SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-9208
NRG GENERATING (U.S.) INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2076187
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1221 Nicollet Mall, Suite 610, Minneapolis, Minnesota 55403
(612) 373-8834
(Address of principal executive offices) (Zip Code)
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days. X Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
As of March 18, 1998, there were outstanding 6,836,769 shares of
Common Stock. Based on the last sales price at which such stock was
sold on that date, the approximate aggregate market value of the shares
of Common Stock held by non-affiliates of the Company was $51,466,000.
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court. X Yes No
Documents Incorporated By Reference
The information required for the following items is incorporated
by reference to the 1998 Definitive Proxy Statement of NRG Generating
(U.S.) Inc.:
Item 10 - Directors and Executive Officers of the Registrant
Item 11 - Executive Compensation
Item 12 - Security Ownership of Certain Beneficial
Owners and Management
Item 13 - Certain Relationships and Related Transactions
Table of Contents
Page
Number
Part I
Item 1.Business 2
Item 2.Properties 21
Item 3.Legal Proceedings 21
Item 4.Submission of Matters to a Vote of Security Holders 23
Part II
Item 5.Market for the Registrant's Common Equity and Related
Stockholder Matters 24
Item 6.Selected Financial Data 26
Item 7.Management's Discussion and Analysis of Financial
Condition and Results of Operations 27
Item 7A.Quantitative and Qualitative Disclosures about
Market Risk 37
Item 8.Financial Statements and Supplementary Data 37
Item 9.Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 37
Part III
Item 10.Directors and Executive Officers of the Registrant 38
Item 11.Executive Compensation 38
Item 12.Security Ownership of Certain Beneficial Owners
and Management 38
Item 13.Certain Relationships and Related Transactions 38
Part IV
Item 14.Exhibits, Financial Statement Schedules and Reports
on Form 8-K 39
Consolidated Financial Statements F-1
Index to Exhibits 41
PART I
ITEM 1. BUSINESS.
Certain of the statements made in this Item 1 and in other
portions of this Report and in documents incorporated by reference
herein constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities
Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such forward-looking statements are not
guarantees of future performance and are subject to risks,
uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to differ materially from
historical results or from any results expressed or implied by such
forward-looking statements. Such factors include, without limitation,
those discussed in "Business - Risk Factors" herein. See "Business -
Risk Factors - Risks Associated with Forward-Looking Statements."
General
NRG Generating (U.S.) Inc. (referred to herein with its
consolidated subsidiaries as "NRGG" or the "Company") is engaged
primarily in the business of developing, owning and operating
cogeneration projects which produce electricity and thermal energy for
sale under long-term contracts with industrial and commercial users and
public utilities. In addition to its energy business, the Company
sells and rents power generation and cogeneration equipment through
subsidiaries located in the United States and the United Kingdom. The
Company currently is pursuing several avenues for the disposition of
its equipment sales and rental business.
In its role as a developer and owner of energy projects, the
Company has developed the following projects in which it currently has
an ownership interest:
(a) The 52 megawatt ("MW") Newark Boxboard Project (the
"Newark Project"), located in Newark, New Jersey, began
operations in November 1990;
(b) The 122 MW E.I. du Pont de Nemours Parlin Project (the
"Parlin Project"), located in Parlin, New Jersey, began
operations in June 1991;
(c) The 22 MW Philadelphia Cogeneration Project (the
"Philadelphia PWD Project"), located in Philadelphia,
Pennsylvania, began operations in May 1993, and
(d) The 150 MW Grays Ferry Cogeneration Project (the "Grays
Ferry Project"), located in Philadelphia, Pennsylvania, began
operations in January 1998. The Company owns a one-third
interest in the Grays Ferry Cogeneration Partnership (the
"Grays Ferry Partnership"), which owns the Grays Ferry
Project. As of the date of this Report, the Company and the
Grays Ferry Partnership are in litigation with the electric
power purchaser from the Grays Ferry Project over, among
other things, the effectiveness of the applicable power
purchase agreements. See "Item 3. Legal Proceedings."
In December 1997, the Company acquired from NRG Energy, Inc. ("NRG
Energy") a 117 MW steam and electricity cogeneration project located in
Morris, Illinois (the "Morris Project").
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The Morris Project is currently under construction with commercial
operation currently expected to occur during the fourth quarter of
1998.
Formerly known as O'Brien Environmental Energy, Inc. ("O'Brien"),
the Company changed its name to NRG Generating (U.S.) Inc. in
connection with its emergence from bankruptcy on April 30, 1996, under
a plan of reorganization (the "Plan") approved by the U.S. Bankruptcy
Court for the District of New Jersey (the "Bankruptcy Court"). O'Brien
had filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code on September 28, 1994. In connection
with the consummation of the Plan, all of the shares of O'Brien Class A
and Class B Common Stock were canceled and replaced by a new issue of
NRGG common stock, par value $.01 per share (the "Common Stock"). In
addition, NRG Energy advanced approximately $71.2 million under loan
agreements with the Company and purchased approximately 41.86% of the
Common Stock for aggregate consideration of approximately $21.2
million. NRG Energy also purchased certain subsidiaries of the Company
for $7.5 million and funded a cash distribution to the O'Brien
stockholders aggregating $7.5 million. NRG Energy's financial backing
of the Plan enabled the Company to provide for full and immediate
payment of all undisputed pre-petition claims as well as a provision
for post-petition interest. In addition, pursuant to the Plan, NRG
Energy and the Company entered into a Co-Investment Agreement (the "Co-
Investment Agreement"), pursuant to which NRG Energy has agreed to
offer to the Company ownership interests in certain power projects
which are initially developed by NRG Energy or with respect to which
NRG Energy has entered into a binding acquisition agreement with a
third party.
The Company was incorporated in Florida in 1981 and subsequently
merged with a Delaware corporation in 1984. Prior to the merger, the
Company was part of a group of several affiliated companies which had
served the power generation market since 1915.
Independent Power Market Overview
The independent power market (the market for power generated by
companies other than traditional utilities) has evolved and is expected
by the Company to continue to expand as a result of the growing need
for new and replacement power capacity by electric utilities and
industrial customers. Historically, regulated utilities in the United
States have been the only producers of electric power intended
primarily for sale to third parties. The increase in oil prices during
the late 1970s and the increasing cost of constructing and financing
large coal-fired or nuclear generating facilities along with the
enactment of the Public Utility Regulatory Policies Act of 1978
("PURPA") created a favorable regulatory environment and favorable
market conditions for the development of energy projects by companies
other than electric utilities. The basic policy judgment behind the
encouragement of the development of cogeneration facilities is that the
United States' dependence on oil and natural gas resources should be
reduced and that the very high incremental costs of large centralized
power production facilities should be avoided. However, economic
considerations remain the central issue affecting a decision to install
a cogeneration project.
PURPA provides significant incentives to developers of "qualifying
facilities" under PURPA. It designates certain small power production
(those utilizing renewable fuels and having a capacity of less than 80
MW) and certain cogeneration facilities as qualifying facilities
eligible for various benefits under federal law, including exemption
from many of the regulatory requirements
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applicable to electric utilities. In accordance with PURPA, the
Company's projects with one exception are exempt as qualifying
facilities, and its proposed projects are intended to be exempt, from
rate, financial and similar regulation as a utility as long as they
meet the requirements of a qualifying facility. These projects also
benefit from regulations that require public utilities to purchase
power generated by qualifying projects at the utilities' "avoided cost"
(determined in accordance with a formula which varies from state to
state but which is generally calculated based upon what the cost to the
utility would be to generate the power itself or to purchase it from
another source). Power purchase contracts generally must be approved
by state public utility commissions. Since the Company benefits from
PURPA, the Company's business could be adversely affected by a
significant change in PURPA and could otherwise be materially impacted
by decisions of federal, state and local legislative, judicial and
regulatory bodies. See "Business - Regulation" and "- Risk Factors -
Proposed Restructuring of the Electric Utility Industry."
Many organizations, including equipment manufacturers and
subsidiaries of utilities and contractors, as well as other
organizations similar to the Company, have entered the market for the
ownership and operation of cogeneration projects. Many of these
companies have substantially greater resources and/or access to the
capital required to fund such activities than the Company. The
Company's primary market is the development and ownership of industrial
inside-the-fence cogeneration projects. A substantial portion of the
electric output of these facilities may be sold to public utilities.
Obtaining power contracts with utilities has become more competitive
with the increased use of competitive bidding procedures and the advent
of deregulation in the electric utility market. This increased
competition may make it more difficult for the Company to secure future
projects, may increase project development costs and may reduce the
Company's operating margins on any future projects. Any such
developments could have a material adverse effect on the Company's
results of operations and financial condition. See "Business -
Competition" and "- Risk Factors - Competition."
Products and Services
During the fiscal year ended December 31, 1997, the Company
operated principally in two industry segments: (i) energy - the
development and ownership of cogeneration projects, the development,
ownership and operation of standby/peak shaving projects through wholly-
owned subsidiaries and limited partnerships; and (ii) equipment sales,
rentals and service - the sale and rental of power generating,
cogenerating and standby/peak shaving equipment and associated
services. See Note 16 of the Notes to the Consolidated Financial
Statements for financial information with respect to industry segments.
Energy Segment
Overview
Set forth below are descriptions of the Company's projects in
operation as of December 31, 1997 and one additional project which
commenced commercial operation in January 1998. Each of these projects
is currently producing revenues through the sale of energy under long-
term contracts. In connection with the obtaining of financing for its
three cogeneration projects in operation, the Company or the owner of
the project has obtained business interruption insurance and
performance guarantees by the operators of the projects. These
arrangements are negotiated and secured prior to commencement of
operations of a project. Taken as a whole, these arrangements reduce
the risks associated with any past and future equipment problems or
unscheduled plant shutdowns. For
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example, in the event of an unscheduled breakdown, the Company or the
owner of the project generally is entitled, pursuant to its business
interruption insurance policy, to the net profit which it is prevented
from earning from the particular project, including all charges and
expenses which continue during the period of interruption, less the
applicable deductible amounts. There can be no assurance, however,
that such insurance or guarantees will sufficiently mitigate the risk
of unforeseen contingencies. As of the date of this Report, the
Company and the Grays Ferry Partnership are in litigation with the
electric power purchaser from the Grays Ferry Project over, among other
things, the effectiveness of the applicable power purchase agreements.
See "Item 3. Legal Proceedings."
<TABLE>
<CAPTION>
Name and Location Rated Approximate Date of Power Company's
Of Project Capacity (1) Capital Cost Operation Purchaser Lender Interest
(in MWs) (in millions)
<S> <C> <C> <C> <C> <C> <C>
Cogeneration
Parlin 122.0 $112.0 June 1991 Jersey Credit 100%
Central Power Suisse(2)
Power & Light
Company
Newark 52.0 56.0 November 1990 Jersey Credit 100%
Central Suisse(2)
Power & Light
Company
Grays Ferry 150.0 160.0 January 1998 PECO Energy Chase(3) 33.3%
Company
Standby/Peak
Shaving
Philadelphia 22.0 12.0 May 1993 Philadelphia (4) 83%
Municipal
Authority
____ _____
346.0 $340.0
(1) See discussion of each particular project which follows for
current contract production, which may be less than the stated
rated capacity.
(2) See Note 8 of the Notes to the Consolidated Financial Statements.
(3) This project is financed under a construction loan which may
be converted to a 15-year term loan. The Grays Ferry Partnership
has received a notice of default from the lender under this
construction loan which asserted default, as of the date
of this Report, has not been waived.
(4) This project is financed under the Company's revolving credit
facility. See Note 8 of Notes to the Consolidated Financial
Statements for a description of this facility.
Cogeneration
Cogeneration involves the sequential production of two or more
forms of usable energy (e.g. electricity and thermal energy) using a
single fuel source, thereby substantially increasing fuel efficiency.
The key elements of a cogeneration project are permit applications,
contracts for sales of electricity and thermal energy, contracts or
arrangements for fuel supply, and project financing and construction.
The Company attempts to design and develop its projects so that they
qualify for the benefits of PURPA, which exempts qualifying projects
from rate, financial and similar utility regulation and requires public
utilities to purchase power generated by these projects. Electricity
may be sold to utilities and end users of electrical power, including
large industrial facilities. Thermal energy from cogeneration plants
may be sold to commercial enterprises and other
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institutions. Large industrial users of thermal energy include plants
in the chemical processing, petroleum refining, food processing,
pharmaceutical and paper industries.
The Company has developed and currently has ownership in three
cogeneration projects, the Newark, Parlin and the Grays Ferry Projects.
Natural gas for the Newark and Parlin projects is provided by Jersey
Central Power and Light Company ("JCP&L") as a part of its obligations
under the terms of its power purchase agreements ("PPAs") with NRG
Generating (Newark) Cogeneration Inc. ("NRGG Newark") and NRG
Generating (Parlin) Cogeneration Inc. ("NRGG Parlin"), respectively, as
renegotiated effective April 30, 1996. Previously, the Company bore
the risk of fluctuating natural gas prices. In the case of the Grays
Ferry Project, gas is currently being provided by purchases on the spot
market by the Grays Ferry fuel manager, Exelon Corporation. Natural
gas for the Grays Ferry Project will be provided by Aquila Energy
Marketing Corporation under a 16-year gas sales agreement.
Power Operations, Inc., a subsidiary of NRG Energy, is responsible
for the operation and maintenance of the Newark and Parlin facilities
under long-term contracts. Philadelphia United Power Corporation, an
affiliate of one of the partners, has been engaged under a long-term
contract to manage and perform all operation and maintenance of the
Grays Ferry Project. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Newark Project. This 52 MW project, which commenced operation in
November 1990, is 100%-owned by NRGG Newark, a wholly-owned subsidiary
of the Company. The Newark Project is designed to operate continuously
and to provide up to 75,000 lbs./hr. of steam to a recycled paper
boxboard manufacturing plant owned by Newark Group, Inc., and 52 MW of
electricity to JCP&L, each under agreements extending into the year
2015. See Note 8 of the Notes to the Consolidated Financial Statements
for a discussion of this project's refinancing. For the fiscal year
ended December 31, 1997, this project accounted for approximately $17.3
million in gross revenues, representing approximately 27% of the
Company's gross revenues.
Parlin Project. This 122 MW project, which commenced operation in
June 1991, is 100%-owned by NRGG Parlin, a wholly-owned subsidiary of
the Company. The Parlin Project provides up to 120,000 lbs./hr. of
steam to a manufacturing plant in Parlin, New Jersey owned by E.I. du
Pont de Nemours and Company ("E.I. du Pont"), under an agreement
extending until 2021. In addition, the project sells 41 MW of base
electric power and up to 73 MW of dispatchable power to JCP&L, under an
agreement with an initial term until 2011. Finally, the project sells
up to 9 MW of power to NRG Parlin, Inc. ("NPI"), a wholly-owned
subsidiary of NRG Energy. NPI resells this power at retail to E.I. du
Pont under an agreement extending until 2021. See Note 8 of the Notes
to the Consolidated Financial Statements for a discussion of this
project's refinancing. For the fiscal year ended December 31, 1997,
this project accounted for approximately $21.7 million in gross
revenues, representing approximately 33% of the Company's gross
revenues. Parlin is also occasionally able to sell marginal power
outside its PPA with JCP&L on a short-term basis.
Grays Ferry Project. This 150 MW project, which commenced
operation in January 1998, is 33.3%-owned by NRGG (Schuylkill)
Cogeneration, Inc., a wholly-owned subsidiary of the Company. The
Company has executed a partnership agreement with an affiliate of PECO
Energy Company ("PECO") and an affiliate of Trigen Energy Corporation
("Trigen") to jointly develop and own this project. The partnership
has executed a 25-year agreement with the Trigen-Philadelphia Thermal
Energy Corporation, a wholly owned subsidiary of Trigen, for the sale
of
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steam and a 20-year agreement for the sale of electric output with
PECO. The project began commercial operation in January 1998 and did
not record any revenue in the fiscal year ended December 31, 1997. As
of the date of this Report, the Company and the Grays Ferry Partnership
are in litigation with PECO Energy over, among other things, the
effectiveness of the applicable power purchase agreements. See "Item
3. Legal Proceedings" and Note 19 of the Notes to the Consolidated
Financial Statements.
Standby/Peak Shaving
Standby/peak shaving projects utilize the Company's power
generation equipment as a back-up source of electricity for large
electrical demand customers. The availability of an alternative energy
source allows these customers to benefit from significantly discounted
interruptible energy tariffs from their primary electricity provider.
The standby/peak shaving generators typically will be required to
provide a specified amount of electricity during peak periods.
Philadelphia PWD Project. This 22 MW project, owned by O'Brien
(Philadelphia) Cogeneration, Inc. ("OPC"), commenced operations in May
1993. The Company owns an 83% interest in OPC, with the remaining 17%
interest owned by an unrelated private investor. See Note 18 to the
Consolidated Financial Statements. Pursuant to a 20-year energy
service agreement, the Philadelphia Municipal Authority (the
"Authority") has the right to be supplied with 20 MW of electricity
from the project at any time on one hour's notice. In addition, the
project uses excess digester gas collected at the Authority's northeast
and southwest Philadelphia plants to generate up to approximately 2 MW
of electricity which is delivered to the Authority pursuant to a 10-
year power generation agreement. In October 1998, the Authority's rate
structure with its electrical utility is due to be renegotiated. The
outcome of these negotiations could adversely affect the project.
However, in the December 23, 1997 Pennsylvania Public Utility
Commission order, PECO is to continue to offer the LILR tariff, which
is the underlying rate structure between the Authority and PECO, until
the end of the restructuring transition period (expected to be June
30th, 2007). The facility was not called on to provide standby power
in 1997. For the fiscal year ended December 31, 1997, this project
accounted for approximately $4.2 million in gross revenues,
representing approximately 6% of the Company's gross revenues.
Equipment Sales, Rentals and Services Segment
In addition to the energy business, the Company sells and rents
power generation and cogeneration equipment and provides related
services. The Company operates its equipment sales, rentals and
services business principally through two subsidiaries. In the United
States, the equipment sales, rentals and services business operates
under the name of O'Brien Energy Services Company ("OES"). NRG
Generating Limited, a wholly-owned United Kingdom subsidiary, is the
holding company for a number of subsidiaries that operate in the United
Kingdom under the common name of Puma ("Puma").
The Company has determined that OES and Puma are not a part of its
strategic plan for the future, and the Company is currently pursuing
several avenues for the disposition of these businesses. The
disposition of these businesses is not expected to have a material
impact on the Company's financial position or results of operations.
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O'Brien Energy Services Company
A significant portion of the Company's equipment rental business
is attributable to the operations of OES. The Company rents power
generation and cogeneration equipment to the construction, industrial,
military, transportation, mining, utility and entertainment markets.
In addition to its rental business, OES sells (i) equipment
manufactured by others to turnkey contractors in connection with the
construction of the Company's projects, (ii) equipment purchased by it
for projects unrelated to those being developed by the Company, and
(iii) equipment purchased and reconditioned by it. Finally, OES
provides related services including the design, assembly, repair and
maintenance of permanent or standby power generation equipment. On a
national level, the Company competes with a number of other companies.
In addition, there are numerous local competitors in each of the
geographic areas in which the Company operates. The Company competes
on the basis of experience, service, price and depth of its rental
fleet.
Puma
Puma designs and assembles diesel and natural gas fueled power
generation systems ranging in size from 5 kilowatts to 5 MW. These
products are engineered and sold for use in prime power base load
applications as well as for standby or main failure emergency
situations. Major markets for these products include commercial
buildings, governmental institutions such as schools, hospitals and
public facilities, industrial manufacturing or production plants,
shipyards, the entertainment industry and offshore drilling operations.
The Company exports many of its products primarily through established
distributors and dealers in local areas for delivery to markets such as
the Far East, including Hong Kong and mainland China, together with the
Middle East and South America.
Puma also designs and manufactures custom electrical control and
distribution subsystems. These include medium voltage cubicle
switchboards, main distribution systems, control instrumentation panels
and packaged substations. This equipment receives and distributes
power through a building, ship or other self-contained structure.
The revenues and operations of the Company's operations in the
United Kingdom disclosed below are attributable solely to the equipment
sales and services segment of the Company's business. The revenues
from such operations accounted for in excess of 50% of that particular
segment's revenue in the fiscal year ended December 31, 1997.
Six Months
Ended
December 31, December 31, June 30, June 30,
1997 1996 1996 1995
(In Thousands)
Revenues:
United States $ 51,504 $ 27,937 $ 82,917 $ 89,332
United Kingdom 13,300 11,979 13,630 12,915
$ 64,804 $ 39,916 $ 96,547 $ 102,247
Net Income (Loss):
United States $ 23,236 $ 6,087 $ (17,591) $ (40,905)
United Kingdom 116 336 (122) (14)
$ 23,352 $ 6,423 $ (17,713) $ (40,919)
Identifiable Assets:
United States $ 221,752 $ 164,631 $ 169,657 $ 179,793
United Kingdom 6,142 8,993 8,505 9,955
$ 227,894 $ 173,624 $ 178,162 $ 189,748
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Project Development Activities
General
The Company, together with its subsidiaries and affiliates,
develops, owns and operates cogeneration projects which produce
electricity and thermal energy for sale under long-term contracts with
industrial and commercial users and public utilities. Potential
project structures include (but are not limited to) sole ownership,
general partnerships, limited partnerships, sale leaseback arrangements
and other forms of joint venture or debt arrangements. Development
activities are pursued by the Company's internal management team.
Under a Co-Investment Agreement with NRG Energy, the Company also may
acquire ownership interests in certain power projects initially
developed by NRG Energy or with respect to which NRG Energy has entered
into a binding acquisition agreement with a third party.
The Company sells the electricity produced by its projects
pursuant to long-term contracts either on a "retail basis" to specific
industrial and commercial users or on a "wholesale basis" to local
public utilities. Presently, most of the electricity produced by the
Company's projects in operation is sold on a wholesale basis. The mix
of future energy sales may differ based upon future economic conditions
and other circumstances.
Internal Project Development
The Company has assembled a management team with more than 80
combined years of experience in the development, financing and
operation of independent power projects. The Company has formed this
team to pursue projects in the industrial inside-the-fence cogeneration
market, focusing on natural gas projects in the United States in the 50
MW to 300 MW size. Internal project development activities will focus
on greenfield development, acquisitions of operating projects,
enhancement of current projects and acquisitions of competitor
companies or portfolios.
Co-Investment Agreement with NRG Energy
Pursuant to the Co-Investment Agreement, NRG Energy agreed to
offer to the Company ownership interests in certain power projects
which were initially developed by NRG Energy or with respect to which
NRG Energy has entered into a binding acquisition agreement with a
third party. If any eligible project reaches certain contract
milestones (which include the execution of a binding PPA and fuel
supply agreement and the completion of a feasibility and engineering
study) by April 30, 2003, NRG Energy has agreed to offer to sell to the
Company all of NRG Energy's ownership interest in such project.
Eligible projects include, with certain exceptions and exclusions,
proposed or existing electric power plants within the United States
which NRG Energy initially develop or in which NRG Energy proposes to
acquire an ownership interest. NRG Energy is obligated under the Co-
Investment Agreement to offer to the Company, during the three year
period ending on April 30, 1999, projects with an aggregate equity
value of at least $60.0 million or a minimum of 150 net MW. As of the
date of this Report, ownership interests in projects with an aggregate
of more than 130 net MW have been offered under the Co-Investment
Agreement, including the 117 net MW Morris Project.
Among the exclusions from the Co-Investment Agreement are (i) any
ownership interest in a project which is below a level that would cause
the project (or its owners) to be in violation of
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the relevant power purchase agreement or applicable state or federal
law upon the generation of electricity for sale by such project, (ii)
any indirect ownership interest held by NRG Energy in an eligible
project arising from NRG Energy's direct or indirect ownership of
equity interests in the Company, (iii) any ownership interest in a
facility below 25 MW in capacity, and (iv) any ownership interest that
is retained in order to later be sold in an exempt transaction. Exempt
transactions include (i) any sale or disposition of an ownership
interest that is consummated as a result of a foreclosure or conveyance
in lieu of foreclosure of liens or security interests, (ii) any sale or
disposition of an ownership interest to a third party that is or will
become a participant in the eligible project, where the obligation to
sell the interest is incidental to the provision of services or the
contribution of assets to the project and is created prior to the
execution and delivery of a binding power purchase agreement and fuel
supply agreement and the completion of an engineering and feasibility
study with respect to the project, and (iii) any sale or disposition of
an ownership interest as part of a larger transaction involving the
sale of all or substantially all of the assets of NRG Energy or the
sale of an equity interest in NRG Energy, provided that the person
acquiring the ownership interest agrees to be bound by the Co-
Investment Agreement.
In December 1997, a wholly-owned subsidiary of the Company
purchased the Morris Project from NRG Energy. The Morris Project, with
an aggregate of 117 net MW, had been offered under the Co-Investment
Agreement. The Company has initiated an arbitration proceeding
pursuant to the terms of the Co-Investment Agreement to resolve a
dispute with NRG Energy concerning the rights and obligations of the
Company and NRG Energy with respect to a 110 MW cogeneration project
which the Company contends NRG Energy agreed to sell to an unrelated
third party without fulfilling its obligations with respect to such
project under the Co-Investment Agreement. See "Item 3. Legal
Proceedings."
To facilitate the Company's ability to acquire ownership interests
which may be offered pursuant to its Co-Investment Agreement, NRG
Energy has agreed to finance the Company's purchase of such ownership
interests at commercially competitive terms to the extent funds are
unavailable to the Company on comparable terms from other sources. Any
such financing provided by NRG Energy under the terms of the Co-
Investment Agreement is required to be recourse to the Company and
secured by a lien on the ownership interest acquired. Such financing
also is required to be repaid from the net proceeds received by the
Company from offerings of equity or debt securities of the Company
(when market conditions permit such offerings to be made on favorable
terms) after taking into account the working capital and other cash
requirements of the Company as determined by its Board of Directors.
In light of the Company's internal development activities, the
Company does not expect the Co-Investment Agreement to serve as the
primary source of future project development activities.
Morris Project
In December 1997, NRGG Funding Inc. ("NRGG Funding"), a wholly-
owned subsidiary of the Company, completed its acquisition from NRG
Energy of all of NRG Energy's interest in a 117 MW project located in
Morris, Illinois by acquiring 100% of the interests in NRG (Morris)
Cogen, LLC ("Morris LLC"). Morris LLC has the exclusive right to build
and operate a cogeneration plant to be located in Morris, Illinois
within a petrochemical manufacturing facility, which is owned by
Equistar Chemicals LP ("Equistar"), a joint venture of Millennium
Chemicals Inc. and Lyondell Petrochemical Company. A 25-year agreement
has been executed for the sale of steam and
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electric output from the project. NRG Energy commenced construction of
the Morris Project in September 1997 with commercial operation
currently expected to occur in the fourth quarter of 1998.
NRGG Funding agreed to assume all of the obligations of NRG Energy
and to provide future equity contributions to Morris LLC which are
limited to the lesser of 20% of the total project cost or $22.0
million. NRG Energy has guaranteed to the Morris Project's lenders
that NRGG Funding will make these future equity contributions, and the
Company has guaranteed to NRG Energy the obligation of NRGG Funding to
make these future equity contributions. In addition, Morris LLC is
obligated to pay NRG Energy $1.0 million as and when permitted under
the project's principal loan agreement. Morris LLC has previously paid
$4.0 million to NRG Energy in connection with the financial closing of
the construction financing of the Morris Project.
The Company intends to arrange financing (the terms and manner of
which have not been determined by the Company) to fund the required
future equity contributions to Morris LLC. NRG Energy is obligated
under a Supplemental Loan Agreement between the Company, NRGG Funding
and NRG Energy to loan NRGG Funding and the Company (as co-borrower)
the full amount of such equity contributions by NRGG Funding, all at
NRGG Funding's option. Any such loan will be secured by a lien on all
of the membership interests of Morris LLC and will be fully recourse to
NRGG Funding and the Company.
Under the terms of its energy services agreement with Equistar,
Morris LLC has granted to Equistar an option to purchase the Morris
Project at its fair market value, as defined in the agreement, at
either the fifteenth or twentieth anniversary of the commercial
operations date. Equistar also was granted a one-time option to
purchase up to a 10% membership interest in Morris LLC. In February
1998 Equistar gave notice of its intention to purchase a 5% passive
membership interest. Under the terms of the proposed agreement,
Equistar would acquire a 5% passive interest in Morris LLC in exchange
for the assumption by Equistar of an obligation to make 5% of the
required equity contributions to Morris LLC, expected to be
approximately $1.1 million.
Other Potential Projects
The Company from time to time identifies and considers potential
opportunities to develop additional projects as well as to acquire
projects in operation or under development and owned by third parties.
As of the date of this report, the Company is not party to any
definitive agreements with respect to any such potential projects, and
no assurances can be made with respect to the likelihood of entering
into any such agreements with respect to any such potential projects.
As a project developer, the Company is responsible for the
evaluation, design, installation and operation of a project. The
Company also assumes the responsibility for evaluating project
alternatives; obtaining financing, insurance, all necessary licenses,
permits and certifications; conducting contract negotiations with local
utilities and arranging turnkey construction. In connection with
obtaining financing, the Company may negotiate for credit support
facilities with equipment suppliers, turnkey construction firms and
financial institutions.
The Company anticipates that in the ordinary course of its
business it will investigate and/or pursue opportunities with respect
to various potential projects which will not be completed. Moreover,
in certain instances the Company may not generate any revenue from such
projects and
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may not be able to recover its investment in such projects, each of
which could have a material adverse effect on the Company.
Regulation
In connection with the development and operation of its projects,
the Company is significantly affected by federal, state and local
energy and environmental laws and regulations.
The enactment in 1978 of PURPA and the adoption of regulations
thereunder by the Federal Energy Regulatory Commission ("FERC")
provided incentives for the development of small power production
facilities (those utilizing renewable fuels and having a capacity of
less than 80 MW) and cogeneration facilities (collectively referred to
as "qualifying facilities" or "QFs"). Electric utilities are required
to purchase power from such facilities at rates based on the
incremental cost of electrical energy (so called "avoided cost").
Under regulations adopted by the FERC and upheld by the United States
Supreme Court, such rates are based upon "the incremental cost to an
electric utility of electrical energy or capacity or both which, but
for the purchase from the qualifying facility or qualifying facilities,
such utility would generate itself or purchase from another source."
Historically, and as it affects the Company's sales of power from
qualifying facilities, avoided cost is generally a function of the
purchasing utility's otherwise applicable cost of fuel required to
generate electricity and its cost of capital required to construct a
power plant to supply such capacity.
With the exception of the Parlin Project and parts of the
Philadelphia PWD Project, all of the Company's existing electric
generating facilities are qualifying small power production facilities
or qualifying cogeneration facilities, as these terms are defined in
PURPA. Pursuant to authority granted under PURPA, FERC has promulgated
regulations which at present generally exempt qualifying facilities
from the Federal Power Act, the Public Utility Holding Company Act of
1935 ("PUHCA") and state laws on electric utility regulation.
In order to qualify for the benefits provided by PURPA, the
Company's QFs must meet certain size, efficiency, fuel and ownership
requirements. However, the standards for qualification and the
regulations described above are subject to amendment. If the
regulations were to be amended, the Company cannot predict the effect
of any such amendment on the extent of regulation to which the Company
may thereby become subject.
In the event that one of the Company's cogeneration facilities
failed to meet the requirements of being a "qualifying facility" after
relying on that status, the Company would be materially adversely
affected. See "Business - Risk Factors - Proposed Restructuring of the
Electric Utility Industry."
The Company renegotiated the PPA for the Parlin Project during
1996. As permitted under the terms of its renegotiated agreements,
NRGG Parlin filed rates with the FERC as a public utility under the
Federal Power Act. Previously, the Parlin Project had been certified
as a QF by FERC. However, the effect of the rate filing by NRGG Parlin
was to relinquish its claim to QF status. FERC has approved the rates
filed by NRGG Parlin effective April 30, 1996, and given certain other
approvals to NRGG Parlin in connection with the consummation of the
Plan. Among other things, NRGG Parlin has received a determination
from FERC that it is an exempt wholesale generator ("EWG"). It is thus
exempt from all provisions of the PUHCA, and the
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ownership of NRGG Parlin by the Company does not subject the Company to
regulation under PUHCA.
The Company is also subject to the Powerplant and Industrial Fuel
Use Act of 1978 ("FUA"), which generally limits the ability of power
producers to burn natural gas in new baseload generation facilities
unless such facilities also have the capability to use coal or any
other alternate fuel as a primary energy source. All of the Company's
existing projects have either received permanent exemption from the FUA
or otherwise complied with its provisions.
Environmental Regulations
In addition to the regulations described above, the Company's
projects must comply with applicable federal, state and local
environmental regulations, including those related to water and air
quality. These laws and regulations in many cases require a lengthy
and complex process of obtaining licenses, permits and approvals from
federal, state and local agencies. The environmental regulations under
which the Company's projects operate are subject to amendment. The
Company cannot predict what effect compliance with such amendments may
have on the Company's business or operations. Compliance could require
modification of a project and thereby increase its costs, extend its
completion date or otherwise adversely affect a project.
The environmental regulations likely to have the greatest impact
on the Company's business and operations are air quality regulations
under the Clean Air Act. All of NRGG's operating plants perform at
levels better than current federal performance standards mandated for
such plants under the Clean Air Act. Based on the current trend of
environmental regulation, management believes that this area of
regulation in the U.S. will become more strict.
In November 1990, Congress passed the Clean Air Act Amendments of
1990 ("the 1990 Amendments"). The Environmental Protection Agency (the
"EPA") is still in the process of implementing the requirements
mandated by the 1990 Amendments. In addition, the EPA and the states
are in the process of revising existing requirements under the Clean
Air Act to make them more stringent.
The 1990 Amendments require the EPA to establish technology-based
emission standards for hazardous air pollutants. "Electric utility
steam generating units" that are greater than 25 MW are excluded from
regulation while the EPA conducts a study of hazardous air pollutant
emissions from these units to determine whether such regulation is
"appropriate and necessary." The final report, which was issued in
February 1998, concluded that regulation of hazardous air pollutant
emissions from those units is not necessary with a few possible
exceptions. The EPA has decided to conduct further studies of certain
utility emissions including mercury and will determine at a later date
whether regulation of those emissions is appropriate. The EPA plans to
issue hazardous air pollutant regulations for combustion sources not
included within the scope of the EPA's electric utility study,
including internal combustion engines, by November 2000. These
regulations may also require the Company to meet additional control
requirements.
The Company's business and operations may also be impacted by
changes to existing regulations under the Clean Air Act. For example,
the EPA and the states are in the process of developing more stringent
emission limitations to control ground-level ozone. In November 1997,
the EPA proposed a rule that would require certain states in the
Eastern U.S. to make substantial reductions in NOx emissions. If
finalized as proposed, this rule could result in new NOx emission
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standards being required by the affected states. If more stringent NOx
standards are adopted by certain states, NRGG could be required to
install additional NOx emission control technology at some of its
facilities. In addition, the EPA has revised the current National
Ambient Air Quality Standards for ground-level ozone and particulate
matter to make them more stringent. These new standards will be
implemented by the states over the next several years. Additional
control technology requirements may be imposed on existing NRGG plants
to comply with the new standards. The Company does not believe that
the effect of any such additional requirements, if implemented, will
have a material adverse effect on its financial condition or results of
operations.
All projects in operation and under development are believed to be
operating in substantial compliance with or designed to meet currently
applicable environmental requirements. To date, compliance with these
environmental regulations has not had a material effect on the
Company's earnings nor has it required the Company to expend
significant capital expenditures.
Competition
Many organizations, including equipment manufacturers and
subsidiaries of utilities and contractors, as well as other
organizations similar to the Company, have entered the cogeneration
market. Many of these organizations have substantially greater
resources than the Company. In addition, obtaining power contracts
with utilities has become more competitive with the increased use of
competitive bidding procedures and the movement towards deregulation of
the electricity energy market. This increased competition may make it
more difficult for the Company to secure future projects, may increase
project development costs and may reduce the Company's operating
margins. In addition, increased competition is leading to the
development of a market for merchant plants. Merchant plants are power
generation facilities that sell all or a portion of their electricity
into the competitive market rather than pursuant to long-term power
sales agreements. The operation of a merchant plant is essentially
participation in a commodity market, which creates certain risk
exposures, including, among other things, underlying price volatility,
credit risk, and variation in cash flows. Even though many of its
potential competitors have substantially greater resources than the
Company, management believes that its experience, particularly if
combined with a strategic alliance with a third party with regard to
larger projects, will enable it to compete effectively.
Principal Customer
The Company derived 57%, 46%, 62% and 65% of its revenues in the
fiscal year ended December 31, 1997, six months ended December 31,
1996, and the fiscal years ended June 30, 1996 and 1995, respectively,
from JCP&L as a result of the operation of the Newark and Parlin
facilities. The revenues from JCP&L, as a percent of total Company
revenues, are anticipated to decline in the future as new projects are
added to the Company's operations.
Employees
As of December 31, 1997, the Company had approximately 110 full-
time employees.
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Patents
The Company and its subsidiaries do not own any patents or
trademarks.
Backlog
Total production backlog relating to the Company's equipment
sales, rental and services business was approximately $3.9 million and
approximately $1.2 million at December 31, 1997 and 1996, respectively.
Risk Factors
Capital Requirements
The Company's business is capital intensive. The long-term growth
of the Company, which involves the development and acquisition of
additional power generation projects, will require the Company to seek
substantial funds through various forms of financing. While the
Company is provided with certain rights under the Co-Investment
Agreement that may enable it to finance the acquisition of ownership
interests in certain projects that may be offered by NRG Energy, there
can be no assurance that the terms on which such financing may be made
available will be satisfactory to the Company, and no financing will be
made available under the Co-Investment Agreement for the development or
acquisition of projects that are not offered to the Company pursuant to
the terms of such agreement. There can be no assurance that the
Company will be able to arrange the financing needed for these
additional projects. Moreover, limitations in the Company's credit
agreements may limit its ability to finance future projects on a
recourse basis, thereby requiring the Company to finance such future
projects on a substantially non-recourse basis. The Company's ability
to arrange financing of additional projects and the costs of such
capital are dependent on numerous factors, including general economic
and capital market conditions, credit availability from banks and other
financial institutions, investor confidence in the Company, its
partners and in the independent power market, the success of current
projects, the perceived quality of new projects and provisions of tax
and securities laws that are conducive to raising capital in the manner
desired. If the Company is unable to secure such financing, or if the
terms of such financing as may be available under the Co-Investment
Agreement are not satisfactory to the Company, its business could be
materially adversely affected. Management believes that sources of
debt financing are available to finance future projects. See "Business
- - Project Development Activities."
Energy Price Fluctuations and Fuel Supply Costs
The Company's PPAs with utilities have typically contained, and
may in the future contain, price provisions which in part are linked to
the utilities' cost of generating electricity. In addition, the
Company's fuel supply prices, with respect to future projects, may be
fixed in some cases or may be linked to fluctuations in energy prices.
These circumstances can result in high volatility in gross margins and
reduced operating income, either of which could have a material adverse
effect on the Company's financial position or results of operations.
Effective April 30, 1996, the Company renegotiated its PPAs with JCP&L,
the primary electricity purchaser from its Newark and Parlin Projects.
Under the new PPAs, JCP&L is responsible for all natural gas supply and
delivery. Management believes that this change in these PPAs has
reduced its historical volatility in gross margins on revenues from
such projects by eliminating the Company's exposure to
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fluctuations in the price of natural gas that must be paid by its
Newark and Parlin Projects. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Costs and
Expenses."
Project Development Risks
The development of cogeneration projects often requires many
months or years to complete and involves a high degree of risk that any
particular project will not be completed. Among the principal elements
involved in developing projects are the selection of a site, obtaining
commitments from others to purchase electrical power and steam,
negotiating fuel supply arrangements, obtaining environmental and other
governmental permits and approvals, arranging project financing and
turnkey construction. These objectives are subject to a host of
uncertainties which in many instances cannot be anticipated. Moreover,
these objectives often are achieved independently of one another, and
success in achieving one objective does not necessarily result in
success in achieving others. For example, the future growth of the
Company is dependent, in part, upon the demand for significant amounts
of additional or replacement electrical generating capacity and its
ability to obtain contracts to supply portions of this capacity.
However, even if the Company is successful in the development or
acquisition of an interest in a project, the Company may require
substantial additional debt or equity financing for such projects,
which additional financing may not be available on acceptable terms, if
at all.
During the period that the Company was in bankruptcy, project
development efforts virtually ceased. Since emerging from bankruptcy
these efforts have resumed, both through the re-staffing of an internal
development team and as a result of the Co-Investment Agreement. There
can be no assurance, however, that the Company will be able to obtain
satisfactory projects under the Co-Investment Agreement and
satisfactory project agreements, construction contracts, necessary
licenses and permits or satisfactory financing commitments or that any
of the projects discussed in this report or which otherwise might be
pursued will ultimately be completed. If its development efforts are
not successful, the Company may abandon a project under development.
At the time of abandonment, the Company would expense all capitalized
development costs incurred in connection therewith and could incur
additional losses associated with any related contingent liabilities.
Moreover, most acquisition agreements and power purchase agreements
permit the seller or customer, respectively, to terminate the agreement
or impose penalties if the acquisition or operation of the project (as
the case may be) is not achieved by a specified date. Any material
unremedied delay in, or unsatisfactory completion of, construction of
the Company's projects could have a material adverse effect on the
Company's business or financial condition. See "Business - Project
Development Activities."
Dependence on Certain Customers and Projects
The Company's projects (including projects in which it may make
minority investments) typically rely on a single customer or a few
customers to purchase all of a facility's output, in each case under
long-term agreements that provide the support for any project debt used
to finance such facilities. See "Business - Principal Customer." The
failure of any one customer to fulfill its contractual obligations to a
facility could have a material adverse effect on such facility's
financial results. As a result, the financial performance of such
facilities is dependent on continued performance by customers of their
obligations under such long-term agreements and, in addition, on the
credit quality of the project's customers. See "Item 3. Legal
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Proceedings." Regulatory developments, including deregulation and
industry restructuring activity, may cause major customers to attempt
to renegotiate contracts or otherwise fail to perform their contractual
obligations, which in turn could adversely affect the Company's results
of operations. In addition, major customers may attempt to renegotiate
contracts or otherwise fail to perform their contractual obligations if
changes in current economic conditions make the terms of such contracts
less favorable to such customers.
Risks Involved in Making Minority Investments in Projects
The Company currently conducts its business primarily through
subsidiaries. However, one of the Company's current project
investments consists of a minority interest in a project entity (i.e.,
the Company beneficially owns 50% or less of the ownership interests),
and future investments in projects may also take the form of minority
interests. As a result, the Company's ability to control the
development, construction, acquisition or operation of such projects
may be limited. The Company may be dependent on its co-investors to
construct and/or to operate such projects. There can be no assurance
that such co-investors will have the same level of experience,
technical expertise, human resources management and other attributes as
the Company. Any such co-investor may have conflicts of interests,
including those relating to its status as a provider of goods or
services to, or a purchaser of power or other services from, the
project. The approval of its co-investors also may be required for
distributions of funds from projects to the Company.
General Operating Uncertainties
The operation of a power plant involves many risks, including the
breakdown or failure of power generation equipment, pipelines,
transmission lines or other equipment or processes, fuel interruption,
and performance below expected levels of output or efficiency. Each
facility may depend on a single or limited number of entities to
purchase electricity or thermal energy, to supply water, to supply gas,
to transport gas, to dispose of wastes or to wheel electricity. The
failure of any such purchasing utility, steam host, water or gas
supplier, gas transporter, wheeling utility or other relevant project
participant to fulfill its contractual obligations could have a
material adverse impact on the Company.
Competition
Many organizations, including equipment manufacturers and
subsidiaries of utilities and contractors, as well as other
organizations similar to the Company, have entered the market for the
development, ownership and operation of cogeneration projects. Many of
these companies have substantially greater resources and/or access to
the capital required to fund such activities than the Company. In
addition, obtaining power contracts with utilities has become more
competitive with the increased use of competitive bidding procedures
and the advent of deregulation in the electric utility market. This
increased competition may make it more difficult for the Company to
secure future projects, may increase project development costs and may
reduce the Company's operating margins on any future projects. Any
such developments could have a material adverse effect on the Company's
results of operations and financial condition. See "Business -
Independent Power Market Overview."
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Proposed Restructuring of the Electric Utility Industry
The U.S. Congress is considering legislation to repeal PURPA
entirely, or at least to repeal the obligation of utilities to purchase
from qualifying facilities thereunder. There is strong support for
grandfathering existing QF contracts if such legislation is enacted,
and also support for requiring utilities to conduct competitive bidding
for new electric generation if the PURPA purchase obligation is
eliminated. Since the Company benefits from PURPA, the Company's
business could be adversely affected by a significant change in PURPA.
See "Business - Independent Power Market Overview," and "Business -
Regulation."
Various bills have also proposed repeal of PUHCA. Repeal of PUHCA
would allow both independent power producers and vertically integrated
utilities to acquire retail utilities in the U.S. that are
geographically widespread, as opposed to the current limitations of
PUHCA which generally require that retail electric systems be capable
of physical integration. Also, registered holding companies would be
free to acquire non-utility businesses, which they may not do now, with
certain limited exceptions.
With the repeal of PURPA or PUHCA, competition for independent
power generators from vertically integrated utilities would likely
increase. While the Company does not believe that any such repeal
would necessarily have a material adverse effect on its financial
position or results of operations, the long term effect on the Company
of any such repeal cannot be predicted. See "Business - Regulation."
In addition, the FERC, many state legislatures and public utility
commissions ("PUCs") and Congress are currently studying and in some
cases implementing proposals to restructure the electric utility
industry in the U.S. to permit consumers to choose their utility
supplier in a competitive electric energy market. The FERC issued
rules in 1996 to require utilities to offer wholesale customers and
suppliers open access on their transmission lines on a comparable basis
to the utilities' own use of the lines. Virtually all investor-owned
utilities have already filed "open access tariffs for wholesale
transmission." The utilities contend that they should recover from
departing customers their fixed costs that will be "stranded" by the
ability of their wholesale customers (and perhaps eventually, their
retail customers) to choose new electric power suppliers. These
include the costs utilities are required to pay under many QF contracts
which the utilities view as excessive when compared with current market
prices. Many utilities are therefore seeking ways to lower these
contract prices or rescind the contracts altogether, out of concern
that their shareholders will be required to bear all or part of such
"stranded" costs. Some utilities have engaged in litigation against
QFs to achieve these ends. In addition, future U.S. electric rates may
be deregulated in a restructured U.S. electric utility industry, and
increased competition may result in lower rates and less profit for
U.S. electricity sellers. Falling electricity prices and uncertainty
as to the future structure of the industry are inhibiting U.S.
utilities from entering into long-term power purchase contracts. At
the state level the New Jersey Board of Public Utilities ("BPU") has
issued a final report and recommendation for introducing retail
electric competition in New Jersey beginning in October 1998.
Consistent with the BPU's recommendation General Public Utilities, the
parent corporation of JCP&L, has filed a restructuring plan with the
BPU seeking the recovery of stranded costs including costs that it
characterizes as stemming from purchased power commitments. JCP&L is
the long term purchaser of power from the Parlin and Newark Projects.
The BPU has recently released draft proposed legislation that it
believes is necessary to implement retail competition fully in New
Jersey.
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In Pennsylvania the Pennsylvania General Assembly enacted the
Electricity Generation Customer Choice and Competition Act in December
1996. The Act provides for phased in retail competition and stranded
cost recovery implemented by the Pennsylvania Public Utility Commission
("PaPUC") over several years. PECO Energy Company ("PECO"), the long
term purchaser of power from the Grays Ferry Project, recently notified
Grays Ferry Cogeneration Partnership that PECO believes the power
purchase agreements that it has with Grays Ferry are no longer in
effect based on the alleged denial of cost recovery by the PaPUC.
Grays Ferry Cogeneration Partnership and other parties including the
Company's wholly-owned subsidiary through which it owns its interest in
the Partnership have commenced litigation against PECO and the PaPUC
seeking injunctive relief and damages. See "Item 3. Legal
Proceedings" and Note 19 of the Notes to the Consolidated Financial
Statements.
While the Company does not believe that ongoing federal and state
restructuring efforts necessarily would have a material adverse effect
on its financial position or results of operations, the long term
effect of any such restructuring on the Company cannot be predicted at
this time. See "Business - Regulation."
Environmental Law and Regulation
The Company and its projects are subject to a number of complex
and stringent environmental laws and regulations, affecting many
aspects of its present and future operations. These laws and
regulations in many cases require a lengthy and complex process of
obtaining licenses, permits and approvals from federal, state and local
agencies. The environmental regulations under which the Company's
projects operate are subject to amendment. The Company cannot predict
what effect compliance with such amendments may have on the Company's
business or operations. Compliance could require modification of a
project and thereby increase its costs, extend its completion date or
otherwise adversely affect a project before or after its completion.
See "Business - Environmental Regulations."
Risks Associated with Foreign Operations
The Company's foreign operations (currently consisting primarily
of its equipment sales and rental operations) are subject to the risks
inherent in doing business in foreign countries, including changes in
currency exchange rates, currency restrictions, political changes and
expropriation. Although it is impossible to predict the likelihood of
such occurrences or their effect on the Company, management believes
these risks to be mitigated by the facts that the Company's foreign
activities historically have not been concentrated in any single
country and have been conducted largely in Europe, which management
believes to be subject to fewer of such risks than other regions. In
addition, the Company attempts to secure payment for export sales with
commercial letters of credit or other secured means. See "Business -
Products and Services - Equipment Sales, Rentals and Services Segment."
History of Losses
The Company reported net income of approximately $23.4 million and
$6.4 million for the fiscal year ended December 31, 1997 and six months
ended December 31, 1996, respectively. However, due in part to costs
associated with its bankruptcy proceeding, the Company incurred losses
of approximately $17.7 million and $40.9 million for the fiscal years
ended June 30, 1996, and June 30, 1995, respectively. These losses had
a material adverse effect on the Company's
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liquidity and financial position and may continue to adversely affect
the Company's liquidity and results of operations in future periods by,
among other things, rendering it more difficult for the Company to
raise capital or otherwise to conduct project development activities.
See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Influence by NRG Energy, Inc.
NRG Energy holds approximately 45.21% of the Company's Common
Stock. Four of the Company's eight directors are executive officers of
NRG Energy. NRG Energy is a major domestic and international developer
of independent power projects. As a result, persons who simultaneously
serve as directors or executive officers of the Company and directors
or executive officers of NRG Energy may be subject to conflicts of
interest with respect to business opportunities or other investments
which may be of interest to both NRG Energy and the Company. While the
Company's Restated Articles of Incorporation impose certain
supermajority requirements in certain circumstances, and the
Independent Directors Committee of the Board has exclusive jurisdiction
over the Company's contractual relations and other material
transactions with NRG Energy (including under the Co-Investment
Agreement), NRG Energy's share ownership may permit it to effectively
control the outcome of matters which may be submitted to a vote of the
shareholders, including the election of directors of the Company. NRG
Energy also may exert significant influence over the Company's business
and affairs through its representation on the Board of Directors and
its other relationships with the Company, including the Co-Investment
Agreement. Moreover, NRG Energy, in its business relationships with
the Company and in its role as a shareholder of the Company, may have
interests which conflict with those of the Company under certain
circumstances. See "Business - Project Development Activities - Co-
Investment Agreement with NRG Energy."
Risks Associated with Forward-Looking Statements
This Form 10-K, including the information incorporated by
reference herein, contains various forward-looking statements and
information that are based on the Company's beliefs and assumptions, as
well as information currently available to the Company. From time to
time, the Company and its officers, directors or employees may make
other oral or written statements (including statements in press
releases or other announcements) which contain forward-looking
statements and information. Without limiting the generality of the
foregoing, the words "believe," "anticipate," "estimate," "expect,"
"intend," "plan," "seek" and similar expressions, when used in this
Form 10-K and in such other statements, are intended to identify
forward-looking statements. All forward-looking statements and
information in this Form 10-K are forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act and are intended to be covered by the safe
harbors created thereby. Such forward-looking statements are not
guarantees of future performance and are subject to risks,
uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to differ materially from
historical results or from any results expressed or implied by such
forward-looking statements. Such factors include, without limitation,
those discussed above. Many of such factors are beyond the Company's
ability to control or predict, and readers are cautioned not to put
undue reliance on such forward-looking statements. The Company
disclaims any obligation to update or review any forward-looking
statements contained in this Report or in any statement referencing the
risk factors and other cautionary statements set forth in this Report,
whether as a result of new information, future events or otherwise.
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ITEM 2. PROPERTIES.
The Company's corporate headquarters are located in Minneapolis,
Minnesota.
The headquarters for Puma's executive offices and its principal
manufacturing facility are located in Ash, Canterbury, Kent, United
Kingdom.
The headquarters of OES are located on approximately four acres in
Wilmington, Delaware. The premises are owned, subject to a mortgage, in
fee simple and include an approximately 55,000 square foot building.
In addition, OES owns, subject to a mortgage, office and warehouse
space in Houston, Texas, on approximately two acres of land. OES
leases space for similar purposes in each of Bakersfield and Benicia,
California. The office and warehouse space in Texas and in the
California locations range from approximately 5,000 to 10,000 square
feet.
The Newark, Parlin, Grays Ferry and Morris project entities lease
property on the site of the Newark, Parlin, Grays Ferry and Morris
cogeneration facilities, respectively, from the commercial user of
thermal energy for a nominal fee. The term of the lease equals or
exceeds that of each respective thermal supply agreement. Management
believes that the leased premises are suitable and adequate for the
Company's projects.
ITEM 3. LEGAL PROCEEDINGS.
Litigation
The Company or a subsidiary is party to the following legal
proceedings:
1. Stevens, et al. v. O'Brien Environmental Energy, Inc., et al.,
United States District Court for the Eastern District of
Pennsylvania, Civil Action No. 94-cv-4577, filed July 27, 1994.
This action was filed by certain purchasers of the Class A Common
Stock of the Company's predecessor during the class period who
allege various violations of the Federal securities laws. The
Plaintiffs claim that certain material misrepresentations and
nondisclosures concerning the Company's financial conditions and
prospects allegedly caused the price of the Common Stock to be
artificially inflated during the class period. Management does
not expect the outcome to have a material adverse effect on the
Company.
2. Blackman and Frantz v. O'Brien, United States District Court,
Eastern District of Pennsylvania, Civil Action No. 94-cv-5686,
filed October 25, 1995. This action was filed by purchasers of
O'Brien debentures during the class period. The Plaintiffs object
to treatment of the class under the Bankruptcy Plan. This matter
has been consolidated with the Stevens class action case described
in paragraph number 1 above. Management does not expect the
outcome to have a material adverse effect on the Company.
3. In re: O'Brien Environmental Energy, Case No. 94-26723, U.S.
Bankruptcy Court for the District of New Jersey, filed September
29, 1994. Calpine Corporation ("Calpine"), an unsuccessful bidder
for the acquisition of the debtor in the bankruptcy case, filed an
application for allowance of an administrative claim for
approximately $4.5 million in break-up fees and expenses in the
bankruptcy case. The Bankruptcy Court denied the
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<PAGE>
application in full, by order dated November 27, 1996. Calpine
filed an appeal from the Bankruptcy Court's order denying its
application. The appeal has now been fully briefed and the
parties are awaiting a decision. Management does not expect the
outcome of its bankruptcy case to have a material adverse effect
on the Company.
4. Grays Ferry Cogeneration Partnership, Trigen-Schuylkill
Cogeneration, Inc., NRGG (Schuylkill) Cogeneration Inc. and
Trigen-Philadelphia Energy Corp. v. PECO Energy Company, Adwin
(Schuylkill) Cogeneration,Inc. and the Pennsylvania Public Utility
Commission, the United States District Court for the Eastern
District of Pennsylvania, Civil Action No. 98-CV-1243, filed
March 9, 1998. This action arose out of PECO Energy Company's
("PECO") notification to the Grays Ferry Cogeneration Partnership
(the "Partnership") that PECO believes its power purchase
agreements with the Partnership relating to the Grays Ferry Project
are no longer effective and PECO's refusal to pay the electricity
rates set forth in the agreement based on its allegations that the
Pennsylvania Public Utility Commission has denied cost recovery of
the power purchase agreements in retail electric rates. The
Plaintiffs include, in addition to the Partnership, the Company's
wholly-owned subsidiary through which it owns its interest in the
Partnership and two subsidiaries of Trigen Energy Corporation
("Trigen"), one of which subsidiaries is also a one-third owner of
the Partnership. Defendant Adwin (Schuylkill) Cogeneration,Inc. is
a subsidiary of PECO and also a partner in the Partnership. The
Plaintiffs are seeking to enjoin PECO from terminating the power
purchase agreements and to compel PECO to pay the rates set forth
therein. In addition, the Plaintiffs are seeking actual damages
against PECO in an amount in excess of $200 million, punitive
damages and attorneys' fees and costs. The Plaintiffs have asserted
claims against PECO and its subsidiary which include breach of
contract, breach of implied covenant of good faith and fair dealing,
breach of fiduciary duties and tortious interference with a long-
term contract which one of the Trigen Plaintiffs has entered into
for the sale of steam to be produced predominantly by the Grays
Ferry Project. The lawsuit further seeks to compel PECO to take
the necessary actions before the Pennsylvania Public Utility
Commission to seek recovery of its costs under the power purchase
agreements and to compel the Pennsylvania Public Utility Commission
to allow cost recovery of the power purchase agreements in PECO's
retail electric rates. On March 19, 1998, the district court
dismissed the lawsuit for lack of subject matter jurisdiction. On
March 27, 1998, the Plaintiffs filed a motion for reconsideration
and leave to file an amended complaint. As of the date of this
Report, the Plaintiffs were awaiting the judge's decision on the
motion and reviewing their other legal options.
Arbitration
On January 30, 1998, the Company gave notice to NRG Energy of a
dispute to be arbitrated pursuant to the terms of the Co-Investment
Agreement. With certain exceptions, the Co-Investment Agreement
obligates NRG Energy to offer to sell to the Company "eligible
projects," which are defined in the Co-Investment Agreement as certain
facilities which generate electricity for sale through the combustion
of natural gas, oil or any other fossil fuel. The Co-Investment
Agreement provides that if NRG Energy offers to sell an eligible
project to the Company and the Company declines to purchase the
project, NRG Energy then has the right to sell the project to a third
party at a price which equals or exceeds that offered to the Company.
See "Business - Project Development Activities - Co-Investment
Agreement with NRG Energy." In the arbitration proceeding, the Company
contends that NRG Energy breached the Co-Investment Agreement by,
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<PAGE>
among other things, agreeing to sell to an affiliate of Oklahoma Gas
and Electric Company, a 110 MW cogeneration project in Oklahoma,
without fulfilling NRG Energy's commitment to offer the project to the
Company at the same price. The Company intends to request specific
performance of the Co-Investment Agreement. NRG Energy has advised the
Company that it believes that it had no obligation to offer the project
to the Company. Both parties have chosen their respective arbitrators
and are awaiting the selection of a third arbitrator from the American
Arbitration Association.
The Company is subject from time to time to various other claims
that arise in the normal course of business, and management believes
that the outcome of these matters (either individually or in the
aggregate) will not have a material adverse effect on the business or
financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's stockholders
during the quarter ended December 31, 1997.
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<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock has been quoted and traded under the
symbol "NRGG" on the Nasdaq SmallCap Market from March 1997 to November
1997 and on the Nasdaq National Market since November 1997. Prior to
March 1997, the Company's Common Stock was not listed on an exchange or
on the Nasdaq Stock Market but traded from time to time on the pink
sheets and on the OTC Bulletin Board. The high and low sales prices of
the Common Stock for the period from March 1997 to December 1997 are
shown in the table below. Such prices may have reflected inter-dealer
prices, without retail mark-ups, mark downs or commissions, and may not
necessarily represent actual transactions.
NRGG Common Stock Price Per Share Information for 1997
Price Per Share ($)
Period Low High
First Quarter (1) 11.250 13.750
Second Quarter 11.125 16.000
Third Quarter 14.250 21.000
Fourth Quarter 18.000 22.375
(1) The Company's Common Stock began trading on the Nasdaq SmallCap
Market on March 3, 1997. This information reflects the low and high
prices during the period from March 3, 1997 to March 31, 1997.
As of March 11, 1998, the Company had approximately 500 holders of
record of its Common Stock, not including beneficial owners whose
shares are held by banks, brokers and nominees.
The Company presently intends to retain all earnings for the
operation and expansion of its business and does not anticipate paying
cash dividends on its Common Stock in the foreseeable future. Any
future determination as to the payment of dividends on the common stock
will depend upon future earnings, results of operations, capital
requirements, the financial condition of the Company and any other
factors the Board of Directors of the Company may consider. Moreover,
as a holding company, the Company's ability to pay any dividends in the
future will depend largely on the ability of its operating subsidiaries
and project entities to pay cash dividends or other cash distributions,
which dividends or other cash distributions may be materially limited
by the terms of credit agreements or other material contracts to which
such operating subsidiaries or project entities may be parties.
Two of the Company's principal operating subsidiaries, NRGG Newark
and NRGG Parlin, are parties to a Credit Agreement which prohibits the
payment of dividends by such subsidiaries to the Company, provided that
such dividend payments may be made out of funds
24
<PAGE>
available after the payment of various costs and expenses set forth in
the Credit Agreement (including without limitation operating costs,
various debt service payments and the funding of various accounts
required to be maintained pursuant to the Credit Agreement) if certain
conditions set forth in the Credit Agreement are satisfied, including
without limitation the maintenance of a debt service coverage ratio set
forth in the Credit Agreement, the absence of any default or event of
default under the Credit Agreement, and the satisfaction of certain
conditions relating to the composition of the Board of Directors of the
Company.
Morris LLC (the owner of the Morris Project) is party to a
Construction and Term Loan Agreement which prohibits the payment of
distributions or the return of capital to Morris LLC's members except
upon the satisfaction of certain conditions which include (i) the
acceptance and commercial operation of the facility and conversion of
the project's construction loan to term loans, (ii) the absence of any
default or event of default under various financing and project
documents, (iii) the full prior funding of various accounts required to
be maintained by Morris LLC under the Construction and Term Loan
Agreement, and (iv) the maintenance of a required debt service coverage
ratio. The Company and NRGG Funding also are parties to a supplemental
Loan Agreement with NRG Energy which prohibits NRGG Funding (which
directly or indirectly owns 100% of the membership interests of Morris
LLC) from paying any distributions or dividends unless, among other
things, the principal and interest then outstanding does not exceed a
prescribed maximum amount and is not projected to exceed the maximum
amount prescribed for the next two interest and principal payment
dates.
The Company is the borrower under another Credit Agreement which
prohibits the payment of dividends by the Company without prior written
consent unless the Company provides more than 30 days prior to the
proposed date of payment of such dividend a letter of credit and a
certificate signed by the chief financial officer of the Company that,
after giving effect to such dividend payment, no default or event of
default (as defined in therein) would occur or reasonably be
anticipated to occur.
On April 30, 1996, the Bankruptcy Court approved the issuance of
6,474,814 shares of Common Stock of the Company which have been issued
since such date and prior to March 31, 1998 pursuant to the terms of
the Plan to NRG Energy and holders of O'Brien Class A and Class B
Common Stock. Such shares issued to NRG Energy were issued in
consideration of a cash payment of approximately $21.2 million, and
such shares issued to holders of O'Brien Class A and Class B Common
Stock were issued in exchange for such shares of O'Brien Class A and
Class B Common Stock. The cash payment from NRG Energy was used by the
Company under the Plan to provide for full and immediate payment of all
undisputed pre-petition claims as well as a provision for post-petition
interest. In connection with the consummation of the Plan, the Company
also granted NRG Energy an option to convert $3.0 million of the
outstanding principal amount of the loan between NRG Energy and NRGG
(Schuylkill) Cogeneration, Inc. ("NSC") in the principal amount of
$10.0 million (the "Loan") into shares of Common Stock. On November
25, 1997, the Company issued 396,255 shares of its Common Stock to NRG
Energy upon conversion of such portion of the Loan. The securities
issued to NRG Energy and the holders of the O'Brien Class A and Class B
Common Stock were issued without registration under the Securities Act
or under any state or local law, in reliance on the exemptions set
forth in Section 1145 of the United States Bankruptcy Code.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The consolidated selected financial data as of and for each of the
periods indicated have been derived from the audited financial
statements of the Company. This data should be read in conjunction
with, and is qualified in its entirety by reference to, the related
financial statements and notes included elsewhere in this Report.
</TABLE>
<TABLE>
<CAPTION>
Year Six Months
Ended Ended
(Dollars in thousands, except per December 31, December 31, Year Ended June 30
share amounts) 1997 1996 (1) 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Energy $ 43,210 $ 21,669 $ 66,623 $ 74,455 $ 62,647 $ 65,136
Equipment sales and services 19,415 15,607 25,344 19,639 24,304 18,955
Rental 2,179 1,062 1,895 2,362 5,372 3,636
Related parties - - - - - 515
Development fees and other - 1,578 2,685 5,791 14,266 9,450
Total 64,804 39,916 96,547 102,247 106,589 97,692
Income (loss) before
extraordinary item 23,352 4,780 (17,713) (40,919) (16,501) (13,711)
Net income (loss). 23,352 6,423 (17,713) (40,919) (16,501) (13,711)
Basic earnings (loss) per share(2):
Before extraordinary item $ 3.59 $ 0.75 $ (4.24) $ (11.02) $ (4.45) $ (3.70)
Extraordinary item - 0.25 - - - -
$ 3.59 $ 1.00 $ (4.24) $ (11.02) $ (4.45) $ (3.70)
Diluted earnings (loss) per share(2)
Before extraordinary item $ 3.48 $ 0.74 $ (4.24) $ (11.02) $ (4.45) $ (3.70)
Extraordinary item - 0.25 - - - -
$ 3.48 $ 0.99 $ (4.24) $ (11.02) $ (4.45) $ (3.70)
Balance Sheet Data:
Total assets $227,894 $173,624 $178,162 $189,748 $237,816 $262,529
Long-term debt, net 190,020 150,311 66,789 3,405(3) 67,383 125,152
Convertible senior subordinated
Debentures - - - - - 49,174
<FN>
(1) Effective July 1, 1996, the Company changed its year end from June 30 to December 31.
(2) Net income (loss) per share has been restated for all periods presented to reflect the
common shares issued under the terms of the Plan.
(3) Excludes $60,310 of long-term project financing which was included in current liabilities
due to default under the debt agreement.
</TABLE>
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Certain of the statements made in this Item 7 and in other
portions of this Report and in documents incorporated by reference
herein constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities
Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such forward-looking statements are not
guarantees of future performance and are subject to risks,
uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to differ materially from
historical results or from any results expressed or implied by such
forward-looking statements. Such factors include, without limitation,
those discussed in "Business - Risk Factors" herein. See "Business -
Risk Factors - Risks Associated with Forward-Looking Statements."
All amounts set forth in this Item 7 are in thousands.
The Company directly and through its subsidiaries develops and
owns cogeneration projects which produce electricity and thermal energy
for sale to industrial and commercial users and public utilities. In
addition, the Company, through its subsidiaries, sells and rents power
generation, cogeneration and standby/peak shaving equipment and
services.
On April 30, 1996, the Company emerged from bankruptcy under a
plan approved by the Bankruptcy Court on January 18, 1996. In
connection with the consummation of the Plan, NRG Energy advanced
approximately $107,418 and purchased approximately 41.86% of the Common
Stock. NRG Energy's financial backing of the Plan enabled the Company
to provide for full and immediate payment of all undisputed pre-
petition claims as well as a provision for post-petition interest. The
Plan also provided that all of the shares of O'Brien Class A and Class
B Common Stock were canceled and replaced by a new issue of NRGG Common
Stock. Net income (loss) per share has been restated for all periods
presented to reflect the new common shares issued under the terms of
the Plan.
Additionally, under the terms of the Plan, NRG Energy acquired the
stock of ten wholly-owned subsidiaries from the Company on the closing
date which included all of the Company's landfill gas projects (those
operating and those in development), the general partner holding a 3%
equity interest in the Artesia Cogeneration partnership and a standby
power project. Management believes that the sale of these subsidiaries
will not have a material adverse effect on its results of operations in
future years.
The Company currently owns two cogeneration facilities (the Newark
and Parlin Projects) with an electric generating capacity of 174 MW.
In addition, the Company operates and owns an 83% interest in two
standby/peak shaving facilities (together comprising the Philadelphia
PWD Project) with a capacity of 22 MW. The Company also has a one-
third ownership interest in a cogeneration facility (the "Grays Ferry
Project") with an electric generating capacity of 150 MW, which
commenced operation in January 1998. As of the date of this Report,
the Company and the Grays Ferry Partnership are in litigation with the
electric power purchaser from the Grays Ferry Project over, among other
things, the effectiveness of the applicable power purchase agreements.
See "Item 3. Legal Proceedings".
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<PAGE>
The Company's PPAs with utilities have typically contained, and
may in the future contain, price provisions which in part are linked to
the utilities' cost of generating electricity. In addition, the
Company's fuel supply prices, with respect to future projects, may be
fixed in some cases or may be linked to fluctuations in energy prices.
These circumstances can result in high volatility in gross margins and
reduced operating income, either of which could have a material adverse
effect on the Company's financial position or results of operations.
Effective April 30, 1996, the Company renegotiated its PPAs with JCP&L,
the primary electricity purchaser from its Newark and Parlin Projects.
Under the new PPAs, JCP&L is responsible for all natural gas supply and
delivery. Management believes that this change in these PPAs has
reduced its historical volatility in gross margins on revenues from
such projects by eliminating the Company's exposure to fluctuations in
the price of natural gas that must be paid by its Newark and Parlin
Projects.
Both the Newark and Parlin Projects were previously certified as
qualifying facilities ("QFs") by the FERC under PURPA. The effect of
QF status is generally to exempt a project's owners from relevant
provisions of the Federal Power Act, PUHCA, and state utility-type
regulation. However, as permitted under the terms of its renegotiated
PPAs, Parlin has chosen to file rates with FERC as a public utility
under the Federal Power Act. The effect of this filing was to
relinquish the Parlin Project's claim to QF status. The FERC approved
Parlin's rates effective April 30, 1996 and has determined Parlin to be
an EWG. As an EWG, Parlin is exempt from PUHCA, and the ownership of
Parlin by the Company does not subject the Company to regulation under
PUHCA. Finally, as a seller of power exclusively at wholesale, Parlin
is not generally subject to state regulation and, in any case,
management believes that Parlin complies with all applicable
requirements of state utility law.
In addition to the energy business, the Company sells and rents
power generation and cogeneration equipment and provides related
services. The Company operates its equipment sales, rentals and
services business principally through two subsidiaries. In the United
States, the equipment sales, rentals and services business operates
under the name of O'Brien Energy Services Company. NRG Generating
Limited, a wholly-owned United Kingdom subsidiary, is the holding
company for a number of subsidiaries that operate in the United Kingdom
under the common name of Puma. The Company has determined that OES and
Puma are not a part of its strategic plan for the future, and the
Company is currently pursuing several avenues for the disposition of
these businesses. The disposition of these businesses is not expected
to have a material impact on the Company's financial position.
Effective January 1, 1997, Power Operation, Inc., a wholly-owned
subsidiary of the Company providing operation and maintenance for the
Newark and Parlin facilities under long-term contracts, was sold to NRG
Energy. This transaction did not have a material financial impact on
the operations of these facilities or on the Company's financial
condition or results of operations. The terms of this transaction were
approved by the Independent Directors Committee of the Company's Board
of Directors as required by the Company's Bylaws.
The Company entered into a Liquidating Asset Management Agreement
on April 30, 1996 with Wexford Management Corp. ("Wexford"), a co-
sponsor of the Plan, which, in accordance with the Plan, retains
Wexford as manager, operator and liquidator of the Liquidating Assets
(as defined in the agreement) of the Company pursuant to the terms and
conditions of the agreement. The Board of Directors and officers of
the Company have the right to direct and control which assets will be
liquidated and the extent of management services required for each
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<PAGE>
Liquidating Asset. The Liquidating Assets identified in the agreement
consist of (a) the Company's engine generator sales, service and rental
business, (b) the Philadelphia PWD Project, (c) unused equipment and
(d) American Hydrotherm ("American Hydrotherm") and two related
companies. In December 1996, the Company sold American Hydrotherm and
the two related companies to the management of American Hydrotherm.
The Company's Board of Directors has decided not to liquidate the
Philadelphia PWD Project. Wexford has received compensation in
accordance with the terms of the agreement (see Note 1 of the Notes to
the Consolidated Financial Statements).
Effective July 1, 1996, the Company changed its year end from June
30 to December 31. As a result, "fiscal 1995" refers to the 12-month
period ended June 30, 1995 ; "fiscal 1996" refers to the 12-month
period ended June 30, 1996; the "1996 transition period" refers to the
6-month period ended December 31, 1996; and "fiscal 1997" refers to the
12-month period ended December 31, 1997.
Results of Operations for Fiscal 1997, the 1996 Transition Period and
Fiscal 1996 and 1995
Revenues
Energy revenues for fiscal 1997, the 1996 transition period and
fiscal 1996 and 1995 were $43,210, $21,669, $66,623 and $74,455,
respectively. Energy revenues primarily reflect billings associated
with the Newark and Parlin Projects and the Philadelphia PWD Project.
The increase in energy revenues for fiscal 1997 as compared to the 1996
transition period was primarily due to only six months of revenues
reported in the 1996 transition period. The decrease in energy
revenues for the 1996 transition period as compared to fiscal 1996 was
primarily due to only six months of revenues reported in the 1996
transition period and to the amended PPAs affecting both the Newark and
Parlin Projects. The decrease in energy revenues in fiscal 1996 from
fiscal 1995 was primarily attributable to a voluntary curtailment of
operations at Parlin and to the negative impact of unit fuel cost
fluctuations on the energy rate calculation under the Parlin Project's
previous PPA. Additionally, a portion of the decrease is attributable
to the amended PPAs affecting both the Newark and Parlin Projects for
the final two months of fiscal 1996.
Revenues recognized by NRGG Parlin for fiscal 1997, the 1996
transition period and fiscal 1996 and 1995 were $21,685, $10,327,
$34,867 and $40,784, respectively. NRGG Parlin revenues increased for
fiscal 1997 as compared to the 1996 transition period primarily due to
only six months of revenues reported in the 1996 transition period.
NRGG Parlin revenues decreased for the 1996 transition period as
compared to fiscal 1996 primarily due to only six months of revenues
reported in the 1996 transition period and to the amended PPA. NRGG
Parlin initiated a voluntary curtailment of electric output beginning
in the first quarter and extending into the second quarter of fiscal
1996, during off-peak hours, to maintain the correct ratio of thermal
to electric production after E.I. du Pont, the steam host,
significantly decreased its steam demand by moving a business segment
overseas. Additionally, NRGG Parlin's fiscal 1996 revenues were
affected by a decrease in the energy rate under the previous PPA
adjusted quarterly based on, in part, the average cost of fuel over the
preceding year. A mild 1995 winter resulted in unusually low natural
gas costs which, after a five quarter lag, lowered the energy rate
received during fiscal 1996. NRGG Parlin revenues also decreased in
fiscal 1996 by approximately $2,680 from the amended PPA implemented on
April 30, 1996.
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<PAGE>
Revenues recognized at NRGG Newark for fiscal 1997, for the 1996
transition period and fiscal 1996 and 1995 were $17,319, $9,259,
$26,820 and $28,908, respectively. NRGG Newark revenues increased for
fiscal 1997 as compared to the 1996 transition period primarily due to
only six months of revenues reported in the 1996 transition period.
NRGG Newark revenues decreased for the 1996 transition period as
compared to fiscal 1996 primarily due to only six months of revenues
reported in the 1996 transition period and to the amended PPA. The
decrease in revenues in fiscal 1996 from 1995 is primarily attributable
to the implementation of the amended PPA in May 1996.
Equipment sales and services revenues for fiscal 1997, for the
1996 transition period and fiscal 1996 and 1995 were $19,415, $15,607,
$25,344 and $19,639, respectively, which principally reflect the
operations of OES, Puma and American Hydrotherm. American Hydrotherm
was sold in December 1996. Revenues increased for fiscal 1997 as
compared to the 1996 transition period primarily due to only six months
of revenues reported in the 1996 transition period and to higher sales
volumes. Revenues decreased for the 1996 transition period as compared
to fiscal 1996 primarily due to only six months of revenues reported in
the 1996 transition period, offset in part by the inclusion of nine
months of revenues in the period from the operations of Puma. Puma
changed its fiscal year end from a fiscal year ended March 31 to a
calendar year fiscal year effective on December 31, 1996. Management
attributes the increase in fiscal 1996 to a volume increase resulting
from successful marketing efforts as well as to an improvement in the
U.S. economy. The Company also believes that its bankruptcy filing in
September 1994 had some negative impact in fiscal 1995 revenues because
of customer uncertainty.
OES equipment sales and services revenues for fiscal 1997, for the
1996 transition period and fiscal 1996 and 1995 were $6,115, $1,575,
$5,232 and $3,575, respectively.
Rental revenues for fiscal 1997, for the 1996 transition period
and fiscal 1996 and 1995 were $2,179, $1,062, $1,895 and $2,362,
respectively. Revenues increased for fiscal 1997 as compared to the
1996 transition period primarily due to only six months of revenues
reported in the 1996 transition period. Revenues decreased for the
1996 transition period as compared to fiscal 1996 primarily due to only
six months of revenues reported in the 1996 transition period.
There were no development fees and other revenues for fiscal 1997.
Development fees and other revenues for the 1996 transition period and
fiscal 1996 and 1995 were $1,578, $2,685 and $5,791, respectively.
Revenues decreased for the 1996 transition period as compared to fiscal
1996 primarily due to only six months of revenues reported in the 1996
transition period. The decrease in revenues in 1996 from 1995 was
attributable primarily to the Company selling its rights to develop a
standby electric project for $1,763, the expiration of a purchase
option whereby, the Company retained $775 in forfeited escrow deposits,
offset in part to higher gas sales to the Artesia Cogeneration
partnership in 1995.
Costs and Expenses
Cost of energy revenues for fiscal 1997, for the 1996 transition
period and fiscal 1996 and 1995 were $14,841, $7,229, $45,663 and
$46,694, respectively. Cost of energy revenues increased for fiscal
1997 primarily due to only six months of costs reported in the 1996
transition period. Cost of energy revenues decreased for the 1996
transition period as compared to fiscal 1996 primarily due to only six
months of costs reported in the 1996 transition period and the
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<PAGE>
result of the amended PPAs in which JCP&L began assuming the cost of
fuel for the Newark and Parlin facilities.
Cost of equipment sales and services for fiscal 1997, for the 1996
transition period and fiscal 1996 and 1995 were $17,037, $12,365,
$22,153 and $17,622, respectively. Cost of equipment sales and
services increased for fiscal 1997 primarily due to only six months of
costs reported in the 1996 transition period, except for the operations
of Puma which included nine months of costs for the 1996 transition
period and to the recording of $190 in the fourth quarter to reserve
for the writedown of inventory. Cost of equipment sales and services
decreased for the 1996 transition period as compared to fiscal 1996
primarily due to only six months of costs reported in the 1996
transition period. The fluctuations in cost of equipment sales and
services between fiscal 1996 and 1995 primarily correlate to the
changes in sales volume in the Company's equipment sales, rental and
service businesses.
Cost of rental revenues for fiscal 1997, for the 1996 transition
period and fiscal 1996 and 1995 were $1,817, $834, $1,406 and $2,357,
respectively. Cost of rental revenues increased for fiscal 1997
primarily due to only six months of costs reported in the 1996
transition period. Cost of rental revenues decreased for the 1996
transition period as compared to fiscal 1996 primarily due to only six
months of costs reported in the 1996 transition period. The decrease
in cost of equipment rentals between fiscal 1996 and 1995 is
attributable to the reacquisition of the Philadelphia PWD Project from
an unrelated private investor.
There were no development fees and other costs for fiscal 1997.
Cost of development fees and other for the 1996 transition period and
fiscal 1996 and 1995 were $1,559, $2,531 and $5,491, respectively.
These costs consist principally of costs associated with the sale of
various projects either under development or in operation.
The Company's gross margins were $31,109 (48.0% of sales), $17,929
(44.9% of sales), $24,794 (25.7% of sales), and $30,083 (29.4% of
sales) for fiscal 1997, for the 1996 transition period and for fiscal
1996 and 1995, respectively. The fluctuations are primarily
attributable to increased operating efficiency in the energy segment of
the Company and to fluctuations in the recovery of fuel costs through
energy revenues under the Newark and Parlin Project PPAs in effect
until April 30, 1996.
Provision for Impaired Assets
In the fourth quarter of 1997, the Company completed a thorough
review of its business operations and market opportunities. As a
result of this review, the Company concluded that the estimated future
cash flows to be generated by certain assets were not sufficient to
recover their carrying values. Accordingly, the Company recorded an
impairment provision of $5,274 for such assets. The provision
consisted of property, plant and equipment write downs of $2,778
primarily related to the generator sales and services business, $1,553
for equipment held for sale, $500 to reduce the carrying value of the
equity investment in PoweRent, $371 to expense project development
costs and $72 for other impairments. The property plant and equipment
and PoweRent provisions reduced the asset carrying values to estimated
fair values determined by management and the board of directors based
on prices of similar assets and various valuation techniques. The
equipment held for sale provision represents the write off of remaining
equipment which is being scrapped. The project development write off
was necessary due to abandonment of certain projects.
31
<PAGE>
During fiscal 1996 unrecoverable project development costs of $180
were written off. In fiscal 1995, based on independent market
appraisals, the Company recorded charges of $15,985 to write-down
property, plant and equipment and $5,655 to write-down equipment held
for sale to lower fair values. In addition, project development costs
of $4,418 determined to be unrecoverable were written off.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for fiscal
1997, for the 1996 transition period and fiscal 1996 and 1995 were
$9,479, $6,149, $12,612 and $15,902, respectively. SG&A increased for
fiscal 1997 primarily due to only six months of costs reported in the
1996 transition period, except for the operations of Puma which
included nine months of costs for the 1996 transition period and to the
recording of $914 in the fourth quarter for various staffing and
relocation costs and other reserves. SG&A decreased for the 1996
transition period as compared to fiscal 1996 primarily due to only six
months of costs reported in the 1996 transition period. Fiscal 1996
includes a $3,100 cost incurred to terminate an interest rate swap
agreement in connection with the Parlin nonrecourse project debt
refinancing. Fiscal 1996 SG&A expenses benefited from lower payroll
and related tax costs as well as reduced insurance expenses by
approximately $2,347 as compared to fiscal 1995.
Interest and Other Income
Interest and other income for fiscal 1997, for the 1996 transition
period and fiscal 1996 and 1995 were $1,310, $413, $569 and $2,587,
respectively. Interest and other income increased for fiscal 1997
primarily due to only six months of income reported in the 1996
transition period, the settlement of a legal suit, the sale of a
development project in Pakistan, offset in part by fees paid to Wexford
under the Liquidating Asset Management Agreement and the sale of unused
equipment. Interest and other income for the 1996 transition period
was positively impacted by interest income earned on escrow account
balances established in connection with the nonrecourse financing on
the Newark and Parlin facilities. Fiscal 1995 other income includes
$1,180 recognized in connection with the original construction of the
Philadelphia PWD Project.
Reorganization Costs
Reorganization costs represent all costs incurred after filing
bankruptcy that relate to the Company's reorganization and
restructuring efforts. Reorganization costs for fiscal 1996 and 1995
were $12,101 and $8,366, respectively. These costs consist primarily
of professional and administrative fees and expenses. Fiscal 1995
expense includes $3,387 to write-off deferred financing costs due to
Court-approved reductions in the carrying value of certain prepetition
subordinated debentures.
Interest and Debt Expense
Interest and debt expense for fiscal 1997, for the 1996 transition
period and fiscal 1996 and 1995 were $14,768, $7,681, $18,646 and
$20,583, respectively. Interest and debt expense increased for fiscal
1997 as compared to the 1996 transition period primarily due to only
six months of expense reported in the 1996 transition period. Interest
and debt expense decreased for the 1996 transition period as compared
to fiscal 1996 primarily due to only six months of expenses reported in
the 1996 transition period and to the refinancing of the Newark and
Parlin
32
<PAGE>
Projects. Fiscal 1996 and 1995 interest and debt expense includes post-
petition interest on prepetition liabilities of $6,487 and $6,194,
respectively. Fiscal 1996 also includes $1,098 in interest costs
associated with loans provided by NRG Energy and $1,433 of deferred
financing costs attributable to the nonrecourse debt relating to the
Newark and Parlin Projects which were refinanced during the year (see
"Liquidity and Capital Resources"). Fiscal 1995 interest and debt
expense includes $1,050 paid to the unrelated private investor to
extend the Company's reacquisition option period for the Philadelphia
PWD Project to August 1994.
Extraordinary Item
In the 1996 transition period, the Company negotiated a buyout of
a subsidiary's capital lease obligation. The lender agreed to accept a
$1,100 payment in full satisfaction of the lease. The transaction
resulted in an extraordinary gain of $1,643 (net of $124 of state
income taxes).
Income Taxes
For fiscal 1997, for the 1996 transition period and fiscal 1996,
the Company realized an overall income tax benefit of $20,454, $268 and
$463, respectively. For fiscal 1995, the provision for income taxes
was $2,680. The benefit for fiscal 1997 and for the 1996 transition
period is derived from the Company's ability to reduce its current and
deferred tax liabilities by using net operating loss carryforwards and
existing deductible temporary differences to offset current taxable
income and future reversals of taxable temporary differences. The
benefit for fiscal 1997 was attributable to the reversal of a valuation
reserve that was applied against deferred tax assets relating to net
operating losses incurred by the Company from fiscal 1992 to fiscal
1996. The benefit for fiscal 1996 was attributable to the utilization
of state net operating loss carryforwards as well as a decrease in the
deferred tax liability primarily attributable to a change in temporary
differences resulting from the landfill gas equipment sold to NRG on
April 30, 1996. The 1995 tax provision, consisting primarily of
deferred taxes relating to property and equipment, results from the
uncertainty of realizing the benefits of the tax loss carryforwards in
future years against them. Additionally, most professional fees
incurred during the bankruptcy period included in reorganization costs
are treated as capital expenditures and are not deductible for income
tax purposes (see Note 14 of the Notes to the Consolidated Financial
Statements).
Net Earnings (Loss) and Earnings (Loss) Per Share
The net earnings for fiscal 1997 were $23,352 compared to net
earnings for the 1996 transition period of $6,423 and a net loss for
fiscal 1996 and 1995 of $17,713 and $40,919, respectively. The basic
earnings per share for fiscal 1997 was $3.59 compared to basic earnings
per share for the 1996 transition period of $1.00 and basic losses per
share for fiscal 1996 and 1995 of $4.24 and $11.02, respectively.
The fiscal 1997 net earnings are primarily due to the reversal of
a valuation reserve that was applied against deferred tax assets
relating to net operating losses incurred by the Company from fiscal
1992 to fiscal 1996 offset in part by the write-off of certain assets.
The 1996 transition period net earnings are primarily attributable to
higher gross margins due in part to the amended PPAs in which JCP&L
began assuming the cost of fuel for the Newark and Parlin facilities.
The fiscal 1996 and 1995 net losses are primarily due to the
reorganization costs incurred after filing for bankruptcy that relate
to the Company's reorganization and restructuring
33
<PAGE>
efforts and to the impact of higher fuel costs prior to the amendment
of the PPAs at Newark and Parlin in May 1996.
Liquidity and Capital Resources
On April 30, 1996, NRG Energy funded $107,418 in accordance with
the Plan. The Company received $99,918 of which $71,240 was advanced
under the terms of three loan agreements between the Company and NRG
Energy; $21,178 represented the purchase of new common stock of NRGG
and $7,500 was designated as the proceeds for the sale of ten wholly-
owned subsidiaries sold to NRG Energy. In addition, NRG Energy
transferred $7,500 directly to the Company's stock transfer agent
representing a cash distribution by NRG Energy to the O'Brien common
stockholders.
In May 1996, the Company's wholly-owned subsidiaries NRGG Newark
and NRGG Parlin entered into a Credit Agreement (the "Credit
Agreement") which established provisions for a $155,000 fifteen-year
loan and a $5,000 five-year debt service reserve line of credit. The
interest rate on the outstanding principal is variable based on, at the
option of Newark and Parlin, LIBOR plus a 1.125% margin or a defined
base rate plus a 0.375% margin, with nominal margin increases in the
sixth and eleventh year. For any quarterly period where the debt
service coverage ratio is in excess of 1.4:1, both margins are reduced
by 0.125%. Concurrent with the Credit Agreement, Newark and Parlin
entered into an interest rate swap agreement with respect to 50% of the
principal amount outstanding under the Credit Agreement. This interest
rate swap agreement fixes the interest rate on such principal amount
($71,726 at December 31, 1997) at 6.9% plus the margin.
The Company used the proceeds of the loan to repay certain
preexisting obligations of the Company including $87,291 of
indebtedness to NRG Energy. NRG Energy provided the Company with loans
during fiscal 1996 of which $101,679 was outstanding to NRG Energy at
June 30, 1996, $14,388 was outstanding at December 31, 1996 and $2,539
was outstanding at December 31, 1997.
NSC, a wholly-owned subsidiary of the Company, owns a one-third
partnership interest in the Grays Ferry Project currently under
construction. In March 1996, the partnership entered into a credit
agreement with The Chase Manhattan Bank N.A. to finance the project.
The credit agreement obligated each of the project's three partners to
make a $10,000 capital contribution prior to the commercial operation
of the facility. The Company made its required capital contribution in
1997, and the facility began commercial operations in January 1998.
NRG Energy entered into a loan commitment to provide NSC the
funding, if needed, for the NSC capital contribution obligation to the
Grays Ferry Partnership. Prior to December 31, 1997, NSC had borrowed
$10,000 from NRG Energy under this loan agreement, of which $1,900
remained outstanding to NRG Energy at December 31, 1997, and
contributed the proceeds to the Grays Ferry Partnership as part of the
above-referenced capital contribution. In connection with this loan
commitment for the Grays Ferry Project, the Company granted NRG Energy
the right to convert $3,000 of borrowings under the commitment into
396,255 shares of common stock of the Company. In October 1997, NRG
Energy exercised such conversion right in full.
In connection with its acquisition of the Morris Project, NRGG
Funding (a wholly-owned subsidiary of the Company) assumed all of the
obligations of NRG Energy to provide future equity
34
<PAGE>
contributions to Morris LLC, which obligations are limited to the
lesser of 20% of the total project cost or $22.0 million. NRG Energy
has guaranteed to the Morris Project's lenders that NRGG Funding will
make these future equity contributions, and the Company has guaranteed
to NRG Energy the obligation of NRGG Funding to make these future
equity contributions. The Company intends to arrange financing for
either NRGG Funding or itself (the terms and manner of which have not
been determined by the Company) to fund the required future equity
contributions by NRGG Funding to Morris LLC. In addition, NRG Energy
is obligated under a Supplemental Loan Agreement between the Company,
NRGG Funding and NRG Energy to loan NRGG Funding and the Company (as co-
borrower) the full amount of such equity contributions by NRGG Funding,
all at NRGG Funding's option. Any such loan will be secured by a lien
on all of the membership interests of Morris LLC and will be recourse
to NRGG Funding and the Company.
