Borrower's interest under the Contracts to the Agent, for the
benefit of the Secured Parties, or a purchaser or grantee at a foreclosure
sale by judicial or nonjudicial foreclosure and sale or by a conveyance by
Borrower in lieu of foreclosure and agrees that upon such foreclosure, sale
or conveyance, the Undersigned shall upon receipt of written notice
recognize the Agent or other purchase or grantee as the applicable party
under the Contracts.
(e) In the event that any of the Contracts is terminated by virtue
of being rejected by a trustee or debtor-in-possession in any bankruptcy or
insolvency proceeding and if, within 45 days after such termination, the
Agent or its successors or assigns shall so request, the Undersigned will
execute and deliver to the Agent new contracts, which Contracts shall be on
the same terms and conditions as the original Contracts for the remaining
term of the Contracts before giving effect to such termination; provided,
however, that if any regulatory approvals are required for the Undersigned
to enter into or perform under any such new Contract, the effectiveness of
such new Contract shall be subject to such regulatory approvals to the
extent required by law, and the Undersigned agrees to diligently pursue
such regulatory approvals in good faith and to use its best efforts to
obtain such approvals in good faith and to use its best efforts to obtain
such approvals as rapidly as possible.
(f) In the event Agent or its designee or assignee elect to
perform Borrower's obligations under the Contracts or to enter into new
contracts as provided in paragraph 1(d) or 1(e) respectively above, Agent,
the Secured Parties, their designees and assignees, shall not have personal
liability to the Undersigned for the performance of such obligations, and
the sole recourse of the Undersigned in seeking the enforcement of such
obligations shall be to such parties' interest in the Project; provided,
however, that any successors to Borrower's interest under the Contracts, or
any new Contracts entered into pursuant to paragraph 1(e) hereof, agree
that the obligation to provide security under the Letter of Credit Drawing
Agreement shall remain in full force and effect. In the event Agent
succeeds to Borrower's interest under the Contracts, or performs any of
Borrower's obligations under the Contracts, Agent shall cure any defaults
for failure to pay amounts owed under the Contracts, but shall not
otherwise be required to perform any of Borrower's other obligations under
the Contracts that were unperformed at such
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time. Agent shall have the right to assign all or part of its interest in
the Contracts or new contracts entered into pursuant to paragraph 1(e) to a
person or entity to whom the Project is transferred, provided such
transferee assumes the obligations of Borrower (or Agent) under the
Contracts (including the obligation to provide security under the Letter of
Credit Drawing Agreement) and has a financial capability at least
equivalent to that of Borrower on the date hereof. Upon such assignment,
the Secured Parties (including their agents, employees and contractors)
shall be released from any further liability thereunder to the extent of
the interest assigned.
(g) The Undersigned agrees that the defined term "Security and
Collection Agreement" contained in the Contracts shall be deemed to mean
the Letter of Credit Drawing Agreement.
2. The Undersigned hereby represents and warrants that, assuming the due
authorization, execution and delivery of the Contracts and this Consent and
Agreement by the other parties thereto, (a) the execution and delivery by the
Undersigned of the Contracts and this Consent and Agreement have been duly
authorized by all necessary corporate action on the part of the Undersigned, and
do not and will not require any further consents or approvals on the part of the
Undersigned which have not been obtained, the performance by the Undersigned of
the Contracts and this Consent and Agreement has been duly authorized by all
necessary corporate action and does not, as of the date hereof, require any
consents or approvals on the part of the Undersigned which have not been
obtained and such execution, delivery and performance do not violate any
provision of any law, regulation, order, judgment, injunction or similar matters
or materially breach any agreement presently in effect with respect to or
binding on the Undersigned, (b) this Consent and Agreement and the Contracts are
legal, valid and binding obligations of the Undersigned enforceable against the
Undersigned except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or other similar
laws, and subject to general equitable principles, (c) all government approvals
necessary as of the date hereof for the execution, delivery and performance by
the Undersigned of its obligations under the Contracts have been obtained and
are in full force and effect and the Undersigned has no reason to expect that
any necessary governmental approvals required in the future may not be obtained
without undue delay or expense, (d) as of the date hereof, the Contracts are in
full force and effect as against the Undersigned and have not been amended,
supplemented or modified, and (e) to the best of the Undersigned's knowledge
Borrower has fulfilled all of its obligations under the Contracts, and to the
best of the Undersigned's knowledge there are no breaches or unsatisfied
conditions presently existing (or which would exist after the passage of time
and/or giving of notice) under the Contracts.
3. All Notices required or permitted hereunder shall be in writing and
shall be effective (i) upon receipt if hand delivered, (ii) when the appropriate
answer back is received if sent by telex and (iii) if otherwise delivered, upon
the earlier of receipt or two (2) Business Days
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after being sent registered or certified mail, return receipt requested, with
proper postage affixed thereto, or by private courier or delivery service with
charges prepaid, and addressed as specified below:
If to the Undersigned:
For the Reimbursement Agreement and this Consent and Agreement:
Tennessee Gas Pipeline Company
P.O. Box 2511
Houston, TX 77252-2511
Attn: Facility Contracts
Phone: (713) 420-3242
FAX: (713) 420-2155
For the Interruptible Gas Transportation Contract, the Firm Gas
Transportation Contract and the Letter of Credit Drawing Agreement:
Tennessee Gas Pipeline Company
P.O. Box 2511
Houston, TX 77252-2511
Attn.: Transportation Services
Phone: (713) 420-4210
FAX: (713) 420-5079
If to Agent:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, NY 10005
Attn: Corporate Trust Administration
FAX: (212) 809-5459
4. This Consent and Agreement shall be binding upon and benefit the
successors and assigns of the Undersigned, Borrower, Agent, the Secured Parties,
and their respective successors, transferees and assigns. No termination,
amendment, variation or waiver of any provisions of this Consent and Agreement
shall be effective unless in writing and signed by the Undersigned, Agent and
Borrower. Each and every provision of this Consent and Agreement is entirely
subject to any governmental approvals which may be required in connection
herewith; provided, however, that no signatory is aware that any such approval
required as of the date
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hereof has not been obtained. This Consent and Agreement shall be governed by
the laws of the State of New York.
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IN WITNESS WHEREOF, the Undersigned by its officer hereunto duly authorized, has
duly executed this Consent and Agreement as of the date set forth below.