On December 17, 1997, the Company entered into a credit agreement
providing for a $30,000 reducing revolving credit facility with a new
lender. The facility is secured by the assets and cash flows of the
Philadelphia PWD Project as well as the distributable cash flows of the
Newark and Parlin projects, and the Grays Ferry Partnership. On
December 19, 1997 the Company borrowed $25,000 under this facility.
The proceeds were used to repay $16,949 to NRG Energy, to repay $6,551
of obligations of the Philadelphia PWD Project and $1,500 for general
corporate purposes. The remaining $5,000 of the facility will become
available once security interests in the Philadelphia PWD Project are
perfected. The facility reduces by $2,500 on the first and second
anniversaries of the agreement and repayment of the outstanding balance
is due on the third anniversary of the agreement. Interest is based,
at the Company's option, on LIBOR plus a margin ranging from 1.50% to
1.875% or the prime rate plus a margin ranging from 0.75% to 1.125%.
The interest rate was 7.84% at December 31, 1997. The facility
provides for commitment fees of 0.375% on the unused facility.
The Company's principal credit agreements (including the NRGG
Newark and NRGG Parlin Credit Agreement) include cross-default
provisions that generally permit its lenders to accelerate the
indebtedness owed thereunder, to decline to make available any
additional amounts for borrowing thereunder, and to exercise certain
other remedies in respect of any collateral securing such indebtedness
in the event certain defaults or other adverse events occur under
certain other instruments or agreements (including financing and other
project documents) to which the Company or one or more of its
subsidiaries or other entities in which it owns an ownership interest
is a party. As a result, a default under one such other instrument or
agreement could have a material adverse effect on the Company by
causing one or more cross-defaults to occur under one or more of the
Company's principal credit agreements, potentially having one or more
of the effects set forth above and otherwise adversely affecting the
Company's liquidity and capital position.
The Grays Ferry Partnership has received a notice of default from
the agent for the lenders under its principal loan agreement. As of
the date of this Report, management believes that it is not in default
under any of its principal credit agreements as a result of the
asserted Grays Ferry default. However, either (i) the passage of time
under the current circumstances, or (ii) certain actions which may be
taken by the lenders to the Grays Ferry Partnership as a consequence of
the asserted Grays Ferry default, would result in a cross-default under
a $30,000 reducing revolving credit facility that the Company entered
into in December 1997 which is further described above. Such a cross-
default, if it were to occur, could result in further cross-defaults
under other credit agreements of the Company and its subsidiaries. The
Company has discussed the Grays Ferry situation with the lender under
the $30,000 reducing revolving credit facility and has obtained a
temporary waiver
35
<PAGE>
of any cross-default under such facility which otherwise might
occur. However, there can be no assurance that the Company will be
successful continuing to obtain any such waiver if and when it may be
needed or in avoiding such cross-defaults. As a result, management
believes there exists a risk that the dispute between the Grays Ferry
Partnership and its electric power purchaser which caused the asserted
Grays Ferry default, if not promptly resolved in favor of the Grays
Ferry Partnership, will result in action by the lenders to the Grays
Ferry Partnership which could result in cross-defaults under one or
more of the Company's principal credit agreements. While the Grays
Ferry Partnership is actively pursuing a rapid and favorable resolution
of its dispute with the power purchaser, there can be no assurance that
the Grays Ferry Partnership will be successful in that regard. As a
result, there can be no assurance that the Grays Ferry default will not
result in cross-defaults which would have a material adverse effect on
the Company's liquidity and financial condition.
The Company's Board of Directors has decided not to liquidate the
Philadelphia PWD Project, which was identified in the Liquidating Asset
Management Agreement. As a result of this decision, Wexford received
compensation in accordance with the terms of the Liquidating Asset
Management Agreement in fiscal 1997.
Inflation
Due to the relatively low rate of inflation in recent years
management believes that inflation has not had a material impact on its
results of operations or financial condition.
Year 2000
The Year 2000 issue refers generally to the data structure problem
that will prevent systems from properly recognizing dates after the
year 1999. For example, computer programs and various types of
electronic equipment that process date information by reference to two
digits rather than four to define the applicable year may recognize a
date using "00" as the year 1900 rather than the year 2000. The Year
2000 problem could result in system failures or miscalculations causing
disruptions of operations. The Year 2000 problem may occur in computer
software programs, computer hardware systems and any device that relies
on a computer chip if that chip relies on date information. Based on a
preliminary study, the Company does not anticipate either a significant
amount of incremental expense or a disruption in service associated
with the Year 2000 and its impact on the Company's systems. However,
there can be no assurance that the Company's systems nor the systems of
other companies with whom the Company conducts business will be Year
2000 compliant prior to December 31, 1999 or that the failure of any
such system will not have a material adverse effect on the Company's
business, operating results and financial condition.
36
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following Consolidated Financial Statements of the Company and
its subsidiaries and independent auditors' report thereon are included
as pages F-1 through F-24 immediately following the signature page of
this Annual Report on Form 10-K, and is incorporated herein by
reference:
Report of Independent Accountants F-1
Financial Statements:
Consolidated Balance Sheets as of December 31, 1997,
December 31, 1996 and June 30, 1996 F-2
Consolidated Statements of Operations for the
year ended December 31, 1997, the six months ended
December 31, 1996 and the years ended
June 30, 1996 and 1995 F-3
Consolidated Statements of Stockholders' Equity
(Deficit) for the year ended December 31, 1997,
the six months ended December 31, 1996 and the
years ended June 30, 1996 and 1995 F-4
Consolidated Statements of Cash Flows for the year
Ended December 31, 1997, the six months ended
December 31, 1996 and the years ended June 30,
1996 and 1995 F-5
Notes to Consolidated Financial Statements F-6 through F-24
All other supplementary financial information has been omitted
because of the absence of the conditions under which it is required.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
37
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required for this item is incorporated by
reference to the Company's 1998 Definitive Proxy Statement which the
Company will file with the Securities and Exchange Commission no later
than 120 days subsequent to December 31, 1997.
ITEM 11. EXECUTIVE COMPENSATION.
The information required for this item is incorporated by
reference to the Company's 1998 Definitive Proxy Statement which the
Company will file with the Securities and Exchange Commission no later
than 120 days subsequent to December 31, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required for this item is incorporated by
reference to the Company's 1998 Definitive Proxy Statement which the
Company will file with the Securities and Exchange Commission no later
than 120 days subsequent to December 31, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required for this item is incorporated by
reference to the Company's 1998 Definitive Proxy Statement which the
Company will file with the Securities and Exchange Commission no later
than 120 days subsequent to December 31, 1997.
38
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-
K.
(a) Documents filed as part of this report.
1. Financial Statements
The following consolidated financial statements of the Company and
its Subsidiaries and report of independent auditors thereon are
included as Pages F-1 through F-24 immediately following the signature
page of this Annual Report on Form 10-K.
Index to Consolidated Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1997, December 31,
1996 and June 30, 1996
Consolidated Statements of Operations for the year ended December
31, 1997, the six months ended December 31, 1996 and for the years
ended June 30, 1996 and 1995
Consolidated Statements of Stockholders' Equity (Deficit) for the
year ended December 31, 1997, the six months ended December 31,
1996 and for the years ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows for the year ended December
31, 1997, the six months ended December 31, 1996 and for the years
ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
All schedules are omitted because of the absence of the conditions
under which they are required or because the required information is
included in the financial statements or notes thereto.
3. Exhibits
The "Index to Exhibits" following the Consolidated Financial
Statements of the Company and its subsidiaries is incorporated herein
by reference.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the last
quarter of the calendar year ended December 31, 1997:
1. Current Report on Form 8-K dated December 30, 1997 reporting
information under Items 2 and 7.
39
<PAGE>
Signature
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NRG GENERATING (U.S.) INC.
/s/ Timothy P. Hunstad
By: Timothy P. Hunstad
Title: Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the
dates indicated:
Signature Title Date
/s/ Robert T. Sherman President and March 30, 1998
By: Robert T. Sherman, Jr. Chief Executive Officer
/s/ Timothy P. Hunstad Vice President and March 30, 1998
By: Timothy P. Hunstad Chief Financial Officer
(Principal Accounting Officer)
/s/ David H. Peterson Chairman of the Board
of Directors March 30, 1998
By: David H. Peterson
/s/ Julie A. Jorgensen Director March 30, 1998
By: Julie A. Jorgensen
/s/ Lawrence I. Littman Director March 30, 1998
By: Lawrence I. Littman
/s/ Craig A. Mataczynski Director March 30, 1998
By: Craig A. Mataczynski
/s/ Spyros S. Skouras, Jr. Director March 30, 1998
By: Spyros S. Skouras, Jr.
/s/ Charles J. Thayer Director March 30, 1998
By: Charles J. Thayer
/s/ Ronald J. Will Director March 30, 1998
By: Ronald J. Will
40
<PAGE>
NRG Generating (U.S.) Inc.
Consolidated Financial Statements
December 31, 1997
<PAGE>
Report of Independent Accountants
To the Stockholders and Board of Directors
of NRG Generating (U.S.) Inc.
In our opinion, the accompanying consolidated balance
sheets and the related consolidated statements of
operations, of stockholders' equity (deficit) and of cash
flows present fairly, in all material respects, the
financial position of NRG Generating (U.S.) Inc. and its
subsidiaries at December 31, 1997, December 31, 1996, and
June 30, 1996, and the results of their operations and
their cash flows for the year ended December 31, 1997,
the six months ended December 31, 1996, and the years
ended June 30, 1996 and 1995, in conformity with
generally accepted accounting principles. These
financial statements are the responsibility of the
company's management; our responsibility is to express an
opinion on these financial statements based on our
audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audits 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,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion
expressed above.
As discussed in Note 1 to the consolidated financial
statements, on April 30, 1996, the company, formerly
known as O'Brien Environmental Energy, Inc., was
reorganized and emerged from bankruptcy.
Price Waterhouse LLP
Minneapolis, Minnesota
March 30, 1998
F-1
<PAGE>
NRG Generating (U.S.) Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Dollars in thousands)
December 31, December 31, June 30,
1997 1996 1996
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,444 $ 3,187 $ 5,022
Restricted cash and cash equivalents 8,527 8,174 8,719
Accounts receivable, net 11,099 11,920 11,627
Receivables from related parties 87 186 461
Notes receivable 27 1,119 1,029
Inventories 2,134 2,897 2,995
Other current assets 1,022 992 1,721
Total current assets 26,340 28,475 31,574
Property, plant and equipment, net 127,574 132,203 134,694
Projects under development 46,376 346 253
Equipment held for sale - 2,628 2,678
Notes receivable, noncurrent - 83 86
Investments in equity affiliates 13,381 3,653 3,449
Deferred financing costs, net 5,643 5,530 4,630
Deferred tax assets, net 7,996 - -
Other assets 584 706 798
Total assets $ 227,894 $ 173,624 $ 178,162
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of loans and payables due NRG Energy $ 2,864 $ 1,256 $ 5,485
Current portion of nonrecourse long-term 8,525 7,595 3,000
Current portion of recourse long-term debt 495 3,225 4,115
Short-term borrowings 1,313 2,388 1,793
Accounts payable 20,582 6,131 8,708
Prepetition liabilities 775 2,537 6,895
Other current liabilities 3,083 2,852 7,789
Total current liabilities 37,637 25,984 37,785
Loans due NRG Energy 4,439 14,388 96,929
Nonrecourse long-term debt 165,020 143,972 60,415
Recourse long-term debt 25,000 6,339 6,374
Deferred income taxes - 13,404 14,182
Other liabilities - 50 50
Total liabilities 232,096 204,137 215,735
Stockholders' equity (deficit):
Preferred stock, par value $.01, 20,000,000 shares
authorized; none issued or outstanding - - -
Common stock, par value $.01, 50,000,000 shares
authorized; 6,871,069, 6,474,814 and 6,474,814
shares, issued, 6,836,769, 6,440,514 and 6,422,014
shares outstanding, respectively 68 64 64
Additional paid-in capital 65,715 62,719 62,515
Accumulated deficit (69,592) (92,944) (99,367)
Other (393) (352) (785)
Total stockholders' equity (deficit) (4,202) (30,513) (37,573)
Total liabilities and stockholders' equity (deficit) $ 227,894 $ 173,624 $ 178,162
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
NRG Generating (U.S.) Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(Dollars in thousands)
Six Months
Year Ended Ended Year Ended
December 31, December 31, June 30, June 30,
1997 1996 1996 1995
<S> <C> <C> <C> <C>
Energy revenues $ 43,210 $ 21,669 $ 66,623 $ 74,455
Equipment sales and services 19,415 15,607 25,344 19,639
Rental revenues 2,179 1,062 1,895 2,362
Development fees and other - 1,578 2,685 5,791
64,804 39,916 96,547 102,247
Cost of energy revenues 14,841 7,229 45,663 46,694
Cost of equipment sales and services 17,037 12,365 22,153 17,622
Cost of rental revenues 1,817 834 1,406 2,357
Cost of development fees and other - 1,559 2,531 5,491
33,695 21,987 71,753 72,164
Gross profit 31,109 17,929 24,794 30,083
Selling, general and administrative
expenses 9,479 6,149 12,612 15,902
Provision for impaired assets 5,274 - 180 26,058
Income (loss) from operations 16,356 11,780 12,002 (11,877)
Interest and other income 1,310 413 569 2,587
Reorganization costs - - (12,101) (8,366)
Interest and debt expense (14,768) (7,681) (18,646) (20,583)
Income (loss) before income taxes 2,898 4,512 (18,176) (38,239)
Provision for income taxes (benefit)(20,454) (268) 2,680 (463)
Income (loss) before
extraordinary item 23,352 4,780 (17,713) (40,919)
Extraordinary item, net of
income taxes - 1,643 - -
Net income (loss) $ 23,352 $ 6,423 $(17,713) $(40,919)
Basic earnings (loss) per share:
Before extraordinary item $ 3.59 $ 0.75 $ (4.24) $ (11.02)
Extraordinary item - 0.25 - -
$ 3.59 $ 1.00 $ (4.24) $ (11.02)
Diluted earnings (loss) per share:
Before extraordinary item $ 3.48 $ 0.74 $ (4.24) $ (11.02)
Extraordinary item - 0.25 - -
$ 3.48 $ 0.99 $ (4.24) $ (11.02)
Weighted average shares
outstanding - Basic 6,511 6,430 4,182 3,712
Weighted average shares
outstanding - Diluted 6,725 6,463 4,182 3,712
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
NRG Generating (U.S.) Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
(Dollars in thousands)
Class A Class B Additional Total
Common Common Common Preferred Paid-in Accumulated Stockholders'
Stock Stock Stock Stock Capital Deficit Other Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 $130 $39 $ - $ - $41,353 $(40,735) $ (651) $ 136
Currency translation
adjustment 25 25
Net loss (40,919) (40,919)
Balance, June 30, 1995 130 39 - - 41,353 (81,654) (626) (40,758)
Plan of reorganization:
Purchase of common stock by
NRG Energy 27 21,151 21,178
Exchange class A and B
common stock for new common
shares, retire treasury
shares (130) (39) 37 68 64 -
Issue preferred shares
to Wexford 49 4,908 4,957
Redemption of preferred
shares (49) (4,908) (4,957)
Preferred dividends (57) (57)
Currency translation
Adjustment (223) (223)
Net loss (17,713) (17,713)
Balance, June 30, 1996 - - 64 - 62,515 (99,367) (785) (37,573)
Payment received on
treasury stock resulting
from reorganization 105 105
Issue restricted stock 99 99
Currency translation
adjustment 433 433
Net income 6,423 6,423
Balance, December 31, 1996 - - 64 - 62,719 (92,944) (352) (30,513)
NRG Energy conversion
of stock option 4 2,996 3,000
Currency translation
Adjustment (41) (41)
Net income 23,352 23,352
Balance, December 31, 1997 $ - $ - $ 68 $ - $65,715 $(69,592) $ (393) $ (4,202)
</TABLE>
F-4
<PAGE>
NRG Generating (U.S.) Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Dollars in thousands) Six Months
Year Ended Ended Year Ended
December 31, December 31, June 30, June 30,
1997 1996 1996 1995
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 23,352 $ 6,423 $ (17,713) $ (40,919)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Extraordinary item, net of
income taxes - (1,643) - -
Depreciation and amortization 7,840 4,869 9,441 14,872
Deferred tax (benefit) expense (21,400) (778) (904) 2,278
Provision for impaired assets 5,274 - 180 26,058
Loss on disposition of property
and equipment 756 59 - -
Reserve for uncollectible note
receivable - - - 3,121
Bankruptcy professional fees accrued - - 432 4,415
Other, net (212) 148 (216) 709
Changes in operating assets and
liabilities:
Accounts receivable 772 (1,011) 730 (257)
Inventories 621 (13) 615 (369)
Receivables from related parties 97 275 223 (51)
Other assets 178 (277) - -
Accounts payable and other current
liabilities (289) (6,996) (838) 1,639
Net cash provided by (used in)
operating activities 16,989 1,056 (8,050) 11,496
Cash flows from investing activities:
Capital expenditures and project
development costs (5,858) (1,315) (1,783) (1,102)
Proceeds from sale of property
and equipment 552 104 - -
Proceeds from sale of subsidiaries
and projects - - 7,500 1,762
Investment in equity affiliates (10,000) - - -
Collections on notes receivable 1,175 10 816 824
Withdrawals from (deposits into)
restricted cash accounts - net (353) 545 (5,156) 1,032
Other, net - (120) 227 (676)
Net cash (used in) provided by
investing activities (14,484) (776) 1,604 1,840
Cash flows from financing activities:
Proceeds from long-term debt 24,582 95,000 60,226 5,711
Proceeds from NRG Energy loans 10,000 - 128,078 -
Repayments of NRG Energy loans (16,949) (86,035) (26,398) -
Repayments of long-term debt (16,857) (6,098) (92,816) (18,061)
NRG Energy capital contribution - - 21,178 -
Net (repayments) proceeds of
short-term borrowings (1,072) 595 193 (785)
Payments on prepetition liabilities (1,762) (4,660) (73,483) (1,799)
Deferred financing costs (190) (1,121) (4,579) -
Payment received on treasury stock
resulting from reorganization - 105 - -
Issuance of restricted stock - 99 - -
Redemption of and dividends on
preferred shares - - (5,014) -
Net cash (used in) provided
by financing activities (2,248) (2,115) 7,385 (14,934)
Net increase (decrease) in cash
and cash equivalents 257 (1,835) 939 (1,598)
Cash and cash equivalents at
beginning of year 3,187 5,022 4,083 5,681
Cash and cash equivalents at
end of year $ 3,444 $ 3,187 $ 5,022 $ 4,083
Supplemental disclosure of cash
flow information:
Interest paid $ 15,887 $ 12,472 $ 18,926 $ 11,869
Income taxes paid 1,477 495 110 -
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
1. Business - Liquidity, Capital Resources and Emergence from
Bankruptcy
NRG Generating (U.S.) Inc. and its subsidiaries ("NRGG" or the
"Company") develop and own cogeneration projects which produce
electricity and thermal energy for sale to industrial and commercial
users and public utilities. In addition, the Company sells and rents
power generation, cogeneration and standby/peak shaving equipment and
services.
On April 30, 1996, O'Brien Environmental Energy, Inc. ("OEE"), the
formerly named parent company, emerged from bankruptcy pursuant to a
plan (the "Plan") submitted by NRG Energy, Inc. ("NRG Energy"), the
O'Brien Official Committee of Equity Security Holders and Wexford
Management LLC ("Wexford") and approved by the U.S. Bankruptcy Court
for the District of New Jersey (the "Court"). The Plan awarded NRG
Energy the rights to acquire a 41.86% equity interest in the Company
and generally provided for full and immediate payment of all undisputed
prepetition liabilities and included a provision for post-petition
interest. The Company was renamed on the April 30, 1996 closing date
to NRG Generating (U.S.) Inc.
OEE filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code with the Court on September 28, 1994
to pursue financial restructuring efforts under the protection afforded
by the U.S. bankruptcy laws. The decision to seek Chapter 11 relief
was based on the conclusion that action had to be taken to preserve its
business relationships, restructure its debt and maintain the
operational strength and assets of the Company. The Company continued
its normal operations as Debtor-in-Possession during the bankruptcy
period but could not engage in transactions outside the ordinary course
of business without approval of the Court.
On April 30, 1996, NRG Energy funded approximately $107,418 in
accordance with the Plan and OEE's existing Class A and Class B common
stock was canceled and became exchangeable for 3,764,457 (58.14%)
shares of new common stock. The NRG Energy funding was comprised of:
$71,240 advanced under the terms of three loan agreements; $21,178 to
purchase 2,710,357 (41.86%) of new common stock; $7,500 for the
purchase of ten wholly-owned subsidiaries of OEE; and $7,500 deposited
with the Company's stock transfer agent representing a cash
distribution of approximately $0.44 per share by NRG Energy to OEE's
Class A and Class B common stockholders.
Also, on April 30 the Company issued 49,574 shares of series A, 13.5%
cumulative preferred stock to Wexford in satisfaction of $4,957 of
prepetition unsecured claims allowed by the Court. The preferred
shares were redeemed by the Company in May 1996 for $4,957 plus $57 in
dividends.
The funds received from NRG Energy were disbursed according to the
Plan's terms which generally provided for full payment (or
cure/reinstatement) of all undisputed prepetition liabilities including
the payment of post-petition interest on most prepetition obligations.
Additionally, disbursements were made to certain creditors of
subsidiary companies whose obligations were not included in prepetition
liabilities and for professional fees incurred during the bankruptcy
proceedings. Certain other bankruptcy claims filed with the Court
remain in dispute. An escrow fund has been established to fully
reserve for the remaining disputed claims submitted to the Court. Any
remaining escrow funds resulting from the Court disallowing any
disputed claims will be disbursed pro rata to all reinstated creditor
claimholders as additional post-petition interest.
F-6
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
In accordance with the Plan, on April 30, 1996 the Company and Wexford
entered into a Liquidating Asset Management Agreement whereby Wexford
agreed to assist the Company with the possible liquidation of certain
specified assets consisting of (a) the Company's engine generator
business, (b) the Philadelphia Cogeneration Project (the "Philadelphia
PWD Project"), (c) certain unused equipment, and (d) American
Hydrotherm Corporation and two other related subsidiaries. Under the
agreement, the Company's board of directors and officers direct and
control which assets will be liquidated and the extent of Wexford's
services. During 1996 and 1997, the unused equipment, American
Hydrotherm and the two other related subsidiaries were sold or
otherwise disposed. During 1997, the board of directors decided to
retain the Philadelphia PWD Project. The Company has determined that
its engine generator business is not a part of its strategic plan for
the future and is currently pursuing several avenues for the
disposition of this business. Management does not expect that the
disposition of this business will have a material effect on the
Company's financial position or results of operations. In accordance
with the agreement and as approved by the Court, the Company paid
Wexford $1,219, and $281 in compensation for services during the year
ended December 31, 1997 and six months ended December 31, 1996.
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of all
majority-owned subsidiaries and all significant intercompany accounts
and transactions have been eliminated. Investments in companies,
partnerships and projects that are more than 20% but less than majority-
owned are accounted for by the equity method.
Effective July 1, 1996, the Company changed its year end from June 30
to December 31. The Company filed a transition report on Form 10-K for
the period July 1, to December 31, 1996. The periods presented in the
Company's consolidated statements of operations, stockholders' equity
(deficit) and of cash flows are for the twelve months ended December
31, 1997, the six months ended December 31, 1996 and the twelve months
ended June 30, 1996 and 1995. The twelve months ended June 30, 1996
and 1995 are sometimes referred to in these Notes to Consolidated
Financial Statements as fiscal 1996 and 1995.
Following are condensed results of operations for the twelve months
ended December 31, 1997 and 1996 (unaudited). Due to the
reorganization, results are not comparable.
Unaudited
Year Ended Year Ended
December 31, December 31,
1997 1996
Revenue $ 64,804 $ 85,562
Cost of revenues 33,695 59,491
Gross profit 31,109 26,071
Operating and other expenses 28,211 38,686
Income (loss) before income tax benefit 2,898 (12,615)
Income tax benefit (20,454) (757)
Income (loss) before extraordinary item 23,352 (11,858)
Extraordinary item - 1,643
Net income (loss) $ 23,352 $(10,215)
F-7
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
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 and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from these estimates.
Reorganization Costs and Prepetition Liabilities
Expenses incurred after filing bankruptcy related to the Company's
reorganization and restructuring efforts have been presented in the
consolidated statement of operations as reorganization costs.
Liabilities which remain subject to the bankruptcy proceeding are
classified on the balance sheet as prepetition liabilities and include
provisions for post-petition interest.
Revenue Recognition
Energy revenues from cogeneration projects are recognized as
electricity and steam are delivered. Revenue from sales and rental of
power generation equipment are recognized upon shipment or over the
term of the rental. Development fee revenue is generally recognized on
a cost recovery basis as cash is received (without future lending
provisions).
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less at the time of purchase to be cash equivalents.
Inventories
Inventories, consisting principally of power generation equipment and
related parts held for sale, are valued at the lower of cost
(determined primarily by the specific identification method) or market.
Property, Plant and Equipment
Property, plant and equipment, net of estimated salvage, is depreciated
using the straight-line method over the estimated useful lives of the
assets which range from five to thirty years. Amortization of
equipment acquired under capital leases is recognized on a straight
line basis over the shorter of the estimated asset life or lease term.
Cost of maintenance and repairs is charged to expense as incurred.
Betterments and improvements are capitalized.
F-8
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
Project Development Costs
Project development costs consist of fees, licenses, permits, site
testing, bids and other charges, including employee costs, incurred
incidental to specific projects under development. Project development
costs are expensed in any period in which management determines the
costs to be unrecoverable.
Deferred Financing Costs
Financing costs are deferred and amortized on a straight-line basis
over the term of the related debt. Interest expense includes
amortization of $407, $199, $1,480 and $570 for the year ended December
31, 1997, the six months ended December 31, 1996 and the years ended
June 30, 1996 and 1995, respectively. Accumulated amortization was
$585, $410 and $180 at December 31, 1997, December 31, 1996 and June
30, 1996, respectively. Fiscal 1995 reorganization costs reported in
the consolidated statement of operations includes $3,387 to write-off
deferred financing costs due to Court-approved reductions in the
carrying value of certain prepetition subordinated debentures.
Nonrecourse Long-term Debt
Nonrecourse long-term debt consists of project financing for which the
repayment obligation is limited to specific project subsidiaries.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109. SFAS No. 109 is an asset and
liability approach that requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and tax basis of other assets
and liabilities. Valuation allowances are recorded when it is more
likely than not that a tax benefit will not be realized.
Interest Rate Swap Agreement
The Company has entered into an interest rate swap agreement to reduce
the impact of changes in interest rates on certain of its variable rate
long-term debt. The differentials paid or received under the swap
agreement are accrued and recorded as adjustments to interest expense.
Foreign Currency Translation
The accounts of foreign subsidiaries have been translated in accordance
with SFAS No. 52, whereby assets and liabilities are translated at
rates of exchange existing at the balance sheet date and revenues and
expenses are translated at the average rates of exchange for the
period.
F-9
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
Concentration of Credit Risk
The Company primarily sells electricity and steam to public utilities
and corporations on the east coast of the United States under long-term
agreements. Also, the Company services, sells and rents equipment to
various entities worldwide. The Company performs on-going credit
evaluations of its customers and generally does not require collateral.
The Company maintains reserves for potential credit losses and such
losses have been within management's expectations.
Reclassifications
Certain reclassifications have been made to conform prior years' data
to the current presentation. These reclassifications had no impact on
previously reported net income or stockholders' deficit.
3. Restricted Cash and Cash Equivalents
Cash and cash equivalents that are not fully available for use in
operations are classified as restricted. Restricted cash and cash
equivalents relate primarily to debt service reserve accounts required
by the nonrecourse project debt for NRG Generating (Newark)
Cogeneration, Inc. ("Newark") and NRG Generating (Parlin) Cogeneration,
Inc. ("Parlin") and to bankruptcy escrow accounts.
Restricted cash and cash equivalents consist of the following:
December 31, December 31, June 30,
1997 1996 1996
Bankruptcy escrow accounts $ 770 $2,388 $8,490
Debt service reserve accounts 7,757 5,786 -
Other - - 229
$8,527 $8,174 $8,719
4. Property, Plant and Equipment
Property, plant and equipment consists of the following:
December 31, December 31, June 30,
1997 1996 1996
Plant and equipment $169,839 $171,035 $169,744
Furniture and fixtures 687 759 898
Land, buildings and improvements 1,528 1,538 1,972
Other equipment 37 44 378
$172,091 $173,376 $172,992
Accumulated depreciation and
amortization (44,517) (41,173) (38,298)
$127,574 $132,203 $134,694
Depreciation expense was $7,320, $3,626, $7,858, and $8,892 for the
year ended December 31, 1997, the six months ended December 31, 1996,
and the years ended June 30, 1996 and 1995, respectively.
F-10
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
Plant and equipment relates primarily to the Newark and Parlin
cogeneration plants and the Philadelphia PWD Project standby facility.
The Newark project consists of a 52 MW cogeneration power plant in
Newark, New Jersey which commenced operations in November 1990 and is
supplying electricity and steam pursuant to 25-year supply contracts.
The Parlin project consists of a 122 MW cogeneration power plant in
Parlin, New Jersey which commenced operations on June 26, 1991 and is
supplying up to 114 MW of electricity pursuant to a 20-year electric
supply contract and steam pursuant to a 30-year supply contract.
Effective April 30, 1996, the Company renegotiated its power purchase
agreements with Jersey Central Power and Light ("JCP&L"), the primary
electricity purchaser from its Newark and Parlin projects. Under the
new amendments, JCP&L is responsible for all natural gas supply and
delivery. As a result, subsequent to the amendment, energy revenues
and cost of energy revenues exclude fuel supply and delivery costs.
The Newark project is a qualifying facility as defined in the Public
Utility Regulatory Policies Act of 1978.
Parlin relinquished its claim to qualifying facility status and filed
rates as a public utility under the Federal Power Act. However, Parlin
has been determined to be an exempt wholesale generator (EWG). The
Parlin project has also changed from a full base load operation to a
partial base load/partial dispatchable project.
The Philadelphia PWD Project is a 22 MW standby/peak shaving facility
in Philadelphia, Pennsylvania which commenced operations in May 1993
and is supplying electricity pursuant to a 20-year energy service
agreement. The Company owns an 83% interest in this project.
5. Morris Acquisition
In December 1997, NRGG Funding, Inc. ("NRGG Funding"), a wholly owned
subsidiary, acquired from NRG Energy the entire ownership interest in a
117 MW steam and electricity cogeneration project ("Morris LLC" or the
"Morris Project") under construction in Morris, Illinois. The purchase
price was $5 million, of which $4 million was previously paid by Morris
LLC from construction financing proceeds. Payment of the remaining $1
million, which is subject to certain contingencies, has been accrued at
December 31, 1997. Identifiable assets acquired were $46,480 which are
primarily included in the balance sheet caption "Projects Under
Development". Identifiable liabilities assumed were $46,480 consisting
of nonrecourse long-term debt of $29,855, accounts payables of $15,446
and payables to NRG Energy of $1,179.
The estimated total cost of the Morris project is $107,600 which is
being financed with project bank debt and future equity contributions.
NRGG Funding is obligated to make future equity contributions to Morris
LLC in an amount which is the lesser of 20% of the total project cost
or $22,000. The future equity contributions are guaranteed by the
Company and NRG Energy. In addition, NRG Energy has agreed to make
loans available to NRGG Funding and the Company to make the equity
contributions.
F-11
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
The Morris Project is scheduled to begin commercial operations in the
fourth quarter of 1998. Morris LLC has entered into an Energy Services
Agreement (the "ESA") with Equistar Chemicals LP ("Equistar") to supply
720,000 pounds of steam per hour and 78 MW of electricity for 25 years.
The Company will arrange for the sale of excess energy and non-firm
capacity to third parties.
Under the terms of the ESA, Equistar has the option to purchase the
project for the fair market value, as defined, at either the fifteenth
or twentieth anniversary of the commercial operation date.
Additionally, Equistar was granted a one-time option to purchase up to
a 10% membership interest in the project. On February 10, 1998,
Equistar gave notice of its intention to purchase a 5% passive
membership interest. Under terms of the proposed agreement, Equistar
would acquire a 5% passive interest in the project in exchange for the
obligation to assume 5% of the required equity contribution expected to
be approximately $1,100. The Company extended the option expiration
date to April 30, 1998, to close this transaction.
6. Investments in Equity Affiliates
Investments in equity affiliates consists of the following:
December 31, December 31, June 30,
1997 1996 1996
Grays Ferry (33% owned) $12,845 $2,659 $2,778
PoweRent Limited (50% owned) 536 994 671
$13,381 $3,653 $3,449
Grays Ferry
NRGG (Schuylkill) Cogeneration, Inc. ("NSC"), a wholly-owned
subsidiary, has a one-third partnership interest in the Grays Ferry
Cogeneration Partnership ("Grays Ferry"). The other partners are
affiliates of PECO Energy Company and Trigen Energy Corporation. Grays
Ferry has constructed a 150 MW cogeneration facility located in
Philadelphia which began commercial operations in January 1998. Grays
Ferry has a 25-year contract to supply all the steam produced by the
project to Trigen-Philadelphia Energy Corporation through January 8,
2023 and a 20-year contract to supply all of the electricity produced
by the project to PECO Energy Company through January 8, 2018. In
March 1998, PECO Energy Company asserted that, as a consequence of
certain regulatory developments, its power purchase agreement with
Grays Ferry was no longer effective. See Note 19. NSC's investment is
comprised of $10,000 equity contributed during 1997 pursuant to its
commitment under Grays Ferry's financing arrangements and development
costs incurred during formation and development of the project.
PoweRent Limited
PoweRent Limited ("PoweRent) is a 50% owned United Kingdom company that
sells and rents power generation equipment. The remaining 50% of
PoweRent is owned by a private investor. In 1997 the Company recorded
a charge of $500 to reduce the carrying value of its investment in
PoweRent (see Note 12).
F-12
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
7. Short-Term Borrowings
Short-term borrowings consist of amounts owed financial institutions
under lines of credit, primarily in the United Kingdom. At December
31, 1997, December 31, 1996 and June 30, 1996 the Company had aggregate
lines of credit of approximately $2,000, $2,400 and $1,800 of which
$1,313, $2,388 and $1,793 was outstanding, respectively. The weighted
average interest rate on short-term borrowings as of December 31, 1997,
December 31, 1996 and June 30, 1996 was approximately 10.0%, 9.9% and
9.1%, respectively.
8. Long-Term Debt
Long-term debt consists of the following:
December 31, December 31, June 30,
1997 1996 1996
Notes payable, due in monthly
installments of principal
plus interest at rates ranging
from 8.3% to 13.48% maturing
on various dates through 1999 $ 733 $ 8,610 $ 8,995
Capital lease obligations - 1,474 4,909
Revolving credit facility 25,000 - -
Morris Project financing (nonrecourse) 29,855 - -
Newark and Parlin financing
(nonrecourse) 143,452 151,047 60,000
199,040 161,131 73,904
Less amounts classified as current (9,020) (10,820) (7,115)
$190,020 $150,311 $66,789
Aggregate amounts of long-term debt maturing during each of the next
five years are $9,020, $9,848, $33,602, $11,322 and $11,945 in 1998,
1999, 2000, 2001 and 2002, respectively.
The Company's principal credit agreements; a revolving credit facility,
Morris Project financing and Newark and Parlin financing, include
cross-default provisions. As a result, a default under one such
instrument or agreement could have a material adverse effect on the
Company's liquidity and capital position. The Company was not in
default under any of its principal credit agreements at December 31,
1997. See note 19.
Revolving Credit Facility
On December 17, 1997, the Company entered into a $30,000, three-year
reducing, revolving credit facility agreement. At December 31, 1997,
$25,000 of the credit facility was utilized; the remaining $5,000 will
become available once security interests in the Philadelphia PWD
Project are perfected. The proceeds were used to repay $16,949 to NRG
Energy, $6,551 of obligations of the Philadelphia PWD Project and
$1,500 for general corporate purposes. The facility reduces by $2,500
on the first and second anniversaries of the agreement and repayment of
the outstanding balance is due on December 17, 2000. Interest is
based, at the Company's option, on LIBOR plus a margin ranging from
1.50% to 1.875% or the prime rate plus a margin ranging from 0.75% to
1.125%, based on the Company's debt service coverage ratio. The
interest rate resets based on the borrowing period selected, generally
one to six months, and was 7.84% at December 31, 1997. The facility
provides for commitment fees of 0.375% on the unused facility.
Borrowings are secured by the assets, capital stock and cash flows of
the Philadelphia PWD Project as well as the distributable cash flows of
Newark, Parlin and Grays Ferry as permitted by these projects' primary
lenders.
F-13
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
The revolving credit facility agreement specifies that the Company
maintain certain covenants with which the Company is in compliance at
December 31, 1997. The Company may under certain circumstances be
limited in its ability to make restricted payments, as defined, which
include dividends and certain purchases and investments, incur
additional indebtedness and engage in certain transactions.
Morris Project Financing
On September 15, 1997, Morris LLC entered into a $91,000 construction
and term loan agreement (the "Agreement") to provide nonrecourse
project financing for a major portion of the Morris Project. The
Agreement provides $85,600 of 20-month construction loan commitments
and $5,400 in letter of credit commitments (the "LOC Commitment").
Upon completion of the project, the Construction Loan is due and
payable or, if certain criteria are satisfied, may be converted to a
five year term loan based on a 25-year amortization with a balloon
payment at maturity. At December 31, 1997, $29,855 was outstanding
under the Construction Loan and no amounts were pledged under the LOC
Commitment. Interest on the Construction Loan is based, at the
Company's option, either on the base rate, as defined in the Agreement,
or LIBOR plus 0.75%. The interest rate resets based on the Company's
selection of the borrowing period ranging from one to six months. The
interest rate was 6.6875% at December 31, 1997. Borrowings are secured
by NRGG Funding's ownership interest in Morris LLC, cash flows,
dividends and any other property that NRGG Funding may be entitled to
as an owner in Morris LLC.
The Agreement specifies that the Company maintain certain covenants
with which the Company is in compliance at December 31, 1997. The
Company may under certain circumstances be limited in its ability to
make restricted payments, as defined, which include dividends and
certain purchases and investments, incur additional indebtedness and
engage in certain transactions.
Newark and Parlin Financing
On May 17, 1996, Newark and Parlin entered into a Credit Agreement (the
"Credit Agreement") with provisions for a $155,000 fifteen-year
nonrecourse term loan and a $5,000 five-year debt service reserve line
of credit. On May 23, 1996, Newark borrowed $60,000 in the form of a
temporary term loan under the Credit Agreement. On July 11, 1996, an
additional $95,000 was borrowed and the aggregate borrowings were
converted into a $155,000 fifteen-year nonrecourse term loan (the "Term
Loan") which is a joint and several liability of Newark and Parlin.
The Term Loan will be amortized as specified by the Credit Agreement.
The interest rate on the outstanding principal is variable based on, at
the Company's option, LIBOR plus a 1.125% margin or a defined base rate
plus a 0.375% margin. For any quarterly period where the debt service
coverage ratio is in excess of 1.4:1, both margins are reduced by
0.125%. The interest rate resets based on the borrowing period
selected, generally one to three months. The interest rate was 6.8125%
at December 31, 1997. Nominal margin increases for both the LIBOR and
the defined base rate will occur in year six and eleven of the Credit
Agreement. Upon entering into the Credit Agreement, Newark and Parlin
entered into an interest rate swap agreement which fixes the interest
rate on 50% of the principal amount outstanding under the Term Loan at
6.9% plus the margin in effect as described above.
F-14
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
No amounts were outstanding on the debt service reserve line of credit
at December 31, 1997 and 1996. The line carries a commitment fee of
1.125% on the undrawn amount. Newark and Parlin are required to
maintain debt service reserve accounts with the lender to provide for
future debt service, capital improvements and major maintenance. At
December 31, 1997, these balances totaled $7,757 and earned interest at
3.25%. These balances are recorded as restricted cash and cash
equivalents in the accompanying financial statements.
The Term Loan is secured by all Newark and Parlin assets and a pledge
of Newark's and Parlin's capital stock. NRGG has guaranteed repayment
of up to $25,000 of the Term Loan and also guaranteed payment by Newark
and Parlin of all income and franchise taxes when due. As an
inducement to obtain the $60,000 temporary term loan, effective May 23,
1996, NRG Energy guaranteed payment of pre-existing liabilities of
Newark and Parlin up to $5,000. The maximum guarantee is reduced as
certain defined milestones are reached and eliminated no later than
May 23, 2001. At December 31, 1997, the guarantee amount was $3,000.
The Credit Agreement specifies that the Company maintain certain
covenants with which the Company is in compliance at December 31, 1997.
The Company may under certain circumstances be limited in its ability
to make restricted payments, as defined, which include dividends and
certain purchases and investments, incur additional indebtedness and
engage in certain transactions.
9. Loans and Accounts Payables Due NRG Energy
Amounts owed to NRG Energy are comprised as follows:
December 31, December 31, June 30,
1997 1996 1996
Long-term debt:
Note due April 30, 2001 bearing
interest at 9.5% $ 2,539 $14,388 $101,679
Grays Ferry note due July 1, 2005
bearing interest at 10.75% 1,900 - -
4,439 14,388 101,679
Less current portion - - (4,750)
$ 4,439 $14,388 $ 96,929
Current maturities and accounts payable:
Current maturities $ - $ - $ 4,750
Morris LLC acquisition 1,000 - -
Accrued interest 821 648 735
Management services, operations
and other 1,043 608 -
$ 2,864 $ 1,256 $ 5,485
F-15
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
10. Stockholders' Equity
NRG Energy stock option
During 1997 NRG Energy made loans aggregating $10,000 to NSC to provide
funding for NSC's equity contribution obligation to Grays Ferry.
Pursuant to a stock option right approved by the Court and included in
the loan commitment agreement, in October 1997 NRG Energy converted
$3,000 of the borrowings into 396,255 shares of the Company's common
stock. Following exercise of the option, NRG Energy's ownership
interest in the Company increased to 45.21%.
Earnings per share
The Company has adopted SFAS No. 128, "Earnings Per Share", which
became effective for financial statements issued for periods ending
after December 15, 1997. SFAS No. 128 requires presentation of basic
and diluted earnings per share ("EPS") and restatement of EPS data for
all prior periods. Basic EPS includes no dilution and is computed by
dividing net income (loss) by the weighted average shares of common
stock outstanding. Diluted EPS is computed by dividing net income
(loss) by the weighted average shares of common stock and dilutive
common stock equivalents outstanding. The Company's dilutive common
stock equivalents result from stock options and are computed using the
treasury stock method. The following table reconciles the numerators
and denominators of the basic and diluted EPS computations for the year
ended December 31, 1997 and the six months ended December 31, 1996.
The dilutive stock options became outstanding subsequent to June 30,
1996. Accordingly, there was no difference in basic and diluted EPS for
the years ended June 30, 1996 and 1995.
Year ended Six months ended
December 31, 1997 December 31, 1996
Income Shares Income Shares
(Numerator)(Denominator) EPS (Numerator)(Denominator) EPS
Income before
extraordinary item:
Basic EPS $23,352 6,511 $3.59 $4,780 6,430 $0.75
Effect of
dilutive
stock options 33 214 - 33
Diluted EPS $23,385 6,725 $3.48 $4,780 6,463 $0.74
Stock options
The Company has reserved 750,000 shares of common stock for issuance
under its 1996 and 1997 stock option plans. The plans provide for
nonqualified and incentive stock options to be granted to directors,
officers, and key employees at an exercise price not less than the fair
market value of the common stock at the date of grant. An option will
generally expire ten years after the date it is granted and will
ordinarily become exercisable as to one third of the shares subject to
the option on each of the first three anniversaries of the grant.
Following a "change of control" all options granted under the stock
option plans may become immediately exercisable.
F-16
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
Option transactions under these plans are summarized as follows:
Weighted Average
Number of Shares Option Price
Outstanding at June 30, 1996 -
Granted 399,000 $5.46
Outstanding at December 31, 1996 399,000 5.46
Granted 305,000 13.19
Canceled (75,000) 5.44
Outstanding at December 31, 1997 629,000 $9.21
The following table summarizes the stock options outstanding and
exercisable at December 31, 1997:
<TABLE>
<CAPTION>
Outstanding Exercisable
Weighted-Average
Exercise Number of Contractual Life Weighted-Average Number of Weighted-Average
Price Range Options Remaining Exercise Price Options Exercise Price
<S> <C> <C> <C> <C> <C>
$5.44-$6.58 324,000 8.8 years $ 5.47 108,000 $ 5.47
$11.58-$16.47 305,000 9.5 years $13.19 - -
629,000 9.1 years $ 9.21 108,000 $ 5.47
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its stock option plans. Had
the Company's compensation costs been determined based on the fair
value of the awards at the option grant dates consistent with the
accounting provisions of SFAS 123 "Accounting for Stock Based
Compensation," the Company's net income and EPS for the year ended
December 31, 1997 and six months ended December 31, 1996 would have
been adjusted to the pro-forma amounts indicated below:
Year Ended Six Months Ended
December 31, 1997 December 31, 1996
Net Income
As reported $23,352 $6,423
Pro-forma $22,695 $6,362
EPS (Diluted)
As reported $ 3.48 $ 0.99
Pro-forma $ 3.38 $ 0.98
The estimated weighted average fair value of stock options granted
during the year ended December 31, 1997 and the six months ended
December 31, 1996 was $6.24 and $2.30 per option, respectively. The
fair values were estimated on the grant dates utilizing the Black-
Scholes option-pricing model and the following assumptions:
F-17
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
Year Ended Six Months Ended
December 31, 1997 December 31, 1996
Risk free interest rates 6.2 - 6.6% 5.8 - 6.1%
Expected life 6 years 6 years
Expected volatility 36.7% 30.0%
Expected dividends - -
Restrictions on retained earnings
As a holding company, the Company's ability to pay any dividends in the
future will depend largely on the ability of its operating subsidiaries
and project entities to pay cash dividends or other cash distributions,
which dividends or other cash distributions may be materially limited
by the terms of credit agreements or other material contracts to which
such operating subsidiaries or project entities may be parties.
11. Extraordinary Item
During the six months ended December 31, 1996, the Company negotiated a
buyout of a subsidiary's capital lease obligation resulting in an
extraordinary gain of $1,643 (net of $124 of state income taxes).
12. Provision for Impaired Assets
In the fourth quarter of 1997, the Company completed a thorough review
of its business operations and market opportunities. As a result of
this review, the Company concluded that the estimated future cash flows
to be generated by certain assets were not sufficient to recover their
carrying values. Accordingly, the Company recorded an impairment
provision of $5,274 for such assets. The provision consisted of
property, plant and equipment write downs of $2,778 primarily related
to the generator sales and services business, $1,553 for equipment held
for sale, $500 to reduce the carrying value of the equity investment in
PoweRent, $371 to expense project development costs and $72 for other
impairments. The property plant and equipment and PoweRent provisions
reduced the asset carrying values to estimated fair values determined
by management and the board of directors based on prices of similar
assets and various valuation techniques. The equipment held for sale
provision represents the write off of remaining equipment which is
being scrapped. The project development write off was necessary due to
abandonment of certain projects.
During fiscal 1996 unrecoverable project development costs of $180 were
written off. In fiscal 1995, based on independent market appraisals,
the Company recorded charges of $15,985 to write-down property, plant
and equipment and $5,655 to write-down equipment held for sale to lower
fair values. In addition, project development costs of $4,418
determined to be unrecoverable were written off.
13. Disclosures about Fair Value of Financial Instruments
At December 31, 1997 and December 31, 1996, the carrying amounts and
fair values of the Company's financial instruments are as follows:
F-18
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
December 31, 1997 December 31, 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets:
Cash and cash equivalents $ 3,444 $ 3,444 $ 3,187 $ 3,187
Restricted cash and cash
equivalents 8,527 8,527 8,174 8,174
Notes receivable 27 27 1,202 1,202
Liabilities:
Short-term borrowings 1,313 1,313 2,388 2,388
Long-term debt 199,040 199,040 161,131 161,131
Loans and payables due
NRG Energy 7,303 7,303 15,644 15,644
Interest rate swap - 2,691 - 1,439
The carrying amounts of cash and cash equivalents, restricted cash and
cash equivalents and notes receivable approximates the fair value of
those instruments due to their short maturity. The fair value of short-
term and long-term debt and amounts due NRG Energy are estimated based
on interest rates available to the Company for issuance of debt with
similar terms and remaining maturities. The fair value of the interest
rate swap is the estimated amount that the Company would pay to
terminate the interest rate swap agreement at the reporting date.
Fair value estimates are made at a specific point in time based on
relevant market information about the financial instruments. The
estimated fair values of financial instruments presented are not
necessarily indicative of the amounts the Company might realize in
actual market transactions.
14. Income Taxes
Income (loss) before income taxes and extraordinary item consists of
the following:
Six Months
Year Ended Ended Year Ended
December 31, December 31, June 30, June 30,
1997 1996 1996 1995
United States $ 2,758 $ 4,195 $(18,054) $(38,225)
Foreign 140 317 (122) (14)
$ 2,898 $ 4,512 $(18,176) $(38,239)
The income tax provision (benefit) consists of:
Current income taxes:
Federal $ - $ 803 $ - $ -
State 946 570 792 402
946 1,373 792 402
Deferred income taxes:
Federal (20,400) (2,292) (493) 912
State (1,000) 651 (762) 1,366
(21,400) (1,641) (1,255) 2,278
Income tax provision (benefit)
excluding extraordinary
item $(20,454) $ (268) $ (463) $ 2,680
F-19
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
Deferred income taxes arise from temporary differences between the tax
bases of assets and liabilities and their reported amounts in the
financial statements. Deferred tax assets and liabilities are
comprised of the following:
December 31, December 31, June 30,
1997 1996 1996
Deferred income tax liabilities:
Property, plant & equipment $(18,925) $(18,445) $(18,109)
Total deferred tax liabilities (18,925) (18,445) (18,109)
Deferred income tax assets:
Net operating loss carryforwards 27,525 26,502 28,219
Alternative minimum tax credits 159 183 84
Investment tax credits 1,427 1,622 1,622
Miscellaneous 5,040 5,571 5,521
Valuation allowance (7,230) (28,837) (31,519)
Total deferred tax assets 26,921 5,041 3,927
Net deferred tax assets
(liabilities) $ 7,996 $(13,404) $(14,182)
The difference between tax expense (benefit) calculated at the U.S.
federal statutory tax rate and the recorded tax expense (benefit) on
pre-tax income before extraordinary item is reconciled below:
<TABLE>
<CAPTION>
Six Months
Year Ended Ended Year Ended
December 31, December 31, June 30, June 30,
1997 1996 1996 1995
<S> <C> <C> <C> <C>
Income tax (benefit) on the amount
of Federal statutory rate $ 985 $ 1,534 $ (6,180) $(13,001)
State income taxes (benefit) (36) 806 252 (286)
Current benefit of state operating
loss carryforwards (353) (655) (232) -
Operating losses with
no current tax benefit 1,182 - 3,204 2,272
Other increase (decrease)
in valuation allowance (22,232) (1,630) (544) 6,233
Excess liabilities - - - 4,000
Reorganization costs - - 2,636 1,712
Other - (323) 401 1,750
Total income tax provision
(benefit) $ (20,454) $ (268) $ (463) $ 2,680
</TABLE>
F-20
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
At December 31, 1997, the Company has federal net operating loss
carryforwards available to offset future regular taxable income and
investment tax credit carryforwards available to offset future federal
income taxes payable. These carryforwards expire as follows:
Net Operating Loss Investment Tax
December 31, Carryforwards Credit Carryforwards
1998 $ - $ 255
1999 - 240
2000 - 409
2001 353 82
2002 3,725 174
2003 1,720 52
2004 4,968 215
2005 13,089 -
2006 4,545 -
2007 15,089 -
2008 10,682 -
2009 6,358 -
2010 9,031 -
2011 - -
2012 1,695 -
Total $71,255 $1,427
The Company has $48,719 of state and local net operating loss
carryforwards available to offset future state and local taxable
income. These carryforwards will expire starting in 1998 and will
continue to expire through 2012. The Company also has foreign net
operating loss carryforwards of approximately $1,500. The net
operating loss carryforwards for alternative minimum tax purposes are
approximately $35,363 at December 31, 1997.
A valuation allowance was recorded in prior years to reserve primarily
for deferred tax assets that were not expected to be recovered through
future reversal of existing temporary differences. In management's
judgment, realization of the reserved tax benefits did not meet the
"more likely than not" recognition criteria of SFAS No. 109 due to the
Company's history of operating losses and projections of future taxable
income. At December 31, 1997, the valuation allowance was reduced to
$7,230 based on management's evaluation of the weight of available
evidence about the likelihood of realizing the deferred tax assets.
Positive factors contributing to the decision to reduce the valuation
allowance included the sustained period of profitability since
emergence from bankruptcy and improved outlooks for future earnings.
The remaining valuation allowance at December 31, 1997 reserves a
portion of the state operating loss carryforwards and certain other
temporary differences and all of the investment tax credit, capital
loss, and foreign operating loss carryforwards.
Under the Plan, NRG Energy acquired a 41.86% equity interest in the
Company. This acquisition, along with other shifts in shareholders'
stock holdings, amounted to a more than 50% change in ownership in the
Company over a three year period. Under the general net operating loss
and tax credit carryover rules, utilization of these losses and tax
credits would be limited. However, the Internal Revenue Code provides
an exception to the general rules for loss corporations that undergo an
F-21
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
ownership change by reason of certain bankruptcy proceedings. The
Company believes it qualifies for the bankruptcy exception and its net
operating loss and tax credit carryforwards are not subject to the
change of ownership limitations. The bankruptcy exception rules also
provide that if a subsequent ownership change should occur within the
two years following the bankruptcy-protected change, the benefits of
the bankruptcy exception will be lost and the Company's net operating
loss and tax credit carryforwards will be effectively eliminated. As
of December 31, 1997, the Company has not undergone a subsequent
ownership change in the two year period following the bankruptcy
protected change.
15. Transactions with Related Parties
NRG Energy provides management, administrative, operation and
maintenance services and certain other services to the Company.
Interest expense related to loans from NRG Energy was $1,327, $648 and
$1,098, for the year ended December 31, 1997, the six months ended
December 31, 1996 and for fiscal 1996. Selling, general and
administrative expenses include $562, $479 and $129 for reimbursement
of services provided by NRG Energy under the terms of a management
services agreement for the year ended December 31, 1997, the six months
ended December 31, 1996 and for the year ended June 30, 1996.
Effective January 1, 1997, Power Operation, Inc., a wholly-owned
subsidiary of the Company providing operations and maintenance for the
Newark and Parlin facilities under long-term contracts, was sold to NRG
Energy. The amount expensed by the Company for these services was $350
in 1997.
The Parlin project sells up to 9 MW of power to NRG Parlin, Inc.
("NPI"), a wholly-owned subsidiary of NRG Energy. NPI resells this
power at retail to a customer of the Company under an agreement
extending until 2021. Total sales to NPI were $1,300 in 1997.
NRG Energy is the project manager of the Morris Project acquired in
December 1997 by the Company from NRG Energy.
16. Segment Information and Major Customers
The Company operates principally in two industry segments. The energy
segment consists of the development and ownership of cogeneration and
standby/peak shaving projects. The equipment sales, rental and
services segment consists of the selling and renting of power
generation, cogeneration and standby/peak shaving equipment and
services. Information with respect to these business segments is as
follows:
Six Months
Year Ended Ended Year Ended
December 31, December 31, June 30, June 30,
1997 1996 1996 1995
Revenues:
Energy $ 43,210 $ 23,247 $ 69,308 $ 80,246
Equipment sales, rental
and services 21,594 16,669 27,239 22,001
$ 64,804 $ 39,916 $ 96,547 $102,247
Identifiable assets:
Energy $195,027 $141,890 $142,390 $164,243
Equipment sales, rental
and services 8,332 16,170 21,342 22,866
Corporate assets 24,535 15,564 14,430 2,639
$227,894 $173,624 $178,162 $189,748
F-22
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
Six Months
Year Ended Ended Year Ended
December 31, December 31, June 30, June 30,
1997 1996 1996 1995
Operating income (loss):
Energy $ 24,984 $ 12,136 $ 16,785 $ 19,642
Equipment sales, rental
and services (2,020) 1,018 (754) (20,265)
General corporate expenses (6,608) (1,374) (4,029) (11,254)
$ 16,356 $ 11,780 $ 12,002 $(11,877)
Depreciation expense:
Energy $ 6,788 $ 3,272 $ 7,025 $ 7,152
Equipment sales, rental
and services 498 333 756 1,494
Not allocable 34 21 77 246
$ 7,320 $ 3,626 $ 7,858 $ 8,892
Capital expenditures:
Energy $ 5,115 $ 1,189 $ 273 $ 457
Equipment sales, rental
and services 432 31 7 161
Not allocable 168 2 19 126
$ 5,715 $ 1,222 $ 299 $ 744
Revenue by segment consists of sales to unaffiliated customers;
intersegment sales are not significant. For the purpose of this
presentation, development and other fees are considered revenues of the
energy segment. Selling, general and administrative expenses have been
allocated to the individual segments on the basis of segment revenues
and geographical location.
Identifiable assets are those assets that are used in the operations of
each business segment. Corporate assets are those not used in the
operations of a specific segment and consist primarily of cash,
deferred financing costs and deferred taxes.
Information with respect to the Company's geographical areas of
business is as follows:
Six Months
Year Ended Ended Year Ended
December 31, December 31, June 30, June 30,
1997 1996 1996 1995
Revenues:
United States $ 51,504 $ 27,937 $ 82,917 $ 89,332
United Kingdom 13,300 11,979 13,630 12,915
$ 64,804 $ 39,916 $ 96,547 $102,247
Net income (loss):
United States $ 23,236 $ 6,087 $(17,591) $(40,905)
United Kingdom 116 336 (122) (14)
$ 23,352 $ 6,423 $(17,713) $(40,919)
Identifiable assets:
United States $221,752 $164,631 $169,657 $179,793
United Kingdom 6,142 8,993 8,505 9,955
$227,894 $173,624 $178,162 $189,748
F-23
<PAGE>
NRG Generating (U.S.) Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands)
Revenues from one energy customer accounted for 57%, 46%, 62% and 65%
for the year ended December 31, 1997, the six months ended December 31,
1996, and the years ended June 30, 1996 and 1995, respectively.
17. Operating Leases
Total rental expense under various operating leases was approximately
$178, $504, $804 and $1,300 for the year ended December 31, 1997, the
six months ended December 31, 1996, and the years ended June 30, 1996
and 1995, respectively.
18. Minority Interest
O'Brien (Philadelphia) Cogeneration ("OPC"), a subsidiary of the
Company, is 17% owned by an unrelated private investor. OPC is
required to make quarterly distributions to the minority owner of 17%
of its net earnings. These distributions totaled $244, $125 and $227
for the year ended December 31, 1997, the six months ended December 31,
1996, and fiscal 1996, respectively, and are recorded as interest
expense in the consolidated statement of operations. The 17% minority
interest is redeemable by the Company at its option for a price equal
to 17% of the present value of the projected income stream of OPC. The
Company is obligated upon certain events of default to redeem the
minority interest at 60% of the Company's redemption price. The
Company's redemption price at December 31, 1997 was approximately
$2,315. There are no events of default.
19. Subsequent Event
On March 9, 1998, the Company announced that it had received notice
from PECO Energy ("PECO"), the purchaser of electric power from Grays
Ferry Cogeneration Partnership, that PECO believed that its power
purchase agreements with the partnership relating to the Grays Ferry
project were no longer in effect and that PECO refused to pay the
electricity rates set forth in the agreements. The Company has filed
a lawsuit against PECO and the Pennsylvania Public Utility Commission
seeking to prevent PECO from terminating its power purchase agreements
with the Grays Ferry Cogeneration Partnership, to compel PECO to pay
the electricity rates set forth in the agreements, and to compel the
Pennsylvania Public Commission to allow the costs of the power purchase
agreements to be recovered in retail electric rates. The Company is
uncertain as to what the outcome of this matter will be or what effect
it will have on the business or financial condition of the Company.
The Grays Ferry Cogeneration Partnership has received a notice of
default from the agent for the lenders under its principal loan
agreement. As of the date of this Report, management believes that it
is not in default under any of its principal credit agreements as a
result of the asserted Grays Ferry default. However, either (i) the
passage of time under the current circumstances, or (ii) certain
actions which may be taken by the lenders to the Grays Ferry Partnership
as a consequence of the asserted Grays Ferry default, would result in a
cross-default under a $30,000 reducing revolving credit facility that
the Company entered into in December 1997. Such a cross-default, if it
were to occur, could result in further cross-defaults under other
credit agreements of the Company and its subsidiaries. The Company has
obtained a temporary waiver of any cross-default under the
$30,000 reducing revolving credit facility. However, there can be no
assurance that the Company will be successful continuing to obtain any
such waiver if and when it may be needed or in avoiding such cross-
defaults. As a result, there can be no assurance that the Grays Ferry
default will not result in cross-defaults which would have a material
adverse effect on the Company's liquidity and financial condition.
F-24
<PAGE>
Index to Exhibits
Exhibit
No. Description
2.1 Composite Fourth Amended and Restated Plan of Reorganization
for the Company dated January 31, 1996 and proposed by the
Company, the Official Committee of Equity Security Holders,
Wexford Management Corp. ("Wexford") and NRG Energy, Inc.
("NRG Energy") filed as Exhibit 2.1 to Amendment No. 1 to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
2.2 Order confirming Composite Fourth Amended and Restated Plan
of Reorganization for the Company proposed by the Company,
the Official Committee of Equity Security Holders, Wexford
and NRG Energy dated February 13, 1996 and entered on
February 22, 1996 and filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K dated February 13, 1996 and
incorporated herein by this reference.
2.3 Amended and Restated Stock Purchase and Reorganization
Agreement dated January 31, 1996 between the Company and NRG
Energy filed as Exhibit 10.1 to the Company's Current Report
on Form 8-K dated February 13, 1996 and incorporated herein
by this reference.
2.4 Letter Agreement dated April 26, 1996 between the Company and
NRG Energy amending the Stock Purchase and Reorganization
Agreement filed as Exhibit 2.4 to Amendment No. 1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
3.1 Amended and Restated Certificate of Incorporation of the
Company filed as Exhibit 3.1 to Amendment No. 1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
3.2 Preferred Stock Certificate of Designation of the Company
filed as Exhibit 3.3 to the Company's Current Report on Form
8-K dated April 30, 1996 and incorporated herein by this
reference.
3.3 Restated Bylaws of the Company.
10.1 Co-Investment Agreement dated April 30, 1996 between the
Company and NRG Energy filed as Exhibit 10.1 to Amendment No.
1 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996 and incorporated herein by this
reference.
10.2.1 Chapter 11 Financing Agreement dated August 30, 1995 between
the Company and NRG Energy filed as Exhibit 10.2.1 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.2.2 Letter Agreement dated February 20, 1996 between the Company
and NRG Energy amending the Chapter 11 Financing Agreement
filed as Exhibit 10.2.2 to Amendment No. 1 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
1996 and incorporated herein by this reference.
10.2.3 Letter Agreement dated April 30, 1996 between the Company and
NRG Energy further amending the Chapter 11 Financing
Agreement filed as Exhibit 10.2.3 to Amendment No. 1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
41
<PAGE>
10.3 Liquidating Asset Management Agreement dated April 30, 1996
between the Company and Wexford filed as Exhibit 10.3 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.4 Management Services Agreement dated as of January 31, 1996
between the Company and NRG Energy filed as Exhibit 10.4 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.5.1 Loan Agreement dated April 30, 1996 between the Company and
NRG Energy filed as Exhibit 10.5.1 to Amendment No. 1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.5.2 Note dated April 30, 1996 from the Company to NRG Energy in
the principal amount of $45,000,000 filed as Exhibit 10.5.2
to Amendment No. 1 to the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.6.1 Supplemental Loan Agreement dated April 30, 1996 between NRG
Energy and the Company filed as Exhibit 10.6.1 to Amendment
No. 1 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996 and incorporated herein by
this reference.
10.6.2 Note dated April 30, 1996 from the Company to NRG Energy in
the principal amount of $15,855,545.25 filed as Exhibit
10.6.2 to Amendment No. 1 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by this reference.
10.7.1 NRG Newark Cogen Loan Agreement dated April 30, 1996 between
NRG Energy and the Company filed as Exhibit 10.7.1 to
Amendment No. 2 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.7.2 Note dated April 30, 1996 from the Company to NRG Energy in
the principal amount of $24,000,000 filed as Exhibit 10.7.2
to Amendment No. 1 to the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.8.1 Credit Agreement dated May 17, 1996 between NRG Generating
(Newark) Cogeneration Inc. ("NRGG Newark"), NRG Generating
(Parlin) Cogeneration Inc. ("NRGG Parlin"), Credit Suisse,
Greenwich Funding Corporation and any Purchasing lender, as
Lenders thereunder filed as Exhibit 10.8.1 to Amendment No. 1
to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996 and incorporated herein by this
reference.
10.8.2 Amendment No. 1 to the Credit Agreement dated June 28, 1996
between NRG Generating (Newark) Inc., NRG Generating (Newark)
Inc. and Credit Suisse, Greenwich Funding Corporation and any
Purchase Lender (as defined therein) filed as Exhibit 10.8.2
to Amendment No. 1 to the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.8.3 Stock Pledge Agreement dated June 28, 1996 between the
Company as Pledgor and
42
<PAGE>
Credit Suisse filed as Exhibit 10.8.3 to Amendment No. 1 to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.8.4 Guaranty dated as of May 17, 1996 by NRG Energy, as
Guarantor, to Credit Suisse, as Agent for the benefit of
Credit Suisse, Greenwich Funding Corporation and any
Purchasing Lender, as Lenders under the Credit Agreement (as
defined therein) filed as Exhibit 10.8.4 to Amendment No. 1
to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996 and incorporated herein by this
reference.
10.8.5 Guaranty dated as of June 28, 1996 by the Company as
Guarantor to Credit Suisse as Agent for the benefit of Credit
Suisse, Greenwich Funding Corporation and any Purchasing
Lender, as Lenders under the Credit Agreement (as defined
therein) filed as Exhibit 10.8.5 to Amendment No. 1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.8.6 Tax Indemnification Agreement dated June 28, 1996 between the
Company, NRGG Newark, NRGG Parlin and Credit Suisse filed as
Exhibit 10.8.6 to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.8.7 Assignment and Security Agreement dated June 28, 1996 between
NRGG Parlin and Credit Suisse filed as Exhibit 10.8.7 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.8.8 Amended and Restated Leasehold Mortgage, Assignment of Leases
and Rents and Security Agreement dated June 28, 1996 between
NRGG Newark and Credit Suisse filed as Exhibit 10.8.8 to
Amendment No. 2 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.8.9 Leasehold Mortgage, Assignment of Leases and Rents and
Security Agreement dated June 28, 1996 between NRGG Parlin
and Credit Suisse filed as Exhibit 10.8.9 to Amendment No. 2
to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996 and incorporated herein by this
reference.
10.8.10 Interest Rate Swap Agreement dated August 2, 1996 between
NRGG Newark, NRGG Parlin and Credit Suisse filed as Exhibit
10.8.10 to Amendment No. 1 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by this reference.
10.9.1 Loan Agreement dated March 8, 1996 between O'Brien
(Schuylkill) Cogeneration Inc. and NRG Energy in connection
with the Grays Ferry Partnership filed as Exhibit 10.9.1 to
Amendment No. 2 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.9.2 Option Agreement dated May 1, 1996 between O'Brien
(Schuylkill) Cogeneration Inc. and NRG Energy filed as
Exhibit 10.9.2 to Amendment No. 2 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.10.1 Gas Supply Agreement dated June 30, 1992 between the Company
and The
43
<PAGE>
Philadelphia Municipal Authority (the "PMA") regarding the NE
Plant (Philadelphia Project) and filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1992 and incorporated herein by this
reference.
10.10.2 Gas Supply Agreement dated June 30, 1992 between the Company
and the PMA regarding the SW Plant (Philadelphia Project) and
filed as an exhibit to the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1992 and incorporated
herein by this reference.
10.10.3 Energy Service Agreement dated June 30, 1992 between the
Company and the PMA regarding the NE Plant (Philadelphia
Project) and filed as an exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1992
and incorporated herein by this reference.
10.10.4 Energy Service Agreement dated June 30, 1992 between the
Company and the PMA regarding the SW Plant (Philadelphia
Project) and filed as an exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1992
and incorporated herein by this reference.
10.10.5 Stock Purchase Agreement dated November 12, 1993 between the
Company, OPC Acquisition, Inc. and BioGas Acquisition, Inc.
and filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1993 and
incorporated herein by this reference.
10.10.6 Loan Agreement between the Company and PECO Energy Company
("PECO") filed as Exhibit 10.10.6 to Amendment No. 2 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.11.1 Long Term Power Purchase Contract for Cogeneration and Small
Power Production dated March 10, 1986 between the Company and
Jersey Central Power and Light ("JCP&L") and filed as an
exhibit to the Company's Registration Statement (File No. 33-
11789) and incorporated herein by this reference.
10.11.2 Letter Agreement dated June 2, 1986 between the Company and
JCP&L amending the Long Term Power Purchase Contract filed as
Exhibit 10.11.2 to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.11.3 Second Amendment to Power Purchase Agreement dated March 1,
1988 between the Company and JCP&L filed as Exhibit 10.11.3
to Amendment No. 1 to the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.11.4 Letter Agreement dated April 30, 1996 between O'Brien
(Newark) Cogeneration, O'Brien (Parlin) Cogeneration and
JCP&L filed as Exhibit 10.11.4 to Amendment No. 1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.11.5 Third Amendment to Power Purchase Agreement dated April 30,
1996 between O'Brien (Newark) Cogeneration and JCP&L filed as
Exhibit 10.11.5 to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.12 Transmission Service and Interconnection Agreement dated
November 17, 1987
44
<PAGE>
between O'Brien Energy Systems, Inc. and Public Service
Electric and Gas Company filed as Exhibit 10.14 to Amendment
No. 2 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996 and incorporated herein by
this reference.
10.13.1 Steam Purchase Agreement dated October 3, 1986 between
O'Brien Cogeneration IV, Inc. and Newark Boxboard Co. filed
as Exhibit 10.15.1 to Amendment No. 2 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.13.2 Amendment to Steam Purchase Agreement dated March 15, 1988
between O'Brien Cogeneration IV, Inc. and Newark Boxboard Co
filed as Exhibit 10.15.2 to Amendment No. 1 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
1996 and incorporated herein by this reference.
10.13.3 Amendment to Steam Purchase Agreement dated July 18, 1988
between O'Brien (Newark) Cogeneration, Inc. and Newark Group
Industries, Inc. filed as Exhibit 10.15.3 to Amendment No. 1
to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996 and incorporated herein by this
reference.
10.14.1 Operating and Maintenance Agreement dated May 1, 1996 between
NRGG Newark and Stewart & Stevenson Operations, Inc. filed as
Exhibit 10.16.1 to Amendment No. 2 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.14.2 Letter Agreement dated May 10, 1996 between the Company and
Stewart & Stevenson Operations, Inc. filed as Exhibit 10.16.2
to Amendment No. 2 to the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.14.3 Letter Agreement dated May 20, 1996 between NRG Generating
(Newark) Cogeneration and Stewart & Stevenson Operations,
Inc. filed as Exhibit 10.16.3 to Amendment No. 2 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.15.1 Agreement for Purchase and Sale of Electric Power dated
October 20. 1986 between the Company and JCP&L and filed as
an exhibit to the Company's Registration Statement (File No.
33-11789) and incorporated herein by this reference.
10.15.2 First Amendment to Agreement for Purchase and Sale Electric
Power dated June 11, 1991 between the Company and JCP&L filed
as Exhibit 10.17.2 to Amendment No. 2 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.15.3 Amended and Restated Agreement for Purchase and Sale of
Electric Power dated April 30, 1996 between O'Brien (Parlin)
Cogeneration, Inc. and JCP&L filed as Exhibit 10.17.3 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.15.4 Letter Agreement dated April 30, 1996 between O'Brien
(Parlin) Cogeneration, Inc. and JCP&L filed as Exhibit
10.17.4 to Amendment No. 1 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by this reference.
45
<PAGE>
10.16.1 Steam Purchase Contract dated December 8, 1986 between the
Company and E.I. du Pont de Nemours("E.I. du Pont") and
Company filed as Exhibit 10.20.1 to Amendment No. 1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.16.2 Amendment No. 1 to Steam Purchase Contract dated January 12,
1988 between the Company and E.I. du Pont filed as Exhibit
10.20.2 to Amendment No. 1 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by this reference.
10.16.3 Letter Agreement dated July 25, 1988 between the Company and
E.I. du Pont filed as Exhibit 10.20.3 to Amendment No. 1 to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.16.4 Amendment No. 3 to Steam Purchase Agreement dated December
12, 1988 between the Company and E.I. du Pont filed as
Exhibit 10.20.4 to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.16.5 Amendment No. 4 to Steam Purchase Contract dated July 14,
1989 between the Company and E.I. du Pont filed as Exhibit
10.20.5 to Amendment No. 1 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by this reference.
10.16.6 Amendment No. 5 to Steam Purchase Contract dated February 16,
1993 between the Company and E.I. du Pont filed as Exhibit
10.20.6 to Amendment No. 1 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by this reference.
10.17.1 Electricity Purchase Contract dated January 18, 1988 between
the Company and E.I. du Pont filed as Exhibit 10.21.1 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.17.2 Electricity Purchase Contract dated April 30, 1996 between
O'Brien (Parlin) Cogeneration Inc. and NRG Parlin Inc. filed
as Exhibit 10.21.2 to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.17.3 Assignment of Electricity Purchase Contract dated April 30,
1996 between O'Brien (Parlin) Cogeneration, Inc., NRG Parlin,
Inc. and E.I. du Pont filed as Exhibit 10.21.3 to Amendment
No. 1 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996 and incorporated herein by
this reference.
10.18.1 Operating & Maintenance Agreement dated May 1, 1996 between
NRG Generating (Parlin) Cogeneration, Inc. and Stewart
Stevenson Operations, Inc. filed as Exhibit 10.22.1 to
Amendment No. 2 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.18.2 Agreement dated May 1, 1996 between the Company, NRGG Newark,
NRGG Parlin and Stewart & Stevenson Operations, Inc. filed as
Exhibit 10.22.2 to Amendment No. 2 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.18.3 Letter Agreement dated May 20, 1996 between NRG Generating
(Parlin)
46
<PAGE>
Cogeneration, Inc. and Stewart & Stevenson Operations, Inc.
filed as Exhibit 10.22.3 to Amendment No. 2 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
1996 and incorporated herein by this reference.
10.19 Amended and Restated Partnership Agreement of Grays Ferry
Cogeneration Partnership ("Grays Ferry") dated March 1, 1996,
between Adwin (Schuylkill) Cogeneration, Inc. ("Adwin
Schuylkill"), O'Brien (Schuylkill) Cogeneration, Inc.
("O'Brien Schuylkill") and Trigen-Schuylkill Cogeneration,
Inc. ("Trigen-Schuylkill") filed as Exhibit 10.23 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.20.1 Acquisition Agreement dated March 1, 1996 between Adwin
Schuylkill, O'Brien Schuylkill and Trigen-Schuylkill filed as
Exhibit 10.24.1 to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.20.2 Side Agreement dated March 1, 1996 between Adwin Schuylkill,
O'Brien Schuylkill and Trigen-Schuylkill filed as Exhibit
10.24.2 to Amendment No. 1 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by this reference.
10.21.1 Contingent Capacity Purchase Addendum to the Agreement for
Purchase of Electric Output (Phase I) dated September 17,
1993 between PECO and Grays Ferry filed as Exhibit 10.25.1 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.21.2 Contingent Capacity Purchase Addendum to the Agreement for
Purchase of Electric Output (Phase II) dated September 17,
1993 between PECO and Grays Ferry filed as Exhibit 10.25.2 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.21.3 Amendment Agreement dated January 31, 1994 between PECO and
Grays Ferry filed as Exhibit 10.25.3 to Amendment No. 2 to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.21.4 Agreement for Purchase of Electric Output (Phase I) dated
July 28, 1992 between PECO and Grays Ferry filed as Exhibit
10.25.4 to Amendment No. 2 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by this reference.
10.21.5 Agreement for Purchase of Electric Output (Phase II) dated
July 28, 1992 between PECO and Grays Ferry filed as Exhibit
10.25.5 to Amendment No. 2 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 and
incorporated herein by this reference.
10.22.1 Amended and Restated Steam Purchase Agreement dated September
17, 1993 among Philadelphia Thermal Energy Corporation
("PTEC"), Adwin Equipment Company ("Adwin"), The Company and
Grays Ferry filed as Exhibit 10.26.1 to Amendment No. 1 to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
47
<PAGE>
10.22.2 Amended and Restated Steam Venture Agreement dated September
17, 1993 among PTEC, Philadelphia United Power Corporation
("PUPCO"), Adwin and the Company filed as Exhibit 10.26.2 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.23.1 Amended and Restated Project Services and Development
Agreement dated September 17, 1993 by and between PUPCO and
Grays Ferry filed as Exhibit 10.27.1 to Amendment No. 2 to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.23.2 Consent to Assignment of Agreement dated March 1, 1996
between PUPCO, Grays Ferry Cogeneration Partnership and The
Chase Manhattan Bank, N.A. filed as Exhibit 10.27.2 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.24 Amended and Restated Site lease, dated September 17, 1993
between PTEC and Grays Ferry filed as Exhibit 10.28 to
Amendment No. 1 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated
herein by this reference.
10.25.1 NRG Generating (Newark) Cogeneration Inc./Power Operations,
Inc. Operating and Maintenance Agreement dated November 8,
1996 between NRG Generating (Newark) Cogeneration Inc. and
Power Operations, Inc.
10.25.2 NRG Generating (Parlin) Cogeneration Inc./Power Operations,
Inc. Operating and Maintenance Agreement dated December 31,
1996 between NRG Generating (Parlin) Cogeneration Inc. and
Power Operations, Inc.
10.25.3 Guarantee of Operator's Obligations by the Company dated
November 8, 1996 relative to NRG Generating (Newark)
Cogeneration Inc.
10.25.4 Indemnification Agreement dated March 21, 1997 between NRG
Generating (Newark) Cogeneration Inc., NRG Generating
(Parlin) Cogeneration Inc., NRG Energy and Credit Suisse
First Boston.
10.25.5 Stock Purchase Agreement dated January 1, 1997 between NRG
Energy and the Company.
10.25.6 Guarantee of Operator's Obligations by NRG Energy dated March
21, 1997 between NRG Generating (Newark) Cogeneration Inc.
and NRG Generating (Parlin) Cogeneration Inc.
10.25.7 Consent to Assignment of Operating Guaranty Agreement dated
March 21, 1997 between NRG Generating (Newark) Cogeneration
Inc., NRG Generating (Parlin) Cogeneration Inc., NRG Energy
and Credit Suisse First Boston.
10.26.1 Credit Agreement dated December 17, 1997 between NRG
Generating (U.S.) Inc., MeesPierson Capital Corp. and the
Lenders (as defined therein).
10.26.2 Promissory Note dated December 17, 1997 from the Company to
MeesPierson Capital Corp. in the principal amount of
$30,000,000.
10.26.3 Pledge Agreement dated December 17, 1997, between NRG
Generating (U.S.) Inc. and MeesPierson Capital Corp.
10.26.4 Guarantee dated as of December 17, 1997, made by O'Brien
(Philadelphia)
48
<PAGE>
Cogeneration Inc. in favor of MeesPierson Capital Corp.
10.26.5 General Security Agreement dated as of December 17, 1997,
between O'Brien (Philadelphia) Cogeneration Inc. and
MeesPierson Capital Corp.
10.26.6 General Security Agreement dated as of December 17, 1997, by
NRG Generating (U.S.) Inc. in favor of MeesPierson Capital
Corp.
10.26.7 General Security Agreement dated as of December 17, 1997, by
O'Brien Energy Services Company in favor of MeesPierson
Capital Corp.
10.26.8 Subordination Agreement dated as of December 10, 1997, among
MeesPierson Capital Corp., the Senior Lenders, NRG Generating
(U.S.) Inc. and NRG Energy, Inc.
10.26.9 Subordination Agreement dated as of December 17, 1997 among
MeesPierson Capital Corp., the Senior Lenders, O'Brien
(Philadelphia) Cogeneration Inc. and O'Brien Energy Services
Company.
10.27.1 Membership Interest Purchase Agreement dated December 10,
1997 between NRG Energy, NRGG Funding Inc. ("NRGG Funding")
and the Company filed as Exhibit 2.1 to the Company's Current
Report on Form 8-K dated December 30, 1997 and incorporated
herein by this reference.
10.27.2 Equity Commitment Agreement dated September 15, 1997 between
NRG Energy and The Chase Manhattan Bank ("Chase").
10.27.3 Assignment and Assumption Agreement dated December 10, 1997
between NRG Energy and NRGG Funding.
10.27.4 Equity Commitment Guaranty, dated as of December 10, 1997 by
NRG Energy in favor of Chase and NRG (Morris) Cogen, LLC
("Cogen, LLC").
10.27.5 Amendment and Consent, dated as of December 10, 1997 among
Cogen, LLC and the banks (the "Banks") party to the Credit
Agreement, dated as of September 15, 1997, among Cogen, LLC,
the Banks and Chase.
10.27.6 Construction Services Agreement dated August 29, 1997 between
Cogen, LLC and NRG Energy.
10.27.7 First Amendment to Construction Services Agreement dated
December 10, 1997 between Cogen, LLC and NRG Energy.
10.27.8 Construction and Term Loan Agreement dated September 15, 1997
between Cogen, LLC, Chase and the Banks.
10.27.9 Consent and Amendment, dated as of December 10, 1997, among
Cogen, LLC, the Banks and Chase.
10.27.10 Pledge and Security Agreement, dated as of December 10, 1997
by NRGG Funding and Morris in favor of Chase.
10.27.11 Supplemental Loan Agreement, dated as of December 10, 1997
between NRG Energy, the Company and NRGG Funding.
10.27.12 Subordination Agreement, dated as of December 10, 1997
between Chase and NRG Energy.
10.27.13 Subordinated Pledge and Security Agreement, dated as of
December 10, 1997 by NRGG Funding and Morris to NRG Energy.
49
<PAGE>
10.27.14 Operation and Maintenance Agreement dated September 19, 1997
between Cogen, LLC and NRG Morris Operations Inc.
10.27.15 First Amendment to Operation and Maintenance Agreement dated
December 10, 1997 between Cogen, LLC and NRG Morris
Operations Inc.
10.27.19 Assignment, Assumption and Consent, dated as of December 30,
1997 among NRG Energy, NRGG Funding, the Company and Equistar
Chemicals, LP a successor in interest to Millennium
Petrochemicals, Inc.
10.27.20 Limited Guaranty dated September 19, 1997 by NRG Energy for
the benefit of Cogen, LLC.
10.27.21 First Amendment to Limited Guaranty, dated as of the 10th day
of December, 1997 that amends the Limited Guaranty made by
NRG Energy for the benefit of Cogen, LLC dated September 19,
1997.
10.28 Newark Lease filed as Exhibit 10.29 to Amendment No. 2 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.29 Parlin Lease filed as Exhibit 10.30 to Amendment No. 2 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.30.1 NRG Generating (U.S.) Inc. 1996 Stock Option Plan ("1996
Plan") dated September 20, 1996 and filed as Appendix A to
the Company's Proxy Statement dated October 28, 1996 and
incorporated herein by this reference.
10.30.2 Form of 1996 Plan Incentive Stock Option Agreement filed as
Exhibit 10.31.2 to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996
and incorporated herein by this reference.
10.30.3 Form of 1996 Plan Employee Nonqualified Stock Option
Agreement filed as Exhibit 10.31.3 to Amendment No. 1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 and incorporated herein by this
reference.
10.30.4 Form of 1996 Plan Nonemployee Director Nonqualified Stock
Option Agreement filed as Exhibit 10.31.4 to Amendment No. 1
to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996 and incorporated herein by this
reference.
10.31.1 NRG Generating (U.S.) Inc. 1997 Stock Option Plan ("1997
Plan") dated May 1, 1997 and filed as an Appendix to the
Company's Proxy Statement dated April 24, 1997 and
incorporated herein by this reference.
10.31.2 Form of 1997 Plan Incentive Stock Option Agreement.
10.31.3 Form of 1997 Plan Employee Nonqualified Stock Option
Agreement.
10.31.4 Form of 1997 Plan Nonemployee Director Nonqualified Stock
Option Agreement.
10.32 Employment Agreement dated March 28, 1997 between the Company
and Robert T. Sherman, Jr., and filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997 and incorporated herein by
this reference.
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<PAGE>
10.33 Employment Agreement dated August 28, 1997 between the
Company and Richard Stone.
10.34 Employment Agreement dated April 30, 1996 between the Company
and Leonard A. Bluhm filed as Exhibit 10.32 to Amendment No.
1 to the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996 and incorporated herein by this
reference.
10.35 Confidentiality Agreement dated October 3, 1997 between the
Company and NRG Energy.
21 List of Subsidiaries of the Registrant.
23.1 Consent of Price Waterhouse LLP.
27 Financial Data Schedule.
51
<PAGE>
Exhibit 3.3
NRG GENERATING (U.S.) INC.
RESTATED BY-LAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
1.1. Annual.
The annual meeting of stockholders for the election of
directors, ratification or rejection of the selection of auditors and
the transaction of such other business as may properly be brought
before the meeting shall be held within five months after the end of
the corporation's fiscal year, or such other time as may be determined
by the board of directors at such time, date and place as the board
shall determine by resolution.
1.2. Special.
Special meetings of stockholders may be called by the board of
directors or the chairman of the board of directors or the Independent
Directors' Committee (as described in Section 3.1(b)), at such place,
date and time and for such purpose or purposes as shall be set forth in
the notice of such meeting.
1.3. Notice of Meetings.
Written notice of each meeting of stockholders shall be given
by the chairman of the board and/or the secretary in compliance with
the provisions of Delaware law.
1.4. List of Stockholders Entitled to Vote.
The secretary shall prepare, at least ten 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 ten 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.
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<PAGE>
1.5. Quorum.
At each meeting of the stockholders, except where otherwise
provided by law or the certificate of incorporation or these by-laws,
the holders of sixty percent of the voting power of the outstanding
shares of stock entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum. In the absence of a quorum, the
stockholders so present may, by majority vote, adjourn the meeting from
time to time in the manner provided in Section 1.9 of these by-laws
until a quorum shall attend. Shares of its own stock belonging to the
corporation or to another corporation, if a majority of the shares
entitled to vote in the election of directors of such other corporation
is held, directly or indirectly, by the corporation, shall neither be
entitled to vote nor be counted for quorum purposes; provided, however,
that the foregoing shall not limit the right of the corporation to vote
stock, including but not limited to its own stock, held by it in a
fiduciary capacity.
1.6. Organization.
The chairman or, if he so designates or is absent, the chief
executive officer or, in their absence, an executive vice president or
vice president designated by the board of directors, shall preside at
meetings of the stockholders. The secretary of the corporation shall
act as secretary, but in his absence the presiding officer may appoint
a secretary.
1.7. Voting; Proxies.
(a) Each stockholder shall be entitled to vote in accordance
with the number of shares and voting powers of the voting shares held
of record by him. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by
proxy, but such proxy, whether revocable or irrevocable, shall comply
with the requirements of Delaware law. All elections and questions
shall, unless otherwise provided by law or by the certificate of
incorporation or these by-laws, be decided by the vote of the holders
of a majority of the voting power of the shares of stock entitled to
vote thereon present in person or by proxy at the meeting.
(b) 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 or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding shares of stock having no
less than the greater of: (i) 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 and (ii) 75% of
the voting power of the shares of stock entitled to vote thereon.
Prompt notice of the taking of the corporate action without a
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meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
1.8 Fixing Date for Determination of Stockholders of Record.
In order that the corporation may determine the stockholders
entitled: (a) to notice of or to vote at any meeting of stockholders or
any adjournment thereof; (b) to express consent to corporate action in
writing without a meeting; (c) to receive payment of any dividend or
other distribution or allotment of any rights; or (d) 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
a record date. The record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of
directors and which record date: (a) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall not be more than sixty nor less than ten
days before the date of such meeting; (b) in the case of determination
of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the
date upon which the resolution fixing the record date is adopted by the
board of directors; and (c) in the case of any other action, shall not
be more than sixty days prior to such 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.
1.9. Adjournments.
Any meeting of stockholders, annual or special, may adjourn
from time to time to reconvene at the same or other place, and notice
need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting the corporation may transact any business
which might have been transacted at the original meeting. If the
adjournment is for more than thirty 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.
1.10. Judges.
All votes by ballot at any meeting of stockholders shall be
conducted by two judges appointed for the purpose, either by the
directors or by the chairman of the meeting. The judges shall decide
upon the qualifications of voters, count the votes and declare the
result.
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1.11. Notice of Stockholder Nomination and Stockholder Business.
(a) At a meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting.
(b) A notice of the intent of a stockholder to make a
nomination or to bring any other matter before the meeting shall be
made in writing and received by the secretary of the corporation not
more than 180 days and not less than 120 days in advance of the annual
meeting (provided, however, that the board of directors may reduce from
120 to 100 the minimum number of days in advance of the corporation's
annual meeting scheduled for a particular year that a notice of the
intent of a stockholder to make a nomination or to bring any other
matter before the meeting shall be made in writing and received by the
corporation's secretary, if the board of directors determines by the
affirmative vote of no fewer than the lesser of all of the directors
then in office, or six (6) of the corporation's directors, that it is
in the best interest of the corporation to do so)(1) or, in the event
of a special meeting of stockholders, such notice shall be received by
the secretary of the corporation not later than the close of the
fifteenth day following the day on which notice of the meeting is first
mailed to stockholders.
(c) Every such notice by a stockholder shall set forth:
(i) the name and residence address of the stockholder
of the corporation who intends to make a nomination or bring up
any other matter;
(ii) a representation that the stockholder is a holder
of the corporation's voting stock and intends to appear in person
or by proxy at the meeting to make the nomination or bring up the
matter specified in the notice;
(iii) with respect to notice of an intent to make a
nomination, a description of all arrangements or understandings
among the stockholder and each nominee and any other person or
persons (naming such person or person) pursuant to which the
nomination or nominations are to be made by the stockholder;
(iv) with respect to notice of an intent to make a
nomination, such other information regarding each nominee
proposed by such stockholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission had each nominee been
nominated by the board of directors of the corporation; and
(1) This parenthetical was added to this Subsection as of January 20,
1998.
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(v) with respect to notice of an intent to bring up any
other matter, a description of the matter, and any material
interest of the stockholder in the matter.
(d) Notice of intent to make a nomination shall be accompanied
by the written consent of each nominee to serve as director of the
corporation if so elected.
(e) At the meeting of stockholders, the chairman shall declare
out of order and disregard any nomination or any other matter not
presented in accordance with this section.
ARTICLE II
BOARD OF DIRECTORS
2.1. Responsibility and Number.
(a) The business and affairs of the corporation shall be
managed by or under the direction of a board of directors.
(b) The number of directors shall be eight (2); provided that
such number of directors may be increased to eight if necessary or
required by the terms of any series of preferred stock that may be
issued from time to time pursuant to a resolution of the board of
directors in accordance with Article FOURTH of the corporation's
certificate of incorporation.
2.2. Election; Resignation; Vacancies.
(a) At each annual meeting of stockholders, the stockholders
shall elect directors, each of whom shall hold office for a term
commencing on the date of the annual meeting of stockholders, or such
later date as shall be determined by the board of directors, and ending
on the next annual meeting of stockholders, or until his or her
successor is elected and qualified. Any director may resign at any
time upon written notice to the chairman of the board or to the
secretary.
(b) Except as otherwise provided in these by-laws with respect
to Independent Directors (as defined in Section 2.10(c)), the nominees
of the board of directors for the election of whom the board will
solicit proxies from the stockholders for use at the corporation's
annual meeting shall be determined by resolution of the board of
directors.
(c) Except as otherwise provided in these by-laws with respect
to Independent Directors, any vacancy occurring in the board of
directors for any reason may be filled by a majority of the remaining
members of the board of directors, although such majority is less than
a quorum. Each director so elected shall
(2) The number was increased from seven to eight on March 27, 1997.
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hold office concurrent with the term of other directors or until his
successor is elected and qualified.
2.3 Regular Meetings.
Unless otherwise determined by resolution of the board of
directors, a meeting of the board of directors for the election of
officers and the transaction of such other business as may come before
it shall be held at such time and places as the board shall from time
to time determine.
2.4 Special Meetings.
Special meetings of the board of directors may be called by the
chairman of the board of directors, the chief executive officer, the
president or a vice chairman, or at the request in writing of a
majority of the directors then in office or of a majority of the
members of the Independent Directors Committee, and shall be called by
the secretary. Notice of a special meeting of the board of directors
shall be given at least twenty-four hours before the special meeting.
2.5 Quorum; Vote Required for Action.
(a) At all meetings of the board of directors, a majority of
the whole board shall constitute a quorum for the transaction of
business. Except in cases in which applicable law, the certificate of
incorporation or these by-laws otherwise provide, the vote of a
majority of the directors present at a meeting at which a quorum is
present shall be the act of the board of directors.
(b) Except as otherwise specifically provided in the
certificate of incorporation or these by-laws; the affirmative vote of
a majority of the entire Board of Directors shall be required to: (i)
amend the certificate of incorporation or these by-laws; (ii) adopt a
plan of liquidation or dissolution of the corporation; (iii) approve
any merger, consolidation or other business combination of the
corporation or any of its subsidiaries with any person (other than a
wholly-owned subsidiary of the corporation); and (iv) appoint members
of board committees in accordance with Section 3.1(b) of these by-laws.
2.6. Organization.
(a) At its last meeting before, or first meeting after, the
annual meeting of stockholders, the board of directors shall elect one
of its members to be chairman of the board. The chairman of the board
may, but need not be, an officer of or employed in an executive or any
other capacity by the corporation.
(b) The chairman of the board of directors shall preside at
meetings of the board of directors and lead the board in fulfilling its
responsibilities as defined in section 2.1 and, in
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particular, its responsibilities to oversee the performance of the
corporation and of the executive management of the corporation.
(c) The chairman of the board of directors, or in his absence,
the chief executive officer, the president or a vice chairman (in the
order stated), or in their absence a member of the board selected by
the members present, shall preside at meetings of the board. The
secretary of the corporation shall act as secretary, but in his absence
the presiding officer may appoint a secretary.
2.7. Transactions with Corporation.
(a) No contract or transaction between the corporation and one
or more of its directors, or between the corporation and any other
corporation, partnership, association, or other organization in which
one or more of its directors or officers are directors or officers, or
have a financial interest, shall be void or voidable for this reason,
or solely because the director or officer is present at or participates
in the meeting of the board or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are
counted for such purpose: (1) if the material facts as to his
relationship or interest and as to the contract or transaction are
disclosed or are known to the board of directors or the committee, and
the board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a
quorum; or (2) if the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) if the contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the board of
directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes the contract or
transaction.
(c) Any material transaction between the corporation or any of
its subsidiaries on the one hand and NRG Energy, Inc., Northern States
Power Company (Minnesota) (or any wholly owned subsidiary of either) on
the other hand shall require approval by a majority of the Independent
Directors of the corporation, as hereinafter defined.
2.8. Informal Action by Directors.
Unless otherwise restricted by the certificate of incorporation
or these by-laws, any action required or permitted to be taken at any
meeting of the board of directors, or of any
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committee thereof, may be taken without a meeting if all members of the
board or such committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
2.9. Telephonic Meetings Permitted.
Members of the board of directors, or any committee designated
by the board, may participate in a meeting of such board or committee
by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each
other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
2.10. Independent Directors.
(a) No fewer than two of the individuals to constitute the
nominees of the board of directors for the election of whom the board
will solicit proxies from the stockholders for use at the corporation's
annual meeting shall consist of individuals who, on the date of their
selection as nominees of the board of directors, would be Independent
Directors.
(b) In the event the board of directors elects directors
between annual meetings of stockholders, the number of such directors
who qualify as Independent Directors on the date of their nomination
shall be such that no less than two of all directors holding office
immediately thereafter shall have been Independent Directors on the
date of the first of their nomination or selection as nominees of the
board of directors.
(c) For purposes of this by-law, the term "Independent
Director" shall mean a director who: (i) is not and has not been
employed by the corporation or its subsidiaries in an executive
capacity within the five years immediately prior to the annual meeting
at which the nominees of the board of directors will be voted upon;
(ii) is not (and is not affiliated with a company or a firm that is) a
significant advisor or consultant to the corporation or its
subsidiaries; (iii) is not affiliated with a significant customer or
supplier of the corporation or its subsidiaries; (iv) does not have
significant personal services contract(s) with the corporation or its
subsidiaries; (v) is not affiliated with a tax-exempt entity that
receives significant contributions from the corporation or its
subsidiaries; (vi) is not an affiliate (as defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of
1934), of any beneficial owner directly or indirectly, of 5% or more of
the voting power of the outstanding voting stock of the corporation;
and (vii) is not a spouse, parent, sibling or child of any person
described by (i) through (vi).
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ARTICLE III
COMMITTEES
3.1. Committees of the Board of Directors.
(a) The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees,
consisting of one or more of the directors of the corporation, to be
committees of the board of directors ("committees of the board"). All
committees of the board may authorize the seal of the corporation to be
affixed to any papers which may require it. To the extent provided in
any resolution of the board of directors or these by-laws, and to the
extent permissible under the laws of the State of Delaware and the
certificate of incorporation, any such committee 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.
(b) The board shall have three standing committees: an Audit
Committee, a Compensation Committee and an Independent Directors
Committee. Subject to the provisions of Sections 3.2 through 3.4
below, each standing committee shall have such number of members as
determined by resolution of the directors and each of such members
shall be appointed by a majority of the whole board.
3.2. Independent Directors Committee.
(a) The Independent Directors Committee shall have three
members, two of whom shall be Independent Directors. The Independent
Directors Committee shall review the qualifications of individuals for
consideration as one of the three members of the Independent Directors
Committee. Prior to the annual meeting of the shareholders each year,
the Independent Directors Committee shall nominate those individuals to
serve on the board and constitute the three members of the Independent
Directors Committee for the election of whom the board will solicit
proxies. The Independent Directors Committee shall also designate the
individuals to fill any vacancies on the board that are to be filled by
a member of the Independent Directors Committee and that arise between
annual meetings of shareholders. The Independent Directors Committee
shall have sole authority and responsibility to make all decisions and
take all actions on behalf of the corporation under both the Co-
Investment Agreement dated as of April 30, 1996 between NRG Energy,
Inc., a Delaware corporation ("NRG") and the corporation and the
Management Services Agreement dated as of April 30, 1996 between NRG
and the corporation, including without limitation decisions regarding
the amendment or modification of such agreements. The Independent
Directors Committee shall have and may exercise such other powers,
authority and responsibilities as provided in these by-laws or as may
be determined by the board of directors.
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(b) Independent Directors Committee members shall have the
right to request and receive such information, reports and/or backup
data from employees of the corporation or the corporation's auditors,
as the case may be, as they deem necessary to assist them in the
conduct of their duties, and such committee shall have the right,
without limitation, to retain such advisors and consultants, including
attorneys, accountants, engineers or other experts, as it deems
necessary or appropriate to assist the members in carrying out the
committee's responsibilities.
3.3. Audit Committee.
The board of directors shall select the members of the Audit
Committee, the majority of whom shall be Independent Directors, and
shall designate the chairman of the committee. No officer of the
corporation shall be a member of the Audit Committee. The members of
the Audit Committee shall not be eligible to participate in any
incentive compensation plan for employees of the corporation or any of
its subsidiaries. The selection by the committee of accountants for
the ensuing calendar year shall be made annually in advance of the
annual meeting of stockholders and shall be submitted to the
stockholders for ratification or rejection at such meeting. The Audit
Committee shall have and may exercise such powers, authority and
responsibilities as are normally incident to the functions of an Audit
Committee or as may be determined by the board of directors.
3.4. Compensation Committee.
(a) The board of directors shall select the members of the
executive Compensation Committee and shall designate the chairman of
the committee. No officer of the corporation shall be a member of the
committee. No member of the committee shall be eligible to participate
in any plan falling within the jurisdiction of the committee. The
committee shall have and may exercise the powers and authority granted
to it by any incentive compensation plan for employees of the
corporation or any of its subsidiaries, and such other powers,
authority and responsibilities as may be determined by the board of
directors.
(b) The committee shall determine the compensation of:
(a) employees of the corporation who are directors of the corporation;
and (b) after receiving and considering the recommendation of the chief
executive officer and the president of the corporation, all other
employees of the corporation who are officers of the corporation or who
occupy such other positions as may be designated by the committee.
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ARTICLE IV
OFFICERS
4.1. Elected officers.
The officers of the corporation shall be elected by the board
of directors. There shall be a chief executive officer, a president,
one or more vice presidents, a secretary, a treasurer and a
comptroller. The chief executive officer and the president shall have
the powers, authority and responsibilities provided by these by-laws.
The officers, other than the chief executive officer and the president,
shall each have, in addition to the powers, authority and
responsibilities of those officers otherwise provided by the by-laws,
such powers, authority and responsibilities as the board of directors
or the chief executive officer may determine. The board of directors
may also elect persons to hold such other offices as the board of
directors shall determine, including one or more vice chairmen of the
board. A person may hold any number of offices. Elected officers
shall hold their offices at the pleasure of the board of directors, or
until their earlier resignation.
4.2 Chief Executive Officer.
(a) The chief executive officer shall have the general
executive responsibility for the conduct of the business and affairs of
the corporation. If the chairman so designates or is absent, the chief
executive officer shall preside at meetings of the stockholders. He
shall exercise such other powers, authority and responsibilities as the
board of directors may determine.
(b) In the absence of or during the physical disability of the
chief executive officer, the board of directors shall designate an
officer who shall have and exercise the powers, authority and
responsibilities of the chief executive officer.
4.3 President.
The president shall have and exercise such powers, authority
and responsibilities as the board of directors may determine.
4.4. Treasurer.
The treasurer shall have custody of all funds and securities of
the corporation and shall perform all acts incident to the position of
treasurer. He shall render such accounts and reports as may be
required by the board of directors. The records, books and accounts of
the office of the treasurer shall, during the usual hours for business
at the office of the treasurer, be open to the examination of any
director.
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4.5 Secretary.
The secretary shall keep the minutes of all meetings of
stockholders and directors and of such committees of the board of
directors as to which he may be so directed. He shall give all
required notices and shall have charge of such books and papers as the
board of directors may require. He shall submit such reports to the
board of directors or to any of the committees of the board or
committees of the corporation as the board of directors or any such
committee may require. Any action or duty required to be performed by
the secretary may be performed by an assistant secretary.
4.6. Comptroller.
The comptroller shall be in charge of the accounts of the
corporation and shall perform all acts incident to the position of
comptroller. He shall submit such reports and records to the board of
directors or to any of the committees of the board or committees of the
corporation as the board of directors or any such committee may
require.
4.7. Subordinate officers.
(a) The board of directors may from time to time appoint one
or more assistant secretaries, assistant treasurers, assistant
comptrollers, and such other subordinate officers as the board of
directors may deem advisable. Such subordinate officers shall have
such powers, authority and responsibilities as the board of directors
may from time to time determine. The board of directors may grant to
any committee of the board or the chief executive officer the power and
authority to appoint subordinate officers and to prescribe their
respective terms of office, powers, authority and responsibilities.
Each subordinate officer shall hold his position at the pleasure of the
board of directors, the committee of the board appointing him, the
chief executive officer and any other officer to whom such subordinate
officer reports.
(b) In the interval between annual organizational meetings of
the board of directors, the chief executive officer shall have the
power and authority to appoint such subordinate officers. Such
subordinate officers shall serve until the first meeting of the board
of directors immediately following the annual meeting of stockholders.
4.8. Resignation, Removal, Suspension and Vacancies.
(a) Any officer may resign at any time by giving written
notice to the chief executive officer, the president or the secretary.
Unless stated in the notice of resignation, the acceptance thereof
shall not be necessary to make it effective. It shall take effect at
the time specified therein or, in the
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absence of such specification, it shall take effect upon the receipt
thereof.
(b) Any officer elected by the board of directors may be
suspended or removed at any time by the affirmative vote of a majority
of the whole board. Any subordinate officer of the corporation
appointed by the board of directors or a committee of the board, or the
chief executive officer, may be suspended or removed at any time by a
majority vote of a quorum of the board of directors or committee
appointing such subordinate officer, or by the chief executive officer
or any other officer to whom such subordinate officer reports.
(c) The chief executive officer may suspend the powers,
authority, responsibilities and compensation of any elected officer or
appointed subordinate officer for a period of time sufficient to permit
the board or the appropriate committee of the board a reasonable
opportunity to consider and act upon a resolution relating to the
reinstatement, further suspension or removal of such person.
(d) As appropriate, the board of directors, a committee of the
board, and/or the chief executive officer may fill any vacancy created
by the resignation of any officer.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
5.1. Execution of Contracts.
The board, except as in these by-laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
5.2. Checks, Drafts, Etc.
All checks, drafts or other orders for payment of money, notes
or other evidence of indebtedness, issued in the name of or payable to
the corporation, shall be signed or endorsed by such person or persons
and in such manner as, from time to time, shall be determined by
resolution of the board. Each such officer, assistant, agent or
attorney shall give such bond, if any, as the board may require.
5.3. Deposits.
All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the board may select,
or as may be selected by any officer or
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officers, assistant or assistants, agent or agents, or attorney or
attorneys of the corporation to whom such power shall have been
delegated by the board. For the purpose of deposit and for the purpose
of collection for the account of the corporation, the President, any
Vice President or the Treasurer (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of
the corporation who shall from time to time be determined by the board)
may endorse, assign and deliver checks, drafts and other orders for the
payment of money which are payable to the order of the corporation.
5.4. General and Special Bank Accounts.
The board may from time to time authorize the opening and
keeping of general and special bank accounts with such banks, trust
companies or other depositories as the board may select or as may be
selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the corporation to whom such power
shall have been delegated by the board. The board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these by-laws, as it may deem
expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
6.1. Certificates for Stock.
Except as otherwise provided in the corporation's certificate
of incorporation or by-laws, every owner of stock of the corporation
shall be entitled to have a certificate or certificates, to be in such
form as the board shall prescribe, certifying the number and class of
shares of the stock of the corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in
which they shall be issued and shall be signed in the name of the
corporation by the President or a Vice President, and by the Secretary
or an Assistant Secretary or by the Treasurer or an Assistant
Treasurer. Any of or all of the signatures on the certificates may be
a facsimile. In case any officer, transfer agent or registrar who has
signed, or whose facsimile signature has been placed upon, any such
certificate, shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may
nevertheless be issued by the corporation with the same effect as
though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, were such officer, transfer
agent or registrar at the date of issue. A record shall be kept of the
respective names of the persons, firms or corporations owning the stock
represented by such certificates, the number and class of shares
represented by such certificates, respectively, and the respective
dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered
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to the corporation for exchange or transfer shall be canceled, and no
new certificate or certificates shall be issued in exchange for any
existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 6.4.
6.2. Transfers of Stock.
Transfers of shares of stock of the corporation shall be made
only on the books of the corporation by the registered holder thereof,
or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.3, and upon surrender
of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. Except as otherwise provided in
the corporation's certificate of incorporation or these by-laws, the
person in whose name shares of stock stand on the books of the
corporation shall be deemed the owner thereof for all purposes as
regards the corporation. Whenever any transfer of shares shall be made
for collateral security, and not absolutely, such fact shall be so
expressed in the entry of transfer if, when the certificate or
certificates shall be presented to the corporation for transfer, both
the transferor and the transferee request the corporation to do so.
6.3. Regulations.
The board may make such rules and regulations as it may deem
expedient, not inconsistent with these by-laws, concerning the issue,
transfer and registration of certificates for shares of the stock of
the corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock
to bear the signature or signatures of any of them.
6.4. Lost, Stolen, Destroyed, and Mutilated Certificates.
In any case of loss, theft, destruction, or mutilation of any
certificate of stock, another may be issued in its place upon proof of
such loss, theft, destruction, or mutilation and upon the giving of a
bond of indemnity to the corporation in such form and in such sum as
the Board may direct; provided, however, that a new certificate may be
issued without requiring any bond when, in the judgment of the board,
it is proper so to do.
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ARTICLE VII
MISCELLANEOUS
7.1. Fiscal Year.
The fiscal year of the Corporation shall be determined by
resolution of the board.
7.2. Waiver of Notices.
Whenever notice is required to be given by these by-laws or the
certificate of incorporation, the person entitled to said notice may
waive such notice in writing, either before or after the time stated
therein, and such waiver shall be deemed equivalent to notice.
ARTICLE VIII (3)
INDEMNIFICATION
8.1. Directors and Officers.
(a) Any person who was or is a party or is threatened to be
made a party to or was or is involved (as a witness or otherwise) in
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than
any action or suit by or in the right of the Corporation to procure a
judgment in its favor (a "derivative action")) by reason of the fact
that he or she is or was a director or officer 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, including service with respect to
employee benefit plans, shall be indemnified by the Corporation, to the
extent authorized by the laws of the State of Delaware as the same
exist or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such laws
permitted prior to such amendment), against all expenses (including,
but not limited to, attorneys' fees) judgments, fines, penalties and
amounts paid in settlement actually and reasonably incurred by him or
her in connection with the defense or settlement of such action, suit
or proceeding. In the event of any derivative action, such persons
shall be indemnified by the Corporation under the same conditions and
to the same extent as specified above, except that no indemnification
is permitted 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 or the court in which
such action or suit was brought shall determine upon application that,
despite the
(3) This article was added on October 28, 1997.
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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. The indemnification expressly provided by statute in a
specific case shall not be deemed exclusive of any other rights to
which any person indemnified may be entitled under any lawful
agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to
action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators
of such a person.
(b) The right to indemnification conferred in this Article
VIII is and shall be a contract right. The right to indemnification
conferred in this Article VIII shall include the right to be paid by
the Corporation the expenses (including attorneys' fees and retainers
therefor) reasonably incurred in connection with any such proceeding in
advance of its final disposition, such advances to be paid by the
Corporation within thirty (30) days after the receipt by the
Corporation of a statement or statements from a director or officer of
the Corporation requesting such advance or advances from time to time;
provided, however, the payment of such expenses incurred by a director
or officer in his or her capacity as a director or officer in advance
of the final disposition of a proceeding shall be made only upon
delivery to the Corporation of an undertaking by or on behalf of such
director or officer to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled
to be indemnified under this Article VIII or otherwise.
(c) To obtain indemnification under this Article VIII, an
indemnitee shall submit to the Corporation a written request, including
therein or therewith such documentation and information as is
reasonably available to such person and is reasonably necessary to
determine whether and to what extent the indemnitee is entitled to
indemnification.
(d) The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or any director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
including service with respect to employee benefit plans, against any
expense, liability or loss, whether or not the Corporation would have
the power to indemnify such person against such expense, liability or
loss under the General Corporation Law of the State of Delaware. To
the extent that the Corporation maintains any policy or policies
providing such insurance, each director and officer, and each employee
and agent to whom rights of indemnification have been granted as
provided in paragraph (e) of this Article VIII, shall be covered by
such policy or policies in accordance with its or their terms to the
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maximum extent of the coverage thereunder for any such director,
officer, employee or agent.
(e) The Corporation may, to the extent authorized from time
to time by the Board of Directors, grant rights to indemnification, and
rights to be paid by the Corporation the expenses incurred in
connection with any proceeding in advance of its final disposition, to
any employee or agent of the Corporation to the fullest extent of the
provisions of this Article VIII with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation."
ARTICLE IX (4)
DIRECTORS EMERITUS AND HONORARY DIRECTORS
9.1. Directors Emeritus and Honorary Directors
The board of directors may from time to time, by resolution passed
by a majority of the whole board, create one or more positions of
director emeritus or honorary director, and may fill any such position
with a retiring or resigning member of the board of directors or other
qualified candidate. The board of directors may consult with or seek
the advice of a director emeritus or honorary director from time to
time, as the board decides is proper, and a director emeritus or
honorary director shall make himself or herself reasonably available
therefor, including without limitation available for attendance at
meetings of the board of directors if the board decides to request such
attendance; otherwise, a director emeritus or honorary director shall
have no rights, duties or entitlements. A director emeritus or
honorary director shall not be a member of the board of directors and
shall not be entitled to notices of meetings of the board, nor shall a
director emeritus or honorary director be entitled to vote on any
business coming before the board or be counted as a member of the board
for any purpose (including without limitation determining the number of
directors necessary to constitute a quorum or determining whether a
quorum is present at a meeting). A director emeritus or honorary
director shall serve at the discretion of the board of directors for
such term as the board provides in its resolution appointing such
director emeritus or honorary director or, in the absence of such a
stated term, until the end of the calendar year of his or her
appointment. The board of directors may remove any director emeritus
or honorary director from such position at any time, with or without
cause, by a resolution passed by a majority of the whole board. In the
event of any vacancy in any director emeritus or honorary director
position for any reason, such position shall thereupon terminate. The
board of directors may, by resolution passed by a majority of the whole
board, provide for a director emeritus or honorary director to receive
such
(4) This article was added on January 23, 1998.
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compensation as the board deems proper in consideration of his or her
service.
IN WITNESS WHEROF, the undersigned has hereunto set her hand as of
the 23rd day of January, 1998.
/s/ Karen A. Brennan
By: Karen A. Brennan
Title: Secretary
<PAGE>
Exhibit 10.25.1
NRG GENERATING (NEWARK) COGENERATION INC./
POWER OPERATIONS, INC.
OPERATING AND MAINTENANCE AGREEMENT
This System Operating and Maintenance Agreement ("Agreement") is made
as of the 8th day of November 1996 between NRG Generating (NEWARK)
Cogeneration Inc., a Delaware corporation ("Owner"), and Power
Operations, Inc., a Delaware corporation ("Operator"), having its
principal place of business at Minneapolis, Minnesota, whose
obligations hereunder shall be fully guaranteed by NRG Generating
(U.S.) Inc. ("NRGG"), pursuant to a Guarantee required by Credit Suisse
per Credit Agreement dated May 17, 1996 in the form of Appendix I.
Owner and Stewart & Stevenson Operations, Inc. (SSOI) Operator entered
into an Operation & Maintenance Contract dated as of May 1, 1996 with
respect to the System (as defined below), a copy of which is attached
as Appendix II (the "Existing O&M Agreement").
In connection with the bankruptcy of Owner's parent, the existing
Electricity Purchase Agreement between Owner and Jersey Central Power &
Light Company relating to the System has been amended with an Third
Amendment to the Power Purchase Agreement (as defined below).
Owner desires to replace SSOI and Owner and Operator have negotiated
the terms and conditions of a new O&M Agreement and desire to enter
into this Agreement effective upon the Effective Date.
In consideration of the foregoing and the mutual covenants and benefits
contained herein, the parties hereby agree as follows:
I. DEFINITIONS
In this Agreement the following terms have the associated meaning:
1. Affiliate - With reference to a specified person, any other person
or entity, directly or indirectly through one or more
intermediaries, which controls, is controlled by, or is under
common control with, such person. A person or entity is
controlled by another person or entity if the second person or
entity holds a sufficient number of securities in the first person
or entity to elect a majority of the directors of the first person
or entity.
2. Agent - The agent for the lenders under the Financing Agreements.
3. Amended Power Purchase Agreement - The Amended and Restated
Agreement for Purchase and Sale of Electric Power, dated April
30, 1996, between Owner and Jersey Central Power & Light, a copy
of which is attached as Appendix III hereto.
4. Annual Operating Plan and Budget - As set forth in Article VI,
Section 6.
5. Bonus - As set forth in Exhibit A.
6. Change - Shall mean any of the following that are proposed by one
party to the other by a written notice to the other party: (i) a
change in the then current Annual Operating Plan and Budget; (ii)
a change in connection with the services to be provided by
Operator hereunder; (iii) a change made necessary to avoid injury
to persons or property or to mitigate losses as a result of the
occurrence of an Emergency; and (iv) a change enabling Operator to
accomplish or contract for a Major System Repair.
<PAGE>
7. Change Order - Shall mean the written approval of a proposed
Change and the related Change Order Budget Statement by Operator and
Owner as further provided for in Article VI Section 7 (b).
8. Change Order Budget Statement - Shall mean the statement prepared
by Operator pursuant to Article VI, Section 7 (b) with respect to
a proposed Change setting forth in reasonable detail: (i) the
direct cost or savings to Owner of the proposed Change; (ii) the
indirect costs or savings of the proposed Change, including
without limitation, any loss of electricity revenues or steam host
revenues and any increased insurance, operating, maintenance or
other costs during or following the implementation of the proposed
Change; (iii) changes in the operating efficiency of the System;
and (iv) any other material effect on the operation, maintenance,
efficiency or profitability of the System or the provision of the
services hereunder.
9. Contract Year - As set forth in the Amended and Restated Power
Purchase Agreement.
10 Effective Date - November 8, 1996.
11. Emergency - Any event or occurrence which in the judgment of
Operator or Owner, as the case may be, requires immediate action
and which constitutes a serious hazard to the safety of persons or
property or may materially interfere with the safe, economical,
lawful or environmentally sound operation of the System.
12. Event of Default - As set forth in Article XII.
13. Existing O&M Agreement - as set forth in the Recitals.
14. Expenses - As set forth in Article VI, Section 2.
15. Financing Agreements - Any loan, lease financing, security or
related agreements entered into at any time by and among Owner and
the lending institutions providing financing for the System.
16. Force Majeure - Unforeseeable causes beyond the reasonable
control of and without the fault or negligence of the party
claiming Force Majeure, including but not limited to acts of God,
strike, flood, earthquake, storm, fire, lightning, epidemic, war,
riot, civil disturbance, sabotage, change in law or applicable
regulation subsequent to the date thereof and action or inaction
by any federal, state or local legislative, executive,
administrative or judicial agency or body which, in any of the
foregoing cases, by exercise of due foresight such party could not
reasonably have been expected to avoid, and which by the exercise
of due diligence, it is unable to overcome.
17. Legal and Contractual Requirements - All:
a. Laws, permits, approvals, regulations or orders of
governmental authorities applicable to the Amended and
Restated Power Purchase Agreement, the System, Owner's
obligations under this Agreement as owner of the System and
Operator's scope of work hereunder;
b. Provisions of the System Contracts;
c. Agreements, warranties and specifications of Operator's or Owner's
suppliers or vendors; and
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d. Operating and maintenance manuals and procedures furnished by
Owner applicable to the System or the components thereof
(such operating manuals to reflect Sound Independent Power
Industry Practice)
18. Liquidated Damages - As set forth in Exhibit A.
19. MAJOR SYSTEM REPAIR -
The inspection, overhaul, repair or replacement of any piece of
equipment needed to operate the System where such inspection, overhaul,
repair or replacement is the result of: (i) an unscheduled breakdown,
repair, or failure of such equipment or (ii) a scheduled inspection,
overhaul, repair or replacement of such equipment (unless the
inspection, overhaul, repair or replacement has been incorporated into
the Annual Operating Plan and Budget) and further that such inspection,
overhaul, repair or replacement shall have a cost in excess of $10,000,
which includes labor and material costs, and shall be adjusted each
year by the increase or decrease in the Producer Price Index.
Equipment shall include the gas turbines, the generators, boilers, heat
steam recovery generators, chillers, load gears, exhaust ducting,
emissions equipment, water and waste water treatment, fuel treatment
facilities and interconnection facilities; provided, however, that a
Major System Repair shall not include the replacement of accessories,
equipment and consumables required in the ordinary course of Routine
Maintenance and preventative maintenance of the System reflecting Sound
Independent Power Industry Practice.
20. Operating Fee - As set forth in Article VI, Section 1.
21. Owner's Plan of Operation - Owner's instructions to Operator as to
the desired electricity and/or thermal energy production schedule
and other operating and maintenance objectives.
22. Owner's Representative - As set forth in Article V, Section 1(a).
23. Producer Price Index - The U.S. Producer Price Index for All
Items, as currently published in the United States Department of
Labor Bureau of Labor Statistic's monthly publication, PPI
Detailed Report or any successor publication of such information,
or if such index is no longer published or the method of
computation thereof is substantially modified, a mutually
agreeable alternative index.
24. Proprietary Information - All financial, technical and operating
information which the parties, directly or indirectly, acquire
from each other, and any other information which a party expressly
designates in writing to be confidential. However, Proprietary
Information shall exclude information falling into any of the
following categories:
a. Information that, at the time of disclosure thereof, is
in the public domain;
b. Information that, after disclosure thereof, enters the
public domain other than by breach of this Agreement;
c. Information that prior to disclosure thereof, was
already in the recipient's possession, either without
limitation on disclosure to others or subsequently becoming
free of such limitation;
d. Information obtained by the recipient from a third party
having an independent right to disclose such information;
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e. Information that is available by independent research
without use of or access to the Proprietary Information
acquired from the other party; and
f. Information that a party is required by law or
governmental action to disclose, provided the disclosing
party notifies the party from whom the information originated
in advance and gives it the opportunity to resist the order.
25. Routine Maintenance - Those activities including the replacement
of accessories, equipment, and consumables required in the
ordinary course of routine and preventative maintenance of the
System and System Site in accordance with Sound Independent Power
Industry Practice.
26. Sound Independent Power Industry Practice - Those prudent
practices and methods in effect at the time of performance that
are customarily followed by operators of similarly situated plants
and equipment.
27. System - Owner's properties, plant and equipment located in
Sayreville, New Jersey, including a single gas turbine combined
cycle generating station with a nominal capacity of approximately
52 megawatts, more fully defined in Exhibit B.
28. System Contracts - Contracts and agreements to which Owner is a
party (including, without limitation, insurance policies) relating
to the operation and maintenance of the System, set forth on
Exhibit C.
II. ENGAGEMENT OF OPERATOR
1. Effective on the Effective Date, Owner engages Operator to operate
and maintain the System and perform certain duties, all as
hereinafter set forth in this Agreement, and Operator accepts such
engagement to operate and maintain the System and perform the
duties specified in this Agreement in accordance with its terms
and conditions.
2. All operating and management personnel involved in the operation
and maintenance of the System shall be employees of Operator or
its Affiliates and shall not for any purposes be deemed employees
of Owner.
III. TERM
The term of this Agreement shall become effective upon the Effective
Date and expire on the sixth (6th) anniversary of the Effective Date,
unless terminated earlier in accordance with Article XII of this
Agreement.
IV. OPERATING AND MAINTENANCE DUTIES OF OPERATOR
1. Subject to the terms of this Agreement, Operator shall operate and
maintain the System and shall control the details and means of
performing its obligations hereunder.
2. For the period prior to and including the Effective Date, Operator
shall assist Owner in preparing the System for operation under the
Amended and Restated Power Purchase Agreement. These services
will include but not be limited to:
a. Preparing a plan and schedule to staff the System;
b. Recruiting and training the staff which will operate and
maintain the System;
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c. Responding, in a timely manner, to Owner's requests for
information;
d. Procuring, as agent for Owner, replacement of stock of
consumables, spare parts, tools, and supplies in accordance
with the Annual Operating Plan and Budget;
e. Appointing a plant manager (subject to Owner's approval)
who shall supervise the performance of Operator's employees
at the System site;
f. Reviewing plans, specifications and drawings of
machinery and equipment layouts and commenting to Owner
thereon with regard to matters affecting operation and
maintenance;
g. Observing and receiving training and instructions from
Owner, such training and instructions to be in accordance
with Sound Independent Power Industry Practice;
h. Performing for Owner such other services as may from
time to time be reasonably requested or are reasonably
necessary or appropriate in connection with the operation and
maintenance of the System; and
i. Reporting to and consulting with Owner about the
operation of the System on a scheduled basis, as reasonably
requested by Owner.
Such services shall be provided in a manner consistent
with all Legal and Contractual Requirements, Sound Independent
Power Industry Practice and the Annual Operating Plan and Budget.
3. All full time personnel whom Operator will provide for the
operation and maintenance of the System shall be at the site and
available full time for training and to perform services to
support System operation and maintenance as required by the
staffing plan to be developed by Operator and approved by Owner.
4. A written management program shall be developed by Operator for
approval by Owner to ensure optimal performance, responsiveness,
and cost-effectiveness in the operation and maintenance of the
System. The program shall include provisions regarding:
a. Budget tracking, analysis and adjustments;
b. Personnel policies, including policies regarding payroll,
compensation, pensions and other benefits;
c. Training;
d. Purchasing and inventory control;
e. A System safety and health program which will include
procedures and a manual;
f. An employee job-site handbook for Operator's employees
operating and maintaining the System;
g. A maintenance planning and scheduling system; and
h. A system for maintaining an inventory of consumables, spare
parts, tools and supplies.
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5. Subsequent to the Effective Date, Operator shall provide all
operations and maintenance services necessary to efficiently
operate and maintain the System, including but not limited to
performing the following operating and maintenance services:
a. Operating and maintaining the System in compliance with
all Legal and Contractual Requirements, Sound Independent
Power Industry Practice and the Annual Operating Plan and
Budget;
b. Obtaining and maintaining in effect all licenses and
permits required by law to be obtained and maintained in
Operator's name and assisting Owner in obtaining and renewing
all licenses and permits required by law to be obtained and
maintained by Owner or in Owner's name;
c. Paying all its employees, agents and subcontractors
promptly and filing all reports and remitting all payments
required under labor statutes to the appropriate governmental
authorities, as the obligations arise;
d. Conducting the operations and maintenance of the System
including, but not limited to, entering into contracts with
third parties as agent for Owner (subject to Owner's approval
if not in the ordinary course of business);
e. Employing, and ensuring adequate training of, Operator
employees and employees of its Affiliates (duly licensed
where required by statute or regulation) for the operation
and maintenance of the System consistent with Sound
Independent Power Industry Practice, and planning and
administering all matters pertaining to employee relations,
salaries, wages, working conditions, hours of work,
termination of employment, employee benefits, employee
staffing, safety and related matters pertaining to such
employees, and maintaining records with respect to all such
matters;
f. Monitoring, preparing and maintaining records of the
operations and maintenance aspects of the System (including
records of financial, business, and sales tax aspects of the
System) in such form and covering such matters as Owner may
reasonably request, consistent with Sound Independent Power
Industry Practice, generally accepted accounting principles,
and applicable records retention requirements; and making
such records available for inspection and/or audit by Owner
and Owner's designees;
g. Implementing an inventory control system to identify,
catalog, and disburse spare parts for the maintenance of the
System and procuring, as agent for Owner, replacement spare
parts and refurbishing, where practical or economical, spare
parts to allow their reuse;
h. Operating and maintaining the System according to the
operations and maintenance programs prepared by Operator for
Owner and, if necessary, creating updates for such programs
and creating new programs as required for operation and
maintenance of the System;
i. Operating and maintaining the System to maximize the continuous,
reliable, safe and efficient generation of electrical and/or thermal
energy by the System so as to conserve fuel and financial resources
and to minimize unscheduled outages, and providing maintenance for the
System in a cost-effective manner to prevent deterioration beyond
normal wear and tear; provided, however, that Owner acknowledges such
efforts shall necessarily be limited by the operating life,
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<PAGE>
capacity and maintenance requirements of the System and by Legal and
Contractual Requirements;
j. Using all reasonable care necessary to keep the System
and the System site clean, orderly, and free from debris,
rubbish or waste to the extent consistent with the operation
of the System;
k. Taking necessary precautions and corrective actions in the event
of an Emergency;
l. Keeping the System and the System site free and clear of
all liens and encumbrances arising out of the acts,
omissions, or debts of Operator or its employees, agents or
subcontractors claiming by, through or under Operator (this
subsection shall not apply to mechanics liens and liens of
any nature arising by operation of law, provided such liens
are promptly removed by the payment of the debts they secure
when due; in the event of a dispute between Operator or its
subcontractors and a lienholder, Operator's obligation to
Owner pursuant to this provision may be satisfied by the
posting of an appropriate bond to the extent acceptable to
the Agent);
m. Within 30 days of its receipt of Owner's Plan of
Operation submitted in accordance with Article V, Section
1(c), preparing and submitting to Owner for Owner's approval
a written proposed Annual Operating Plan and Budget which
shall include all anticipated Expenses of the System to be
paid by Owner for each succeeding calendar year, all as more
fully described in Article VI, Section 6 or required by the
Agent;
n. Reporting to and consulting with Owner about the
operation of the System on a scheduled basis, as reasonably
requested by Owner;
o. Using reasonable commercial efforts to secure from
vendors, suppliers and subcontractors the best indemnities,
warranties and guarantees as may be commercially available
regarding supplies, equipment and services purchased for the
System, all of which shall be assigned to Owner (Operator
shall render reasonable assistance to Owner for the purpose
of enforcing such indemnities, warranties or guarantees of
which Owner is a beneficiary regarding the System);
p. Performing for Owner such other services as may from
time to time be reasonably requested or are necessary or
appropriate in connection with the operation and maintenance
of the System;
q. Promptly notifying Owner of:
i. Any condition, event or act which is likely to
result in a material deficiency in budgeted revenues, or
excess in budgeted costs, of Owner;
ii. Any forced outages or significant malfunction
of the System as soon as practicable;
iii. Any material failure to comply with any Legal
and Contractual Requirements or any event which is
reasonably expected to cause such material failure;
r. Promptly providing Owner with such information relative
to the System as Owner may reasonably request;
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<PAGE>
s. Establishing an effective maintenance planning and
scheduling system to optimize the availability, reliability
and heat rate of the System;
t. Assisting Owner in the compliance by Owner with the
terms of the Financing Agreements, as they relate to the
operation and maintenance of the System, including the
preparation of reports concerning operations and making
personnel available for discussions with the Agent or other
lender representatives;
u. Subject to Article XI, assisting Owner in selling or
otherwise disposing of used and/or unneeded parts and
supplies; and
v. Providing and maintaining written procedures, in a form reasonably
acceptable to Owner, required to enable Operator's employees to safely
and efficiently start-up, operate, and shut down the System equipment
and to perform preventative maintenance on the System equipment.
8
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V. RESPONSIBILITIES OF OWNER
1. Subject to the terms of this Agreement, Owner shall, at its cost
and expense, perform and provide the following at the times
required to support the start-up, operation and maintenance of the
System:
a. Providing an Owner's Representative who shall represent
and bind Owner in all matters regarding this Agreement and
the performance of Owner hereunder;
b. Providing the System and System Site free and clear of
all liens and encumbrances (except for any liens or
encumbrances in favor of Agent or the lenders under the
Financing Agreements);
c. Preparing the Owner's Plan of Operation and delivering
the same to Operator on or before September 1 of each year;
d. With Operator's assistance, administering all System
Contracts;
e. Providing all required utility services, including
water, sewer, telephone, water/waste water treatment, waste
disposal, special waste disposal and electricity;
f. With Operator's assistance, obtaining and reviewing all
necessary licenses and permits except those required by law to be
obtained and maintained in Operator's name;
g. Providing manufacturer's operating and maintenance manuals
for the System;
h. With Operator's assistance, preparing and submitting any
special accounting and reporting documents that may be
required by governmental authorities;
i. Providing at its own expense, an office at the site for
use by Operator;
j. Within five days of its receipt thereof, providing
Operator complete copies of all technical, operational and
other System and System site related information, including
the System Contracts, as are in the possession, or under the
control, of Owner;
k. Being responsible for the billing and collection of
electricity revenues under the Amended and Power Purchase
Agreement and thermal revenues under the Steam Purchase
Contract with Newark Boxboard;
l. Being solely responsible for obtaining, maintaining and
renewing all licenses and permits necessary for: (i) Owner to
do business in the jurisdictions in which the System is
located and (ii) the ownership, operation and maintenance of
the System and System site;
m. Being responsible for arranging the disposal of hazardous
wastes generated by or at the System or System site; Operator
will coordinate removal of such waste from the System site
using subcontractors chosen by Owner.
n. Complying with, and diligently enforcing, all agreements
(including the System Contracts) to which Owner is a party
and which relate to or impact upon the System or Operator's
ability to perform its obligations hereunder; and
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o. Timely paying all of Owner's vendors, suppliers and
contractors.
Such activities shall be provided in a manner consistent with
all Legal and Contractual Requirements, Sound Independent Power
Industry Practice and the Annual Operating Plan and Budget.
VI. EXPENSES, REIMBURSEMENTS, BUDGET, CONSIDERATION, COMPENSATION
1. As compensation to Operator for its performance of the services,
Owner shall pay Operator (a) the Expenses incurred by Operator
and (b) an annual fee ("Operator's Fee"). The Operator's Fee for
the first Contract Year shall be $150,000.00. The Operator's Fee
shall be payable in equal monthly installments in arrears. The
Operator's Fee shall be adjusted annually in accordance with the
following sentence. For each Contract Year after the first
Contract Year, the Operator's Fee shall be equal to the product
of: (i) the ratio of the Producer Price Index for the last month
of the then expiring Contract Year over the Producer Price Index
for the last month of the previous Contract Year and (ii) the
Operator's Fee for the then expiring Contract Year; provided,
however, that for any partial Contract Year, the Operator's Fee
shall be multiplied by a fraction, the numerator of which shall be
the total number of days in such Contract Year and the denominator
of which shall be 365 or 366, as the case may be. If Operator
fails to pay accrued, undisputed Liquidated Damages in any
Contract Year in accordance with the provisions herein, Owner may
elect to reduce the Operator's Fee in the subsequent Contract Year
by the amount of undisputed Liquidated Damages owed to Owner.
2. Owner shall directly pay, or promptly reimburse to Operator as the
case may be, the following expenses ("Expenses") relating to the
System:
a. Insurance and bond premiums for policies which are
required by Article VIII hereof;
b. Property and other taxes (including, without limitation,
sales taxes, gross receipts taxes, value added taxes, energy
taxes and capital taxes) related to Owner or the System, but
not including those based on Operator's income or capital;
c. The base salaries, straight time hourly wages and
overtime hourly wages of all of Operator's on-site personnel
plus (i) thirty eight percent (38%) of (x) the base salaries
and straight time hourly wages and (y) the straight time
hourly portion of the actual overtime wages for all hourly
employees, and (ii) five percent (5%) of the base salaries,
straight time hourly wages, and overtime hourly wages.
d. Transportation, travel, lodging, and (for employees
newly hired or newly assigned to the System site) relocation
expenses of persons employed by Operator or its Affiliates
performing the duties of Operator under this Agreement
subject to advance approval by Owner in writing;
e. Reasonably incurred legal and accounting fees relating
to the System, subject to advance approval by Owner in
writing;
f. Fuel expenses including fuel purchase, transportation,
handling and demurrage charges;
g. The expenses of purchased electric power, telephone and
other communication services, purchased potable water, waste
disposal, special waste disposal, lubricants and chemicals
necessary for the operation of the System;
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h. Costs reasonably incurred or paid by Operator due to an
Emergency;
i. Training, including outside training services;
j. The costs of permits or licenses required for either
Owner, Operator or the System;
k. Costs associated with Routine Maintenance, Major System Repairs
(including scheduled and unscheduled) inspections, and overhauls,
outside contractor services and purchases of replacement equipment,
parts and components;
l. Spare parts, tools, supplies and consumables;
m. Capital costs approved by Owner for improvements,
alterations or additions to the System including those
required by governmental laws, regulations or orders
including without limitation, those arising from
environmental concerns; and
n. The cost of transportation of spare parts, tools,
supplies, consumables and any item which is a reimbursable
expense hereunder.
For all Expenses (other than relating to labor and legal and
accounting fees) incurred and paid by Operator for which Operator
is entitled to reimbursement hereunder, Owner additionally shall
pay Operator a general and administrative expense fee of five
percent (5%) of such Expenses.
3. a. For convenience and in order to save on expenses, Owner
will directly pay certain of the Expenses reimbursable to
Operator as set forth in the Annual Operating Plan and Budget
described in Article VI, Section 2 as practicable. To the
extent reasonably practical, the items covered by such
Article VI, Section 2 shall be procured through Operator's
issuance of an Owner purchase order and the cost of any such
items shall be paid directly by Owner to the vendor thereof.
Operator shall perform such duty as Owner's agent.
b. Without Owner's prior approval, Operator shall be
empowered to prepare and issue an Owner purchase order for
any material or service the cost of which would constitute an
Expense, so long as the total cost for such item is less than
or equal to $10,000. For any item or items whose cost is
greater than $10,000, Operator shall submit a written
requisition to Owner, and after receipt of written approval
from Owner, Operator shall be authorized as agent for Owner
to prepare and issue a purchase order on behalf of Owner on
Owner's purchase order form for such item. Operator shall
(i) verify the receipt at the System site of all materials
and services to be delivered to the System site covered by
Owner's purchase orders issued by Operator, (iii) verify the
accuracy of vendors' invoices in connection therewith, and
(iv) forward such invoices to Owner for approval, processing
and payment by Owner. Nothing in this Agreement shall
prevent Operator from procuring any material or service the
cost of which would constitute an Expense under Article VI
Section 2.
c. Operator shall periodically, but not more often than once a week,
deliver to Owner invoices received by Operator from third parties for
all direct Expenses, accompanied by a summary of all such invoices
which itemizes all such invoices by operating cost account number.
Such invoices shall also be accompanied by a statement from Operator
confirming that all such invoices are accurate, due and payable,
together with all relevant documentation reasonably necessary for
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Owner to verify the accuracy thereof. Each invoice submitted to
Owner shall be paid by Owner directly to the payee of such invoice
on or before the date such invoice is due.
4. From time-to-time, Operator will prepare and send to Owner an
invoice, including expense statements, vouchers or such other
supporting information as Owner may reasonably require, for the amounts
then due for reimbursable Expenses and the monthly installment of the
Operator's Fee. Owner shall pay the amount due to Operator no later
than 30 days after receipt of the invoice. All payments shall be
made by wire transfer of immediately available funds to Norwest Bank,
Minneapolis, Minnesota Account No. (to be furnished later). Any
payment not made within 30 days after receipt of the invoice will bear
interest from the date on which payment was due at the rate of one and
one-half (1.5%) percent per month or the maximum rate permitted by law,
whichever is the lesser.
5. Operator shall maintain complete, true, and correct records in
connection with all Expenses incurred by Operator. Operator shall
retain all such records for five (5) years after Expense reimbursement
by Owner has been fulfilled or for any longer period of time required
by law. All documents and records relating to this Agreement shall be
available for inspection by Owner anytime during normal business hours.
Owner may audit all records of Operator relating to Expenses and
services performed hereunder. In the event the audit shows that the
payment by Owner to Operator exceeds the amount due Operator, Owner
shall disclose such information to Operator and Operator shall refund
the excess amount to Owner within five (5) business days of the
disclosure to Operator. In the event the audit shows that the payment
by Owner to Operator is greater than the amount due Operator under this
Agreement and such error was caused by Operator, Owner shall be
reimbursed its reasonable costs of performing the audit. In the event
the audit shows that the payment by Owner is less than the amount due
Operator, Owner shall disclose such information to Operator and pay the
underpayment amount to Operator within five (5) business days of the
disclosure to Operator.
6. On or before October 1 of each year, the Operator shall prepare
and submit to Owner a written Annual Operating Plan and Budget
which shall include all expenses of the System anticipated to be
paid by Owner as either a direct or reimbursable Expense during
the upcoming calendar year pursuant to subsection 1 of this
Article VI, together with a written operations and maintenance
plan for the same period of time. Such Annual Operating Plan and
Budget shall set forth the anticipated operations and maintenance
plan including projected electrical production from the System on
a monthly basis, and a complete schedule (to the extent
technically feasible) of Operator responsible Routine Maintenance
and all Owner-directed major maintenance tasks (including Major
System Repairs) to be accomplished during said year. Owner and
Operator shall agree upon the budget, operations and maintenance
plan, and persons to perform maintenance under the plan prior to
the start of the calendar year, and shall meet and exchange
information as is necessary and convenient to such end.
If the parties cannot reach agreement on the Annual Operating Plan
and Budget by the start of any calendar year, then, until such
time as agreement is reached or the dispute is resolved, the
Annual Operating Plan and Budget for such calendar year shall be
based on the Annual Operating Plan and Budget for the preceding
calendar year, as adjusted to reflect the net change, if any,
between the most recently published Producer Price Index available
on the first day of the calendar year in question and the
corresponding Producer Price Index in effect at the start of the
immediately preceding calendar year.
Operator has submitted, and Owner has accepted, the Annual
Operating Plan and Budget for the calendar year ending December
31, 1997, a copy of which is attached as
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Exhibit F. All Annual Operating Plan and Budgets shall be in
substantially the form attached as Exhibit F. The amounts set
forth on Exhibit F shall be reduced pro rata based on the number
of days remaining in the calendar year from and after the
Effective Date. Likewise, the amounts set forth in the Annual
Operating Plan and Budget in effect during the calendar year in
which this Agreement expires or is terminated shall be reduced on
a pro rata basis based actual number of days elapsed during such
calendar year prior to the date of the expiration or termination
of this Agreement.
7. a. The parties recognize that Changes may be required
during the term of this Agreement. Either Owner or Operator
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. The written notice of a Change proposed by Operator
shall be accompanied by a Change Order Budget Statement.
Upon receipt by Operator of any proposed Change from Owner,
Operator shall use its best efforts to prepare and submit to
Owner a Change Order Budget Statement with respect to such
proposed Change within fifteen (15) days of the receipt of
Owner's proposed Change. No proposed Change the cost of
which is in excess of $10,000 shall be implemented until a
Change Order has been executed by both parties approving the
Change and the related Change Order Budget Statement;
provided, however, that Operator shall be entitled to
implement a proposed Change without the prior approval of
Owner if such Change is required due to an Emergency. If
Operator implements a Change without the prior approval of
Owner due to an Emergency, Operator shall promptly notify
Owner of such Change and pursue Owner's approval thereof in
accordance with subsection c below. Operator acknowledges
that Owner's approval of any proposed Change and/or the
related Change Order Budget Statement may require the
approval of the Agent.
c. Owner and Operator shall diligently and in good faith
endeavor to reach agreement upon any proposed Change and the
related Change Order Budget Statement within thirty (30) days
after the date of the receipt of a proposed Change and
related Change Order Budget Statement. If a Change is
required as a result of an Emergency, then Operator shall
provide to Owner, as soon as practicable, notice of such
Change, together with a statement describing the Emergency
and a Change Order Budget Statement. If a Change due to an
Emergency causes the Annual Operating Plan and Budget to be
exceeded and Owner believes that an Emergency did not exist,
then Owner shall have the right to dispute the Change. If
Owner and Operator do not agree as to the resolution of such
dispute, then either party may submit the dispute to
arbitration in accordance with the provisions of Article
XVIII Sections 2 and 3.
8. Operator shall report to Owner in writing monthly on electrical
and thermal output and expenditures incurred to date; projected
electrical and thermal output and expenditures for the balance of
the calendar year; performance to date under the operations and
maintenance plan and such other matters as Owner may reasonably
request as to the operation and maintenance of the System. In
such report, Operator shall recommend such changes to the then
current budget and operations and maintenance plan as Operator
considers necessary or appropriate.
9. Operator shall use its best efforts to operate and maintain
the System each year within the budget approved by Owner (as amended by
Change Orders). For purposes of determining the approved budget for
the initial calendar year, the budget provided as Exhibit F in the
aggregate amount of $1,606,997, for operating and maintenance duties
set forth in Article IV, shall be adjusted by the ratio of the
remaining number of days from the Effective Date to year-end divided by
366. If for any calendar year the Expenses
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(other than those Expenses set forth in Article VI, Section 2 (b)
and Expenses incurred in response to Emergencies), whether direct or
reimbursable, paid by Owner exceed the approved Annual Operating
Plan and Budget, as amended by Change Orders mutually agreed by
Owner and Operator, then Operator shall be solely responsible for
any such excess.
10. Operator's consideration for services performed and expenses paid
pursuant to this Agreement shall be the reimbursement of expenses
described in Section VI(2), the Operator's Fee, and, if applicable, the
Bonus.
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VII. INDEMNIFICATION
1. Operator will protect, indemnify and hold harmless Owner, Owner's
Affiliates and Agent, and their respective directors, officers,
employees, agents and representatives against and from any and all
demands, losses, claims, actions or suits, including costs,
judgments, penalties, fines and attorney's fees, for or on account
of injury to or death of third persons, or for damage to or
destruction of property belonging to third persons or for
violation of law, in each case resulting from or arising out of
Operator's negligent maintenance or operation of the System or
Operator's willful act or omission, except to the extent caused by
System design or construction defect, by Owner's act or omission,
or the act or omission of third parties.
2. Owner will protect, indemnify and hold harmless Operator,
Operator's Affiliates, and their respective directors, officers,
employees, agents and representatives against and from any and all
demands, losses, claims, actions or suits, including costs,
judgments, penalties, fines and attorneys' fees, for or on account
of injury to or death of third persons, or for damage to or
destruction of property belonging to third persons, or for
violation of law, in each case resulting from or arising out of a
System design or construction defect, or the negligence or willful
act or omission of Owner.
3. The duty to indemnify under this Article will continue in full
force and effect, notwithstanding the expiration or termination of
this Agreement, with respect to any claim or action based on facts
or conditions which occurred prior to such termination.
4. If any indemnified party intends to seek indemnification under
this Article from any indemnifying party with respect to any
action or claim, the indemnified party shall give the indemnifying
party notice of such claim or action within thirty (30) days of
the commencement of, or actual knowledge by the indemnified party
of, such claim or action. The indemnifying party shall have no
liability under this Article for any claim or actions for which
such notice is not provided; provided, however, so long as the
indemnifying party is not materially harmed by the indemnified
party's failure to give timely notice of a claim or action, then
the indemnifying party's indemnity obligation shall be unaffected.
The indemnifying party shall, at its sole cost and expense, defend
any such claim or action; provided, however, that the indemnified
party shall, at its own cost and expense, have the right to
participate in the defense or settlement of any such claim or
action. The indemnified party shall not compromise or settle any
such claim or action without the prior written consent of the
indemnifying party, which consent shall not be unreasonably
withheld.
VIII. INSURANCE COVERAGE
1. Operator, on its behalf and on the behalf of all subcontractors of
Operator performing any on-site services in connection with the
operation and maintenance of the System or any of its appurtenant
equipment, shall procure and maintain in effect during the term
for which they perform services pursuant to this Agreement the
following minimum insurance coverages, in the given amounts:
a. Vehicle liability insurance covering all owned, non-
owned and hired automobiles, trucks, trailers and other
vehicles. Such insurance shall provide coverage not less
than that of the standard comprehensive automobile policy in
limits not less than $1,000,000 combined single limit each
occurrence for bodily injury and property damage. The Owner
and NRG Generating (U.S.) Inc. shall be named as additional
insureds.
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b. Workers' Compensation Insurance that satisfies statutory
requirements and Employers' Liability Insurance with limits
of $1,000,000. This insurance shall include All States
Coverage and Longshoreman & Harbor Workers Compensation Act
coverage (if exposure exists) The Employer's Liability
Coverage shall not contain occupational disease exclusion.
c. Liability Insurance, on an "Occurrence" basis and in a
form providing coverage not less than that of the standard
Commercial General Liability, covering operations of the
System including independent contractors, products and
completed operations with broad form blanket contractual
liability coverage (for any written or oral contracts related
to the System) and personal injury liability coverage for
claims arising out of the operations of the System for bodily
injury and property damage (broad form, including completed
operations) in policy limits not less than $1,000,000
combined single limit each occurrence and $2,000,000
aggregate limit. The aggregate policy limits shall apply
solely to this project or site. Coverage shall include a
standard severability of interests clause and cross liability
coverage. The Owner and NRG Generating (U.S.) Inc. shall be
named as additional insureds.
d. Excess or umbrella liability Insurance, on an
"Occurrence" basis and with coverage at least as broad as the
vehicle liability, employers' liability and general liability
policies, to provide limits of insurance in excess of Owner's
vehicle liability, employers' liability and general liability
policies for not less than $10,000,000 combined single limit
each occurrence and in the aggregate for bodily injury,
property damage and personal injury. The aggregate policy
limits shall apply solely to this project or site. Coverage
shall include a standard severability of interests clause and
cross liability coverage. The Owner and NRG Generating
(U.S.) Inc. shall be named as additional insureds.
2. Owner shall procure and maintain in effect during the term of this
Agreement at its expense the following minimum insurance coverage:
a. Vehicle liability insurance covering all owned, non-
owned and hired automobiles, trucks, trailers and other
vehicles. Such insurance shall provide coverage not less
than that of the standard comprehensive automobile policy in
limits not less than $1,000,000 combined single limit each
occurrence for bodily injury and property damage. The
Operator and NRG Generating (U.S.) Inc. shall be named as
additional insureds.
b. Workers' Compensation Insurance that satisfies statutory
requirements and Employers' Liability Insurance with limits
of $1,000,000. This insurance shall include All States
Coverage and Longshoreman & Harbor Workers Compensation Act
coverage (if exposure exists) The Employer's Liability
Coverage shall not contain occupational disease exclusion.
c. Liability Insurance, on an "Occurrence" basis and in a form
providing coverage not less than that of the standard Commercial
General Liability, covering operations of the System including
independent contractors, products and completed operations with broad
form blanket contractual liability coverage (for any written or oral
contracts related to the System) and personal injury liability cover-
age for claims arising out of the operations of the System for bodily
injury and property damage (broad form, including completed opera-
tions) in policy limits not less than $1,000,000 combined single
limit each occurrence and $2,000,000
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aggregate limit. The aggregate policy limits shall apply solely to
this project or site. Coverage shall include a standard
severability of interests clause and cross liability
coverage. The Operator and NRG Generating (U.S.) Inc. shall
be named as additional insureds.
d. Excess or umbrella liability Insurance, on an
"Occurrence" basis and with coverage at least as broad as the
vehicle liability, employers' liability and general liability
policies, to provide limits of insurance in excess of Owner's
vehicle liability, employers' liability and general liability
policies for not less than $10,000,000 combined single limit
each occurrence and in the aggregate for bodily injury,
property damage and personal injury. The aggregate policy
limits shall apply solely to this project or site. Coverage
shall include a standard severability of interests clause and
cross liability coverage. The Operator and NRG Generating
(U.S.) Inc. shall be named as additional insureds.
d. "All Risk" Property Insurance, including Boiler and
Machinery Insurance and difference in conditions coverage
(including flood perils), with an extension for Business
Interruption Coverage, and naming Operator and NRG as
additional insureds for all such insurance coverage as their
interests appear.
3. Within thirty (30) days after the date of execution of this
Agreement, each party shall provide to the other party, pursuant
to the notice provisions of Article XIV, properly executed
certificates of insurance, signed by an authorized representative
of the insurance carrier. These certificates shall provide the
following information:
a. Name of insurance company, policy number and expiration
date;
b. The coverage required and the limits on each, including
the amount of deductibles and self-insured retentions;
c. A statement indicating that sixty (60) days notice of
cancellation, non-renewal, or material change in coverage of
any of the policies shall be given to each named insured and
any additional insured; and
d. Named and additional insured.
4. Each party shall have the right to inspect and photocopy the
policies of insurance at the other party's place of business
during regular business hours, on reasonable prior written notice.
5. All insurance policies, including Workers' Compensation
Insurance, provided by Owner and Operator shall waive all rights
of subrogation against one another and NRG .
6. The provision of insurance shall not be construed to limit the
liability of any party to the other party.
7. All commercial insurance carriers providing insurance hereunder
must be rated A- or better, with a minimum size rating of VIII by
Bests Insurance Guide and Key Ratings or an equivalent rating by
another nationally recognized insurance rating agency of a standing
similar to Best.
8. All deductibles or self insured retentions associated with
policies required hereunder shall be the responsibility of the named
insured.
IX. ENGAGEMENT OF THIRD PARTIES
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Operator may engage or subcontract in the ordinary course of business
and at Owner's expense such persons, corporations or other entities as
Operator deems advisable for the purpose of performing or carrying out
any of the obligations of Operator under this Agreement. Except in the
case of an Emergency, before incurring an Expense in excess of $10,000,
Operator shall obtain the prior written approval from Owner.
X. OPERATOR REPORTING OBLIGATIONS
Operator shall provide Owner with copies of all reports generated by
Operator's employees, agents, or subcontractors with respect to the
operation of the System that are filed with any federal, state, or
local agency or governmental entity. In addition, Operator shall
provide Owner with monthly compliance reports, summarizing Operator's
compliance with all System permits and licenses. All monthly
compliance reports shall be delivered to Owner within ten (10) days
after the last day of the relevant month.
XI. SPECIFIC LIMITATIONS
In the conduct of its duties hereunder, Operator shall not, without
first obtaining the written consent of Owner:
1. Limit on Expenditures. Under-take an expenditure outside
Operator's scope of responsibilities except that, in case of an
Emergency, Operator may make such immediate expenditures as may be
necessary, but notice of any such Emergency and expenditures shall
be given to Owner as promptly as possible, but in no case more
than 12 hours after the event.
2. Settlement of Claims. For any claim for which Owner is or may be
responsible, pay in excess of $10,000 in the settlement of any
claim for injury to or death of persons, or loss of or damage to
property, or in settlement of any contract or other dispute.
3. Disposition of Equipment. On Owner's behalf, sell or otherwise
dispose of any item of equipment which is part of or used in the
operating or maintaining the System if the current price of new
equipment similar thereto is in excess of $5,000.
4. Contracts with Affiliates. On Owner's behalf, enter into any
contract with an Affiliate of Operator with a value in excess of
$5,000.
XII. TERMINATION/DEFAULT
1. This Agreement may be terminated:
a. By the non-defaulting party at any time following the
occurrence of any Event of Default, as described in this
Article XII, if such Event of Default is not cured within the
period, if any, provided therefor;
b. By Operator, if, after Operator has taken all reasonable
efforts to avoid regulation as a public utility, Operator's
performance under this Agreement renders Operator subject to
regulation as a public utility by any federal, state or local
agency of any governmental entity, by delivery of thirty (30)
days' prior written notice to Owner;
c. By Operator, if Owner's action or inactions under this Agreement
renders Operator subject to regulation as a public utility by any
federal, state or local agency of any governmental entity, by delivery
of thirty (30) days' prior written
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notice to Owner;
d. By Owner for its convenience, upon 90 days' written notice to
Operator, provided that Owner pays Operator the applicable termination
charge in accordance with the provisions of Exhibit D (no termination
of this Agreement under this provision may be effective until the
third anniversary of the Effective Date);
e. By Owner, if, at, on, or in connection with the operation and
maintenance of any part or all of either or both of (x) the System or
(y) the properties, plant or equipment operated by Operator for NRG
Generating (Newark) Cogeneration, Inc., Operator fails to comply in
all material respects with all applicable laws, permits, licenses,
regulations, or orders of any Governmental Authority; provided,
however, that no failure of Operator to perform its obligations under
this Article XII, Section 1(e) shall be grounds for termination if
such failure is the result of the negligence of a third party other
than subcontractors of or procured by Operator or Operator's affili-
ates or an act of Force Majeure, so long as Operator is diligently
pursuing a cure as required by this Agreement. Owner may exercise its
right of termination under this Article XII action 1(e), if and
when Owner believes that Operator has failed to achieve and main-
tain compliance with an applicable law, permit, license, regulation or
order, whether or not (s) a court or administrative agency with
competent jurisdiction has determined that there has been such a fail-
ure or (t) a dispute resolution process has determined that the fail-
ure was not the result of either negligence of a third party other
than subcontractors or an act of Force Majeure which Operator is
diligently attempting to cure; provided, however, that following any
termination by Owner under this Article XII Section 1(e), if (u) a
court or administrative agency, with competent jurisdiction to
assess a fine, penalty or other action for failures in
circumstances of the sort which were the basis of Owner's
termination, issues a final nonappealable order (or issues an order
for which all appeals periods have expired) determining as a matter
of both fact and law that the circumstances which were the basis of
Owner's termination did not constitute a violation of any law,
permit, license, regulation or order, or v) a dispute resolution
process under Article XVIII determines that the failure was the result
of negligence of a third party other than subcontractors or an act of
Force Majeure which Operator is diligently attempting to cure, then
Owner shall pay Operator the amount determined in accordance with
Exhibit E.;
f. By the mutual agreement of the parties; and
g. By Owner, if the Amended Power Purchase Agreement is
terminated for any reason other than a default by Owner or an
Owner Affiliate.
2. Owner shall be in default under this Agreement upon the happening
or occurrence of any of the following events or conditions, each
of which shall be deemed to be an Event of Default for purposes of
this Agreement:
a. Owner materially breaches any of Owner's obligations,
covenants, conditions, services or other responsibilities
under this Agreement unless within thirty (30) days after
notice from Operator specifying the nature of such breach,
Owner either cures such breach or, if such breach (other than
the failure to make payment obligations) cannot be cured
within thirty (30) days, Owner commences and diligently
pursues such cure and thereafter continues to diligently
pursue such cure. If the breach is not cured within 120 days
of the date of Operator's written notice to Owner, then
Operator may terminate this Agreement;
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b. There is an assignment for the benefit of Owner's
creditors, or Owner or its parent company, NRG Generating
(U.S.) Inc., is adjudged bankrupt, or a petition is filed by
or against Owner or its parent company under the provisions
of any insolvency or bankruptcy laws (and such petition is
not dismissed within six months), or the business or
principal assets of Owner or its parent company are placed in
the hands of a receiver, assignee or trustee, or Owner is
dissolved, or Owner's existence is terminated or its business
is discontinued; or
c. Any material representation or warranty furnished by
Owner in connection with this Agreement was knowingly false
or misleading in any material respect at the time it was
made.
3. Operator shall be in default under this Agreement upon the
happening or occurrence of any of the following events or
conditions, each of which shall be deemed to be an Event of
Default for purposes of this Agreement:
a. Operator materially breaches or fails to observe or
timely perform any of Operator's obligations, covenants,
conditions, services or responsibilities under this
Agreement, unless within thirty (30) days after notice from
Owner specifying the nature of such breach or failure,
Operator either cures such breach or failure or, if such
breach cannot be cured within thirty (30) days, Operator
commences and diligently pursues such cure and thereafter
continues to diligently pursue such cure. If the breach is
not cured within 120 days of the date of Owner's written
notice to Operator, then Owner may terminate this Agreement;
b. There is an assignment for the benefit of Operator's
creditors, or Operator is adjudged bankrupt, or a petition is
filed by or against Operator under the provisions of any
insolvency or bankruptcy laws (and such petition is not
dismissed within six months), or the business or principal
assets of Operator are placed in the hands of a receiver,
assignee or trustee, or Operator is dissolved, or Operator's
existence is terminated or its business is discontinued; or
c. Any material representation or warranty furnished by
Operator in connection with this Agreement was knowingly
false or misleading in any material respect at the time when
made.
Notwithstanding subsection (a) above, Operator (i) shall not be
afforded any cure period, (ii) will not be permitted to invoke or
utilize the Article XVIII Dispute Resolution provisions, and (iii)
will be subject to immediate termination if the termination of
this Agreement is effected under the language of Article XII,
Section 1(e).
4. Upon the occurrence of an Event of Default, the non-defaulting
party may:
a. Without recourse to legal process, terminate this
Agreement by delivery of a written notice of termination to
the defaulting party or its assigns; and/or
b. Pursue, concurrently or separately, other remedies
existing in law, any provision of this Agreement, or
otherwise.
5. Upon termination or expiration of this Agreement, Operator
shall:
a. Deliver to Owner all books, records, operator logs, accounts and
manuals developed or maintained by Operator pursuant to this
Agreement, provided however, that Operator may retain copies of
such documents. Furthermore,
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Owner shall have the right to take possession of all of the equipment,
spare parts and supplies purchased for the System and paid
for by Owner;
b. At Owner's request and expense, cooperate with Owner to
effect an orderly transition of the operations and
maintenance of the System, including, without limitation,
perform the following:
i. Continue to operate the System in accordance with
this Agreement for a period not to exceed 180 days while
Owner appoints and mobilizes a successor operator;
ii. Assist Owner in preparing an inventory of all
material, equipment, spare parts and supplies purchased
for the System; and
iii. Assign to Owner all Operator's contractual
agreements with third parties relating to the operations
or maintenance of the System, to the extent such
agreements are so assignable.
XIII. ACCESS TO SYSTEM
Operator and Owner and their agents, representatives, and employees
shall have full and free access at all times to the System.
XIV. NOTICES
1. Any notice required or permitted under this Agreement shall be in
writing and shall be valid and sufficient if delivered personally,
mailed by registered or certified mail, or sent by a recognized
private overnight express delivery service. In each case postage
prepaid, return receipt requested, addressed to the other party as
follows:
If to Operator:
NRG Services, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, Minnesota 55403
Attn: NRG Asset Manager
Telephone: 612-373-5498
If to Owner:
NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 600
Minneapolis, Minnesota 55403
Attn: Chief Executive Officer
Telephone: 612-373-5300
2. Any party may change its address, or add additional addresses, by
notice given to the other parties in the manner set forth above.
XV. FURTHER ASSURANCES
1. Owner and Operator agree to execute, acknowledge and deliver any
and all such further documents and instruments and to take such action
as may reasonably be required in
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order to allow the financing of the System to proceed, to
effectuate the purpose of this Agreement, and to obtain any
government permits, licenses, or approvals necessary or convenient
to accomplish the foregoing.
2. Title to all materials, equipment, supplies, consumables, spare
parts and other items purchased or obtained by Operator for the
System shall pass to and vest in Owner upon the passage of title
from the vendor or supplier thereof and the payment or
reimbursement of Operator's costs by Owner.
XVI. REPRESENTATIONS AND WARRANTIES
1. Owner represents and warrants to Operator as follows:
a. Owner is a corporation duly formed, validly existing,
and in good standing under the laws of Delaware, and it is
properly qualified to do business in New Jersey;
b. The execution of this Agreement has been duly authorized
and approved by Owner, and no other authorizations,
approvals, or consents are required in order for this
agreement to constitute a binding and enforceable legal
obligation of Owner;
c. The execution of this Agreement by Owner, and the
performance of Owner's obligations under this Agreement will
not conflict with, or result in a breach or default under,
any agreement, contract, or covenant to which Owner is a
party; provided, however, that this provision is modified to
be consistent with Section 7 of the Agreement which is being
executed contemporaneously herewith as an inducement to the
execution of this agreement; and
d. This Agreement, as executed, constitutes a binding legal
obligation of Owner that is enforceable in accordance with
its terms and conditions.
2. Operator represents and warrants to Owner as follows:
a. Operator is a corporation duly incorporated, validly
existing, and in good standing under the laws of Delaware,
and it is properly qualified to do business in New Jersey;
b. The execution of this Agreement by Operator has been
duly authorized an approved by Operator and no other
authorizations, approvals, or consents are required in order
for this Agreement to constitute a binding and enforceable
legal obligation of Operator;
c. The execution of this Agreement by Operator, and the
performance of its obligations under this Agreement will not
conflict with, or result in a breach or default under, any
agreement, contract, or covenant to which Operator is a
party; and
d. This Agreement as executed, constitutes a binding legal
obligation of Operator that is enforceable in accordance with
its terms and conditions.
XVII. FORCE MAJEURE
1. Except for the obligation of either party to make any required
payments hereunder, the parties shall be excused from performing their
respective obligations under this Agreement and shall not be liable in
damages or otherwise if and to the extent that they
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are unable to so perform or are prevented from performing by a
Force Majeure, provided that:
a. The non-performing party, as promptly as practicable
after the occurrence of the Force Majeure, but in no event
later than 14 days thereafter, gives the other party written
notice describing the particulars of the occurrence;
b. The suspension of performance is of no greater scope and
of no longer duration than is reasonably required by the
Force Majeure;
c. The non-performing party uses its best efforts to remedy
its inability to perform; and
d. As soon as the non-performing party is able to resume
performance of its obligations excused as a result of the
occurrence, it shall give prompt written notification thereof
to the other party.
2. Neither party shall be required to settle any strike, walkout,
lockout or other labor dispute on terms which, in the sole judgment of
the party involved in the dispute, are contrary to its interest, it
being understood and agreed that the settlement of strikes, walkouts,
lockouts or other labor disputes shall be entirely within the
discretion of the party having such dispute.
XVIII DISPUTE RESOLUTION
1. Resolution by Parties.
a First Attempt. In the event that a dispute arises
hereunder between the parties, the parties shall attempt in
good faith to settle such dispute by mutual discussions
within 30 days after the date that a party gives written
notice of the dispute to the other party; provided, however,
that if the dispute involves any amount claimed under an
invoice and after 10 days of mutual discussion either party
believes in good faith that further discussion will not
resolve the dispute to its satisfaction, such party may
immediately refer the matter to arbitration in accordance
with subsection 2 of this Article XVIII.
b Chief Executive Officers. In the event that the dispute
is not resolved in accordance with subsection 1 (a) above,
either party may refer the dispute to the chief executive
officers or chief operating officers of the respective
parties for further consideration. In the event that such
individuals are unable to reach agreement within 15 days, or
such longer period as they may agree, then either party may
refer the matter to arbitration in accordance with subsection
2 of this Article XVIII.
2. Arbitration. In the event a dispute arises between Owner and
Operator which is not resolved pursuant to Section 1 of this Article
XVIII, shall be resolved by arbitration pursuant to the terms hereof.
As a condition to initiating arbitration proceedings, a party must
first have attempted to resolve the dispute under Section 1 of this
Article XVIII. All claims, disputes, and other matters in question
arising out of or relating to this Agreement or the breach thereof,
shall be decided by arbitrators selected as hereinafter provided and
shall be conducted in accordance with the Commercial arbitration Rules
of the American Arbitration Association then obtaining, unless the
parties mutually agree otherwise. The resolution of such disputes
shall not delay Operator's or Owner's performance of their undisputed
obligations under the terms of this Agreement. The arbitration shall
be held in Newark, New Jersey and any arbitration demand must be filed
with the American Arbitration Association office located closest to
Newark, New Jersey. If the claim or
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defense of either party is determined to be frivolous, the
arbitrators may require that the party at fault pay or reimburse
the other party for (i) fees and expenses, including, attorneys
and expert fees and expenses, and (ii) reasonable out of pocket
expenses incurred by the other party in connection with the
arbitration proceedings. Notwithstanding the foregoing, a
termination of the Agreement under the language of Article XII,
Section 1(e) shall not, under any circumstances (except for
disputes relating to the settlement of payment obligations), be
subject to arbitration under this Article XVIII.
3. Selection of Arbitrators. Each dispute shall be submitted to
three arbitrators, one arbitrator being selected by Owner, one
arbitrator being selected by Operator, and the third arbitrator
being selected by the two so selected. The party initiating the
arbitration shall include in its notification under subsection 4
below the designation of its selected arbitrator and the party
receiving such notification shall designate its arbitrator within
fifteen (15) days thereafter by notify the initiating party and
its arbitrator of the selection. If the arbitrators selected by
Owner and Operator cannot agree on a third arbitrator within
fifteen (15) days after the second arbitrator is selected, the
third arbitrator shall be selected by the American Arbitration
Association. In the event the party receiving notification of a
demand for arbitration shall not have selected its arbitrator and
given notice thereof to the other party and its arbitrator within
fifteen (15) days after receiving such notification, such
arbitrator shall be selected by the American Arbitration
Association.
4. Notice. Notice of demand for arbitration shall be filed in
writing with the other party to this Agreement and with the
American Arbitration Association. The demand shall be made within
a reasonable time after the claim, dispute or other matter in
question has arisen. In no event shall the demand for arbitration
be made after the date when the applicable statute of limitations
would bar institution of a legal or equitable proceeding based on
such claim, dispute, or other matter in question.
5. Award. This agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. The award
rendered by the arbitrators shall be final and judgment may be
entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
6. Survival. This Article shall survive termination of this
Agreement.
XIX. GENERAL PROVISIONS
1. Governing Law. This Agreement shall be governed by and construed
under the laws of New Jersey.
2. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
3. Headings. Title and headings of the Articles and Sections of this
Agreement are for convenience of reference only and do not form a
part of and shall not in any way affect the interpretation of this
Agreement.
4. Amendment. No modification or amendment of this Agreement shall
be valid unless in writing and executed by both parties to this
Agreement.
5. Assignment. This Agreement may not be assigned by Operator
without the written consent of Owner and written agreement of
assignee whereby it expressly assumes and agrees to perform each
and every obligation of Operator hereunder. Any assignment by
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Operator in violation hereof shall be null and void. Owner may,
without the consent of Operator, assign its rights (but not its
obligations) under this Agreement to or by a lender (including
finance lessor) providing funds to refinance the System.
6. Successors and Assigns. This Agreement shall be binding and inure
to the benefit of the parties hereto and their respective
successors and assigns, to the extent that assignment is permitted
under this Agreement.
7. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, supersedes all prior representations,
documents or statements transmitted between the parties.
8. Consequential Damages. In no event will Owner or Operator have
the right, with or without legal process, to recover punitive or
special damages, or indirect or consequential damages, such as
loss of use, lost profits, costs incurred because of delays, cost
of replacement energy, "idle plant" costs, interest on borrowed
money, letters of credit, security deposits or bonds. In no event
will Owner or Operator be liable for representations, oral or
otherwise, as to the results intended to be achieved through its
undertakings pursuant to this Agreement, except as specifically
provided in this Agreement.
9. Other Provisions. Nothing in this Agreement shall be construed to
prevent or prohibit Operator from providing operating services to
any other person, organization, or entity.
10. Waiver. The waiver of any breach of any term or condition hereof
shall not be deemed a waiver of any other or subsequent breach,
whether of like or different nature.
11. Not for Benefit of Third Parties. This Agreement and each and
every provision thereof is for the exclusive benefit of the
parties to this Agreement and not for the benefit of any third
party.
12. Survival of Representations, Warranties and Indemnities. All
representations, warranties and indemnities of the parties set
forth in this Agreement shall survive the termination or
expiration of this Agreement.
13. Approval by Proposed Lender. If any provision of this Agreement
must be approved by a lender, lessor or equity investor in
connection with the financing of the System or any other action
contemplated hereby, and such lender requires any modification of
the provisions of this Agreement, neither Owner nor Operator shall
unreasonably withhold its approval and execution of any such
modifications.
14. Survival of Obligations. Termination of this Agreement for any
reason shall not relieve Owner or Operator of any obligation
accruing or arising prior to such termination.
15. Confidentiality. The parties shall hold in confidence, and shall
use only for the purposes of this Agreement, any and all
Proprietary Information disclosed to each other.
16. Severability. Should any section or subsection hereof be declared
invalid or unenforceable for any reason, the remaining sections
and subsections of this Agreement shall remain in full force an
effect, and the parties hereto agree to immediately renegotiate in
good faith such section or subsection as was declared invalid or
unenforceable.
17. Duty to Mitigate. Each party must use its best efforts to
mitigate the injury or damage caused by the other party's failure to
perform. When a party seeking damages fails to
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make these efforts, the other party shall be entitled to have the
damages accordingly reduced.
18. Consent. Except in the case of an Emergency, when either party's
consent or approval is required, such consent or approval must be
in writing and given prior to the act for which such consent or
approval is sought.
19. 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, nor
shall any acts or requests of a party be unreasonable in light of
the surrounding facts and circumstances.
20. Disclaimer. THE WARRANTIES EXPRESSLY PROVIDED BY OPERATOR
HEREUNDER ARE THE SOLE, INTENDED WARRANTIES AND OPERATOR HEREBY
DISCLAIMS ALL OTHER 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.
21. Limits on Liability. Notwithstanding any provision contained in
this Agreement to the contrary, for any Contract Year, Operator
shall not be liable to Owner (whether by contract, warranty, tort,
statute or otherwise, including Liquidated Damages or penalties
owed by Operator under this Agreement) for any amounts that in the
aggregate exceed the amount of the Operating Fee and Bonuses paid
for the Contract 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 Contract Year of the term.
The limits of liability set forth herein shall not apply to any
damages incurred by a party as a result of its gross negligence or
willful misconduct.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first set forth above.
OWNER: OPERATOR:
NRG Generating (Newark) Power Operations, Cogeneration Inc.
By:/s/ Leonard Bluhm By:/s/ Timothy P. Hunstad
Its: President Its:Secretary
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EXHIBIT A
BONUS/LIQUIDATED DAMAGES
For the purpose of determining the liquidated damages ("Liquidated
Damages") payable by Operator, or the bonus ("Bonus") payable by Owner
to Operator, the effectiveness of Operator under this Agreement shall
be measured in terms of both availability and heat rate. These
measurements shall be applied at the completion of each Contract Year
to determine the Liquidated Damages or Bonus for that Contract Year.
Availability. Operator shall undertake to operate the System to
maximize availability. Availability will be measured for Base Capacity
level, as defined as 52 Mwe (net). In each case the following formula
will be used:
Contract Availability = [Total Hours - (Equivalent Contract Unavailable
Hours)]
Total Hours
where:
Total Hours = total hours in the Contract Year; and
Equivalent Contract Unavailable Hours = total of all hours during
the Contract Year during which there occurred a full or partial
Planned, Forced, or Maintenance Outage, as those terms are defined
by Edison Electric Institute as Equivalent Availability (including
outages resulting from Force Majeure events, but excluding outages
resulting from (x) JCP&L's failure to supply natural gas to the
Facility during periods when PSE&G has not interrupted
transportation that it supplies under the PSE&G Gas Supply
Agreement and (y) JCP&L's failure to accept available Output from
the Facility). Partial outages are measured on an equivalency
basis, e.g., a 50% outage for one hour would be equivalent to a
full outage for one-half hour, and so forth.
Availability. For purposes of Bonus/Liquidated Damages availability
calculation, the target Base availability will be 95%, for the term of
this Contract. Each one tenth of one percent (0.1%) of availability
will have a value of $20,000 as a Bonus or Liquidated Damages for
availability measurement.
Heat Rate. For purposes of Bonus/Liquidated Damages heat rate
calculations, the heat rate incentive will be based on 9750 Btu per kwh
HHV, as calculated in accordance with Article A.9 of the Amended Power
Purchase Agreement, for the term of this Contract.
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LIQUIDATED DAMAGES AND BONUS
The Liquidated Damages payable by Operator to Owner and the Bonus
payable by Owner to Operator shall be based on the Availability and
Heat Rate guarantees set forth in this Exhibit. For any Contract Year,
the maximum Liquidated Damages (in the aggregate for each category as
adjusted by the amounts of any Bonus payable to Operator) payable by
Operator shall be no more than one hundred percent (100%) of the
Operator's Fee for such Contract Year. For any Contract Year, once
the aggregate Bonuses payable to Operator (adjusted for the Liquidated
Damages, if any, owed by Operator) equal $250,000, then any amounts in
excess of $250,000 shall be payable to Operator at a rate of 40% of
such excess. The availability and heat rate bonus/penalty
calculations will be calculated monthly and payable to the end of the
Contract Year as set forth in the Third Amendment to Power Purchase
Agreement.
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EXHIBIT B
DESCRIPTION OF THE SYSTEM
NEWARK SYSTEM
The facility is a combustion gas turbine-steam turbine combined-cycle,
topping cycle cogeneration facility.
The nominal rating is 52 MW electrical with average thermal output of
45,000 lbs/hr steam. The prime movers of the plant is one General
Electric Frame 6 dual fuel combustion turbine, driving a 54,000 kVA
synchronous generator with electrical output PH, 60 Hz and 13.8 kV.
The exhaust from the Frame 6 turbine is directed into a three drum (tri-
pressure) heat recovery steam generator ("HRSG"). The HRSG at full
turbine load and 59F ambient temperature produces when fired with 94.0
million BtuHHV an hour of auxiliary filing, 227,000 lbs/hr of 600 psig,
700 F steam; 23,000 lbs/hr of 285 psig/500 F steam; and 12,300 lbs/hr
of 30 psig D&S steam.
The 600 psig steam is directed to the condensing extraction steam
turbine which drives a 22,000 kVa synchronous generator with an
electrical output of 3PH, 60 Hz and 13.8 kV.
The 165 psig steam extracted from the steam turbine is directed into a
header from which 45,000 lbs/hr is directed to process to dry
paperboard.
Thermal loads of the system vary seasonally +/- 5,000 lbs from an
average of 45,000 lbs/hr over the course of an 8760 hour year.
The plant will operate on natural gas under normal circumstances other
then interruptions due to curtailment of supply on extremely cold days.
Kerosene fuel is used as the alternate, approximately 480 hr/yr.
Output of the combustion turbine is controlled by sensing and
maintaining a constant optimum turbine exhaust temperature.
NOX emission from the plant are controlled by a combination of
steam injection into the combustion turbine and Selective Catalytic
Reduction using anhydrous ammonia injection with a semi-precious metal
catalyst in the HRSG. The plant is equipped with Continuous Emission
Monitoring equipment.
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EXHIBIT C
SYSTEM CONTRACTS
SYSTEM CONTRACTS
NEWARK
Power Purchase Agreement dated 04/30/96
Transmission Service and
Interconnection Agreement dated 11/17/87
Gas Service Agreement dated 04/30/96
Steam Purchase Agreement dated 10/03/86
Amended 03/08 & 07/20/88
Permits
Air Permit/Certification (Rental Boiler Stack) issued 03/11/93
Sewer Connection Permit issued 09/17/95
NJPDES General Permit issued N/A
Air Permit/Certification (Keeler Boiler Stack) issued 03/28/94
Air Permit/Certification (Fuel Oil Storage Tank)issued 08/13/90
Air Permit/Certification (Stack #1) issued 12/10/87
Stormwater Discharge Permit issued 10/15/93
30
EXHIBIT D
TERMINATION FOR CONVENIENCE
Commencing on the third anniversary of the Effective Date, the Owner
may terminate this agreement as set forth in Article XII. The
termination fee shall be $200,000 pro-rated based on the number of
calendar days remaining in the Agreement term as the numerator and 1096
calendar days as the denominator. The termination fee will be adjusted
accordingly for any pro-rated undisputed bonus/liquidated damage
payments due the Operator on the Termination Date.
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EXHIBIT E
Outstanding obligations under existing O&M Agreement
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EXHIBIT F
1997 Budget
SEE ATTACHED
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Exhibit 10.25.2
NRG GENERATING (PARLIN) COGENERATION INC./
POWER OPERATIONS, INC.
OPERATING AND MAINTENANCE AGREEMENT
This System Operating and Maintenance Agreement ("Agreement") is made
as of the 31st day of December 1996 between NRG Generating (PARLIN)
Cogeneration Inc., a Delaware corporation ("Owner"), and Power
Operations, Inc., a Delaware corporation ("Operator"), having its
principal place of business at Minneapolis, Minnesota, whose
obligations hereunder shall be fully guaranteed by NRG Generating
(U.S.) Inc. ("NRGG"), pursuant to a Guarantee required by Credit Suisse
per Credit Agreement dated May 17, 1996 in the form of Appendix I.
Owner (formerly named "O'Brien (Parlin) Cogeneration, Inc.") and
Stewart & Stevenson Operations, Inc. (SSOI) Operator entered into an
Operation & Maintenance Contract dated as of April 1, 1994 with respect
to the System (as defined below), a copy of which is attached as
Appendix II (the "Existing O&M Agreement").
In connection with the bankruptcy of Owner's parent, the existing
Electricity Purchase Agreement between Owner and Jersey Central Power &
Light Company relating to the System has been renegotiated and replaced
with an Amended and Restated Power Purchase Agreement (as defined
below).
Owner desires to replace SSOI and Owner and Operator have negotiated
the terms and conditions of a new O&M Agreement and desire to enter
into this Agreement effective upon the Effective Date.
In consideration of the foregoing and the mutual covenants and benefits
contained herein, the parties hereby agree as follows:
I. DEFINITIONS
In this Agreement the following terms have the associated meaning:
1. Affiliate - With reference to a specified person, any other person
or entity, directly or indirectly through one or more
intermediaries, which controls, is controlled by, or is under
common control with, such person. A person or entity is
controlled by another person or entity if the second person or
entity holds a sufficient number of securities in the first person
or entity to elect a majority of the directors of the first person
or entity.
2. Agent - The agent for the lenders under the Financing Agreements.
3. Amended and Restated Power Purchase Agreement - The Amended and
Restated Agreement for Purchase and Sale of Electric Power, dated
April 30, 1996, between Owner and Jersey Central Power & Light, a
copy of which is attached as Appendix III hereto.
4. Annual Operating Plan and Budget - As set forth in Article VI,
Section 6.
5. Bonus - As set forth in Exhibit A.
6. Change - Shall mean any of the following that are proposed by one
party to the other by a written notice to the other party: (i) a
change in the then current Annual Operating Plan and Budget; (ii)
a change in connection with the services to be provided by
Operator hereunder; (iii) a change made necessary to avoid injury
to persons or property or to mitigate losses as a result of the
occurrence of an Emergency; and (iv) a change enabling Operator to
accomplish or contract for a Major System Repair.
<PAGE>
7. Change Order - Shall mean the written approval of a proposed
Change and the related Change Order Budget Statement by Operator and
Owner as further provided for in Article VI Section 7 (b).
8. Change Order Budget Statement - Shall mean the statement prepared
by Operator pursuant to Article VI, Section 7 (b) with respect to
a proposed Change setting forth in reasonable detail: (i) the
direct cost or savings to Owner of the proposed Change; (ii) the
indirect costs or savings of the proposed Change, including
without limitation, any loss of electricity revenues or steam host
revenues and any increased insurance, operating, maintenance or
other costs during or following the implementation of the proposed
Change; (iii) changes in the operating efficiency of the System;
and (iv) any other material effect on the operation, maintenance,
efficiency or profitability of the System or the provision of the
services hereunder.