Dated: November 18, 1999
TENNESSEE GAS PIPELINE COMPANY,
a Delaware corporation
By: /s/ Matthew W. Rowland
____________________________________
Name: Matthew W. Rowland
Title: Agent and Attorney-in-Fact
Accepted:
U.S. BANK TRUST NATIONAL ASSOCIATION,
for itself and as Agent for the benefit
of the Secured Parties
By: /s/ Ward A. Spooner
_______________________________
Name:
Title:
By: /s/ John Bowman
_______________________________
Name:
Title:
PROJECT ORANGE ASSOCIATES, L.P.,
a Delaware limited partnership
By: G.A.S. ORANGE ASSOCIATES, LLC
a Delaware limited liability company,
general partner
By: /s/ Douglas Corbett
___________________________
Name: Douglas Corbett
Title: Vice President
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EXHIBIT 10.24
CONSENT AND AGREEMENT
TransCanada PipeLines Limited ("TransCanada"), a corporation organized
under the laws of Canada, hereby consents upon the terms and conditions
herein set forth to the collateral assignment of the Assigned Agreement (as
defined below) by Canadian Hunter Exploration Ltd. ("Canadian Hunter"), an
Alberta corporation, to Project Orange Associates, L.P. ("Project Orange"),
a Delaware limited partnership pursuant to that certain Collateral
Assignment of the Firm Service Agreement dated as of April 5, 1991 between
Canadian Hunter and Project Orange ("Collateral Assignment").
TransCanada hereby consents upon the terms and conditions herein set
forth to the assignment of the Assigned Agreement (as defined below) by
Project Orange to U.S. Bank Trust National Association, as collateral agent
("Agent") pursuant to that certain Security Agreement dated as of December
6, 1999 between Agent and Project Orange (the "Security Agreement").
For purposes of this Consent and Agreement, the term "Assigned
Agreement" shall mean the Firm Service Contract entered into by TransCanada
and Canadian Hunter made as of October 11, 1990, as such Firm Service
Contract may be amended or supplemented from time to time.
Canadian Hunter, Project Orange, Agent and TransCanada agree as
follows:
1. (a) Project Orange or Agent, as the case may be, may at its election,
upon (i) satisfying TransCanada's financial assurance requirements; (ii)
supplying TransCanada with all information reasonably requested by
TransCanada pertaining to gas supply and upstream and downstream
transportation arrangements and TransCanada being satisfied with such
information; (iii) providing TransCanada with evidence that Project Orange
or the Agent, as the case may be, has obtained such certificates, permits,
orders, licenses and authorizations from regulators or other governmental
agencies in the United States of America or Canada, as the case may be, as
are necessary to enable Project Orange or the Agent, as the case may be, to
remove from the province of production and deliver to TransCanada at the
Receipt Point(s) (as defined in the Assigned Agreement) and to receive from
TransCanada, export from Canada, import and deliver into the United States
of America at the Delivery Point(s) (as defined in the Assigned Agreement)
the quantities of gas to be transported by TransCanada under the Assigned
Agreement; and (iv) prior written notice to TransCanada and Canadian
Hunter:
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(i) given at any time after the termination of the Restated Gas
Sale and Purchase Agreement dated as of March 18, 1991 (the
"Restated Gas Sale and Purchase Agreement"), by and between
Project Orange and Canadian Hunter (as successor by assignment
to Noranda Inc.), by Project Orange pursuant to Section 12.1 of
the Restated Gas Sale and Purchase Agreement, exercise any and
all rights of Canadian Hunter under the Assigned Agreement in
accordance with the terms of the Assigned Agreement to the same
extent as if Project Orange or Agent were a party to the
Assigned Agreement in the place of Canadian Hunter, or assign
any and all of Canadian Hunter's rights under the Assigned
Agreement to any person or entity to whom Project Orange or
Agent is authorized to assign the rights and obligations of
Canadian Hunter under the Assigned Agreement pursuant to
Section 1(f) hereof (such person or entity, a "Permitted
Assignee"), whereupon the Permitted Assignee shall be entitled
to exercise any and all rights of Canadian Hunter under the
Assigned Agreement in accordance with the terms of the Assigned
Agreement; or
(ii) given at any time after the occurrence of a default by Canadian
Hunter under the Restated Gas Sale and Purchase Agreement such
that Project Orange has the right to obtain and is obtaining
Substitute Supplies (as defined in the Restated Gas Sale and
Purchase Agreement), at Project Orange's or Agent's election,
exercise any and all rights of Canadian Hunter under the
Assigned Agreement in accordance with the terms of the Assigned
Agreement, to the same extent as if Project Orange or Agent, as
the case may be, were a party to the Assigned Agreement in the
place of Canadian Hunter, for so long as Project Orange is
obtaining Substitute Supplies in respect of the particular
default (provided that such notice may be given only during the
continuance of such default unless the termination of the
Restated Gas Sale and Purchase Agreement as contemplated in
clause (i) has occurred);
provided, however, that TransCanada does not waive any rights it may have
pursuant to the Assigned Agreement, and provided further that any
assignment of rights under the Assigned Agreement to anyone other than
Project Orange or Agent, or any reassignment by any assignee of Project
Orange or Agent, shall be subject to the provisions of Section 1(f) hereof.
Canadian Hunter agrees with TransCanada that TransCanada is authorized to
act in accordance with the exercise by Project Orange, Agent or any
Permitted Assignee of Canadian Hunter's rights in accordance with this
Section 1(a) and that TransCanada shall bear no liability to Canadian
Hunter in connection therewith, provided however, that nothing contained in
this sentence will affect any claim which Canadian Hunter, Project Orange,
Agent or any such Permitted Assignee may have against any other such
Person.
(b) Canadian Hunter, Project Orange and Agent agree that the
conditions under which Project Orange or Agent may exercise the rights or
make an assignment as
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described in Section 1(a) hereof are subject to further restrictions
contained in Section 3 of the Collateral Assignment. Such restrictions
shall not in any manner be binding upon TransCanada, nor shall TransCanada
be required to inquire whether such restrictions have been complied with.
(c) Any notice to TransCanada from Agent (or an assignee of Agent)
shall be given priority by TransCanada over any notice from Project Orange
(or an assignee of Project Orange), notwithstanding the time of giving
notice. Project Orange (or an assignee of Project Orange) may exercise
Canadian Hunter's rights in accordance with Section 1(a) hereof provided
that and only for such period of time as TransCanada has not received
notice that Agent intends to exercise Canadian Hunter's rights in
accordance with such Section l(a). In the event TransCanada receives
notices from both Project Orange (or an assignee of Project Orange) and
Agent (or an assignee of Agent) the parties hereto agree that TransCanada
shall give priority to and act in accordance with the notice from Agent (or
any assignee of Agent) and shall bear no liability to Agent (or any
assignee of Agent) or to Project Orange (or any assignee of Project Orange)
in connection therewith.
(d) TransCanada may in good faith rely conclusively on any notice
received from Project Orange or Agent pursuant to Section 1(a) hereof,
without inquiring as to the circumstantial basis for such notice.