9. Contract Year - As set forth in the Amended and Restated Power
Purchase Agreement.
10 Effective Date - The date the agreement was executed.
11. Emergency - Any event or occurrence which in the judgment of
Operator or Owner, as the case may be, requires immediate action
and which constitutes a serious hazard to the safety of persons or
property or may materially interfere with the safe, economical,
lawful or environmentally sound operation of the System.
12. Event of Default - As set forth in Article XII.
13. Existing O&M Agreement - as set forth in the Recitals.
14. Expenses - As set forth in Article VI, Section 2.
15. Financing Agreements - Any loan, lease financing, security or
related agreements entered into at any time by and among Owner and
the lending institutions providing financing for the System.
16. Force Majeure - Unforeseeable causes beyond the reasonable
control of and without the fault or negligence of the party
claiming Force Majeure, including but not limited to acts of God,
strike, flood, earthquake, storm, fire, lightning, epidemic, war,
riot, civil disturbance, sabotage, change in law or applicable
regulation subsequent to the date thereof and action or inaction
by any federal, state or local legislative, executive,
administrative or judicial agency or body which, in any of the
foregoing cases, by exercise of due foresight such party could not
reasonably have been expected to avoid, and which by the exercise
of due diligence, it is unable to overcome.
17. Legal and Contractual Requirements - All:
a. Laws, permits, approvals, regulations or orders of
governmental authorities applicable to the Amended and
Restated Power Purchase Agreement, the System, Owner's
obligations under this Agreement as owner of the System and
Operator's scope of work hereunder;
b. Provisions of the System Contracts;
c. Agreements, warranties and specifications of Operator's or
Owner's suppliers or vendors; and
d. Operating and maintenance manuals and procedures furnished by
Owner applicable to the System or the components thereof (such
operating manuals to
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reflect Sound Independent Power Industry Practice)
18. Liquidated Damages - As set forth in Exhibit A.
19. MAJOR SYSTEM REPAIR -
The inspection, overhaul, repair or replacement of any piece of
equipment needed to operate the System where such inspection, overhaul,
repair or replacement is the result of: (i) an unscheduled breakdown,
repair, or failure of such equipment or (ii) a scheduled inspection,
overhaul, repair or replacement of such equipment (unless the
inspection, overhaul, repair or replacement has been incorporated into
the Annual Operating Plan and Budget) and further that such inspection,
overhaul, repair or replacement shall have a cost in excess of $10,000,
which includes labor and material costs, and shall be adjusted each
year by the increase or decrease in the Producer Price Index.
Equipment shall include the gas turbines, the generators, boilers, heat
steam recovery generators, chillers, load gears, exhaust ducting,
emissions equipment, water and waste water treatment, fuel treatment
facilities and interconnection facilities; provided, however, that a
Major System Repair shall not include the replacement of accessories,
equipment and consumables required in the ordinary course of Routine
Maintenance and preventative maintenance of the System reflecting Sound
Independent Power Industry Practice.
20. Operating Fee - As set forth in Article VI, Section 1.
21. Owner's Plan of Operation - Owner's instructions to Operator as to
the desired electricity and/or thermal energy production schedule
and other operating and maintenance objectives.
22. Owner's Representative - As set forth in Article V, Section 1(a).
23. Producer Price Index - The U.S. Producer Price Index for All
Items, as currently published in the United States Department of
Labor Bureau of Labor Statistic's monthly publication, PPI
Detailed Report or any successor publication of such information,
or if such index is no longer published or the method of
computation thereof is substantially modified, a mutually
agreeable alternative index.
24. Proprietary Information - All financial, technical and operating
information which the parties, directly or indirectly, acquire
from each other, and any other information which a party expressly
designates in writing to be confidential. However, Proprietary
Information shall exclude information falling into any of the
following categories:
a. Information that, at the time of disclosure thereof, is
in the public domain;
b. Information that, after disclosure thereof, enters the
public domain other than by breach of this Agreement;
c. Information that prior to disclosure thereof, was
already in the recipient's possession, either without
limitation on disclosure to others or subsequently becoming
free of such limitation;
d. Information obtained by the recipient from a third party
having an independent right to disclose such information;
e. Information that is available by independent research
without use of or access to the Proprietary Information
acquired from the other party; and
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f. Information that a party is required by law or
governmental action to disclose, provided the disclosing
party notifies the party from whom the information originated
in advance and gives it the opportunity to resist the order.
25. Routine Maintenance - Those activities including the replacement
of accessories, equipment, and consumables required in the
ordinary course of routine and preventative maintenance of the
System and System Site in accordance with Sound Independent Power
Industry Practice.
26. Sound Independent Power Industry Practice - Those prudent
practices and methods in effect at the time of performance that
are customarily followed by operators of similarly situated plants
and equipment.
27. System - Owner's properties, plant and equipment located in
Sayreville, New Jersey, including a single gas turbine combined
cycle generating station with a nominal capacity of approximately
120 megawatts, more fully defined in Exhibit B.
28. System Contracts - Contracts and agreements to which Owner is a
party (including, without limitation, insurance policies) relating
to the operation and maintenance of the System, set forth on
Exhibit C.
II. ENGAGEMENT OF OPERATOR
1. Effective on the Effective Date, Owner engages Operator to operate
and maintain the System and perform certain duties, all as
hereinafter set forth in this Agreement, and Operator accepts such
engagement to operate and maintain the System and perform the
duties specified in this Agreement in accordance with its terms
and conditions.
2. All operating and management personnel involved in the
operation and maintenance of the System shall be employees of
Operator or its Affiliates and shall not for any purposes be
deemed employees of Owner.
III. TERM
The term of this Agreement shall become effective upon the Effective
Date and expire on the sixth (6th) anniversary of the Effective Date,
unless terminated earlier in accordance with Article XII of this
Agreement.
IV. OPERATING AND MAINTENANCE DUTIES OF OPERATOR
1. Subject to the terms of this Agreement, Operator shall operate and
maintain the System and shall control the details and means of
performing its obligations hereunder.
2. For the period prior to and including the Effective Date, Operator
shall assist Owner in preparing the System for operation under the
Amended and Restated Power Purchase Agreement. These services
will include but not be limited to:
a. Preparing a plan and schedule to staff the System;
b. Recruiting and training the staff which will operate and
maintain the System;
c. Responding, in a timely manner, to Owner's requests for
information;
d. Procuring, as agent for Owner, replacement of stock of
consumables, spare parts, tools, and supplies in accordance
with the Annual Operating Plan and Budget;
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e. Appointing a plant manager (subject to Owner's approval)
who shall supervise the performance of Operator's employees
at the System site;
f. Reviewing plans, specifications and drawings of
machinery and equipment layouts and commenting to Owner
thereon with regard to matters affecting operation and
maintenance;
g. Observing and receiving training and instructions from
Owner, such training and instructions to be in accordance
with Sound Independent Power Industry Practice;
h. Performing for Owner such other services as may from
time to time be reasonably requested or are reasonably
necessary or appropriate in connection with the operation and
maintenance of the System; and
i. Reporting to and consulting with Owner about the
operation of the System on a scheduled basis, as reasonably
requested by Owner.
Such services shall be provided in a manner consistent
with all Legal and Contractual Requirements, Sound Independent
Power Industry Practice and the Annual Operating Plan and Budget.
3. All full time personnel whom Operator will provide for the
operation and maintenance of the System shall be at the site and
available full time for training and to perform services to
support System operation and maintenance as required by the
staffing plan to be developed by Operator and approved by Owner.
4. A written management program shall be developed by Operator for
approval by Owner to ensure optimal performance, responsiveness,
and cost-effectiveness in the operation and maintenance of the
System. The program shall include provisions regarding:
a. Budget tracking, analysis and adjustments;
b. Personnel policies, including policies regarding payroll,
compensation, pensions and other benefits;
c. Training;
d. Purchasing and inventory control;
e. A System safety and health program which will include
procedures and a manual;
f. An employee job-site handbook for Operator's employees
operating and maintaining the System;
g. A maintenance planning and scheduling system; and
h. A system for maintaining an inventory of consumables, spare
parts, tools and supplies.
5. Subsequent to the Effective Date, Operator shall provide all
operations and maintenance services necessary to efficiently
operate and maintain the System, including but not limited to
performing the following operating and maintenance services:
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a. Operating and maintaining the System in compliance with
all Legal and Contractual Requirements, Sound Independent
Power Industry Practice and the Annual Operating Plan and
Budget;
b. Obtaining and maintaining in effect all licenses and
permits required by law to be obtained and maintained in
Operator's name and assisting Owner in obtaining and renewing
all licenses and permits required by law to be obtained and
maintained by Owner or in Owner's name;
c. Paying all its employees, agents and subcontractors
promptly and filing all reports and remitting all payments
required under labor statutes to the appropriate governmental
authorities, as the obligations arise;
d. Conducting the operations and maintenance of the System
including, but not limited to, entering into contracts with
third parties as agent for Owner (subject to Owner's approval
if not in the ordinary course of business);
e. Employing, and ensuring adequate training of, Operator
employees and employees of its Affiliates (duly licensed
where required by statute or regulation) for the operation
and maintenance of the System consistent with Sound
Independent Power Industry Practice, and planning and
administering all matters pertaining to employee relations,
salaries, wages, working conditions, hours of work,
termination of employment, employee benefits, employee
staffing, safety and related matters pertaining to such
employees, and maintaining records with respect to all such
matters;
f. Monitoring, preparing and maintaining records of the
operations and maintenance aspects of the System (including
records of financial, business, and sales tax aspects of the
System) in such form and covering such matters as Owner may
reasonably request, consistent with Sound Independent Power
Industry Practice, generally accepted accounting principles,
and applicable records retention requirements; and making
such records available for inspection and/or audit by Owner
and Owner's designees;
g. Implementing an inventory control system to identify,
catalog, and disburse spare parts for the maintenance of the
System and procuring, as agent for Owner, replacement spare
parts and refurbishing, where practical or economical, spare
parts to allow their reuse;
h. Operating and maintaining the System according to the
operations and maintenance programs prepared by Operator for
Owner and, if necessary, creating updates for such programs
and creating new programs as required for operation and
maintenance of the System;
i. Operating and maintaining the System to maximize the
continuous, reliable, safe and efficient generation of
electrical and/or thermal energy by the System so as to
conserve fuel and financial resources and to minimize
unscheduled outages, and providing maintenance for the System
in a cost-effective manner to prevent deterioration beyond
normal wear and tear; provided, however, that Owner
acknowledges such efforts shall necessarily be limited by the
operating life, capacity and maintenance requirements of the
System and by Legal and Contractual Requirements;
j. Using all reasonable care necessary to keep the System
and the System site clean, orderly, and free from debris,
rubbish or waste to the extent consistent with the operation
of the System;
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k. Taking necessary precautions and corrective actions in the event
of an Emergency;
l. Keeping the System and the System site free and clear of
all liens and encumbrances arising out of the acts,
omissions, or debts of Operator or its employees, agents or
subcontractors claiming by, through or under Operator (this
subsection shall not apply to mechanics liens and liens of
any nature arising by operation of law, provided such liens
are promptly removed by the payment of the debts they secure
when due; in the event of a dispute between Operator or its
subcontractors and a lienholder, Operator's obligation to
Owner pursuant to this provision may be satisfied by the
posting of an appropriate bond to the extent acceptable to
the Agent);
m. Within 30 days of its receipt of Owner's Plan of
Operation submitted in accordance with Article V, Section
1(c), preparing and submitting to Owner for Owner's approval
a written proposed Annual Operating Plan and Budget which
shall include all anticipated Expenses of the System to be
paid by Owner for each succeeding calendar year, all as more
fully described in Article VI, Section 6 or required by the
Agent;
n. Reporting to and consulting with Owner about the
operation of the System on a scheduled basis, as reasonably
requested by Owner;
o. Using reasonable commercial efforts to secure from
vendors, suppliers and subcontractors the best indemnities,
warranties and guarantees as may be commercially available
regarding supplies, equipment and services purchased for the
System, all of which shall be assigned to Owner (Operator
shall render reasonable assistance to Owner for the purpose
of enforcing such indemnities, warranties or guarantees of
which Owner is a beneficiary regarding the System);
p. Performing for Owner such other services as may from
time to time be reasonably requested or are necessary or
appropriate in connection with the operation and maintenance
of the System;
q. Promptly notifying Owner of:
i. Any condition, event or act which is likely to
result in a material deficiency in budgeted revenues, or
excess in budgeted costs, of Owner;
ii. Any forced outages or significant malfunction
of the System as soon as practicable;
iii. Any material failure to comply with any Legal
and Contractual Requirements or any event which is
reasonably expected to cause such material failure;
r. Promptly providing Owner with such information relative
to the System as Owner may reasonably request;
s. Establishing an effective maintenance planning and
scheduling system to optimize the availability, reliability
and heat rate of the System;
t. Assisting Owner in the compliance by Owner with the
terms of the Financing Agreements, as they relate to the
operation and maintenance of the System, including the
preparation of reports concerning operations and making
personnel available for discussions with the Agent or other
lender representatives;
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u. Subject to Article XI, assisting Owner in selling or
otherwise disposing of used and/or unneeded parts and
supplies; and
v. Providing and maintaining written procedures, in a form reasonably
acceptable to Owner, required to enable Operator's employees to safely
and efficiently start-up, operate, and shut down the System equipment
and to perform preventative maintenance on the System equipment.
8
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V. RESPONSIBILITIES OF OWNER
1. Subject to the terms of this Agreement, Owner shall, at its cost
and expense, perform and provide the following at the times
required to support the start-up, operation and maintenance of the
System:
a. Providing an Owner's Representative who shall represent
and bind Owner in all matters regarding this Agreement and
the performance of Owner hereunder;
b. Providing the System and System Site free and clear of
all liens and encumbrances (except for any liens or
encumbrances in favor of Agent or the lenders under the
Financing Agreements);
c. Preparing the Owner's Plan of Operation and delivering
the same to Operator on or before September 1 of each year;
d. With Operator's assistance, administering all System
Contracts;
e. Providing all required utility services, including
water, sewer, telephone, water/waste water treatment, waste
disposal, special waste disposal and electricity;
f. With Operator's assistance, obtaining and reviewing all necessary
licenses and permits except those required by law to be obtained and
maintained in Operator's name;
g. Providing manufacturer's operating and maintenance manuals
for the System;
h. With Operator's assistance, preparing and submitting any
special accounting and reporting documents that may be
required by governmental authorities;
i. Providing at its own expense, an office at the site for
use by Operator;
j. Within five days of its receipt thereof, providing
Operator complete copies of all technical, operational and
other System and System site related information, including
the System Contracts, as are in the possession, or under the
control, of Owner;
k. Being responsible for the billing and collection of
electricity revenues under the Amended and Power Purchase
Agreement and thermal revenues under the Steam Purchase
Contract with Newark Boxboard;
l. Being solely responsible for obtaining, maintaining and
renewing all licenses and permits necessary for: (i) Owner to
do business in the jurisdictions in which the System is
located and (ii) the ownership, operation and maintenance of
the System and System site;
m. Being responsible for arranging the disposal of hazardous
wastes generated by or at the System or System site; Operator
will coordinate removal of such waste from the System site
using subcontractors chosen by Owner.
n. Complying with, and diligently enforcing, all agreements
(including the System Contracts) to which Owner is a party
and which relate to or impact upon the System or Operator's
ability to perform its obligations hereunder; and
n. Timely paying all of Owner's vendors, suppliers and
contractors.
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Such activities shall be provided in a manner consistent with
all Legal and Contractual Requirements, Sound Independent Power
Industry Practice and the Annual Operating Plan and Budget.
VI. EXPENSES, REIMBURSEMENTS, BUDGET, CONSIDERATION, COMPENSATION
1. As compensation to Operator for its performance of the services,
Owner shall pay Operator (a) the Expenses incurred by Operator
and (b) an annual fee ("Operator's Fee"). The Operator's Fee for
the first Contract Year shall be $200,000.00. The Operator's Fee
shall be payable in equal monthly installments in arrears. The
Operator's Fee shall be adjusted annually in accordance with the
following sentence. For each Contract Year after the first
Contract Year, the Operator's Fee shall be equal to the product
of: (i) the ratio of the Producer Price Index for the last month
of the then expiring Contract Year over the Producer Price Index
for the last month of the previous Contract Year and (ii) the
Operator's Fee for the then expiring Contract Year; provided,
however, that for any partial Contract Year, the Operator's Fee
shall be multiplied by a fraction, the numerator of which shall be
the total number of days in such Contract Year and the denominator
of which shall be 365 or 366, as the case may be. If Operator
fails to pay accrued, undisputed Liquidated Damages in any
Contract Year in accordance with the provisions herein, Owner may
elect to reduce the Operator's Fee in the subsequent Contract Year
by the amount of undisputed Liquidated Damages owed to Owner.
2. Owner shall directly pay, or promptly reimburse to Operator as the
case may be, the following expenses ("Expenses") relating to the
System:
a. Insurance and bond premiums for policies which are
required by Article VIII hereof;
b. Property and other taxes (including, without limitation,
sales taxes, gross receipts taxes, value added taxes, energy
taxes and capital taxes) related to Owner or the System, but
not including those based on Operator's income or capital;
c. The base salaries, straight time hourly wages and
overtime hourly wages of all of Operator's on-site personnel
plus (i) thirty eight percent (38%) of (x) the base salaries
and straight time hourly wages and (y) the straight time
hourly portion of the actual overtime wages for all hourly
employees, and (ii) five percent (5%) of the base salaries,
straight time hourly wages, and overtime hourly wages.
d. Transportation, travel, lodging, and (for employees
newly hired or newly assigned to the System site) relocation
expenses of persons employed by Operator or its Affiliates
performing the duties of Operator under this Agreement
subject to advance approval by Owner in writing;
e. Reasonably incurred legal and accounting fees relating
to the System, subject to advance approval by Owner in
writing;
f. Fuel expenses including fuel purchase, transportation,
handling and demurrage charges;
g. The expenses of purchased electric power, telephone and
other communication services, purchased potable water, waste
disposal, special waste disposal, lubricants and chemicals
necessary for the operation of the System;
h. Costs reasonably incurred or paid by Operator due to an
Emergency;
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i. Training, including outside training services;
j. The costs of permits or licenses required for either
Owner, Operator or the System;
k. Costs associated with Routine Maintenance, Major System Repairs
(including scheduled and unscheduled) inspections, and overhauls,
outside contractor services and purchases of replacement equipment,
parts and components;
l. Spare parts, tools, supplies and consumables;
m. Capital costs approved by Owner for improvements,
alterations or additions to the System including those
required by governmental laws, regulations or orders
including without limitation, those arising from
environmental concerns; and
n. The cost of transportation of spare parts, tools,
supplies, consumables and any item which is a reimbursable
expense hereunder.
For all Expenses (other than relating to labor and legal and
accounting fees) incurred and paid by Operator for which Operator
is entitled to reimbursement hereunder, Owner additionally shall
pay Operator a general and administrative expense fee of five
percent (5%) of such Expenses.
3. a. For convenience and in order to save on expenses, Owner
will directly pay certain of the Expenses reimbursable to
Operator as set forth in the Annual Operating Plan and Budget
described in Article VI, Section 2 as practicable. To the
extent reasonably practical, the items covered by such
Article VI, Section 2 shall be procured through Operator's
issuance of an Owner purchase order and the cost of any such
items shall be paid directly by Owner to the vendor thereof.
Operator shall perform such duty as Owner's agent.
b. Without Owner's prior approval, Operator shall be
empowered to prepare and issue an Owner purchase order for
any material or service the cost of which would constitute an
Expense, so long as the total cost for such item is less than
or equal to $10,000. For any item or items whose cost is
greater than $10,000, Operator shall submit a written
requisition to Owner, and after receipt of written approval
from Owner, Operator shall be authorized as agent for Owner
to prepare and issue a purchase order on behalf of Owner on
Owner's purchase order form for such item. Operator shall
(i) verify the receipt at the System site of all materials
and services to be delivered to the System site covered by
Owner's purchase orders issued by Operator, (iii) verify the
accuracy of vendors' invoices in connection therewith, and
(iv) forward such invoices to Owner for approval, processing
and payment by Owner. Nothing in this Agreement shall
prevent Operator from procuring any material or service the
cost of which would constitute an Expense under Article VI
Section 2.
c. Operator shall periodically, but not more often than once a
week, deliver to Owner invoices received by Operator from
third parties for all direct Expenses, accompanied by a
summary of all such invoices which itemizes all such invoices
by operating cost account number. Such invoices shall also
be accompanied by a statement from Operator confirming that
all such invoices are accurate, due and payable, together
with all relevant documentation reasonably necessary for
Owner to verify the accuracy thereof. Each invoice submitted
to Owner shall be paid by Owner directly to the payee of such
invoice on or before the date such invoice is due.
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<PAGE>
4. From time-to-time, Operator will prepare and send to Owner an
invoice, including expense statements, vouchers or such other
supporting information as Owner may reasonably require, for the amounts
then due for reimbursable Expenses and the monthly installment of the
Operator's Fee. Owner shall pay the amount due to Operator no later
than 30 days after receipt of the invoice. All payments shall be
made by wire transfer of immediately available funds to Norwest Bank,
Minneapolis, Minnesota Account No. (to be furnished later). Any
payment not made within 30 days after receipt of the invoice will bear
interest from the date on which payment was due at the rate of one and
one-half (1.5%) percent per month or the maximum rate permitted by law,
whichever is the lesser.
5. Operator shall maintain complete, true, and correct records in
connection with all Expenses incurred by Operator. Operator shall
retain all such records for five (5) years after Expense reimbursement
by Owner has been fulfilled or for any longer period of time required
by law. All documents and records relating to this Agreement shall be
available for inspection by Owner anytime during normal business hours.
Owner may audit all records of Operator relating to Expenses and
services performed hereunder. In the event the audit shows that the
payment by Owner to Operator exceeds the amount due Operator, Owner
shall disclose such information to Operator and Operator shall refund
the excess amount to Owner within five (5) business days of the
disclosure to Operator. In the event the audit shows that the payment
by Owner to Operator is greater than the amount due Operator under this
Agreement and such error was caused by Operator, Owner shall be
reimbursed its reasonable costs of performing the audit. In the event
the audit shows that the payment by Owner is less than the amount due
Operator, Owner shall disclose such information to Operator and pay the
underpayment amount to Operator within five (5) business days of the
disclosure to Operator.
6. On or before October 1 of each year, the Operator shall prepare
and submit to Owner a written Annual Operating Plan and Budget
which shall include all expenses of the System anticipated to be
paid by Owner as either a direct or reimbursable Expense during
the upcoming calendar year pursuant to subsection 1 of this
Article VI, together with a written operations and maintenance
plan for the same period of time. Such Annual Operating Plan and
Budget shall set forth the anticipated operations and maintenance
plan including projected electrical production from the System on
a monthly basis, and a complete schedule (to the extent
technically feasible) of Operator responsible Routine Maintenance
and all Owner-directed major maintenance tasks (including Major
System Repairs) to be accomplished during said year. Owner and
Operator shall agree upon the budget, operations and maintenance
plan, and persons to perform maintenance under the plan prior to
the start of the calendar year, and shall meet and exchange
information as is necessary and convenient to such end.
If the parties cannot reach agreement on the Annual Operating Plan
and Budget by the start of any calendar year, then, until such
time as agreement is reached or the dispute is resolved, the
Annual Operating Plan and Budget for such calendar year shall be
based on the Annual Operating Plan and Budget for the preceding
calendar year, as adjusted to reflect the net change, if any,
between the most recently published Producer Price Index available
on the first day of the calendar year in question and the
corresponding Producer Price Index in effect at the start of the
immediately preceding calendar year.
Operator has submitted, and Owner has accepted, the Annual
Operating Plan and Budget for the calendar year ending December
31, 1997, a copy of which is attached as Exhibit F. All Annual
Operating Plan and Budgets shall be in substantially the form
attached as Exhibit F. The amounts set forth on Exhibit F shall
be reduced pro rata based on the number of days remaining in the
calendar year from and after the Effective Date. Likewise, the
amounts set forth in the Annual Operating Plan and Budget in
effect during the calendar year in which this Agreement expires or
is terminated shall be
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reduced on a pro rata basis based actual number of days elapsed
during such calendar year prior to the date of the expiration or
termination of this Agreement.
7. a. The parties recognize that Changes may be required
during the term of this Agreement. Either Owner or Operator
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. The written notice of a Change proposed by Operator
shall be accompanied by a Change Order Budget Statement.
Upon receipt by Operator of any proposed Change from Owner,
Operator shall use its best efforts to prepare and submit to
Owner a Change Order Budget Statement with respect to such
proposed Change within fifteen (15) days of the receipt of
Owner's proposed Change. No proposed Change the cost of
which is in excess of $10,000 shall be implemented until a
Change Order has been executed by both parties approving the
Change and the related Change Order Budget Statement;
provided, however, that Operator shall be entitled to
implement a proposed Change without the prior approval of
Owner if such Change is required due to an Emergency. If
Operator implements a Change without the prior approval of
Owner due to an Emergency, Operator shall promptly notify
Owner of such Change and pursue Owner's approval thereof in
accordance with subsection c below. Operator acknowledges
that Owner's approval of any proposed Change and/or the
related Change Order Budget Statement may require the
approval of the Agent.
c. Owner and Operator shall diligently and in good faith
endeavor to reach agreement upon any proposed Change and the
related Change Order Budget Statement within thirty (30) days
after the date of the receipt of a proposed Change and
related Change Order Budget Statement. If a Change is
required as a result of an Emergency, then Operator shall
provide to Owner, as soon as practicable, notice of such
Change, together with a statement describing the Emergency
and a Change Order Budget Statement. If a Change due to an
Emergency causes the Annual Operating Plan and Budget to be
exceeded and Owner believes that an Emergency did not exist,
then Owner shall have the right to dispute the Change. If
Owner and Operator do not agree as to the resolution of such
dispute, then either party may submit the dispute to
arbitration in accordance with the provisions of Article
XVIII Sections 2 and 3.
8. Operator shall report to Owner in writing monthly on electrical
and thermal output and expenditures incurred to date; projected
electrical and thermal output and expenditures for the balance of
the calendar year; performance to date under the operations and
maintenance plan and such other matters as Owner may reasonably
request as to the operation and maintenance of the System. In
such report, Operator shall recommend such changes to the then
current budget and operations and maintenance plan as Operator
considers necessary or appropriate.
9. Operator shall use its best efforts to operate and maintain
the System each year within the budget approved by Owner (as
amended by Change Orders). For purposes of determining the
approved budget for the initial calendar year, the budget provided
as Exhibit F in the aggregate amount of $2,261,061, for operating
and maintenance duties set forth in Article IV, shall be adjusted
by the ratio of the remaining number of days from the Effective
Date to year-end divided by 366. If for any calendar year the
Expenses (other than those Expenses set forth in Article VI,
Section 2 (b) and Expenses incurred in response to Emergencies),
whether direct or reimbursable, paid by Owner exceed the approved
Annual Operating Plan and Budget, as amended by Change Orders
mutually agreed by Owner and Operator, then Operator shall be
solely responsible for any such excess.
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10. Operator's consideration for services performed and expenses paid
pursuant to this Agreement shall be the reimbursement of expenses
described in Section VI(2), the Operator's Fee, and, if applicable, the
Bonus.
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VII. INDEMNIFICATION
1. Operator will protect, indemnify and hold harmless Owner, Owner's
Affiliates and Agent, and their respective directors, officers,
employees, agents and representatives against and from any and all
demands, losses, claims, actions or suits, including costs,
judgments, penalties, fines and attorney's fees, for or on account
of injury to or death of third persons, or for damage to or
destruction of property belonging to third persons or for
violation of law, in each case resulting from or arising out of
Operator's negligent maintenance or operation of the System or
Operator's willful act or omission, except to the extent caused by
System design or construction defect, by Owner's act or omission,
or the act or omission of third parties.
2. Owner will protect, indemnify and hold harmless Operator,
Operator's Affiliates, and their respective directors, officers,
employees, agents and representatives against and from any and all
demands, losses, claims, actions or suits, including costs,
judgments, penalties, fines and attorneys' fees, for or on account
of injury to or death of third persons, or for damage to or
destruction of property belonging to third persons, or for
violation of law, in each case resulting from or arising out of a
System design or construction defect, or the negligence or willful
act or omission of Owner.
3. The duty to indemnify under this Article will continue in full
force and effect, notwithstanding the expiration or termination of
this Agreement, with respect to any claim or action based on facts
or conditions which occurred prior to such termination.
4. If any indemnified party intends to seek indemnification under
this Article from any indemnifying party with respect to any
action or claim, the indemnified party shall give the indemnifying
party notice of such claim or action within thirty (30) days of
the commencement of, or actual knowledge by the indemnified party
of, such claim or action. The indemnifying party shall have no
liability under this Article for any claim or actions for which
such notice is not provided; provided, however, so long as the
indemnifying party is not materially harmed by the indemnified
party's failure to give timely notice of a claim or action, then
the indemnifying party's indemnity obligation shall be unaffected.
The indemnifying party shall, at its sole cost and expense, defend
any such claim or action; provided, however, that the indemnified
party shall, at its own cost and expense, have the right to
participate in the defense or settlement of any such claim or
action. The indemnified party shall not compromise or settle any
such claim or action without the prior written consent of the
indemnifying party, which consent shall not be unreasonably
withheld.
VIII.INSURANCE COVERAGE
1. Operator, on its behalf and on the behalf of all subcontractors of
Operator performing any on-site services in connection with the
operation and maintenance of the System or any of its appurtenant
equipment, shall procure and maintain in effect during the term
for which they perform services pursuant to this Agreement the
following minimum insurance coverages, in the given amounts:
a. Vehicle liability insurance covering all owned, non-
owned and hired automobiles, trucks, trailers and other
vehicles. Such insurance shall provide coverage not less
than that of the standard comprehensive automobile policy in
limits not less than $1,000,000 combined single limit each
occurrence for bodily injury and property damage. The Owner
and NRG Generating (U.S.) Inc. shall be named as additional
insureds.
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b. Workers' Compensation Insurance that satisfies statutory
requirements and Employers' Liability Insurance with limits
of $1,000,000. This insurance shall include All States
Coverage and Longshoreman & Harbor Workers Compensation Act
coverage (if exposure exists) The Employer's Liability
Coverage shall not contain occupational disease exclusion.
c. Liability Insurance, on an "Occurrence" basis and in a
form providing coverage not less than that of the standard
Commercial General Liability, covering operations of the
System including independent contractors, products and
completed operations with broad form blanket contractual
liability coverage (for any written or oral contracts related
to the System) and personal injury liability coverage for
claims arising out of the operations of the System for bodily
injury and property damage (broad form, including completed
operations) in policy limits not less than $1,000,000
combined single limit each occurrence and $2,000,000
aggregate limit. The aggregate policy limits shall apply
solely to this project or site. Coverage shall include a
standard severability of interests clause and cross liability
coverage. The Owner and NRG Generating (U.S.) Inc. shall be
named as additional insureds.
d. Excess or umbrella liability Insurance, on an
"Occurrence" basis and with coverage at least as broad as the
vehicle liability, employers' liability and general liability
policies, to provide limits of insurance in excess of Owner's
vehicle liability, employers' liability and general liability
policies for not less than $10,000,000 combined single limit
each occurrence and in the aggregate for bodily injury,
property damage and personal injury. The aggregate policy
limits shall apply solely to this project or site. Coverage
shall include a standard severability of interests clause and
cross liability coverage. The Owner and NRG Generating
(U.S.) Inc. shall be named as additional insureds.
2. Owner shall procure and maintain in effect during the term of this
Agreement at its expense the following minimum insurance coverage:
a. Vehicle liability insurance covering all owned, non-
owned and hired automobiles, trucks, trailers and other
vehicles. Such insurance shall provide coverage not less
than that of the standard comprehensive automobile policy in
limits not less than $1,000,000 combined single limit each
occurrence for bodily injury and property damage. The
Operator and NRG Generating (U.S.) Inc. shall be named as
additional insureds.
b. Workers' Compensation Insurance that satisfies statutory
requirements and Employers' Liability Insurance with limits
of $1,000,000. This insurance shall include All States
Coverage and Longshoreman & Harbor Workers Compensation Act
coverage (if exposure exists) The Employer's Liability
Coverage shall not contain occupational disease exclusion.
c. Liability Insurance, on an "Occurrence" basis and in a
form providing coverage not less than that of the standard
Commercial General Liability, covering operations of the
System including independent contractors, products and
completed operations with broad form blanket contractual
liability coverage (for any written or oral contracts related
to the System) and personal injury liability coverage for
claims arising out of the operations of the System for bodily
injury and property damage (broad form, including completed
operations) in policy limits not less than $1,000,000
combined single limit each occurrence and $2,000,000
aggregate limit. The aggregate policy limits shall apply
solely to this project or site. Coverage shall include a
standard severability of interests clause and cross liability
coverage. The Operator and NRG Generating (U.S.) Inc. shall
be named as additional insureds.
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d. Excess or umbrella liability Insurance, on an
"Occurrence" basis and with coverage at least as broad as the
vehicle liability, employers' liability and general liability
policies, to provide limits of insurance in excess of Owner's
vehicle liability, employers' liability and general liability
policies for not less than $10,000,000 combined single limit
each occurrence and in the aggregate for bodily injury,
property damage and personal injury. The aggregate policy
limits shall apply solely to this project or site. Coverage
shall include a standard severability of interests clause and
cross liability coverage. The Operator and NRG Generating
(U.S.) Inc. shall be named as additional insureds.
d. "All Risk" Property Insurance, including Boiler and
Machinery Insurance and difference in conditions coverage
(including flood perils), with an extension for Business
Interruption Coverage, and naming Operator and NRG as
additional insureds for all such insurance coverage as their
interests appear.
3. Within thirty (30) days after the date of execution of this
Agreement, each party shall provide to the other party, pursuant
to the notice provisions of Article XIV, properly executed
certificates of insurance, signed by an authorized representative
of the insurance carrier. These certificates shall provide the
following information:
a. Name of insurance company, policy number and expiration
date;
b. The coverage required and the limits on each, including
the amount of deductibles and self-insured retentions;
c. A statement indicating that sixty (60) days notice of
cancellation, non-renewal, or material change in coverage of
any of the policies shall be given to each named insured and
any additional insured; and
d. Named and additional insured.
4. Each party shall have the right to inspect and photocopy the
policies of insurance at the other party's place of business
during regular business hours, on reasonable prior written notice.
5. All insurance policies, including Workers' Compensation Insurance,
provided by Owner and Operator shall waive all rights of
subrogation against one another and NRG .
6. The provision of insurance shall not be construed to limit the
liability of any party to the other party.
7. All commercial insurance carriers providing insurance hereunder
must be rated A- or better, with a minimum size rating of VIII by
Bests Insurance Guide and Key Ratings or an equivalent rating by
another nationally recognized insurance rating agency of a standing
similar to Best.
8. All deductibles or self insured retentions associated with
policies required hereunder shall be the responsibility of the named
insured.
IX. ENGAGEMENT OF THIRD PARTIES
Operator may engage or subcontract in the ordinary course of business
and at Owner's expense such persons, corporations or other entities as
Operator deems advisable for the purpose of performing or carrying out
any of the obligations of Operator under this Agreement. Except in the
case of an Emergency, before incurring an Expense in excess of $10,000,
Operator shall obtain the prior written approval from Owner.
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X. OPERATOR REPORTING OBLIGATIONS
Operator shall provide Owner with copies of all reports generated by
Operator's employees, agents, or subcontractors with respect to the
operation of the System that are filed with any federal, state, or
local agency or governmental entity. In addition, Operator shall
provide Owner with monthly compliance reports, summarizing Operator's
compliance with all System permits and licenses. All monthly
compliance reports shall be delivered to Owner within ten (10) days
after the last day of the relevant month.
XI. SPECIFIC LIMITATIONS
In the conduct of its duties hereunder, Operator shall not, without
first obtaining the written consent of Owner:
1. Limit on Expenditures. Under-take an expenditure outside
Operator's scope of responsibilities except that, in case of an
Emergency, Operator may make such immediate expenditures as may be
necessary, but notice of any such Emergency and expenditures shall
be given to Owner as promptly as possible, but in no case more
than 12 hours after the event.
2. Settlement of Claims. For any claim for which Owner is or may be
responsible, pay in excess of $10,000 in the settlement of any
claim for injury to or death of persons, or loss of or damage to
property, or in settlement of any contract or other dispute.
3. Disposition of Equipment. On Owner's behalf, sell or otherwise
dispose of any item of equipment which is part of or used in the
operating or maintaining the System if the current price of new
equipment similar thereto is in excess of $5,000.
4. Contracts with Affiliates. On Owner's behalf, enter into any
contract with an Affiliate of Operator with a value in excess of
$5,000.
XII. TERMINATION/DEFAULT
1. This Agreement may be terminated:
a. By the non-defaulting party at any time following the
occurrence of any Event of Default, as described in this
Article XII, if such Event of Default is not cured within the
period, if any, provided therefor;
b. By Operator, if, after Operator has taken all reasonable
efforts to avoid regulation as a public utility, Operator's
performance under this Agreement renders Operator subject to
regulation as a public utility by any federal, state or local
agency of any governmental entity, by delivery of thirty (30)
days' prior written notice to Owner;
c. By Operator, if Owner's action or inactions under this Agreement
renders Operator subject to regulation as a public utility by any
federal, state or local agency of any governmental entity, by delivery
of thirty (30) days' prior written notice to Owner;
d. By Owner for its convenience, upon 90 days' written notice to
Operator, provided that Owner pays Operator the applicable termination
charge in accordance with the provisions of Exhibit D (no termination
of this Agreement under this provision may be effective until the
third anniversary of the Effective Date);
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e. By Owner, if, at, on, or in connection with the operation and
maintenance of any part or all of either or both of (x) the System or
(y) the properties, plant or equipment operated by Operator for NRG
Generating (Newark) Cogeneration, Inc., Operator fails to comply in
all material respects with all applicable laws, permits, licenses,
regulations, or orders of any Governmental Authority; provided,
however, that no failure of Operator to perform its obligations under
this Article XII, Section 1(e) shall be grounds for termination if
such failure is the result of the negligence of a third party other
than subcontractors of or procured by Operator or Operator's affili-
ates or an act of Force Majeure, so long as Operator is diligently
pursuing a cure as required by this Agreement. Owner may exercise
its right of termination under this Article XII action 1(e), if and
when Owner believes that Operator has failed to achieve and maintain
compliance with an applicable law, permit, license, regulation or
order, whether or not (s) a court or administrative agency with
competent jurisdiction has determined that there has been such a
failure or (t) a dispute resolution process has determined that the
failure was not the result of either negligence of a third party other
than subcontractors or an act of Force Majeure which Operator is
diligently attempting to cure; provided, however, that following
any termination by Owner under this Article XII Section 1(e), if
(u) a court or administrative agency, with competent jurisdiction
to assess a fine, penalty or other action for failures in
circumstances of the sort which were the basis of Owner's
termination, issues a final nonappealable order (or issues an order
for which all appeals periods have expired) determining as a matter
of both fact and law that the circumstances which were the basis of
Owner's termination did not constitute a violation of any law,
permit, license, regulation or order, or v) a dispute resolution
process under Article XVIII determines that the failure was the
result of negligence of a third party other than subcontractors or
an act of Force Majeure which Operator is diligently attempting to
cure, then Owner shall pay Operator the amount determined in
accordance with Exhibit E.;
f. By the mutual agreement of the parties; and
g. By Owner, if the Amended Power Purchase Agreement is
terminated for any reason other than a default by Owner or an
Owner Affiliate.
2. Owner shall be in default under this Agreement upon the happening
or occurrence of any of the following events or conditions, each
of which shall be deemed to be an Event of Default for purposes of
this Agreement:
a. Owner materially breaches any of Owner's obligations,
covenants, conditions, services or other responsibilities
under this Agreement unless within thirty (30) days after
notice from Operator specifying the nature of such breach,
Owner either cures such breach or, if such breach (other than
the failure to make payment obligations) cannot be cured
within thirty (30) days, Owner commences and diligently
pursues such cure and thereafter continues to diligently
pursue such cure. If the breach is not cured within 120 days
of the date of Operator's written notice to Owner, then
Operator may terminate this Agreement;
b. There is an assignment for the benefit of Owner's
creditors, or Owner or its parent company, NRG Generating
(U.S.) Inc., is adjudged bankrupt, or a petition is filed by
or against Owner or its parent company under the provisions
of any insolvency or bankruptcy laws (and such petition is
not dismissed within six months), or the business or
principal assets of Owner or its parent company are placed in
the hands of a receiver, assignee or trustee, or Owner is
dissolved, or Owner's existence is terminated or its business
is discontinued; or
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c. Any material representation or warranty furnished by
Owner in connection with this Agreement was knowingly false
or misleading in any material respect at the time it was
made.
3. Operator shall be in default under this Agreement upon the
happening or occurrence of any of the following events or
conditions, each of which shall be deemed to be an Event of
Default for purposes of this Agreement:
a. Operator materially breaches or fails to observe or
timely perform any of Operator's obligations, covenants,
conditions, services or responsibilities under this
Agreement, unless within thirty (30) days after notice from
Owner specifying the nature of such breach or failure,
Operator either cures such breach or failure or, if such
breach cannot be cured within thirty (30) days, Operator
commences and diligently pursues such cure and thereafter
continues to diligently pursue such cure. If the breach is
not cured within 120 days of the date of Owner's written
notice to Operator, then Owner may terminate this Agreement;
b. There is an assignment for the benefit of Operator's
creditors, or Operator is adjudged bankrupt, or a petition is
filed by or against Operator under the provisions of any
insolvency or bankruptcy laws (and such petition is not
dismissed within six months), or the business or principal
assets of Operator are placed in the hands of a receiver,
assignee or trustee, or Operator is dissolved, or Operator's
existence is terminated or its business is discontinued; or
c. Any material representation or warranty furnished by
Operator in connection with this Agreement was knowingly
false or misleading in any material respect at the time when
made.
Notwithstanding subsection (a) above, Operator (i) shall not be
afforded any cure period, (ii) will not be permitted to invoke or
utilize the Article XVIII Dispute Resolution provisions, and (iii)
will be subject to immediate termination if the termination of
this Agreement is effected under the language of Article XII,
Section 1(e).
4. Upon the occurrence of an Event of Default, the non-defaulting
party may:
a. Without recourse to legal process, terminate this
Agreement by delivery of a written notice of termination to
the defaulting party or its assigns; and/or
b. Pursue, concurrently or separately, other remedies
existing in law, any provision of this Agreement, or
otherwise.
5. Upon termination or expiration of this Agreement, Operator
shall:
a. Deliver to Owner all books, records, operator logs,
accounts and manuals developed or maintained by Operator
pursuant to this Agreement, provided however, that Operator
may retain copies of such documents. Furthermore, Owner
shall have the right to take possession of all of the
equipment, spare parts and supplies purchased for the System
and paid for by Owner;
b. At Owner's request and expense, cooperate with Owner to
effect an orderly transition of the operations and
maintenance of the System, including, without limitation,
perform the following:
i. Continue to operate the System in accordance with
this Agreement for a period not to exceed 180 days while
Owner appoints and mobilizes a successor operator;
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ii. Assist Owner in preparing an inventory of all
material, equipment, spare parts and supplies purchased
for the System; and
iii. Assign to Owner all Operator's contractual
agreements with third parties relating to the operations
or maintenance of the System, to the extent such
agreements are so assignable.
XIII. ACCESS TO SYSTEM
Operator and Owner and their agents, representatives, and employees
shall have full and free access at all times to the System.
XIV. NOTICES
1. Any notice required or permitted under this Agreement shall be in
writing and shall be valid and sufficient if delivered personally,
mailed by registered or certified mail, or sent by a recognized
private overnight express delivery service. In each case postage
prepaid, return receipt requested, addressed to the other party as
follows:
If to Operator:
Power Operations, Inc.
970 Washington Road
Parlin, New Jersey 08859
Attn: Operations Manager
Telephone: 908-651-1014
If to Owner:
NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 600
Minneapolis, Minnesota 55403
Attn: Chief Executive Officer
Telephone: 612-373-5300
2. Any party may change its address, or add additional addresses, by
notice given to the other parties in the manner set forth above.
XV. FURTHER ASSURANCES
1. Owner and Operator agree to execute, acknowledge and deliver any
and all such further documents and instruments and to take such
action as may reasonably be required in order to allow the
financing of the System to proceed, to effectuate the purpose of
this Agreement, and to obtain any government permits, licenses, or
approvals necessary or convenient to accomplish the foregoing.
2. Title to all materials, equipment, supplies, consumables, spare
parts and other items purchased or obtained by Operator for the
System shall pass to and vest in Owner upon the passage of title
from the vendor or supplier thereof and the payment or
reimbursement of Operator's costs by Owner.
XVI. REPRESENTATIONS AND WARRANTIES
1. Owner represents and warrants to Operator as follows:
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a. Owner is a corporation duly formed, validly existing,
and in good standing under the laws of Delaware, and it is
properly qualified to do business in New Jersey;
b. The execution of this Agreement has been duly authorized
and approved by Owner, and no other authorizations,
approvals, or consents are required in order for this
agreement to constitute a binding and enforceable legal
obligation of Owner;
c. The execution of this Agreement by Owner, and the
performance of Owner's obligations under this Agreement will
not conflict with, or result in a breach or default under,
any agreement, contract, or covenant to which Owner is a
party; provided, however, that this provision is modified to
be consistent with Section 7 of the Agreement which is being
executed contemporaneously herewith as an inducement to the
execution of this agreement; and
d. This Agreement, as executed, constitutes a binding legal
obligation of Owner that is enforceable in accordance with
its terms and conditions.
2. Operator represents and warrants to Owner as follows:
a. Operator is a corporation duly incorporated, validly
existing, and in good standing under the laws of Delaware,
and it is properly qualified to do business in New Jersey;
b. The execution of this Agreement by Operator has been
duly authorized an approved by Operator and no other
authorizations, approvals, or consents are required in order
for this Agreement to constitute a binding and enforceable
legal obligation of Operator;
c. The execution of this Agreement by Operator, and the
performance of its obligations under this Agreement will not
conflict with, or result in a breach or default under, any
agreement, contract, or covenant to which Operator is a
party; and
d. This Agreement as executed, constitutes a binding legal
obligation of Operator that is enforceable in accordance with
its terms and conditions.
XVII. FORCE MAJEURE
1. Except for the obligation of either party to make any required
payments hereunder, the parties shall be excused from performing
their respective obligations under this Agreement and shall not be
liable in damages or otherwise if and to the extent that they are
unable to so perform or are prevented from performing by a Force
Majeure, provided that:
a. The non-performing party, as promptly as practicable
after the occurrence of the Force Majeure, but in no event
later than 14 days thereafter, gives the other party written
notice describing the particulars of the occurrence;
b. The suspension of performance is of no greater scope and
of no longer duration than is reasonably required by the
Force Majeure;
c. The non-performing party uses its best efforts to remedy
its inability to perform; and
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d. As soon as the non-performing party is able to resume
performance of its obligations excused as a result of the
occurrence, it shall give prompt written notification thereof
to the other party.
2. Neither party shall be required to settle any strike, walkout,
lockout or other labor dispute on terms which, in the sole judgment of
the party involved in the dispute, are contrary to its interest, it
being understood and agreed that the settlement of strikes, walkouts,
lockouts or other labor disputes shall be entirely within the
discretion of the party having such dispute.
XVIII DISPUTE RESOLUTION
1. Resolution by Parties.
a First Attempt. In the event that a dispute arises
hereunder between the parties, the parties shall attempt in
good faith to settle such dispute by mutual discussions
within 30 days after the date that a party gives written
notice of the dispute to the other party; provided, however,
that if the dispute involves any amount claimed under an
invoice and after 10 days of mutual discussion either party
believes in good faith that further discussion will not
resolve the dispute to its satisfaction, such party may
immediately refer the matter to arbitration in accordance
with subsection 2 of this Article XVIII.
b Chief Executive Officers. In the event that the dispute
is not resolved in accordance with subsection 1 (a) above,
either party may refer the dispute to the chief executive
officers or chief operating officers of the respective
parties for further consideration. In the event that such
individuals are unable to reach agreement within 15 days, or
such longer period as they may agree, then either party may
refer the matter to arbitration in accordance with subsection
2 of this Article XVIII.
2. Arbitration. In the event a dispute arises between Owner and
Operator which is not resolved pursuant to Section 1 of this
Article XVIII, shall be resolved by arbitration pursuant to the
terms hereof. As a condition to initiating arbitration
proceedings, a party must first have attempted to resolve the
dispute under Section 1 of this Article XVIII. All claims,
disputes, and other matters in question arising out of or relating
to this Agreement or the breach thereof, shall be decided by
arbitrators selected as hereinafter provided and shall be
conducted in accordance with the Commercial arbitration Rules of
the American Arbitration Association then obtaining, unless the
parties mutually agree otherwise. The resolution of such disputes
shall not delay Operator's or Owner's performance of their
undisputed obligations under the terms of this Agreement. The
arbitration shall be held in Newark, New Jersey and any
arbitration demand must be filed with the American Arbitration
Association office located closest to Newark, New Jersey. If the
claim or defense of either party is determined to be frivolous,
the arbitrators may require that the party at fault pay or
reimburse the other party for (i) fees and expenses, including,
attorneys and expert fees and expenses, and (ii) reasonable out of
pocket expenses incurred by the other party in connection with the
arbitration proceedings. Notwithstanding the foregoing, a
termination of the Agreement under the language of Article XII,
Section 1(e) shall not, under any circumstances (except for
disputes relating to the settlement of payment obligations), be
subject to arbitration under this Article XVIII.
3. Selection of Arbitrators. Each dispute shall be submitted to
three arbitrators, one arbitrator being selected by Owner, one
arbitrator being selected by Operator, and the third arbitrator being
selected by the two so selected. The party initiating the arbitration
shall include in its notification under subsection 4 below the
designation of its selected arbitrator and the party receiving such
notification shall designate its arbitrator within fifteen (15) days
thereafter by notify the initiating party and its arbitrator of the
selection.
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If the arbitrators selected by Owner and Operator cannot agree on
a third arbitrator within fifteen (15) days after the second
arbitrator is selected, the third arbitrator shall be selected by
the American Arbitration Association. In the event the party
receiving notification of a demand for arbitration shall not have
selected its arbitrator and given notice thereof to the other
party and its arbitrator within fifteen (15) days after receiving
such notification, such arbitrator shall be selected by the
American Arbitration Association.
4. Notice. Notice of demand for arbitration shall be filed in
writing with the other party to this Agreement and with the
American Arbitration Association. The demand shall be made within
a reasonable time after the claim, dispute or other matter in
question has arisen. In no event shall the demand for arbitration
be made after the date when the applicable statute of limitations
would bar institution of a legal or equitable proceeding based on
such claim, dispute, or other matter in question.
5. Award. This agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. The award
rendered by the arbitrators shall be final and judgment may be
entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
6. Survival. This Article shall survive termination of this
Agreement.
XIX. GENERAL PROVISIONS
1. Governing Law. This Agreement shall be governed by and construed
under the laws of New Jersey.
2. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
3. Headings. Title and headings of the Articles and Sections of this
Agreement are for convenience of reference only and do not form a
part of and shall not in any way affect the interpretation of this
Agreement.
4. Amendment. No modification or amendment of this Agreement shall
be valid unless in writing and executed by both parties to this
Agreement.
5. Assignment. This Agreement may not be assigned by Operator
without the written consent of Owner and written agreement of
assignee whereby it expressly assumes and agrees to perform each
and every obligation of Operator hereunder. Any assignment by
Operator in violation hereof shall be null and void. Owner may,
without the consent of Operator, assign its rights (but not its
obligations) under this Agreement to or by a lender (including
finance lessor) providing funds to refinance the System.
6. Successors and Assigns. This Agreement shall be binding and inure
to the benefit of the parties hereto and their respective
successors and assigns, to the extent that assignment is permitted
under this Agreement.
7. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, supersedes all prior representations,
documents or statements transmitted between the parties.
8. Consequential Damages. In no event will Owner or Operator have
the right, with or without legal process, to recover punitive or
special damages, or indirect or consequential damages, such as loss of
use, lost profits, costs incurred because of
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delays, cost of replacement energy, "idle plant" costs, interest
on borrowed money, letters of credit, security deposits or bonds.
In no event will Owner or Operator be liable for representations,
oral or otherwise, as to the results intended to be achieved
through its undertakings pursuant to this Agreement, except as
specifically provided in this Agreement.
9. Other Provisions. Nothing in this Agreement shall be construed to
prevent or prohibit Operator from providing operating services to
any other person, organization, or entity.
10. Waiver. The waiver of any breach of any term or condition hereof
shall not be deemed a waiver of any other or subsequent breach,
whether of like or different nature.
11. Not for Benefit of Third Parties. This Agreement and each and
every provision thereof is for the exclusive benefit of the
parties to this Agreement and not for the benefit of any third
party.
12. Survival of Representations, Warranties and Indemnities. All
representations, warranties and indemnities of the parties set
forth in this Agreement shall survive the termination or
expiration of this Agreement.
13. Approval by Proposed Lender. If any provision of this Agreement
must be approved by a lender, lessor or equity investor in
connection with the financing of the System or any other action
contemplated hereby, and such lender requires any modification of
the provisions of this Agreement, neither Owner nor Operator shall
unreasonably withhold its approval and execution of any such
modifications.
14. Survival of Obligations. Termination of this Agreement for any
reason shall not relieve Owner or Operator of any obligation
accruing or arising prior to such termination.
15. Confidentiality. The parties shall hold in confidence, and shall
use only for the purposes of this Agreement, any and all
Proprietary Information disclosed to each other.
16. Severability. Should any section or subsection hereof be declared
invalid or unenforceable for any reason, the remaining sections
and subsections of this Agreement shall remain in full force an
effect, and the parties hereto agree to immediately renegotiate in
good faith such section or subsection as was declared invalid or
unenforceable.
17. Duty to Mitigate. Each party must use its best efforts to
mitigate the injury or damage caused by the other party's failure
to perform. When a party seeking damages fails to make these
efforts, the other party shall be entitled to have the damages
accordingly reduced.
18. Consent. Except in the case of an Emergency, when either party's
consent or approval is required, such consent or approval must be
in writing and given prior to the act for which such consent or
approval is sought.
19. 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, nor
shall any acts or requests of a party be unreasonable in light of
the surrounding facts and circumstances.
20. Disclaimer. THE WARRANTIES EXPRESSLY PROVIDED BY OPERATOR
HEREUNDER ARE THE SOLE, INTENDED WARRANTIES AND OPERATOR HEREBY
DISCLAIMS ALL OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, ORAL,
WRITTEN, EXPRESS OR IMPLIED, INCLUDING ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR
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PURPOSE, AND ALL WARRANTIES ARISING FROM COURSE OF DEALING OR
USAGE OF TRADE.
21. Limits on Liability. Notwithstanding any provision contained in
this Agreement to the contrary, for any Contract Year, Operator
shall not be liable to Owner (whether by contract, warranty, tort,
statute or otherwise, including Liquidated Damages or penalties
owed by Operator under this Agreement) for any amounts that in the
aggregate exceed the amount of the Operating Fee and Bonuses paid
for the Contract 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 Contract Year of the term.
The limits of liability set forth herein shall not apply to any
damages incurred by a party as a result of its gross negligence or
willful misconduct.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first set forth above.
OWNER: OPERATOR:
NRG Generating (Parlin) Power Operations, Cogeneration Inc.
By:/s/ Leonard Bluhm By:/s/ Timothy P. Hunstad
Its: President Its: Secretary
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EXHIBIT A
BONUS/LIQUIDATED DAMAGES
For the purpose of determining the liquidated damages ("Liquidated
Damages") payable by Operator, or the bonus ("Bonus") payable by Owner
to Operator, the effectiveness of Operator under this Agreement shall
be measured in terms of both availability and heat rate. These
measurements shall be applied at the completion of each Contract Year
to determine the Liquidated Damages or Bonus for that Contract Year.
Availability. Operator shall undertake to operate the System to
maximize availability. Availability will be measured for Base Capacity
level, as defined as 52 Mwe (net). In each case the following formula
will be used:
Contract Availability = [Total Hours - (Equivalent Contract Unavailable
Hours)]
Total Hours
where:
Total Hours = total hours in the Contract Year; and
Equivalent Contract Unavailable Hours = total of all hours during
the Contract Year during which there occurred a full or partial
Planned, Forced, or Maintenance Outage, as those terms are defined
by Edison Electric Institute as Equivalent Availability (including
outages resulting from Force Majeure events, but excluding outages
resulting from (x) JCP&L's failure to supply natural gas to the
Facility during periods when PSE&G has not interrupted
transportation that it supplies under the PSE&G Gas Supply
Agreement and (y) JCP&L's failure to accept available Output from
the Facility). Partial outages are measured on an equivalency
basis, e.g., a 50% outage for one hour would be equivalent to a
full outage for one-half hour, and so forth.
Availability. For purposes of Bonus/Liquidated Damages availability
calculation, the target Base availability will be 95%, for the term of
this Contract. Each one tenth of one percent (0.1%) of availability
will have a value of $20,000 as a Bonus or Liquidated Damages for
availability measurement.
Heat Rate. For purposes of Bonus/Liquidated Damages heat rate
calculations, the heat rate incentive will be based on 9750 Btu per kwh
HHV, as calculated in accordance with Article A.9 of the Amended Power
Purchase Agreement, for the term of this Contract.
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LIQUIDATED DAMAGES AND BONUS
The Liquidated Damages payable by Operator to Owner and the Bonus
payable by Owner to Operator shall be based on the Availability and
Heat Rate guarantees set forth in this Exhibit. For any Contract Year,
the maximum Liquidated Damages (in the aggregate for each category as
adjusted by the amounts of any Bonus payable to Operator) payable by
Operator shall be no more than one hundred percent (100%) of the
Operator's Fee for such Contract Year. For any Contract Year, once
the aggregate Bonuses payable to Operator (adjusted for the Liquidated
Damages, if any, owed by Operator) equal $250,000, then any amounts in
excess of $250,000 shall be payable to Operator at a rate of 40% of
such excess. The availability and heat rate bonus/penalty
calculations will be calculated monthly and payable to the end of the
Contract Year as set forth in the Amended and Restated Power Purchase
Agreement.
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EXHIBIT B
DESCRIPTION OF THE SYSTEM
PARLIN SYSTEM
The cogeneration plant consists of a dual combustion gas turbine-steam
turbine combined cycle (topping cycle) plant.
The nominal rating is 120 MW electrical, with average thermal output of
30,000 lbs/hr steam. The prime movers of the plant are two General
Electric Frame 6 dual fuel combustion turbines, each direct connected
to a 54,000 kVA synchronous generator with electrical output at 3 PH,
60 Hz and 13.8 kV.
The exhaust from each of the G.E. Frame 6 turbines is directed into a
three drum (tri-pressure) heat recovery steam generator (HRSG). Each
HRSG, at full turbine load and 59 F ambient temperature produces when
fired with 94.0 million BtuHHV an hour of auxiliary filing, 227,000
lbs/hr of 700 psig, 900 F steam; 23,000 lbs/hr of 285 psig/521 F steam;
and 12,300 lbs/hr of 30 psig dry and saturated steam.
The combined 700 psig steam is directed to two condensing extraction
steam turbines, each of which is direct connected through a step-up
gearbox to a 24,000 kVa synchronous generator with an electrical output
of 3PH, 60 Hz and 13.8 kV.
The 165 psig steam extracted from the steam turbine is directed into a
header from which 35,000 lbs/hr is directed to process to the site
steam host.
Thermal loads of the system vary seasonally from an average of 30,000
lbs/hr over the course of an 8760 hour year.
The plant will operate on natural gas under normal circumstances other
then interruptions due to curtailment of supply on extremely cold days.
Kerosene fuel is used as the alternate, approximately 480 hr/yr.
Output of the combustion turbine is controlled by sensing and
maintaining a constant optimum turbine exhaust temperature.
NOX emission from the plant are controlled by a combination of steam
injection into the combustion turbine and Selective Catalytic Reduction
using anhydrous ammonia injection with a semi-precious metal catalyst
in the HRSG. The plant is equipped with Continuous Emission Monitoring
equipment.
The interconnection points for the System are shown an identified an
the following diagram associated with this Exhibit.
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EXHIBIT C
SYSTEM CONTRACTS
PARLIN
Power Purchase Agreement dated 04/30/96
Gas Service Agreement dated 04/30/96
Electricity Agreement with Dupont dated 01/18/88
Steam Purchase Agreement dated 12/08/86
Permits
Air Permit/Certification (Storage Tank #1) issued 10/10/90
Air Permit/Certification (Auxiliary Boiler) issued 05/21/89
Wastewater Discharge Permit issued 04/01/93
Air Permit/Certification (Auxiliary Boiler) issued 06/15/95
Air Permit/Certification (Stack #2) issued 10/21/90
Air Permit/Certification (Stack #1) issued 12/22/93
Air Permit/Certification (Storage Tank #2) issued 10/10/90
30
<PAGE>
EXHIBIT D
TERMINATION FOR CONVENIENCE
Commencing on the third anniversary of the Effective Date, the Owner
may terminate this agreement as set forth in Article XII. The
termination fee shall be $200,000 pro-rated based on the number of
calendar days remaining in the Agreement term as the numerator and 1096
calendar days as the denominator. The termination fee will be adjusted
accordingly for any pro-rated undisputed bonus/liquidated damage
payments due the Operator on the Termination Date.
31
<PAGE>
EXHIBIT E
Outstanding obligations under existing O&M Agreement
32
<PAGE>
EXHIBIT F
1997 Budget
SEE ATTACHED
33
<PAGE>
Exhibit 10.25.3
NEWARK
GUARANTEE OF OPERATOR'S OBLIGATIONS
BY NRG GENERATING (U.S.) INC.
In consideration of Owner entering into this Operation and Maintenance
Contract for the Newark Cogeneration Project with our wholly owned
subsidiary company, Power Operations, Inc. ("Operator") NRG Generating
(U.S.) Inc. ("Guarantor") hereby agrees to the following guarantees:
If Operator fails to perform any of its obligations under this O&M
Contract, or execute any of its liabilities arising therefrom,
Guarantor will, upon written request from Owner, and after having given
Guarantor seven (7) days notice in writing of Owner's intention under
this Contract, to make a claim under this Guarantee, forthwith perform
such obligations or liabilities on the same terms and conditions as
stated in the O&M Contract, mobilizing and using, for that purpose,
sufficient personnel and resources. Alternatively, Guarantor will
cause a third party acceptable to Owner to perform such obligations or
liabilities, the due and faithful performance of which Guarantor will
guarantee as if such third party were Operator.
This Guarantee shall apply to this O&M Contract including all
extensions of time, indulgences, variations or alterations as may be
made, given, conceded or agreed upon under this Contract, whether or
not Guarantor receives notice and/or approves of these.
The Guarantor shall also enter into an agreement to
unconditionally and irrevocably indemnify Owners borrower in full and
for all costs and expenses incurred in connection with the termination
of the Stewart & Stevenson Operations, Inc. Operations and Maintenance
Agreement terminated by the Owner on October 28, 1996. Such NRG
Guarantee is pursuant to Section 5.32 of the Credit Agreement by and
among NRG Generating (Newark) Cogeneration, Inc. and NRG Generating
(Parlin) Cogeneration, Inc., Credit Suisse, Greenwich Funding
Corporation and any purchasing Lender as Lender and Credit Suisse as
Agent dated May 17, 1996.
This Guarantee shall be governed by, and construed in accordance
with, the laws of the State of New Jersey and all parties agree to
subject any disputes that may arise under or in connection with this
Guarantee to the jurisdiction of the courts of the State of New Jersey.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed by its authorized officer as of the date set forth below.
NRG GENERATING (U.S.) INC.
BY: /s/ Leonard Bluhm
TITLE: President & CEO
DATE: November 8, 1996
<PAGE>
Exhibit 10.25.4
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT, dated as of March 21, 1997, to be
effective as of January 1, 1997, (this "Agreement"), is made by and
among (i) NRG GENERATING (PARLIN) COGENERATION INC., a Delaware
corporation ("NRGG Parlin"), (ii) NRG GENERATING (NEWARK) COGENERATION
INC., a Delaware corporation ("NRGG Newark"; NRGG Newark and NRGG
Parlin, collectively, the "Borrowers"), (iii) NRG ENERGY, INC., a
Delaware corporation ("NRG"), (iv) NRG GENERATING (U.S.) INC., a
Delaware corporation ("NRGG") and (v) CREDIT SUISSE FIRST BOSTON
(formerly known as Credit Suisse, as agent ("Agent") on behalf of and
for the benefit of the Secured Parties (as defined in the Credit
Agreement referred to below).
W I T N E S S E T H
WHEREAS, the Borrowers and Agent have previously entered into the
Credit Agreement, dated as of May 17, 1996, by and among (i) the
Borrowers, (ii) Credit Suisse First Boston and each purchasing lender
(the "Lenders") and (iii) Agent (as the same may be amended, modified
or supplemented from time to time, the "Credit Agreement"), pursuant to
which the Lenders have provided the Loans and the Commitments to
Borrowers on the terms and conditions set forth in the Credit
Agreement;
WHEREAS, NRGG Parlin and Stewart & Stevenson Operations, Inc., a
Delaware corporation ("SSOI"), entered into that certain Operations and
Maintenance Agreement (the "Parlin SSOI Agreement"), dated as of May 1,
1996;
WHEREAS, NRGG Newark and SSOI entered into that certain Operations
and Maintenance Agreement (the "Newark SSOI Agreement"; the Parlin SSOI
Agreement and the Newark SSOI Agreement, collectively, the "SSOI
Agreements") dated as of May 1, 1996;
WHEREAS, on October 28, 1996, NRGG Newark terminated the Newark
SSOI Agreement pursuant to and in accordance with Section XII(1)(e)
thereof;
WHEREAS, on December 20, 1996, NRGG Parlin terminated the Parlin
SSOI Agreement pursuant to and in accordance with Section XII(1)(e)
thereof;
WHEREAS, NRGG Newark has entered into that certain Operating and
Maintenance Agreement (the "POI Newark Agreement") dated November 8,
1996 between NRGG Newark and Power Operations Inc. ("POI") pursuant to
which the POI agreed to operate and maintain NRGG Newark's electric
generation facility;
WHEREAS, NRGG Parlin has entered into that certain Operating and
Maintenance Agreement (the "POI Parlin Agreement") dated December 31,
1996 between NRGG Parlin and POI pursuant to which POI agreed to
operate and maintain NRGG Parlin's electric generation facility;
<PAGE>
WHEREAS, NRG owns 100% of the issued and outstanding capital stock
of POI, and NRG and is willing to indemnify the Borrowers for certain
costs and expenses incurred in connection with the termination of the
SSOI Agreements;
WHEREAS, the Borrowers are subsidiaries of NRGG, and NRGG is also
willing to indemnify the Borrowers for certain costs and expenses
incurred in connection with the termination of the SSOI Agreements
NOW THEREFORE, for and in consideration of the premises and the
aforesaid loan, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. Definitions.
Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Credit Agreement, to the
extent defined therein.
2. Indemnity.
NRGG and NRG, as set forth in the following sentence, hereby
indemnify and agree to save and hold NRGG Newark and NRGG Parlin
harmless from and against any and all losses, liabilities, claims,
demands, assessments, actions, suits, proceedings, damages, costs and
expenses including without limitation, reasonable attorneys' fees and
disbursements (including costs, expenses and legal fees incurred by
NRGG Newark and NRGG Parlin, or their respective officers, directors,
agents and employees (each of which is herein referred to as an
"Indemnified Person") incident to the foregoing or to enforcing said
rights of defense and indemnity), arising out of or in connection with
NRGG Newark's and NRGG Parlin's termination of (i) the Newark SSOI
Agreement (the "SSOI Newark Losses") and (ii) the Parlin SSOI Agreement
(the "SSOI Parlin Losses"; with SSOI Newark Losses and SSOI Parlin
Losses, being collectively referred to as the "SSOI Losses"),
respectively. As between each other, NRGG and NRG agree that they
shall allocate SSOI Losses as follows: (1) NRGG shall pay the first
$200,000 of SSOI Losses; and (2) NRG shall pay all SSOI Losses in
excess of $200,000 to Borrowers. NRGG and NRG agree to reimburse each
other as required to achieve the above result, provided that NRG, its
officers, directors, agents and employees (each of which is herein
referred to as a "NRG Indemnified Person") shall not be entitled to
receive an amount of indemnity pursuant to this Section 2 for the
amount of any SSOI Losses as and to the extent such amount, when added
to all amounts previously paid or reimbursed to a NRG Indemnified
Person pursuant to this Section 2 would exceed $200,000.
NRG shall indemnify, defend and hold harmless NRGG, its
officers, directors, agents and employees and NRGG shall indemnify,
defend and hold harmless NRG Indemnified Persons promptly upon demand
at any time and from time to time, against any and all SSOI Losses as
provided in this Section 2.
2
<PAGE>
If any action, suit or proceeding shall be commenced against
or any claim, demand or assessment be asserted against an Indemnified
Person in respect of which an Indemnified Person proposes to demand
defense and indemnification pursuant to this Section 2, and the total
amount sought in all such actions, suits, proceedings, claims, demands
and assessments is estimated by the applicable Borrower to be $200,000
or less, then NRGG shall be notified to that affect with reasonable
promptness and shall have the right, but not the obligation, to assume
the entire control of the defense, compromise or settlement thereof,
including, at NRGG's expense, employment of counsel satisfactory to the
Indemnified Person and in connection therewith, the Indemnified Person
shall cooperate fully to make available to NRGG all pertinent
information under its control; provided, that failure to provide such
notice shall not relieve NRG or NRGG of their obligation to indemnify
hereunder.
If any action, suit or proceeding shall be commenced against or
any claim, demand or assessment be asserted against an Indemnified
Person in respect of which an Indemnified Person proposes to demand
defense and indemnification pursuant to this Section 2, the control of
which action, suit, proceeding, claim, demand, or assessment is not
assigned pursuant to the immediately preceding paragraph, NRG shall be
notified to that affect with reasonable promptness and shall have the
right, but not the obligation, to assume the entire control of the
defense, compromise or settlement thereof, including, at NRG's expense,
employment of counsel satisfactory to the Indemnified Person and in
connection therewith, the Indemnified Person shall cooperate fully to
make available to NRG all pertinent information under its control;
provided, that failure to provide such notice shall not relieve NRG or
NRGG of their obligation to indemnify hereunder.
3. Notice; Contest or Dispute of Charges
Borrowers shall provide NRG and NRGG with prompt written notice of
any claim for which indemnification is or may be sought pursuant to
Section 2 hereof; provided, that failure to provide such notice shall
not relieve NRG or NRGG of their obligation to indemnify hereunder,
except to the extent that the delay in provision of such notice is
prejudicial to NRG or NRGG.
If Borrowers shall obtain a repayment from a third party of any
claim paid by NRG or NRGG pursuant to Section 2, Borrowers shall
promptly pay to NRG or NRGG as the case may be (i) the amount of such
repayment, together with any interest (other than interest for the
period, if any, after such claim was paid by Borrowers until such claim
was paid or reimbursed by NRG or NRGG) received by Borrowers on account
of such repayment net of expenses and (ii) the net amount, after taking
into account any taxes actually payable as a result of the receipt of
such refund or associated interest, of any Federal, state or local
income taxes saved by Borrowers in respect of its payment to NRG or
NRGG of amounts referred to in clause (i) above and its payment to NRG
or NRGG of amounts pursuant to this clause (ii). In no event shall
Borrowers be obligated to pay to either NRG or NRGG more than the
amount actually received by Borrowers.
3
<PAGE>
4. Method of Payment.
Any payment required to be made pursuant to Section 2 hereof shall
be paid in immediately available funds within 10 Business Days after
Borrowers or Agent makes written demand upon NRG and/or NRGG, together
with reasonable documentation of the liability of expense to be
indemnified pursuant to Section 2. Any such payment shall be made
directly to Agent for deposit in the Project Account.
5. No Setoff.
The payment obligations of NRG and NRGG hereunder shall be
satisfied in all events at the times and in the amounts set forth
herein without offset, abatement, withholding or reduction of any kind.
6. Enforcement.
Both NRG and NRGG hereby agree that Agent on behalf of the Secured
Parties and/or Borrowers shall have the right to directly enforce the
provisions hereof against each of them and NRG and NRGG agree to pay
all costs, including reasonable attorneys' fees, actually incurred by
Agent with respect to any such enforcement in accordance with Section 2
hereof.
7. Notices.
All notices, demands, requests and other communications required
or permitted hereunder shall be in writing, and shall be given and
deemed to have been given in accordance with Section 8.1 of the Credit
Agreement and the information set forth immediately below shall apply
to NRG and NRGG:
If to NRG:
1221 Nicollet Mall
Suite 700
Minneapolis, Minnesota 55403
Attention: President
Telecopy:
If to NRGG:
NRG Generating (U.S.) Inc.
1221 Nicollet Mall
Suite 610
Minneapolis, Minnesota 55403
Attention: President
Telecopy: (612) 373-8833
4
<PAGE>
8. Survival of Representations and Warranties.
All agreements, representations and warranties made herein or made
in writing by NRG and/or NRGG in connection herewith shall survive the
execution and delivery of this Agreement and the performance of the
obligations contained herein, and shall be deemed to be material and to
have been relied upon by Agent and the Secured Parties, regardless of
any investigation made by or on behalf of Agent or the Secured Parties.
9. Prior Agreements.
The parties hereto hereby agree this Agreement supersedes (i) that
certain Indemnification Agreement (the "NRGG Newark Indemnification
Agreement") dated as of November 8, 1996, among NRG Newark, NRGG and
Agent and (ii) that certain Indemnification Agreement (the "Parlin
Indemnification Agreement") dated as of ____________, 199__ among NRG
Parlin, NRGG and Agent.
10. Severability.
Any provision of this Agreement which is prohibited, unenforceable
or not authorized in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition, unenforceability or
non-authorization, without invalidating the remaining provisions hereof
or affecting the validity, enforceability or legality of such provision
in any other jurisdiction. Where provisions of any law or regulation
resulting in such prohibition or unenforceability may be waived they
are hereby waived by NRG, NRGG and Agent to the full extent permitted
by law so that this Agreement shall be deemed a valid, binding
agreement, enforceable in accordance with its terms.
11. Amendment.
This Agreement may be amended, modified or rescinded only by a
writing expressly referring to this Agreement and signed by all the
parties hereto.
12. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted
assigns. In the event of any assignment or transfer by any Secured
Party of any instrument evidencing all or any part of the Obligations,
the holder of such instrument shall, subject to the Credit Agreement,
be entitled to the benefits of this Agreement.
13. Number and Gender.
Whenever used in this Agreement, the singular number shall include
the plural and the plural the singular, and the use of any gender shall
be applicable to all genders.
5
<PAGE>
14. Headings Descriptive.
The captions or headings of the several sections an subsections
and the table of contents of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
15. Governing Law; Jurisdiction; Waiver of Trial by Jury.
(a) 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.
(b) Jurisdiction. With respect to any legal action or proceeding
brought by Agent or the Secured Parties against NRG or NRGG arising out
of or in connection with this Agreement, NRG and NRGG hereby
irrevocably (i) consent to the jurisdiction of any state or federal
court located in the State of New York, (ii) consent to the service of
process outside the territorial jurisdiction of said courts in any such
action or proceeding by mailing copies thereof by registered United
States mail, postage prepaid, to the address specified by NRG or NRGG,
as applicable, for the receipt of notices if such address is outside
such territorial jurisdiction and (iii) waives any objection to the
venue of the aforesaid courts. NRG and NRGG hereby irrevocably
designate, appoint and empower CT Corporation System (the "Process
Agent", which has consented thereto) as agent to receive for and on
behalf of NRG and NRGG service of process in the State of New York.
Both NRG and NRGG agree they will at all times continuously maintain
either a registered office or an agent to receive service of process in
the State of New York on behalf of themselves and their properties
with respect to this Agreement.
(c) Waiver of Trial by Jury. WITH REGARD TO THIS AGREEMENT, EACH
OF THE PARTIES HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING AND FOR ANY COUNTERCLAIM THEREIN.
16. Counterparts.
This Agreement may be executed in several counterparts, each of
which shall be an original, but all of which together shall constitute
one and the same agreement.
17. Effective Date.
The parties hereto agree that the effective date of this agreement
shall be January 1, 1997.
18. Term.
This Agreement shall continue in effect until repayment in full of
all Obligations.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement through their duly authorized representatives as of
the date first written above.
NRG GENERATING (PARLIN) COGENERATION INC.
By:/s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: VP & CFO
NRG GENERATING (NEWARK) COGENERATION INC.
By:/s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: VP & CFO
NRG ENERGY, INC.
By:/s/ Ronald J. Will
Name: Ronald J. Will
Title: Vice President
NRG GENERATING (U.S.) INC.
By:/s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: VP & CFO
CREDIT SUISSE FIRST BOSTON, as Agent
By:/s/ Guy Cirincione
Name: Guy Cirincione
Title: Director
By:/s/ Andrew B. Leon
Name: Andrew B. Leon
Title: Associate
7
<PAGE>
Exhibit 10.25.5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is signed on the
6th day of February 1997, to be effective as of January 1, 1997, by and
between NRG Energy, Inc., a Delaware corporation ("Buyer"), and NRG
Generating (U.S.) Inc., a Delaware corporation ("Shareholder").
RECITALS
WHEREAS, Buyer beneficially owns approximately 41.86% of
Shareholder;
WHEREAS, Shareholder owns beneficially and of record all of the
issued and outstanding shares (the "Shares") of Power Operations Inc.,
a Delaware corporation (the "Company");
WHEREAS, on October 28, 1996, NRGG Generating (Newark)
Cogeneration Inc., a Delaware corporation ("NRGG Newark"), terminated
that certain Operating and Maintenance Agreement (the "SSOI Newark
Agreement") dated May 1, 1996, between NRGG Newark and Stewart &
Stevenson Operations, Inc. ("SSOI"), pursuant to and in accordance with
Section XII(1)(e) of the SSOI Newark Agreement;
WHEREAS, on December 20, 1996, NRGG Generating (Parlin)
Cogeneration Inc., a Delaware corporation ("NRGG Parlin"), terminated
that certain Operating and Maintenance Agreement (the "SSOI Parlin
Agreement") dated May 1, 1996, between NRGG Parlin and SSOI, pursuant
to and in accordance with Section XII(1)(e) of the SSOI Parlin
Agreement;
WHEREAS, NRGG Newark has entered into that certain Operating and
Maintenance Agreement dated November 8, 1996 between NRGG Newark and
the Company (the "POI Newark Agreement") pursuant to which the Company
agreed to operate and maintain NRGG Newark's electric generation
facility;
WHEREAS, NRGG Parlin has entered into that certain Operating and
Maintenance Agreement dated December 31, 1996 between NRGG Parlin and
the Company (the "POI Parlin Agreement") pursuant to which the Company
agreed to operate and maintain NRGG Parlin's electric generation
facility;
WHEREAS, Shareholder desires to sell the Shares and Buyer desires
to purchase the Shares on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in reliance on the representations, warranties and
agreements and subject to the terms and conditions hereinafter set
forth, the parties hereby agree as follows:
1. Purchase and Sale of Shares. Subject to the terms and conditions
contained in this Agreement, at the Closing (as herein defined),
Shareholder shall sell, assign, transfer, and deliver to Buyer, and
Buyer shall purchase from Shareholder, the Shares. In consideration
for the Shares, Buyer shall (i) pay to Seller $10.00 cash,
(ii) indemnify, defend and hold harmless
<PAGE>
Shareholder, its officers, directors, agents and employees (each of
which is herein referred to as a "Shareholder Indemnified Person") as
provided in Sections 5, 7 and 8 of this Agreement (the "Purchase
Price"), and (iii) pay to Seller such amount as is necessary to clear
the Company's books as of the close of business on December 31, 1996,
as contemplated in Section 2 hereof.
The closing of the transactions contemplated by this
Agreement (the "Closing"), shall be held simultaneous with the
execution of this Agreement (the "Closing Date").
2. Clearing of Accounts. Shareholder and Buyer agree that Buyer
will pay to Shareholder within thirty (30) days after the Closing such
amount of funds as is equal to the positive balance of the accounts
receivable on the balance sheet of the Company as of the close of
business on December 31, 1996. The balance of the accounts receivable
on the balance sheet of the Company as of the close of business on
December 31, 1996 shall be adjusted after this payment, if and as
mutually agreed between the parties, to correct errors existing in the
balance as of the time such payment is made, if any.
Within thirty (30) days of the date of this Agreement,
Shareholder shall submit to Buyer an invoice for any and all expenses
of the Company that were funded by Shareholder prior to the date of
this Agreement and not reimbursed to Shareholder prior to the date of
this Agreement. Buyer shall pay the amount of such invoice to
Shareholder within thirty (30) days after Buyer's receipt thereof.
If and to the extent that the Company earns a bonus under the
POI Newark Agreement for any period of time that includes the period
between November 8, 1996 and December 31, 1996, Buyer shall within
thirty (30) days after Buyer's receipt of such bonus pay to Shareholder
that portion of the bonus as is attributable to the activity of the
Company during the referenced period of time.
3. Representations and Warranties of Shareholder. Shareholder
represents and warrants to Buyer that:
(a) Shareholder has all requisite power and authority to
execute and deliver this Agreement.
(b) Shareholder has good and marketable title to the shares
and owns the shares beneficially and of record, free and
clear of any security interests, claims, conditions,
liens, pledges, options, encumbrances, charges,
agreements, voting trusts, proxies or other arrangements
or restrictions whatsoever.
(c) Following the Closing, Buyer will own all of the shares
free and clear of any liens charges, claims,
restrictions (other than those resulting from action of
Buyer and other than with respect to applicable federal
and state securities laws), preemptive rights or other
encumbrances.
2
<PAGE>
(d) No consent, approval, authorization or signature of any
other party is necessary to transfer ownership
(beneficial and of record) of the Shares to Buyer.
(e) This Agreement has been duly authorized by Shareholder
and constitutes the legal, valid and binding obligation
of Shareholder enforceable against it in accordance with
its terms, except to the extent limited by bankruptcy,
insolvency, reorganization, moratorium or other laws
relating to or affecting the enforcement of creditor's
rights or by general equitable principles.
(f) There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of
Shareholder.
(g) Shareholder is not prohibited by any order, writ,
injunction or decree of any body of competent
jurisdiction from consummating the transactions
contemplated by this Agreement, and no such action or
proceeding is pending against Shareholder which
questions the validity of this Agreement, any of the
transactions contemplated hereby or any action which has
been taken by any of the parties in connection herewith
or in connection with any of the transactions
contemplated hereby.
(h) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the
state of Delaware, has full corporate power to carry on
its business as it is now and has since its
incorporation been conducted, and is entitled to own,
lease or operate the properties and assets it now owns,
leases or operates.
(i) The Company is authorized to issue 1000 shares of common
stock, $.01 par value ("Common Stock"), 100 shares of
Common Stock are issued and outstanding, all of which
are owned, of record and beneficially, by Shareholder.
All of the shares have been duly authorized and are
validly issued, fully paid and nonassessable. There are
not, and on the Closing Date there will not be,
outstanding (i) any options, warrants or other rights to
purchase from the Company any capital stock of the
Company, (ii) any securities convertible into or
exchangeable for shares of such stock or (iii) any
commitments of any kind for the issuance of additional
shares of capital stock or options, warrants or other
securities of the Company.
(j) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the
fulfillment of the terms hereof, will (a) violate or result in a
breach of, any of the terms and provisions of, or constitute
a default under, or conflict with (i) any agreement, contract,
commitment, permit, indenture or other instrument to which the
Company is a party or by which the Company or
3
<PAGE>
its assets, are bound, or give rise to any right of
termination, cancellation or acceleration under any such
agreement, contract, commitment, permit, indenture or
other instrument by any party thereto, (ii) the Articles
of Certificate of Incorporation or Bylaws of the
Company, or (iii) any law, statute or regulation, or any
judgment, decree, order or award of any court,
governmental body or arbitrator applicable to the
Company; or (b) result in the creation or imposition of
any lien, charge, pledge, security interest or
encumbrance of any kind on any asset of the Company.
(k) The Company does not have any liabilities or obligations
of any nature or kind whatsoever, whether known or
unknown, liquidated or unliquidated, absolute, accrued,
contingent or otherwise, and whether due or to because
due (including, without limitation, any liability for
taxes and interest, penalties and other charges payable
with respect to any such liability or obligation) and
there is no existing condition, situation or set of
circumstances which could be expected to result in such
liabilities other than (i) liabilities related to or
connected with the SSOI Losses (as such term is defined
in Section 5 hereof) (ii) liabilities specifically
reflected or reserved against and provided for in the
Company's most recent balance sheet (the "Balance
Sheet"), and (iii) liabilities incurred in the ordinary
course of business consistent with past practice since
the date of the Balance Sheet, which individually or in
the aggregate are not material to the Company.
4. Representations and Warranties of Buyer. Buyer hereby
represents and warrants to Shareholder that:
(a) Buyer is duly organized and existing under the laws of
the State of Delaware.
(b) This Agreement has been duly and validly authorized by
Buyer and constitutes the valid and binding obligation
of Buyer enforceable against Buyer in accordance with
its terms, except to the extent limited by bankruptcy,
insolvency, reorganization, moratorium or other laws
relating to or affecting the enforcement of creditor's
rights or by general equitable principles.
(c) No consent, approval, authorization or signature of any
other party is necessary to transfer ownership
(beneficial and of record) of the Shares to Buyer.
(d) There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Buyer.
4
<PAGE>
(e) Buyer is not prohibited by any order, writ, injunction
or decree of any body of competent jurisdiction from
consummating the transactions contemplated by this
Agreement, and no such action or proceeding is pending
against Buyer which questions the validity of this
Agreement, any of the transactions contemplated hereby
or any action which has been taken by any of the parties
in connection herewith or in connection with any of the
transactions contemplated hereby.
(f) Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated
hereby, nor the fulfillment of the terms hereof, will
(a) violate or result in a breach of, any of the terms
and provisions of, or constitute a default under, or
conflict with (i) any agreement, contract, commitment,
permit, indenture or other instrument to which the Buyer
is a party or by which the Buyer or its assets, are
bound, or give rise to any right of termination,
cancellation or acceleration under any such agreement,
contract, commitment, permit, indenture or other
instrument by any party thereto, (ii) the Articles of
Certificate of Incorporation or Bylaws of the Buyer, or
(iii) any law, statute or regulation, or any judgment,
decree, order or award of any court, governmental body
or arbitrator applicable to the Buyer; or (b) result in
the creation or imposition of any lien, charge, pledge,
security interest or encumbrance of any kind on any
asset of the Buyer.
(g) Buyer is acquiring the Shares for its own account for
investment purposes only and not with a view to, or for
resale in connection with, any distribution of such
securities within the meaning of the Minnesota Statutes,
as amended, or the Securities Act of 1933, as amended,
and that Buyer does not presently intend to resell,
assign, or otherwise dispose of all or any part of the
securities to be acquired hereunder. Buyer further
acknowledges that any certificates representing the
Shares subscribed for hereunder will contain a legend
indicating that said shares are issued in reliance on
the exemption provided by Section 80A.15 of the
Minnesota Statutes (1996), as amended, and prohibiting
further transfer, sale or conveyance of such securities
until such securities may, in the opinion of counsel to
the issuer, be so transferred, sold or conveyed without
a violation of any state or federal securities law.
5. Indemnification for SSOI Losses.
Shareholder and Buyer agree that they shall allocate
responsibility for any and all losses, liabilities, claims, demands,
assessments, actions, suits, proceedings, damages, costs and expenses
(other than Shareholder's or Buyer's internal costs and/or expenses),
including without limitation, reasonable attorneys' fees and
disbursements (including costs, expenses and legal fees incurred by the
other party, or such party's officers, directors, agents and employees
(each of which is herein referred to as an "Indemnified Person")
incident to the foregoing or to enforcing said rights of defense and
indemnity), arising out of or in connection with Shareholder's
termination of (i) the SSOI Newark Agreement (the "SSOI Newark Losses")
and (ii) the SSOI
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<PAGE>
Parlin Agreement (the "SSOI Parlin Losses"; with SSOI Newark Losses and
SSOI Parlin Losses, being collectively referred to as the "SSOI
Losses"), as follows: (1) Shareholder shall cause either itself, NRGG
Newark or NRGG Parlin to pay the first $200,000 of SSOI Losses; and (2)
Buyer shall pay all SSOI Losses in excess of $200,000. Shareholder and
Buyer agree to reimburse each other as required to achieve the above
result, provided that Buyer, its officers, directors, agents and
employees (each of which is herein referred to as a "Buyer Indemnified
Person") shall not be entitled to receive an amount of indemnity
pursuant to this Section 5 for the amount of any SSOI Losses as and to
the extent such amount, when added to all amounts previously paid or
reimbursed to a Buyer Indemnified Person pursuant to this Section 5
would exceed $200,000.
Each party shall indemnify, defend and hold harmless the
other party's Indemnified Persons promptly upon demand at any time and
from time to time, against any and all SSOI Losses as provided in this
Section 5.
If any action, suit or proceeding shall be commenced against
or any claim, demand or assessment be asserted against an Indemnified
Person in respect of which an Indemnified Person proposes to demand
defense and indemnification pursuant to this Section 5, and the total
amount sought in all such actions, suits, proceedings, claims, demands
and assessments is $200,000 or less, then Shareholder shall be notified
to that affect with reasonable promptness and shall have the right, but
not the obligation, to assume the entire control of the defense,
compromise or settlement thereof, including, at Shareholder's expense,
employment of counsel satisfactory to the Indemnified Person and in
connection therewith, the Indemnified Person shall cooperate fully to
make available to Shareholder all pertinent information under its
control.
If any action, suit or proceeding shall be commenced against
or any claim, demand or assessment be asserted against an Indemnified
Person in respect of which an Indemnified Person proposes to demand
defense and indemnification pursuant to this Section 5, the control of
which action, suit, proceeding, claim, demand, or assessment is not
assigned pursuant to the immediately preceding paragraph, Buyer shall
be notified to that affect with reasonable promptness and shall have
the right, but not the obligation, to assume the entire control of the
defense, compromise or settlement thereof, including, at Buyer's
expense, employment of counsel satisfactory to the Indemnified Person
and in connection therewith, the Indemnified Person shall cooperate
fully to make available to Buyer all pertinent information under its
control.
6. Indemnification of Buyer for Losses other than SSOI Losses.
Shareholder shall indemnify, defend and hold harmless Buyer Indemnified
Persons promptly upon demand at any time and from time to time, against
any and all losses, liabilities, claims, demands, assessments, actions,
suits, proceedings, damages and expenses, including without limitation,
reasonable attorneys' fees and disbursements (including costs, expenses
and legal fees incurred by an Indemnified Person incident to the
foregoing or to enforcing said rights of defense and indemnity)
(individually a "Loss" and collectively "Losses"), other than SSOI
losses, arising out of or in connection with any of the following:
6
<PAGE>
(a) Any misrepresentation or breach of any warranty made by
Shareholder in this Agreement; or
(b) Any breach or non-fulfillment of any covenant or agreement
made by Shareholder in this Agreement.
If any action, suit or proceeding shall be commenced against
or any claim, demand or assessment be asserted against a Buyer
Indemnified Person in respect of which a Buyer Indemnified Person
proposes to demand defense and indemnification, Shareholder shall be
notified to that effect with reasonable promptness and shall have the
right, but not the obligation, to assume the entire control of the
defense, compromise or settlement thereof, including, at Shareholder's
expense, employment of counsel satisfactory to the Buyer Indemnified
Person and in connection therewith, the Buyer Indemnified Person shall
cooperate fully to make available to Shareholder all pertinent
information under its control.
7. Indemnification of Shareholder for Losses other than SSOI
Losses. Buyer shall indemnify, defend and hold harmless Shareholder,
its officers, directors, agents and employees (each of which is herein
referred to as a "Shareholder Indemnified Person") promptly upon demand
at any time and from time to time, against any and all losses,
liabilities, claims, demands, assessments, actions, suits, proceedings,
damages and expenses, including without limitation, reasonable
attorneys' fees and disbursements (including costs, expenses and legal
fees incurred by an Indemnified Person incident to the foregoing or to
enforcing said rights of defense and indemnity) (individually a "Loss"
and collectively "Losses"), other than SSOI losses, arising out of or
in connection with any of the following:
(a) Any misrepresentation or breach of any warranty made by Buyer
in this Agreement; or
(b) Any breach or non-fulfillment of any covenant or agreement
made by Buyer in this Agreement.
If any action, suit or proceeding shall be commenced against
or any claim, demand or assessment be asserted against a Shareholder
Indemnified Person in respect of which a Shareholder Indemnified Person
proposes to demand defense and indemnification, Buyer shall be notified
to that effect with reasonable promptness and shall have the right, but
not the obligation, to assume the entire control of the defense,
compromise or settlement thereof, including, at Buyer's expense,
employment of counsel satisfactory to the Shareholder Indemnified
Person and in connection therewith, the Shareholder Indemnified Person
shall cooperate fully to make available to Buyer all pertinent
information under its control.
8. Conflicts. Notwithstanding Sections 5, 6, and 7 hereof,
Shareholder and Buyer agree that, if an Indemnified Person perceives
that there is a potential conflict of interest, between the respective
interests or legal positions of the Indemnified Person and the person
from whom the Indemnified Person has a right under one of such Sections
5, 6 or 7 to claim indemnity (the "Indemnifying Party"), regarding any
action, suit, proceeding, claim, demand or assessment described in
Sections 5, 6, or 7 hereof, then the Indemnifying Party shall have no
right to assume or retain the control of the defense, compromise or
settlement thereof. In such event, upon the
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<PAGE>
written request of the Indemnified Person, the Indemnifying Party
shall, at the Indemnifying Party's expense, employ separate counsel
chosen by the Indemnified Person to represent the Indemnified Person,
and the Indemnifying Party shall turn over to such counsel full control
of the Indemnified Person's defense. Notwithstanding the previous
sentence, the Indemnified Person shall not settle any such litigation
without the prior written consent of the Indemnifying Party, such
consent not to be unreasonably withheld. Each party agrees that the
Indemnifying Party may employ counsel, at the Indemnifying Party's
expense, to represent such Indemnifying Party in the event of such
conflict.
9. Effective Date. The parties hereto agree that he effective
date of this agreement shall be January 1, 1997.
10. Survival. All representations, warranties, indemnities,
covenants and agreements made by Shareholder or Buyer in this Agreement
or in any document or agreement delivered in connection therewith shall
survive the Closing, notwithstanding any examination or investigation
made by or for any party.
11. Further Assurances. The parties hereto shall cooperate and
take such actions, execute such other documents as either may
reasonably request in order to carry out the provisions or purpose of
this Agreement.
12. Notices. All notices or other communications in connection
with the Agreement shall be in writing and shall be considered given
when personally delivered or when mailed by registered or certified
mail, postage prepaid, return receipt requested, as follows:
If to Shareholder: NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403 -2444
Attention: President
If to the Buyer: NRG Energy, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, Minnesota 55403- 2444
Attention: President
13. Entire Agreement. This Agreement sets forth the final and
entire agreement of the parties with respect to the subject matter and
supersedes any and all prior understandings and agreements.
14. Successors. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and
assigns. This Agreement may not be assigned to any party without the
prior written consent of the other party hereto.
15. Expenses. Each party to this Agreement shall pay all expenses
incurred by it or on its behalf in connection with the preparation,
authorization, execution and performance of this Agreement. Each party
agrees that there are no other finder's fees or brokerage commissions
8
<PAGE>
payable in connection with the transactions contemplated hereby as
a result of actions taken by such party.
16. Severability. If any provisions of this Agreement shall be
held by any court of competent jurisdiction to be illegal, invalid or
unenforceable, such provisions shall be construed and enforced as if it
had been more narrowly drawn so as not to be illegal, invalid or
unenforceable, and such illegality, invalidity or unenforceability
shall have no effect upon and shall not impair the enforceability of
any other provision of this Agreement.
17. Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with, the internal laws, and
not the laws pertaining to choice or conflicts of law, of the State of
Minnesota.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed in original, but all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto as of the date first above written.
NRG ENERGY, INC.
By: /s/ Ronald J. Will
Name: Ronald J. Will
Title: V.P. Operations & Engineering
NRG GENERATING (U.S.) INC.
By: /s/ Leonard Bluhm
Name: Leonard Bluhm
Title: Chairman & CEO
<PAGE>
Exhibit 10.25.6
GUARANTY OF OPERATOR'S OBLIGATIONS
BY NRG ENERGY, INC.
In consideration of, and as an inducement for NRG Generating
(Newark) Cogeneration, Inc., a Delaware corporation ("NRGG Newark") and
NRG Generating (Parlin) Cogeneration, Inc., a Delaware corporation
("NRGG Parlin"; NRGG Newark and NRGG Parlin, collectively, the
"Owners") to enter in certain agreements with Power Operations Inc., a
Delaware corporation ("Operator"), NRG Energy, Inc., a Delaware
corporation and owner of all of the issued and outstanding stock of
Operator ("Guarantor") hereby, irrevocably guarantees to Owners the
prompt performance and payment when due, whether by acceleration or
otherwise, of all obligations, indebtedness, liabilities or
undertakings according to the terms of (i) the Operating Agreement
dated November 8, 1996 (the "Newark O&M Contract") between NRGG Newark
and Operator and (ii) the Operating Agreement dated December 31, 1996
between NRGG Parlin and Operator (the "Parlin O&M Contract, the Parlin
O&M Contract and Newark O&M Contract, collectively the "O&M
Contracts").
If Operator fails to perform any of its obligations under either
of the O&M Contracts, or execute any of its liabilities arising
therefrom, as such obligations and liabilities are limited by the terms
thereof, Guarantor will (a) pay upon demand (i) any sum due and to
become due, (ii) any damages, costs and expenses entitled to be
recovered from Operator by reason of such default, and (iii) reasonable
attorneys' fees and all costs and other expenses incurred as a result
of any such default or in enforcing this Guaranty and (b) upon written
request from such Owner, and after having given Guarantor seven (7)
days notice in writing of such Owner's intention under such O&M
Contract, to make a claim under the Guaranty, (i) forthwith perform
such obligations or liabilities on the same terms and conditions as
stated in such O&M Contract mobilizing and using, for that purpose,
sufficient personnel and resources, or (ii) cause a third party
acceptable to such Owner to perform such obligations or liabilities,
the due and faithful performance of which Guarantor will Guaranty as if
such third party were Operator. This Guaranty is a Guaranty of payment
and not of collection and no action need be brought against Operator as
a precondition to the enforcement of this Guaranty.
Subject to the terms and provisions hereto set forth, the Guaranty
is continuing, absolute and unconditional irrespective of (a) any lack
of validity or enforceability of the O&M Contracts, (b) any amendment
to, waiver of or consent to, departure from, or failure to exercise any
right or remedy under the O&M Contracts, or either of them, (c) any
acceptance of partial payment or performance of any of the guaranteed
obligations, (d) any release, application or amendment of or consent to
departure from any security or guaranty therefor, (e) any assignment of
this Guaranty, (f) the insolvency, bankruptcy, dissolution or
liquidation of Operator or any change in ownership of Operator, or (g)
any other circumstances of a similar or different nature which might
otherwise constitute a defense available to Operator or the
undersigned. Notice of acceptance of the Guaranty is hereby waived,
and this Guaranty shall remain in full force and effect up to and
including the expiration of both the O&M Contracts including all
extensions of time.
<PAGE>
The Guarantor waives promptness, diligence, any and all demands
for payment, any notice of credits extended and shipments or
merchandise made hereunder, and all other notices whatsoever. The
Guarantor consents to any extensions of time for the payment of said
account, to any changes in the terms of any settlement or adjustment
thereof and to any changes in the terms of the O&M Contracts. No
delays on the part of Owners in the exercise by Owners of any right or
remedy shall preclude other or further exercise thereof or the exercise
of any other right or remedy. No actions of Operator shall in any way
impair or affect this Guaranty.
The Guarantor has also agreed pursuant to (i) that certain Stock
Purchase Agreement (the "POI Stock Purchase Agreement") dated as of
February 6, 1997, effective as of January 1, 1997, by and between
Guarantor and NRG Generating (U.S.) Inc. ("NRGG"), and (ii) that
certain Indemnification Agreement (the "Indemnification Agreement")
dated as of even date hereof, among NRGG Newark, NRGG Parlin,
Guarantor, NRG Generating (U.S.) Inc. ("NRGG") and Credit Suisse First
Boston (formerly Credit Suisse) (The "Agent") to unconditionally and
irrevocably and indemnify Owner for costs and expenses incurred in
connection with the termination of (a) that certain Operations and
Maintenance Agreement, dated as of May 1, 1996 (the "SSOI Newark
Agreement") between Stewart & Stevenson Operations, Inc. ("SSOI") and
NRGG Newark and (b) that certain Operations and Maintenance Agreement,
dated as May 1, 1996 (the "SSOI Parlin Agreement") between SSOI and
NRGG Parlin. Such indemnification is pursuant to Section 5.32 of the
Credit Agreement by and among NRGG Newark, NRGG Parlin, Credit Suisse
First Boston, Greenwich Funding Corporation and any purchasing Lender
as Lender and Credit Suisse as Agent dated May 17, 1996.
This Guaranty shall be binding upon the Guarantor and its
successors and assigns and shall be for the benefit of the person named
above, its successors and assigns. Should any one or more of the
provisions of the Guaranty by determined by a court of competent
jurisdiction to be illegal or unenforceable, all other provisions shall
remain effective. This Guaranty shall be effective as of January 1,
1997.
This Guaranty shall be governed by, and construed in accordance
with, the laws of the State of New York and all parties agree to
subject any disputes that may arise under or in connection with this
Guaranty to the jurisdiction of the courts of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be
duly executed by its authorized officer as of the date set forth below.
NRG ENERGY, INC.
By: /s/ Ronald J. Will
Name: Ronald J. Will
Title: Vice President
Dated as of: March 21, 1997
<PAGE>
Exhibit 10.25.7
CONSENT TO ASSIGNMENT
OF
OPERATING GUARANTY AGREEMENT
This Consent to Assignment (this "Consent") is entered into as of
March 21, 1997, to be effective as of December 31, 1997, by NRG Energy,
Inc., a Delaware corporation (the "Company"), NRG Generating (Parlin)
Cogeneration Inc. (formerly known as O'Brien (Parlin") Cogeneration,
Inc.), a Delaware corporation ("NRGG Parlin"), and Credit Suisse First
Boston (formerly known as Credit Suisse), acting through its New York
branch ("CS") as agent (hereinafter in such capacity, together with any
successors thereto in such capacity referred to as "Agent") pursuant to
the Credit Agreement dated as of May 17, 1996 by and amount (i) NRGG
Parlin and NRG Generating (Newark) Cogeneration Inc. (formerly known as
O'Brien (Newark) Cogeneration, Inc.), a Delaware corporation ("NRGG
Newark"; NRGG Parlin and NRGG Newark, collectively, the "Borrowers"),
(ii) Credit Suisse First Boston, as Lender and each additional Lender
from time to time party to the Credit Agreement and (iii) the Agent (as
to same may be amended, modified or supplemented from time to time, the
"Credit Agreement").
RECITALS
WHEREAS, the Company, for the benefit of NRGG Parlin, has entered
into that certain Guaranty Agreement, dated as of even date herewith,
to be effective January 1, 1997, (as the same may be amended, modified
or supplemented from time to time, the "Assigned Agreement") with
respect to the System Operation and Maintenance Agreement, dated as of
December 31, 1997 (as the same may be amended, modified or supplemented
from time to time, the "O&M Agreement"), between Power Operations, Inc.
(the "Operator") and NRGG Parlin; and
WHEREAS, NRGG Parlin has assigned or will assign to Agent for the
benefit of the Secured Parties (as defined in the Credit Agreement and
referred to herein as "Assignee") all of its rights, title and interest
in, to and under the Assigned Agreement as security for NRGG Parlin's
obligations under the Credit Agreement; and
WHEREAS, the Company is willing to consent to such assignment and
the grant of a security interest by NRGG Parlin in favor of Assignee as
described above.
NOW, THEREFORE, in consideration of the premises and of other valuable
consideration, the parties hereto agree as follows:
19. Assignment and Security Interest
As security for the due and punctual performance and payment of
all of NRGG Parlin's obligations under the Credit Agreement, NRGG
Parlin has assigned or will assign to Assignee as collateral
security, all of NRGG Parlin's rights to and under the Security
Agreement (as defined in the Credit Agreement).
<PAGE>
20. Consent
The Company hereby (i) irrevocably consents to the assignment
specified in paragraph 1 of this Consent and to any subsequent
assignments by Agent or Assignee upon and after Agent's or
Assignee's exercise of its rights and remedies under the Security
Agreement and (ii) agrees that, following the assumption of the
Assigned Agreement by Agent, Assignee or their nominee, designee
or assignee, all agreements made by the Company under or pursuant
to the Assigned Agreement shall inure to the benefit of such party
and shall be enforceable by such party to the same extent as if
such party were originally named in the Assigned Agreement.
21. Amendment or Termination of Operating Guaranty
(a) The Company covenants and agrees with Agent that without the
prior written consent of Agent (i) the Company will not materially
amend, modify or terminate the Assigned Agreement and (ii) no
waiver by NRGG Parlin of any of the obligations of the Company
under the Assigned Agreement, and no consent, approval or election
made by NRGG Parlin in connection with the Assigned Agreement
shall be effective.
(b) In the event that the Operator and Agent, Assignee or their
nominee or designee enter into a new O&M Agreement pursuant to
Section 3(b) of that certain Consent to Assignment of System
Operating and Maintenance Agreement, dated as December 31, 1997,
entered into by the Operator, NRGG Parlin and Agent, then the
Company shall, at the option of Agent and Assignee, enter into a
new Assigned Agreement for the benefit of Agent, Assignee or (at
the direction of Agent or Assignee) their nominee or designee
having terms substantially identical to the Assigned Agreement,
pursuant to which Agent, Assignee or their nominee or designee
shall have all the rights and obligations of NRGG Parlin under the
Assigned Agreement.
22. Payments
The Company agrees that until receipt of written notice from Agent
that all obligations of NRGG Parlin under the Credit Agreement
have been fully satisfied, the Company hereby agrees to make all
payments due to NRGG Parlin under the Assigned Agreement directly
to such account as Agent may from time to time hereafter specify
in writing and the Company will not be entitled to recover any
amount so paid from Agent.
23. Representations and Warranties
The Company hereby represents and warrants to Agent and Assignee
as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. The Company has full power, authority
2
<PAGE>
and legal right to incur the obligations provided for in
this Consent and the Assigned Agreement.
(b) The execution, delivery and performance by the Company
of this Consent and the Assigned Agreement have been duly
authorized by all necessary corporate action.
(c) The Assigned Agreement is in full force and effect and
has not been amended.
(d) Each of this Consent and the Assigned Agreement
constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with
its terms, except as enforceability may be limited by general
principles of equity and by applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors
rights generally.
(e) There is no litigation, action, suit, investigation or
proceeding pending or, to the best knowledge of the Company,
threatened against the Company nor any basis therefor, before
or by any court, administrative agency, environmental
council, arbitrator or governmental authority, body or
agency, which could adversely affect the performance by the
Company of its obligations hereunder or under the Assigned
Agreement or which questions the validity, binding effect or
enforceability hereof or thereof.
(f) The Company is not in violation of its articles of
incorporation or bylaws, and the execution, delivery and
performance by the Company of this Consent and the Assigned
Agreement, and the consummation of the transactions
contemplated hereby and thereby, will not result in any
violation of any term of its articles of incorporation or
bylaws, of any material contract or agreement applicable to
it, or of any license, permit, franchise, judgment, decree,
writ, injunction, order, charter, law, ordinance, rule or
regulation applicable to it or any of its properties or to
any obligations incurred by it or by which it or any of its
properties may be bound or affected, or of any determination
or award of any arbitrator applicable to it, and will not
conflict with, or cause a breach of, or default under, any
such term.
(g) The Company has not received notice of, or consented to
the assignment of any of NRGG Parlin's right, title, or
interest in the Assigned Agreement to any person or entity
other than Agent and Assignee.
24. Notices
All notices or other communications which are required or
permitted hereunder to be given to any party shall be in writing
(including facsimile communication) and shall be deemed given if
delivered personally or sent by telecopy or by registered or
certified mail, return receipt requested, to the address of such
party specified below or to such other address as the addressee
may have specified in a notice duly given to the sender as
provided herein:
3
<PAGE>
If to Agent:
Credit Suisse First Boston
Eleven Madison Avenue
19th Floor
New York, NY 10010-3629
Attention: Project Finance
Telecopy: (212) 325-8049
If to NRGG Parlin:
NRG Generating (Parlin) Cogeneration, Inc.
c/o NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, MN 55403
Attention: President
Telecopy: (612) 373-8833
If to the Company:
NRG Energy, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403
Attention:
Telecopy:
All such notices and communications shall, when mailed, be
effective seven (7) days after being deposited in the mail in the
manner aforesaid, or when sent by telecopier, upon receipt thereof.
25. Governing Law
THIS CONSENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW EXCEPT SECTION 5-
1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
4
<PAGE>
26. Successors and Assigns
This Consent shall be binding upon the parties and their
successors and assigns and inure to the benefit of the parties and
their respective successors and assigns (which assigns, in the
case of Agent and Assignee, shall include, without limitation, any
nominee or designee of Agent and Assignee and any purchaser of all
or any portion of rights under the Assigned Agreement in
connection with an Event of Default under the Credit Agreement or
a foreclosure by Agent and Assignee.)
27. Waiver
No amendment or waiver of any provisions of this Consent shall be
effective unless the same shall be in writing and signed by Agent,
and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
28. Counterparts
This Consent may be executed in any number of counterparts, all of
which counterparts shall together constitute one and the same
instrument.
29. Further Assurances
The Company will at any time and from time to time, upon the
written request of Agent, execute and deliver such further
documents and do such other acts and things as Agent may
reasonably request in order to effectuate more fully the purposes
of this Consent.
30. Conflicts
In the event of a conflict between any provision of this Consent
and the provisions of the Assigned Agreement, the provisions of
this Consent shall prevail.
[SIGNATURES APPEAR ON THE NEXT PAGE]
5
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Consent as of the date first above written.
NRG ENERGY, INC.
By:/s/ Ronald J. Will
Name: Ronald J. Will
Title: Vice President
NRG GENERATING (PARLIN)
COGENERATION INC.
By:
Name:
Title:
Accepted:
CREDIT SUISSE FIRST BOSTON, as Agent
By:/s/ Guy Cirincione
Name: Guy Cirincione
Title: Director
By:/s/ Andrew B. Leon
Name: Andrew B. Leon
Title: Associate
6
<PAGE>
Exhibit 10.26.1
CREDIT AGREEMENT PROVIDING FOR
A
U.S. $30,000,000
REDUCING REVOLVING CREDIT FACILITY
TO BE MADE AVAILABLE TO
NRG GENERATING (U.S.) INC.
ARRANGED BY
MEESPIERSON CAPITAL CORP.
Dated as of December 17, 1997
<PAGE>
INDEX
PAGE
SECTION 1 DEFINITIONS 1
1.1 Defined Terms 1
1.2 Construction 44
1.3 GAAP 44
SECTION 2 REPRESENTATIONS AND WARRANTIES 44
2(a) Due Organization and Power 44
2(b) Capitalization...... 44
2(c) Authorization and Consents.. 45
2(d) Binding Obligations.................. 45
2(e) No Violation........................... 45
2(f) Litigation 45
2(g) No Default 46
2(h) Existing Projects and Project Agreements 46
2(i) Insurance 47
2(j) Financial Information 48
2(k) Tax Returns 48
2(l) ERISA 48
2(m) Margin Regulations 48
2(n) Investment Company Act 49
2(o) Security Interests 49
2(p) Business of Project Entities 49
2(q) EWG Status: Qualifying Cogeneration
Facility Status 49
2(r) Regulation of Borrower Entities 49
2(s) Title to and Sufficiency of Assets 50
2(t) Labor Matters 50
2(u) Transactions with Affiliates 50
2(v) Environmental Matters and Claims 50
2(w) Bank Accounts 52
2(x) Survival 52
2(y) No Material Adverse Effect 52
i
<PAGE>
SECTION 3 ADVANCES 52
3.1(a) Purposes 52
3.1(b) Making of the Advances 53
3.1(c) Maximum Number of LIBOR Rate Advances 53
3.2 Drawdown Notice 53
3.3 Effect of Drawdown Notices 53
3.4 Notation of Advances 54
SECTION 4 CONDITIONS 54
4.1 Conditions Precedent to Drawdown
of the Initial Advance 54
4.2 Further Conditions Precedent 58
4.3 Breakfunding Costs 59
4.4 Satisfaction After Drawdown 59
SECTION 5 REPAYMENT, REDUCTION AND PREPAYMENT 60
5.1 Repayment 60
5.2 Reductions of the Credit Facility 60
5.3 Prepayment; Reborrowing 60
5.4 Optional and Mandatory Conversions 60
5.5 Interest and Costs with Prepayments 61
5.6 Pro Rata Reduction of Commitments 61
SECTION 6 INTEREST AND RATE 61
6.1 Payment of Interest; Interest Rate 61
6.2 Calculation of Interest 62
6.3 Maximum Interest 62
SECTION 7 PAYMENTS 62
7.1 Place of Payments, No Set Off 62
7.2 Tax Forms 63
7.3 Tax Credits 63
ii
<PAGE>
SECTION 8 ACCOUNTS 63
8.1 Collection Account 63
8.2 Application of Assigned Moneys 63
8.3 Assignment of Collection Account 64
SECTION 9 EVENTS OF DEFAULT 64
9.1 64
9.1(a) Non-Payment of Principal 64
9.1(b) Non-Payment of Interest or
Other Amounts 64
9.1(c) Representations 64
9.1(d) Certain Covenants 65
9.1(e) Other Covenants 65
9.1(f) Indebtedness 65
9.1(g) Stock Ownership 65
9.1(h) Failure to Maintain Status. 66
9.1(i) Bankruptcy 66
9.1(j) Termination of Operations; Sale
of Assets 66
9.1(k) Judgments 66
9.1(l) Inability to Pay Debts 66
9.1(m) Project Agreements 66
9.1(n) ERISA Debt 67
9.1(o) Invalidity or Revocation of Guarantee 67
9.1(p) Dissolution 67
9.2 Indemnification 68
9.3 Application of Moneys 68
9.4 Alleged PECO Option 69
9.5 Equipment Liens 70
SECTION 10 COVENANTS 70
10.1 70
10.1(A)(i) Performance of Credit Facility
Agreements 70
10.1(A)(ii) Notice of Default, Etc. 70
10.1(A)(iii) Obtain Consents 71
10.1(A)(iv) Financial Information 71
10.1(A)(v) Corporate Existence 72
iii
<PAGE>
10.1(A)(vi) Books and Records 72
10.1(A)(vii) Taxes and Assessments 72
10.1(A)(viii) Inspection 72
10.1(A)(ix) Compliance with Statutes, Etc. 72
10.1(A)(x) Environmental Matters 73
10.1(A)(xi) ERISA 73
10.1(A)(xii) Consolidated Debt Service
Coverage Ratio 73
10.1(A)(xiii) Borrower Debt Service Coverage
Ratio 74
10.1(A)(xiv) Maintenance of Properties, Etc. 74
10.1(A)(xv) Revenue Collection Account;
Assignment 74
10.1(A)(xvi) Performance of Project Agreements 74
10.1(A)(xvii) Operating Logs 75
10.1(A)(xviii) Maintenance of Insurance 75
10.1(A)(xix) Use of Proceeds 75
10.1(A)(xx) Additional Documents; Filings and
Recordings 75
10.1(B)(i) Liens 76
10.1(B)(ii) Capital Expenditures 76
10.1(B)(iii) Indebtedness 76
10.1(B)(iv) Change in Business 77
10.1(B)(v) Sale or Pledge of Shares 77
10.1(B)(vi) Sale of Assets 77
10.1(B)(vii) Changes in Offices or Names 77
10.1(B)(viii) Consolidation and Merger 77
10.1(B)(ix) Limitation on Dividends 77
10.1(B)(x) Amendment, Termination, Etc. of
Project Agreements 78
10.1(B)(xi) Fiscal Year 78
10.1(B)(xii) Transactions with Affiliates 78
10.1(B)(xiii) Investments 78
iv
<PAGE>
SECTION 11 ASSIGNMENT. 79
SECTION 12 ILLEGALITY, INCREASED COSTS,
NON-AVAILABILITY, ETC. 79
12.1 Illegality 79
12.2 Increased Costs 80
12.3 Nonavailability of Funds 81
12.4 Compensation for Losses 81
12.5 Replacement of Lender 81
SECTION 13 FEES AND EXPENSES 83
13.1 Commitment Fee 83
13.2 Administrative Fee 83
13.3 Expenses 83
SECTION 14 APPLICABLE LAW, JURISDICTION AND WAIVER 84
14.1 Applicable Law 84
14.2 Jurisdiction 84
14.3 WAIVER OF JURY TRIAL 84
SECTION 15 THE AGENT 85
15.1(a) Appointment of Agent 85
15.1(b) Appointment of Security Trustee 85
15.2 Distribution of Payments 85
15.3 Holder of Interest in Note 85
15.4 No Duty to Examine, Etc. 86
15.5 Agent as Lender 86
15.6(a) Obligations of Agent 86
15.6(b) No Duty to Investigate 86
15.7(a) Discretion of Agent 86
15.7(b) Instructions of Majority Lenders 86
15.8 Assumption re Event of Default 87
15.9 No Liability of Agent or Lenders 87
15.10 Indemnification of Agent 88
15.11 Consultation with Counsel 88
15.12 Resignation 88
15.13 Representations of Lenders 88
15.14 Notification of Event of Default 89
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<PAGE>
SECTION 16 NOTICES AND DEMANDS 89
16.1 Notices 89
SECTION 17 MISCELLANEOUS 90
17.1 Time of Essence 90
17.2 Unenforceable, etc., Provisions -
Effect 90
17.3 References 90
17.4 Prior Agreements, Merger 90
17.5 Entire Agreement, Amendments 91
17.6 Indemnification 91
17.7 Headings 92
vi
<PAGE>
SCHEDULE
1 The Lenders and the Commitments
2 Margin
2(b) Capitalization
2(f) Litigation
2(h) Material Governmental Approvals
2(i) Insurance
2(o) Consents to Granting of Security Interests
2(s) Exceptions to Title
2(u) Transactions with Affiliates
2(v) Environmental Matters
2(w) Bank Accounts
EXHIBIT CONTENTS
A Form of Note
B Form of Guarantee
C Form of Borrower Pledge
D Form of Acknowledgment
E Form of General Security Agreement
F Form of Assignment and Assumption Agreement
G Form of Compliance Certificate
H Form of Drawdown Notice
I Form of Subordination Agreement
J Form of Letter of Credit
K Form of Mortgage
vii
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of the 17th day of December,
1997, by and among (1) NRG GENERATING (U.S.) INC., a corporation
incorporated under the laws of Delaware with offices at 1221 Nicollet
Mall, Suite 610, Minneapolis, Minnesota 55403 (the "Borrower"),
(2) MEESPIERSON CAPITAL CORP. ("MPCC"), as arranger (the "Arranger"),
(3) the banks and financial institutions whose names and addresses are
set out in Schedule 1 (together, the "Lenders", each a "Lender"), and
(4) MPCC, as agent (the "Agent") and security trustee (the "Security
Trustee") for the Lenders.
WITNESSETH THAT:
WHEREAS, the Borrower desires to obtain Commitments from the
Lenders pursuant to which Advances will be made to the Borrower from
time to time prior to the Maturity Date; and
WHEREAS, the Lenders are willing, on the terms and subject to
the conditions hereinafter set forth, to extend such Commitments and
make such Advances to the Borrower.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
1.1 In this Agreement the words and expressions specified below shall,
except where the context otherwise requires, have the meanings
attributed to them below:
"Acceptable Accounting Firm" means Price Waterhouse LLP, or such
other nationally recognized accounting
firm as shall be approved by the
Agent, such approval not to be
unreasonably withheld;
"Acknowledgment(s)" means the acknowledgments and
undertakings executed by the Project
Entities (and in the case of Grays
Ferry, together with NRGG (Schuylkill)
Cogeneration Inc.) in connection with
the Assignment of Collection Account
substantially in the form of Exhibit D
hereto pursuant to which the Project
<PAGE>
Entities shall, among other things,
covenant to make all permissible
distributions of Project Cash Flow to
the Collection Account;
"Advance(s)" means any amount advanced to the
Borrower hereunder as either a Base
Rate Advance or a LIBOR Rate Advance
or (as the context may require) the
aggregate amount of all such advances
for the time being outstanding;
"Adwin" means Adwin Equipment Company, a
Pennsylvania corporation;
"Adwin Schuylkill" means Adwin (Schuylkill) Cogeneration,
Inc., a Pennsylvania corporation;
"Affiliate" means with respect to any Person, any
other Person directly or indirectly
controlled by or under common control
with such Person. For the purposes of
this definition, "control" (including,
with correlative meanings, the terms
"controlled by" and "under common
control with") as applied to any
Person means the possession directly
or indirectly of the power to direct
or cause the direction of the
management and policies of that Person
whether through ownership of voting
securities or by contract or
otherwise;
"Agreement" means this Agreement, as the same
shall be amended, modified or
supplemented from time to time;
"Alternative Fuel" means fuel, other than natural gas
delivered pursuant to a purchase
agreement, that is permitted to be
used to operate an Existing Project to
meet its
2
<PAGE>
objectives, including, but not limited
to, kerosene;
"Applicable Rate" means any rate of interest on the
Advances from time to time applicable
pursuant to Section 6.1;
"Aquila" means Aquila Energy Marketing
Corporation, a Delaware corporation;
"Aquila Tracking Account means the Tracking Account
Agreement" Agreement dated as of November 9, 1995
between Grays Ferry, Aquila and
Utilicorp as amended by Amendment
No. 1 dated as of March 1, 1996;
"Assigned Moneys" means sums received by the Agent, the
Security Trustee, the Lenders or the
Arranger pursuant to the Assignment of
Collection Account;
"Assignment and Assumption means the Assignment and Assumption
Agreement(s)" Agreement(s) executed pursuant to
Section 11 substantially in the form
set out in Exhibit F;
"Assignment of Collection means the first priority assignment of
Account" the Collection Account in favor of the
Security Trustee, made by the Borrower
pursuant to Section 8.3;
"Banking Day(s)" means day(s) on which banks are open
for the transaction of business in
London, England (in respect of LIBOR
Rate Advances only) and New York, New
York;
"Base Rate" means a fluctuating rate of interest
per annum equal to the higher of:
(a) the rate of interest
most recently publicly announced by
the Reference
3
<PAGE>
Bank in New York City, New
York as its prime rate; and
(b) the Federal Funds Rate,
plus 1/2 of 1%.
The Base Rate is not necessarily
intended to be the lowest rate of
interest determined by the Agent in
connection with extensions of credit.
Changes in the rate of interest on any
Advance maintained as a Base Rate
Advance shall take effect
simultaneously with each change in the
Base Rate. The Agent shall give
notice promptly to the Borrower of
changes in the Base Rate;
"Base Rate Advance" means an Advance bearing interest
based on the Base Rate;
"Borrower Debt Service
Coverage Ratio" means, with respect to the Borrower on
any date, the ratio of (i) the
aggregate of (A) cash distributions to
the Borrower from the Project Entities
for the four fiscal quarters for which
financial information in respect
thereof is available immediately prior
to such date plus (B) fees received by
the Borrower from the Project Entities
during such period, to (ii) the
Borrower's Debt Service during such
four fiscal quarters, provided,
however, that such ratio shall be
determined by reference only to fiscal
quarters ending after the Initial
Drawdown Date;
"Borrower Entities" means each of the Borrower, OESC and
the Project Entities, any Subsidiary
of any Project Entity, or any of them;
4
<PAGE>
"Borrower Pledge" means a pledge of the capital stock
owned by the Borrower or any Affiliate
of Philadelphia Cogeneration, OESC and
any other entity owning assets of the
Philadelphia Cogeneration Project,
executed by the Borrower pursuant to
Section 4.1(c) substantially in the
form of Exhibit C;
"Borrower's Debt Service" shall mean for any period, the sum of
(i) interest expense for such period
plus (ii) the excess of (A) the Credit
Facility Balance over (B) the amount
of the Credit Facility available under
the Credit Facility on the next
Scheduled Reduction Date, provided
that item (ii) shall never be more
than $2,500,000;
"Code" means the Internal Revenue Code of
1986, as amended, and any successor
statute and regulation promulgated
thereunder;
"Collateral" means all property or other assets,
real or personal, tangible or
intangible, whether now owned or
hereafter acquired in which the Agent,
Security Trustee or the Lenders has
been granted a security interest
pursuant to this Agreement and/or any
Security Document;
"Collection Account" has the meaning ascribed thereto in
Section 8;
"Commitment(s)" means, in relation to a Lender, the
portion of the Credit Facility set out
opposite its name in Schedule 1 or, as
the case may be, in any relevant
Assignment and Assumption Agreement,
as reduced from time to time pursuant
to the terms of this Agreement;
5
<PAGE>
"Compliance Certificate" means a certificate certifying the
compliance by the Borrower with all of
its covenants contained herein and
showing the calculations thereof in
reasonable detail, delivered by the
chief financial officer of the
Borrower, in his capacity as an
officer, to the Agent from time to
time pursuant to Section 10.1(A)(iv)
in the form set out in Exhibit G, or
in such other form as the Agent may
agree;
"Consolidated Debt Service means, with respect to the Borrower
Coverage Ratio" and the Project Entities on any date,
the ratio of (i) the aggregate of
(A) total EBITDA of the Project
Entities attributable to the Borrower
for the four fiscal quarters for which
financial information in respect
thereof is available immediately prior
to such date plus (B) fees received by
the Borrower or its Subsidiaries from
the Project Entities for such period,
to (ii) the sum of (x) the portion of
debt service of each Project Entity
attributable to the Borrower plus (y)
Borrower's Debt Service for the four
fiscal quarters for which financial
information in respect thereof is
available immediately prior to such
date; provided, however, that such
ratio shall be determined by reference
only to fiscal quarters ending after
the Initial Drawdown Date;
"Credit Facility" means the sums to be advanced by the
Lenders to the Borrower pursuant to
this Agreement in an aggregate amount
not to exceed at any one time
outstanding Thirty Million Dollars
($30,000,000); provided, however, that
(i) until such time as the Borrower
shall have provided the Agent with
evidence reasonably satisfactory to
6
<PAGE>
the Agent that the Borrower or
Philadelphia Cogeneration, as the case
may be, shall have purchased and/or
redeemed all of the minority interest
of the Revocable Trust of Marsha
Reines Perelman in Philadelphia
Cogeneration the aggregate amount to
be advanced to the Borrower pursuant
to this Agreement shall not exceed
Twenty-nine Million Dollars
($29,000,000) and (ii) until such time
as Philadelphia Cogeneration shall
have executed and delivered the
Mortgage the aggregate amount to be
advanced to the Borrower pursuant to
this Agreement shall not exceed Twenty-
five Million Dollars ($25,000,000),
and provided, further, that until such
time as the Borrower shall have
provided the Agent with evidence
reasonably satisfactory to the Agent
that the Equipment Liens shall have
been released, the aggregate amount to
be advanced to the Borrower pursuant
to this Agreement shall be further
reduced by the aggregate amount of the
Indebtedness secured by all Equipment
Liens which have not been released;
"Credit Facility Balance" means the Dollar amount of the
Advances at any relevant time then
outstanding as reduced by payments
pursuant to the terms of this
Agreement;
"Credit Facility Period" means the period from the Initial
Drawdown Date to the date on which all
amounts owing under the Credit
Facility and all other amounts owing
to the Agent, the Arranger, the
Security Trustee and the Lenders
pursuant to this Agreement, the Note
and the Security Documents become
repayable and are repaid in full;
7
<PAGE>
"Default Rate" means the rate per annum equal to the
Applicable Rate plus two percent (2%);
"Depository" shall have the meaning ascribed
thereto in Section 8.01;
"Dollars" and the means the legal currency, at
sign "$" any relevant time hereunder, of the
United States of America and, in
relation to all payments hereunder, in
same day funds settled through the New
York Clearing House Interbank Payments
System (or such other Dollar funds as
may be determined by the Agent to be
customary for the settlement in New
York City of banking transactions of
the type herein involved);
"Drawdown Dates" means the dates, each being a Banking
Day falling not later than the day
immediately preceding the Maturity
Date, upon which the Borrower has
requested that an Advance be made
available to the Borrower as provided
in Section 3;
"Drawdown Notice" has the meaning ascribed thereto in
Section 3.2;
"DuPont" means E.I. duPont de Nemours and
Company, a Delaware corporation, and
its successors and assigns;
"DuPont Power Purchase
Agreement" means the Electricity Purchase
Contract, dated January 18, 1988,
between DuPont and O'Brien (Parlin)
Cogeneration, Inc., as the same may be
amended, restated, supplemented or
otherwise modified from time to time;
"EBITDA" means, with respect to any Person for
any period, (A) net income (or net
loss), plus
8
<PAGE>
(B) to the extent deducted in
determining net income, (i) interest
expense, (ii) depreciation expense,
(iii) amortization expense,
(iv) federal, state and local income
taxes and (v) all other non cash
charges minus (C) any non-cash income
or non-cash gains to the extent added
in determining such net income;
"Energy Service Agreements" means the Northeast Energy Service
Agreement and the Southwest Energy
Service Agreement, or either of them;
"Environmental Affiliate" means any person or entity, the
liability of which for Environmental
Claims any Security Party or
Subsidiary of any Security Party may
have assumed by contract or operation
of law;
"Environmental Approvals" has the meaning ascribed thereto in
Section 2(v);
"Environmental Claim(s)" has the meaning ascribed thereto in
Section 2(v);
"Environmental Laws" has the meaning ascribed thereto in
Section 2(v);
"Equipment Liens" has the meaning ascribed thereto in
Section 3.1(a);
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended;
"ERISA Affiliate" means a trade or business (whether or
not incorporated) which is under
common control with the Borrower
within the meaning of Sections 414(b),
(c), (m) or (o) of the Code;
9
<PAGE>
"Events of Default" means any of the events set out in
Section 9.1;
"Exchange Act" means the Securities and Exchange Act
of 1934, as amended;
"Existing Project(s)" means the Newark Project, the Parlin
Project, the Grays Ferry Project and
the Philadelphia Cogeneration Project,
or any of them;
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each
day during such period to the weighted
average of the rates on overnight
Federal funds transactions with
members of the Federal Reserve System
arranged by Federal funds brokers, as
published for such day (or, if such
day is not a Banking Day, for the next
preceding Banking Day) by the Federal
Reserve Bank of New York, or, if such
rate is not so published for any day
which is a Banking Day, the average of
the quotations for such day on such
transactions received by the Agent
from three (3) Federal funds brokers
of recognized standing selected by the
Agent;
"FPA" means the Federal Power Act, as
amended from time to time, and all
rules and regulations promulgated
thereunder;
"Future Project(s)" means (a) the Millennium Project, and
(b) any other electric generation
project(s) (other than the Existing
Projects), including without
limitation cogeneration projects,
hereafter owned and operated, in whole
or in part, by the Borrower, any
Subsidiary of the Borrower, or any
Project Entity;
10
<PAGE>
"GAAP" has the meaning ascribed thereto in
Section 1.3;
"General Security
Agreement(s)" means the general security agreements
in respect of (i) all of the personal
property of Philadelphia Cogeneration,
(ii) equipment leased or subleased by
OESC to Philadelphia Cogeneration and
(iii) equipment leased or subleased by
the Borrower to OESC and in turn
subleased by OESC to Philadelphia
Cogeneration as referenced in clause
(ii) above, to be executed by each of
the Borrower, Philadelphia
Cogeneration and OESC in favor of the
Security Trustee pursuant to Section
4.1(d) and substantially in the form
set out in Exhibit E;
"Good Faith Contest" means the contest of an item if the
item is diligently contested in good
faith by appropriate proceedings
timely instituted and (i) adequate
cash reserves (or, at the applicable
Borrower Entity's option, bonds or
other security reasonably satisfactory
to Agent) are established with respect
to the contested item, and (ii) during
the period of such contest, the
enforcement of any contested item is
effectively stayed;
"Governmental Approval" means all authorizations, consents,
approvals, registrations, waivers,
exemptions, variances, franchises,
permissions, permits and licenses of,
and filings and declarations with, and
rulings by any Governmental Authority
including, without limitation, all
ordinances, and resolutions of
Governmental Authorities relating to
each Existing Project;
11
<PAGE>
"Governmental Authority" means the United States Federal
Government, any state or other
political subdivision thereof,
including any entity exercising
executive, legislative, judicial,
regulatory or administrative functions
of or pertaining to such government;
"Grays Ferry" means Grays Ferry Cogeneration
Partnership, a Pennsylvania general
partnership;
"Grays Ferry Construction means, collectively, (a) the Agreement
Contract" for Engineering, Procurement and
Construction Services dated as of
August 31, 1995 (the "Original
Construction Contract"), (b) Amendment
No. One to the Original Construction
Contract dated as of October 16, 1995,
(c) Amendment No. Two to the Original
Construction Contract dated as of
October 23, 1995, (d) Amendment
No. Three to the Original Construction
Contract dated as of December 31,
1995, (e) Amendment No. Four to the
Original Construction Contract dated
February 29, 1996, (f) the
Westinghouse Letter re Options under
the Original Construction Contract
dated as of March 1, 1996 (g) the
Letter Agreement re Project
Investigation dated as of March 1,
1996 and (h) the Letter Agreement re
Release, dated November 11, 1995, each
made between Grays Ferry and
Westinghouse;
"Grays Ferry Construction means that certain letter agreement
dated
Management Agreement" as of February 20, 1996 among Grays
Ferry and NRG.
12
<PAGE>
"Grays Ferry Dock Facility means the Dock Facility Service
Agreement
Service Agreement" dated as of November 11, 1991, among
PTDC, Trigen and Grays Ferry;
"Grays Ferry Gas Contract(s)" means the Grays Ferry Gas Sales
Agreement, the Grays Ferry Gas
Services Agreements, the Grays Ferry
Gas Transportation Agreements, the
Aquila Tracking Account Agreement and
any other material contracts relating
to the supply and transportation of
natural gas fuel to the Grays Ferry
Project;
"Grays Ferry Gas Sales means the Gas Sales Agreement dated as
Agreement" of November 9, 1995 among Aquila,
UtiliCorp and Grays Ferry, as amended
by Amendment No. 1 dated March 1,
1996;
"Grays Ferry Gas Services means, collectively, the
Agreement(s)" PAID Service Contract, the PAID
Service Agreement and the PAID
Assignment Agreement, each closing
certificate, document or instrument
delivered by the City of Philadelphia
or PAID relating to the foregoing
agreements and the Trigen Gas Services
Agreement;
"Grays Ferry Gas Transportation means, collectively, (a)
Agreements" the Capacity Release Umbrella
Agreement (Contract No. 900285) dated
as of February 16, 1996 between Grays
Ferry and TETCO (including Addenda
Numbers 882232 through 882248),
(b) the Service Agreement for Rate
Schedule FT-1 (Contract No. 800516),
dated February 29, 1996 between Grays
Ferry and TETCO, (c) the Service
Agreement for Rate Schedule FT-1
(Contract No. 800514) dated
February 29, 1996, between TETCO and
13
<PAGE>
PAID, (d) the Service Agreement for
Rate Schedule FT-1 (Contract
No. 800515), dated as of February 29,
1996 between TETCO and PAID and
(e) the TETCO Letter Agreement;
"Grays Ferry Ground Lease" means, collectively, the Grays Ferry
Lease and the Grays Ferry Master
Lease;
"Grays Ferry Lease" means the Amended and Restated Site
Lease dated September 17, 1993 between
Trigen and Grays Ferry;
"Grays Ferry Management means the Project Management
Agreement" Services Letter Agreement dated
February 20, 1996 among Adwin
Schuylkill, O'Brien Schuylkill and
Trigen;
"Grays Ferry Master Lease" means the Schuylkill Station Lease
Agreement dated January 30, 1987
between PECO and Trigen;
"Grays Ferry O&M Agreement" means the Amended and Restated Project
Services and Development Agreement
dated as of September 17, 1993 between
Grays Ferry and the Grays Ferry
Operator;
"Grays Ferry Operator" means Philadelphia United Power
Corporation, a Pennsylvania
corporation, or such other Person as
shall be approved by the Majority
Lenders to operate the Grays Ferry
Project;
"Grays Ferry Partnership means the Amended and
"Agreement" Restated Partnership Agreement of
Grays Ferry, dated March 1, 1996 among
O'Brien Schuylkill, Adwin Schuylkill
and Trigen-Schuylkill;
14
<PAGE>
"Grays Ferry Power Purchase means, collectively, (a) the
Agreement" Agreement for Purchase of Electric
Output (Phase I) dated as of July 28,
1992, (b) the Agreement for Purchase
of Electric Output (Phase II) dated as
of July 28, 1992, (c) the Contingent
Capacity Purchase Addenda (Phase I),
dated as of September 17, 1993,
(d) the Contingent Capacity Purchase
Addenda (Phase II), dated as of
September 17, 1993, (e) Amendment
Agreement to Power Purchase
Agreements, dated January 31, 1994,
each between Grays Ferry and PECO and
(f) the Activation Notice, dated as of
March 30, 1995;
"Grays Ferry Project" means the approximately 150 MW gross
gas and oil fired cogeneration
facility to be constructed by
Westinghouse under the Grays Ferry
Construction Contract, including the
related electric power transmission,
fuel supply and fuel transportation
facilities, fuel storage facilities,
fuel contracts and other facilities,
services or goods that are ancillary,
incidental, necessary or reasonably
related to the marketing, management,
servicing, ownership or operation of
the foregoing, or otherwise, as well
as the applicable Project Agreements
and other contractual arrangements
with customers, suppliers and
contractors or any infrastructure
facilities related thereto;
"Grays Ferry Project
Agreements" means the Grays Ferry Construction
Contract, the Grays Ferry Gas
Contracts, the Grays Ferry Steam Sales
Agreement, the Grays Ferry Power
Purchase Agreement, the Grays Ferry
O&M Agreement, the Grays Ferry Lease,
the
15
<PAGE>
Grays Ferry Master Lease, the Grays
Ferry Steam Venture Agreement, the
Grays Ferry Dock Facility Service
Agreement, the Grays Ferry Partnership
Agreement, the Grays Ferry Settlement
Agreement, the O'Brien Assignment
Agreements (Grays Ferry), the Grays
Ferry Relocation Agreement, the Grays
Ferry Management Agreement, and the
Grays Ferry Construction Management
Agreement;
"Grays Ferry Relocation means the Relocation
Agreement" Agreement dated as of March 1, 1996
between PECO and Grays Ferry;
"Grays Ferry Settlement means the Settlement
Agreement" Agreement and Mutual Release, dated as
of November 16, 1995, among Canadian
Imperial Bank of Commerce, Chadbourne
& Parke, Grays Ferry and Adwin;
"Grays Ferry Steam means, collectively, (a) the Amended
and
Sales Agreement" Restated Steam Purchase Agreement
dated as of September 17, 1993 among
Trigen, Adwin, the Borrower and Grays
Ferry and (b) the Letter Agreement
Regarding Steam Pricing dated March 1,
1996 between Trigen and Grays Ferry;
"Grays Ferry Steam means, collectively, (a) the
Venture Agreement" Amended and Restated Steam Venture
Agreement dated September 17, 1993
among Trigen, Operator, Adwin and the
Borrower, as amended and (b) the
Agreement relating to Amended and
Restated Steam Venture Agreement dated
September 29, 1993 among Trigen,
Operator, Adwin, the Borrower and
Grays Ferry;
16
<PAGE>
"Ground Lease" means the Newark Ground Lease, the
Parlin Ground Lease, the Philadelphia
Cogeneration Leases or the Grays Ferry
Ground Lease;
"Guarantee" means the guarantee in favor of the
Security Trustee to be executed by
Philadelphia Cogeneration in respect
of the obligations of the Borrower
under this Agreement and under the
Note pursuant to Sections 4.l(d)
substantially in the form set out in
Exhibit B;
"Indebtedness" means, with respect to any Person at
any date of determination (without
duplication), (i) all indebtedness of
such Person for borrowed money,
(ii) all obligations of such Person
evidenced by bonds, debentures, notes
or other similar instruments,
(iii) all obligations of such Person
in respect of letters of credit or
other similar instruments (including
reimbursement obligations with respect
thereto), (iv) all obligations of such
Person to pay the deferred and unpaid
purchase price of property or
services, which purchase price is due
more than six months after the date of
placing such property in service or
taking delivery thereof or the
completion of such services, except
trade payables, (v) all obligations on
account of principal of such Person as
lessee under capitalized leases,
(vi) all indebtedness of other Persons
secured by a lien on any asset of such
Person, whether or not such
indebtedness is assumed by such
Person; provided that the amount of
such indebtedness shall be the lesser
of (a) the fair market value of such
asset at such date of determination
and (b) the amount of such
indebtedness, and (vii) all
17
<PAGE>
indebtedness of other Persons
guaranteed by such Person to the
extent such indebtedness is guaranteed
by such Person. The amount of
Indebtedness of any Person at any date
shall be the outstanding balance at
such date of all unconditional
obligations as described above and,
with respect to contingent
obligations, the maximum liability
upon the occurrence of the contingency
giving rise to the obligation,
provided that the amount outstanding
at any time of any indebtedness issued
with original issue discount is the
face amount of such indebtedness less
the remaining unamortized portion of
the original issue discount of such
indebtedness at such time as
determined in conformity with GAAP;
and provided further that Indebtedness
shall not include any liability for
current or deferred federal, state,
local or other taxes, or any trade
payables; provided, however, in the
case of the Borrower, "Indebtedness"
shall not include (i) any Lien granted
by the Borrower on any equity interest
of Borrower in any Subsidiary of
Borrower as security for any debt of
such Subsidiary in respect of any
Future Project or any debt with
respect to such Subsidiary's project
or project owner in respect of any
Future Project, or (ii) subject to the
limitations set forth in
Section 10.1(B)(iii), any equity
funding commitment made or guaranteed
by Borrower, regardless of whether
such equity funding commitment is
assigned or otherwise pledged as
security for any debt of any
Subsidiary in respect of any Future
Project or any debt with respect to
such Subsidiary's project or project
owner in respect of any Future
Project.
18
<PAGE>
For purposes of calculating the amount
of any Indebtedness hereunder, there
shall be no double-counting of direct
obligations, guarantees and
reimbursement obligations for letters
of credit;
"Initial Drawdown Date" means the Drawdown Date, being not
later than December 19, 1997, upon
which the Borrower has requested that
the first Advance be made available to
the Borrower as provided in Section 3;
"Interest Notice" means a notice to the Agent specifying
the duration of any relevant Interest
Period;
"Interest Period" means with respect to any LIBOR Rate
Advance, each period commencing on the
date such LIBOR Rate Advance is made
or converted from a Base Rate Advance
or the last day of the next preceding
Interest Period with respect to such
LIBOR Rate Advance and ending on the
same day in the first, second, third
or sixth (as selected by the Borrower)
calendar month thereafter, except that
each such Interest Period which
commences on the last Banking Day of a
calendar month (or on any day for
which there is no numerically
corresponding day in the appropriate
subsequent calendar month) shall end
on the last Banking Day of the
appropriate subsequent calendar month;
Notwithstanding the foregoing, (i) no
Interest Period may extend beyond the
Maturity Date; (ii) each Interest
Period which would otherwise end on a
day which is not a Banking Day shall
end on the next succeeding Banking Day
(or, if
19
<PAGE>
such next succeeding Banking Day falls
in the next succeeding calendar month,
on the next preceding Banking Day);
(iii) each Interest Period which would
otherwise commence before and end
after the Maturity Date shall end on
the Maturity Date; and (iv)
notwithstanding clauses (i) and (iii)
above, if any Interest Period would
have a duration of less than one
month, such LIBOR Rate Advances shall
be Base Rate Advances during such
period;
"Interest Rate Agreements" means any interest rate protection
agreement, interest rate future
agreement, interest rate option
agreement, interest rate swap
agreement, interest rate cap
agreement, interest rate collar
agreement, interest rate hedge
agreement or other similar agreement
or arrangement designed to protect the
Borrower or any of its Subsidiaries
against fluctuations in interest rates
to or under which the Borrower or any
of its Subsidiaries is a party or a
beneficiary on the date of this
Agreement or becomes a party or a
beneficiary hereafter;
"Investment" in any Person means (i) any loan,
extension of credit or advance to such
Person, (ii) any purchase or other
acquisition of any capital stock,
warrants, rights, options, obligations
or other securities of such Person, or
(iii) any capital contribution to such
Person;
"JCP&L" means Jersey Central Power & Light
Company, a utility corporation
organized and existing under the laws
of the State of New Jersey, and its
successors and permitted assigns;
20
<PAGE>
"Letter of Credit" means a letter of credit in favor of
the Security Trustee, issued from time
to time pursuant to Section
10.1(B)(ix) by a financial institution
reasonably acceptable to the Agent, in
an amount equal to six (6) months' of
the Borrower's Debt Service and in
substantially the form of set out in
Exhibit J;
"LIBOR Rate" means, with respect to any Interest
Period for any LIBOR Rate Advance, the
rate per annum determined by the Agent
to be equal to the quotient (rounded
upwards, if necessary, to the next
higher 1/16 of 1%) of (y) (i) the rate
of interest for deposits in Dollars
for a period equal to the number of
days in such Interest Period which
appears on Page "LIBO" on the Reuters
monthly money rate service as of
11:00 A.M., London time, on the day
that is two London Banking Days prior
to the first day of such Interest
Period, or (ii) if such rate does not
appear on the Reuters Page "LIBO" at
such time, the rate per annum at which
deposits in Dollars are offered to the
Agent in immediately available funds
at its LIBOR lending office in an
amount comparable to the principal
amount of such LIBOR Rate Advance for
a period equal to such Interest Period
at approximately 10:00 A.M., New York
City time, on the date two Banking
Days before the first day of such
Interest Period, divided by (z) a
number equal to 1.00 minus the LIBOR
Rate Reserve Percentage;
"LIBOR Rate Advance" means an Advance bearing interest
based on the LIBOR Rate;
"LIBOR Rate Reserve means, for any day, the
21
<PAGE>
maximum percentage
Percentage" (expressed as a decimal) specified
from time to time by the Board of
Governors of the Federal Reserve
System (or any successor) for
determining the maximum reserve
requirements (including, but not
limited to, supplemental, marginal and
emergency reserves) with respect to
eurocurrency funding (currently
referred to as "Eurocurrency
Liabilities") of a member bank in such
System. The LIBOR Rate shall be
adjusted automatically with respect to
any LIBOR Rate Advance outstanding on
the effective date of any change in
the LIBOR Rate Reserve Percentage, as
of such effective date;
"Lien" means any mortgage, deed of trust,
security interest, pledge,
hypothecation, escrow arrangement,
assignment for security, charge,
encumbrance, lien (statutory or other)
or other preferential arrangement in
the nature of a security interest,
including, without limitation, any
conditional sale or other title
retention agreement, any financing
lease having substantially the same
economic effect as any such agreement,
and the filing of any statement under
the Uniform Commercial Code or
comparable law of any jurisdiction
evidencing a lien;
"Majority Lenders" means any Lender or Lenders whose
Commitments exceed one-half of the
total Commitments, or, if the
Commitments have terminated, any
Lender or Lenders holding in the
aggregate in excess of one-half of the
Credit Facility Balance;
22
<PAGE>
"Margin" means an interest rate margin which
will vary based upon the Consolidated
Debt Service Coverage Ratio as set
forth in Schedule 2;
"Material Adverse Effect" means a material adverse effect on
(i) the ability of any Security Party
to perform its obligations to
Arranger, the Agent, the Security
Trustee or the Lenders under this
Agreement, the Note or any of the
Security Documents or (ii) the
business, property, assets,
liabilities, operations or condition
(financial or otherwise) of the
Borrower and the other Security
Parties taken as a whole;
"Material Governmental
Approval" means all Governmental Approvals which
are required under applicable law in
connection with the operation,
maintenance, ownership or leasing of
the Projects other than such
Governmental Approvals as are
immaterial in nature;
"Materials of Environmental has the meaning ascribed
Concern" thereto in Section 2(v);
"Maturity Date" means that date which is three years
from the Initial Drawdown Date or if
such day is not a Banking Day, the
next following Banking Day unless such
next following Banking Day falls in
the following month, in which case the
Maturity Date shall be the immediately
preceding Banking Day;
"Millennium Project" means the approximately 117 MW gas-
fired co-generation facility located
at the premises of Millennium Petro
Chemicals, Inc. in Morris, Illinois,
including the related electric power
transmission, fuel supply and fuel
transportation facilities,
23
<PAGE>
fuel storage facilities, fuel
contracts and other facilities,
services or goods that are ancillary,
incidental, necessary or reasonably
related to the marketing, management,
servicing, ownership or operation of
the foregoing, or otherwise, as well
as the applicable project agreements
and other contractual arrangements
with customers, suppliers and
contractors or any infrastructure
facilities related thereto;
"Mortgage" means the leasehold mortgage in
respect of the Philadelphia
Cogeneration Leases in favor of the
Security Trustee executed by
Philadelphia Cogeneration pursuant to
Section 4.1(d) substantially in the
form of Exhibit K;
"Newark" means NRG Generating (Newark)
Cogeneration Inc., a Delaware
corporation;
"Newark Consents" means, collectively, the consents with
respect to each Newark Project
Agreement assigned to Credit Suisse
First Boston;
"Newark Ground Lease" means the Ground Lease, dated July 18,
1988, as amended pursuant to an
agreement dated July 20, 1988 and the
Stipulation of Settlement, as the same
may be amended, modified or
supplemented from time to time;
"Newark Group" means Newark Group Industries, Inc., a
New Jersey corporation f/k/a Newark
Boxboard Company, and its successors
and permitted assigns;
"Newark Mortgage" means the Mortgage, dated as of May
17, 1996, between Newark and Credit
Suisse
24
<PAGE>
First Boston, as the same may be
amended, modified, supplemented or re-
recorded from time to time;
"Newark Operations and
Maintenance Agreement" means the Operating and Maintenance
Agreement, dated as of November 8,
1996, by and between Newark and POI,
as such agreement may be amended,
modified or supplemented from time to
time;
"Newark Pledge Agreement" means the Stock Pledge Agreement with
respect to the capital stock of Newark
dated as of May 17, 1996 by Borrower
in favor of Credit Suisse First
Boston;
"Newark Power Purchase means the Agreement for
Agreement" Purchase of Electric Power, dated
March 10, 1986, between O'Brien Energy
Systems, Inc. and JCP&L, as amended by
Letter Agreement, dated June 2, 1986,
as further amended by the Second
Amendment to Power Purchase Agreement,
dated as of March 1, 1988, as assigned
by O'Brien Energy Systems, Inc. to
O'Brien (Newark) Cogeneration, Inc.
pursuant to Assignment Agreement,
dated as of July 22, 1988, as further
amended by the Third Amendment to
Power Purchase Agreement executed
April 30, 1996, as the same may be
further amended, modified or
supplemented from time to time;
"Newark Project" means the 52 MW power plant located in
Newark, New Jersey, including the
related electric power transmission,
fuel supply and fuel transportation
facilities, fuel storage facilities,
fuel contracts and other facilities,
services or goods that are ancillary,
incidental, necessary or
25
<PAGE>
reasonably related to the marketing,
management, servicing, ownership or
operation of the foregoing, or
otherwise, as well as the applicable
Project Agreements and other
contractual arrangements with
customers, suppliers and contractors
or any infrastructure facilities
related thereto;
"Newark Project Agreements" means the Newark Power Purchase
Agreement, Newark Ground Lease, Newark
Steam Agreement, Newark Transmission
Agreement, Newark Operations and
Maintenance Agreement, the Operating
Guaranty, and the Newark Consents;
"Newark Steam Agreement" means the Steam Purchase Agreement,
dated October 3, 1986, between O'Brien
Cogeneration IV, Inc. and Newark
Group, as amended by Amendment to
Steam Purchase Agreement between
O'Brien Cogeneration IV, Inc. and
Newark Group, executed March 8, 1988,
as further amended by Amendment to
Steam Purchase Agreement between
O'Brien (Newark) Cogeneration, Inc.
(formerly known as O'Brien
Cogeneration IV, Inc.) and Newark
Group, as the same may be further
amended, modified or supplemented from
time to time;
"Newark Transmission
Agreement" means the Transmission Service and
Interconnection Agreement, dated
November 17, 1987, between O'Brien
Energy Systems, Inc. and PSE&G, as
assigned by O'Brien Energy Systems,
Inc. to O'Brien (Newark) Cogeneration,
Inc. (formerly known as O'Brien
Cogeneration IV, Inc.) and Newark
26
<PAGE>
Group, as the same may be amended,
modified or supplemented from time to
time;
"Northeast Agreements" means the Northeast Energy Service
Agreement, the Northeast Master Lease,
the Northeast Lease, the Northeast
Collection Facilities Lease, the
Northeast Collection Facilities
Sublease Agreement, the Northeast Gas
Supply Agreement, the Northeast Gas
Supply Contract and the Northeast
Service Contract;
"Northeast Collection means the Collection Facilities
Facilities Lease" Lease dated as of June 30, 1992 made
between the City of Philadelphia and
the Philadelphia Municipal Authority
in respect of the Northeast Facility;
"Northeast Collection means the Collection Facilities
Facilities Sublease Sublease Agreement dated as of
Agreement" June 30, 1992 made between the
Philadelphia Municipal Authority and
Philadelphia Biogas in respect of the
Northeast Facility;
"Northeast Demised Premises" means the certain parcels of land
together with improvements thereon
erected subject of the Northeast
Lease;
"Northeast Energy Service means that certain energy
Agreement" service agreement dated June 30, 1992
by and between Philadelphia Municipal
Authority and Philadelphia
Cogeneration in respect of the
Northeast Facility;
"Northeast Facility" means the cogeneration facility
operated by Philadelphia Cogeneration
on the Northeast Demised Premises;
"Northeast Gas Supply means the Gas Supply Agreement
27
<PAGE>
Agreement" dated as of June 30, 1992 between
Philadelphia Biogas and the
Philadelphia Municipal Authority in
respect of the Northeast Facility;
"Northeast Gas Supply means the Gas Supply Contract
Contract" dated as of June 30, 1992 between the
City of Philadelphia and the
Philadelphia Municipal Authority in
respect of the Northeast Facility;
"Northeast Lease" means that certain sublease dated
June 30, 1992 by and between
Philadelphia Municipal Authority, as
lessor, and Philadelphia Cogeneration,
as lessee, in respect of the Northeast
Demised Premises;
"Northeast Master Lease" means the Lease dated June 30, 1992
between the City of Philadelphia and
the Philadelphia Municipal Authority
in respect of the Northeast Facility;
"Northeast Service Contract" means the Service Contract made as of
June 30, 1992 between the City of
Philadelphia and the Philadelphia
Municipal Authority in respect of the
Northeast Facility;
"Note" means that certain promissory note to
be executed by the Borrower to the
order of the Security Trustee pursuant
to Section 4.1(c), to evidence the
Advances substantially in the form set
out Exhibit A;
"NRG Energy" means NRG Energy, Inc., a Delaware
corporation;
"OESC" means O'Brien Energy Services Company,
a Delaware corporation;
28
<PAGE>
"OESC Financing Program" means the annual, or from time to
time, asset-based debt financing
required for the acquisition of assets
for the OESC Rental Fleet;
"OESC Rental Fleet" means the engine-generator sets
employed by OESC and leased or rented
to customers from which revenues are
derived;
"O'Brien Assignment Agreements" means, collectively, (a) the
(Grays Ferry) Agreement of Assignment, Assumption,
Consent and Release dated as of
March 1, 1996, among the Borrower,
Adwin, Grays Ferry, PUPCO, and Trigen
and (b) the O'Brien Signature
Agreement dated March 1, 1996, among
the Borrower, Adwin, Grays Ferry,
PTDC, Adwin Schuylkill, O'Brien
Schuylkill, PUPCO and Trigen;
"O'Brien Schuylkill" means O'Brien (Schuylkill)
Cogeneration, Inc., a Delaware
corporation;
"Operating Guaranty" means the Corporate Guaranty dated as
of March 21, 1997, effective as of
January 1, 1997, among NRG Energy,
Newark, Parlin and POI;
"PAID" means the Philadelphia Authority for
Industrial Development, a public
instrumentality of the City of
Philadelphia;
"PAID Assignment Agreement" means, collectively, (a) the
Assignment of Service Agreement dated
as of March 1, 1996 by PAID in favor
of Grays Ferry, and (b) the Assignment
of FT-1 Agreements dated as of
March 1, 1996 by PAID in favor of
Grays Ferry;
29
<PAGE>
"PAID Service Agreement" means the Service Agreement dated as
of January 28, 1996 between PAID and
the City of Philadelphia;
"PAID Service Contract" means the Service Contract dated as of
January 28, 1996 between PAID and
Grays Ferry;
"Parlin" means NRG Generating (Parlin)
Cogeneration Inc., a Delaware
corporation;
"Parlin Consents" means, collectively, the consents with
respect to each Parlin Project
Agreement assigned to Credit Suisse
First Boston (other than the DuPont
Power Purchase Agreement);
"Parlin Ground Lease" means the Ground Lease, dated January
2, 1986, between O'Brien (Parlin)
Cogeneration, Inc. and DuPont, as the
same may be amended, modified or
supplemented from time to time;
"Parlin Mortgage" means the Mortgage, dated as of June
28, 1996, between Parlin and Credit
Suisse First Boston, as the same may
be amended, modified, supplemented or
re-recorded from time to time;
"Parlin Operations and
Maintenance Agreement" means the Operating and Maintenance
Agreement dated as of December 31,
1996, by and between Parlin and POI,
as such agreement may be amended,
modified or supplemented from time to
time;
"Parlin Pledge Agreement" means the Stock Pledge Agreement with
respect to the capital stock of Parlin
dated as of June 28, 1996 by Borrower
in favor of Credit Suisse First
Boston;
30
<PAGE>
"Parlin Power Purchase
Agreement" means the Amended and Restated
Agreement for Purchase and Sale of
Electric Power between Parlin and
JCP&L executed April 30, 1996, as the
same may be further amended, modified
or supplemented from time to time;
"Parlin Project" means the approximately 122 MW power
plant located in Sayerville, New
Jersey, including the related electric
power transmission, fuel supply and
fuel transportation facilities, fuel
storage facilities, fuel contracts and
other facilities, services or goods
that are ancillary, incidental,
necessary or reasonably related to the
marketing, management, servicing,
ownership or operation of the
foregoing, as well as the applicable
Project Agreements and other
contractual arrangements with
customers, suppliers and contractors
or any infrastructure facilities
related thereto;
"Parlin Project Agreements" means the Parlin Power Purchase
Agreement, Parlin Ground Lease, Parlin
Steam Agreement, Parlin Operations and
Maintenance Agreement, Parlin Non
Disturbance Agreement, Wholesale Power
Purchase Agreement, DuPont Power
Purchase Agreement, Operating
Guaranty, and the Parlin Consents;
"Parlin Steam Agreement" means the Steam Purchase Contract,
dated December 8, 1996, between DuPont
and O'Brien Energy Systems, Inc., as
amended by Agreement between O'Brien
Energy Systems, Inc. and DuPont,
Amendment 1 to Steam Purchase
Agreement, dated January 12, 1988, as
amended by Letter, dated July 25,
1988, from G.R. Carson of DuPont to
31
<PAGE>
Robert Shinn of O'Brien Energy
Systems, Inc., as amended by Agreement
between O'Brien Energy Systems, Inc.
and DuPont, Amendment No. 3 to Steam
Purchase Agreement, executed December
12, 1988, as amended by Amendment
Number Four to Steam Purchase Contract
between O'Brien Energy Systems, Inc.
and DuPont (Parlin Cogeneration
Facility), executed July 14, 1989 and
July 26, 1989, and amended by
Amendment No. 5 to Steam Purchase
Agreement, executed January 22, 1993
and February 16, 1993, as assigned by
O'Brien Energy Systems, Inc. to
O'Brien (Parlin) Cogeneration, Inc.
and as further amended by Amendment
No. 6 to Steam Purchase Agreement
executed November 15, 1994, as the
same may be further amended, modified
or supplemented from time to time;
"PECO" means PECO Energy Company, formally
known as Philadelphia Electric
Company, a Pennsylvania corporation;
"Permitted Investments" means any of the following:
(a) Investments in commercial paper
maturing in 270 days or less from the
date of issuance which, (i) are issued
by any commercial bank of recognized
standing (or its parent corporation)
under the laws of the United States of
America, any state thereof or any
foreign jurisdiction, having capital
and surplus in excess of $300,000,000,
or (ii) at the time of acquisition, is
rated one of the two highest ratings
by Standard &Poor's Ratings Services
or by Moody's Investors Services, Inc.
or any substantially similar
commercial paper or short-term ratings
32
<PAGE>
by any other nationally recognized
credit rating agency domiciled in the
United States of America or the United
Kingdom of similar standing (a
"Substitute Rating Agency");
(b) Investments in obligations issued
by or guaranteed by the United States
of America or any agency or
instrumentality of the United States
of America;
(c) Investments in certificates of
deposit, time deposits or bankers'
acceptances issued by a bank or trust
company organized under the laws of
the United States of America or any
State thereof, having capital, surplus
and undivided profits aggregating at
least $300,000,000 or having a rating
of A or better from both S&P and
Moody's (if only one of S&P and
Moody's has issued a rating, then from
S&P or Moody's, as the case may be, or
if neither S&P or Moody's has issued a
rating, then from a nationally
recognized rating agency acceptable to
Agent);
(d) Investments in indebtedness of any
governmental body of the United States
of America or any State or political
subdivision thereof, which
indebtedness is at all times accorded
one of the two highest ratings by S&P,
Moody's, or a Substitute Rating Agency
maturing not later than three years
from the date of acquisition thereof
(or, if maturing more than three years
after the date of acquisition, which
is subject to a put at par by the
holder thereof on a weekly or more
frequent basis);
33
<PAGE>
(e) Investments in money market
investment programs which are
classified as a current asset in
accordance with GAAP and which are
administered by reputable financial
institutions having capital, surplus
and undivided profits of at least
$300,000,000 and which are registered
under the Investment Company Act of
1940; and
(f) Investments in repurchase
obligations, with a term of not more
than thirty days for underlying
securities of the types described in
clauses (a) and (b) above, entered
into with any bank meeting the
qualifications specified in clause (a)
above;
"Permitted Liens" means any Liens that are:
(a) Liens for taxes, or other
governmental levies and assessments
that (i) do not arise under ERISA or
Environmental Laws and (ii) are not
yet due or which are subject to a Good
Faith Contest;
(b) carriers', warehousemen's,
mechanics', materialmen's, repairmen's
or other like Liens arising in the
ordinary course of business which are
not past due for a period of more than
90 days or which are subject to a Good
Faith Contest;
(c) pledges or deposits in connection
with workmen's compensation,
unemployment insurance and other
social security legislation;
(d) deposits to secure the performance
of bids, trade contracts (other than
for borrowed money), leases, statutory
34
<PAGE>
obligations, surety and appeal bonds,
performance bonds and other
obligations of a like nature incurred
in the ordinary course of business;
(e) easements, rights-of-way,
restrictions (including landmarking
and zoning restrictions), royalties,
leasehold and fee interest covenants
and other similar encumbrances
incurred or imposed in the ordinary
course of business which are not of
the nature of a Lien for security
purposes and which do not in any case
materially detract from the value of
the property subject thereto or
interfere with the ordinary conduct of
the business of any Security Party;
(f) Liens arising under the Security
Documents;
(g) Liens for purchase money
obligations, provided that any such
Lien encumbers only the assets so
purchased;
(h) Liens arising from legal
proceedings, so long as such
proceedings are being contested in
Good Faith Contest and so long as
execution is stayed on all judgments
resulting from any such proceedings;
(i) Liens referred to in the title
insurance policies delivered in
connection with the Credit Agreements
described in Section
10.1B(iii)(b)(vi);
(j) Liens securing Indebtedness
permitted under Section 10.1B(iii)(b),
including without limitation pledges
by the Borrower of its equity interest
in any
35
<PAGE>
Future Projects as security for such
permitted Indebtedness; and
(k) the Lien in favor of NRG on the
shares of stock of O'Brien Schuylkill
owned by the Borrower pursuant to that
certain NRG Subordinated Stock Pledge
Agreement dated as of March 1, 1996
among NRG Energy, the Borrower,
O'Brien Schuylkill and The Chase
Manhattan Bank;
"Person" means any individual, sole
proprietorship, corporation,
partnership (general or limited),
limited liability company, business
trust, bank, trust company, joint
venture, association, joint stock
company, trust or other unincorporated
organization, whether or not a legal
entity, or any government or agency or
political subdivision thereof;
"Philadelphia Biogas" means Philadelphia Biogas Supply,
Inc., a Delaware corporation;
"Philadelphia Cogeneration" means O'Brien (Philadelphia)
Cogeneration Inc., a Delaware
corporation;
"Philadelphia Cogeneration means the Southwest Lease
Leases" and the Northeast Lease, or either of
them;
"Philadelphia Cogeneration means the Operation & Maintenance
Operation & Maintenance Contract dated as of May 15, 1993
Contract" between Philadelphia Cogeneration and
OESC in respect of the Northeast
Facility and the Southwest Facility;
"Philadelphia Cogeneration
Project" means the Northeast Facility and the
36
<PAGE>
Southwest Facility;
"Philadelphia Cogeneration means the Southwest Agreements
Project Agreements" and the Northeast Agreements;
"Philadelphia Municipal means The Philadelphia
Authority" Municipal Authority, a body corporate
and politic organized and existing
under the laws of the Commonwealth of
Pennsylvania;
"Plan" means any employee benefit plan
covered by Title IV of ERISA;
"POI" means Power Operations, Inc., a
Delaware corporation;
"Prepayment Amount" has the meaning ascribed thereto in
Section 9.4;
"Project Agreement(s)" means the Grays Ferry Project
Agreements, the Newark Project
Agreements, the Parlin Project
Agreements, the Philadelphia
Cogeneration Project Agreements and
any other agreements, contracts or
leases of any kind whatsoever pursuant
to which the Borrower is entitled
directly, indirectly, by assignment or
otherwise to receive payments in
respect of any Existing Project, or
any of them;
"Project Cash Flow" means any and all moneys or cash
distributions made or permitted to be
made by the Project Entities to the
Borrower with respect to the Existing
Projects (but excluding amounts on
deposit (i) in the Operating Account
(as such term is defined in Section
7.5 of that certain Credit Agreement,
dated March 1, 1996, among Grays
Ferry, the financial
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institutions listed on Exhibit H
thereto and The Chase Manhattan Bank)
prior to the distribution thereof in
accordance with the terms of such
Credit Agreement, and (ii) in the
Project Account (as such term is
defined in Section 5.1(b) of that
certain Credit Agreement, dated as of
May 17, 1996, among Newark, Parlin,
Credit Suisse, Greenwich Funding
Corporation and any Purchasing Lender
and Credit Suisse) prior to the
distribution thereof in accordance
with the terms of such Credit
Agreement;
"Project Entity(ies)" means Grays Ferry, Newark, Parlin,
Philadelphia Cogeneration and any
other Affiliate of the Borrower owning
any Existing Project;
"PSE&G" means Public Service Electric & Gas
Company, a utility corporation
organized and existing under the laws
of the State of New Jersey, and its
successors and assigns;
"PTDC" means Philadelphia Thermal Development
Corporation, a Pennsylvania
corporation;
"PUHCA" means the Public Utility Holding
Company Act of 1935, as amended from
time to time, and all rules and
regulations promulgated thereunder;
"PUPCO" means Philadelphia United Power
Corporation, a Pennsylvania
corporation.
"PURPA" means the Public Utility Regulatory
Policies Act of 1978, as amended from
time to time, and all rules and
regulations adopted thereunder;
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"QF Certificate" means, with respect to each Project
Entity which is a Qualifying
Cogeneration Facility, the
certification or certifications as to
the qualifying status of such Project
Entity, as the same are more
particularly described in
Section 2(q);
"Qualifying Cogeneration
Facility" has the meaning specified for such
term in PURPA;
"Reduction Dates" means the Scheduled Reduction Dates
and the Voluntary Reduction Dates, or
any of them;
"Reference Bank" means The Chase Manhattan Bank;
"Scheduled Reduction Dates" means each of the dates falling at
intervals of one (1) year after the
Initial Drawdown Date and prior to the
Maturity Date; if such day is not a
Banking Day, the next following
Banking Day, unless such next
following Banking Day falls in the
following calendar month, in which
case the relevant Scheduled Reduction
Date shall be the immediately
preceding Banking Day;
"Security Documents" means the Guarantee, the Borrower
Pledge, the Assignment of Collection
Account, the General Security
Agreement, the Mortgages, the
Subordination Agreements and any other
documents that may be executed as
security for the Credit Facility and
the Security Parties' obligations in
connection therewith;
"Security Party(ies)" means the Borrower, OESC and
Philadelphia Cogeneration, or any of
them;
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"Southwest Agreements" means the Southwest Energy Service
Agreement, the Southwest Master Lease,
the Southwest Lease, the Southwest
Collection Facilities Lease, the
Southwest Collection Facilities
Sublease Agreement, the Southwest Gas
Supply Agreement, the Southwest Gas
Supply Contract and the Southwest
Service Contract;
"Southwest Collection means the Collection Facilities
Facilities Lease" Lease dated as of June 30, 1992 made
between the City of Philadelphia and
the Philadelphia Municipal Authority
in respect of the Southwest Facility;
"Southwest Collection means the Collection Facilities
Facilities Sublease Sublease Agreement dated as of
Agreement" June 30, 1992 made between the
Philadelphia Municipal Authority and
Philadelphia Biogas in respect of the
Southwest Facility;
"Southwest Demised Premises" means the parcels of land together
with improvements thereon erected
subject of the Southwest Lease;
"Southwest Energy Service means that certain energy
Agreement" service agreement dated June 30, 1992
by and between Philadelphia Municipal
Authority and Philadelphia
Cogeneration in respect of the
Southwest Facility;
"Southwest Facility" means the cogeneration facility
operated by Philadelphia Cogeneration
on the Southwest Demised Premises;
"Southwest Gas Supply means the Gas Supply Agreement
Agreement" dated as of June 30, 1992 between
Philadelphia Biogas and the
Philadelphia Municipal Authority in
respect of the Southwest Facility;
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"Southwest Gas Supply means the Gas Supply Contract
Contract" dated as of June 30, 1992 between the
City of Philadelphia and the
Philadelphia Municipal Authority in
respect of the Southwest Facility;
"Southwest Lease" means that certain sublease dated
June 30, 1992 by and between
Philadelphia Municipal Authority, as
lessor, and Philadelphia Cogeneration,
as lessee, in respect of the Southwest
Demised Premises;
"Southwest Master Lease" means the Lease dated June 30, 1992
between the City of Philadelphia and
the Philadelphia Municipal Authority
in respect of the Southwest Facility;
"Southwest Service Contract" means the Service Contract made as of
June 30, 1992 between the City of
Philadelphia and the Philadelphia
Municipal Authority in respect of the
Southwest Facility;
"Steam Sales Agreement" means the Newark Steam Sales
Agreement, the Parlin Steam Sales
Agreement or the Grays Ferry Steam
Sales Agreement;
"Subordination Agreement(s)" means the subordination agreement or
agreements to be executed by (i) the
Borrower, OESC and the Agent
subordinating the rights of the
Borrower and OESC to payments from
Philadelphia Cogeneration in respect
of, among other things, equipment
rentals to the rights of the Agent,
the Arranger and the Lenders under and
in connection with this Agreement
pursuant to Sections 4.1(c) and (e)
and (ii) the Borrower, the Borrower's
creditors and the Agent
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pursuant to Section 10.1(B)(iii), each
to be substantially in the form of
Exhibit I;
"Subsidiaries" means, with respect to any Person, any
business entity of which more than 50%
of the outstanding voting stock is
owned directly or indirectly by such
Person and one or more other
Subsidiaries of such Person;
"Taxes" means any present or future income or
other taxes, levies, duties, charges,
fees, deductions or withholdings of
any nature now or hereafter imposed,
levied, collected, withheld or
assessed by any taxing authority
whatsoever, except for taxes on or
measured by the overall net income of
each Lender imposed by its
jurisdiction of incorporation or
applicable lending office, the United
States of America, the State or City
of New York or any governmental
subdivision or taxing authority of any
thereof or by any other taxing
authority having jurisdiction over
such Lender (unless such jurisdiction
is asserted solely by reason of the
activities of the Borrower or any of
the Subsidiaries);
"Termination Event" shall mean (i) a "reportable event",
as such term is defined in
Section 4043 of ERISA (other than a
"reportable event" not subject to the
provision for 30-day notice to the
PBGC) (ii) the withdrawal of the
Borrower or any ERISA Affiliate from a
Multiple Employer Plan during a plan
year in which it was a "substantial
employer", as such term is defined in
Section 4001(a)(2) of ERISA, or the
incurrence of liability by the
Borrower or any ERISA Affiliate under
Section 4064 of ERISA upon the
termination of a
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Multiple Employer Plan, (iii) the
filing of a notice of intent to
terminate a Plan under Section 4041(c)
of ERISA or the treatment of a
Multiemployer Plan amendment as a
termination under Section 4041A of
ERISA, (iv) the institution of
proceedings to terminate a Plan or a
Multiemployer Plan or (v) any other
event or condition which might
constitute grounds under Section 4042
of ERISA for termination of, or the
appointment of a trustee to
administer, any Plan or Multiemployer
Plan;
"TETCO" means Texas Eastern Transmission
Corporation, a Texas corporation;
"TETCO Letter Agreement" means the January 26, 1996 letter by
and among Grays Ferry, Trigen, TETCO,
and Sun Company, Inc. (R&M);
"Trigen" means Trigen-Philadelphia Energy
Corporation, a Pennsylvania
corporation (formerly known as
Philadelphia Thermal Energy
Corporation and Philadelphia Thermal
Corporation);
"Trigen Gas Services Agreement" means the Gas Services Agreement
between Trigen and Grays Ferry dated
March 1, 1996;
"Trigen-Schuylkill" means Trigen-Schuylkill Cogeneration,
Inc., a Pennsylvania corporation;
"Utilicorp" means Utilicorp United, Inc., a
Delaware corporation;
"Voluntary Reduction Date" means each of the dates each being a
Banking Day, on which the Borrower has
requested, as provided in
Section 5.2(b), that the Commitments
be reduced;
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"Westinghouse" means Westinghouse Electric
Corporation, a Pennsylvania
corporation;
"Withdrawal Liability" shall have the meaning given to such
term under Part 1 of Subtitle E of
Title IV of ERISA.
1.2 Construction. Words importing the singular number only shall
include the plural and vice versa. Words importing persons shall
include companies, firms, corporations, partnerships, unincorporated
associations and their respective successors and assigns.
1.3 GAAP. All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting
principles as in effect from time to time in the United States of
America consistently applied ("GAAP") and all financial statements
submitted pursuant to this Agreement shall be prepared in accordance
with, and all financial data submitted pursuant hereto shall be derived
from financial statements prepared in accordance with, GAAP.
2. REPRESENTATIONS AND WARRANTIES
In order to induce the Arranger, the Agent, the Security Trustee
and the Lenders to enter into this Agreement and to induce the Lenders
to make the Credit Facility available, the Borrower hereby represents
and warrants to the Arranger, the Agent, the Security Trustee and the
Lenders (which representations and warranties shall survive the
execution and delivery of this Agreement and the Note and the drawdown
of the Advances hereunder) that:
(a) Due Organization and Power. Each Borrower Entity is
duly formed and is validly existing in good standing under the laws of
its jurisdiction of organization and is properly qualified to do
business and in good standing in every jurisdiction where the failure
to maintain such qualification or good standing could reasonably be
expected to result in a Material Adverse Effect. Each Borrower Entity
has full power to carry on its business as now being conducted and has
complied with all statutory, regulatory and other requirements relative
to such business and such agreements, except where non-compliance could
not reasonably be expected to result in a Material Adverse Effect.
Each Security Party has full power and authority to enter into and
perform its obligations under this Agreement, the Note and the Security
Documents to which it is a party.
(b) Capitalization. The authorized capital stock or other
equity interests of each of the Borrower Entities (other than the
Borrower) are held as set forth on Schedule 2(b) and except as set
forth thereon no shares of the capital stock or other equity
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<PAGE>
interests of the Borrower Entities are issued and outstanding. Except
as set forth on Schedule 2(b), all of the issued and outstanding shares
of capital stock of each Borrower Entity are duly authorized and
validly issued, fully paid, nonassessable, free and clear of all Liens
(to the extent owned by the Borrower), and such shares were issued in
compliance with all applicable state, federal and foreign laws
concerning the issuance of securities. Except as set forth on Schedule
2(b), there are no preemptive or other outstanding rights, options,
warrants, conversion rights or similar agreements or understandings for
the purchase or acquisition of any shares of capital stock or other
securities or equity interests of the Borrower Entities (to the extent
owned by the Borrower).
(c) Authorization and Consents. All necessary corporate
action has been taken to authorize, and all necessary consents and
authorities have been obtained and remain in full force and effect to
permit, each Security Party to enter into and perform its obligations
under this Agreement, the Note and the Security Documents to which it
is a party and, in the case of the Borrower, to borrow, service and
repay the Advances and, as of the date of this Agreement, no further
consents or authorities are necessary for the service and repayment of
the Advances or any part thereof, including, without limitation, any
consent or approval of, or notice to, or other action with or by, any
Governmental Authority, regulatory body or any other Person which has
not been made or obtained and in full force and effect.
(d) Binding Obligations. This Agreement, the Note and the
Security Documents constitute or will, when executed and delivered,
constitute the legal, valid and binding obligations of each Security
Party as is a party thereto enforceable against such Security Party in
accordance with their respective terms, except to the extent that such
enforcement may be limited by equitable principles, principles of
public policy or applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting generally the enforcement of
creditors' rights.
(e) No Violation. The execution and delivery of, and the
performance of the provisions of, this Agreement, the Note and the
Security Documents to which it is to be a party by each Security Party
do not contravene any applicable law or regulation existing at the date
hereof, any Governmental Approval or any contractual restriction
binding on such Security Party or the certificate of incorporation or
by-laws (or equivalent instruments) thereof.
(f) Litigation. Except as set forth on Schedule 2(f), no
action, suit or proceeding is pending or, to the Borrower's knowledge,
threatened against any Borrower Entity before any court, board of
arbitration or administrative agency which could reasonably be expected
to result in any Material Adverse Effect. There is no injunction,
writ, preliminary restraining order or any order of any nature issued
by an arbitrator or
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<PAGE>
other Governmental Authority directing that any material aspect of the
transactions provided for in this Agreement not be consummated as
herein or therein provided.
(g) No Default. No Borrower Entity is in default under any
material agreement by which it is bound, or is in default in respect of
any financial commitment or obligation, in either case the default of
which could reasonably be expected to result in a Material Adverse
Effect.
(h) Existing Projects and Project Agreements. Upon the date
hereof and as of the date of the making of each Advance:
(i) All Material Governmental
Approvals required under applicable law in
connection with the operation, maintenance and
ownership of the Existing Projects are set
forth on Schedule 2(h). Each Material
Governmental Approval has been obtained, is
validly issued, is in full force and effect,
is not subject to appeal by any Person, and,
to the knowledge of the Borrower, is free from
conditions or requirements compliance with
which could reasonably be expected to result
in a Material Adverse Effect. There is no
proceeding pending or, to the knowledge of the
Borrower, threatened which is reasonably
likely to result in the rescission,
revocation, material modification, suspension,
determination of invalidity or limitation of
effectiveness of any Material Governmental
Approval. To the knowledge of the Borrower,
the information set forth in each application
and other written material submitted by or on
behalf of each Project Entity to the
applicable Governmental Authority in
connection with such Material Governmental
Approval was accurate and complete in all
material respects at the time such application
or other written material was submitted. Each
Existing Project complies in all material
respects with all covenants, conditions,
restrictions and reservations in the Material
Governmental Approvals relating to such
Existing Project and the Project Agreements
applicable thereto and all laws applicable
thereto, except to the extent any non-
compliance could not reasonably be expected to
result in a Material Adverse Effect;
(ii) Each Project Agreement to which
a Project Entity is a party is a legal, valid
and binding agreement of such Project Entity
enforceable against such Project Entity in
accordance with its terms, except to the
extent enforceability may be limited by
applicable bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting
the enforcement of creditors' rights and
subject to general equitable principles;
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<PAGE>
(iii) All representations and
warranties set forth in each Project Agreement
by the Borrower Entity which is a party
thereto are true and correct in all material
respects (the determination of such material
truth and correctness to be made by the Agent
in good faith) as though made as of the date
hereof, except to the extent any such
representation or warranty relates to a prior
date;
(iv) Each Existing Project will be
able to be operated on a safe and commercially
sound basis in compliance with all
Governmental Approvals and applicable Project
Agreements and laws, so that the performance
and facility guarantees and specifications
provided for in the applicable Project
Agreements and Governmental Approvals can be
substantially met during the term of this
Agreement and each Project Entity can duly and
punctually meet its obligations under the
applicable Project Agreements and Governmental
Approvals in accordance with the terms
thereof, except to the extent any inadvertent
non-compliance with such Governmental
Approvals and Project Agreements could not
reasonably be expected to have a Material
Adverse Effect; provided, however, that such
inadvertent noncompliance must be remedied or
cured within 30 days of any Borrower Entity's
obtaining knowledge thereof. Each Project
Entity has adequate inventories and spare
parts to operate its respective Project in
accordance with the Project Agreements,
Governmental Approvals and applicable law;
(v) Each Existing Project includes
facilities for the storage of Alternative Fuel
(including kerosene) sufficient to meet its
obligations under the Project Agreements,
Governmental Approvals and laws applicable
thereto; and
(vi) Each Project Entity is the sole
owner of its respective Existing Project free
and clear of all Liens (other than Permitted
Liens).