(e) In the event that Project Orange or Agent exercises or succeeds
to any or all of Canadian Hunter's rights and interests under the Assigned
Agreement, whether by foreclosure or otherwise, Project Orange or Agent, as
the case may be, shall assume liability for all of Canadian Hunter's
obligations under the Assigned Agreement, including without limitation,
payment of all amounts due and owing to TransCanada under the Assigned
Agreement, whether such amounts shall have accrued before or after the date
of succession, and for the performance of the representations, warranties
and conditions of Canadian Hunter under the Assigned Agreement from and
after the date of succession. Unless and until Project Orange or Agent
notifies TransCanada pursuant to Section 1(a) that it is exercising or
succeeding to any or all of the rights of Canadian Hunter under the
Assigned Agreement, neither Project Orange nor Agent shall have any
obligations or liabilities whatsoever to TransCanada under or in connection
with the Assigned Agreement and TransCanada shall have no obligation or
liability to Project Orange or Agent other than each such party's
obligation to comply with the terms of this Consent and Agreement. Nothing
in this Section 1(e) is intended to or shall: (i) limit the right of
TransCanada to proceed against Canadian Hunter for recovery in respect of
any default or unperformed obligations under the Assigned Agreement
accruing or arising in respect of any period prior to the effective date of
such exercise or succession; or (ii) diminish any liability or obligation
of Canadian Hunter to Project Orange or Agent
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(including but not limited to any obligation to indemnify Project Orange or
Agent) under the Collateral Assignment; provided, however, that such
liability or obligation of Canadian Hunter to Project Orange or Agent shall
not affect the rights of TransCanada with respect to Project Orange or
Agent arising under this Consent and Agreement and the Assigned Agreement.
(f) Upon the exercise by Project Orange or Agent, as the case may
be, of any of the remedies which it is entitled to exercise after a default
by Canadian Hunter under the Restated Gas Sale and Purchase Agreement and
during the continuance thereof, Project Orange or Agent, as the case may
be, may assign the rights and interests of Canadian Hunter under the
Assigned Agreement to any person or entity if such person or entity shall
assume all of the obligations of Canadian Hunter under the Assigned
Agreement including, without limitation, payment of all amounts due and
owing to TransCanada under the Assigned Agreement, whether such amounts
shall have accrued before or after the date of assignment, and for the
performance of the covenants and agreements of Canadian Hunter under the
Assigned Agreement from and after the date of assignment; provided that any
such assignment shall be subject to: (i) the prior written consent of
TransCanada, which consent shall not be unreasonably withheld or delayed if
TransCanada reasonably determines that the assignee satisfies the
requirements of TransCanada's Gas Tariff and TransCanada's financial
assurance requirements (which financial assurance requirements may exceed
those set forth in TransCanada's Gas Tariff); and (ii) the assignee's prior
execution and delivery to TransCanada of an assumption agreement
substantially in the form attached hereto as Exhibit A, and, provided
further, that TransCanada does not waive any rights it may have pursuant to
the Assigned Agreement. Upon such assignment, assumption and consent by
TransCanada, Canadian Hunter, Project Orange or Agent, as the case may be,
shall be relieved of all obligations, if any, which it may have under or
with respect to the Assigned Agreement arising after such assignment and
assumption.
(g) Upon receipt by TransCanada of a notice from a person who is an
assignee of the Assigned Agreement pursuant to Section l(f) above that such
person requests that Canadian Hunter succeed to such person's rights and
obligations under the Assigned Agreement (which notice shall be based on
the circumstances described in Section 4 of the Collateral Assignment, as
to which circumstances TransCanada shall in no manner be required to
inquire), such person may assign the rights and interests under the
Assigned Agreement to Canadian Hunter if Canadian Hunter shall assume all
of the obligations of such person under the Assigned Agreement including,
without limitation, payment of all amounts due and owing to TransCanada
under the Assigned Agreement, whether such amounts shall have accrued
before or after the date of assignment, and for the performance of the
covenants and agreements of such person under the Assigned Agreement from
and after the date of assignment; provided that any such assignment
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shall be subject to: (i) the prior written consent of TransCanada, which
consent shall not be unreasonably withheld or delayed if TransCanada
reasonably determines that Canadian Hunter satisfies the requirements of
TransCanada's Gas Tariff and TransCanada's financial assurance requirements
(which financial assurance requirements may exceed those set forth in
TransCanada's Gas Tariff); and (ii) Canadian Hunter's prior execution and
delivery to TransCanada of an assumption agreement substantially in the
form attached hereto as Exhibit A, and, provided, further, that TransCanada
---------
does not waive any rights it may have pursuant to the Assigned Agreement.
Upon such assignment, assumption and consent by TransCanada, such person
shall be relieved of all obligations, if any, which it may have under or
with respect to the Assigned Agreement arising after such assignment and
assumption.
(h) References in the Assigned Agreement to the defined term
"Consent and Agreement" shall be deemed to refer to this Consent and
Agreement.
2. (a) TransCanada acknowledges that Canadian Hunter has agreed with
Project Orange that Canadian Hunter will obtain the consent of Project
Orange for any amendment to the Assigned Agreement (which consent will not
be unreasonably withheld) and further acknowledges that Project Orange has
agreed pursuant to the Financing Agreement (as defined in the Security
Agreement) that Project Orange will obtain the consent of the Trustee (as
defined in the Security Agreement) for certain amendments to the Assigned
Agreement, provided that: (i) it shall be Canadian Hunter's responsibility
to ensure compliance with its agreement with Project Orange (and
TransCanada shall not be required to inquire whether Canadian Hunter has
fulfilled this responsibility); (ii) it shall be Project Orange's
responsibility to ensure compliance with its agreement with Agent (and
TransCanada shall not be required to inquire whether Project Orange has
fulfilled this responsibility); (iii) neither agreement shall prevent
TransCanada from proposing or making any modification or amendment to
TransCanada's Gas Tariff; and (iv) neither agreement shall prevent
TransCanada from making any modification or amendment of the Assigned
Agreement necessary, in TransCanada's good faith judgment, to conform with
the requirements of any governmental or regulatory authority having
jurisdiction, including but not limited to the National Energy Board
("NEB").
(b) Canadian Hunter has agreed with Project Orange to provide
Project Orange promptly with a copy of each material notice sent by
TransCanada to Canadian Hunter in connection with the Assigned Agreement.
It shall be Canadian Hunter's responsibility to ensure compliance with its
agreement with Project Orange and any failure by Canadian Hunter to do so
shall not affect TransCanada's ability to exercise any rights that it has
under the Assigned Agreement.
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3. TransCanada will deliver to Project Orange and Agent notice of
default or breach by Canadian Hunter of the Assigned Agreement concurrently
with delivery of any such notice to Canadian Hunter. Project Orange and
Agent will be given the same time period allowed to Canadian Hunter to cure
such default or breach. If through inadvertence, TransCanada fails to
deliver such notice to Project Orange or Agent, TransCanada shall incur no
liability therefor to any party hereto or to any successor or assign
thereof.
4. (a) Any notice, request or demand ("Notice") to or upon the
respective parties hereto shall be in writing and shall be validly
communicated by the delivery thereof to its addressee, either personally or
by courier, first class mail, or telecopier to the address hereinunder
mentioned:
In the case of TransCanada:
Mailing Address:
TransCanada PipeLines Limited
P.O. Box 1000
Station M
Calgary, Alberta T2P 4K5
Attention: Vice President, Transportation
FAX: (403) 267-8620
Delivery Address:
TransCanada PipeLines Limited
TransCanada PipeLines Tower
3000, 111 - 5th Avenue S.W.
Calgary, Alberta T2P 3Y5
Attention: Vice President, Transportation
In the case of Project Orange:
Project Orange Associates, L.P.
c/o G.A.S. Orange Associates, LLC
90 Presidential Plaza
Syracuse, New York 13209
Attention: Richard S. Scolaro, Esq.
Fax: (315) 471-1355
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In the case of Canadian Hunter:
Canadian Hunter Exploration Ltd.
2800, 605 5/th/ Avenue S.W.
Calgary, Alberta T2P 3H5
Attention: Vice President, Marketing
FAX: (403) 260-1146
In the case of Agent:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, New York 10005
Attention: Corporate Trust Administration
FAX: (212) 809-5459
(b) Any such Notice shall be sent in order to ensure prompt receipt
of such Notice by the other party(ies). Such Notice sent as aforesaid shall
be deemed to have been received by the party to whom it is sent at the time
of its delivery if personally delivered or if sent by telecopier, or on the
business day following the transmittal thereof if sent by courier, or on
the third business day following the transmittal thereof if sent by first
class mail, provided however, that in the event normal mail service,
courier service, or telecopier service shall be interrupted by a cause
beyond the control of the parties hereto, then the party sending the Notice
shall utilize any service that has not been so interrupted or shall deliver
such Notice. Each party shall provide Notice to the other parties of any
change of address for the purposes hereof.
5. Notwithstanding anything herein to the contrary, TransCanada agrees
that Project Orange or Agent may, without TransCanada's consent, assign its
rights, but not its obligations, under this Consent and Agreement to any
person and entity.
6. TransCanada hereby represents that: (i) this Consent and Agreement
has been duly authorized, executed and delivered by TransCanada, and is in
full force and effect on the date hereof and constitutes the legal, valid
and binding obligation of TransCanada, enforceable in accordance with its
terms, except as (a) enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditor's rights generally, and (b) the availability of any particular
remedy may be limited by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at
law; (ii) no consent, license, approval or authorization of, or filing,
registration or declaration with, or exemption by, any governmental body,
authority, bureau or agency is required in connection with the
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execution, delivery or performance by TransCanada of this Consent and
Agreement other than those which have been duly obtained and are in full
force and effect.
7. The obligations of TransCanada hereunder are subject to all
applicable valid rules, orders, regulations and laws of governmental and
regulatory authorities having jurisdiction, including but not limited to
the NEB.
8. This Consent and Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Alberta and, when applicable,
the laws of Canada.
9. Notwithstanding any other provision of this Consent and Agreement,
nothing herein set forth is intended to or shall amend, modify or in any
other way change the Assigned Agreement and TransCanada does not waive any
rights it may have pursuant to the Assigned Agreement.
10. This Consent and Agreement sets forth the terms and conditions upon
which TransCanada consents to the collateral assignment of the Assigned
Agreement by Canadian Hunter to Project Orange pursuant to the Collateral
Assignment and the collateral assignment of the Assigned Agreement and the
Collateral Assignment by Project Orange to the Agent pursuant to the
Security Agreement. To the extent that there is a conflict between any term
or provision set forth in this Consent and Agreement and any term or
provision of the Collateral Assignment or the Security Agreement, the terms
and provisions of this Consent and Agreement shall govern with respect to
TransCanada's rights and obligations but the terms and provisions of the
Collateral Assignment shall govern as to the rights and obligations of
Project Orange and Canadian Hunter to each other and the terms and
provisions of the Security Agreement shall govern as to the rights and
obligations of Project Orange and Agent to each other. Furthermore, except
as explicitly stated in this Consent and Agreement, TransCanada does not
consent to any term or provision of the Collateral Assignment or the
Security Agreement.
[THE REMAINDER OF THIS PAGE IS
INTENTIONALLY LEFT BLANK]
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto by their respective officers
thereunto duly authorized, have duly executed this Consent and Agreement as
of the date set forth below.
Dated: December 6, 1999
TRANSCANADA PIPELINES LIMITED
By: /s/ Max Feldman
______________________________
Name: Max Feldman
Title: Senior Vice President
Customer Sales & Services
By: /s/ Steven D. Becker
______________________________
Name: Steven D. Becker
Title: Senior Vice-President
Market Development
CANADIAN HUNTER EXPLORATION LTD.
By: /s/ John Kowal
______________________________
Name: John Kowal
Title: Treasurer
By: /s/ Murray Lueke
______________________________
Name: Murray Lueke
Title: VP, Engineering
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. ORANGE ASSOCIATES, LLC
a Delaware limited liability company
By: /s/ Douglas Corbett
____________________________
Name: Douglas Corbett
Title: Vice President
-9-
<PAGE>
U.S. BANK TRUST NATIONAL ASSOCIATION
as Agent
By: /s/ Ward A. Spooner
______________________________
Name:
Title:
By: /s/ John Bowman
______________________________
Name:
Title:
-10-
<PAGE>
Exhibit A
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT, dated as of ________________________,
BETWEEN: _______________________________________________________
(hereinafter referred to as the "Assignee")
AND: TRANSCANADA PIPELINES LIMITED, a Canadian corporation (hereinafter
referred to as "TransCanada").
RECITALS:
Canadian Hunter Exploration Ltd., an Alberta Corporation ("Canadian
Hunter") and TransCanada are parties to that certain Firm Service Contract made
as of October 11, 1990 (the "Firm Service Contract"). Pursuant to the
Collateral Assignment of the Firm Service Agreement dated as of April 5, 1991
(the "Collateral Assignment") between Canadian Hunter and Project Orange
Associates, L.P., a Delaware limited partnership (the "Partnership"), Canadian
Hunter assigned to the Partnership its rights under the Firm Service Contract in
order to secure the payment and performance of the obligations of Canadian
Hunter (as successor by assignment to Noranda Inc., an Ontario corporation)
under that certain Restated Gas Sale and Purchase Agreement dated as of March
18, 1991. Pursuant to the Security Agreement, dated as of December 6, 1999 (the
"Security Agreement") by and between the Partnership and U.S. Bank Trust
National Association, as collateral agent ("Agent"), the Partnership assigned to
the Agent its rights under the Firm Service Contract in order to secure the
payment and performance of the obligations of the Partnership under the
Financing Agreement (as defined in the Security Agreement). TransCanada,
Canadian Hunter, Agent and the Partnership have all entered into a Consent and
Agreement dated as of December 6, 1999 (the "Consent") pursuant to which
TransCanada consented to the assignment of Canadian Hunter's rights in, to and
under the Firm Service Contract to the Partnership and to the assignment of the
Partnership's rights in, to and under the Firm Service Contract to the Agent, as
the Partnership's assignee, on the terms specified in the Consent.
The Partnership or Agent, as the case may be, has assigned its rights under
the Firm Service Contract, as set forth in the Collateral Assignment of the Firm
Service Contract, to the Assignee and the Assignee desires to effect such
assignment under the terms of the Consent by executing and delivering this
Assumption Agreement to TransCanada.