(i) Insurance. Schedule 2(i) (which shall be updated by the
Borrower and provided to the Agent not less often than annually) sets
forth a complete and accurate description of all material policies of
insurance that will be in effect as of the Initial Drawdown Date. To
the knowledge of the Borrower, such policies are with companies rated
"A-" or better by Best's Insurance Guide and Key Rating or other
insurance companies of recognized responsibility satisfactory to the
Agent, and the coverages provided by such policies are in amounts and
cover such risks as are usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in
which each Borrower Entity operates and, in any event, other than to
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<PAGE>
account for amortization of loan repayments, the insurance coverages
shall not be less than the insurance coverages set forth in
Schedule 2(i).
(j) Financial Information. Except as otherwise disclosed in
writing to the Agent on or prior to the date hereof, all financial
statements, information and other data furnished by any Borrower Entity
to the Agent are complete and correct, such financial statements have
been prepared in accordance with GAAP (except, in the case of interim
financial statements, for the absence of footnotes) and accurately and
fairly present the financial condition of the parties covered thereby
as of the respective dates thereof and the results of the operations
thereof for the period or respective periods covered by such financial
statements and since such date or dates, there has been no Material
Adverse Effect as to any of such parties and none thereof has any
contingent obligations, liabilities for taxes or other outstanding
financial obligations which are material in the aggregate except as
disclosed in such statements, information and data.
(k) Tax Returns. Each Borrower Entity has filed all
material tax returns required to be filed thereby and has paid all
taxes payable thereby which have become due, other than those not yet
delinquent or the nonpayment of which would not have a Material Adverse
Effect on such Borrower Entity and except for those taxes the amount or
validity of which is currently being contested in a Good Faith Contest.
(l) ERISA. The execution and delivery of this Agreement,
the Note and the Security Documents and the consummation of the
transactions hereunder will not involve any prohibited transaction
within the meaning of ERISA or Section 4975 of the Code and no
condition exists or event or transaction has occurred in connection
with any Plan maintained or contributed to by any Borrower Entity or
any ERISA Affiliate resulting from the failure of any thereof to comply
with ERISA insofar as ERISA applies thereto which is reasonably likely
to result in such Borrower Entity or any ERISA Affiliate incurring any
liability, fine or penalty which individually or in the aggregate would
have a Material Adverse Effect. Prior to the date hereof, the Borrower
has delivered to the Agent a list of all Plans to which any Borrower
Entity or any ERISA Affiliate is a "party in interest" (within the
meaning of Section 3(14) of ERISA) or a "disqualified person" (within
the meaning of Section 4975(e)(2) of the Code).
(m) Margin Regulations. No Borrower Entity is engaged in
the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation G, T, U, or X
of the Board of Governors of the Federal Reserve System) and no
proceeds of any Advance will be used in a manner which would violate,
or result in a violation of, such Regulation, G, T, U, or X.
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(n) Investment Company Act. No Borrower Entity is an
"investment company" nor a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(o) Security Interests. Except to the extent consents set
forth in Schedule 2(o) are required to create a first priority
perfected security interest in the Collateral, the security interests
created in favor of the Security Trustee under the Security Documents
are valid and perfected, first priority security interests (subject
only to Permitted Liens) superior and prior to the rights of all
Persons (except those rights of the holders of Permitted Liens),
whether the property subject to the security interests is now owned by
the Security Party granting such security interest or is hereafter
acquired. The Security Documents (including Uniform Commercial Code
financing statements) have been duly filed, recorded and/or registered
in each office and in each jurisdiction where required to create and
perfect the lien and security interest described above. The chief
executive office and chief place of business of each Security Party and
the office in which the records relating to the earnings and other
receivables of each Security Party are kept is located, as of the date
hereof, at the locations set forth on Schedule 2(o) for such Security
Party. Such locations are the sole offices or places of business
maintained by each Security Party as of the date hereof. To the
knowledge of the Borrower, no Security Party has transacted any
business during the five year period prior to the date of this
Agreement under any name other than those set forth on Schedule 2(o).
(p) Business of Project Entities. No Project Entity has
engaged in any business other than the operation of its respective
Existing Project nor is any Project Entity a party to any contract,
operating lease, agreement or commitment which, either individually, or
in the aggregate is material to the operation of its respective
Existing Project other than the Project Agreements applicable thereto.
(q) EWG Status; Qualifying Cogeneration Facility Status.
Parlin is an Exempt Wholesale Generator and each of the Newark Project,
the Grays Ferry Project and the Philadelphia Cogeneration Project is a
Qualifying Cogeneration Facility. Each of Newark, Grays Ferry and
Philadelphia Cogeneration has maintained and established by filing the
QF Certificate for each of the Newark Project, the Grays Ferry Project
and Philadelphia Cogeneration Project, with such filings reflecting the
ownership and operation of such Projects. Each of the Newark Project,
the Grays Ferry Project and the Philadelphia Cogeneration Project is
owned and operated in the manner contemplated by its QF Certificate.
(r) Regulation of Borrower Entities. None of the Borrower
Entities, the Agent, the Security Trustee nor any Lender is or will be,
solely as a result of the participation by such parties separately or
as a group in the transactions contemplated hereby or in any Project
Agreement, or by the ownership, use or operation of any
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Existing Project in accordance with its respective Project Agreements,
subject to regulation by any Governmental Authority as a "public
utility" under the FPA, a "holding company" under PUHCA, a utility
under state law, or a subsidiary or affiliate of any of the foregoing;
provided, however, that Parlin is subject to regulation as a "public
utility" under the FPA. None of the Agent, the Security Trustee nor
any Lender will, solely by reason of its or their ownership or
operation of the Philadelphia Cogeneration Project upon the exercise of
remedies under the Security Documents, be subject to financial,
organizational or rate regulation by any Governmental Authority as a
"public utility" under the FPA, a "holding company" under PUHCA, a
utility under state law, or a subsidiary or affiliate of any of the
foregoing.
(s) Title to and Sufficiency of Assets. Except as set forth
on Schedule 2(s), each Borrower Entity has good, valid and sufficient
title to (or a leasehold interest in) its assets and properties. Each
of the Borrower Entities has good, marketable, indefeasible and
insurable title in fee simple (or its equivalent under applicable law)
to the real property owned by it, all of which is listed on
Schedule 2(s). Except as specified in Schedule 2(s), none of the real
property owned or leased by any Borrower Entity is located within any
federal, state or municipal flood plain. Except as set forth on
Schedule 2(s), the security interests granted to the Security Trustee
by the Security Parties are first and prior security interests and no
Security Party has granted any security interests in the Collateral
owned by it other than those granted to the Security Trustee hereunder.
All leases necessary for the conduct of the business of the Borrower
Entities as presently conducted and as proposed to be conducted are
valid and subsisting and are in full force and effect. The Borrower
Entities enjoy peaceful and undisturbed possession under all material
leases to which they are parties (all such leases being set forth on
Schedule 2(s)). The services to be performed, the materials to be
supplied and the easements, licenses and other rights granted or to be
granted to each Project Entity pursuant to the Project Agreements and
Governmental Approvals applicable thereto provide or will provide such
Project Entity with all rights and property interests required to
enable such Project Entity to obtain all services, materials or rights
(including access) required for the operation and maintenance of its
Existing Project, including such Project Entity's full and prompt
performance of its obligations, and full and timely satisfaction of all
conditions precedent to the performance by others of their obligations
under such Project Agreements and Governmental Approvals.
(t) Labor Matters. There are no strikes or other material
labor disputes or grievances, charges or complaints with respect to any
employee or group of employees pending or, to the knowledge of the
Borrower, threatened against any Borrower Entity.
(u) Transactions with Affiliates. Set forth on
Schedule 2(u) is a true, accurate and complete description of all
transactions between any Borrower Entity and any Affiliate thereof
since August 14, 1997 which required or which will require in the
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case of any Borrower Entity the payment by such Borrower Entity of an
aggregate amount equal to or greater than $100,000 during any twelve-
month period.
(v) Environmental Matters and Claims. Except as set forth
on Schedule 2(v), (i) each of the Borrower Entities is in compliance
with all applicable United States federal, state and local laws,
regulations, rules and orders relating to pollution prevention or
protection of the environment or exposure to Materials of Environmental
Concern (including, without limitation, ambient air, surface water,
ground water, navigable waters, waters of the contiguous zone, ocean
waters and international waters), including, without limitation, laws,
regulations, rules and orders ("Environmental Laws") relating to
(1) emissions, discharges, releases or threatened releases of
substances defined as "hazardous substances," "hazardous materials,"
"contaminants," "pollutants," "hazardous wastes" or "toxic substances"
in (i) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act, 42 U.S.C. ? 9601 et seq., (ii) the Hazardous
Materials Transportation Act, 49 U.S.C. ? 1801 et seq., (iii) the
Resource Conservation and Recovery Act, 42 U.S.C. ? 6901 et seq., (iv)
the Federal Water Pollution Control Act, as amended, 33 U.S.C. ? 1251
et seq., (v) the Clean Air Act, 33 U.S.C. ? 7401 et seq., (vi) the
Toxic Substances Control Act, 15 U.S.C. ? 2601 et seq. or (vii) the
Safe Drinking Water Act, 42 U.S.C. ? 300f et seq. ("collectively,
Materials of Environmental Concern"), or (2) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Materials of Environmental Concern, all to the extent
the failure to comply with Environmental Laws could reasonably be
expected to have a Material Adverse Effect; (ii) each of the Borrower
Entities has all permits, licenses, approvals, consents or other
authorizations required under applicable Environmental Laws
("Environmental Approvals") and is in compliance with all Environmental
Approvals required to operate their business as then being conducted,
all to the extent the failure to maintain or comply with an
Environmental Approval could reasonably be expected to have a Material
Adverse Effect; (iii) none of the Borrower Entities has received any
notice of any claim, action, cause of action, investigation or demand
by any person, entity, enterprise or government, or any political
subdivision, intergovernmental body or agency, department or
instrumentality thereof, alleging potential liability for, or a
requirement to incur, material investigatory costs, cleanup costs,
response and/or remedial costs (whether incurred by a governmental
entity or otherwise), natural resources damages, property damages,
personal injuries, attorneys' fees and expenses, or fines or penalties,
in each case arising out of, based on or resulting from (1) the
presence, or release or threat of release into the environment, of any
Materials of Environmental Concern at any location, whether or not
owned by such person, or (2) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law or
Environmental Approval, and in each case which could reasonably be
expected to have a Material Adverse Effect ("Environmental Claim")
(other than Environmental Claims that have been fully and finally
adjudicated or otherwise determined and all fines, penalties
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and other costs, if any, payable by the Security Parties in respect
thereof have been paid in full or which are fully covered by insurance
(including permitted deductibles)); (iv) there are no circumstances
that may prevent or interfere with such compliance in the future; (v)
no Materials of Environmental Concern are currently located at, in, on,
under or about or are being released from any of the properties on
which the Projects are located (or any other property with respect to
which any Borrower Entity has or may have liability either
contractually or by operation of law) in a manner which violates any
applicable Environmental Law, or for which cleanup or corrective action
of any kind is required under any applicable Environmental Law where
such violation, cleanup or corrective action could reasonably be
expected to have a Material Adverse Effect; (vi) no notice of
violation, Lien, complaint, suit, order or other notice with respect to
the environmental condition of any of the properties on which the
Projects are located (or any other property with respect to which any
of the Borrower Entities has or may have liability either contractually
or by operation of law) is outstanding or, to the Borrower's knowledge,
threatened against a Borrower Entity which could reasonably be expected
to result in a Material Adverse Effect.
(w) Bank Accounts. Schedule 2(w) sets forth the account
numbers and locations of all bank accounts of each Borrower Entity.
(x) Survival. All representations, covenants and warranties
made herein and in any certificate or other document delivered pursuant
hereto or in connection herewith shall survive the making of the
Advances and the issuance of the Note to be issued by the Borrower
hereunder.
(y) No Material Adverse Effect. Since June 30, 1997, there
has not occurred any event or condition resulting in a Material Adverse
Effect.
3. ADVANCES
3.1 (a) Purposes. The Lenders shall make the Advances available
to the Borrower for the purpose of making advances or loans to any
Affiliates of the Borrower, for the purposes of (i) refinancing the
Borrower's existing $5,500,000 credit facility with PECO Energy
Company, (ii) enabling (A) the Borrower or Philadelphia Cogeneration to
purchase the minority interest of the Revocable Trust of Marsha Reines
Perelman in Philadelphia Cogeneration and (B) the Borrower or
Philadelphia Biogas to purchase the minority interest of the Revocable
Trust of Marsha Reines Perelman in Philadelphia Biogas,
(iii) refinancing the existing Indebtedness of the Borrower to NRG
Energy, (iv) refinancing the existing Indebtedness of Borrower, OESC
and/or Philadelphia Cogeneration, as the case may be, to each of GE
Capital Corporation, Fleet Credit Corporation, Financing for Science
and Industry, Inc., FINOVA Capital Corporation, New England Capital
Corporation and WASCO Funding Corp. and obtaining the release
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of the Liens securing such Indebtedness (the "Equipment Liens"), and
(v) for general working capital purposes.
(b) Making of the Advances. Each of the Lenders, relying
upon each of the representations and warranties set out in Section 2,
hereby severally and not jointly agrees with the Borrower that, subject
to and upon the terms of this Agreement, it will on the Drawdown Dates,
make the Advances available through the Agent to the Borrower in an
aggregate amount not to exceed its Commitment ratably with the other
Lenders according to their respective Commitments. The maximum
aggregate amount of all Advances which may be outstanding at any time
under this Agreement is the aggregate amount of the Credit Facility, as
reduced pursuant to Section 5.2. All Advances shall be in a minimum
amount of Two Hundred Fifty Thousand Dollars ($250,000).
(c) Maximum Number of LIBOR Rate Advances. The maximum
number of LIBOR Rate Advances that may be outstanding at any time under
this Agreement shall be six (6).
3.2 Drawdown Notice. The Borrower shall, in respect of all
Advances, serve a written notice in the form of Exhibit H hereto (a
"Drawdown Notice") on the Agent (which shall promptly furnish a copy to
each Lender) by facsimile or otherwise (i) for a LIBOR Rate Advance,
not later than 11:00 A.M., New York City time, at least two (2) Banking
Days prior to the date of the proposed LIBOR Rate Advance, and (ii) for
a Base Rate Advance, not later than 11:00 A.M., New York City time, on
the day of the proposed Base Rate Advance. Each Drawdown Notice shall
specify (a) the date of the proposed borrowing (which shall be a
Banking Day), (b) the principal amount of the Advance to be made by the
Lenders on that date, (c) whether such Advance is a Base Rate Advance
or a LIBOR Rate Advance, (d) if a LIBOR Rate Advance, the Interest
Period requested by the Borrower, and (e) the disbursement instructions
for the proceeds of such Advance. Each Drawdown Notice shall be
effective upon receipt by the Agent and shall be irrevocable.
3.3 Effect of Drawdown Notices. Each Drawdown Notice shall be
deemed to constitute a warranty by the Borrower (a) that the
representations and warranties stated in Section 2 (updated mutatis
mutandis) are true and correct on and as of the date of such Drawdown
Notice and will be true and correct on and as of the relevant Drawdown
Date as if made on such date, except to the extent such representations
and warranties relate to a prior date and except that the Borrower
shall not be required to update the Schedules hereto to the extent
changes have occurred in the information disclosed therein from and
after the date hereof (provided that such exception shall not relieve
the Borrower of its obligations to provide or update certain
information relating to matters disclosed on such Schedules under
Section 10.1A hereof), (b) that after giving effect to the borrowing
made pursuant to such Drawdown Notice, the Credit Facility Balance
shall not exceed the
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maximum amount then available hereunder pursuant to the terms hereof
and (c) that no Event of Default nor any event which with the giving of
notice or lapse of time or both would constitute an Event of Default
has occurred and is continuing.
3.4 Notation of Advances. Each Advance made by the Lenders to
the Borrower may be evidenced by a notation of the same made by the
Agent on the grid attached to the Note, which notation, absent manifest
error, shall be prima facie evidence of the amount of the relevant
Advance.
4. CONDITIONS
4.1 Conditions Precedent to Drawdown of the Initial Advance. The
obligation of the Lenders to make the initial Advance available to the
Borrower under this Agreement shall be expressly subject to the
following conditions precedent:
(a) the Agent shall have received the following documents in
form and substance satisfactory to the Agent and its legal advisor:
(i) copies, certified as true and complete by
an officer of each of the Security Parties, of
the resolutions of the board of directors of such
Security Party evidencing approval of this
Agreement, the Note and those Security Documents
to which it is to be a party and authorizing an
appropriate officer or officers or attorney-in-
fact or attorneys-in-fact to execute the same on
its behalf, or other evidence of such approvals
and authorizations;
(ii) copies, certified as true and complete by an officer of
each of the Security Parties, of all documents evidencing any other
necessary action (including actions by such parties thereto other than
the Security Parties as may be required by the Agent), approvals or
consents with respect to this Agreement, the Note, and the Security
Documents;
(iii) copies, certified as true and complete by
an officer of the Borrower and each of the
Project Entities, of the constating instruments
of the Borrower and each Project Entity;
(iv) certificate of the Secretary of the
Borrower certifying that it legally and
beneficially owns, directly or indirectly, the
issued and outstanding capital stock and
partnership
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interests of each of the Project Entities and
that such capital stock and/or interests as set
out in Schedule 2(b), are free and clear of any
liens, claims, pledges or other encumbrances
whatsoever other than as disclosed to the Lenders
in writing on or before the date hereof;
(v) certificate of the Secretary of each
Project Entity certifying as to the record
ownership of all of its issued and outstanding
capital stock or partnership interests, as the
case may be;
(vi) certificates of the jurisdiction of
formation of each of the Borrower Entities as to
the good standing thereof; and
(viii) certificate of the Secretary of each of
the Borrower Entities as to the incumbency and
signatures of the officers authorized to act for
each such entity.
(b) the Agent shall have received in form and substance
satisfactory to it and its legal advisors:
(i) environmental reports and/or reliance
letters which shall contain the results of the
review of the environmental audit of Philadelphia
Cogeneration, permitting issues and other matters
of environmental concern with respect to the
Existing Projects;
(ii) an engineer's report on the technical
condition of the equipment utilized by the
Philadelphia Cogeneration Project;
(iii) evidence, in the form of self-
certification, that each of the Existing Projects
(other than the Parlin Project) shall be a
Qualifying Cogeneration Facility and that each
Project Entity (other than Parlin) shall have
maintained and established by filing the
necessary certificates with respect thereto;
(iv) evidence that the capital stock or other
equity interests of each of the Project Entities
held by the Borrower is held free and clear of
all Liens other than Permitted Liens;
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(v) evidence that the Security Trustee has,
for the benefit of the Lenders and the Agent, a
valid and perfected first priority security
interest in the Collateral (subject only to
Permitted Liens) and that the Equipment Liens
have been terminated;
(vi) evidence that all Governmental Approvals
and filings and consents from third parties
required in connection with the transactions
contemplated hereby have been obtained;
(vii) evidence that none of the Existing
Projects includes any real property located within an area that has
been identified by the Director of the Federal Emergency Management
Agency as an area having special flood hazards and for which flood
insurance has been made available under the National Flood Insurance
Act of 1968, as amended; and
(viii) with respect to the Advance the
proceeds of which are to be used to acquire the minority interest of
Philadelphia Cogeneration held by the Revocable Trust of Marsha Reines
Perelman, evidence that such interest will be held by the Borrower or
Philadelphia Cogeneration free and clear of all Liens; and
(ix) written acknowledgment from The Chase
Manhattan Bank of its receipt of notice of the
pledge and assignment of the Collection Account
to the Security Trustee pursuant to Section 8.3.
(c) the Borrower shall have duly executed and delivered to
the Agent:
(i) the Note;
(ii) each Security Document to which it is to
be a party;
(iii) Uniform Commercial Code Financing
Statements for filing with New Jersey,
Pennsylvania, Delaware and Minnesota and in such
other jurisdictions as the Agent may reasonably
require; and
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(iv) stock certificates representing 83% of the
issued and outstanding shares of capital stock of Philadelphia
Cogeneration, together with irrevocable undated stock powers duly
endorsed in blank.
(d) Philadelphia Cogeneration shall have duly executed and
delivered to the Agent:
(i) the Security Documents to which it is to
be a party, and
(ii) Uniform Commercial Code Financing
Statements for filing with Pennsylvania, Delaware
and Minnesota and in such other jurisdictions as
the Agent may reasonably require.
(e) OESC shall have duly executed and delivered:
(i) the Security Documents to which it is to
be a party, and
(ii) Uniform Commercial Code Financing
Statements for filing with Pennsylvania, Delaware, California and
Minnesota and in such other jurisdictions as the Agent may reasonably
require.
(f) the Agent shall have received fully executed copies of
the Subordination Agreements;
(g) the Agent shall have received a certificate of an
officer of Philadelphia Cogeneration, in his capacity as an officer,
confirming the representations and warranties with respect to solvency
set forth in the Guarantee and containing conclusions as to the
solvency of Philadelphia Cogeneration;
(h) the Agent shall have received consents from the
Philadelphia Municipal Authority to (i) the assignment of the
Philadelphia Cogeneration Leases to the Security Trustee pursuant to
the Mortgage and (ii) the assignment of Energy Service Agreements to
the Security Trustee, pursuant to the General Security Agreement.
(i) the Agent shall be satisfied that neither the Borrower
nor any of the Project Entities is subject to any Environmental Claim
which could have a Material Adverse Effect;
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(j) the Agent shall have received payment in full of all
fees and expenses due to the Agent, the Arranger and the Lenders under
Section 14;
(k) the Borrower shall have established the Collection
Account pursuant to Section 8 and each of the Project Entities shall
have executed and delivered to the Security Trustee its Acknowledgment;
(l) the Agent shall have received evidence satisfactory to
it and to its legal advisor that, save for the liens created by the
filing of any Uniform Commercial Code Financing Statements, the
Borrower Pledge, the Assignments, or any other Security Document there
are no liens, charges or encumbrances of any kind whatsoever on any of
the Collateral except as permitted hereby or by any of the Security
Documents;
(m) the Agent shall have received legal opinions addressed
to the Agent and the Lenders from (i) Troutman Sanders LLP, as counsel
for the Security Parties, (ii) Dechert Price & Rhoads, as local
Pennsylvania counsel for the Security Parties, and (iii) Seward &
Kissel, special counsel to the Agent, in each case in such form as the
Agent may reasonably require; and
(n) the Agent shall have received (i) a certified copy of,
or binder for, each of the insurance policies required by
Section 2.1(i), such policies to be in form and substance, and issued
by companies, reasonably satisfactory to the Agent, together with
evidence satisfactory to the Agent that such insurance complies with
the provisions of Section 2.1(i) and with the provisions of the Project
Agreements, and that all premiums then due with respect to such
insurance have been paid and (ii) a written report of an insurance
consultant describing the insurance obtained by each Project Entity
with respect to its Existing Project and stating that the required
insurance is in full force and effect and provides reasonable and
adequate coverage for such Existing Project.
Each of the Agent, the Security Trustee, the Arranger and
each of the Lenders hereby agrees that, notwithstanding any provision
or term to the contrary set forth in this Agreement, the execution and
delivery of the Mortgage shall not be a condition precedent to the
funding of the Initial Advance, provided (i) that the amount available
under the Credit Facility shall be reduced as set forth in the
definition of "Credit Facility" in Section 1.1 above, and (ii) that
Philadelphia Cogeneration shall execute and deliver the Mortgage,
together with such opinions and Uniform Commercial Code financing
statement filings as the Agent shall reasonably request, by not later
than forty-five (45) days from and after the Initial Drawdown Date, and
it is expressly agreed that the failure to so deliver the Mortgage
within such 45-day period shall constitute an Event of Default
hereunder.
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4.2 Further Conditions Precedent. The obligation of the Lenders
to make any Advance available to the Borrower under this Agreement
shall be expressly and separately subject to the following further
conditions precedent on the relevant Drawdown Date:
(a) the Agent having received a Drawdown Notice in
accordance with the terms of Section 3.2;
(b) the representations stated in Section 2 (updated
mutatis mutandis to such date) being true and correct as if made on and
as of that date except to the extent such representations and
warranties relate to a prior date and except that the Borrower shall
not be required to update the Schedules hereto to the extent changes
have occurred in the information disclosed therein from and after the
date hereof (provided that such exception shall not relieve the
Borrower of its obligations to provide or update certain information
relating to matters disclosed on such Schedules under Section 10.1A
hereof);
(c) no Event of Default having occurred and being continuing
and no event having occurred and being continuing which, with the
giving of notice or lapse of time, or both, would constitute an Event
of Default;
(d) the Agent being satisfied that no change in any
applicable laws, regulations, rules or in the interpretation thereof
shall have occurred which make it unlawful for any Security Party to
make any payment as required under the terms of this Agreement, the
Note, the Security Documents or any of them; and
(e) there having been no Material Adverse Effect since the
date hereof.
4.3 Breakfunding Costs. In the event that, on any date specified
for the making of an Advance in any Drawdown Notice, the Lenders shall
not be obliged under this Agreement to make such Advance available
under this Agreement, the Borrower shall indemnify and hold the Lenders
fully harmless against any actual losses which the Lenders (or any
thereof) may sustain as a result of borrowing or agreeing to borrow
funds to meet the drawdown requirement of such Drawdown Notice. At the
Borrower's request, each such Lender shall provide the Borrower with
reasonable evidence of such actual losses incurred by such Lender.
4.4 Satisfaction after Drawdown. Without prejudice to any of the
other terms and conditions of this Agreement, in the event the Lenders,
in their sole discretion, advance any Advance prior to the satisfaction
of all or any of the conditions referred to elsewhere in Sections 4.1
or 4.2, the Borrower hereby covenants and undertakes to satisfy or
procure the satisfaction of such condition or conditions within
seven (7) days after the
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relevant Drawdown Date (or such longer period as the Lenders, in their
sole discretion, may agree).
5 REPAYMENT, REDUCTION AND PREPAYMENT
5.1 Repayment. The Borrower shall repay all outstanding Advances
(subject to such reduction and prepayments as hereinafter set forth) on
the Maturity Date and, to the extent required to comply with the
limitations set forth in Section 5.2 below, on each Reduction Date.
5.2 Reductions of the Credit Facility. The Credit Facility shall
be reduced:
(a) on each of the Scheduled Reduction Dates, by Two Million
Five Hundred Thousand Dollars ($2,500,000), and
(b) on any Voluntary Reduction Date, by such amount as the
Borrower may indicate to the Agent in writing at least ten (10) days in
advance of such date.
On each Reduction Date, each Lender's Commitment shall be
reduced by an amount equal to (i) the ratio of such Lender's Commitment
to the aggregate of the Commitments on such date, multiplied by
(ii) the amount by which the total Credit Facility is to be so reduced
on such date. On each Reduction Date the Borrower shall, if necessary,
prepay the Credit Facility in the amount required so that the Credit
Facility Balance shall not exceed the aggregate of the Commitments as
reduced pursuant to this Section 5.2.
5.3 Prepayment; Reborrowing. Subject to the provisions of
Section 5.5 in the case of the prepayment of any LIBOR Rate Advance on
any day other than the last day of the Interest Period with respect to
such LIBOR Rate Advance, the Borrower may, at its option, without
penalty or premium, on any Banking Day, prepay all or any portion of
the principal of any Advance. The Borrower shall deliver to the Agent
(which shall promptly furnish a copy to each Lender) notice of such
prepayment on not less than three (3) Banking Days with respect to each
LIBOR Rate Advance and one (1) Banking Day with respect to each Base
Rate Advance (which notice shall be irrevocable and shall specify the
date and amount of prepayment). Each prepayment shall be in a minimum
amount of One Million Dollars ($1,000,000). Subject to the limits and
upon the conditions herein provided (including the reduction of the
Commitments provided in Section 5.2), the Borrower may from time to
time prepay the Advances and thereafter re-borrow such Advances or a
portion thereof.
5.4 Optional and Mandatory Conversions. Subject to Section 5.5,
the Borrower may, at its option (i) on the last day of any Interest
Period, convert a LIBOR Rate
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Advance into a Base Rate Advance, (ii) on the last day of any Interest
Period, continue a LIBOR Rate Advance as a LIBOR Rate Advance, and
(iii) on any Banking Day, convert a Base Rate Advance into a LIBOR Rate
Advance; provided, that, except as otherwise provided in this
Agreement to the contrary, the Borrower shall deliver to the Agent
(which will promptly send a copy to each Lender) a Notice of Conversion
or Continuation by 11:00 A.M., New York City time, (A) in the case of
clauses (ii) and (iii) above, not less than three Banking Days prior to
the date of each such conversion or continuation, and (B) in the case
of clause (i) above, on or prior to the date of such conversion. Each
Notice of Conversion or Continuation shall specify (x) the amount of
each Advance to be continued or converted, (y) the date of such
continuation or conversion, and (z) the type of Advance to be continued
or converted (and in the case of a conversion, the type of Advance to
result from such conversion and, if such Advance is to be converted
into a LIBOR Rate Advance, the Interest Period). Subject to
Section 9.2, upon the occurrence of an Event of Default all LIBOR Rate
Advances will be converted to Base Rate Advances upon termination of
the then applicable Interest Periods.
5.5 Interest and Costs with Prepayments. Any prepayment of the
Advances made hereunder (including, without limitation, those made
pursuant to Sections 5.2 and 5.3) shall be subject to the condition
that on the date of prepayment all accrued interest to the date of such
prepayment shall be paid in full with respect to the Advances or
portions thereof being prepaid, together with any and all actual costs
or expenses incurred by any Lender in connection with any breaking of
funding. At the Borrower's request, each such Lender shall provide the
Borrower with reasonable evidence of such actual losses incurred by
such Lender.
5.6 Pro-Rata Reduction of Commitments. If the Commitments of the
Lenders are reduced pursuant to Section 5.2 or any other provision of
this Agreement, the Commitments shall be reduced on the Reduction Dates
falling on or after the date of such reduction by the same proportion
as that by which the amount of the aggregate of the Commitments of the
Lenders is so reduced and the remaining reductions pursuant to Section
5.2 shall be adjusted proportionately to reflect such reduction.
6. INTEREST AND RATE
6.1 Payment of Interest; Interest Rate. (a) The Borrower hereby
promises to pay to the Lenders interest on the unpaid principal amount
of each Advance made to the Borrower for the period commencing on the
date of such Advance until but not including the stated maturity
thereof (whether by acceleration or otherwise) or the date of
prepayment thereof (i) during the periods such Advance is a Base Rate
Advance, at the Base Rate plus the Margin, and (ii) during the periods
such Advance is a LIBOR Rate Advance, at the LIBOR Rate plus the
Margin (as the case may be from time to time, the "Applicable Rate");
provided, however, that after the occurrence and during the
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continuance of an Event of Default under Section 9.1(a) or (b) or,
after notice from the Agent, an Event of Default mentioned elsewhere in
Section 9.1, all outstanding Advances shall bear interest at the
Default Rate.
(b) Notwithstanding the foregoing, the Borrower hereby
promises to pay interest on any Advance made to the Borrower and (to
the extent that the payment of such interest shall be legally
enforceable) on any overdue installment of interest, and on any other
amount payable by such Borrower hereunder which shall not be paid in
full when due (whether at stated maturity, by acceleration or
otherwise), for the period commencing on the due date thereof until but
not including the date the same is paid in full at the Default Rate.
(c) Except as provided in the next sentence, accrued
interest on each Advance shall be payable (x) in respect of each Base
Rate Advance, quarterly, on the last Banking Day of each calendar
quarter, (y) in respect of each LIBOR Rate Advance on the last day of
each Interest Period, except that if the Borrowers shall select an
Interest Period in excess of three (3) months, accrued interest shall
be payable during such Interest Period on each three (3) month
anniversary of the commencement of such Interest Period and upon the
last day of such Interest Period, and (z) in the case of all Advances
together with each repayment of principal thereof. Interest payable at
the Default Rate shall be payable from time to time on demand of the
Agent.
6.2 Calculation of Interest. All interest shall accrue from day-to-
day and be calculated on the actual number of days elapsed and on the
basis of a three hundred sixty (360) day year with respect to each
LIBOR Rate Advance and on the basis of a 365/366 day year with respect
to each Base Rate Advance.
6.3 Maximum Interest. Anything in this Agreement or the Note to
the contrary notwithstanding, the interest rate on any Advance shall in
no event be in excess of the maximum rate permitted by applicable law.
7. PAYMENTS
7.1 Place of Payments, No Set Off. All payments to be made hereunder
by the Borrower shall be made to the Agent, not later than 11 a.m. New
York time (any payment received after 11 a.m. New York time shall be
deemed to have been paid on the next Banking Day) on the due date of
such payment, at its office located at 445 Park Avenue, New York, New
York 10022 or to such other office of the Agent as the Agent may
direct, without set-off or counterclaim and free from, clear of, and
without deduction for, any Taxes, provided, however, that, subject to
such Lender's compliance with Section 7.2 below, if the Borrower shall
at any time be compelled by law to withhold or deduct any Taxes from
any amounts payable to the Lenders hereunder, then the Borrower shall
pay
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such additional amounts in Dollars as may be necessary in order that
the net amounts received after withholding or deduction shall equal the
amounts which would have been received if such withholding or deduction
were not required and, in the event any withholding or deduction is
made, whether for Taxes or otherwise, the Borrower shall promptly send
to the Agent such documentary evidence with respect to such withholding
or deduction as may be required from time to time by the Lenders.
7.2 Tax Forms. Each Lender shall promptly provide the Borrower
with two duly completed copies of Internal Revenue Service Form 1001 or
4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is entitled to benefits
under an income tax treaty to which the United States is a party that
exempts withholding tax on payments under this Agreement or the Note or
certifying that the income receivable pursuant to this Agreement or the
Note is effectively connected with the conduct of a trade or business
in the United States.
7.3 Tax Credits. If any Lender obtains the benefit of a credit
against the liability thereof for federal income taxes imposed by any
taxing authority for all or part of the Taxes as to which the Borrower
has paid additional amounts as aforesaid (and each Lender agrees to use
its best efforts to obtain the benefit of any such credit which may be
available to it, provided it has knowledge that such credit is in fact
available to it), then such Lender shall reimburse the Borrower for the
amount of the credit so obtained. Each Lender agrees that in the event
that Taxes are imposed on account of the situs of its loans hereunder,
such Lender, upon acquiring knowledge of such event, shall, if
commercially reasonable, shift such loans on its books to another
office of such Lender so as to avoid the imposition of such Taxes.
8. ACCOUNTS
8.1 Collection Account. The Borrower shall procure that each
Project Entity shall make all distributions of Project Cash Flow and
that all of such Project Cash Flow shall be paid, whether by the
Borrower or by the Project Entities, to an account maintained by, and
in the name of, the Security Trustee for the account of the Borrower,
at The Chase Manhattan Bank (the "Depository") (Account No. 100970300;
Ref.: NRG GENERATING (U.S.) INC.) (the "Collection Account"). The
Collection Account shall be subject to the exclusive control of the
Security Trustee and to the pledge, assignment and security interest
granted in Section 8.3. The Security Trustee shall be entitled to
apply the Assigned Moneys toward payment of the Credit Facility Balance
and interest thereon then due and payable and all other charges and
indebtedness which then may be due and payable under this Agreement,
the Note or any of the Security Documents.
8.2 Application of Assigned Moneys. So long as no Event of
Default specified herein or in any of the Security Documents, and no
event which, with the lapse of time or
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the giving of notice, would become an Event of Default shall have
occurred and be continuing, the Security Trustee shall, upon receipt
from the Borrower of a request therefor and a certification by an
officer of the Borrower (in form and substance satisfactory to the
Security Trustee) that all of the representations and warranties stated
in Section 2 (updated mutatis mutandis to the date of such
certification) are true and correct as if made on the date of such
certification (except to the extent such representations and warranties
relate to a prior date and except that the Borrower shall not be
required to update the Schedules hereto to the extent changes have
occurred in the information disclosed therein from and after the date
hereof (provided that such exception shall not relieve the Borrower of
its obligations to provide or update certain information relating to
matters disclosed on such Schedules under Section 10.1A hereof)) cause
the Depository to remit from the Collection Account to such account as
may be specified by the Borrower in writing the balance thereof. Upon
the occurrence of an Event of Default, and so long as the same shall be
continuing, all moneys then held in the Collection Account and all
Assigned Moneys thereafter received by the Security Trustee or the
Depository shall be applied as provided in Section 9.3.
8.3 Assignment of Collection Account. All monies held in the
Collection Account and all Assigned Moneys received by the Agent, the
Security Trustee or the Lenders shall be collateral security for the
payment and performance by the Borrower of its obligations hereunder
and under the Note and the Security Documents and the Borrower hereby
pledges, assigns and grants the Security Trustee a security interest in
the Borrower's interest in and to the Collection Account and the
Assigned Moneys. If an Event of Default shall occur and so long as the
same shall be continuing, all monies held in the Collection Account and
all Assigned Moneys thereafter received by the Agent, the Security
Trustee or the Lenders may be applied as provided in Section 9.3.
9. EVENTS OF DEFAULT
9.1 In the event that any of the following events shall occur and be
continuing:
(a) Non-Payment of Principal. Any payment of principal due
on a Reduction Date or on the Maturity Date is not paid on such due
date; or
(b) Non-Payment of Interest or Other Amounts. Any interest
on any Advance or any other amount becoming payable to the Agent, the
Security Trustee, the Arranger or any Lender under this Agreement,
under the Note or under any of the Security Documents is not paid on
the due date or date of demand (as the case may be), and such default
continues unremedied for a period of five (5) Banking Days; or
(c) Representations. Any representation, warranty or other
statement made by the Borrower in this Agreement or by any Security
Party in any of the Security
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Documents or in any other instrument, document or other agreement
delivered in connection herewith or therewith proves to have been
untrue or misleading in any material respect as at the date as of which
made or confirmed and such default is not cured within 30 days after
written notice thereof, provided such cure period shall only apply if
the granting thereof could not reasonably be expected to have a
Material Adverse Effect; or
(d) Certain Covenants. Any Security Party defaults in the
performance or observance of any covenant contained in Sections 10.1(A)
(ii), (v), (vii), (xii), (xiii), (ix), (xv), (xix) or Section 10.1(B);
or
(e) Other Covenants. Any Security Party defaults in the due
and punctual observance or performance of any other term, covenant or
agreement contained in this Agreement, in the Note, in any of the
Security Documents or in any other instrument, document or other
agreement delivered in connection herewith or therewith, or it becomes
impossible or unlawful for any Security Party to fulfill any such term,
covenant or agreement or there occurs any other event which constitutes
a default under this Agreement, under the Note or under any of the
Security Documents, in each case other than an Event of Default
referred to elsewhere in this Section 9.1, and, if such default is
capable of being remedied, such default, continues unremedied or
unchanged, as the case may be, for a period of thirty (30) days after
such Security Party obtains knowledge of such default or, if (i) such
failure is incapable of being remedied in 30 days, and (ii) the
applicable Security Party is proceeding with diligence and good faith
to remedy such failure and such failure could not reasonably be
expected to result in a Material Adverse Effect, and (iii) no
distributions are made to the Borrower pursuant to Section 8.2 during
the cure period provided in this paragraph (e), 90 days after the
earlier of (i) the date on which such failure first becomes known to
any Security Party or (ii) the date on which a written notice thereof
shall have been given to the Borrower by the Agent or any Lender; or
(f) Indebtedness. Any Security Party or Project Entity
shall default in the payment when due (subject to any applicable grace
period) of any Indebtedness or of any other indebtedness, in either
case, in the outstanding principal amount equal to or exceeding Two
Hundred Fifty Thousand Dollars ($250,000) or such Indebtedness or
indebtedness is accelerated or any party becomes entitled to enforce
the security for any such Indebtedness or indebtedness and such party
shall take steps to enforce the same, unless such default or
enforcement is being contested in good faith and by appropriate
proceedings or other acts and the Security Party, Subsidiary or
Affiliate, as the case may be, shall set aside on its books adequate
reserves with respect thereto; or
(g) Stock Ownership. (i) NRG Energy shall cease to directly
own at least such number of shares of capital stock of the Borrower as
it did on the Initial
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Drawdown Date (together with any shares acquired as a result of any
stock splits, warrants, rights, options or stock dividends associated
with such shares), (ii) the Borrower shall cease to directly own its
interest in any Project Entity as set out in Schedule 2(b), or (iii)
any Project Entity shall cease to directly own one hundred percent
(100%) of its respective Existing Project; or
(h) Failure to Maintain Status. Failure of any Project
Entity to maintain its status as either the owner of a Qualifying
Cogeneration Facility or as an Exempt Wholesale Generator;
(i) Bankruptcy. The Borrower or any Project Entity thereof
commences any proceeding under any reorganization, arrangement or
readjustment of debt, dissolution, winding up, adjustment, composition,
bankruptcy or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect ("Proceeding"), or there is commenced
against any thereof any Proceeding and such Proceeding remains
undismissed or unstayed for a period of sixty (60) days or any
receiver, trustee, liquidator or sequestrator of, or for, any thereof
or any substantial portion of the property of any thereof is appointed
and is not discharged within a period of sixty (60) days or any thereof
by any act indicates consent to or approval of or acquiescence in any
Proceeding or the appointment of any receiver, trustee, liquidator or
sequestrator of, or for, itself or of, or for, any substantial portion
of its property; or
(j) Termination of Operations; Sale of Assets. Except as
expressly permitted under this Agreement, the Borrower or any Project
Entity ceases its operations or sells or otherwise disposes of all or
substantially all of its assets or all or substantially all of the
assets of the Borrower or any Project Entity are seized or otherwise
appropriated; or
(k) Judgments. Any judgment or order is made the effect
whereof is to render ineffective or invalid this Agreement, the Note or
any of the Security Documents; or
(l) Inability to Pay Debts. The Borrower or any Project
Entity is unable to pay or admits in writing its inability to pay its
debts as they fall due or a moratorium shall be declared in respect of
any material indebtedness of the Borrower or any Project Entity; or
(m) Project Agreements. There occurs any default or event
of default under any Project Agreement which is continuing which could
reasonably be expected to result in a Material Adverse Effect and such
default or event of default shall not be remediable or, if remediable,
shall continue unremedied for a period terminating on the last day of
the applicable cure period, if any, specified in the relevant Project
Agreement,
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or shall not be waived by the appropriate party; provided that for
purposes of this Section 9.1(m) only, "Project Agreements" shall not
include the Assignment of the DuPont Power Purchase Agreement, dated as
of April 30, 1996 from Parlin to NRG Parlin Inc.; provided, further,
that, to the extent caused by a default or event of default by a Person
other than a Borrower Entity with respect to a Project Agreement, such
failure to comply, breach or default shall not be an event of default
under this Section 9.1(m) if (A) such failure to comply, breach or
default is cured within 60 days of the date of occurrence thereof, or
(B)(1) such Project Agreement is replaced within 60 days of the date of
such failure to comply, breach or default with a substitute Project
Agreement in form and substance reasonably satisfactory to the Majority
Lenders, (2) the party or parties (other than the applicable Borrower
Entity) to such substitute Project Agreement are acceptable to the
Majority Lenders, and, in the opinion of the Majority Lenders, are
capable of performing their obligations under such substitute Project
Agreement, (3) in the case of substitution of a Philadelphia
Cogeneration Project Agreement, the Security Trustee shall have been
granted a security interest in any substitute Philadelphia Cogeneration
Project Agreement for the benefit of the Lenders to the same extent as
the Philadelphia Cogeneration Project Agreement being replaced, or (4)
in the case of substitution of any Steam Sales Agreement, the Ground
Lease for the applicable Existing Project shall not be terminable as a
result of the termination of such Steam Sales Agreement; or
(n) ERISA Debt. The Borrower, any Project Entity or any
ERISA Affiliate shall (i) fail to pay when due an amount or amounts
which it shall have become liable to pay under Title IV of ERISA and
such failure to pay could reasonably be expected to result in a
Material Adverse Effect or (ii) incur, or shall reasonably expect to
incur, individually or collectively, any Withdrawal Liability or
liability upon the happening of a Termination Event and such incurrence
could reasonably be expected to a result in a Material Adverse Effect;
or
(o) Invalidity or Revocation of Guarantee. The Guarantee
shall at any time and for any reason cease to be valid and binding or
Philadelphia Cogeneration shall purport to renounce or revoke the
Guarantee; or
(p) Dissolution. The liquidation, dissolution, termination,
acquisition or consolidation of any Security Party other than as
permitted by Section 10.1(B)(viii);
then the Lenders' obligation to make any Advance available shall cease
and the Agent on the instructions of the Majority Lenders may, by
notice to the Borrower, declare the entire unpaid balance of the then
outstanding Advances, accrued interest and any other sums payable by
the Borrower hereunder or under the Note due and payable, whereupon the
same shall forthwith be due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly
waived; provided that upon the happening of an event specified in
subsections (i) of this Section 9.1 with respect to the Borrower,
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the Note shall be immediately due and payable without declaration or
other notice to the Borrower. In such event, the Lenders may proceed
to protect and enforce their rights by action at law, suit in equity or
in admiralty or other appropriate proceeding, whether for specific
performance of any covenant contained in this Agreement, in the Note or
in any Security Document, or in aid of the exercise of any power
granted herein or therein, or the Lenders may proceed to enforce the
payment of the Note or to enforce any other legal or equitable right of
the Lenders, or proceed to take any action authorized or permitted
under the terms of any Security Document or by applicable law for the
collection of all sums due, or so declared due, on the Note, including,
without limitation, the right to appropriate and hold or apply
(directly, by way of set-off or otherwise) to the payment of the
obligations of the Borrower to the Lenders hereunder and/or under the
Note (whether or not then due) all moneys and other amounts of the
Borrower then or thereafter in possession of any Lender, the balance of
any deposit account (demand or time, mature or unmatured) of the
Borrower then or thereafter with any Lender and every other claim of
the Borrower then or thereafter against any of the Lenders.
9.2 Indemnification. The Borrower agrees to, and shall, indemnify and
hold the Agent, the Security Trustee, the Arranger and the Lenders
harmless against any out-of-pocket loss, as well as against any
reasonable costs or expenses (including reasonable legal fees and
expenses), which any of the Agent, the Security Trustee, the Arranger
or the Lenders sustains or incurs as a result of any default in payment
of the principal amount of the Advances, interest accrued thereon or
any other amount payable hereunder, under the Note or under any
Security Documents including, but not limited to, all actual losses
incurred in liquidating or re-employing fixed deposits made by third
parties or funds acquired to effect or maintain the Advances or any
portion thereof. At the Borrower's request, each such Lender shall
provide the Borrower with reasonable evidence of such actual losses
incurred by such Lender.
9.3 Application of Moneys. Except as otherwise provided in any
Security Document, all moneys received by the Agent, the Security
Trustee, the Arranger or the Lenders under or pursuant to this
Agreement, the Note or any of the Security Documents after the
happening of any Event of Default (unless cured to the satisfaction of,
or waived by, the Majority Lenders) shall be applied by the Agent in
the following manner:
(a) first, in or towards the payment or reimbursement of any
expenses or liabilities incurred by the Agent, the Security Trustee,
the Arranger or the Lenders in connection with the ascertainment,
protection or enforcement of its rights and remedies hereunder, under
the Note and under any of the Security Documents,
(b) secondly, in or towards payment of all other sums which
may be owing to the Agent, the Security Trustee, the Arranger or the
Lenders under this
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Agreement, under the Note, under the fee letter between the Borrower
and the Agent of even date herewith or under any of the Security
Documents,
(c) thirdly, in or towards payment of any interest owing in
respect of the Advances,
(d) fourthly, in or towards repayment of principal owing in
respect of the Advances,
(e) fifthly, in prepayment of principal of any then
outstanding Advances, and
(f) sixthly, the surplus (if any) shall be paid to the
Borrower or to whosoever else may be entitled thereto.
9.4 Alleged PECO Option. Each of the Agent, the Security
Trustee, the Arranger and each of the Lenders hereby (a) acknowledges
that PECO has claimed that it possesses an option to purchase the
common stock of Philadelphia Cogeneration, as set forth in the payoff
letter and related release from PECO to the Borrower, dated on or about
the date hereof, copies of which have been delivered to the Agent,
which claim the Borrower disputes and has so advised PECO, (b) agrees
that, notwithstanding any provision or term to the contrary set forth
in this Agreement or any of the Security Documents, such claim and the
existence of any such option (and the existence of the Revocable Trust
of Marsha Perelman's "right of first refusal" to purchase the
Philadelphia Cogeneration common stock upon the exercise by PECO of its
claimed option to purchase such stock) shall not by themselves
constitute an Event of Default under this Agreement or an event of
default under any of the Security Documents, (c) agrees that,
notwithstanding any provisions or term to the contrary set forth in
this Agreement or any of the other Security Documents, the exercise of
such claimed option by PECO (or the exercise by the Revocable Trust of
Marsha Perelman of its "right of first refusal" to purchase the
Philadelphia Cogeneration common stock upon the exercise by PECO of its
claimed option to purchase such stock) shall not constitute an Event of
Default under this Agreement or an event of default under any of the
Security Documents, provided that (i) the Borrower pays to the Agent,
immediately upon the Borrower's receipt thereof, as a prepayment of the
Advances, an amount equal to the greater of (x) the net proceeds
received by the Borrower from any such purchase and sale, and (y)
$9,500,000 (such greater amount being referred to as the "Prepayment
Amount"), and (ii) the Credit Facility shall be permanently reduced by
the Prepayment Amount, and (d) agrees that, upon receipt of the
Prepayment Amount, the Agent, the Security Trustee and the Lenders
shall, if requested by the Borrower, (i) release all of their Liens in
the Collateral consisting of assets relating to the Philadelphia
Cogeneration Project, including
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without limitation the common stock of Philadelphia Cogeneration, the
Collateral subject to the Mortgage, all personal property of
Philadelphia Cogeneration and OESC serving as Collateral for the
Advances, and all personal property of the Borrower located at the
Philadelphia Cogeneration Project, and (ii) execute and deliver, at the
Borrower's expense, such releases and terminations as the Borrower may
reasonably request in order to evidence such release.
9.5 Equipment Liens. Each of the Agent, the Security Trustee,
the Arranger and each of the Lenders hereby agrees that,
notwithstanding any provision or term to the contrary set forth in this
Agreement or any of the Security Documents, the existence of the
Equipment Liens shall not constitute an Event of Default under this
Agreement or an event of default under any of the Security Documents,
provided that the Borrower shall deliver evidence in form and substance
reasonably satisfactory to the Agent of the release of all of the
Equipment Liens by not later than forty-five (45) days from and after
the Initial Drawdown Date, and it is expressly agreed that the failure
to so deliver such evidence within such 45-day period shall constitute
an Event of Default hereunder.
10. COVENANTS
10.1 The Borrower hereby covenants and undertakes with the Lenders
that, from the date hereof and so long as any principal, interest or
other moneys are owing in respect of this Agreement, under the Note or
under any of the Security Documents:
A. The Borrower will, and will procure that each other
Security Party will:
(i) Performance of Credit Facility Agreements. Duly
perform and observe, and procure the observance and performance by all
other parties thereto (other than the Agent, the Arranger, the Security
Trustee and the Lenders) of, the terms of this Agreement, the Note and
the Security Documents;
(ii) Notice of Default, Etc. Promptly upon obtaining
knowledge thereof (and in any event within ten (10) days thereof),
inform the Agent of the occurrence of (a) any Event of Default or of
any event which, with the giving of notice or lapse of time, or both,
would constitute an Event of Default, (b) any litigation or
governmental proceeding pending or threatened against it or against any
of the Project Entities which could reasonably be expected to have a
Material Adverse Effect, and (c) any other event or condition which is
reasonably likely to have a Material Adverse Effect on its ability, or
the ability of any of the Security Parties, to perform its obligations
under this Agreement, under the Note and/or under any of the Security
Documents;
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(iii) Obtain Consents. Without prejudice to Section 2(a)
and this Section 10, obtain every consent and do all other acts and
things which may from time to time be necessary or advisable for the
continued due performance of all its and the other Security Parties'
respective obligations under this Agreement, under the Note and under
the Security Documents;
(iv) Financial Information. At the expense of the
Borrower, deliver to the Agent:
(a) as soon as available but not later than
105 days after the end of each fiscal year of the
Borrower complete copies of the consolidated
financial reports of the Borrower and its
Subsidiaries (in the case of the Borrower, together
with a Compliance Certificate), all in reasonable
detail, which shall include at least the
consolidated balance sheet of such entity and its
Subsidiaries as of the end of such year and the
related consolidated statements of income and
sources and uses of funds for such year, which
shall be audited reports prepared by an Acceptable
Accounting Firm;
(b) as soon as available but not less than 60
days after the end of each of the first three
quarters of each fiscal year of the Borrower a
quarterly interim consolidated balance sheet of the
Borrower and its Subsidiaries and the related
consolidated profit and loss statements and sources
and uses of funds (in the case of the Borrower,
together with a Compliance Certificate), all in
reasonable detail, unaudited, but certified to be
true and complete by the chief financial officer of
the Borrower;
(c) within 30 days of the filing thereof,
copies of all registration statements and reports
on Forms 10-K, 10-Q and 8-K (or their equivalents)
and other material filings which the Borrower shall
have filed with the Securities and Exchange
Commission or any similar governmental authority;
(d) promptly upon the mailing thereof to the
shareholders of the Borrower, copies of all
financial statements, reports, proxy statements and
other communications provided to the Borrower's
shareholders; and
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(e) such other statements (including, without
limitation, monthly consolidated statements of
operating revenues and expenses), operating logs
for each Existing Project, lists of assets and
accounts, budgets, forecasts, reports and other
financial information with respect to the business
of the Borrower as the Agent may from time to time
reasonably request, certified to be true and
complete by the chief financial officer of the
Borrower;
(v) Corporate Existence. Do or cause to be done, and
procure that each Project Entity shall do or cause to be done, all
things necessary to: (a) preserve and keep in full force and effect
its corporate or partnership existence; and (b) preserve and keep in
full force and effect all licenses, franchises, permits and assets
necessary to the conduct of its business, except, in the case of clause
(b) only, where the failure to do so could not reasonably be expected
to result in a Material Adverse Effect;
(vi) Books and Records. Keep, and cause each Project
Entity to keep, proper and accurate books of record and account in
accordance with GAAP throughout the Credit Facility Period;
(vii) Taxes and Assessments. Pay and discharge, and
cause each Project Entity to pay and discharge, all material taxes,
assessments and governmental charges or levies imposed upon it or upon
its income or property prior to the date upon which penalties attach
thereto; provided, however, that it shall not be required to pay and
discharge, or cause to be paid and discharged, any such tax,
assessment, charge or levy so long as the legality thereof shall be
contested in good faith and by appropriate proceedings or other acts
and it shall set aside on its books adequate reserves with respect
thereto;
(viii) Inspection. Allow, and cause each Project Entity
to allow, any representative or representatives designated by any
Lender, subject to applicable laws and regulations, to visit and
inspect any of its properties, and, on the reasonable request thereof,
to examine (at a location where normally kept) its books of account,
records, reports and other papers and to discuss its affairs, finances
and accounts with its officers, at reasonable times and upon reasonable
prior notice;
(ix) Compliance with Statutes, etc. Do or cause to be
done, and cause each Project Entity to do and cause to be done, all
things necessary to comply in all material respects with all material
laws, and the rules and regulations thereunder, applicable to the
Borrower or such Project Entity, including, without limitation, those
laws, rules and regulations relating to employee benefit plans and
environmental matters;
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(x) Environmental Matters. Promptly upon the
occurrence of any of the following conditions, provide to the Agent a
certificate of an officer thereof, specifying in detail the nature of
such condition and its proposed response or the response of its
Environmental Affiliates: (a) its receipt or the receipt by any
Project Entity or any Environmental Affiliates of the Borrower or any
Project Entity of any written communication whatsoever that alleges
that such person is not in compliance with any applicable Environmental
Law or Environmental Approval, if such noncompliance could reasonably
be expected to have a Material Adverse Effect, (b) knowledge by it, or
by any Project Entity or any Environmental Affiliates of the Borrower
or any Project Entity that there exists any Environmental Claim pending
or threatened against any such person, which could reasonably be
expected to have a Material Adverse Effect, or (c) any release,
emission, discharge or disposal of any Material of Environmental
Concern that could form the basis of any Environmental Claim against
it, any Project Entity or against any Environmental Affiliates of the
Borrower or any Project Entity under applicable Environmental Law, if
such Environmental Claim could reasonably be expected to have a
Material Adverse Effect. Upon the written request by the Agent, it
will submit to the Agent at reasonable intervals, a report providing an
update of the status of any issue or claim identified in any notice or
certificate required pursuant to this subsection;
(xi) ERISA. Forthwith upon learning of the occurrence
of any material liability of the Borrower or any Project Entity or any
ERISA Affiliate pursuant to ERISA in connection with the termination of
any Plan or withdrawal or partial withdrawal of any multi-employer plan
(as defined in ERISA) or of a failure to satisfy the minimum funding
standards of Section 412 of the Code or Part 3 of Title I of ERISA by
any Plan for which the Borrower or any Project Entity or any ERISA
Affiliate is plan administrator (as defined in ERISA), furnish or cause
to be furnished to the Agent written notice thereof;
(xii) Consolidated Debt Service Coverage Ratio. Maintain
a Consolidated Debt Service Coverage Ratio of not less than 1:20 to
1:00 provided, however, that if the Consolidated Debt Service Coverage
Ratio is at least 1.0 to 1.0, if (A) within thirty days after the
occurrence of a breach of this Section 10.1(A)(xii), the Borrower
provides Agent with a business plan (satisfactory to Agent), including,
without limitation, the projections for the immediately succeeding
twelve month period, which incorporate the assumptions set forth in the
business plan, describing the steps the Borrower will take to cause the
Consolidated Debt Service Coverage Ratio to be 1.2 to 1.0 or better
(together with such information as Agent may reasonably request) and
(B) the Borrower is proceeding with diligence and good faith to
implement such business plan, then the Borrower shall have up to ninety
days after the occurrence of such breach to bring the Consolidated Debt
Service Coverage Ratio to a level of at least 1.2 to 1.0; provided,
further, that during such ninety (90) day period, the Borrower shall be
entitled
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to no moneys from the Collection Account and the Lenders shall not be
obligated to make any Advances under the Credit Facility;
(xiii) Borrower Debt Service Coverage Ratio. Maintain a
Borrower Debt Service Coverage Ratio of not less than 2:00 to 1:00;
provided, however, that if the Borrower Debt Service Coverage Ratio is
at least 1.3 to 1.0, if (A) within thirty days after the occurrence of
a breach of this Section 10.1(A)(xiii), the Borrower provides Agent
with a business plan (satisfactory to Agent), including, without
limitation, the projections for the immediately succeeding twelve month
period, which incorporate the assumptions set forth in the business
plan, describing the steps the Borrower will take to cause the Borrower
Debt Service Coverage Ratio to be 2.0 to 1.0 or better (together with
such information as Agent may reasonably request) and (B) the Borrower
is proceeding with diligence and good faith to implement such business
plan, then the Borrower shall have up to ninety days after the
occurrence of such breach to bring the Borrower Debt Service Coverage
Ratio to a level of at least 2.0 to 1.0; provided, further, that during
such ninety (90) day period, the Borrower shall be entitled to no
moneys from the Collection Account and the Lenders shall not be
obligated to make any Advances under the Credit Facility;
(xiv) Maintenance of Properties, Etc. Preserve and
maintain good and marketable title to all of its properties and assets
which are necessary in the conduct of its business in good working
order and condition, ordinary wear and tear excepted, subject to no
Liens other than Permitted Liens;
(xv) Revenue Collection Account; Assignment. Throughout
the Credit Facility Period, shall cause each Project Entity to make all
permissible distributions of Project Cash Flow and shall cause all such
Project Cash Flow to be paid into the Revenue Collection Account;
(xvi) Performance of Project Agreements. Cause each
Project Entity to (A) perform and observe all of its covenants and
agreements contained in the Governmental Approvals and any of the
Project Agreements to which it is a party, unless the failure to
perform or observe such covenants and agreements could not reasonably
be expected to result in a Material Adverse Effect, (B) preserve,
protect and defend its rights contained in the Governmental Approvals
and any of the Project Agreements to which it is a party, unless the
failure to preserve, protect or defend such rights could not reasonably
be expected to result in a Material Adverse Effect and (C) maintain in
full force and effect each of the Project Agreements to which it is a
party and all contracts, permits and Governmental Approvals relating
thereto which are necessary for the maintenance and operation its
Existing Project;
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(xvii) Operating Logs. Cause each Project Entity at its
sole cost and expense to (A) maintain at its respective Existing
Project daily operating logs showing, among other things the electrical
output of such Existing Project, (B) keep maintenance and repair
reports in sufficient detail to indicate the nature and date of all
work done, (C) maintain a current operating manual and a complete set
of plans, accounting records and specifications reflecting all
alterations and (D) maintain all other records, logs and other
materials required by the relevant Project Agreements or any
Governmental Approval;
(xviii) Maintenance of Insurance. Maintain or cause to be
maintained with insurance companies rated "A-" or better by Best's
Insurance Guide and Key Ratings or other insurance companies of
recognized responsibility reasonably satisfactory to the Agent,
insurance in such amounts and covering such risks as are usually
carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which such Security Party or
Project Entity operates, and in any event the insurance coverages shall
not be less than the insurance coverages set forth on Schedule 2(i).
The Borrower shall, upon the request of the Agent, promptly provide a
schedule indicating the policies maintained by each of the Borrower and
each Project Entity, coverage limits of liability, effective dates of
coverage, insurance carrier names and policy numbers. Borrower shall
cause the Security Trustee to be named as loss payee or as an
additional named insured in respect of the Philadelphia Cogeneration
Project, for the account of the Lenders and the Agent itself. Evidence
of payment of premiums for such insurance policies shall be delivered
to the Agent at least thirty (30) days prior to the expiration thereof
and such insurance policies shall be delivered to the Agent promptly
upon its request therefor;
(xix) Use of Proceeds. Use the proceeds of all Advances
only as set forth in Section 3.1(a);
(xx) Additional Documents; Filings and Recordings.
Execute and deliver from time to time as reasonably requested by Agent,
at such Security Party's expense, such other documents in connection
with the rights and remedies of the Security Trustee, Agent and Lenders
granted or provided for by the Security Documents, as applicable, which
are necessary to consummate the transactions contemplated therein.
Each Security Party shall, at its own expense, take all reasonable
actions that have been or shall be requested by the Security Trustee to
establish, maintain, protect, perfect and continue the perfection of
the security interests of the Security Trustee created by the Security
Documents including the execution of such instruments, and providing
such other information as may be required to enable the Security
Trustee to effect any such action. Without limiting the generality of
the foregoing, each Security Party shall execute or cause to be
executed and shall file or cause to be filed such financing statements,
continuation statements, fixture filings, assignments, mortgages or
deed of trust in all
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places necessary or advisable (in the opinion of counsel for the
Security Trustee) to establish, maintain and perfect such security
interests and in all other places that the Security Trustee shall
reasonably request.
B. The Borrower will not, and will procure that each
Project Entity will not, without the prior written consent of the Agent
(or the Majority Lenders or all of the Lenders if required by
Section 16.7):
(i) Liens. Create, assume or permit to exist, any
mortgage, pledge, lien, charge, encumbrance or any security interest
whatsoever upon any Collateral except Permitted Liens.
(ii) Capital Expenditures. Make any capital
expenditures (excluding ordinary or scheduled maintenance) in relation
to any Existing Project, in any calendar year, exceeding (i) with
respect to the Parlin Project and the Grays Ferry Project, $2,000,000,
(ii) with respect to the Newark Project, $1,000,000, or (iii) with
respect to the Philadelphia Cogeneration Project, $500,000; provided,
however, that, during the calendar year 1997, such capital expenditures
of up to $2,000,000 may be made in respect of the Newark Project;
(iii) Indebtedness. Incur any Indebtedness except
(a) Indebtedness hereunder or in connection herewith to the Agent, the
Arranger, the Security Trustee or the Lenders, or (b) so long as no
Event of Default occurs and is continuing: (i) if non-recourse to the
Borrower, Indebtedness of any Subsidiary of the Borrower which is
formed after the Initial Drawdown Date; (ii) Indebtedness of the
Borrower to NRG Energy which is subordinated, pursuant to a
Subordination Agreement, to the Borrower's obligations under this
Agreement, the Note and any of the Security Documents;
(iii) Indebtedness of up to $1,000,000 during each calendar year during
the Credit Facility Period of OESC pursuant to the OESC Financing
Program, for use in the ordinary course of business of OESC to finance
the OESC Rental Fleet; (iv) unsecured Indebtedness of the Borrower, if
subordinated, pursuant to a Subordination Agreement, to the Borrower's
obligations under this Agreement, the Note and the Security Documents,
the terms of any such Indebtedness to be acceptable to the Agent;
(v) Indebtedness of any Project Entity, if non-recourse to the
Borrower, under interest rate swap agreements to hedge interest rate
exposure for permitted non-recourse financings; (vi) Indebtedness under
(A) that certain Credit Agreement, dated as of March 1, 1996, among
Grays Ferry, the financial institutions listed on Exhibit H thereto and
The Chase Manhattan Bank, N.A., and (B) that certain Credit Agreement,
dated as of May 17, 1996, among Newark, Parlin, Credit Suisse,
Greenwich Funding Corporation and any Purchasing Lender and Credit
Suisse; and (vii) Indebtedness of Grays Ferry incurred under fuel price
hedges as the same were in effect on March 1, 1996;
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(iv) Change in Business. Materially change the nature
of its business or commence any business materially different from its
current business;
(v) Sale or Pledge of Shares. Sell, assign, transfer,
pledge or otherwise convey or dispose of any of the shares or direct or
indirect interest (including by way of spin-off, installment sale or
otherwise) of the capital stock of or other equity interests in any
Project Entity;
(vi) Sale of Assets. Sell, or otherwise dispose of, any
Existing Project or any other asset (including by way of spin-off,
installment sale or otherwise) which is substantial in relation to its
assets taken as a whole, except for (a) sales and dispositions of
obsolete, worn or replaced property not used or useful in such Project
Entity's business provided that the proceeds thereof (to the extent not
used to replace such obsolete, worn or replace property) shall be
deposited in the Collection Account and (b) transfers of assets from
OESC to Philadelphia Cogeneration, and from the Borrower to
Philadelphia Cogeneration, in connection with the consolidation of the
Philadelphia Cogeneration operating assets;
(vii) Changes in Offices or Names. Change the location
of the chief executive office of any Security Party, the office of the
chief place of business any such parties, the office of the Security
Parties in which the records relating to the earnings or insurances of
the Existing Projects are kept unless the Agent shall have received
thirty (30) days prior written notice of such change;
(viii) Consolidation and Merger. Consolidate with, or
merge into, any corporation or other entity, or merge any corporation
or other entity into the Borrower or any Project Entity provided, that,
Philadelphia Cogeneration and OESC may merge and/or consolidate their
operations into Philadelphia Cogeneration as long as the security
interest of the Security Trustee in their assets maintains its priority
and effectiveness;
(ix) Limitation on Dividends. Directly or indirectly
declare or pay any dividend or make any distribution on its capital
stock (other than stock dividends) or distribution to partners, as the
case may be (any such payments being defined as "Dividends") (except
that the Project Entities may distribute Project Cash Flow to the
Borrower and Philadelphia Cogeneration and Philadelphia Biogas may pay
regularly scheduled dividends on their respective stock held by the
Revocable Trust of Marsha Reines Perelman until such time as such
shares are redeemed by Philadelphia Cogeneration or Philadelphia Biogas
or purchased by the Borrower) unless not less than thirty (30) days
prior to the proposed date of payment of such Dividend the Borrower
shall have delivered to the Agent (A) a certificate signed by the chief
financial officer of the Borrower that, after giving effect to such
proposed Dividend Payment, no Default or
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Event of Default would occur or reasonably be anticipated to occur
and/or be continuing and (B) the Letter of Credit;
(x) Amendment, Termination, Etc. of Project Agreements.
Terminate, cancel or suspend, or permit or consent to any termination,
cancellation or suspension of, or enter into or consent to or permit
the assignment of the rights or obligations of any party to, any of the
Project Agreements or Governmental Approvals. The Borrower shall not
permit any Project Entity to, directly or indirectly, amend, modify,
supplement or waive, or permit or consent to the amendment,
modification, supplement or waiver of, any of the provisions of, or
give any consent under, any of the Project Agreements without (A) first
submitting to the Agent a copy of such proposed amendment,
modification, supplement, waiver or consent and (B) if in the
reasonable judgment of the Agent, such proposed amendment,
modification, supplement, waiver or consent could reasonably be
expected to result in a Material Adverse Effect, the express prior
written consent of the Majority Lenders thereto;
(xi) Fiscal Year. Change its fiscal year;
(xii) Transactions with Affiliates. Enter into any
transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any
Affiliate except for (A) transactions contemplated by existing
operations and maintenance agreements and/or management agreements in
respect of the Existing Projects, (B) transactions contemplated by the
April 30, 1996 Management Services Agreement between the Borrower and
NRG Energy, and (C) other transactions in the ordinary course of
business and pursuant to the reasonable requirements of such Security
Party's or Project Entity's business and upon fair and reasonable terms
no less favorable than would be obtained in an comparable arm's length
transaction with a Person not an Affiliate, which, as to any
transaction with NRG Energy or its Affiliates, shall be conclusively
determined if the Independent Committee of the Board of Directors of
the Borrower approves such transaction; and
(xiii) Investments. Make any Investments except
(i) investments, directly or indirectly, in Future Projects and
(ii) Permitted Investments or use any part of the proceeds of any
Advance to purchase margin stock (as defined in the regulations
referred to below) or for any other purpose which would result in the
violation by any Borrower Entity of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System or to extend credit to
others for any such purpose.
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11. ASSIGNMENT.
This Agreement shall be binding upon, and inure to the
benefit of, the Borrower and the Lenders, the Arranger, the Security
Trustee and the Agent and their respective successors and assigns,
except that the Borrower may not assign any of its rights or
obligations hereunder. Each Lender shall be entitled to assign its
rights and obligations under this Agreement or grant participation(s)
in the Credit Facility to any subsidiary, holding company or other
affiliate of such Lender, to any subsidiary or other affiliate company
of any thereof or, with the consent of the Borrower and the Agent, not
to be unreasonably withheld, to any other bank or financial institution
(in a minimum amount of not less than $5,000,000, provided, however,
that, unless otherwise agreed to in writing by the Agent and the
Borrower (such consent of the Borrower not to be unreasonably
withheld), after giving affect to any such assignment or grant of
participation, such Lender's remaining Commitment shall be in an amount
equal to at least $5,000,000), and such Lender shall forthwith give
notice of any such assignment or participation to the Borrower;
provided, however, that any such an assignment must be made pursuant to
an Assignment and Assumption Agreement. The Borrower will take all
reasonable actions requested by the Agent or any Lender to effect an
assignment, including, without limitation, the execution of a written
consent to an Assignment and Assumption Agreement. Voting rights of
any participants shall be limited to those matters with respect to
which the affirmative vote of the Lender from which it purchased its
participation would be required. Pledges of a Lender's loans under the
this Agreement are permitted without restriction to any Federal Reserve
Bank in support of borrowings made by the pledging Lender to such
Federal Reserve Bank. Separate Notes to individual Lenders will be
issued only upon request and only in connection with a pledge thereof
to a Federal Reserve Bank.
12. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
12.1 Illegality. In the event that by reason of any change in any
applicable law, regulation or regulatory requirement or in the
interpretation thereof, a Lender has a reasonable basis to conclude
that it has become unlawful for any Lender to maintain or give effect
to its obligations as contemplated by this Agreement, such Lender shall
inform the Agent and the Borrower to that effect, whereafter the
liability of such Lender to make its Commitment available shall
forthwith cease and the Borrower shall be required either to repay to
such Lender that portion of the Advances advanced by such Lender
immediately or, if such Lender so agrees, to repay such portion of the
Advances to the Lender on the last day of any then current Interest
Period in accordance with and subject to the provisions of
Section 12.5, provided, that, should such illegality relate solely to a
Lender's ability to make LIBOR Rate Advances, any such LIBOR Rate
Advances outstanding shall be converted to Base Rate Advances and such
Lender's obligation to make Base Rate Advances available to the
Borrower shall continue. In any such event,
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but without prejudice to the aforesaid obligations of the Borrower to
repay such portion of the Advances, the Borrower and the relevant
Lender shall negotiate in good faith with a view to agreeing on terms
for making such portion of the Advances available from another
jurisdiction or otherwise restructuring such portion of the Credit
Facility on a basis which is not unlawful.
12.2 Increased Costs. If any change in applicable law, regulation
or regulatory requirement, or in the interpretation or application
thereof by any governmental or other authority, shall:
(i) subject any Lender to any Taxes with
respect to its income from the Credit Facility, or
any part thereof, or
(ii) change the basis of taxation to any
Lender of payments of principal or interest or any
other payment due or to become due pursuant to this
Agreement (other than a change in the basis
effected by the jurisdiction of organization of
such Lender, the jurisdiction of the principal
place of business of such Lender, the United States
of America, the State or City of New York or any
governmental subdivision or other taxing authority
having jurisdiction over such Lender (unless such
jurisdiction is asserted solely by reason of the
activities of the Borrower or any of the other
Security Parties) or such other jurisdiction where
the Credit Facility may be payable), or
(iii) impose, modify or deem applicable
any reserve requirements or require the making of
any special deposits against or in respect of any
assets or liabilities of, deposits with or for the
account of, or loans by, a Lender, or
(iv) impose on any Lender any other condition
affecting the Credit Facility or any part thereof,
and the result of the foregoing is either to increase the cost to such
Lender of making available or maintaining its Commitment or any part
thereof or to reduce the amount of any payment received by such Lender
(collectively, "Increased Costs"), then and in any such case if such
increase or reduction in the opinion of such Lender materially affects
the interests of such Lender under or in connection with this
Agreement:
(a) the Lender shall notify the Agent and the
Borrower of the happening of such event, and
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(b) the Borrower agrees forthwith upon demand to
pay to such Lender the amount of such Increased Costs.
PROVIDED, however, that the foregoing provisions shall
not be applicable in the event that Increased Costs to
the Lender result from the exercise by the Lender of its
right to assign its rights or obligations under
Section 12. At the Borrower's request, such Lender
shall provide the Borrower with reasonable evidence of
the Increased Costs to such Lender.
Each Lender shall notify the Borrower of any event that will
entitle such Lender to compensation under this Section within 45 days
after such Lender obtains actual knowledge thereof, provide that if any
Lender fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to
compensation payable under this Section, only be entitled to payment
for Increased Costs incurred from and after the date that is 45 days
prior to the date that such Lender does give such notice. Except as
provided in the preceding sentence, the failure to give any such notice
shall not release or diminish any of the Borrower's obligations to pay
any amounts pursuant to this Section.
12.3 Nonavailability of Funds. If the Agent shall determine that,
by reason of circumstances affecting the London Interbank Market
generally, adequate and reasonable means do not or will not exist for
ascertaining the Applicable Rate for any LIBOR Rate Advance for any
Interest Period, the Agent shall give notice of such determination to
the Borrower, and the right of the Borrower to select LIBOR Rate
Advances shall be suspended until the Agent shall notify the Borrower
that the circumstances causing such suspension no longer exists.
During such suspension, all Advances shall be made as Base Rate
Advances.
12.4 Compensation for Losses. Where any Advance or a portion
thereof is to be repaid by the Borrower pursuant to this Section 12,
the Borrower agrees simultaneously with such repayment to pay to the
relevant Lender all accrued interest to the date of actual payment on
the amount repaid and all other sums then payable by the Borrower to
the relevant Lender pursuant to this Agreement, together with such
amounts as may be necessary to compensate such Lender for any actual
loss, premium or penalties incurred or to be incurred thereby on
account of funds borrowed to make, fund or maintain its Commitment or
such portion thereof for the remainder (if any) of the then current
Interest Period or Periods, if any, but otherwise without penalty or
premium. At the Borrower's request, such Lender shall provide the
Borrower with reasonable evidence of the actual loss, premium or
penalty incurred by such Lender.
12.5 Replacement of Lender. (a) In the event that (i) any Lender
requests compensation pursuant to Section 12.2 or 12.4, (ii) the
obligation of any Lender to make or continue its proportionate interest
in the Loans or the Commitments is terminated
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pursuant to Section 12.1, (iii) the obligation of any Lender to make or
continue LIBOR Rate Advances shall be suspended pursuant to
Section 12.3, or (iv) any Lender becomes insolvent or fails to make any
Advance in response to a request for borrowing by the Borrower where
the Majority Lenders have made the respective Advances to be made by
them in response to such request, then, so long as such condition
exists and no Event of Default has occurred and is continuing, the
Borrower may either (x) designate another financial institution (such
financial institution being herein called a "Replacement Lender")
acceptable to the Agent (which acceptance shall not be unreasonably
withheld) and which is not an Affiliate of the Borrower, to assume such
Lender's Commitment hereunder and to purchase the Advances of such
Lender and such Lender's rights under this Agreement and the Notes and
any other Security Documents held by such Lender, all without recourse
to or representation or warranty by, or expense to, such original
Lender, for a purchase price equal to the outstanding principal amount
of the Advances payable to such Lender plus any accrued but unpaid
interest on such Advances and accrued but unpaid fees owing to such
Lender under this Agreement, and upon such assumption, purchase and
substitution, and subject to the execution and delivery to the Agent by
the Replacement Lender of documentation satisfactory to the Agent
(pursuant to which such Replacement Lender shall assume the obligations
of such original Lender under this Agreement), the Replacement Lender
shall succeed to the rights and obligations of such original Lender
hereunder, or (y) pay to such Lender the outstanding principal amount
of the Advances and accrued but unpaid interest on such Advances and
accrued but unpaid fees owing to such Lender under this Agreement. In
the event that the Borrower exercises its rights under the preceding
sentence, the Lender against which such rights were exercised shall no
longer be a party hereto or have any rights or obligations hereunder.
If the Borrower exercises its rights under clause (y) above against any
Lender, then the outstanding Advances and the Commitments shall be
reduced to the extent of such Lender's pro rata share of the Advances
and the Commitments.
(b) If the Borrower exercises its rights under clause (y) of
Section 12.5(a) hereof, the Borrower may, not later than the first
anniversary of such exercise, designate another financial institution
(such financial institution being herein called a "Substitute Lender")
acceptable to the Agent (which acceptance shall not be unreasonably
withheld) and which is not an Affiliate of the Borrower, to assume the
Commitments of the Lender against which such rights were exercised and,
subject to the execution and delivery to the Agent by the Substitute
Lender of documentation satisfactory to the Lender, the Substitute
Lender shall become a party to this Agreement as a Lender. Upon the
Substitute Lender becoming a party to this Agreement, the Borrower
shall borrow Advances from the Substitute Lender in such a manner and
in such amounts as will result in the outstanding principal amount of
the Advances held by the Lenders being pro rata according to the
amounts of their respective Commitments.
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13 FEES AND EXPENSES
13.1 Commitment Fee. The Borrower shall pay to the Agent for the
account of the Lenders a fee in an amount equal to three-eighths of one
percent (3/8%) per annum on the committed but undrawn amount of the
Credit Facility from the date hereof through the Maturity Date
quarterly in arrears, provided, however that, if on the last day of any
calendar quarter the average amount of outstanding Advances under the
Credit Facility during the immediately preceding four calendar quarters
is less than 80% of the Credit Facility (as reduced from time to time),
the commitment fee payable hereunder shall for such calendar quarter be
increased to one-half of one percent (1/2%). Such fee shall accrue
from day-to-day and be calculated on the actual number of days elapsed
and a three hundred and sixty (360) day year.
13.2 Administrative Fee. The Borrower shall pay the Agent an annual
administrative fee of $30,000, payable on the Initial Drawdown Date and
on each anniversary thereof (excluding the Maturity Date).
13.3 Expenses. The Borrower agrees, whether or not the transactions
hereby contemplated are consummated, on demand to pay, or reimburse the
Agent, the Security Trustee and the Arranger for their payment of, the
reasonable expenses of the Agent, the Security Trustee, the Arranger
and (after the occurrence and during the continuance of an Event of
Default) the Lenders incident to said transactions (and in connection
with any supplements, amendments, waivers or consents relating thereto
or incurred in connection with the enforcement or defense of any of the
Agent's, the Security Trustee's, the Arranger's and the Lenders' rights
or remedies with respect thereto or in the preservation of the Agent's,
the Security Trustee's, the Arranger's and the Lenders' priorities
under the documentation executed and delivered in connection therewith)
including, without limitation, all reasonable costs and expenses of the
Agent, the Security Trustee and the Arranger of preparation,
negotiation, execution and administration (other than routine
administration) of this Agreement and the documents referred to herein,
the reasonable fees and disbursements of the Agent's counsel in
connection therewith, as well as the reasonable fees and expenses of
any independent appraisers, surveyors, engineers and other consultants
reasonably retained by the Agent, the Security Trustee or the Arranger
in connection with this transaction (provided, however, that unless an
Event of Default has occurred, neither the Agent, the Security Trustee
or the Arranger shall be entitled to reimbursement of any consultants
fees and expenses unless the Borrower shall have received notice of the
intention to retain such consultants and a reasonable opportunity to
provide such party with the requested information), all reasonable
costs and expenses, if any, in connection with the enforcement of this
Agreement, the Note and the Security Documents and stamp and other
similar taxes, if any, incident to the execution and delivery of the
documents (including, without limitation, the Note) herein contemplated
and to hold the Agent, the Security Trustee, the Arranger and the
Lenders free and
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harmless in connection with any liability arising from the nonpayment
of any such stamp or other similar taxes. Such taxes and, if any,
interest and penalties related thereto as may become payable after the
date hereof shall be paid immediately upon demand by the Borrower to
the Agent, the Security Trustee, the Arranger or the Lenders, as the
case may be, when liability therefor is no longer contested by such
party or parties or reimbursed immediately by the Borrower to such
party or parties after payment thereof (if the Agent, the Security
Trustee, the Arranger or the Lenders, at their sole discretion, chooses
to make such payment).
14 APPLICABLE LAW, JURISDICTION AND WAIVER
14.1 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
14.2 Jurisdiction. The Borrower hereby irrevocably submits to the
jurisdiction of the courts of the State of New York and of the United
States District Court for the Southern District of New York in any
action or proceeding brought against it by any of the Lenders, the
Agent, the Security Trustee or the Agent under this Agreement or under
any document delivered hereunder and hereby irrevocably agrees that
valid service of summons or other legal process on it may be effected
by serving a copy of the summons and other legal process in any such
action or proceeding on the Borrower by mailing (certified or
registered mail) or delivering the same by hand to the Borrower at the
address indicated for notices in Section 16.1. The service, as herein
provided, of such summons or other legal process in any such action or
proceeding shall be deemed personal service and accepted by the
Borrower as such, and shall be legal and binding upon the Borrower for
all the purposes of any such action or proceeding. A judgment (a
certified or exemplified copy of which shall be conclusive evidence of
the fact and of the amount of any indebtedness of the Borrower to the
Lenders, the Agent, the Security Trustee or the Arranger) after
exhaustion of any appeals taken against the Borrower in any such legal
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment. The Borrower will advise the
Agent promptly of any change of address for the purpose of service of
process. Notwithstanding anything herein to the contrary, the Lenders
may bring any legal action or proceeding in any other appropriate
jurisdiction.
14.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE
BORROWER, THE OTHER SECURITY PARTIES, THE ARRANGER, THE AGENT, THE
SECURITY TRUSTEE AND THE LENDERS THAT EACH OF THEM HEREBY WAIVES TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY
HERETO AGAINST ANY OTHER PARTY HERETO ON ANY MATTER WHATSOEVER
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ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE NOTE,
THE GUARANTEE OR THE SECURITY DOCUMENTS.
15. THE AGENT
15.1 (a) Appointment of Agent. Each of the Lenders hereby irrevocably
appoints and authorizes the Agent (which for purposes of this
Section 15 shall be deemed to include the Agent acting in its capacity
as Security Trustee pursuant to Section 15.1(b)) to take such action as
agent on its behalf and to exercise such powers under this Agreement,
the Note and the Security Documents as are delegated to the Agent by
the terms hereof and thereof. Neither the Agent nor any of its
directors, officers, employees or agents shall be liable for any action
taken or omitted to be taken by it or them under this Agreement, the
Note or the Security Documents or in connection therewith, except for
its or their own gross negligence or willful misconduct.
(b) Appointment of Security Trustee. Each of the Lenders
irrevocably appoints the Security Trustee as security trustee on its
behalf with regard to (i) the security, powers, rights, titles,
benefits and interests (both present and future) constituted by and
conferred on the Lenders or any of them or for the benefit thereof
under or pursuant to this Agreement, the Note or any of the Security
Documents (including, without limitation, the benefit of all covenants,
undertakings, representations, warranties and obligations given, made
or undertaken to any Lender in the Agreement, the Note or any Security
Document), (ii) all moneys, property and other assets paid or
transferred to or vested in any Lender or any agent of any Lender or
received or recovered by any Lender or any agent of any Lender pursuant
to, or in connection with, this Agreement, the Note or the Security
Documents whether from any Security Party or any other person and (iii)
all money, investments, property and other assets at any time
representing or deriving from any of the foregoing, including all
interest, income and other sums at any time received or receivable by
any Lender or any agent of any Lender in respect of the same (or any
part thereof). The Security Trustee hereby accepts such appointment.
15.2 Distribution of Payments. Whenever any payment is received by the
Agent from the Borrower or any other Security Party for the account of
the Lenders, or any of them, whether of principal or interest on the
Note, commissions, fee under Section 13.1 or otherwise, it will
thereafter cause to be distributed on the same day if received before
11 a.m. New York time, or on the next day if received thereafter, like
funds relating to such payment ratably to the Lenders according to
their respective Commitments, in each case to be applied according to
the terms of this Agreement.
15.3 Holder of Interest in Note. The Agent may treat each Lender as
the holder of all of the interest of such Lender in the Note.
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15.4 No Duty to Examine, Etc. The Agent shall not be under a duty to
examine or pass upon the validity, effectiveness or genuineness of any
of this Agreement, the Note, the Security Documents or any instrument,
document or communication furnished pursuant to this Agreement or in
connection therewith or in connection with the Note, or any Security
Document, and the Agent shall be entitled to assume that the same are
valid, effective and genuine, have been signed or sent by the proper
parties and are what they purport to be.
15.5 Agent as Lender. With respect to that portion of the Advances
made available by it, the Agent shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it
were not the Agent, and the term "Lender" or "Lenders" shall include
the Agent in its capacity as a Lender. The Agent and its affiliates
may accept deposits from, lend money to and generally engage in any
kind of business with, the Borrower and the other Security Parties as
if it were not the Agent.
15.6 (a) Obligations of Agent. The obligations of the Agent under
this Agreement, under the Note and under the Security Documents are
only those expressly set forth herein and therein.
(b) No Duty to Investigate. The Agent shall not at any time
be under any duty to investigate whether an Event of Default, or an
event which with the giving of notice or lapse of time, or both, would
constitute an Event of Default, has occurred or to investigate the
performance of this Agreement, the Note or any Security Document by any
Security Party.
15.7 (a) Discretion of Agent. The Agent shall be entitled to use its
discretion with respect to exercising or refraining from exercising any
rights which may be vested in it by, and with respect to taking or
refraining from taking any action or actions which it may be able to
take under or in respect of, this Agreement, the Note and the Security
Documents, unless the Agent shall have been instructed by the Majority
Lenders to exercise such rights or to take or refrain from taking such
action; provided, however, that the Agent shall not be required to take
any action which exposes the Agent to personal liability or which is
contrary to this Agreement or applicable law.
(b) Instructions of Majority Lenders. The Agent shall in
all cases be fully protected in acting or refraining from acting under
this Agreement, under the Note or under any Security Document in
accordance with the instructions of the Majority Lenders, and any
action taken or failure to act pursuant to such instructions shall be
binding on all of the Lenders. Neither this Agreement nor any of the
Security Documents nor any terms hereof or thereof may be amended
unless such amendment is approved by the Borrower and the Majority
Lenders, provided that no such amendment shall, without the consent of
each Lender affected hereby, (i) extend the Credit Facility Period, or
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reduce the rate or extend the time of payment of principal or interest
or fees thereon, or reduce the principal amount of the Advances,
(ii) increase the Commitment of any Lender over the amount thereof then
in effect (it being understood that a waiver of any default or Event of
Default or any mandatory repayment of Advances shall not constitute a
change in the terms of any Commitment of any Lender), (iii) amend,
modify or waive any provision of this Section 15, (iv) amend the
definition of Majority Lenders, (v) consent to the assignment or
transfer by the Borrower of any of its rights and obligations under
this Agreement, (vi) release any Security Party from any of its
obligations under any Security Document except as expressly provided
herein or in such Security Document or (vii) amend any provision
relating to the maintenance of collateral under Section 9.3. All
amendments approved by the Majority Lenders under this Section 15 must
be in writing and signed by the Borrower and each of the Lenders. In
the event that any Lender is unable to or refuses to sign an amendment
approved by the Majority Lenders hereunder, such Lender hereby appoints
the Agent as its Attorney-In-Fact for the purposes of signing such
amendment. No provision of this Section 15 or any other provisions
relating to the Agent may be modified without the consent of the Agent.
15.8 Assumption re Event of Default. Except as otherwise provided in
Section 15.14, the Agent shall be entitled to assume that no Event of
Default, or event which with the giving of notice or lapse of time, or
both, would constitute an Event of Default, has occurred and is
continuing, unless the Agent has been notified by any Security Party of
such fact, or has been notified by a Lender that such Lender considers
that an Event of Default or such an event (specifying in detail the
nature thereof) has occurred and is continuing. In the event that the
Agent shall have been notified by any Security Party or any Lender in
the manner set forth in the preceding sentence of any Event of Default
or of an event which with the giving of notice or lapse of time, or
both, would constitute an Event of Default, the Agent shall notify the
Lenders and shall take action and assert such rights under this
Agreement, under the Note and under the Security Documents as the
Majority Lenders shall request in writing.