The Assignee and TransCanada agree as follows:
A-1
<PAGE>
1. Assumption. The Assignee hereby assumes liability for all of
----------
Canadian Hunter's obligations under the Consent and the Firm Service Contract
including, without limitation, its obligations for payment of all amounts due
and owing to TransCanada under the Firm Service Contract, whether such amounts
shall have accrued before or after the date hereof, and for the performance of
the covenants and agreements of Canadian Hunter under the Consent and the Firm
Service Contract from and after the date hereof. Nothing herein is intended to
limit the right of TransCanada or the Agent to proceed against Canadian Hunter
for recovery in respect of any default or unperformed obligations of Canadian
Hunter under the Consent or the Firm Service Contract accruing or arising in
respect of any period prior to the effective date of this Assumption Agreement.
The Assignee agrees to be bound by the terms of the Consent and the Firm Service
Contract as if it were substituted for Canadian Hunter.
2. Acknowledgment. The Assignee acknowledges that any rights of the
--------------
Partnership, or any assignee of the Partnership, are subordinate to the rights
of the Agent, or any assignee of the Agent, under the Firm Service Contract as
set forth in the Security Agreement and the Consent, including the right to
assume the Firm Service Contract and request that TransCanada render performance
thereunder directly to Agent or such assignee notwithstanding this Assumption
Agreement. Assignee acknowledges and agrees that if the Assignee is an assignee
of the Partnership, then forthwith upon receipt by TransCanada of a notice from
the Agent pursuant to Paragraph 1(a) of the Consent or upon an assignment by the
Agent pursuant to Paragraph 1(f) of the Consent, the Assignee shall thereupon
have no further rights or obligations under the Firm Service Contract provided
that the Assignee shall continue to be bound by those of its obligations that
arose prior to the date of receipt of such notice or the date of such
assignment, as the case may be. Assignee agrees that TransCanada shall bear no
liability to Assignee resulting from rendering performance under the Firm
Service Contract directly to the Agent or from such assumption of the Firm
Service Contract by a subsequent person.
3. Release of the Partnership. Upon the satisfaction of the
--------------------------
requirements set forth in paragraph l(f) of the Consent, the Partnership shall
be relieved of all obligations to TransCanada, if any, which it may have under
or with respect to the Firm Service Contract arising after the date hereof.
4. Notices. The address of the Assignee for the purposes of Section
-------
6.1 of the Firm Service Contract and Article 4 of the Consent shall be:
_______________________________
_______________________________
Attention:_____________________
FAX:___________________________
A-2
<PAGE>
5. Assignment. The Assignee may assign its rights in, to and under the
----------
Firm Service Contract in accordance with the terms and conditions of the
Consent.
6. Governing Law, etc. This Assumption Agreement shall be governed by,
------------------
and construed in accordance with, the laws of the Province of Alberta and, when
applicable, the laws of Canada. The obligations of TransCanada are subject to
all applicable valid rules, orders, regulations and laws of governmental and
regulatory authorities having jurisdiction, including but not limited to the
National Energy Board.
IN WITNESS WHEREOF, the parties hereto by their respective officers
thereunto duly authorized, have duly executed this Assumption Agreement as of
the date set forth below.
Dated: ___________
ASSIGNEE:
By: _________________________
Title: ______________________
TRANSCANADA PIPELINES LIMITED
By: _________________________
Title:_______________________
By: _________________________
Title:_______________________
A-3
<PAGE>
________________________________________________________________________________
EXHIBIT 10.25
CONSENT AND AGREEMENT
(Asset Management Agreement)
Dated as of December 6, 1999
by
NIAGARA MOHAWK ENERGY MARKETING, INC.
________________________________________________________________________________
<PAGE>
CONSENT AND AGREEMENT
(Asset Management Agreement)
1. NIAGARA MOHAWK ENERGY MARKETING, INC., a Delaware corporation (the
"Undersigned") hereby acknowledges that pursuant to the Security Agreement dated
as of December 6, 1999 ("Security Agreement"), between Project Orange
Associates, L.P., a Delaware limited partnership (the "Borrower"), and U.S. Bank
Trust National Association, as collateral agent ("Agent") for the benefit of the
Secured Parties, and that Indenture dated as of December 6, 1999 (the "Financing
Agreement"), between Borrower and U.S. Bank Trust National Association, as
Trustee (the "Trustee") on behalf of and for the benefit of the holders of the
Borrower's 10.5% Senior Secured Notes due 2007 (the "Holders" and, together with
the Trustee, the "Secured Parties"), Borrower has assigned its interest under
that certain Asset Management Letter Agreement, dated as of December 6, 1999
(the "Contract"), between the Undersigned and Borrower, to the Agent for the
benefit of the Secured Parties. The Undersigned consents to such assignment and
agrees with the Agent as follows:
(a) Unless otherwise defined, all terms used herein which are defined
in the Security Agreement or, if not defined therein, in the Financing
Agreement, shall have their respective meanings as defined therein.
(b) The Undersigned agrees that the Agent shall be entitled to
exercise all rights and to cure any defaults of the Borrower under the
Contract. Upon receipt of notice from the Agent, the Undersigned agrees to
accept such exercise and cure by the Agent and to render all performance
due by it under the Contract and this Consent and Agreement to the Agent.
The Undersigned agrees to make all payments (if any) to be made by it under
the Contract directly to Agent upon receipt of Agent's written
instructions.
(c) The Undersigned will not, without the prior written consent of the
Agent (such consent not to be unreasonably withheld), (i) cancel or
terminate the Contract except as provided in the Contract and, with respect
to any termination on account of any default or breach by Borrower, in
accordance with paragraph l(d) hereof, or consent to or accept any
cancellation or termination thereof by the Borrower, (ii) sell, assign
(except as authorized under the Contract with respect to assignments of the
Contract to an affiliate of the Undersigned or payments to a third party
agent for financing collateral purposes) or otherwise dispose (by operation
of law or otherwise) of any part of its interest in the Contract, or (iii)
amend or modify the Contract in any material respect. The Undersigned will
deliver duplicates or copies of all notices delivered under or pursuant to
the Contract to the Agent promptly upon receipt thereof and will advise the
Agent of any material amendments to the Contract.
-1-
<PAGE>
(d) The Undersigned will not terminate the Contract on account of any
default or breach of Borrower thereunder without written notice to the
Agent and first providing to the Agent (i) forty-five (45) days from the
date on which notice of default or breach is delivered to Agent to cure
such default if such default is the failure to pay amounts to the
Undersigned which are due and payable under the Contract or (ii) a
reasonable time as is necessary to cure such default if the breach or
default cannot be cured by the payment of money to the Undersigned so long
as they have commenced to cure the default within a ninety (90) day period
from the date on which notice of default or breach is delivered to Agent
and either Borrower or Agent thereafter diligently pursues such cure to
completion and continues to perform any monetary obligations under the
Contract and all other obligations under the Contract are performed by the
Borrower or the Agent. If possession of the Project is necessary to cure
such breach or default, and the Agent declares Borrower in default and
commences foreclosure proceedings, the Agent will be allowed a reasonable
period to complete such proceedings. If the Agent is prohibited by any
court order or bankruptcy or insolvency proceedings from curing the default
or from commencing or prosecuting foreclosure proceedings, the foregoing
time periods shall be extended until such prohibition is removed and Agent
is permitted to cure the default or foreclosure, but in no event for longer
than one hundred and twenty (120) days. The Undersigned consents to the
transfer of Borrower's interest under the Contract to the Agent, for the
benefit of the Secured Parties, or a purchaser or grantee at a foreclosure
sale by judicial or nonjudicial foreclosure and sale or by a conveyance by
Borrower in lieu of foreclosure and agrees that upon such foreclosure, sale
or conveyance, the Undersigned shall recognize the Agent or any other
purchaser or grantee as the applicable party under the Contract so long as
there are no uncured defaults.
(e) In the event that the Contract is rejected by a trustee or debtor-
in-possession in any bankruptcy or insolvency proceeding, or if the
Contract is terminated for any reason other than a default which could have
been but was not cured by the Agent as provided in paragraph l(d) above,
and if, within forty-five (45) days after such termination, the Agent or
its successors or assigns shall so request, the Undersigned will execute
and deliver to the Agent a new Contract, which Contract shall be on the
same terms and conditions as the original Contract for the remaining term
of the Contract before giving effect to such termination and shall only
take effect once properly authorized by the trustee in bankruptcy or
debtor-in-possession.
(f) In the event Agent or its designee or assignee elect to perform
Borrower's obligations under the Contract or to enter into a new Contract
as provided in subparagraph (d) or (e) respectively above, the Agent, the
Secured Parties, their designees and assignees, shall not have personal
liability to the Undersigned for the performance of such obligations, and
the sole recourse of the Undersigned in seeking
-2-
<PAGE>
the enforcement of such obligations shall be to such parties' interest in
the Project. In the event Agent succeeds to the Borrower's interest under
the Contract, or performs any of Borrower's obligations under the Contract,
Agent shall cure any defaults for failure to pay amounts owed under the
Contract within the time periods specified in paragraph 1(d), but shall not
otherwise be required to perform (or be subject to any defenses or offsets
by reason of) any of the Borrower's other obligations under the Contract
that were unperformed at such time. Agent shall have the right to assign
all or part of its interest in the Contract or a new Contract entered into
pursuant to subparagraph (e) to a person or entity to whom the Project is
transferred, provided such transferee assumes the obligations of the
Borrower (or the Agent) under the Contract and has a financial capability
at least equivalent to that of Borrower on the date hereof. Upon such
assignment, the Agent (including its agents, employees and contractors)
shall be released from any further liability thereunder to the extent of
the interest assigned.
(g) The Undersigned hereby acknowledges and agrees that its rights to
receive payment of the fees, expenses and other amounts under the Contract
are subordinate in right of payment to the rights of the Secured Parties
under the Financing Agreement and that payments of such fees and expenses
shall be made from time to time (but no more frequently than monthly)
solely out of, and shall be due and payable only to the extent of, proceeds
held in the Subordinated Asset Management Fee Account of Borrower created
under Section 2.02 of the Depositary Agreement, to the extent such proceeds
are available after the application of project revenues to waterfall items
(1) through (6) (Capital Expenditure Reserve Account) under Section 3.01(c)
of the Depositary Agreement; provided that the Undersigned shall receive
written notice of any modifications or additions to such waterfall
provisions.
2. The Undersigned hereby represents and warrants that (a) the execution,
delivery and performance by the Undersigned of the Contract and this Consent and
Agreement have been duly authorized by all necessary corporate action, and do
not and will not require any further consents or approvals which have not been
obtained, or violate any provision of any law, regulation, order, judgment,
injunction or similar matters or materially breach any agreement presently in
effect with respect to or binding on the Undersigned; (b) this Consent and
Agreement and the Contract are legal, valid and binding obligations of the
Undersigned enforceable against the Undersigned; (c) all government approvals
necessary for the execution, delivery and performance by the Undersigned of its
obligations under the Contract have been obtained and are in full force and
effect; (d) as of the date hereof, the Contract is in full force and effect, has
not been amended, supplemented or modified and the Undersigned has no reason to
expect that any necessary governmental approvals required in the future may not
be obtained without undue delay or expense; and (e) to the best of the
Undersigned's knowledge Borrower has fulfilled all of its obligations under the
Contract, and there are no breaches or
-3-
<PAGE>
unsatisfied conditions presently existing (or which would exist after the
passage of time and/or giving of notice) under the Contract.
3. All Notices required or permitted hereunder shall be in writing and
shall be effective (i) upon receipt if hand delivered, (ii) when the appropriate
answer back is received if sent by telex and (iii) if otherwise delivered, upon
the earlier of receipt or two (2) Business Days after being sent registered or
certified mail, return receipt requested, with proper postage affixed thereto,
or by private courier or delivery service with charges prepaid, and addressed as
specified below:
If to the Undersigned:
Niagara Mohawk Energy Marketing, Inc.
507 Plum Street
Syracuse, NY 13204
Attn: Vice President, Business Development
FAX: (315) 460-3005
If to Agent:
U.S. Bank Trust National Association
100 Wall Street, Suite 1600
New York, NY 10005
Attn: Corporate Trust Administration
FAX: (212) 809-5459
4. This Consent and Agreement shall be binding upon and benefit the
successors and assigns of the Undersigned, the Borrower, the Agent, and their
respective successors, transferees and assigns. No termination, amendment,
variation or waiver of any provisions of this Consent and Agreement shall be
effective unless in writing and signed by the Undersigned, the Agent and the
Borrower. This Consent and Agreement shall be governed by the laws of the State
of New York.
-4-
<PAGE>
IN WITNESS WHEREOF, the Undersigned by its officer thereunto duly
authorized, has duly executed this Consent and Agreement as of the date set
forth below.
Dated: December 6, 1999
NIAGARA MOHAWK ENERGY MARKETING, INC.,
a New York corporation
By: /s/ James Cifaratta
________________________________
Name: James Cifaratta
Title: Vice President
Accepted:
U.S. BANK TRUST NATIONAL ASSOCIATION,
for itself and as Agent for the benefit of
the Secured Parties
By: /s/ Ward A. Spooner
________________________________________
Name:
Title:
PROJECT ORANGE ASSOCIATES, L.P.,
a Delaware limited partnership
By: G.A.S. ORANGE ASSOCIATES, L.L.C.
a Delaware limited liability company
By: /s/ Adam Victor
________________________________________
Name: Adam Victor
Title: President
-5-
<PAGE>
Exhibit 10.26
AGENCY AGREEMENT
----------------
THIS AGENCY AGREEMENT ("Agreement") is made effective as of the 14th day
of January 2000 by and between NIAGARA MOHAWK ENERGY MARKETING, INC., a New York
business corporation ("NMEM") and PROJECT ORANGE ASSOCIATES LP, a Delaware
limited partnership ("POA").