15.9 No Liability of Agent or Lenders. Neither the Agent nor any of
the Lenders shall be under any liability or responsibility whatsoever:
(A) to any Security Party or any other person or entity as a
consequence of any failure or delay in performance by, or any breach
by, any other Lenders or any other person of any of its or their
obligations under this Agreement or under any Security Document;
(B) to any Lender or Lenders as a consequence of any failure or
delay in performance by, or any breach by, any Security Party of any of
its respective obligations under this Agreement, under the Note or
under the Security Documents; or
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(C) to any Lender or Lenders for any statements, representations
or warranties contained in this Agreement, in any Security Document or
in any document or instrument delivered in connection with the
transaction hereby contemplated; or for the validity, effectiveness,
enforceability or sufficiency of this Agreement, the Note , any
Security Document or any document or instrument delivered in connection
with the transactions hereby contemplated.
15.10 Indemnification of Agent. The Lenders agree to indemnify the
Agent (to the extent not reimbursed by the Security Parties or any
thereof), pro rata according to the respective amounts of their
Commitments, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever (including legal fees
and expenses incurred in investigating claims and defending itself
against such liabilities) which may be imposed on, incurred by or
asserted against, the Agent in any way relating to or arising out of
this Agreement, the Note, or any Security Document, any action taken or
omitted by the Agent thereunder or the preparation, administration,
amendment or enforcement of, or waiver of any provision of, this
Agreement, the Note, or any Security Document, except that no Lender
shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements resulting from the Agent's gross negligence or willful
misconduct.
15.11 Consultation with Counsel. The Agent may consult with legal
counsel selected by the Agent and shall not be liable for any action
taken, permitted or omitted by it in good faith in accordance with the
advice or opinion of such counsel.
15.12 Resignation. The Agent may resign at any time by giving
sixty (60) days' written notice thereof to the Lenders and the
Borrower. Upon any such resignation, the Lenders shall have the right
to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Lenders and shall have accepted such appointment
within sixty (60) days after the retiring Agent's giving notice of
resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent which shall be a bank or trust company of
recognized standing. The appointment of any successor Agent shall be
subject to the prior written consent of the Borrower, such consent not
to be unreasonably withheld. After any retiring Agent's resignation as
Agent hereunder, the provisions of this Section 15 shall continue in
effect for its benefit with respect to any actions taken or omitted by
it while acting as Agent.
15.13 Representations of Lenders. Each Lender represents and
warrants to each other Lender and the Agent that:
(i) In making its decision to enter into this Agreement and to
make its Commitment available hereunder, it has independently taken
whatever steps it considers
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<PAGE>
necessary to evaluate the financial condition and affairs of the
Security Parties, that it has made an independent credit judgment and
that it has not relied upon any statement, representation or warranty
by any other Lender or the Agent; and
(ii) So long as any portion of its Commitment remains outstanding,
it will continue to make its own independent evaluation of the
financial condition and affairs of the Security Parties.
15.14 Notification of Event of Default. The Agent hereby
undertakes to promptly notify the Lenders, and the Lenders hereby
promptly undertake to notify the Agent and the other Lenders, of the
existence of any Event of Default which shall have occurred and be
continuing of which the Agent or any Lender has actual knowledge.
16. NOTICES AND DEMANDS
16.1 Notices. All notices, requests, demands and other
communications to any party hereunder shall be in writing (including
prepaid overnight courier, facsimile transmission or similar writing)
and shall be given to the Borrower at the address or telecopy number
set forth below and to the Lenders, the Agent and the Security Trustee
at their address and telecopy number set forth in Schedule 1 or at such
other address or telecopy number as such party may hereafter specify
for the purpose by notice to each other party hereto. Each such
notice, request or other communication shall be effective (i) if given
by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section and telephonic confirmation of receipt
thereof is obtained or (ii) if given by mail, prepaid overnight courier
or any other means, when received at the address specified in this
Section or when delivery at such address is refused.
If to the Borrower:
NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403
Attention: Vice President-CFO
Telecopy No. (612) 373-8833
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with a copy to:
Troutman Sanders LLP
600 Peachtree Street, N.W.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: M. Stuart Sutherland, Esq.
Telecopy No. (404) 885-3900
17. MISCELLANEOUS
17.1 Time of Essence. Time is of the essence of this Agreement but no
failure or delay on the part of any Lender, the Agent, the Security
Trustee or the Arranger to exercise any power or right under this
Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise by any Lender, the Agent, the Security Trustee or the
Arranger of any power or right hereunder preclude any other or further
exercise thereof or the exercise of any other power or right. The
remedies provided herein are cumulative and are not exclusive of any
remedies provided by law.
17.2 Unenforceable, etc., Provisions - Effect. In case any one or more
of the provisions contained in this Agreement, the Note or in any
Security Document would, if given effect, be invalid, illegal or
unenforceable in any respect under any law applicable in any relevant
jurisdiction, said provision shall not be enforceable against the
relevant Security Party, but the validity, legality and enforceability
of the remaining provisions herein or therein contained shall not in
any way be affected or impaired thereby.
17.3 References. References herein to Sections, Schedules and Exhibits
are to be construed as references to sections of, schedules to and
exhibits to, this Agreement.
17.4 Prior Agreements, Merger. Any and all prior understandings and
agreements heretofore entered into between the Security Parties on the
one part, and the Agent, the Security Trustee, the Arranger or the
Lenders, on the other part, whether written or oral, are superseded by
and merged into this Agreement and the other agreements (the forms of
which are exhibited hereto) to be executed and delivered in connection
herewith to which the Security Parties, the Security Trustee, the
Arranger, the Agent and/or the Lenders are parties, which alone fully
and completely express the agreements between the Security Parties, the
Security Trustee, the Arranger, the Agent and the Lenders with respect
to the subject matter hereof.
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17.5 Entire Agreement; Amendments. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject
matter hereof including all parties added hereto pursuant to an
Assignment and Assumption Agreement and, subject to Section 15.7(b)
cannot be amended other than by written agreement signed by all such
parties.
17.6 Indemnification. The Borrower and, by its execution and delivery
of the Consent and Agreement set forth below, each of the other
Security Parties jointly and severally agree to indemnify each Lender,
the Agent, the Security Trustee and the Arranger, their respective
successors and assigns, and their respective officers, directors,
employees, representatives and agents (each an "Indemnitee") from, and
hold each of them harmless against, any and all losses, liabilities,
claims, damages, expenses, obligations, penalties, actions, judgments,
suits, costs or disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of counsel
for such Indemnitee in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether
or not such Indemnitee shall be designated a party thereto) that may at
any time (including, without limitation, at any time following the
payment of the obligations of the Borrower hereunder) be imposed on,
asserted against or incurred by, any Indemnitee as a result of, or
arising out of or in any way related to or by reason of any
investigation, litigation or other proceeding related to this
Agreement, the Credit Facility or the use of proceeds of the Advances,
including without limitation any investigation, litigation or other
proceeding related to, (a) any violation by any Security Party of any
applicable Environmental Law, (b) any Environmental Claim arising out
of the management, use, control, ownership or operation of property or
assets by any Security Party (or, after foreclosure, by any Lender, the
Agent, the Security Trustee, the Arranger or any of their respective
successors or assigns), (c) the breach of any representation, warranty
or covenant set forth in Sections 2.1(v) or 10.1A.(x) and (d) the
alleged PECO option referenced in Section 9.4 above; provided, that the
foregoing indemnity will not, as to any Indemnitee, apply to losses,
liabilities, claims, damages, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements, to the extent they
are found by a judgment of a court of competent jurisdiction to arise
from (A) the willful misconduct or gross negligence of such Indemnitee
or (B) a dispute between the Borrower and such Indemnitee in which the
Borrower prevails. Each such Indemnitee shall use its best efforts to,
upon becoming aware of any event which may result in the Borrower being
required to perform any of its indemnity obligations under this
Section, promptly notify the Borrower (provided that failure to so
notify shall not mitigate the obligations of the Borrower hereunder).
If and to the extent that the obligations of the Security Parties under
this Section are unenforceable for any reason, the Borrower and, by its
execution and delivery of the Consent and Agreement set forth below,
each of the other Security Parties jointly and severally agree to make
the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law. The obligations
of the Security Parties under this
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Section 17.7 shall survive the termination of this Agreement and the
repayment to the Lender of all amounts owing thereto under or in
connection herewith.
17.7 Headings. In this Agreement, Section headings are inserted for
convenience of reference only and shall not be taken into account in
the interpretation of this Agreement.
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IN WITNESS whereof the parties hereto have caused this
Agreement to be duly executed by their duly authorized representatives
as of the day and year first above written.
NRG GENERATING (U.S.) INC.
By: /s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
MEESPIERSON CAPITAL CORP.
By: /s/ Hendrik J. Vroege
Name: Hendrik J. Vroege
Title: Vice President
By: /s/ John O'Connor
Name: John O'Connor
Title: Senior Vice President
<PAGE>
CONSENT AND AGREEMENT
Each of the undersigned, referred to in the foregoing Credit
Agreement as the "Security Parties", hereby consents and agrees to said
Credit Agreement and to the documents contemplated thereby and to the
provisions contained therein relating to conditions to be fulfilled and
obligations to be performed by the undersigned pursuant to or in
connection with said Credit Agreement and agrees particularly to be
bound by the representations, warranties and covenants relating to the
undersigned contained in Sections 2 and 10 of said Credit Agreement and
by the indemnification provisions of Section 17.7 of said Credit
Agreement to the same extent as if the undersigned were a party to said
Credit Agreement.
O'BRIEN (PHILADELPHIA) COGENERATION INC.
By: /s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
O'BRIEN ENERGY SERVICES COMPANY
By: /s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
<PAGE>
Exhibit 10.26.2
PROMISSORY NOTE
in favor of
MEESPIERSON CAPITAL CORP.,
as Agent
December 17, 1997
<PAGE>
PROMISSORY NOTE
US $30,000,000 December 17, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned, NRG GENERATING (U.S.)
INC., a corporation incorporated under the laws of the State of
Delaware (the "Borrower"), hereby promises to pay to the order of
MEESPIERSON CAPITAL CORP., a corporation incorporated under the laws of
the State of Delaware, in its capacity as agent for the Lenders which
are parties to the Credit Agreement (as such terms are hereinafter
defined) (the "Agent"), with offices at 445 Park Avenue, New York, New
York, the principal sum of Thirty Million United States Dollars (US
$30,000,000) or, if less, the aggregate unpaid principal amount of the
Advances from time to time outstanding made by the Lenders to the
Borrower pursuant to the Credit Agreement. The Borrower shall repay
the principal amount of such Advances as provided in Section 5 of the
Credit Agreement, but in any event no later than the Maturity Date.
Words and expressions used herein (including those in the
foregoing paragraph) and defined in the Credit Agreement shall have the
same meaning herein as therein defined.
The Credit Facility Balance shall bear interest at the
Applicable Rate. Any principal payment not paid when due, whether by
acceleration or otherwise, shall bear interest thereafter at a rate per
annum of two percent (2%) over the Applicable Rate in effect with
respect thereto at the time of such default. All interest shall accrue
from day to day and be calculated on the actual number of days elapsed
and on the basis of a 360 day year with respect to each LIBOR Rate
Advance and on the basis of a 365/366 day year with respect to each
Base Rate Advance.
Both principal and interest are payable in lawful money of
the United States of America to the Agent, at its New York branch
located at 445 Park Avenue, New York, New York (or to such other office
of the Agent as the Agent may direct), in immediately available same
day funds.
The Agent may endorse the amount and the date of the making
of each Advance evidenced hereby and each payment of principal
hereunder on the grid annexed hereto and made a part hereof, which
endorsement shall constitute prima facie evidence of the accuracy of
the information so endorsed; provided, however, that any failure to
endorse such information on such grid shall not in any manner affect
the obligation of the
<PAGE>
Borrower to make payment of principal and interest in accordance with
the terms of this Promissory Note.
If this Promissory Note or any payment required hereunder
becomes due and payable on a day which is not a Banking Day (as
hereinafter defined) the due date thereof shall be extended until the
next following Banking Day (in which event, interest shall be payable
during such extension at the rate applicable immediately prior
thereto), unless such next following Banking Day falls in the following
month in which case such payment shall be payable on the Banking Day
immediately preceding the day on which such payment would otherwise be
payable.
"Banking Day" means a day on which banks are open for the
transaction of business of the nature required by this Promissory Note
in London, England (with respect to LIBOR Rate Advances only), and New
York.
This Promissory Note is the Note referred to in, and is
entitled to the security and benefits of, (1) the Credit Agreement (the
"Credit Agreement"), dated December __, 1997, by and among the
Borrower, the Agent, and the Lenders whose names are set forth on
Schedule 1 thereto, and (2) the Security Documents. Upon the
occurrence of any Event of Default under the Credit Agreement, the
principal hereof and accrued interest hereon may be declared to be and
shall thereupon become, forthwith, due and payable.
Presentment, demand, protest and notice of dishonor of this
Promissory Note or any other notice of any kind are hereby expressly
waived.
THE BORROWER AND, BY THEIR ACCEPTANCE HEREOF, THE AGENT AND
THE LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY PARTY HERETO OR ANY BENEFICIARY HEREOF ON
ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
PROMISSORY NOTE.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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<PAGE>
IN WITNESS WHEREOF, the Borrower has executed and delivered
this Promissory Note on the date and year first above written.
NRG GENERATING (U.S.) INC.
By /s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
3
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
Type Amount of Unpaid
of Amount of Principal Paid Principal Notation
Date Advance Advance or Prepaid Balance Made By
4
<PAGE>
Exhibit 10.26.3
PLEDGE AGREEMENT
NRG GENERATING (U.S.) INC.,
and
MEESPIERSON CAPITAL CORP.,
as Security Trustee
December 17, 1997
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of this 17 day of December,
1997, between NRG GENERATING (U.S.) INC., a Delaware corporation having
offices at 1221 Nicollet Mall, Suite 610, Minneapolis, Minnesota 55403
(the "Borrower") and MeesPierson Capital Corp., a Delaware corporation
having offices at 445 Park Avenue, New York, New York ("MPCC"), as
security trustee (the "Pledgee").
WITNESSETH:
WHEREAS:
A. Pursuant to a credit agreement dated as of December 17, 1997 (the
"Credit Agreement") made by and among (i) the Borrower, as borrower,
(ii) MPCC, as arranger, (iii) the banks and financial institutions
whose names and addresses are set out in Schedule 1 thereto (together,
the "Lenders") and (iv) MPCC, as agent (in such capacity, the "Agent')
and security trustee (in such capacity the "Security Trustee") for the
Lenders, the Lenders, subject to the terms thereof, have agreed to make
advances to the Borrower of up to Thirty Million United States Dollars
(US$30,000,000) outstanding at any time (the "Credit Facility");
B. As of the date hereof, the Borrower is the registered and
beneficial owner of 83% of the issued and outstanding shares of capital
stock (the "Pledged Shares") of O'Brien (Philadelphia) Cogeneration
Inc., a Delaware corporation (the "Pledged Corporation") and the
Pledged Shares are represented by stock certificates described in
Schedule 1 hereto (collectively, the "Stock Certificates"); and
C. It is a condition precedent to the availability of the Credit
Facility to the Borrower that the Borrower execute and deliver to the
Pledgee, among other things, this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises the Borrower
agrees with the Pledgee as follows:
1. Defined Terms. Unless otherwise defined herein, terms
defined in the Credit Agreement shall have the same meanings when used
herein.
2. Grant of Security. As security for the full and prompt
payment to the Agent and the Lenders of all sums owing by the Borrower
to the Lenders whether for
<PAGE>
principal, interest, fees, expenses or otherwise, under and in
connection with the Credit Agreement, the Note and the other Security
Documents or otherwise and the due and punctual performance by the
Borrower of its obligations in connection therewith (all of the above
now or hereafter existing, together the "Obligations"), the Borrower
hereby pledges, assigns, transfers and delivers to the Pledgee as Agent
and Security Trustee for the Lenders the Pledged Shares and hereby
grants to the Pledgee a first lien on, and first security interest in,
the Pledged Shares.
3. Pledge Documents. Concurrently with the execution of
this Pledge Agreement, the Borrower shall execute and deliver to the
Pledgee Irrevocable Proxies in favor of the Pledgee in respect of the
Pledged Shares in the form set out in Exhibit A hereto (the
"Irrevocable Proxies"), and shall deliver to the Pledgee the Stock
Certificates together with signed, undated stock powers pertaining
thereto duly executed in blank.
4. Representations and Warranties. The Borrower represents
and warrants that:
(i) it is the legal and
beneficial owner of, and has good and marketable
title to, the Pledged Shares, subject to no
pledge, lien, mortgage, hypothecation, security
interest, charge, option or other encumbrance
whatsoever, except the lien and security interest
created by this Pledge Agreement and the delivery
of the Pledged Shares to the Pledgee;
(ii) it has full power, authority
and legal right to execute, deliver and perform
this Pledge Agreement and to create the
collateral security interest for which this
Pledge Agreement provides;
(iii) the Pledged Shares of the
Pledged Corporation (a) have been duly and
validly issued and are fully paid and
nonassessable and (b) constitute eighty-three
percent (83%) of the issued and outstanding
capital stock of the Pledged Corporation, the
only capital stock of the Pledged Corporation not
owned by the Borrower being the seventeen percent
(17%) owned by the Revocable Trust of Marsha
Reines Perelman (the "Perelman Shares");
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<PAGE>
(iv) as of the date hereof, the
Pledged Corporation has not entered into any
options, warrants or other agreements to issue
additional capital stock and there are no voting
trusts or other shareholder agreements or
arrangements relating to the Pledged Shares other
than in respect of the Perelman Shares;
(v) this Pledge Agreement
constitutes a valid obligation of the Borrower,
legally binding upon it and enforceable in
accordance with its terms, except to the extent
that such enforcement may be limited by equitable
principles, principles of public policy or
applicable bankruptcy, insolvency,
reorganization, moratorium or other laws
affecting generally the enforcement of creditor's
rights;
(vi) the pledge, hypothecation,
assignment and delivery of the Pledged Shares
pursuant to this Pledge Agreement creates a valid
first perfected security interest in each of the
Pledged Shares and the proceeds thereof;
(vii) except for consents obtained
prior to the date hereof, no consent of any other
party (including stockholders of the Borrower) is
required in connection with the execution,
delivery, performance, validity, enforceability
or enforcement of this Pledge Agreement, and,
except to the extent obtained prior to the date
hereof, no consent, license, approval or
authorization of, or registration or declaration
with, any governmental authority, bureau or
agency is required in connection with the
execution, delivery, performance, validity,
enforceability or enforcement of this Pledge
Agreement; and
(viii) the execution, delivery and
performance of this Pledge Agreement will not
violate or contravene any provision of any
existing law or regulation or decree of any
court, governmental authority, bureau or agency
having jurisdiction in the premises or of the
Articles of Incorporation, by-laws or other
charter documents of the Borrower or of any
mortgage, indenture, security agreement,
contract, undertaking or other agreement to
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<PAGE>
which the Borrower is a party or
which purports to be binding upon it or any of
its properties or assets and will not result in
the creation or imposition of any lien, charge or
encumbrance on, or security interest in, any of
its properties or assets pursuant to the
provisions of any such mortgage, indenture,
security agreement, contract, undertaking or
other agreement.
5. Covenants. The Borrower hereby covenants that during the
continuance of this security:
(i) it shall warrant and defend
the right and title of the Pledgee conferred by
this Pledge Agreement in and to the Pledged
Shares at the cost of the Borrower against the
claims and demands of all persons whomsoever;
(ii) except as herein provided,
without the prior written consent of the Pledgee,
it shall not sell, assign, transfer, charge,
pledge or encumber in any manner any part of the
Pledged Shares or suffer to exist any encumbrance
on the Pledged Shares;
(iii) without the prior written
consent of Pledgee, it shall not vote the Pledged
Shares in favor of the consolidation, merger,
dissolution, liquidation or any other corporate
reorganization of the Pledged Corporation, except
as permitted under Section 10.1B(viii) of the
Credit Agreement;
(iv) without the prior written
consent of the Pledgee it shall not take from the
Pledged Corporation any undertaking or security
in respect of its liability hereunder or in
respect of any other liability of the Pledged
Corporation to the Borrower and the Borrower
shall not prove nor have the right of proof in
competition with the Pledgee, for any monies
whatsoever owing from the Pledged Corporation to
the Borrower, in any insolvency or liquidation,
or analogous proceedings under any applicable
law, of the Borrower; and
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<PAGE>
(v) The Pledged Corporation shall
not issue any additional shares of its capital
stock nor enter into any options, warrants or
other agreements to do so.
6. Delivery of Additional Shares. If the Borrower shall
become entitled to receive or shall receive any stock certificates
(including, without limitation, any certificate representing a stock
dividend or a distribution in connection with any reclassification,
increase or reduction of capital, or issued in connection with any
reorganization), option or rights, whether as an addition to, in
substitution of, or in exchange for any of the Pledged Shares or upon
acquisition of the Perelman Shares as contemplated by the Credit
Agreement, the Borrower agrees to accept the same as the agent of the
Pledgee and to hold the same in trust for the benefit of the Pledgee
and to deliver the same forthwith to the Pledgee in the exact form
received, with the endorsement of the Borrower when necessary and/or
appropriate undated stock powers duly executed in blank, and
irrevocable proxies for any stock certificates so received, in
substantially the form of Exhibit A, to be held by the Pledgee, subject
to the terms hereof, as additional collateral security for the
Obligations. Any sums paid upon or in respect of the Pledged Shares on
the liquidation or dissolution of the Pledged Corporation shall be paid
over to the Pledgee to be held by it as additional collateral security
for the Obligations.
7. Collateral. All property at any time pledged to the
Pledgee hereunder by the Borrower (whether described herein or not) and
all income therefrom and proceeds thereof, are herein collectively
sometimes called the "Collateral".
8. Voting Rights. The Pledgee shall as pledgee and as the
holder of the Irrevocable Proxies receive notice (if an Event of
Default shall have occurred and is continuing) and shall have the right
to vote the Pledged Shares at its own discretion at any annual or
special meeting of the shareholders of the Pledged Corporation, as the
case may be, provided, however, that the Pledgee shall not exercise
such right to vote unless an Event of Default shall have occurred and
be continuing.
9. Default. The security constituted by this Pledge
Agreement shall become immediately enforceable on the occurrence of an
Event of Default under the Credit Agreement.
10. Remedies. At any time after the security constituted by
this Pledge Agreement shall have become enforceable as aforesaid, the
Pledgee shall be entitled without further notice to the Borrower:
5
<PAGE>
(i) to sell, assign or convert
into money all or any part of the Collateral in
such manner and upon such terms and for such
consideration (whether in cash, securities or
other assets, whether deferred or not and whether
at public or private sale) as the Pledgee may in
its absolute discretion think fit with the right
to the Pledgee upon such sale to purchase the
whole or any part of the Collateral, free of any
right or equity of redemption in the Borrower,
which right and/or equity is hereby expressly
waived;
(ii) to cause the resignation of
the then existing directors and officers of the
Pledged Corporation and to elect new directors
and appoint new officers of the Pledged
Corporation and to exercise through such
directors and officers the powers of management
of the Pledged Corporation; and
(iii) to exercise all voting and
other corporate rights at any meeting of the
Pledged Corporation and exercise any and all
rights of conversion, exchange, subscription or
any other rights, privileges or options
pertaining to the Pledged Shares of the Pledged
Corporation as if it was the absolute owner
thereof, including, without limitation, the right
to exchange at its discretion, any and all of
such Pledged Shares upon the merger,
consolidation, reorganization, recapitalization
or other readjustment of the Pledged Corporation
or, upon the exercise by such Pledged Corporation
or the Pledgee of any right, privilege or option
pertaining to any of the Pledged Shares, and in
connection therewith, to deposit and deliver any
and all of the Pledged Shares of the Pledged
Corporation with any committee, depository,
transfer agent, registrar or other designated
agency upon such terms and conditions as it may
determine, all without liability except to
account for property actually received by it.
In addition to the rights and remedies granted to it in this Pledge
Agreement and in any other instrument or agreement securing, evidencing
or relating to any of the Obligations, the Pledgee shall have rights
and remedies of a secured party under the Uniform Commercial Code of
the State of New York.
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<PAGE>
11. No Duty on Pledgee. The Pledgee shall have no duty to
exercise any of the aforesaid rights, privileges or options and shall
not be responsible for any failure to do so or delay in so doing.
12. Application of Proceeds. All moneys collected or
received by the Pledgee pursuant to this Pledge Agreement shall be
dealt with as provided in Section 9.3 of the Credit Agreement.
13. Termination. When all of the Obligations shall have
been fully satisfied, the Pledgee agrees that it shall forthwith
release the Borrower from its Obligations hereunder and the Irrevocable
Proxies shall terminate forthwith and be delivered to the Borrower
forthwith together with the other items furnished to the Pledgee
pursuant to Section 3 hereof.
14. Further Assurances. The Borrower shall from time to
time, and at all times after the security constituted by this Pledge
Agreement shall have become enforceable, execute all such further
instruments and documents and do all such things as the Pledgee may
reasonably deem desirable for the purpose of obtaining the full benefit
of this Pledge Agreement and of the rights, title, interest, powers,
authorities and discretions conferred on the Pledgee by this Pledge
Agreement including (without limitation) causing the Pledged
Corporation to execute any such instruments and documents as aforesaid.
The Borrower hereby irrevocably appoints the Pledgee its attorney-in-
fact for it and in its name and on its behalf and as its act and deed
to execute, seal and deliver and otherwise perfect any deed, assurance,
agreement, instrument or act which it may reasonably deem desirable for
any of the purposes of this Pledge Agreement; provided that the Pledgee
shall not exercise such power until the security constituted by this
Pledge Agreement shall have become enforceable. The Pledgee shall have
full power to delegate this power of attorney but no such delegation
shall preclude the subsequent exercise of such power by the Pledgee
itself or preclude the Pledgee from subsequent delegation to some other
person and any delegation may be revoked by the Pledgee at any time.
15. No Waiver; Remedies Cumulative and Exclusive. The
Pledgee shall not by any act, delay, omission or otherwise be deemed to
have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Pledgee, and then only
to the extent therein set forth. A waiver by the Pledgee of any right
or remedy hereunder on any one occasion shall not be construed as a bar
to any right or remedy which the Pledgee would otherwise have had on
any future occasion. No failure to exercise nor any delay in
exercising on the part of the Pledgee, any right, power
7
<PAGE>
or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies hereunder
provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law.
16. Changes in Writing; Successors and Assigns. None of the
terms or provisions of this Pledge Agreement may be waived, altered,
modified or amended except by an instrument in writing, duly executed
by the Pledgee. This Pledge Agreement and all obligations of the
Borrower hereunder shall be binding upon the successors and assigns of
the Borrower and shall, together with the rights and remedies of the
Pledgee hereunder, inure to the benefit of the Pledgee, its respective
successors and assigns.
17. Notices. All notices, requests, demands and other
communications to any party hereunder shall be in writing (including
prepaid overnight courier, facsimile transmission or similar writing)
and shall be given to the Borrower at the address or telecopy number
set forth below and to the Lenders, the Agent and the Security Trustee
at their address and telecopy number set forth in Schedule 1 to the
Credit Agreement or at such other address or telecopy number as such
party may hereafter specify for the purpose by notice to each other
party hereto. Each such notice, request or other communication shall
be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and
telephonic confirmation of receipt thereof is obtained or (ii) if given
by mail, prepaid overnight courier or any other means, when received at
the address specified in this Section or when delivery at such address
is refused.
If to the Borrower:
NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403
Attention: Vice President-CFO
Telecopy No. (612) 373-8833
with a copy to:
Troutman Sanders LLP
600 Peachtree Street, N.W.
Suite 5200
8
<PAGE>
Atlanta, Georgia 30308-2216
Attention: M. Stuart Sutherland, Esq.
Telecopy No. (404) 885-3900
If the Pledgee:
MeesPierson Capital Corp.
445 Park Avenue
New York, New York 10022
Attention: Hendrik J. Vroege
Telecopy No. (212) 801-0420
18. Governing Law. This Pledge Agreement shall be governed by
and construed in accordance with the laws of the State of New York
without regard to the principles of conflicts of law thereof.
19. Submission to Jurisdiction. The Borrower hereby irrevocably
submits to the jurisdiction of the courts of the State of New York and
of the United States District Court for the Southern District of New
York in any action or proceeding brought against it by the Pledgee
under this Agreement or under any document delivered hereunder and
hereby irrevocably agrees that valid service of summons or other legal
process on it may be effected by serving a copy of the summons and
other legal process in any such action or proceeding on the Borrower by
mailing (certified or registered mail) or delivering the same by hand
to the Borrower at the address indicated for notices in Section 18.
The service, as herein provided, of such summons or other legal process
in any such action or proceeding shall be deemed personal service and
accepted by the Borrower as such, and shall be legal and binding upon
the Borrower for all the purposes of any such action or proceeding. A
judgment (a certified or exemplified copy of which shall be conclusive
evidence of the fact and of the amount of any indebtedness of the
Borrower to the Pledgee or the Lenders) after exhaustion of any appeals
taken against the Borrower in any such legal action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the
judgment. The Borrower will advise the Pledgee promptly of any change
of address for the purpose of service of process. Notwithstanding
anything herein to the contrary, the Pledgee or the Lenders may bring
any legal action or proceeding in any other appropriate jurisdiction.
20. WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE PLEDGEE
HEREBY WAIVES TRIAL BY JURY IN ANY ACTION,
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<PAGE>
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST ANY
OTHER PARTY HERETO ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS PLEDGE AGREEMENT.
21. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed
in favor of the Pledgee in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (ii) the invalidity
and unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any
other jurisdiction.
22. Counterparts. This Pledge 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.
23. Headings. In this Pledge Agreement, section headings are
inserted for convenience of reference only and shall be ignored in the
interpretation of this Pledge Agreement.
IN WITNESS whereof the parties hereto have caused this Pledge
Agreement to be duly executed the day and year first above written.
NRG GENERATING (U.S.) INC.
By: /s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
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<PAGE>
MEESPIERSON CAPITAL CORP.
By: /s/ Hendrik J. Vroege
Name: Hendrik J. Vroege
Title: Vice President
By: /s/ John T. Connors
Name: John T. Connors
Title: Exec. V.P.
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<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
The undersigned, the registered and beneficial owner of the
below described shares of O'BRIEN (PHILADELPHIA) COGENERATION INC., a
corporation organized under the laws of the State of Delaware (the
"Company"), hereby makes, constitutes and appoints MeesPierson Capital
Corp. ("the Pledgee") with full power to appoint a nominee or nominees
to act hereunder from time to time, the true and lawful attorney and
proxy of the undersigned to vote the issued shares of the Company
represented by Share Certificate(s) No(s). at all annual and special
meetings of shareholders of the Company or take any action by written
consent with the same force and effect as the undersigned might or
could do, hereby ratifying and confirming all that the said attorney or
their nominee or nominees shall do or cause to be done by virtue
hereof.
The said shares have been pledged (the "Pledge") to the
Pledgee pursuant to a Pledge Agreement dated December __, 1997.
This power and proxy is coupled with an interest and is
irrevocable and shall remain irrevocable so long as the Pledge is
outstanding and is in full force and effect.
IN WITNESS whereof the undersigned has caused this instrument
to be duly executed this __ day of ________, ________.
NRG GENERATING (U.S.) INC.
By /s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
<PAGE>
SCHEDULE 1
STOCK CERTIFICATES REPRESENTING PLEDGED SHARES
Certificate # # of Shares
6 100
<PAGE>
Exhibit 10.26.4
GUARANTEE
in favor of
MEESPIERSON CAPITAL CORP.,
as Security Trustee
December 17, 1997
<PAGE>
GUARANTEE
THIS GUARANTEE, dated as of December 17, 1997, is made by
O'BRIEN (PHILADELPHIA) COGENERATION INC., a Delaware corporation, (the
"Guarantor"), in favor of MEESPIERSON CAPITAL CORP., a corporation
organized under the laws of the State of Delaware, in its capacity as
security trustee under the Credit Agreement referred to in Recital (A)
below.
WITNESSETH THAT:
WHEREAS:
(A) By a Credit Agreement dated as of December 17, 1997 (the
"Credit Agreement") and made by and among (i) NRG Generating (U.S.)
Inc., a Delaware corporation (the "Borrower"), (ii) MeesPierson Capital
Corp. ("MPCC"), as arranger (the "Arranger"), (iii) the Lenders (as
such term is defined in the Credit Agreement) and (iv) MPCC, as agent
(the "Agent") and security trustee (the "Security Trustee") for the
Lenders, the Lenders have agreed to make available to the Borrower upon
the terms and conditions therein described a three year revolving
credit facility in the maximum principal amount not to exceed at any
one time outstanding Thirty Million United States Dollars ($30,000,000)
(the "Credit Facility"). Words and expressions used herein as defined
terms but not defined herein shall have the meanings ascribed thereto
in the Credit Agreement.
(B) It is a condition precedent to the Lenders making the Credit
Facility available to the Borrower that the Guarantor enter into this
Guarantee and otherwise agree to be bound by the terms of this
Guarantee.
NOW, THEREFORE, in consideration of the premises and for
other valuable consideration, the receipt and adequacy of which the
Guarantor hereby acknowledges, the Guarantor hereby agrees as follows:
1. GUARANTEE
(a) The Guarantor hereby unconditionally and irrevocably
guarantees as primary obligor and not merely as surety to the Security
Trustee, for the account of the Agent, the Security Trustee, the
Arranger and the Lenders (together, the "Creditors") on first demand
the due and punctual payment, when due, whether by acceleration or
<PAGE>
otherwise, of all sums owing by the Borrower to any of the Creditors
under the Credit Agreement, the Note and the Security Documents,
together with any and all reasonable out-of-pocket legal costs and
other reasonable expenses incurred in connection therewith by any of
the Creditors and, in case of extension of time of payment or renewal
in whole or in part of the said obligations of the Borrower, the prompt
payment when due of all said sums according to such extension or
extensions or renewal or renewals, whether by acceleration or
otherwise.
(b) The Guarantor makes this guarantee (hereinafter, this
"Guarantee") irrespective of the validity, regularity or enforceability
of the Credit Agreement, the Note or any of the Security Documents or
any of the obligations under the Credit Agreement, the Note and the
Security Documents and irrespective of any present or future law or
order of any government (whether of right or in fact) or of any agency
thereof purporting to reduce, amend or otherwise affect any obligation
of the Borrower or to vary the terms of payment or to restrict the
right or power of the Borrower or of the Guarantor to make payment of
any of their respective obligations to any of the Creditors. This
Guarantee is a guarantee of payment and performance and not of
collection.
2. REPRESENTATIONS AND WARRANTIES
The Guarantor hereby represents and warrants to the Security
Trustee on behalf of the Creditors (which representations and
warranties shall survive the execution and delivery of this Guarantee)
that the representations set forth in Section 2 of the Credit Agreement
insofar as they relate to the Guarantor are true and correct and hereby
incorporate, repeat and represent, on its own behalf, without
limitation, such representations as though they were set forth herein
at length.
3. COVENANTS
(a) The Guarantor hereby covenants and undertakes with the
Security Trustee, on behalf of the Creditors, that from the date hereof
and so long as any principal, interest or other monies are owing by the
Borrower under or in connection with the Credit Agreement, the Note,
the Security Documents, or any of them, it will:
(i) duly perform and observe the terms of this
Guarantee;
(ii) promptly upon obtaining knowledge thereof, inform
the Agent of the occurrence of (a) any Event of Default (as such term
is defined in the Credit Agreement) or of any event which, with the
giving of notice or lapse of time, or both, would constitute an Event
of
2
<PAGE>
Default, (b) any litigation or governmental
proceeding pending or threatened against it which could reasonably be
expected to have a material adverse effect on its business, assets,
operations, property or financial condition and (c) any other event or
condition which is reasonably likely to have a material adverse effect
on its ability to perform its obligations under this Guarantee;
(iii) obtain every consent and do all other acts and
things which may from time to time be necessary or advisable for the
continued due performance of all its obligations under this Guarantee;
and
(iv) perform each and every covenant and
undertaking in the Credit Agreement applicable to it
or procure the performance thereof as though such
covenants and undertakings were set forth at length
herein.
(b) The Guarantor hereby covenants and undertakes with the
Security Trustee on behalf of the Creditors that, from the date hereof
and so long as any principal, interest or other monies are owing by the
Borrower under or in connection with the Credit Agreement, the Note,
the Security Documents or any of them, it will not, without the prior
written consent of the Majority Lenders (or all of the Lenders if
required by Section 16.7(b) of the Credit Agreement) other than as
expressly permitted by the terms of the Credit Agreement and the
Security Documents:
(i) sell, assign, transfer, pledge or otherwise
convey or dispose of or issue any of the shares of its
capital stock to anyone other than the Borrower,
except as permitted under clause (iii) below;
(ii) sell, or otherwise dispose of, or grant any
security interest in, lien on or encumbrance over any
of its assets which constitute Collateral, except for
sales and dispositions of obsolete, worn or replaced
property not used or useful in Guarantor's business
provided that the proceeds thereof (to the extent not
used to replace such obsolete, worn or replaced
property) shall be deposited in the Collection
Account; or
(iii) consolidate with, or merge into, any
corporation, or merge any corporation into it;
provided, however, that the Guarantor shall be
permitted to merge with or consolidate with any other
Security Party so long as no Event of Default would
result therefrom and
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<PAGE>
the Guarantor is the surviving entity in such
merger or consolidation.
4. PAYMENTS
4.1 Payment. (a) All payments by the Guarantor under this
Guarantee shall be made in the same manner as the Borrower is required
to make payments under the Loan Agreement as specifically set forth
therein.
(b) On all sum or sums for which the Guarantor is
liable hereunder interest shall be due at the Default Rate specified in
Section 1.1 in the Credit Agreement from the date of the demand made
hereunder until the date of payment of such amount by the Guarantor.
4.2 Taxes; Withholdings. Subject to such Creditor's
compliance with Section 4.3 below, if the Guarantor shall at any time
be compelled by law to withhold or deduct any Taxes from any amounts
payable to the Creditor hereunder, then the Guarantor shall pay such
additional amounts in Dollars as may be necessary in order that the net
amounts received after withholding or deduction shall equal the amounts
which would have been received if such withholding or deduction were
not required and, in the event any withholding or deduction is made,
whether for Taxes or otherwise, the Guarantor shall promptly send to
the Agent such documentary evidence with respect to such withholding or
deduction as may be required from time to time by the Creditors.
4.3 Tax Forms. Each Creditor shall promptly provide the
Guarantor with two duly completed copies of Internal Revenue Service
Form 1001 or 4224, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Creditor is entitled
to benefits under an income tax treaty to which the United States is a
party that exempts withholding tax on payments under this Guarantee or
the Note or certifying that the income receivable pursuant to this
Guarantee or the Note is effectively connected with the conduct of a
trade or business in the United States.
4.4 Tax Credits. If any Creditor obtains the benefit of a
credit against the liability thereof for federal income taxes imposed
by any taxing authority for all or part of the Taxes as to which the
Guarantor has paid additional amounts as aforesaid (and each Creditor
agrees to use its best efforts to obtain the benefit of any such credit
which may be available to it, provided it has knowledge that such
credit is in fact available to it), then such Creditor shall reimburse
the Guarantor for the amount of the credit so obtained.
4
<PAGE>
5. PRESERVATION OF RIGHTS
(a) The Guarantor hereby consents that from time to time,
the time for the performance and/or observance by the Borrower of any
of the agreements, covenants or conditions in the Credit Agreement, the
Note or the Security Documents, or any of them, on the part of the
Borrower to be performed and/or observed may be waived or the time of
performance thereof extended by the Creditors and payment of any sums
owing or payable under any such document may be extended or any such
document may be renewed in whole or in part or modified in any respect
or any collateral or arrangement provided for by any such document as
security for any obligation contemplated by any such document may be
exchanged, surrendered, released or otherwise dealt with as the
Creditors may determine, that the time for the making of any payment of
any obligation hereby guaranteed may be accelerated in accordance with
any agreement between any of the Creditors and the Borrower, and that
any of the acts mentioned in any of said documents may be done and that
any other guarantor of any of the obligations hereby guaranteed and/or
any document or security therefor may be released in whole or in part
without affecting the obligations of the Guarantor hereunder.
(b) The Guarantor hereby waives any presentment, demand of
payment, protest and notice of nonpayment or protest thereof or of any
exchange, sale, surrender, release or other handling or disposition of
such collateral or arrangement. The obligations of the Guarantor
hereunder shall not be affected by receipt by any Creditor of any
proceeds of any security at any time held by any of the Creditors.
(c) The Guarantor agrees that so long as the Borrower
remains under any actual or contingent liability under the Credit
Agreement and the Security Documents any rights which the Guarantor may
at any time have by reason of the performance by the Guarantor of its
obligations hereunder (a) to be indemnified by the Borrower and/or
(b) to claim any contribution from any other guarantor or Security
Party of the Borrower's obligations under the Credit Agreement or the
Security Documents and/or (c) to take the benefit (in whole or in part)
of any security taken pursuant to this Guarantee or the Credit
Agreement or the Security Documents by, all or any of the persons to
whom the benefit of the Guarantor's obligations are given, shall be
exercised by the Guarantor in such manner and upon such terms as the
Creditors may require and further agrees to hold any monies at any time
received by it as a result of the exercise of any such rights or
otherwise for and on behalf of and to the order of the Creditors for
application in or towards payment of any sums at any time owed by the
Borrower under the Credit Agreement or the Security Documents.
5
<PAGE>
(d) The Guarantor further agrees that its liabilities
hereunder shall be unconditional irrespective of any other circumstance
which might otherwise constitute a discharge at law or in equity of a
guarantor or surety. The Guarantor further guarantees that all
payments made by the Borrower, the Guarantor, or either of them, to any
of the Creditors on any obligation hereby guaranteed will, when made,
be final and agrees that, if any such payment is recovered from, or
repaid by, any of the Creditors in whole or in part in any bankruptcy,
insolvency or similar proceeding instituted by or against the Borrower,
or the Guarantor, or either of them, this Guarantee shall continue to
be fully applicable to such obligation to the same extent as though the
payment so recovered or repaid had never been originally made on such
obligation.
(e) The Creditors may enforce the Guarantor's obligations
hereunder without in any way first pursuing or exhausting any other
rights or remedies which any of the Creditors may have against the
Borrower, or against any other person, firm or corporation, or against
any security any of the Creditors may hold.
(f) The Guarantor hereby irrevocably waives all rights of
subrogation (whether contractual, under Section 509 of Title 11 of the
United States Code entitled "Bankruptcy" as now or hereafter in effect,
or any successor thereto (herein called the "Bankruptcy Code"), under
common law, or otherwise) to the claims of any of the Creditors against
the Borrower and all contractual, statutory or common law rights of
contribution, reimbursement, indemnification and similar rights and
"claims" (as such term is defined in the Bankruptcy Code) against the
Borrower which arise in connection with, or as a result of, this
Guarantee, until such time as the obligations of the Borrower under or
in connection with the Credit Agreement, the Note and the Security
Documents have been indefeasibly paid in full.
(g) The Guarantor shall not assign, transfer, hypothecate or
dispose of any claim that it has or may have against the Borrower while
any indebtedness of the Borrower to the Creditors remains unpaid,
without the written consent of each of the Creditors.
(h) Any delay in or failure to exercise any right or remedy
of any of the Creditors shall not be deemed a waiver of any obligation
of Guarantor or right of any of the Creditors. This Agreement may be
modified, and any of the Creditors' rights hereunder waived, only by an
agreement in writing signed by all of the Lenders.
(i) Notice of acceptance by the Security Trustee on behalf
of the Creditors of this Guarantee and of the incurring of any or all
of the obligations hereby guaranteed is hereby waived by the Guarantor,
and this Guarantee and all of the terms
6
<PAGE>
and provisions hereof shall immediately be binding upon the Guarantor
from the date of execution hereof.
6. BENEFIT OF GUARANTEE; ASSIGNMENT
This Guarantee shall inure to the benefit of the Creditors,
their successors and permitted assigns, and shall bind the successors
and assigns of the Guarantor.
7. WAIVER OF JURY TRIAL; GOVERNING LAW; JURISDICTION
THE GUARANTOR AND, BY ITS ACCEPTANCE HEREOF, EACH OF THE
SECURITY TRUSTEE AND THE CREDITORS, HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO OR
BENEFICIARY HEREOF ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS GUARANTEE.
THIS GUARANTEE AND ALL RIGHTS, OBLIGATIONS AND LIABILITIES
ARISING HEREUNDER SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE
OF NEW YORK.
Unless the context otherwise requires, all terms used herein
which are defined in the New York Uniform Commercial Code shall have
the meanings therein stated.
The Guarantor hereby irrevocably submits to the jurisdiction
of the courts of the State of New York and of the United States
District Court for the Southern District of New York in any action or
proceeding brought against it by any of the Creditors under this
Guarantee or under any document delivered hereunder and hereby
irrevocably agrees that valid service of summons or other legal process
on it may be effected by serving a copy of the summons and other legal
process in any such action or proceeding on the Guarantor by mailing
(certified or registered mail) or delivering the same by hand to the
Guarantor at the address indicated for notices in Section 9. The
service, as herein provided, of such summons or other legal process in
any such action or proceeding shall be deemed personal service and
accepted by the Guarantor as such, and shall be legal and binding upon
the Guarantor for all the purposes of any such action or proceeding. A
judgment (a certified or exemplified copy of which shall be conclusive
evidence of the fact and of the amount of any indebtedness of the
Guarantor to the Creditors) after exhaustion of any appeals taken
against the Guarantor in any such legal action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
7
<PAGE>
judgment. The Guarantor will advise the Agent promptly of any change
of address for the purpose of service of process. Notwithstanding
anything herein to the contrary, the Creditors may bring any legal
action or proceeding in any other appropriate jurisdiction.
8. FRAUDULENT CONVEYANCES; FRAUDULENT TRANSFERS
Notwithstanding anything to the contrary contained in the
Credit Agreement, the Note, this Guarantee or any of the other Security
Documents, in the event that any court or other judicial body of
competent jurisdiction determines that legal principles of fraudulent
conveyances, fraudulent transfers or similar concepts are applicable in
evaluating the enforceability against the Guarantor or its assets of
the Credit Agreement, the Note, this Guarantee or any other Security
Document granted by the Guarantor as security for its obligations
hereunder and that under such principles, this Guarantee or such other
Security Documents would not be enforceable against the Guarantor or
its assets unless the following provisions of this Section 8 had
effect, then, the maximum liability of the Guarantor hereunder (the
``Maximum Liability Amount'') shall be limited so that in no event
shall such amount exceed the lesser of (i) the Indebtedness and (ii) an
amount equal to the aggregate, without double counting, of (a) ninety-
five percent (95%) of the Guarantor's Adjusted Net Worth (as
hereinafter defined) on the date hereof, or on the date enforcement of
this Guarantee is sought (the ``Determination Date''), whichever is
greater, (b) the aggregate fair value of the Guarantor's Subrogation
and Contribution Rights (as hereinafter defined) and (c) the amount of
any Valuable Transfer (as hereinafter defined) to the Guarantor,
provided that the Guarantor's liability under this Guarantee shall be
further limited to the extent, if any, required so that the obligations
of the Guarantor under this Guarantee shall not be subject to being set
aside or annulled under any applicable law relating to fraudulent
transfers or fraudulent conveyances. In determining the limitations,
if any, on the amount of any of the Guarantor's obligations hereunder
pursuant to the preceding sentence, any rights of subrogation or
contribution (collectively the ``Subrogation and Contribution Rights'')
which the Guarantor may have on the Determination Date with respect to
any other guarantor of the Indebtedness under applicable law shall be
taken into account. As used in Section 8, ``Indebtedness'' of the
Guarantor shall mean, all of the Guarantor's present or future
indebtedness whether for principal, interest, fees, expenses or
otherwise, to the Creditors under the Credit Agreement, the Note and
the Security Documents. As used herein ``Adjusted Net Worth'' of the
Guarantor shall mean, as of any date of determination thereof, an
amount equal to the lesser of (a) an amount equal to the excess of
(i) the amount of the present fair salable value of the assets of the
Guarantor over (ii) the amount that will be required to pay the
Guarantor's probable liability on its then existing debts, including
contingent liabilities, as they become absolute and matured, and (b) an
amount equal to (i) the excess of the sum of the Guarantor's property
at a fair valuation over (ii) the amount of all liabilities of the
Guarantor, contingent or otherwise,
8
<PAGE>
as such terms are construed in accordance with applicable laws
governing determinations of the insolvency of debtors. In determining
the Adjusted Net Worth of the Guarantor for purposes of calculating the
Maximum Liability Amount for the Guarantor, the liabilities of the
Guarantor to be used in such determination pursuant to each section
(ii) of the preceding sentence shall in any event exclude (a) the
liability of the Guarantor under this Guarantee and the other Security
Documents to which it is a party, (b) the liabilities of the Guarantor
subordinated in right of payment to this Guarantee and (c) any
liabilities of the Guarantor for Subrogation and Contribution Rights to
any of the other guarantors. As used herein ``Valuable Transfer''
shall mean, in respect of the Guarantor, (a) all loans, advances or
capital contributions made to the Guarantor with proceeds of the Credit
Facility, (b) all debt securities or other obligations of the Guarantor
acquired from the Guarantor or retired by the Guarantor with proceeds
of the Credit Facility, (c) the fair market value of all property
acquired with proceeds of the Loan and transferred, absolutely and not
as collateral, to the Guarantor, (d) all equity securities of the
Guarantor acquired from the Guarantor with proceeds of the Credit
Facility, and (e) the value of any other economic benefits in
accordance with applicable laws governing determinations of the
insolvency of debtors, in each such case accruing to the Guarantor as a
result of the Credit Facility and this Guarantee.
9. NOTICES
Notices and other communications hereunder shall be in
writing and may be given at the address or telecopy number set forth
below:
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<PAGE>
If to the Guarantor:
O'Brien (Philadelphia) Cogeneration Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403
Attention: Vice President-CFO
Telecopy No. (612) 373-8833
with a copy to:
Troutman Sanders LLP
600 Peachtree Street, N.W.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: M. Stuart Sutherland, Esq.
Telecopy No. (404) 885-3900
If to the Security Trustee:
MeesPierson Capital Corp.
445 Park Avenue
New York, New York 10022
Attn: Mr. Hendrick Vroege
Telecopy No. (212) 801-0420
or to such other address as any party shall from time to time specify
in writing. Any notice sent by telecopy shall be confirmed by letter
dispatched as soon as practicable thereafter.
Every notice or demand shall, except so far as otherwise
expressly provided by this Guarantee, be deemed to have been received
(provided that it is received prior to 2 p.m. New York time), in the
case of a telecopy, on the date of dispatch thereof (provided that if
the date of dispatch is not a Banking Day in the locality of the party
to whom such notice or communication is sent it shall be deemed to have
been received on the next following Banking Day in such locality), and,
in the case of a letter, at the time of receipt thereof.
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10. HEADINGS
In this Guarantee, Section headings are inserted for
convenience of reference only and shall be ignored in the
interpretation hereof.
IN WITNESS WHEREOF, this Guarantee has been duly executed by
the Guarantor as of this 17 day of December, 1997.
O'BRIEN (PHILADELPHIA) COGENERATION
INC.
By /s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
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Exhibit 10.26.5
GENERAL SECURITY AGREEMENT
of
O'BRIEN (PHILADELPHIA) COGENERATION INC.
in favor of
MEESPIERSON CAPITAL CORP.
December 17, 1997
<PAGE>
GENERAL SECURITY AGREEMENT
THIS GENERAL SECURITY AGREEMENT ("this Agreement") dated as
of December 17, 1997, is entered into by and between O'BRIEN
(PHILADELPHIA) COGENERATION INC., a corporation incorporated under the
laws of the State of Delaware, having offices at 1221 Nicollet Mall,
Suite 610, Minneapolis, Minnesota 55403 (the "Grantor"), and
MEESPIERSON CAPITAL CORP., a corporation incorporated under the laws of
the State of Delaware, with offices at 445 Park Avenue, New York, New
York (the "Security Trustee").
W I T N E S S E T H T H A T :
WHEREAS:
A. By a Credit Agreement dated as of December 17, 1997 (the
"Credit Agreement") made among the Security Trustee, as Agent and
Security Trustee, the banks and financial institutions whose names and
addresses are set out in Schedule 1 thereto (the "Lenders"), and NRG
Generating (U.S.) Inc. (the "Borrower"), the Lenders, subject to the
terms thereof, have agreed to make advances to the Borrower of up to
Thirty Million United States Dollars (US$30,000,000) outstanding at any
time (the "Credit Facility");
B. The Borrower is an affiliate of the Grantor, and the
financial accommodations made to the Borrower under the Credit Facility
will be of benefit to the Grantor; and
C. Pursuant to the Credit Agreement it is a condition
precedent to the availability of the Credit Facility that the Grantor
execute and deliver to the Security Trustee this Agreement and grant
the security interests contemplated hereby in order to create in favor
of the Security Trustee a valid and perfected security interest, as
that term is defined in the Uniform Commercial Code of New York (the
"Code"), in the Collateral (as such term is hereinafter defined), as
security for the payment and performance of all the obligations of the
Borrower under and in connection with the Credit Agreement and the Note
(as such term is defined in the Credit Agreement) now or hereafter
existing whether for principal, interest, fees, expenses or otherwise
and all secured obligations of the Grantor now or hereafter existing
under this Agreement (all such obligations of the Grantor are
hereinafter collectively referred to as the "Secured Obligations").
NOW, THEREFORE, in consideration of the premises, the parties
hereby agree as follows:
<PAGE>
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Credit
Agreement.
2. Grant of Security. The Grantor, as legal and beneficial
owner, as security for the Secured Obligations, hereby assigns,
pledges, transfers and sets over unto the Security Trustee and its
successors and assigns, and hereby grants to the Security Trustee a
security interest in, all of the Grantor's right, title and interest in
and to the following property (hereinafter referred to as the
"Collateral"):
(a) Any and all equipment (as defined in the Code) of the
Grantor, or in which it has rights, whether now owned or hereafter
acquired, and all machinery, tools, office equipment, furniture,
furnishings, fixtures, rolling stock, dies and tools used or useful in
Grantor's business, structures, leasehold improvements, installations,
equipment and appurtenances hereafter constructed, drilled or placed
and any and all goods, equipment and tangible property held or used by
the Grantor, supplies and materials on hand, and all personal property
of every kind, nature and description, whether affixed to land or
imbedded therein or otherwise, of the Grantor together with all present
and future improvements or products of, accessions, attachments and
other additions to and substitutes and replacements for, all or any
part of the foregoing (all of the foregoing types or items of property
and interests described in this paragraph are hereinafter collectively
referred to in this Agreement as the "Personal Property");
(b) Any and all general intangibles (as defined in the Code) of the
Grantor, whether now existing or hereafter acquired or arising,
including, without limitation, all contracts, Energy Service
Agreements, leases, power purchase agreements, steam sale agreements
and any other contractual rights (including any rights to distributions
under any partnership agreements), partnership interests, copyrights,
royalties, licenses, sublicenses, trademarks, trade names, service
marks, patent and proprietary rights, blueprints, drawings, designs,
trade secrets, plans, diagrams, schematics, assembly and display
materials relating thereto and all customer lists, including, without
limitation, all present and future rights, titles, interests and
estates now owned or hereafter acquired by the Grantor (including,
without limitation, all rights to receive payments) under or by virtue
of all agreements, or under or by virtue of all contracts ; provided,
however, any of the foregoing (including the Permits but excluding the
Energy Services Agreements which shall under all circumstances be
subject to the pledge and assignment hereunder and as to which Grantor
has obtained all necessary consents to permit such pledge and
assignment) which by their terms would become void, voidable,
terminable or revocable or would constitute a breach or default
thereunder if pledged or assigned hereunder or if a security interest
therein were granted hereunder are expressly excepted and excluded from
the lien and terms of this Agreement to the extent necessary to avoid
such voidness,
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violability, terminability or revocability; provided further, however,
the Grantor will use all reasonable efforts to obtain all consents
necessary to permit such pledge, assignment and security interest (all
of the foregoing rights, titles, interests and estates referred to or
described in this paragraph are hereinafter collectively referred to in
this Agreement as the "Intangibles Collateral"). As used herein,
"Permits" shall mean any authorizations, consents, approvals, waivers,
exemptions, variances, registrations, leases, tariffs, certifications,
franchises, permissions, permits and licenses now or hereafter of, and
filings and declarations now or hereafter with, and rulings now or
hereafter by, any Governmental Authority (including, without
limitation, the QF Certificate), including those with respect to the
reconstruction, repair, alteration, addition, improvement, replacement,
use, operation or management of the Philadelphia Cogeneration Project
(including, without limitation, all Governmental Approvals now or
hereafter held in the name or for the benefit of the Grantor);
(c) Any and all present and future accounts (as defined in
the Code) (including, but not limited to, all open accounts, accounts
receivable and rights to payment of money, hire due or to become due
and moneys arising under or pursuant to the Intangibles Collateral or
to any other agreements, documents or instruments relating to any
property whether or not owned or leased by the Grantor), chattel paper,
documents, instruments, cash and noncash proceeds, all returned or
repossessed goods and all books, records, computer tapes, programs and
ledger books arising therefrom or relating thereto and other rights
arising from or by virtue of, or from the voluntary or involuntary sale
or other disposition of, or collections with respect to, or insurance
proceeds payable with respect to, or proceeds payable by virtue of
warranty or other claims and causes of action (i) for money, loss or
damages arising out of or in any way connected with the use, operation
or management of any property of the Grantor or (ii) against
manufacturers of or claims against any other person or entity with
respect to all or any part of the Personal Property and other property
whether or not owned or leased by the Grantor (all of the foregoing
types and items of property and interests described in this paragraph
are hereinafter collectively referred to in this Agreement as the
"Accounts");
(d) Any and all inventory (as defined in the Code) of the
Grantor, or in which it has rights, whether now owned or hereafter
acquired, wherever located, including, without limitation, all goods
(as defined in the Code) of the Grantor held for sale or lease or
furnished or to be furnished under contracts of service, all goods held
for display or demonstration, goods on lease or consignment, recess,
finished goods and supplies used or consumed in the Grantor's business,
together with all documents, documents of title, warehouse receipts,
bills of lading or orders for the delivery of all, or any portion, of
the foregoing (all of the foregoing types and items of property and
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<PAGE>
interests described in this paragraph are hereinafter collectively
referred to in this Agreement as the "Inventory Collateral");
(e) Any and all other interests of every kind and character
which the Grantor now has or at any time hereafter acquires in and to
any property whether or not owned or leased by the Grantor, any
interest of the Grantor in the goods or inventory produced therefrom or
stored thereon, the Personal Property, the Intangibles Collateral, the
Accounts and the Inventory Collateral and all property, real, personal
or mixed, tangible or intangible, which is used or useful in connection
with any property whether or not owned or leased by the Grantor, any
interest of the Grantor in the goods or inventory produced therefrom or
stored thereon, the Personal Property, the Intangibles Collateral, the
Accounts and the Inventory Collateral and the proceeds and products of
all of the foregoing and all moneys of any kind whatsoever arising from
or in connection with the Grantor's ownership, sale or lease of the
interest of the Grantor in the goods or inventory produced therefrom or
stored thereon, the Personal Property, the Intangibles Collateral, the
Accounts and the Inventory Collateral, including without limitation,
any and all money and claims for moneys due and to become due to the
Grantor with respect to the actual constructive, agreed, arranged or
compromised total loss, or requisition, purchase, seizure, or taking in
any manner of title or ownership of any property of the Grantor, and
all claims for damage or compensation with respect thereto, and any
indemnity, warranty or guaranty otherwise payable by reason of loss or
damage to, or otherwise with respect to, any interest of the Grantor in
the goods or inventory produced therefrom or stored thereon, the
Personal Property, the Intangibles Collateral, the Accounts and the
Inventory Collateral, whether now owned or hereafter acquired; and
(f) Any and all proceeds of, and all other profits, rentals
or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing or other disposition of, or
realization upon, the Personal Property, the Intangibles Collateral,
the Accounts and the Inventory Collateral, including without limitation
(i) all claims of the Grantor against third parties for loss of, damage
to or destruction of, or of proceeds payable under, or unearned
premiums with respect to policies of insurance in respect of, any of
the Personal Property, the Intangibles Collateral, the Accounts or the
Inventory Collateral; (ii) any condemnation payments with respect to
any of the Personal Property, the Intangibles Collateral, the Accounts
or the Inventory Collateral, in each case whether now existing or
hereafter arising; and (iii) any and all other amounts from time to
time paid or payable under or in connection with any of the Personal
Property, the Intangibles Collateral, the Accounts or the Inventory
Collateral, including, without limitation, all other rights, claims and
benefits of the Grantor against any person arising out of, relating to
or in connection with, any of the Personal Property, the Intangibles
Collateral, the Accounts or the Inventory Collateral.]
4
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The security interest of the Security Trustee contained
herein shall cover, and shall include a continuing general assignment
in favor of the Security Trustee in, any and all documents, contracts,
liens and security instruments, guarantees, books and records
evidencing, securing or relating to the Collateral and the insurance to
be secured to cover same in accordance with Section 5 hereof.
3. Security for Secured Obligations. This Agreement secures
the payment and performance of all of the Secured Obligations.
4. Representations and Warranties. The Grantor represents
and warrants as follows:
(a) The Grantor owns the Collateral free and clear of any
lien, security interest, charge or encumbrance except for any Permitted
Liens. Except with respect to Permitted Liens, no effective financing
statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office.
(b) Appropriate financing statements and mortgages have been
or are concurrently herewith being filed at all governmental offices in
each jurisdiction where such filing is necessary to perfect the
security interest intended to be covered hereby and such security
interest shall, upon such filing, constitute a perfected security
interest in the Collateral in favor of the Security Trustee (to the
extent that such security interest can be perfected in the Collateral
by filing a financing statement or mortgage under the Code or
applicable state or foreign law) which are enforceable as such against
all creditors of and purchasers from the Grantor (other than purchasers
who take free of such liens, encumbrances or security interests under
the Code) and against any owner or purchaser of the real property where
any of the equipment is located and any present or future creditor
obtaining any lien, encumbrance or security interest on such real
property. All other filings and other actions requested by the
Security Trustee to perfect and protect the security interest granted
herein have been duly made or taken.
(c) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
(other than as contemplated by sub-clause (c) immediately preceding
this sub-clause) is required either (i) for the grant by the Grantor of
the security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Grantor or (ii) for the perfection
of or the exercise by the Security Trustee of its right and remedies
hereunder.
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<PAGE>
(d) All material agreements and rights constituting the
Collateral (including, but not limited to the Intangibles Collateral)
are valid and subsisting and are in full force and effect; and all
rentals, royalties and other material amounts due and payable by the
Grantor in respect thereof (and, to Grantor's knowledge, all rentals,
royalties and other material amounts due and payable by third parties
in respect thereof) have been paid or provision for such payment
satisfactory to the Security Trustee has been made; all of Grantor's
obligations in respect thereof have been timely met; and all leases,
agreements and all other material obligations to lessors and others
attendant to the ownership of the Collateral have been timely met and
duly performed. Except to the extent incurred in the ordinary course
of business, the Accounts are free from any claim for credit, deduction
or allowance of any party obligated in respect thereof and free from
any defense, dispute, setoff or counterclaim and there is no extension
or indulgence with respect thereto.
5. Further Assurances. (a) The Grantor agrees that from
time to time, at the expense of the Grantor, the Grantor will promptly
execute and deliver all further instruments and documents, and take all
further action, that may be necessary or advisable, or that the
Security Trustee may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby
or to enable the Security Trustee to exercise and enforce its rights
and remedies hereunder with respect to the Collateral. Without
limiting the generality of the foregoing, the Grantor shall execute and
file such financing or continuation statements, or amendments thereto,
and such other instruments or notices, as may be necessary or
advisable, or as the Security Trustee may reasonably request, whether
in a jurisdiction where the Code has been adopted or any other
jurisdiction, in order to perfect and preserve the security interests
granted or purported to be granted hereby.
(b) The Grantor hereby authorizes the Security Trustee 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 the Grantor where permitted by law. In the event that the
Security Trustee files any such financing statements or renewals
without the signature of the Grantor, it shall provide the Grantor with
notice thereof as soon as practicable after such filing.
(c) The Grantor will furnish to the Security Trustee from
time to time as the Security Trustee may reasonably request statements
and schedules further identifying and describing the Collateral and
such other reports in connection therewith, all in reasonable detail.
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<PAGE>
(d) Upon reasonable notice without materially interfering
with the ordinary course or conduct of the Grantor's business, the
Security Trustee shall at all times have full and free access during
normal business hours to all the books, correspondence and records of
the Grantor, and the Security Trustee or its representatives may
examine the same, take extracts therefrom and make photocopies thereof,
and the Grantor agrees to render to the Security Trustee, at the
Grantor's cost and expense, such clerical and other assistance as may
be reasonably requested with regard thereto. The Security Trustee and
its representatives shall at all times, upon reasonable notice, without
materially interfering with the ordinary course or conduct of the
Grantor's business, also have the right to enter into and upon any
premises where any of the Collateral is located for the purpose of
inspecting the same, observing its use or otherwise protecting its
interests therein.
(e) The Grantor will comply with all requirements of law
applicable to the Collateral or any part thereof other than those
requirements with which the failure to comply would not have a material
adverse effect on the existence, condition or value of the Collateral
or the security interests granted hereunder; provided, however, that
the Grantor may contest any requirement of law in any reasonable manner
which shall not, in the reasonable opinion of the Security Trustee,
materially adversely affect the Security Trustee's rights or the
priority of their security interests in the Collateral.
(f) Without thirty (30) days' prior written notice to the
Security Trustee, the Grantor shall not (i) change its chief executive
office or principal place of business, (ii) change the location at
which it maintains its records relating to the Intangibles Collateral
or Accounts, and (iii) except as permitted under the Credit Agreement,
remove its Personal Property from any of the counties in which such
Personal Property is presently located (other than temporary removals
of Personal Property which are in the ordinary course of Grantor's
business). Grantor shall furnish to the Security Trustee from time to
time, as the Security Trustee may reasonably request, reports
identifying the locations where the Collateral is located.
(g) The Grantor shall not change its corporate name,
identity or corporate structure, nor carry on business under any name
other than its corporate name, unless (i) it has given to the Security
Trustee not less than thirty days prior written notice of its intention
to do so, specifying such new corporate name, identity or corporate
structure, and providing such other information in connection therewith
as the Security Trustee may reasonably request, and (ii) with respect
to such new corporate name, identity or corporate structure, it shall
have taken all action, requested by the Security Trustee in its
reasonable discretion, to maintain the security interest of the
Security
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Trustee in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
(h) The Grantor shall pay promptly, or cause to be paid
promptly, when due all property and other material taxes, assessments
and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the
Collateral, except to the extent the validity thereof is being
contested in good faith and adequate reserves have been maintained
therefor.
(i) The Grantor will maintain all Collateral necessary in
the Grantor's business in good operating condition, ordinary wear and
tear and immaterial impairments of value and damage by the elements
excepted, and will provide maintenance, service and repairs necessary
for such purpose.
(j) The Grantor shall, within ten days of acquiring an
ownership interest in any Collateral having a value in excess of Twenty-
Five Thousand Dollars ($25,000) on which a security interest under the
Code can only be perfected by appropriate notations on the certificate
of title relating to such Collateral, deliver to the Security Trustee
any and all certificates of title, applications for title or similar
evidence of ownership of such Collateral and shall cause the Security
Trustee to be named as lienholder on any such certificate of title or
other evidence of ownership.
(k) The Grantor will, promptly upon request, provide to the
Security Trustee all information and evidence it may reasonably request
concerning the Collateral, and in particular the Accounts, to enable
the Security Trustee to enforce the provisions of this Agreement.
6. Security Trustee Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Security Trustee as the Grantor's
attorney-in-fact, with full authority in the name, place and stead of
the Grantor, from time to time in the Security Trustee's discretion,
should an Event of Default (as such term is defined in the Credit
Agreement) have occurred and be continuing to take any action and to
execute any document which the Security Trustee may deem necessary or
advisable to accomplish the purposes of this Agreement, including,
without limitation:
(i) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any
of the Collateral,
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(ii) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper in
connection with clause (i) above, and
(iii) to file any claims or take any action or
institute any proceedings which the Security Trustee may
deem necessary or advisable for the recovery of any of
the Collateral or otherwise to enforce the rights of the
Security Trustee with respect thereto created by this
Agreement.
7. Concerning Account Debtors. (a) If the Security Trustee
so directs at any time after the occurrence and during the continuation
of an Event of Default, the Grantor agrees (i) to cause all payments on
account of the Accounts to be made directly to the Security Trustee and
(ii) that the Security Trustee may, at its option, directly notify the
obligors with respect to any of the Accounts to make such payments.
The Grantor agrees to be bound by any commercially reasonable
collection, compromise, forgiveness, extension or other action taken by
the Security Trustee with respect to the Accounts. Without notice to
or assent by the Grantor, the Security Trustee shall apply any or all
amounts then or thereafter deposited with it in the manner provided in
Section 11 of this Agreement. The costs and expenses (including
reasonable attorneys' fees) of collection, whether incurred by the
Grantor or the Security Trustee, shall be borne by the Grantor.
(b) The Grantor shall endeavor to cause to be collected from
the account debtor named in each of its Accounts, as and when due
(including, without limitation, amounts which are delinquent, such
amounts to be collected in accordance with generally accepted
collection procedures in accordance with all applicable laws), any and
all amounts owing under or on account of such Account, and apply
forthwith upon receipt thereof of all such amounts as are so collected
to the outstanding balance of such Account, except that, unless an
Event of Default shall have occurred and be continuing, the Grantor may
allow in the ordinary course of business as adjustments to amounts
owing under its Accounts (i) an extension or renewal of the time or
times of payment or settlement for less than the total unpaid balance
in the ordinary course of business, consistent with the Grantor's
existing policies with respect thereto and which the Grantor finds
appropriate at the time in accordance with sound business judgment, and
(ii) a refund or credit due as a result of returned or damaged
merchandise or improperly performed services. The costs and expenses
(including, without limitation, reasonable attorneys' fees) of
collection, whether incurred by the Grantor or the Security Trustee,
shall be borne by the Grantor.
8. Instruments. If any of the Accounts become evidenced by
an instrument, chattel paper or letter of credit (each defined in the
Code), the Grantor, upon notice from the Security Trustee and provided
an Event of Default has occurred and is continuing,
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shall promptly, and in any event within ten days, notify the Security
Trustee thereof, and upon request by the Security Trustee promptly
deliver such instrument, chattel paper or letter of credit as further
security under this Agreement.
9. Security Trustee May Perform. If the Grantor fails to
perform any agreement contained herein, the Security Trustee may itself
perform, or cause to be performed, such agreement, and the expenses of
the Security Trustee incurred in connection therewith shall be payable
by the Grantor.
10. The Security Trustee's Duties. The powers conferred on
the Security Trustee hereunder are solely to protect its interest in
the Collateral and shall not impose any duty upon the Security Trustee
to exercise any such powers. Except for the safe custody of any of the
Collateral which, from time to time, may come into its possession and
the accounting for moneys actually received by it hereunder, the
Security Trustee shall have no duty as to the Collateral or as to the
taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to the Collateral.
11. Remedies. The security constituted by this Agreement
shall be enforceable if an Event of Default shall have occurred and be
continuing:
(a) The Security Trustee may exercise, in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Code (whether or not the Code shall
be applied by the court in the jurisdiction in which enforcement of the
security interest contained herein is sought) and also may (i) require
the Grantor to, and the Grantor hereby agrees that it will at its
expense and upon request of the Security Trustee forthwith, assemble
all or any part of the Collateral as directed by the Security Trustee
and make it available to the Security Trustee, at a place to be
designated by the Security Trustee which is reasonably convenient to
both parties, and (ii) without notice, except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Security Trustee's offices or elsewhere,
for cash, and at such price or prices and upon such other terms as the
Security Trustee may deem commercially reasonable. The Security
Trustee shall give the Grantor at least ten days' notice of the time
and place of any public sale. The Grantor agrees that ten days' notice
of any such sale is commercially reasonable notification. The Security
Trustee shall not be obligated to make any sale of the Collateral
regardless of notice of sale having been given. The Security Trustee
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned.
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(b) All cash proceeds received by the Security Trustee in
respect of any sale of, or other realization upon, all or any part of
the Collateral shall be applied (after payment of any amounts payable
to the Security Trustee pursuant to Section 13 of this Agreement) in
whole or in part by the Security Trustee as set forth in Section 9 of
the Credit Agreement.
12. Non-Interference with Remedies; Specific Performance.
(a) The Grantor agrees that following the occurrence and during the
continuance of an Event of Default it will not at any time pledge,
claim or take the benefit of any appraisal, valuation, stay, extension,
moratorium or redemption law now or hereafter in force in order to
prevent or delay the enforcement of this Agreement, or the absolute
sale of the whole or any part of the Collateral or the possession
thereof by any purchaser at any sale hereunder, and the Grantor waives
the benefit of all such laws to the extent it lawfully may do so. The
Grantor agrees it will not interfere with any right, power or remedy of
the Security Trustee provided for in this Agreement now or hereafter
existing at law or in equity or by statute or otherwise, or with the
exercise or beginning of the exercise by the Security Trustee of any
one or more of such rights, powers or remedies.
(b) The Grantor agrees that a breach of any of the
agreements or covenants contained in this Agreement will cause
irreparable injury to the Security Trustee, that the Security Trustee
has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every agreement and covenant
contained in this Agreement shall be specifically enforceable against
the Grantor, and the Grantor hereby waives and agrees not to assert any
defenses against an action for specific performance of such agreements
or covenants except for a defense that the Secured Obligations are not
then due and payable in accordance with the agreements and instruments
governing and evidencing such Secured Obligations.
13. Indemnity, Expenses and Interest. (a) The Grantor
shall on demand of the Security Trustee pay to the Security Trustee (on
a full indemnity basis) all costs, charges, losses, liabilities and
expenses expended, paid or incurred by the Security Trustee (whether
before or after this Agreement becomes enforceable), including any tax
thereon and reasonable professional fees including attorneys' fees, in
connection with any breach of the covenants or undertakings herein or
the exercise of any rights exercisable under it or the recovery of any
of the Secured Obligations by the Security Trustee, including, without
limitation, any remuneration and other sums at any time payable to the
Security Trustee and all costs, charges, losses, liabilities and
expenses connected with the protection, realization, enforcement or
release of any provision of this Agreement, except to the extent the
same results from the Security Trustee's gross negligence or willful
misconduct.
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(b) The Grantor shall after demand by the Security Trustee
pay to the Security Trustee interest at a rate per annum equal to the
Default Rate on all of the costs, charges, losses, liabilities and
expenses referred to this clause. So long as no Event of Default has
occurred and is continuing, such interest shall accrue and be payable
from the date on which the Grantor receives notice from the Security
Trustee, otherwise, such interest shall accrue and be payable from the
date such cost, charge, loss, liability or expense was incurred by the
Security Trustee.
14. Security Interest Absolute. All rights of the Security
Trustee and the security interest granted hereunder, and all Secured
Obligations, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the
Credit Agreement or the Note, or any other agreement or
instrument relating thereto;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the
obligations of the Grantor or any other person under or
in connection with the Credit Agreement or any other
amendment or waiver of or any consent to any departure
from the Credit Agreement, the Note or the terms of any
thereto; or
(iii) any other circumstances which might otherwise
constitute a defense available to, or a discharge of,
the Grantor in respect of the Secured Obligations or
this Agreement.
15. Amendments. No amendment or waiver of any provision of
this Agreement, nor consent to any departure therefrom by the Grantor,
shall be effective unless the same shall be in writing and signed by
the parties hereto, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which
given.
16. Successors and Assigns. Whenever in this Agreement
reference is made to any person, such reference shall be deemed to
include the successors and assigns of such person.
17. Notices. Every notice or other communication under this
Agreement shall be in writing and may be given by telex or telecopy as
follows:
12
<PAGE>
If to the Grantor:
O'Brien (Philadelphia) Cogeneration Inc.
1221 Nicollet Mall
Suite 610
Minneapolis, Minnesota 55403
Attention: Vice President-CFO
Telecopy No.: (612) 373-8833
with a copy to:
Troutman Sanders LLP
600 Peachtree Street, N.W.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: M. Stuart Sutherland, Esq.
Telecopy No.: (404) 885-3900
If to the Security Trustee:
MeesPierson Capital Corporation
445 Park Avenue
New York, New York 10022
Attention: Hendrik Vroege
Telecopy No.: (212) 801-0420
or to such other address as either party shall from time to time
specify in writing to the other. Any notice sent by telex or telecopy
shall be confirmed by letter dispatched as soon as practicable
thereafter.
Every notice or other communication as shall, except so far
as otherwise expressly provided by this Agreement, be deemed to have
been received (provided it is received prior to 2 p.m. New York time;
otherwise it shall be deemed to have been received on the next
following Banking Day (as such term is defined in the Credit
Agreement)) in the case of a telex or telecopy at the time the
transmitting machine
13
<PAGE>
provides confirmation of dispatch thereof (provided further that if the
date of dispatch is not a Banking Day in the locality of the party to
whom such notice or demand is sent it shall be deemed to have been
received on the next following Banking Day in such locality) and, in
the case of a letter, at the time of receipt thereof.
18. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall
(i) remain in full force and effect until payment in full of the
Secured Obligations, (ii) be binding upon the Grantor, its successors
and assigns, and (iii) inure to the benefit of the Security Trustee and
its respective successors, transferees and assigns. Upon the payment
in full of the Secured Obligations, the security interest granted
hereby shall terminate and all rights in and to the Collateral shall
revert to the Grantor. Upon any such termination, the Security Trustee
will, at the Grantor's expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such
termination.
19. Headings. In this Agreement, clause headings are
inserted for convenience of reference only and shall not be considered
in the interpretation of this Agreement.
20. Waiver of Jury Trial. IT IS MUTUALLY AGREED BY AND
BETWEEN THE PARTIES HERETO THAT EACH OF THEM HEREBY WAIVES TRAIL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY
HERETO AGAINST THE OTHER PARTY HERETO ON ANY MATTER WHATSOEVER ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT AND ANY SECURITY
DOCUMENT TO WHICH THE GRANTOR OR THE ASSIGNEE MAY BE A PARTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
21. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
ANY REFERENCE TO CONFLICTS OF LAWS PRINCIPLES OF THAT STATE.
22. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be deemed to be duplicate
originals and which shall constitute one and the same instrument.
14
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized
on the day and year first above written.
O'BRIEN (PHILADELPHIA)
COGENERATION INC.
By: /s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
MEESPIERSON CAPITAL CORP.
By: /s/ Hendrik J. Vroege
Name: Hendrik J. Vroege
Title: Vice President
By: /s/ John T. Connors
Name: John T. Connors
Title: Exec. V.P.
15
<PAGE>
Exhibit 10.26.6
GENERAL SECURITY AGREEMENT
of
NRG GENERATING (U.S.) INC.
in favor of
MEESPIERSON CAPITAL CORP.
December 17, 1997
<PAGE>
GENERAL SECURITY AGREEMENT
THIS GENERAL SECURITY AGREEMENT ("this Agreement") dated as
of December 17, 1997, is entered into by and between NRG GENERATING
(U.S.) INC., a corporation incorporated under the laws of the State of
Delaware, having offices at 1221 Nicollet Mall, Suite 610, Minneapolis,
Minnesota 55403 (the "Grantor"), and MEESPIERSON CAPITAL CORP., a
corporation incorporated under the laws of the State of Delaware, with
offices at 445 Park Avenue, New York, New York (the "Security
Trustee").
W I T N E S S E T H T H A T :
WHEREAS:
A. By a Credit Agreement dated as of December 17, 1997 (the
"Credit Agreement") made among the Security Trustee, as Agent and
Security Trustee, the banks and financial institutions whose names and
addresses are set out in Schedule 1 thereto (the "Lenders"), and
Grantor, the Lenders, subject to the terms thereof, have agreed to make
advances to the Grantor of up to Thirty Million United States Dollars
(US$30,000,000) outstanding at any time (the "Credit Facility");
B. Pursuant to the Credit Agreement it is a condition
precedent to the availability of the Credit Facility that the Grantor
execute and deliver to the Security Trustee this Agreement and grant
the security interests contemplated hereby in order to create in favor
of the Security Trustee a valid and perfected security interest, as
that term is defined in the Uniform Commercial Code of New York (the
"Code"), in the Collateral (as such term is hereinafter defined), as
security for the payment and performance of all the obligations of the
Grantor under and in connection with the Credit Agreement and the Note
(as such term is defined in the Credit Agreement) now or hereafter
existing whether for principal, interest, fees, expenses or otherwise
and all secured obligations of the Grantor now or hereafter existing
under this Agreement (all such obligations of the Grantor are
hereinafter collectively referred to as the "Secured Obligations").
NOW, THEREFORE, in consideration of the premises, the parties
hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Credit
Agreement.
<PAGE>
2. Grant of Security. The Grantor, as legal and beneficial
owner, as security for the Secured Obligations, hereby assigns,
pledges, transfers and sets over unto the Security Trustee and its
successors and assigns, and hereby grants to the Security Trustee a
security interest in, all of the Grantor's right, title and interest in
and to the following property (hereinafter referred to as the
"Collateral"):
(a) Any and all equipment (as defined in the Code) of the
Grantor, or in which it has rights, whether now owned or hereafter
acquired, which is used in connection with, or located at, the
Northeast Facility or the Southwest Facility of the Philadelphia
Cogeneration Project owned and operated by O'Brien (Philadelphia)
Cogeneration Inc., together with all present and future improvements or
products of, accessions, attachments and other additions to and
substitutes and replacements for, all or any part of the foregoing (all
of the foregoing types or items of property and interests described in
this paragraph are hereinafter collectively referred to in this
Agreement as the "Equipment"); and
(b) Any and all proceeds of, and all other profits, rentals
or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing or other disposition of, or
realization upon, the Equipment, including without limitation (i) all
claims of the Grantor against third parties for loss of, damage to or
destruction of, or of proceeds payable under, or unearned premiums with
respect to policies of insurance in respect of, any of the Equipment;
(ii) any condemnation payments with respect to any of the Equipment,
whether now existing or hereafter arising; and (iii) any and all other
amounts from time to time paid or payable under or in connection with
any of the Equipment, including, without limitation, all other rights,
claims and benefits of the Grantor against any person arising out of,
relating to or in connection with, any of the Equipment.
The security interest of the Security Trustee contained
herein shall cover, and shall include a continuing general assignment
in favor of the Security Trustee in, any and all documents, contracts,
liens and security instruments, guarantees, books and records
evidencing, securing or relating to the Collateral and the insurance to
be secured to cover same in accordance with Section 5 hereof.
3. Security for Secured Obligations. This Agreement secures
the payment and performance of all of the Secured Obligations.
4. Representations and Warranties. The Grantor represents
and warrants as follows:
2
<PAGE>
(a) The Grantor owns the Collateral free and clear of any
lien, security interest, charge or encumbrance except for any Permitted
Liens. Except with respect to Permitted Liens, no effective financing
statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office.
(b) Appropriate financing statements and mortgages have been
or are concurrently herewith being filed at all governmental offices in
each jurisdiction where such filing is necessary to perfect the
security interest intended to be covered hereby and such security
interest shall, upon such filing, constitute a perfected security
interest in the Collateral in favor of the Security Trustee (to the
extent that such security interest can be perfected in the Collateral
by filing a financing statement or mortgage under the Code or
applicable state or foreign law) which are enforceable as such against
all creditors of and purchasers from the Grantor (other than purchasers
who take free of such liens, encumbrances or security interests under
the Code) and against any owner or purchaser of the real property where
any of the equipment is located and any present or future creditor
obtaining any lien, encumbrance or security interest on such real
property. All other filings and other actions requested by the
Security Trustee to perfect and protect the security interest granted
herein have been duly made or taken.
(c) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
(other than as contemplated by sub-clause (c) immediately preceding
this sub-clause) is required either (i) for the grant by the Grantor of
the security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Grantor or (ii) for the perfection
of or the exercise by the Security Trustee of its right and remedies
hereunder.
5. Further Assurances. (a) The Grantor agrees that from
time to time, at the expense of the Grantor, the Grantor will promptly
execute and deliver all further instruments and documents, and take all
further action, that may be necessary or advisable, or that the
Security Trustee may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby
or to enable the Security Trustee to exercise and enforce its rights
and remedies hereunder with respect to the Collateral. Without
limiting the generality of the foregoing, the Grantor shall execute and
file such financing or continuation statements, or amendments thereto,
and such other instruments or notices, as may be necessary or
advisable, or as the Security Trustee may reasonably request, whether
in a jurisdiction where the Code has been adopted or any other
jurisdiction, in order to perfect and preserve the security interests
granted or purported to be granted hereby.
3
<PAGE>
(b) The Grantor hereby authorizes the Security Trustee 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 the Grantor where permitted by law. In the event that the
Security Trustee files any such financing statements or renewals
without the signature of the Grantor, it shall provide the Grantor with
notice thereof as soon as practicable after such filing.
(c) The Grantor will furnish to the Security Trustee from
time to time as the Security Trustee may reasonably request statements
and schedules further identifying and describing the Collateral and
such other reports in connection therewith, all in reasonable detail.
(d) Upon reasonable notice without materially interfering
with the ordinary course or conduct of the Grantor's business, the
Security Trustee shall at all times have full and free access during
normal business hours to all the books, correspondence and records of
the Grantor, and the Security Trustee or its representatives may
examine the same, take extracts therefrom and make photocopies thereof,
and the Grantor agrees to render to the Security Trustee, at the
Grantor's cost and expense, such clerical and other assistance as may
be reasonably requested with regard thereto. The Security Trustee and
its representatives shall at all times, upon reasonable notice, without
materially interfering with the ordinary course or conduct of the
Grantor's business, also have the right to enter into and upon any
premises where any of the Collateral is located for the purpose of
inspecting the same, observing its use or otherwise protecting its
interests therein.
(e) The Grantor will comply with all requirements of law
applicable to the Collateral or any part thereof other than those
requirements with which the failure to comply would not have a material
adverse effect on the existence, condition or value of the Collateral
or the security interests granted hereunder; provided, however, that
the Grantor may contest any requirement of law in any reasonable manner
which shall not, in the reasonable opinion of the Security Trustee,
materially adversely affect the Security Trustee's rights or the
priority of their security interests in the Collateral.
(f) Without thirty (30) days' prior written notice to the
Security Trustee, the Grantor shall not (i) change its chief executive
office or principal place of business, (ii) change the location at
which it maintains its records relating to the Equipment, and (iii)
except as permitted under the Credit Agreement, remove the Equipment
from any of the counties in which such Equipment is presently located.
Grantor shall furnish to the Security Trustee from time to time, as the
Security Trustee may reasonably request, reports identifying the
locations where the Collateral is located.
4
<PAGE>
(g) The Grantor shall not change its corporate name,
identity or corporate structure, nor carry on business under any name
other than its corporate name, unless (i) it has given to the Security
Trustee not less than thirty days prior written notice of its intention
to do so, specifying such new corporate name, identity or corporate
structure, and providing such other information in connection therewith
as the Security Trustee may reasonably request, and (ii) with respect
to such new corporate name, identity or corporate structure, it shall
have taken all action, requested by the Security Trustee in its
reasonable discretion, to maintain the security interest of the
Security Trustee in the Collateral intended to be granted hereby at all
times fully perfected and in full force and effect.
(h) The Grantor shall pay promptly, or cause to be paid
promptly, when due all property and other material taxes, assessments
and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the
Collateral, except to the extent the validity thereof is being
contested in good faith and adequate reserves have been maintained
therefor.
(i) The Grantor will maintain all Collateral necessary in
the Grantor's business in good operating condition, ordinary wear and
tear and immaterial impairments of value and damage by the elements
excepted, and will provide maintenance, service and repairs necessary
for such purpose.
(j) The Grantor shall, within ten days of acquiring an
ownership interest in any Collateral having a value in excess of Twenty-
Five Thousand Dollars ($25,000) on which a security interest under the
Code can only be perfected by appropriate notations on the certificate
of title relating to such Collateral, deliver to the Security Trustee
any and all certificates of title, applications for title or similar
evidence of ownership of such Collateral and shall cause the Security
Trustee to be named as lienholder on any such certificate of title or
other evidence of ownership.
(k) The Grantor will, promptly upon request, provide to the
Security Trustee all information and evidence it may reasonably request
concerning the Collateral to enable the Security Trustee to enforce the
provisions of this Agreement.
6. Security Trustee Appointed Attorney-in-Fact. The
Grantor hereby irrevocably appoints the Security Trustee as the
Grantor's attorney-in-fact, with full authority in the name, place and
stead of the Grantor, from time to time in the Security Trustee's
discretion, should an Event of Default (as such term is defined in the
Credit Agreement) have occurred and be continuing to take any action
and to execute any
5
<PAGE>
document which the Security Trustee may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without
limitation:
(i) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any
of the Collateral,
(ii) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper in
connection with clause (i) above, and
(iii) to file any claims or take any action or
institute any proceedings which the Security Trustee may
deem necessary or advisable for the recovery of any of
the Collateral or otherwise to enforce the rights of the
Security Trustee with respect thereto created by this
Agreement.
7. Security Trustee May Perform. If the Grantor fails to
perform any agreement contained herein, the Security Trustee may itself
perform, or cause to be performed, such agreement, and the expenses of
the Security Trustee incurred in connection therewith shall be payable
by the Grantor.
8. The Security Trustee's Duties. The powers conferred on
the Security Trustee hereunder are solely to protect its interest in
the Collateral and shall not impose any duty upon the Security Trustee
to exercise any such powers. Except for the safe custody of any of the
Collateral which, from time to time, may come into its possession and
the accounting for moneys actually received by it hereunder, the
Security Trustee shall have no duty as to the Collateral or as to the
taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to the Collateral.
9. Remedies. The security constituted by this Agreement
shall be enforceable if an Event of Default shall have occurred and be
continuing:
(a) The Security Trustee may exercise, in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Code (whether or not the Code shall
be applied by the court in the jurisdiction in which enforcement of the
security interest contained herein is sought) and also may (i) require
the Grantor to, and the Grantor hereby agrees that it will at its
expense and upon request of the Security Trustee forthwith, assemble
all or any part of the Collateral as directed by the Security Trustee
and make it available to the Security Trustee, at a place to be
designated by the Security Trustee which is reasonably convenient to
both parties, and (ii) without notice, except as
6
<PAGE>
specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Security Trustee's
offices or elsewhere, for cash, and at such price or prices and upon
such other terms as the Security Trustee may deem commercially
reasonable. The Security Trustee shall give the Grantor at least ten
days' notice of the time and place of any public sale. The Grantor
agrees that ten days' notice of any such sale is commercially
reasonable notification. The Security Trustee shall not be obligated
to make any sale of the Collateral regardless of notice of sale having
been given. The Security Trustee may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(b) All cash proceeds received by the Security Trustee in
respect of any sale of, or other realization upon, all or any part of
the Collateral shall be applied (after payment of any amounts payable
to the Security Trustee pursuant to Section 11 of this Agreement) in
whole or in part by the Security Trustee as set forth in Section 9 of
the Credit Agreement.