W I T N E S S E T H:
WHEREAS, POA and NMEM have entered into a certain Asset Management
Agreement dated December 6, 1999 ("Asset Management Agreement"); and
WHEREAS, in order to assist NMEM in the discharge of its obligations under
the Asset Management Agreement, POA and NMEM desire to enter into this Agreement
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, the terms, conditions,
covenants and agreements hereinafter set forth, the parties hereto agree that:
1. Appointment; Acceptance. POA hereby appoints NMEM as its exclusive
-----------------------
agent for the purposes contained herein, and NMEM hereby accepts its designation
as agent of POA hereunder. The duties of POA shall expressly include, but not
be limited to, the following:
(a) Tendering payments from POA's designated account,
(b) Accepting and disbursing funds though a POA bank account, limited
to the purposes of administering the POA Contracts (as defined in the Asset
Management Agreement);
(c) Entering into contracts or agreements as POA's attorney-in-fact,
provided (i) such contracts or agreements are consistent with the objectives of
<PAGE>
the Asset Management Agreement and the Contract Optimization Agreement between
POA and NMEM; (ii) such contracts or agreements, and the obligations of POA
thereunder, are within the parameters of POA's present and previously approved
budget; and (iii) the obligations of POA under such contracts or agreements do
not exceed Fifty Thousand dollars ($50,000.00) individually or One Hundred
Thousand dollars ($100,000.00) in the aggregate for any calendar year; and
(d) Executing additional contracts and agreements from time to time
which are not within the scope of subparagraph "(c)" above as POA's attorney-in-
fact, provided NMEM has obtained the prior written direction of POA to execute
such contracts or agreements. POA shall make a representative available for
NMEM so that decisions can be made on a timely basis.
(e) Notwithstanding the monetary limitations set forth in
subparagraph (c) above, negotiating and executing contracts and agreements for
the sale of natural gas or purchase of energy, provided such contracts and
agreements are in compliance with Section 4.18 of a certain Indenture among POA,
Project Orange Capital Corp. and U.S. Bank Trust National Association, dated
December 6, 1999. In addition, NMEM shall not enter into any contracts and
agreements regarding the sale of natural gas or purchase of energy which extend
in duration for a period of excess of six (6) months without the prior
2
<PAGE>
written direction of POA.
2. Discharge of Duties; Standard of Care; Personnel of NMEM.
--------------------------------------------------------
(a) To the extent NMEM will manage funds of POA, NMEM shall manage
such funds with the same standard of care that it would use in managing its own
assets.
(b) NMEM hereby agrees to provide the services of qualified personnel
to satisfy its obligations under this Agreement ("NMEM Personnel").
3. Consideration. As full and complete consideration for this Agreement
-------------
(and no independent consideration separate and apart from the Asset Management
Agreement), POA shall pay to NMEM the fees due pursuant to paragraph "6" of the
Asset Management Agreement.
4. Term. The term of this Agreement shall commence on the date hereof
----
and continue in effect until the first of the following to occur:
(a) Termination of the Asset Management Agreement;
(b) Termination by the mutual agreement of POA and NMEM; or
(c) Termination by either party upon written notice, in which case
NMEM agrees to immediately return all originals and copies of this Agreement to
POA.
5. Place for Performance of Services. Except as may otherwise be
---------------------------------
provided herein, NMEM shall perform its services under this Agreement at NMEM's
offices. On reasonable notice from POA, and at POA's expense, NMEM shall make
NMEM Personnel available from time to time at other reasonable locations as POA
may request.
6. Expenses. POA shall reimburse NMEM for the reasonable and necessary
--------
3
<PAGE>
expenses incurred by NMEM in connection with the performance of its services
under this Agreement.
7. Assignability. NMEM may not assign its rights hereunder without the
-------------
prior written consent of POA. POA may not assign its rights hereunder without
the prior written consent of NMEM.
8. Indemnification.
---------------
(a) To the fullest extent permitted by law, POA agrees to defend,
indemnify and hold NMEM, its directors, officers, employees and representatives
harmless from and against any and all damages, costs, expenses, including
reasonable attorney's fees claims or liabilities arising out of or based on
POA's failure to perform or performance under this Agreement to the extent that
such damages, costs, expenses, claims or liabilities are not caused solely by
the negligence or willful misconduct of NMEM.
(b) To the fullest extent permitted by law, NMEM agrees to defend,
indemnify and hold POA, its partners, directors, officers, employees or
representatives harmless from and against any and all damages, costs, expenses,
including reasonable attorney's fees, claims or liabilities arising out of or
based on NMEM's failure to perform or performance under this Agreement, except
to the extent that such damages, costs, expenses, claims or liabilities are not
caused solely by the negligence or willful misconduct of POA.
(c) A party seeking indemnification ("Indemnitee") shall notify, by
certified mail
4
<PAGE>
return receipt requested, the party from whom indemnification is sought
("Indemnitor") promptly after discovery of any fact or circumstance on which it
could claim indemnification pursuant to this Agreement. The notice shall
describe the nature of the claim and the amount of the claim. Indemnitee shall
use its best efforts to minimize the amounts of its loss or injury for which it
shall be entitled to indemnification pursuant to this Agreement, but it shall
not be required to institute legal or other proceedings to do so. If Indemnitee
is involved in any legal action, the outcome of which could give rise to
Indemnitee seeking indemnification from Indemnitor pursuant to this Agreement,
it shall immediately notify Indemnitor in writing, and Indemnitor shall have the
right to elect to control any such legal action and proceeding through its own
counsel, although Indemnitee may, at its election, continue to participate in
any such legal action at its sole cost and expense and without any right to
indemnification for such cost and expense. If Indemnitor shall fail to assume
the defense of any such legal action, then Indemnitee may continue to defend,
through counsel of its own choice, such claim, action or suit and, in such
event, Indemnitee shall be entitled to indemnification for any such costs and
expenses (including reasonable attorneys' fees).
(d) No claim, action or suit for which indemnification is asserted
pursuant to this Agreement shall be settled or compromised by a party without
the prior written consent of other party hereto.
(e) All claims for indemnification under this Agreement shall be paid
within thirty (30) days following receipt of written demand therefor, after such
claim has been finally determined. A claim shall be deemed to be "finally
determined" when (A) the parties have so determined by mutual agreement; or (B)
if a claim is disputed by any party to this Agreement,
5
<PAGE>
when a non-appealable final order of a court of competent jurisdiction has been
entered.
9. Amendment. Any waiver, alteration or modification of any provision of
---------
this Agreement or cancellation or replacement of this Agreement shall not be
valid unless in writing and signed by the parties.
10. Notices. Any and all notices referred to herein shall be sufficient
-------
if furnished in writing, sent by first class mail, to the representative parties
hereto at their last known address, or other address as may be designated by
notice in accordance with this Paragraph.
11. Entire Agreement. This Agreement is the sole and entire agreement by
----------------
and between the parties relating to its subject matter and shall, as of the date
of its execution, supersede any and all other agreements between the parties.
If any provision of this Agreement is held to be invalid, the remainder of this
Agreement shall not be affected thereby.
12. Governing Law. This Agreement, having been made and duly executed
-------------
within the State of New York, shall be construed and regulated in all respects
in accordance with and pursuant to the laws of New York.
13. Further Documents. The parties hereto agree that they will at any
-----------------
time, and from time to time, from the date hereof and upon request of the other
party, execute, acknowledge and deliver any further assignments, transfers and
conveyances and perform any further acts that may be reasonably required in
accordance with this Agreement to more fully effect the purposes set forth
herein.
14. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original hereof.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day
and year
6
<PAGE>
first above written.
NIAGARA MOHAWK ENERGY MARKETING, INC.
By: /s/ James Cifaratta
------------------------------------
James Cifaratta, Vice President
Business Development
PROJECT ORANGE ASSOCIATES LP
by: G.A.S. ORANGE ASSOCIATES, L.L.C., it general partner
by: /s/ Adam H. Victor
------------------------------------
Adam H. Victor, President
7
<PAGE>
EXHIBIT 23.1
STONE & WEBSTER LETTERHEAD
Donaldson, Lufkin & Jenrette G.A.S. Orange Partners LP
277 Park Avenue c/o MCM Securities Inc.
New York, New York 10172 One Rockefeller Plaza, Suite 2330
New York, New York 10020
G.A.S. Orange Associates LLC
630 1st Avenue, Suite 30C
New York, New York 10016
INDEPENDENT TECHNICAL CONSULTANT'S REPORT
PROJECT ORANGE
We submitted our Independent Technical Consultants Report for the Project Orange
Associates, L.P. cogeneration facility, ("Project Orange") dated December 2,
1999 (the "Report") in connection with the joint issuance by Project Orange
Funding, L.P. and Project Orange Capital Corp. (collectively, the "Issuers") of
approximately U.S. $68,000,000 of Senior Secured Notes due 2007 (the "Notes") to
be purchased by Donaldson, Lufkin & Jenrette Securities Corporation (the
"Initial Purchaser") and resold pursuant to Rule 144A and Regulation S under the
Securities Act of 1933, as amended ("the Securities Act"). We understand that
the Report will be used by the Initial Purchaser, Project Orange Associates,
L.P. and G.A.S. Orange Associates, L.L.C. in evaluating certain engineering, and
economic aspects of Project Orange in connection with the purchase and resale of
the Notes by the Initial Purchaser. In addition, we understand that the Report
will be included as an appendix to the prospectus to be included as part of a
registration statement to be filed with the U.S. Securities and Exchange
Commission (the "SEC") in connection with the registration of the Notes under
the Securities Act in accordance with the terms of a registration rights
agreement to be entered into between the Issuers and the Initial Purchaser. We
consent to the Report being so used and so included as an appendix (i) to the
Offering Memorandum, and (ii) to the prospectus incorporated in the registration
statement to be filed with the SEC. It is understood that, regarding the use of
this report, the addressees of this letter are subject to the Stone & Webster
Management Consultants, Inc. terms and conditions of this assignment.
Sincerely,
STONE & WEBSTER MANAGEMENT CONSULTANTS, INC.
By /s/ K.H. Applewhite, Jr.
------------------------
K.H. Applewhite, Jr.
Vice President
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form S-4 of Project
Orange Associates, L.P. of our report dated August 16, 1999 (December 6, 1999 as
to Note 14 to the financial statements) appearing in the Prospectus, which is a
part of such Registration Statement, and to the reference to us under the
heading "Experts" in such Prospectus.
Deloitte & Touche LLP
Parsippany, New Jersey
February 11, 2000
<PAGE>
EXHIBIT 25.1
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) _________
U.S. BANK TRUST NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
13-3781471
(I. R. S. Employer
Identification No.)
100 Wall Street, New York, NY 10005
(Address of principal executive offices) (Zip Code)
------------------------------
For information, contact:
Terry L. McRoberts, President
U.S. Bank Trust National Association
100 Wall Street, 16th Floor
New York, NY 10005
Telephone: (212) 361-2506
Project Orange Associates L.P.
and
Project Orange Capital Corp.
(Exact names of obligors as specified in their charters)
Delaware 13-3472059
Delaware 16-1580601
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
Project Orange Associates L.P.
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
Project Orange Capital Corp.
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
(Address of principal executive offices) (Zip Code)
------------------------------
SENIOR SECURED NOTES
<PAGE>
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
---- -------
Comptroller of the Currency Washington, D. C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligors are affiliates of the trustee, describe each such
affiliation.
None.
Item 16. List of Exhibits.
Exhibit 1. Articles of Association of U.S. Bank Trust National
Association, incorporated herein by reference to Exhibit
1 of Form T-1, Registration No. 333-51961.
Exhibit 2. Certificate of Authority to Commence Business for First
Trust of New York, National Association now known as U.S.
Bank Trust National Association, incorporated herein by
reference to Exhibit 2 of Form T-1, Registration No.
33-83774.
Exhibit 3. Authorization to exercise corporate trust powers for U.S.
Bank Trust National Association, incorporated herein by
reference to Exhibit 3 of Form T-1, Registration No.
333-51961.
Exhibit 4. By-Laws of U.S. Bank Trust National Association,
incorporated herein by reference to Exhibit 4 of Form T-1,
Registration No. 333-51961.
Exhibit 5. Not applicable.
Exhibit 6. Consent of First Trust of New York, National Association
now known as U.S. Bank Trust National Association,
required by Section 321(b) of the Act, incorporated herein
by reference to Exhibit 6 of Form T-1, Registration No.
33-83774.
Exhibit 7. Report of Condition of U.S. Bank Trust National
Association, as of the close of business on September 30,
1999, published pursuant to law or the requirements of its
supervising or examining authority.
<PAGE>
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, U.S. Bank Trust National Association, a national banking
association organized and existing under the laws of the United States, 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 __ day of February, 2000.
U.S. BANK TRUST
NATIONAL ASSOCIATION
By: /s/ John D. Bowman
------------------------
John D. Bowman
Vice President
<PAGE>
Exhibit 7
---------
U.S. Bank Trust National Association
Statement of Financial Condition
As of 9/30/99
($000's)
9/30/99
Assets --------
Cash and Due From Depository Institutions $ 46,596
Federal Reserve Stock 3,358
Fixed Assets 416
Intangible Assets 63,350
Other Assets 7,372
--------
Total Assets $121,092
Liabilities
Other Liabilities 9,557
--------
Total Liabilities 9,557
Equity
Common and Preferred Stock 1,000
Surplus 120,932
Undivided Profits (10,397)
--------
Total Equity Capital 111,535
Total Liabilities and Equity Capital $121,092
-------------------------------------------------------
To the best of the undersigned's determination, as of this
date the above financial information is true and correct.
U.S. Bank Trust National Association
By: _______________________
Vice President
Dated: ______________, 2000