10. Non-Interference with Remedies; Specific Performance.
(a) The Grantor agrees that following the occurrence and during the
continuance of an Event of Default it will not at any time pledge,
claim or take the benefit of any appraisal, valuation, stay, extension,
moratorium or redemption law now or hereafter in force in order to
prevent or delay the enforcement of this Agreement, or the absolute
sale of the whole or any part of the Collateral or the possession
thereof by any purchaser at any sale hereunder, and the Grantor waives
the benefit of all such laws to the extent it lawfully may do so. The
Grantor agrees it will not interfere with any right, power or remedy of
the Security Trustee provided for in this Agreement now or hereafter
existing at law or in equity or by statute or otherwise, or with the
exercise or beginning of the exercise by the Security Trustee of any
one or more of such rights, powers or remedies.
(b) The Grantor agrees that a breach of any of the
agreements or covenants contained in this Agreement will cause
irreparable injury to the Security Trustee, that the Security Trustee
has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every agreement and covenant
contained in this Agreement shall be specifically enforceable against
the Grantor, and the Grantor hereby waives and agrees not to assert any
defenses against an action for specific performance of such agreements
or covenants except for a defense that the Secured Obligations are not
then due and payable in accordance with the agreements and instruments
governing and evidencing such Secured Obligations.
7
<PAGE>
11. Indemnity, Expenses and Interest. (a) The Grantor
shall on demand of the Security Trustee pay to the Security Trustee (on
a full indemnity basis) all costs, charges, losses, liabilities and
expenses expended, paid or incurred by the Security Trustee (whether
before or after this Agreement becomes enforceable), including any tax
thereon and reasonable professional fees including attorneys' fees, in
connection with any breach of the covenants or undertakings herein or
the exercise of any rights exercisable under it or the recovery of any
of the Secured Obligations by the Security Trustee, including, without
limitation, any remuneration and other sums at any time payable to the
Security Trustee and all costs, charges, losses, liabilities and
expenses connected with the protection, realization, enforcement or
release of any provision of this Agreement, except to the extent the
same results from the Security Trustee's gross negligence or willful
misconduct.
(b) The Grantor shall after demand by the Security Trustee
pay to the Security Trustee interest at a rate per annum equal to the
Default Rate on all of the costs, charges, losses, liabilities and
expenses referred to this clause. So long as no Event of Default has
occurred and is continuing, such interest shall accrue and be payable
from the date on which the Grantor receives notice from the Security
Trustee, otherwise, such interest shall accrue and be payable from the
date such cost, charge, loss, liability or expense was incurred by the
Security Trustee.
12. Security Interest Absolute. All rights of the Security
Trustee and the security interest granted hereunder, and all Secured
Obligations, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the
Credit Agreement or the Note, or any other agreement or
instrument relating thereto;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the
obligations of the Grantor or any other person under or
in connection with the Credit Agreement or any other
amendment or waiver of or any consent to any departure
from the Credit Agreement, the Note or the terms of any
thereto; or
(iii) any other circumstances which might otherwise
constitute a defense available to, or a discharge of,
the Grantor in respect of the Secured Obligations or
this Agreement.
12. Amendments. No amendment or waiver of any provision of
this Agreement, nor consent to any departure therefrom by the Grantor,
shall be effective
8
<PAGE>
unless the same shall be in writing and signed by the parties hereto,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
13. Successors and Assigns. Whenever in this Agreement
reference is made to any person, such reference shall be deemed to
include the successors and assigns of such person.
14. Notices. Every notice or other communication under this
Agreement shall be in writing and may be given by telex or telecopy as
follows:
If to the Grantor:
NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403
Attention: Vice President-CFO
Telecopy No.: (612) 373-8833
with a copy to:
Troutman Sanders LLP
600 Peachtree Street, N.W.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: M. Stuart Sutherland, Esq.
Telecopy No.: (404) 885-3900
9
<PAGE>
If to the Security Trustee:
MeesPierson Capital Corporation
445 Park Avenue
New York, New York 10022
Attention: Hendrik Vroege
Telecopy No.: (212) 801-0420
or to such other address as either party shall from time to time
specify in writing to the other. Any notice sent by telex or telecopy
shall be confirmed by letter dispatched as soon as practicable
thereafter.
Every notice or other communication as shall, except so far
as otherwise expressly provided by this Agreement, be deemed to have
been received (provided it is received prior to 2 p.m. New York time;
otherwise it shall be deemed to have been received on the next
following Banking Day (as such term is defined in the Credit
Agreement)) in the case of a telex or telecopy at the time the
transmitting machine provides confirmation of dispatch thereof
(provided further that if the date of dispatch is not a Banking Day in
the locality of the party to whom such notice or demand is sent it
shall be deemed to have been received on the next following Banking Day
in such locality) and, in the case of a letter, at the time of receipt
thereof.
15. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall
(i) remain in full force and effect until payment in full of the
Secured Obligations, (ii) be binding upon the Grantor, its successors
and assigns, and (iii) inure to the benefit of the Security Trustee and
its respective successors, transferees and assigns. Upon the payment
in full of the Secured Obligations, the security interest granted
hereby shall terminate and all rights in and to the Collateral shall
revert to the Grantor. Upon any such termination, the Security Trustee
will, at the Grantor's expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such
termination.
16. Headings. In this Agreement, clause headings are
inserted for convenience of reference only and shall not be considered
in the interpretation of this Agreement.
17. Waiver of Jury Trial. IT IS MUTUALLY AGREED BY AND
BETWEEN THE PARTIES HERETO THAT EACH OF THEM HEREBY
11
<PAGE>
WAIVES TRAIL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT
BY EITHER PARTY HERETO AGAINST THE OTHER PARTY HERETO ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT
AND ANY SECURITY DOCUMENT TO WHICH THE GRANTOR OR THE ASSIGNEE MAY BE A
PARTY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
18. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
ANY REFERENCE TO CONFLICTS OF LAWS PRINCIPLES OF THAT STATE.
19. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be deemed to be duplicate
originals and which shall constitute one and the same instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized
on the day and year first above written.
NRG GENERATING (U.S.) INC.
By:/s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
MEESPIERSON CAPITAL CORP.
By:/s/ Hendrik J. Vroege
Name: Hendrik J. Vroege
Title: Vice President
By:/s/ John O'Connor
Name: John O'Connor
Title: Senior Vice President
12
<PAGE>
Exhibit 10.26.7
GENERAL SECURITY AGREEMENT
of
O'BRIEN ENERGY SERVICES COMPANY
in favor of
MEESPIERSON CAPITAL CORP.
December 17, 1997
GENERAL SECURITY AGREEMENT
THIS GENERAL SECURITY AGREEMENT ("this Agreement") dated as
of December 17, 1997, is entered into by and between O'BRIEN ENERGY
SERVICES COMPANY, a corporation incorporated under the laws of the
State of Delaware, having offices at 920 Church Street, Wilmington,
Delaware 19899 (the "Grantor"), and MEESPIERSON CAPITAL CORP., a
corporation incorporated under the laws of the State of Delaware, with
offices at 445 Park Avenue, New York, New York (the "Security
Trustee").
W I T N E S S E T H T H A T :
WHEREAS:
A. By a Credit Agreement dated as of December 17, 1997 (the
"Credit Agreement") made among the Security Trustee, as Agent and
Security Trustee, the banks and financial institutions whose names and
addresses are set out in Schedule 1 thereto (the "Lenders"), and NRG
Generating (U.S.) Inc. (the "Borrower"), the Lenders, subject to the
terms thereof, have agreed to make advances to the Borrower of up to
Thirty Million United States Dollars (US$30,000,000) outstanding at any
time (the "Credit Facility");
B. The Borrower is an affiliate of the Grantor, and the
financial accommodations made to the Borrower under the Credit Facility
will be of benefit to the Grantor; and
C. Pursuant to the Credit Agreement it is a condition
precedent to the availability of the Credit Facility that the Grantor
execute and deliver to the Security Trustee this Agreement and grant
the security interests contemplated hereby in order to create in favor
of the Security Trustee a valid and perfected security interest, as
that term is defined in the Uniform Commercial Code of New York (the
"Code"), in the Collateral (as such term is hereinafter defined), as
security for the payment and performance of all the obligations of the
Borrower under and in connection with the Credit Agreement and the Note
(as such term is defined in the Credit Agreement) now or hereafter
existing whether for principal, interest, fees, expenses or otherwise
and all secured obligations of the Grantor now or hereafter existing
under this Agreement (all such obligations of the Grantor are
hereinafter collectively referred to as the "Secured Obligations").
NOW, THEREFORE, in consideration of the premises, the parties
hereby agree as follows:
<PAGE>
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Credit
Agreement.
2. Grant of Security. The Grantor, as legal and beneficial
owner, as security for the Secured Obligations, hereby assigns,
pledges, transfers and sets over unto the Security Trustee and its
successors and assigns, and hereby grants to the Security Trustee a
security interest in, all of the Grantor's right, title and interest in
and to the following property (hereinafter referred to as the
"Collateral"):
(a) Any and all equipment (as defined in the Code) of the
Grantor, or in which it has rights, whether now owned or hereafter
acquired, together with all present and future improvements or products
of, accessions, attachments and other additions to and substitutes and
replacements for, all or any part of the foregoing (all of the
foregoing types or items of property and interests described in this
paragraph are hereinafter collectively referred to in this Agreement as
the "Equipment"); and
(b) Any and all proceeds of, and all other profits, rentals
or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing or other disposition of, or
realization upon, the Equipment, including without limitation (i) all
claims of the Grantor against third parties for loss of, damage to or
destruction of, or of proceeds payable under, or unearned premiums with
respect to policies of insurance in respect of, any of the Equipment;
(ii) any condemnation payments with respect to any of the Equipment,
whether now existing or hereafter arising; and (iii) any and all other
amounts from time to time paid or payable under or in connection with
any of the Equipment, including, without limitation, all other rights,
claims and benefits of the Grantor against any person arising out of,
relating to or in connection with, any of the Equipment.
The security interest of the Security Trustee contained
herein shall cover, and shall include a continuing general assignment
in favor of the Security Trustee in, any and all documents, contracts,
liens and security instruments, guarantees, books and records
evidencing, securing or relating to the Collateral and the insurance to
be secured to cover same in accordance with Section 5 hereof.
3. Security for Secured Obligations. This Agreement secures
the payment and performance of all of the Secured Obligations.
4. Representations and Warranties. The Grantor represents
and warrants as follows:
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(a) The Grantor owns the Collateral free and clear of any
lien, security interest, charge or encumbrance except for any Permitted
Liens. Except with respect to Permitted Liens, no effective financing
statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office.
(b) Appropriate financing statements and mortgages have been or
are concurrently herewith being filed at all governmental offices in
each jurisdiction where such filing is necessary to perfect the
security interest intended to be covered hereby and such security
interest shall, upon such filing, constitute a perfected security
interest in the Collateral in favor of the Security Trustee (to the
extent that such security interest can be perfected in the Collateral
by filing a financing statement or mortgage under the Code or
applicable state or foreign law) which are enforceable as such against
all creditors of and purchasers from the Grantor (other than purchasers
who take free of such liens, encumbrances or security interests under
the Code) and against any owner or purchaser of the real property where
any of the equipment is located and any present or future creditor
obtaining any lien, encumbrance or security interest on such real
property. All other filings and other actions requested by the
Security Trustee to perfect and protect the security interest granted
herein have been duly made or taken.
(c) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
(other than as contemplated by sub-clause (c) immediately preceding
this sub-clause) is required either (i) for the grant by the Grantor of
the security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Grantor or (ii) for the perfection
of or the exercise by the Security Trustee of its right and remedies
hereunder.
5. Further Assurances. (a) The Grantor agrees that from
time to time, at the expense of the Grantor, the Grantor will promptly
execute and deliver all further instruments and documents, and take all
further action, that may be necessary or advisable, or that the
Security Trustee may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby
or to enable the Security Trustee to exercise and enforce its rights
and remedies hereunder with respect to the Collateral. Without
limiting the generality of the foregoing, the Grantor shall execute and
file such financing or continuation statements, or amendments thereto,
and such other instruments or notices, as may be necessary or
advisable, or as the Security Trustee may reasonably request, whether
in a jurisdiction where the Code has been adopted or any other
jurisdiction, in order to perfect and preserve the security interests
granted or purported to be granted hereby.
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(b) The Grantor hereby authorizes the Security Trustee 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 the Grantor where permitted by law. In the event that the
Security Trustee files any such financing statements or renewals
without the signature of the Grantor, it shall provide the Grantor with
notice thereof as soon as practicable after such filing.
(c) The Grantor will furnish to the Security Trustee from
time to time as the Security Trustee may reasonably request statements
and schedules further identifying and describing the Collateral and
such other reports in connection therewith, all in reasonable detail.
(d) Upon reasonable notice without materially interfering
with the ordinary course or conduct of the Grantor's business, the
Security Trustee shall at all times have full and free access during
normal business hours to all the books, correspondence and records of
the Grantor, and the Security Trustee or its representatives may
examine the same, take extracts therefrom and make photocopies thereof,
and the Grantor agrees to render to the Security Trustee, at the
Grantor's cost and expense, such clerical and other assistance as may
be reasonably requested with regard thereto. The Security Trustee and
its representatives shall at all times, upon reasonable notice, without
materially interfering with the ordinary course or conduct of the
Grantor's business, also have the right to enter into and upon any
premises where any of the Collateral is located for the purpose of
inspecting the same, observing its use or otherwise protecting its
interests therein.
(e) The Grantor will comply with all requirements of law
applicable to the Collateral or any part thereof other than those
requirements with which the failure to comply would not have a material
adverse effect on the existence, condition or value of the Collateral
or the security interests granted hereunder; provided, however, that
the Grantor may contest any requirement of law in any reasonable manner
which shall not, in the reasonable opinion of the Security Trustee,
materially adversely affect the Security Trustee's rights or the
priority of their security interests in the Collateral.
(f) Without thirty (30) days' prior written notice to the
Security Trustee, the Grantor shall not (i) change its chief executive
office or principal place of business, (ii) change the location at
which it maintains its records relating to the Equipment, and (iii)
except as permitted under the Credit Agreement, remove the Equipment
from any of the counties in which such Equipment is presently located.
Grantor shall furnish to the Security Trustee from time to time, as the
Security Trustee may reasonably request, reports identifying the
locations where the Collateral is located.
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(g) The Grantor shall not change its corporate name,
identity or corporate structure, nor carry on business under any name
other than its corporate name, unless (i) it has given to the Security
Trustee not less than thirty days prior written notice of its intention
to do so, specifying such new corporate name, identity or corporate
structure, and providing such other information in connection therewith
as the Security Trustee may reasonably request, and (ii) with respect
to such new corporate name, identity or corporate structure, it shall
have taken all action, requested by the Security Trustee in its
reasonable discretion, to maintain the security interest of the
Security Trustee in the Collateral intended to be granted hereby at all
times fully perfected and in full force and effect.
(h) The Grantor shall pay promptly, or cause to be paid
promptly, when due all property and other material taxes, assessments
and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the
Collateral, except to the extent the validity thereof is being
contested in good faith and adequate reserves have been maintained
therefor.
(i) The Grantor will maintain all Collateral necessary in
the Grantor's business in good operating condition, ordinary wear and
tear and immaterial impairments of value and damage by the elements
excepted, and will provide maintenance, service and repairs necessary
for such purpose.
(j) The Grantor shall, within ten days of acquiring an
ownership interest in any Collateral having a value in excess of Twenty-
Five Thousand Dollars ($25,000) on which a security interest under the
Code can only be perfected by appropriate notations on the certificate
of title relating to such Collateral, deliver to the Security Trustee
any and all certificates of title, applications for title or similar
evidence of ownership of such Collateral and shall cause the Security
Trustee to be named as lienholder on any such certificate of title or
other evidence of ownership.
(k) The Grantor will, promptly upon request, provide to the
Security Trustee all information and evidence it may reasonably request
concerning the Collateral to enable the Security Trustee to enforce the
provisions of this Agreement.
6. Security Trustee Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Security Trustee as the Grantor's
attorney-in-fact, with full authority in the name, place and stead of
the Grantor, from time to time in the Security Trustee's discretion,
should an Event of Default (as such term is defined in the Credit
Agreement) have occurred and be continuing to take any action and to
execute any
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document which the Security Trustee may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without
limitation:
(i) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any
of the Collateral,
(ii) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper in
connection with clause (i) above, and
(iii) to file any claims or take any action or
institute any proceedings which the Security Trustee may
deem necessary or advisable for the recovery of any of
the Collateral or otherwise to enforce the rights of the
Security Trustee with respect thereto created by this
Agreement.
7. Security Trustee May Perform. If the Grantor fails to
perform any agreement contained herein, the Security Trustee may itself
perform, or cause to be performed, such agreement, and the expenses of
the Security Trustee incurred in connection therewith shall be payable
by the Grantor.
8. The Security Trustee's Duties. The powers conferred on
the Security Trustee hereunder are solely to protect its interest in
the Collateral and shall not impose any duty upon the Security Trustee
to exercise any such powers. Except for the safe custody of any of the
Collateral which, from time to time, may come into its possession and
the accounting for moneys actually received by it hereunder, the
Security Trustee shall have no duty as to the Collateral or as to the
taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to the Collateral.
9. Remedies. The security constituted by this Agreement
shall be enforceable if an Event of Default shall have occurred and be
continuing:
(a) The Security Trustee may exercise, in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Code (whether or not the Code shall
be applied by the court in the jurisdiction in which enforcement of the
security interest contained herein is sought) and also may (i) require
the Grantor to, and the Grantor hereby agrees that it will at its
expense and upon request of the Security Trustee forthwith, assemble
all or any part of the Collateral as directed by the Security Trustee
and make it available to the Security Trustee, at a place to be
designated by the Security Trustee which is reasonably convenient to
both parties, and (ii) without notice, except as
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<PAGE>
specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Security Trustee's
offices or elsewhere, for cash, and at such price or prices and upon
such other terms as the Security Trustee may deem commercially
reasonable. The Security Trustee shall give the Grantor at least ten
days' notice of the time and place of any public sale. The Grantor
agrees that ten days' notice of any such sale is commercially
reasonable notification. The Security Trustee shall not be obligated
to make any sale of the Collateral regardless of notice of sale having
been given. The Security Trustee may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(b) All cash proceeds received by the Security Trustee in
respect of any sale of, or other realization upon, all or any part of
the Collateral shall be applied (after payment of any amounts payable
to the Security Trustee pursuant to Section 11 of this Agreement) in
whole or in part by the Security Trustee as set forth in Section 9 of
the Credit Agreement.
10. Non-Interference with Remedies; Specific Performance.
(a) The Grantor agrees that following the occurrence and during the
continuance of an Event of Default it will not at any time pledge,
claim or take the benefit of any appraisal, valuation, stay, extension,
moratorium or redemption law now or hereafter in force in order to
prevent or delay the enforcement of this Agreement, or the absolute
sale of the whole or any part of the Collateral or the possession
thereof by any purchaser at any sale hereunder, and the Grantor waives
the benefit of all such laws to the extent it lawfully may do so. The
Grantor agrees it will not interfere with any right, power or remedy of
the Security Trustee provided for in this Agreement now or hereafter
existing at law or in equity or by statute or otherwise, or with the
exercise or beginning of the exercise by the Security Trustee of any
one or more of such rights, powers or remedies.
(b) The Grantor agrees that a breach of any of the
agreements or covenants contained in this Agreement will cause
irreparable injury to the Security Trustee, that the Security Trustee
has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every agreement and covenant
contained in this Agreement shall be specifically enforceable against
the Grantor, and the Grantor hereby waives and agrees not to assert any
defenses against an action for specific performance of such agreements
or covenants except for a defense that the Secured Obligations are not
then due and payable in accordance with the agreements and instruments
governing and evidencing such Secured Obligations.
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<PAGE>
11. Indemnity, Expenses and Interest. (a) The Grantor
shall on demand of the Security Trustee pay to the Security Trustee (on
a full indemnity basis) all costs, charges, losses, liabilities and
expenses expended, paid or incurred by the Security Trustee (whether
before or after this Agreement becomes enforceable), including any tax
thereon and reasonable professional fees including attorneys' fees, in
connection with any breach of the covenants or undertakings herein or
the exercise of any rights exercisable under it or the recovery of any
of the Secured Obligations by the Security Trustee, including, without
limitation, any remuneration and other sums at any time payable to the
Security Trustee and all costs, charges, losses, liabilities and
expenses connected with the protection, realization, enforcement or
release of any provision of this Agreement, except to the extent the
same results from the Security Trustee's gross negligence or willful
misconduct.
(b) The Grantor shall after demand by the Security Trustee
pay to the Security Trustee interest at a rate per annum equal to the
Default Rate on all of the costs, charges, losses, liabilities and
expenses referred to this clause. So long as no Event of Default has
occurred and is continuing, such interest shall accrue and be payable
from the date on which the Grantor receives notice from the Security
Trustee, otherwise, such interest shall accrue and be payable from the
date such cost, charge, loss, liability or expense was incurred by the
Security Trustee.
12. Security Interest Absolute. All rights of the Security
Trustee and the security interest granted hereunder, and all Secured
Obligations, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of the
Credit Agreement or the Note, or any other agreement or
instrument relating thereto;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the
obligations of the Grantor or any other person under or
in connection with the Credit Agreement or any other
amendment or waiver of or any consent to any departure
from the Credit Agreement, the Note or the terms of any
thereto; or
(iii) any other circumstances which might otherwise
constitute a defense available to, or a discharge of,
the Grantor in respect of the Secured Obligations or
this Agreement.
12. Amendments. No amendment or waiver of any provision of
this Agreement, nor consent to any departure therefrom by the Grantor,
shall be effective
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unless the same shall be in writing and signed by the parties hereto,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
13. Successors and Assigns. Whenever in this Agreement
reference is made to any person, such reference shall be deemed to
include the successors and assigns of such person.
14. Notices. Every notice or other communication under this
Agreement shall be in writing and may be given by telex or telecopy as
follows:
If to the Grantor:
O'Brien Energy Services Company
920 Church Street
Wilmington, Delaware 19899
Attention: Vice President-CFO
Telecopy No.: (___) ___-____
with a copy to:
Troutman Sanders LLP
600 Peachtree Street, N.W.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: M. Stuart Sutherland, Esq.
Telecopy No.: (404) 885-3900
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If to the Security Trustee:
MeesPierson Capital Corporation
445 Park Avenue
New York, New York 10022
Attention: Hendrik Vroege
Telecopy No.: (212) 801-0420
or to such other address as either party shall from time to time
specify in writing to the other. Any notice sent by telex or telecopy
shall be confirmed by letter dispatched as soon as practicable
thereafter.
Every notice or other communication as shall, except so
far as otherwise expressly provided by this Agreement, be deemed to
have been received (provided it is received prior to 2 p.m. New York
time; otherwise it shall be deemed to have been received on the next
following Banking Day (as such term is defined in the Credit
Agreement)) in the case of a telex or telecopy at the time the
transmitting machine provides confirmation of dispatch thereof
(provided further that if the date of dispatch is not a Banking Day in
the locality of the party to whom such notice or demand is sent it
shall be deemed to have been received on the next following Banking Day
in such locality) and, in the case of a letter, at the time of receipt
thereof.
15. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall
(i) remain in full force and effect until payment in full of the
Secured Obligations, (ii) be binding upon the Grantor, its successors
and assigns, and (iii) inure to the benefit of the Security Trustee and
its respective successors, transferees and assigns. Upon the payment
in full of the Secured Obligations, the security interest granted
hereby shall terminate and all rights in and to the Collateral shall
revert to the Grantor. Upon any such termination, the Security Trustee
will, at the Grantor's expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such
termination.
16. Headings. In this Agreement, clause headings are
inserted for convenience of reference only and shall not be considered
in the interpretation of this Agreement.
17. Waiver of Jury Trial. IT IS MUTUALLY AGREED BY AND
BETWEEN THE PARTIES HERETO THAT EACH OF THEM HEREBY
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WAIVES TRAIL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT
BY EITHER PARTY HERETO AGAINST THE OTHER PARTY HERETO ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT
AND ANY SECURITY DOCUMENT TO WHICH THE GRANTOR OR THE ASSIGNEE MAY BE A
PARTY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
18. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
ANY REFERENCE TO CONFLICTS OF LAWS PRINCIPLES OF THAT STATE.
19. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be deemed to be duplicate
originals and which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized
on the day and year first above written.
O'BRIEN ENERGY SERVICES COMPANY
By:/s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
MEESPIERSON CAPITAL CORP.
By:/s/ Hendrik J. Vroege
Name: Hendrik J. Vroege
Title: Vice President
By:/s/ John T. Connors
Name: John T. Connors
Title: Exec. V.P.
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Exhibit 10.26.8
SUBORDINATION AGREEMENT
in favor of
MEESPIERSON CAPITAL CORP.
December 10, 1997
<PAGE>
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT dated as of December 10, 1997
among (1) MEESPIERSON CAPITAL CORP. (the "Agent"), (2) the banks and
financial institutions whose names and addresses are set out in
Schedule 1 (together, the "Senior Lenders", each a "Senior Lender"),
(3) NRG GENERATING (U.S.) INC. (the "Company") and (4) NRG ENERGY, INC.
(the "Subordinated Lender").
BACKGROUND
As a condition to the Senior Lenders providing a credit
facility in favor of the Company, the Subordinated Lender has agreed to
enter into this subordination agreement to provide for the
subordination of the Subordinated Indebtedness to the Senior
Indebtedness.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
1.1. General Terms. For purposes of this Agreement,
the following terms shall have the following meanings:
"Agreements" shall mean, collectively, the Credit
Agreement and the Subordinated Lending Agreement.
"Credit Agreement" shall mean that certain Credit
Agreement dated as of December 10, 1997 by and among, the Company, the
Agent and the Senior Lenders, as the same may be amended, modified or
supplemented from time to time.
"Company" shall mean NRG Generating (U.S.) Inc., a
Delaware corporation.
"Creditors" shall mean, collectively, the Agent, the
Senior Lenders and the Subordinated Lender, and their respective
successors and assigns.
<PAGE>
"Distribution" shall mean any payment by the Company,
whether in cash, in kind, securities or any other property.
"Event" shall have the meaning set forth in Section
2.2(c) hereof.
"Subordinated Lender" shall mean NRG Energy, Inc. and
any other Person(s) at any time or in any manner acquiring any right or
interest in any of the Subordinated Indebtedness.
"Person" shall mean an individual, a partnership, a
corporation (including a business trust), a joint stock company, a
trust, a limited liability corporation, a limited liability
partnership, an unincorporated association, a joint venture or other
entity, or a government or any agency, instrumentality or political
subdivision thereof.
"Senior Indebtedness" shall mean all obligations of any
kind owed by the Company to the Senior Lenders and the Agent from time
to time under or pursuant to the Credit Agreement or any Note or
Guaranty issued thereunder including, without limitation, all principal
of and interest on the Advances made thereunder (including all interest
accruing after commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the
Company) charges, expenses, fees and other sums chargeable to the
Company by the Senior Lenders or the Agent, and reimbursement,
indemnity or other obligations payable to the Senior Lenders and the
Agent. Senior Indebtedness shall continue to constitute Senior
Indebtedness, notwithstanding the fact that such Senior Indebtedness or
any claim for such Senior Indebtedness is subordinated, avoided or
disallowed under the federal Bankruptcy Code or other applicable law.
Senior Indebtedness shall also include any indebtedness of the Company
incurred in connection with an extension, modification, amendment or
refinancing of the Credit Agreement.
"Senior Lender(s)" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Subordinated Indebtedness" shall mean all principal,
interest and other amounts payable or chargeable, contingent or
otherwise, in connection with the Subordinated Lending Agreement.
"Subordinated Lending Agreement" shall mean that certain
Supplemental Loan Agreement, dated as of December 10, 1997, by and
between the Subordinated Lender, the Company and NRGG Funding Inc.
("Funding") and all promissory notes, agreements, guaranties, documents
and instruments now or at any time
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hereafter executed and/or delivered by the Company with or in favor of
the Subordinated Lender in connection therewith or related thereto, as
all of the foregoing now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.2. Other Terms. Capitalized terms not otherwise
defined herein shall have the meanings given to them in the Credit
Agreement.
1.3. Certain Matters of Construction. The terms
"herein", "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronoun used shall be deemed to cover
all genders. Wherever appropriate in the context, terms used herein in
the singular also include the plural and vice versa. All references to
statutes and related regulations shall include any amendments of same
and any successor statutes and regulations. All references to any
instruments or agreements, including, without limitation, references to
any of the Credit Agreement or the Subordinated Lending Agreement shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof in accordance with the provisions of
this Agreement.
2. Covenants. The Company and the Subordinated Lender
hereby covenant that until the Senior Indebtedness shall have been paid
in full and satisfied in cash and the Credit Agreement shall have been
terminated, all in accordance with the terms of the Credit Agreement,
each will comply with such of the following provisions as are
applicable to it:
2.1. Transfers. The Subordinated Lender covenants that
any transferee from it of any Subordinated Indebtedness shall, prior to
acquiring such interest, execute and deliver a counterpart of this
Subordination Agreement to each other party hereto.
2.2. Subordination Provisions. Notwithstanding any
other provision of the Subordinated Indebtedness to the contrary, any
Distribution with respect to the Subordinated Indebtedness is and shall
be expressly junior and subordinated in right of payment to all amounts
due and owing upon all Senior Indebtedness outstanding from time to
time to the extent and on the terms and conditions set forth herein.
Notwithstanding anything herein to the contrary, this Agreement shall
in no way impair or otherwise affect: (i) the obligations of Funding to
the Subordinated Lender under, or the rights and remedies of the
Subordinated Lender (including, without limitation, the right of the
Subordinated Lender to receive payments of any nature from Funding) in
accordance with, the terms of the Subordinated Lending Agreement; (ii)
subject to the waiver provisions of Section 8.02 of the Subordinated
Lending Agreement, the obligation
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of the Company to return to Funding any payments of any nature received
by the Company in violation of the terms of the Subordinated Lending
Agreement, to which the Senior Lenders hereby consent; ; or (iii) the
obligations of Funding and NRG Morris Inc. (collectively, the
"Pledgors") to the Subordinated Lender under the Pledge and Security
Agreement dated as of December __, 1997 pursuant to which the Pledgors
grant to the Subordinated Lender a security interest in all of the
outstanding membership interests of NRG (Morris) Cogen LLC, all
proceeds thereof and certain other related collateral (collectively,
the "Collateral") or the rights and remedies of the Subordinated Lender
thereunder, including without limitation, its right to receive payments
of any nature relating to such Collateral.
(a) Payments. The Company shall make no Distribution
on the Subordinated Indebtedness until such time as the Senior
Indebtedness shall have been paid in full in cash and the Credit
Agreement shall have been irrevocably terminated; provided, however, so
long as no Event of Default shall have occurred and be continuing under
the Credit Agreement, the Company may pay and the Subordinated Lender
may receive and retain regularly scheduled payments of principal and
interest on the Subordinated Indebtedness as set forth on the Effective
Date in the Subordinated Lending Agreement. No optional redemptions or
mandatory redemptions of Subordinated Indebtedness shall be permitted
without the express written consent of the Senior Lender.
Following the occurrence of an Event of Default, upon
and after receipt by the Company and the Subordinated Lender of written
notice of such Event of Default from the Agent (such notice, the
"Default Notice"), the Company shall make no Distribution on the
Subordinated Indebtedness and the Subordinated Lender shall not be
entitled to receive or retain any such Distribution in respect of the
Subordinated Indebtedness; provided, further, that notwithstanding the
foregoing restriction, the Company may pay and the Subordinated Lender
shall be entitled to receive and retain any principal or interest
payment which shall have become due and payable (on a non-accelerated
basis) on the earliest to occur of (x) the date on which all such
Events of Defaults set forth in the Default Notice shall have been
cured or waived, and (y) payment in full in cash of all Senior
Indebtedness (except for claims which were not in existence at the time
of termination of the Credit Agreement and repayment in full of the
Senior Indebtedness) and the termination of the Credit Agreement. Only
one Default Notice may be sent within any 360-day period with respect
to any Event of Default which was in existence at the time the Default
Notice was sent.
(b) Limitation on Acceleration. During any period described
in Section 2.2 (a) hereof in which a Distribution is not permitted to
be made on Subordinated Indebtedness (any such period, a "Non-Payment
Period"), the Subordinated Lender shall
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not be entitled to accelerate the maturity of the Subordinated
Indebtedness, exercise any remedies or commence any action or
proceeding to recover any amounts due or to become due with respect to
Subordinated Indebtedness, provided, however, the foregoing limitation
on acceleration or exercise of any remedies shall not be applicable
following (x) the occurrence of an Event (as to which Section 2.2 (c)
shall apply) or (y) following the maturity or acceleration of all
Senior Indebtedness; provided, further, the prohibition against
exercise of remedies shall not prohibit the Subordinated Lender from
exercising equitable remedies for defaults under the Subordinated
Lending Agreement which are not payment defaults so long as such
equitable remedies do not result in acceleration of the Subordinated
Indebtedness or payment of any Subordinated Indebtedness.
(c) Prior Payment of Senior Indebtedness in Bankruptcy,
etc. In the event of any insolvency or bankruptcy proceedings relative
to the Company or its property, or any receivership, liquidation,
reorganization or other similar proceedings in connection therewith,
or, in the event of any proceedings for voluntary liquidation,
dissolution or winding-up of the Company or distribution or marshalling
of its assets or any composition with creditors of the Company, whether
or not involving insolvency or bankruptcy, or the appointment of a
receiver, intervenor or conservator of, or trustee, custodian or
similar officer for the Company or any substantial part of its property
(each individually or collectively, an "Event"), then all Senior
Indebtedness shall be paid in full and satisfied in cash and the Credit
Agreement terminated before any Distribution shall be made on account
of any Subordinated Indebtedness. Any such Distribution which would,
but for the provisions hereof, be payable or deliverable in respect of
the Subordinated Indebtedness, shall be paid or delivered directly to
the Agent for the benefit of the Senior Lenders until amounts owing
upon Senior Indebtedness shall have been paid in full in cash and the
Credit Agreement has been irrevocably terminated.
(d) Acceleration. In the event all Senior Indebtedness
becomes due and payable, whether by acceleration, maturity or
otherwise, no Distribution shall thereafter be made on account of the
Subordinated Indebtedness until all Senior Indebtedness shall be paid
in full in cash and the Credit Agreement is terminated.
(e) Power of Attorney. To enable the Agent on behalf
of itself and the Senior Lenders to assert and enforce its rights
hereunder in any proceeding referred to in Section 2.2(c) or upon the
happening of any Event, the Agent or any person whom it may designate
is hereby irrevocably appointed attorney in fact for the Subordinated
Lender with full power to act in the place and stead of the
Subordinated Lender to present and file such proofs of claim against
the Company on account of all or any part of the Subordinated
Indebtedness as the Agent may deem advisable in the event the
Subordinated Lender fails to do so prior to 30 days prior to the
expiration of the time
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to file such claim or claims and to receive and collect any and all
dividends or other payments made thereon and to apply the same on
account of Senior Indebtedness to the extent provided for under this
Agreement. The Subordinated Lender will execute and deliver to the
Agent such instruments as may be required by the Agent to enforce any
and all Subordinated Indebtedness, to effectuate the aforesaid power of
attorney and to effect collection of any and all dividends or other
payments which may be made at any time on account thereof, and the
Subordinated Lender hereby irrevocably appoints the Agent as its lawful
attorney and agent to execute financing statements on behalf of the
Subordinated Lender and hereby further authorizes the Agent to file
such financing statements in any appropriate public office.
(f) Payments Held in Trust. Should any Distribution or
the proceeds thereof, in respect of the Subordinated Indebtedness, be
collected or received by the Subordinated Lender or any Affiliate (as
such term is defined in Rule 405 of Regulation C adopted by the
Securities and Exchange Commission pursuant to the Securities Act of
1933) of the Subordinated Lender at a time when the Subordinated Lender
is not permitted to receive any such Distribution or proceeds thereof
(including if same is collected or received when there is or would be
after giving effect to such payment an Event of Default and the Agent
thereafter gives a Default Notice with respect to such Default), then
the Subordinated Lender will forthwith deliver, or cause to be
delivered, the same to the Agent in precisely the form held by the
Subordinated Lender (except for any necessary endorsement) and until so
delivered, the same shall be held in trust by the Subordinated Lender,
or any such Affiliate, as the property of the Agent and the Senior
Lenders and shall not be commingled with other property of the
Subordinated Lender or any such Affiliate.
(g) Subrogation. Subject to the prior payment in full
in cash of the Senior Indebtedness and the termination of the Credit
Agreement, to the extent that the Agent for the benefit of itself and
the Senior Lenders has received any Distribution on the Senior
Indebtedness which, but for this Agreement, would have been applied to
the Subordinated Indebtedness, the Subordinated Lender shall be
subrogated to the then or thereafter rights of the Agent and the Senior
Lenders including, without limitation, the right to receive any
Distribution made on Senior Indebtedness until the principal of,
interest on and other charges due under the Subordinated Indebtedness
shall be paid in full; and, for the purposes of such subrogation, no
Distribution to the Agent for the benefit of the Senior Lenders to
which the Subordinated Lenders would be entitled except for the
provisions of this Agreement shall, as between the Company, its
creditors (other than the Agent and the Senior Lenders) and the
Subordinated Lenders, be deemed to be a Distribution by the Company to
or on account of Senior Indebtedness, it being understood that the
provisions hereof are and are intended solely for the purpose of
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<PAGE>
defining the relative rights of the Subordinated Lender on the one
hand, and the Agent and the Senior Lenders on the other hand.
(h) Scope of Subordination. The provisions of this
Agreement are solely to define the relative rights of the Subordinated
Lender and the Agent and the Senior Lenders. Nothing in this Agreement
shall impair, as between the Company and the Subordinated Lender the
unconditional and absolute obligation of the Company to punctually pay
the principal, interest and any other amounts and obligations owing
under the Subordinated Lending Agreement in accordance with the terms
thereof, subject to the rights of the Agent and the Senior Lenders
under this Agreement.
3. Miscellaneous.
3.1. Provisions of Subordinated Note. From and after
the date hereof, the Company and the Subordinated Lender shall cause
each promissory note or other document evidencing the Subordinated
Indebtedness to contain a provision to the following effect:
"This Note is subject to the Subordination Agreement, dated
as of December __, 1997, among the Maker, the Payee and
MeesPierson Capital Corporation under which this Note and the
Maker's obligations hereunder are subordinated in the manner
set forth therein to the prior payment of certain obligations
to the holders of Senior Indebtedness as defined therein."
Proof of compliance with the foregoing shall be promptly
given to the Agent.
3.2. Additional Agreements. In the event that the
Senior Indebtedness is refinanced in full, the Subordinated Lender
agrees at the request of such refinancing party to enter into a
subordination agreement on terms identical to those contained in this
Subordination Agreement.
3.3. Survival of Rights. The right of Agent or any
Senior Lender to enforce the provisions of this Agreement shall not be
prejudiced or impaired by any act or omitted act of the Company, the
Agent or any Senior Lender including forbearance, waiver, consent,
compromise, amendment, extension, renewal, or taking or release of
security in respect of any Senior Indebtedness or noncompliance by the
Company with such provisions, regardless of the actual or imputed
knowledge of the Agent or such Senior Lender.
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3.4. Receipt of Agreements. The Subordinated Lender
hereby acknowledges that it has delivered to the Agent a correct and
complete copy of the Subordinated Lending Agreement as in effect on the
date hereof. The Agent hereby acknowledges that it has delivered to
the Subordinated Lender a correct and complete copy of the Credit
Agreement as in effect on the date hereof.
3.5. No Amendment of Subordinated Lending Agreement.
So long as the Credit Agreement remains in effect, neither the Company
nor the Subordinated Lender shall enter into any amendment to or
modification of the Subordinated Lending Agreement which relates to or
affects the principal amount, interest rate, payment terms, or any
other material covenant or agreement of the Company thereunder or in
respect thereof (including, without limitation, Section 8.02 thereof),
without the prior written consent of the Agent and the Senior Lenders.
3.6. Amendments to Credit Agreement. Nothing contained
in this Agreement, or in any other agreement or instrument binding upon
any of the parties hereto, shall in any manner limit or restrict the
ability of the Agent and the Senior Lenders from increasing or changing
the terms of the Advances under the Credit Agreement, or to otherwise
waive, amend or modify the terms and conditions of the Credit
Agreement, in such manner as the Agent, the Senior Lenders and the
Company shall mutually determine. The Subordinated Lender hereby
consents to any and all such waivers, amendments, modifications and
compromises, and any other renewals, extensions, indulgences, releases
of collateral or other accommodations granted by the Agent and the
Senior Lenders to the Company from time to time, and agrees that none
of such actions shall in any manner affect or impair the subordination
established by this Subordination Agreement in respect of the
Subordinated Indebtedness.
3.7. Notice of Default and Certain Events. The Agent,
the Senior Lenders and the Subordinated Lender shall undertake in good
faith to notify the other of the occurrence of any of the following as
applicable:
(a) the obtaining of actual knowledge of the
occurrence of any default under the Subordinated Lending Agreement;
(b) the acceleration of any Senior Indebtedness by
the Agent and the Senior Lenders or of any Subordinated Indebtedness by
the Subordinated Lender;
(c) the granting by the Agent and the Senior
Lenders of any waiver of any Event of Default under the Credit
Agreement or the granting by the
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Subordinated Lender of any waiver of any "default" or "event of
default" under the Subordinated Lending Agreement; or
(d) the payment in full by the Company (whether as
a result of refinancing or otherwise) of all Senior Indebtedness.
The failure of any party to give such notice shall not
affect the subordination of the Subordinated Indebtedness as provided
in this Subordination Agreement.
3.8. Notices. Any notice or other communication
required or permitted pursuant to this Subordination Agreement shall be
deemed given (a) when personally delivered to any officer of the party
to whom it is addressed, (b) on the earlier of actual receipt thereof
or three (3) days following posting thereof by certified or registered
mail, postage prepaid, or (c) upon actual receipt thereof when sent by
a recognized overnight delivery service or (d) upon actual receipt
thereof when sent by telecopier to the number set forth below with
telephone communication confirming receipt and subsequently confirmed
by registered, certified or overnight mail to the address set forth
below, in each case addressed to each party at its address set forth
below or at such other address as has been furnished in writing by a
party to the other by like notice:
If to the Agent and the
Senior Lenders: MeesPierson Capital Corporation
445 Park Avenue
New York, New York 10022
Attention: Hendrik Vroege
Telephone: 212-801-0200
Telecopier: 212-801-0420
If to the Subordinated
Lender: NRG Energy, Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403
Attention: Vice President-CFO
Telephone: 612-373-5300
Telecopier: 612-373-8833
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1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403
Attention: Vice President-CFO
Telephone: 612-373-5300
Telecopier: 612-373-8833
3.9. Books and Records. The Subordinated Lender shall
(a) make notations on the books of the Subordinated Lender beside all
accounts or on other statements evidencing or recording any
Subordinated Indebtedness to the effect that such Subordinated
Indebtedness is subject to the provisions of this Agreement and
(b) furnish the Agent, upon reasonable request from time to time, a
statement of the account between the Subordinated Lender and the
Company.
3.10 Binding Effect; Other. This Subordination Agreement
shall be a continuing agreement, shall be binding upon and shall inure
to the benefit of the parties hereto from time to time and their
respective successors and assigns, shall be irrevocable and shall
remain in full force and effect until the Senior Indebtedness shall
have been satisfied or paid in full in cash and the Credit Agreement
shall have terminated, but shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part
thereof, of any amount paid by or on behalf of the Company with regard
to the Senior Indebtedness is rescinded or must otherwise be restored
or returned upon or as a result of the occurrence of an Event, or
otherwise, all as though such payments had not been made. If any
payment to the Subordinated Lender is turned over to the Agent and/or
the Senior Lenders pursuant to the provisions of this Subordination
Agreement and such payment is returned upon or as a result of the
occurrence of an Event, the Agent shall reverse the application of such
payments to the Senior Indebtedness and return such payment (without
interest) to the Subordinated Lender. No action which the Agent, any
Senior Lender or the Company may take or refrain from taking with
respect to the Senior Indebtedness, including any amendments thereto,
shall affect the provisions of this Subordination Agreement or the
obligations of the Subordinated Lender hereunder. Any waiver or
amendment hereunder must be evidenced by a signed writing of the party
to be bound thereby, and shall only be effective in the specific
instance. This Subordination Agreement shall be governed by and
construed in accordance with the laws of the State of New York. The
headings in this Subordination Agreement are for convenience of
reference only, and shall not alter or otherwise affect the meaning
hereof.
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4. Representations and Warranties.
(a) The Subordinated Lender represents and warrants to the
Agent and the Senior Lenders that the Subordinated Lender is the holder
of the Subordinated Indebtedness. The Subordinated Lender agrees that
it shall not (i) assign or transfer any of the Subordinated
Indebtedness without (x) prior notice being given to the Agent and
(y) such assignment or transfer being made expressly subject to the
terms of this Subordination Agreement, (ii) exercise any right of set-
off or convert any Subordinated Indebtedness to equity, in either event
without the written consent of the Agent and the Senior Lenders. The
Subordinated Lender further warrants to the Agent and the Senior
Lenders that it has full right, power and authority to enter into this
Subordination Agreement and, to the extent it is an agent or trustee
for other parties, that this Subordination Agreement shall fully bind
all such other parties.
(b) Each Senior Lender severally represents and warrants to
the Subordinated Lender that it is the holder of Senior Indebtedness.
The Agent and each Senior Lender further warrants to the Subordinated
Lender that it has full right, power and authority to enter into this
Subordination Agreement and, to the extent the Senior Lender is an
agent or trustee for other parties, that this Subordination Agreement
shall fully bind all such other parties.
5. Proceedings. ANY JUDICIAL PROCEEDING BROUGHT BY OR
AGAINST ANY SUBORDINATED LENDER WITH RESPECT TO THIS OR ANY RELATED
AGREEMENT MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN THE
SUPREME COURT OF THE STATE OF NEW YORK, ANY FEDERAL DISTRICT COURT
WITHIN THE STATE OF NEW YORK, OR ELSEWHERE AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT THE SUBORDINATED LENDER, THE AGENT, EACH
SENIOR LENDER AND THE COMPANY ACCEPT FOR THEMSELVES AND IN CONNECTION
WITH THEIR PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE BOUND
BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHTS OF THE AGENT AND
THE SENIOR LENDERS TO BRING PROCEEDINGS AGAINST THE SUBORDINATED LENDER
IN ANY COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY
THE SUBORDINATED LENDER AGAINST THE AGENT AND/OR ANY SENIOR LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER OR CLAIM IN ANY WAY
ARISING OUT OF, RELATED TO OR
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CONNECTED WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, SHALL BE
BROUGHT ONLY IN A COURT LOCATED IN THE CITY OF NEW YORK, STATE OF NEW
YORK. THE SUBORDINATED LENDER WAIVES ANY OBJECTION TO JURISDICTION AND
VENUE OF ANY ACTION INSTITUTED HEREUNDER AND SHALL NOT ASSERT ANY
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON
CONVENIENS.
6. Waiver Of Jury Trial. EACH CREDITOR HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR
(B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF ANY CREDITOR OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED BY THEM
IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH CREDITOR HEREBY
AGREES AND CONSENTS THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT JURY, AND THAT EITHER OF THEM
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THEIR CONSENT TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
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IN WITNESS WHEREOF, the undersigned have entered into this
Agreement as of this 10th day of December, 1997.
MEESPIERSON CAPITAL CORP.,
as Agent and Lender
By:/s/ Hendrik J. Vroege
Name: Hendrik J. Vroege
Title: Vice President
By:/s/ John O'Connor
Name: John O'Connor
Title: Senior Vice President
NRG ENERGY, INC.
By:/s/ David H. Peterson
Name: David H. Peterson
Title: President & CEO
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COMPANY'S ACKNOWLEDGMENT
The undersigned hereby acknowledges and agrees to the
foregoing Subordination Agreement. The undersigned agrees to be bound
by the terms and provisions thereof as they relate to the relative
rights of the Creditors with respect to each other. However, nothing
therein shall be deemed to amend, modify, supersede or otherwise alter
the terms of the respective agreements between the undersigned and each
Creditor. The undersigned further agrees that the Subordination
Agreement is solely for the benefit of the Creditors and shall not give
the undersigned, its successors and assigns, or any other person, any
rights vis-a-vis any Creditor.
NRG GENERATING (U.S.) INC.
By:/s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
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Exhibit 10.26.9
SUBORDINATION AGREEMENT
in favor of
MEESPIERSON CAPITAL CORP.
December 17, 1997
<PAGE>
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT dated as of December 17, 1997
among (1) MEESPIERSON CAPITAL CORP. (the "Agent"), (2) the banks and
financial institutions whose names and addresses are set out in
Schedule 1 (together, the "Senior Lenders", each a "Senior Lender"),
(3) O'BRIEN (PHILADELPHIA) COGENERATION INC. (the "Company") and
(4) O'BRIEN ENERGY SERVICES COMPANY (the "Subordinated Lender").
BACKGROUND
As a condition to the Senior Lenders providing a credit
facility in favor of NRG GENERATING (U.S.) INC. ("NRGG"), the
Subordinated Lender has agreed to enter into this subordination
agreement to provide for the subordination of the Subordinated
Indebtedness to the Senior Indebtedness.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
1.1. General Terms. For purposes of this Agreement,
the following terms shall have the following meanings:
"Agreements" shall mean, collectively, the Credit
Agreement and the Subordinated Lending Agreement.
"Credit Agreement" shall mean that certain Credit
Agreement dated as of December 17, 1997 by and among, NRGG, the Agent
and the Senior Lenders, as the same may be amended, modified or
supplemented from time to time.
"Company" shall mean O'Brien (Philadelphia) Cogeneration
Inc., a Delaware corporation.
"Creditors" shall mean, collectively, the Agent, the
Senior Lenders and the Subordinated Lender, and their respective
successors and assigns.
<PAGE>
"Distribution" shall mean any payment by the Company,
whether in cash, in kind, securities or any other property.
"Event" shall have the meaning set forth in Section
2.2(c) hereof.
"Subordinated Lender" shall mean O'Brien Energy Services
Company and any other Person(s) at any time or in any manner acquiring
any right or interest in any of the Subordinated Indebtedness.
"Person" shall mean an individual, a partnership, a
corporation (including a business trust), a joint stock company, a
trust, a limited liability corporation, a limited liability
partnership, an unincorporated association, a joint venture or other
entity, or a government or any agency, instrumentality or political
subdivision thereof.
"Senior Indebtedness" shall mean all obligations of any
kind owed by the Company to the Senior Lenders and the Agent from time
to time under or pursuant to the Credit Agreement or any Note or
Guaranty issued thereunder including, without limitation, all principal
of and interest on the Advances made thereunder (including all interest
accruing after commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the
Company) charges, expenses, fees and other sums chargeable to the
Company by the Senior Lenders or the Agent, and reimbursement,
indemnity or other obligations payable to the Senior Lenders and the
Agent. Senior Indebtedness shall continue to constitute Senior
Indebtedness, notwithstanding the fact that such Senior Indebtedness or
any claim for such Senior Indebtedness is subordinated, avoided or
disallowed under the federal Bankruptcy Code or other applicable law.
Senior Indebtedness shall also include any indebtedness of the Company
incurred in connection with an extension, modification, amendment or
refinancing of the Credit Agreement.
"Senior Lender(s)" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Subordinated Indebtedness" shall mean all lease
payments, principal, interest and other amounts payable or chargeable,
contingent or otherwise, in connection with the Subordinated Lending
Agreement.
"Subordinated Lending Agreement" shall mean collectively
those certain lease or sublease agreements set forth on Exhibit A
attached hereto and all promissory notes, agreements, guaranties,
documents and instruments now or at any time hereafter executed and/or
delivered by the Company with or in favor of the Subordinated
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Lender in connection therewith or related thereto, as all of the
foregoing now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.2. Other Terms. Capitalized terms not otherwise
defined herein shall have the meanings given to them in the Credit
Agreement.
1.3. Certain Matters of Construction. The terms
"herein", "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronoun used shall be deemed to cover
all genders. Wherever appropriate in the context, terms used herein in
the singular also include the plural and vice versa. All references to
statutes and related regulations shall include any amendments of same
and any successor statutes and regulations. All references to any
instruments or agreements, including, without limitation, references to
any of the Credit Agreement or the Subordinated Lending Agreement shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof in accordance with the provisions of
this Agreement.
2. Covenants. The Company and the Subordinated Lender
hereby covenant that until the Senior Indebtedness shall have been paid
in full and satisfied in cash and the Credit Agreement shall have been
terminated, all in accordance with the terms of the Credit Agreement,
each will comply with such of the following provisions as are
applicable to it:
2.1. Transfers. The Subordinated Lender covenants that
any transferee from it of any Subordinated Indebtedness shall, prior to
acquiring such interest, execute and deliver a counterpart of this
Subordination Agreement to each other party hereto.
2.2. Subordination Provisions. Notwithstanding any
other provision of the Subordinated Indebtedness to the contrary, any
Distribution with respect to the Subordinated Indebtedness is and shall
be expressly junior and subordinated in right of payment to all amounts
due and owing upon all Senior Indebtedness outstanding from time to
time to the extent and on the terms and conditions set forth herein.
(a) Payments. The Company shall make no Distribution
on the Subordinated Indebtedness until such time as the Senior
Indebtedness shall have been paid in full in cash and the Credit
Agreement shall have been irrevocably terminated; provided, however, so
long as no Event of Default shall have occurred and be continuing under
the Credit Agreement, the Company may pay regularly scheduled lease
payments on the Subordinated Indebtedness as set forth on the Effective
Date in the Subordinated
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Lending Agreement, provided, however, that such lease payments shall be
paid by the Company to the Collection Account for distribution in
accordance with the terms of the Credit Agreement.
Following the occurrence of an Event of Default, upon
and after receipt by the Company and the Subordinated Lender of written
notice of such Event of Default from the Agent (such notice, the
"Default Notice"), the Company shall make no Distribution on the
Subordinated Indebtedness and the Subordinated Lender shall not be
entitled to receive or retain any such Distribution in respect of the
Subordinated Indebtedness; provided, further, that notwithstanding the
foregoing restriction, the Company may pay and the Subordinated Lender
shall be entitled to receive and retain any principal or interest
payment which shall have become due and payable (on a non-accelerated
basis) on the earliest to occur of (x) the date on which all such
Events of Defaults set forth in the Default Notice shall have been
cured or waived, and (y) payment in full in cash of all Senior
Indebtedness (except for claims which were not in existence at the time
of termination of the Credit Agreement and repayment in full of the
Senior Indebtedness) and the termination of the Credit Agreement. Only
one Default Notice may be sent within any 360-day period with respect
to any Event of Default which was in existence at the time the Default
Notice was sent.
(b) Limitation on Acceleration. During any period
described in Section 2.2 (a) hereof in which a Distribution is not
permitted to be made on Subordinated Indebtedness (any such period, a
"Non-Payment Period"), the Subordinated Lender shall not be entitled to
accelerate the maturity of the Subordinated Indebtedness, exercise any
remedies or commence any action or proceeding to recover any amounts
due or to become due with respect to Subordinated Indebtedness,
provided, however, the foregoing limitation on acceleration or exercise
of any remedies shall not be applicable following (x) the occurrence of
an Event (as to which Section 2.2 (c) shall apply) or (y) following the
maturity or acceleration of all Senior Indebtedness; provided, further,
the prohibition against exercise of remedies shall not prohibit the
Subordinated Lender from exercising equitable remedies for defaults
under the Subordination Lending Agreement which are not payment
defaults so long as such equitable remedies do not result in
acceleration of the Subordinated Indebtedness or payment of any
Subordinated Indebtedness.
(c) Prior Payment of Senior Indebtedness in Bankruptcy,
etc. In the event of any insolvency or bankruptcy proceedings relative
to the Company or its property, or any receivership, liquidation,
reorganization or other similar proceedings in connection therewith,
or, in the event of any proceedings for voluntary liquidation,
dissolution or winding-up of the Company or distribution or marshalling
of its assets or any composition with creditors of the Company, whether
or not involving insolvency or
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bankruptcy, or the appointment of a receiver, intervenor or conservator
of, or trustee, custodian or similar officer for the Company or any
substantial part of its property (each individually or collectively, an
"Event"), then all Senior Indebtedness shall be paid in full and
satisfied in cash and the Credit Agreement terminated before any
Distribution shall be made on account of any Subordinated Indebtedness.
Any such Distribution which would, but for the provisions hereof, be
payable or deliverable in respect of the Subordinated Indebtedness,
shall be paid or delivered directly to the Agent for the benefit of the
Senior Lenders until amounts owing upon Senior Indebtedness shall have
been paid in full in cash and the Credit Agreement has been irrevocably
terminated.
(d) Acceleration. In the event all Senior Indebtedness
becomes due and payable, whether by acceleration, maturity or
otherwise, no Distribution shall thereafter be made on account of the
Subordinated Indebtedness until all Senior Indebtedness shall be paid
in full in cash and the Credit Agreement is terminated.
(e) Power of Attorney. To enable the Agent on behalf
of itself and the Senior Lenders to assert and enforce its rights
hereunder in any proceeding referred to in Section 2.2(c) or upon the
happening of any Event, the Agent or any person whom it may designate
is hereby irrevocably appointed attorney in fact for the Subordinated
Lender with full power to act in the place and stead of the
Subordinated Lender to present and file such proofs of claim against
the Company on account of all or any part of the Subordinated
Indebtedness as the Agent may deem advisable in the event the
Subordinated Lender fails to do so prior to 30 days prior to the
expiration of the time to file such claim or claims and to receive and
collect any and all dividends or other payments made thereon and to
apply the same on account of Senior Indebtedness to the extent provided
for under this Agreement. The Subordinated Lender will execute and
deliver to the Agent such instruments as may be required by the Agent
to enforce any and all Subordinated Indebtedness, to effectuate the
aforesaid power of attorney and to effect collection of any and all
dividends or other payments which may be made at any time on account
thereof, and the Subordinated Lender hereby irrevocably appoints the
Agent as its lawful attorney and agent to execute financing statements
on behalf of the Subordinated Lender and hereby further authorizes the
Agent to file such financing statements in any appropriate public
office.
(f) Payments Held in Trust. Should any Distribution or
the proceeds thereof, in respect of the Subordinated Indebtedness, be
collected or received by the Subordinated Lender or any Affiliate (as
such term is defined in Rule 405 of Regulation C adopted by the
Securities and Exchange Commission pursuant to the Securities Act of
1933) of the Subordinated Lender at a time when the Subordinated Lender
is not permitted to receive any such Distribution or proceeds thereof
(including if
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same is collected or received when there is or would be after giving
effect to such payment an Event of Default and the Agent thereafter
gives a Default Notice with respect to such Default), then the
Subordinated Lender will forthwith deliver, or cause to be delivered,
the same to the Agent in precisely the form held by the Subordinated
Lender (except for any necessary endorsement) and until so delivered,
the same shall be held in trust by the Subordinated Lender, or any such
Affiliate, as the property of the Agent and the Senior Lenders and
shall not be commingled with other property of the Subordinated Lender
or any such Affiliate.
(g) Subrogation. Subject to the prior payment in full
in cash of the Senior Indebtedness and the termination of the Credit
Agreement, to the extent that the Agent for the benefit of itself and
the Senior Lenders has received any Distribution on the Senior
Indebtedness which, but for this Agreement, would have been applied to
the Subordinated Indebtedness, the Subordinated Lender shall be
subrogated to the then or thereafter rights of the Agent and the Senior
Lenders including, without limitation, the right to receive any
Distribution made on Senior Indebtedness until the principal of,
interest on and other charges due under the Subordinated Indebtedness
shall be paid in full; and, for the purposes of such subrogation, no
Distribution to the Agent for the benefit of the Senior Lenders to
which the Subordinated Lenders would be entitled except for the
provisions of this Agreement shall, as between the Company, its
creditors (other than the Agent and the Senior Lenders) and the
Subordinated Lenders, be deemed to be a Distribution by the Company to
or on account of Senior Indebtedness, it being understood that the
provisions hereof are and are intended solely for the purpose of
defining the relative rights of the Subordinated Lender on the one
hand, and the Agent and the Senior Lenders on the other hand.
(h) Scope of Subordination. The provisions of this
Agreement are solely to define the relative rights of the Subordinated
Lender and the Agent and the Senior Lenders. Nothing in this Agreement
shall impair, as between the Company and the Subordinated Lender the
unconditional and absolute obligation of the Company to punctually pay
the principal, interest and any other amounts and obligations owing
under the Subordinated Lending Agreement in accordance with the terms
thereof, subject to the rights of the Agent and the Senior Lenders
under this Agreement.
3. Miscellaneous.
3.1. Provisions of Subordinated Note. From and after
the date hereof, the Company and the Subordinated Lender shall cause
each promissory note or other document evidencing the Subordinated
Indebtedness to contain a provision to the following effect:
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"This Note is subject to the Subordination Agreement, dated
as of December 17, 1997, among the Maker, the Payee and
MeesPierson Capital Corporation under which this Note and the
Maker's obligations hereunder are subordinated in the manner
set forth therein to the prior payment of certain obligations
to the holders of Senior Indebtedness as defined therein."
Proof of compliance with the foregoing shall be promptly
given to the Agent.
3.2. Additional Agreements. In the event that the
Senior Indebtedness is refinanced in full, the Subordinated Lender
agrees at the request of such refinancing party to enter into a
subordination agreement on terms identical to those contained in this
Subordination Agreement.
3.3. Survival of Rights. The right of Agent or any
Senior Lender to enforce the provisions of this Agreement shall not be
prejudiced or impaired by any act or omitted act of the Company, the
Agent or any Senior Lender including forbearance, waiver, consent,
compromise, amendment, extension, renewal, or taking or release of
security in respect of any Senior Indebtedness or noncompliance by the
Company with such provisions, regardless of the actual or imputed
knowledge of the Agent or such Senior Lender.
3.4. Receipt of Agreements. The Subordinated Lender
hereby acknowledges that it has delivered to the Agent a correct and
complete copy of the Subordinated Lending Agreement as in effect on the
date hereof. The Agent hereby acknowledges that it has delivered to
the Subordinated Lender a correct and complete copy of the Credit
Agreement as in effect on the date hereof.
3.5. No Amendment of Subordinated Lending Agreement.
So long as the Credit Agreement remains in effect, neither the Company
nor the Subordinated Lender shall enter into any amendment to or
modification of the Subordinated Lending Agreement which relates to or
affects the principal amount, interest rate, payment terms, or any
other material covenant or agreement of the Company thereunder or in
respect thereof, without the prior written consent of the Agent and the
Senior Lenders.
3.6. Amendments to Credit Agreement. Nothing contained
in this Agreement, or in any other agreement or instrument binding upon
any of the parties hereto, shall in any manner limit or restrict the
ability of the Agent and the Senior Lenders from increasing or changing
the terms of the Advances under the Credit
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Agreement, or to otherwise waive, amend or modify the terms and
conditions of the Credit Agreement, in such manner as the Agent, the
Senior Lenders and the Company shall mutually determine. The
Subordinated Lender hereby consents to any and all such waivers,
amendments, modifications and compromises, and any other renewals,
extensions, indulgences, releases of collateral or other accommodations
granted by the Agent and the Senior Lenders to the Company from time to
time, and agrees that none of such actions shall in any manner affect
or impair the subordination established by this Subordination Agreement
in respect of the Subordinated Indebtedness.
3.7. Notice of Default and Certain Events. The Agent,
the Senior Lenders and the Subordinated Lender shall undertake in good
faith to notify the other of the occurrence of any of the following as
applicable:
(a) the obtaining of actual knowledge of the
occurrence of any default under the Subordinated Lending Agreement;
(b) the acceleration of any Senior Indebtedness by
the Agent and the Senior Lenders or of any Subordinated Indebtedness by
the Subordinated Lender;
(c) the granting by the Agent and the Senior
Lenders of any waiver of any Event of Default under the Credit
Agreement or the granting by the Subordinated Lender of any waiver of
any "default" or "event of default" under the Subordinated Lending
Agreement; or
(d) the payment in full by the Company (whether as
a result of refinancing or otherwise) of all Senior Indebtedness.
The failure of any party to give such notice shall not
affect the subordination of the Subordinated Indebtedness as provided
in this Subordination Agreement.
3.8. Notices. Any notice or other communication
required or permitted pursuant to this Subordination Agreement shall be
deemed given (a) when personally delivered to any officer of the party
to whom it is addressed, (b) on the earlier of actual receipt thereof
or three (3) days following posting thereof by certified or registered
mail, postage prepaid, or (c) upon actual receipt thereof when sent by
a recognized overnight delivery service or (d) upon actual receipt
thereof when sent by telecopier to the number set forth below with
telephone communication confirming receipt and subsequently confirmed
by registered, certified or overnight mail to the
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<PAGE>
address set forth below, in each case addressed to each party at its
address set forth below or at such other address as has been furnished
in writing by a party to the other by like notice:
If to the Agent and the
Senior Lenders: MeesPierson Capital Corporation
445 Park Avenue
New York, New York 10022
Attention: Hendrik Vroege
Telephone: 212-801-0200
Telecopier: 212-801-0420
If to the Subordinated
Lender: O'Brien Energy Services Company
920 Church Street
Wilmington, Delaware 19899
Attention: Vice President-CFO
Telephone: ___-___-____
Telecopier: ___-___-____
If to the Company: O'Brien (Philadelphia)
Cogeneration Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403
Attention: Vice President-CFO
Telephone: 612-___-____
Telecopier: 612-373-8833
3.9. Books and Records. The Subordinated Lender shall
(a) make notations on the books of the Subordinated Lender beside all
accounts or on other statements evidencing or recording any
Subordinated Indebtedness to the effect that such Subordinated
Indebtedness is subject to the provisions of this Agreement and
(b) furnish the Agent, upon reasonable request from time to time, a
statement of the account between the Subordinated Lender and the
Company.
3.10 Binding Effect; Other. This Subordination
Agreement shall be a continuing agreement, shall be binding upon and
shall inure to the benefit of the parties hereto from time to time and
their respective successors and assigns, shall be irrevocable and shall
remain in full force and effect until the Senior Indebtedness shall
have been satisfied or paid in full in cash and the Credit Agreement
shall have terminated, but shall
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<PAGE>
continue to be effective, or be reinstated, as the case may be, if at
any time payment, or any part thereof, of any amount paid by or on
behalf of the Company with regard to the Senior Indebtedness is
rescinded or must otherwise be restored or returned upon or as a result
of the occurrence of an Event, or otherwise, all as though such
payments had not been made. If any payment to the Subordinated Lender
is turned over to the Agent and/or the Senior Lenders pursuant to the
provisions of this Subordination Agreement and such payment is returned
upon or as a result of the occurrence of an Event, the Agent shall
reverse the application of such payments to the Senior Indebtedness and
return such payment (without interest) to the Subordinated Lender. No
action which the Agent, any Senior Lender or the Company may take or
refrain from taking with respect to the Senior Indebtedness, including
any amendments thereto, shall affect the provisions of this
Subordination Agreement or the obligations of the Subordinated Lender
hereunder. Any waiver or amendment hereunder must be evidenced by a
signed writing of the party to be bound thereby, and shall only be
effective in the specific instance. This Subordination Agreement shall
be governed by and construed in accordance with the laws of the State
of New York. The headings in this Subordination Agreement are for
convenience of reference only, and shall not alter or otherwise affect
the meaning hereof.
4. Representations and Warranties.
(a) The Subordinated Lender represents and warrants to the
Agent and the Senior Lenders that the Subordinated Lender is the holder
of the Subordinated Indebtedness. The Subordinated Lender agrees that
it shall not (i) assign or transfer any of the Subordinated
Indebtedness without (x) prior notice being given to the Agent and
(y) such assignment or transfer being made expressly subject to the
terms of this Subordination Agreement, (ii) exercise any right of set-
off or convert any Subordinated Indebtedness to equity, in either event
without the written consent of the Agent and the Senior Lenders. The
Subordinated Lender further warrants to the Agent and the Senior
Lenders that it has full right, power and authority to enter into this
Subordination Agreement and, to the extent it is an agent or trustee
for other parties, that this Subordination Agreement shall fully bind
all such other parties.
(b) Each Senior Lender severally represents and warrants to
the Subordinated Lender that it is the holder of Senior Indebtedness.
The Agent and each Senior Lender further warrants to the Subordinated
Lender that it has full right, power and authority to enter into this
Subordination Agreement and, to the extent the Senior Lender is an
agent or trustee for other parties, that this Subordination Agreement
shall fully bind all such other parties.
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<PAGE>
5. Proceedings. ANY JUDICIAL PROCEEDING BROUGHT BY OR
AGAINST ANY SUBORDINATED LENDER WITH RESPECT TO THIS OR ANY RELATED
AGREEMENT MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN THE
SUPREME COURT OF THE STATE OF NEW YORK, ANY FEDERAL DISTRICT COURT
WITHIN THE STATE OF NEW YORK, OR ELSEWHERE AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT THE SUBORDINATED LENDER, THE AGENT, EACH
SENIOR LENDER AND THE COMPANY ACCEPT FOR THEMSELVES AND IN CONNECTION
WITH THEIR PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE BOUND
BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHTS OF THE AGENT AND
THE SENIOR LENDERS TO BRING PROCEEDINGS AGAINST THE SUBORDINATED LENDER
IN ANY COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY
THE SUBORDINATED LENDER AGAINST THE AGENT AND/OR ANY SENIOR LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER OR CLAIM IN ANY WAY
ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR ANY
RELATED AGREEMENT, SHALL BE BROUGHT ONLY IN A COURT LOCATED IN THE CITY
OF NEW YORK, STATE OF NEW YORK. THE SUBORDINATED LENDER WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER
AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE
OR BASED UPON FORUM NON CONVENIENS.
6. Waiver Of Jury Trial. EACH CREDITOR HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR
(B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF ANY CREDITOR OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED BY THEM
IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH CREDITOR HEREBY
AGREES AND CONSENTS THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
11
<PAGE>
SHALL BE DECIDED BY COURT TRIAL WITHOUT JURY, AND THAT EITHER OF THEM
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THEIR CONSENT TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have entered into this
Agreement as of this 17th day of December, 1997.
MEESPIERSON CAPITAL CORP.,
as Agent and Lender
By:/s/ Hendrik J. Vroege
Name: Hendrik J. Vroege
Title: Vice President
By:/s/ John T. Connors
Name: John T. Connors
Title: Exec. V.P.
O'BRIEN ENERGY SERVICES COMPANY
By:/s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
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<PAGE>
COMPANY'S ACKNOWLEDGMENT
The undersigned hereby acknowledges and agrees to the
foregoing Subordination Agreement. The undersigned agrees to be bound
by the terms and provisions thereof as they relate to the relative
rights of the Creditors with respect to each other. However, nothing
therein shall be deemed to amend, modify, supersede or otherwise alter
the terms of the respective agreements between the undersigned and each
Creditor. The undersigned further agrees that the Subordination
Agreement is solely for the benefit of the Creditors and shall not give
the undersigned, its successors and assigns, or any other person, any
rights vis-a-vis any Creditor.
O'BRIEN (PHILADELPHIA)
COGENERATION INC.
By:/s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: Vice President-CFO
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EXHIBIT A
SUBORDINATED LENDING AGREEMENT
All contracts, leases or other agreements, whether oral or
written, by and between the Subordinated Lender and the Company,
relating to the lease to or use by the Company of equipment owned or
leased by the Subordinated Lender.
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<PAGE>
Exhibit 10.27.2
Execution Version
EQUITY COMMITMENT AGREEMENT
dated as of September 15, 1997
among
NRG ENERGY, INC.
NRG (MORRIS) COGEN, LLC
and
THE CHASE MANHATTAN BANK,
as Collateral Agent
<PAGE>
EQUITY COMMITMENT AGREEMENT
This EQUITY COMMITMENT AGREEMENT, dated as of September 15, 1997
(this "Agreement"), is made and entered into by and among NRG Energy,
Inc., a Delaware corporation ("NRG"), NRG (Morris) Cogen, LLC, a
Delaware limited liability company (the "Borrower"), and The Chase
Manhattan Bank, a banking corporation organized and existing under the
laws of the State of New York, in its capacity as Collateral Agent
under the Loan Agreement referred to below for the benefit of the Banks
hereinafter described.
WITNESSETH:
WHEREAS, the Borrower proposes to develop, construct, own and
operate an approximately 117 megawatt gas-fired cogeneration plant,
producing electricity and steam together with related facilities (the
"Project") at the Morris, Illinois complex of Millennium Petrochemicals
Inc. (formerly Quantum Chemical Corporation), a Virginia corporation;
and
WHEREAS, the Borrower and The Chase Manhattan Bank, as collateral
agent (together with its successors in such capacity, the "Collateral
Agent") for the banks that are or may from time to time become parties
to the Loan Agreement (as defined below), have entered into a
Construction and Term Loan Agreement, dated as of September 15, 1997
(the "Loan Agreement"), with the banks party thereto (the "Banks") and
The Chase Manhattan Bank, in its capacity as agent for the Banks (in
such capacity, the "Agent Bank"), pursuant to which the Banks will make
construction loans and term loans and extend other credit to the
Borrower for the purpose of financing the cost of developing,
constructing, starting up and operating the Project and certain related
expenses (the "Loans"); and
WHEREAS, pursuant to the Loan Agreement, the Borrower is
obligated to maintain a Construction Account; and
WHEREAS, on the date hereof, NRG and NRG Morris Inc., a Delaware
corporation and a wholly-owned subsidiary of NRG ("NRGMI"),
beneficially own 99% and 1%, respectively, of the issued and
outstanding membership interests in the Borrower; and
WHEREAS, it is a condition precedent to the making of Loans by
the Banks that this Agreement shall have been entered into by the
parties hereto and shall have become unconditionally and fully
effective in accordance with it terms; and
WHEREAS, NRG will derive substantial benefit from the making of
the Loans by the Banks to the Borrower.
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<PAGE>
NOW, THEREFORE, in consideration of the above recited premises and
in order to induce the Banks to make the Loans to the Borrower, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows. Capitalized
terms used but not otherwise defined herein shall have the meanings
given to them in the Loan Agreement.
1. Equity Contributions. The Borrower and NRG each hereby
acknowledge and agree:
a. Subject to the terms of Section 1.b below, NRG shall make
cash equity contributions (each an "Equity Contribution") to
the Borrower by payment to the Construction Account on the
date and in the amount specified in any Equity Requisition
Certificate, in the form of Exhibit A attached hereto (each
an "Equity Requisition Certificate"), delivered by the
Borrower to NRG. All such amounts in the Construction
Account shall be used in accordance with, and for the
purposes expressly set forth in, the Loan Agreement.
b. From time to time, but not more frequently than once per
month, the Borrower may execute and submit to NRG an Equity
Requisition Certificate requesting a Equity Contribution;
provided, however, that no Equity Contribution shall be made,
and the Borrower may not request such a Equity Contribution,
if:
(i) subject to Section 2 below, as of the date on which
such Equity Contribution is requested, the Dollar amount of
all Construction Loan Borrowings is less than Eighty-Four
Million Dollars ($84,000,000); or
(ii) the total amount of the requested Equity
Contribution, plus the amount of all prior Equity
Contributions, shall be greater than the lesser of (y) twenty
percent (20%) of the total Project Costs (as set forth in
the then current Construction Budget) or (z) Twenty-Two
Million Dollars ($22,000,000) (the lesser of such amounts
being hereinafter referred to as the "Maximum Equity
Commitment"); provided, however, that if any requested Equity
Contribution, together with the aggregate of all previous
Equity Contributions, exceeds the Maximum Equity Commitment,
NRG shall make an Equity Contribution equal to the Maximum
Equity Commitment less the amount of all previous Equity
Contributions; or
(iii) such Equity Contribution is requested on or
after the Construction Loan Maturity Date.
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<PAGE>
2. Event of Default. Notwithstanding any other provision of
this Agreement, if (i) an Event of Default shall occur and be
continuing, or (ii) the Date Certain shall occur and the Construction
Loans shall not have converted to Term Loans pursuant to the Credit
Agreement, NRG shall, upon the occurrence of such Event of Default or
on the Date Certain, as the case may be, make a cash equity
contribution (a "Default Equity Contribution") to the Borrower by
payment to the Proceeds Account of an amount equal to the Maximum
Equity Commitment less the aggregate of all previous Equity
Contributions.
3. New Member Equity Commitment; Release of NRG Equity
Commitment.
a. If, at any time when NRG has continuing obligations under
this Agreement, NRG sells or otherwise transfers its entire
membership interest in the Borrower to NRG Generating (U.S.)
Inc., a Delaware corporation ("NRG Generating"), in
accordance with Section 4.1 of the Pledge Agreement, then the
Borrower and the Collateral Agent, for and on behalf of the
Agent Bank and the Banks, shall release NRG from its
obligations under this Agreement provided NRG has delivered
or caused to be delivered to the Collateral Agent the
following:
(i) a written assumption agreement, in form and
substance satisfactory to the Required Banks, pursuant to
which NRG Generating assumes all of the then unperformed
obligations of NRG under this Agreement, duly executed by NRG
Generating; and
(ii) a written guaranty by NRG in favor of the
Collateral Agent and the Borrower guarantying the obligations
of NRG Generating under this Agreement, as assumed pursuant
to clause (i) immediately above, substantially in the form of
Exhibit B attached hereto or otherwise approved by Agent
Bank, and duly executed by NRG.
b. If any Person (other than NRG Generating) shall be added as a
new member of the Borrower with the prior written consent of
the Required Banks pursuant to Section 4.1 of the Pledge
Agreement (any such Person, a "New Member"), the equity
commitment obligations of NRG (or NRG Generating, as
applicable) under Sections 1 and 2 hereof shall be reduced by
the amount of any equity commitment granted by such New
Member to the Collateral Agent for the benefit of the Banks,
which equity commitment and any credit support provided
therefor shall be in form and substance acceptable to each
Bank.
4. Representations and Warranties. NRG represents and warrants
to the Borrower and the Collateral Agent, for its own benefit and for
the benefit of the other
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<PAGE>
Secured Parties, which representations and warranties shall survive the
execution and delivery of this Agreement that:
a. NRG is a corporation duly organized and validly existing
under the Laws of the Sate of Delaware, and is duly
qualified, authorized to do business and in good standing as
a foreign corporation in every jurisdiction in which it owns
or leases real property or in which the nature of its
business requires it to be so qualified except to the extent
the failure to be so qualified would not reasonably be
expected to result in a Material Adverse Effect. As used in
this Section 4.a and otherwise in this Agreement, the term
"Material Adverse Effect" shall mean a material adverse
effect on either (i) the operations, business, financial
condition or property of NRG and its subsidiaries on a
consolidated basis, or (ii) the ability of NRG to perform in
a timely manner its material obligations under this
Agreement.
b. The execution, delivery and performance of this Agreement,
the compliance by NRG with the provisions hereof, and the
consummation of the transactions contemplated hereby, will
not (i) conflict with or result in a breach or violation of
any of the respective charters or bylaws of NRG or any of its
subsidiaries or any material franchise or license of NRG or
any of the terms or provisions thereof, (ii) constitute a
default or cause an acceleration of any obligation under, or
result in the imposition or creation of (or the obligation to
create or impose) a Lien with respect to, any bond, note,
debenture or other evidence of Indebtedness or any indenture,
mortgage, deed of trust or other agreement or instrument to
which NRG or any of its subsidiaries is a party or by which
it or any of them is bound, or to which any properties of NRG
or any of its subsidiaries is or may be subject, (iii)
contravene any order of any court or Governmental Authority
or body having jurisdiction over NRG or any of its
subsidiaries or any of their properties, or (iv) violate or
conflict with any statute, rule or regulation or
administrative or court decree applicable to NRG or any of
its subsidiaries or any of their respective properties, in
the case of clauses (ii), (iii) and (iv) which conflict,
breach, violation, default or contravention, singly or in the
aggregate with each other conflict, breach, violation,
default or contravention, could reasonably be expected to
result in a Material Adverse Effect.
c. NRG has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its
obligations under this Agreement.
d. The execution, delivery and performance by NRG of this Agreement
have been duly authorized by all necessary corporate action on the
part of NRG
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<PAGE>
and do not require any approval or consent of any holder (or any
trustee for any holder) of any Indebtedness or other obligation of NRG
or any other Person or entity, except approvals or consents which have
previously been obtained and which are in full force and effect.
e. This Agreement has been duly authorized, executed and
delivered by NRG and constitutes a legally valid and binding
agreement, enforceable against NRG in accordance with its
terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar
Laws affecting creditors' rights and remedies generally and
to principles of equity (regardless of whether enforcement is
sought at law or in equity).
f. There is no legislation, litigation, action, suit, proceeding
or investigation pending or (to the best of NRG's knowledge
after due inquiry) threatened against NRG before or by any
court, administrative agency, arbitrator or Governmental
Authority which if adversely determined individually or in
the aggregate, (i) could reasonably be expected to result in
a Material Adverse Effect or (ii) questions the validity,
binding effect or enforceability hereof, any action taken or
to be taken pursuant hereto or any of the transactions
contemplated hereby.
g. The financial statements of NRG provided or to be provided as
contemplated in the Credit Agreement and the other Financing
Documents are or will be true, correct and complete as of the
dates specified therein and fully and accurately present the
financial condition of NRG as of the dates and for the
periods specified. There has been no material adverse change
in the financial condition of NRG from the date of NRG's most
recent audited financial statements delivered to the Agent
Bank (except as heretofore disclosed to the Agent Bank in a
writing delivered by or on behalf of NRG).
h. NRG is in compliance with all Laws applicable to it except to
the extent that the failure to comply therewith could
reasonably be expected to result in a Material Adverse
Effect.
5. Covenants and Agreements. NRG hereby covenants and agrees
that it shall faithfully observe and fulfill, and shall cause to be
observed and fulfilled, each and all of the following covenants:
a. NRG shall not merge or consolidate with or into any other
entity unless the surviving entity (if other than NRG)
expressly agrees to assume all the obligations of NRG under
this Agreement and each other Transaction
6
<PAGE>
Document to which NRG is a party and expressly agrees to
otherwise be subject to the terms of this Agreement and each
other Transaction Document to which NRG is a party.
b. Neither NRG nor any of its Affiliates shall commence or join
with any other Person (other than the Agent Bank, the
Collateral Agent or any of the Banks) in commencing any Event
of Bankruptcy against the Borrower.
c. NRG agrees that it will not, and that it will cause its
subsidiaries not to, enter into any bond, note, debenture or
other evidence of Indebtedness or any indenture, mortgage,
deed of trust or other agreement or instrument which would
conflict with the performance by NRG of its obligations
pursuant to this Agreement or compliance by NRG with the
provisions hereof or pursuant to which this Agreement would
constitute a default or cause an acceleration of any
obligation under, or result in the imposition or creation of
(or the obligation to create or impose) a Lien.
6. Action by Collateral Agent. The Collateral Agent shall be
entitled to rely on any notice received by it from the Agent Bank, any
Bank or the Borrower stating that any Event of Default shall have
occurred and shall not be under any duty or responsibility to make any
independent verification of such statement.
7. Enforcement. NRG hereby agrees that the Collateral Agent
shall have the right to directly enforce the provisions hereof which
are binding upon NRG against NRG and NRG hereby agrees to pay all
costs, including reasonable attorneys' fees, incurred with respect to
the enforcement of such provisions of this Agreement against NRG, which
enforcement costs, regardless of when incurred, shall be payable by NRG
on the earlier of (a) the date on which a final judgment shall be
obtained against NRG with respect to this Agreement and any and all
applicable appeal periods with respect thereto shall have expired and
(b) the date on which NRG and the Collateral Agent shall have otherwise
resolved (including by way of settlement) any dispute with respect to
the enforcement of this Agreement against NRG.
8. Assignment and Consent. NRG consents to the terms and
provisions of the Security Documents, including the assignment of this
Agreement to the Collateral Agent for the benefit of the Banks. NRG
agrees that the Collateral Agent (acting for the benefit of the Banks)
and any assignee thereof shall be entitled to exercise any and all
rights of the Borrower under this Agreement in accordance with the
terms thereof (in its own name or in the name of the Borrower), and NRG
shall comply in all respects with such exercise. Without limiting the
generality of the foregoing, the Collateral Agent and any assignee
thereof shall have the full right and power to enforce directly against
NRG and its assignees any and all obligations of NRG under this
Agreement and otherwise to exercise any and all remedies hereunder and
under the Security Documents and to make
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any and all requests required or permitted to be made by the Borrower
(in its own name or in the name of the Borrower) under this Agreement.
9. Limitation of Liability. Notwithstanding anything else in
this Agreement or any other Transaction Document, NRG's liability in
respect of this Agreement is limited to the equity contributions
specified in Sections 1 and 2 of this Agreement. Neither NRG nor any
shareholder, officer, employee, controlling Person, executive,
director, agent or Affiliate (other than the Borrower) of NRG (herein
referred to as "operatives") shall be liable for payments or other
obligations due by the Borrower under the Loan Agreement or any other
Transaction Document or for the payment or performance by the Borrower
of any other Obligation. In the event of foreclosure or other sale or
disposition of properties, no judgment for any deficiency upon the
obligations of the Borrower under any Financing Document shall be
obtainable by the Banks against NRG or any of such operatives except,
in the case of each of such parties and their respective operatives,
with respect to any then-remaining collateral pledged by such parties
and their respective operatives, respectively. Notwithstanding the
foregoing, nothing in this Section 9 shall be deemed to affect or
diminish the obligations of NRG or any operative under this Agreement
or any other Transaction Document to which NRG or any such operative is
a party.
10. Payment Absolute.
a. Subrogation. Notwithstanding any payment or payments made or
caused to be made by NRG hereunder, NRG shall not be entitled
to be subrogated to any of the rights of the Secured Parties
or any collateral security or guaranty held by the Secured
Parties in connection with the Borrower's Obligations, nor
shall NRG seek any reimbursement from the Borrower in respect
of payments made or caused to be made by NRG hereunder. If
any amount shall be paid to NRG as a result of such
subrogation rights at any time prior to the Loan Agreement
Termination Date, such amount shall be held by NRG in trust
for the Secured Parties, segregated from other funds of NRG,
and shall be turned over to the Collateral Agent for the
benefit of the Secured Parties, in the exact form received by
NRG (duly endorsed by NRG to the Collateral Agent for the
benefit of itself and the other Secured Parties, if
required), to be applied against Obligations in such order as
the Collateral Agent (as directed by the Agent Bank, acting
pursuant to the Credit Agreement) may elect.
b. Unconditional Obligation. The obligations of NRG under
Sections 1 and 2 hereof shall be absolute, unconditional and
irrevocable under any and all circumstances and shall be
performed by NRG regardless of any circumstance whatsoever
which might otherwise constitute an excuse for nonperformance
of the obligations of NRG under Sections 1 and 2. Without
limiting the generality of the foregoing, NRG shall remain
obligated to
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<PAGE>
the extent provided hereunder, notwithstanding that, without
any reservation of rights by or against NRG and without
notice to or further assent by NRG, any demand for payment of
any amount due pursuant to the Loan Agreement or any other
Financing Document may be rescinded by the Secured Parties
and any of the Loans or other extensions of credit thereunder
continued and such amounts, or the liability of any other
Person upon or for any part thereof, or any collateral
security or guaranty therefor or right of offset with respect
thereto may, form time to time, in whole or part, be renewed,
extended, amended, modified, accelerated, compromised,
waived, surrendered or released by the Secured Parties, and
the Loan Agreement or any other Financing Document or any
other document executed in connection therewith may be
amended, modified, supplemented or terminated, in whole or in
part, as the Secured Parties may deem advisable from time to
time, and any collateral security or guaranty or right of
offset at any time held by the Secured Parties for the
payment of such amounts may be sold or exchanged, waived,
surrendered or released. None of the Secured Parties shall
have any obligation to protect, secure, perfect or inquire as
to any Lien at any time held by any of them as security for
any amount due under the Loan Agreement or any other
Financing Document or any property subject to any such Lien
and the failure of any of the Secured Parties to do any of
the foregoing shall have no effect on the obligations of NRG
hereunder and none of the Secured Parties shall have any
liability for the performance or observance of any of the
obligations or duties of the Borrower under the Loan
Agreement or under any other Transaction Document and the
Borrower's failure to perform any such obligations or duties
shall not impair the obligations of NRG hereunder.
c. Continuing Obligations. The obligations set forth herein
shall continue to be effective or shall be reinstated, as the
case may be, if at any time and for any reason, any payment
made hereunder by NRG is rescinded or must otherwise be
returned by the Secured Parties, all as though such payment
had not been made.
11. No Setoff. NRG shall not have the right to withhold or
offset against any payment due for any reason including, without
limitation, any dispute between the Borrower and NRG.
12. Third Party Beneficiaries. The agreements of the parties
hereto are intended to benefit the Secured Parties and their respective
successors and assigns.
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<PAGE>
13. Counterparts. This Agreement may be executed 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.
14. Survival. The terms of this Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective
successors and assigns. All representations, warranties and
indemnities contained herein or made in writing by NRG in connection
herewith shall survive the execution and delivery of this Agreement and
the performance of the obligations contained herein until the
Conversion Date.
15. Notices. Except as otherwise expressly provided herein,
(a) all notices and other communications provided for hereunder shall
be provided in writing and shall be sent by personal delivery,
telecopy, overnight courier or, if such courier service is not
available, by certified mail with postage prepaid to any party at the
address set forth below its signature on this Agreement, or at such
other address as shall be designated by a party in a written notice to
the other parties hereto and (b) all such notices and communications
shall be effective seven (7) days after being deposited in the mails in
the manner as aforesaid, when delivered by personal delivery, one (1)
day after delivery to the courier in the manner as aforesaid, or when
sent by telecopier, upon confirmation of receipt.
16. Successors and Assigns. This Agreement shall inure to the
benefit of the parties hereto, the Agent Bank and each of the Banks, as
third party beneficiaries, and their successors and assigns, and shall
bind the heirs, executors, administrators, personal representatives,
successors and assigns of such Persons. NRG shall not assign or
otherwise transfer all or any of its obligations hereunder other than
in accordance with Section 3 hereof.
17. Bankruptcy. NRG hereby irrevocably waives any protection it
may be entitled to under Section 365(c)(1) and (2) and Section
365(e)(1) and (2) of the Bankruptcy Code upon the occurrence of an
Event of Bankruptcy with respect to the Borrower (a "Proceeding"). In
the event the trustee in bankruptcy or the debtor-in-possession takes
any action (including, without limitation, the institution of any
action, suit or other proceeding) in a Proceeding for the purpose of
enforcing the obligations of NRG under Section 1 or 2 hereof, NRG
agrees (a) not to assert any defense, claim or counterclaim denying
liability under Section 1 or 2 hereof on the basis that this Agreement
is either (i) not an executory contract or (ii) an executory contract
that cannot be assumed, assigned or enforced, or on any other theory
directly or indirectly based on Section 365(c)(1) and (2) or Section
365(e)(1) and (2) of the Bankruptcy Code or any successor provision of
law and (b) to make all payments hereunder regardless of any rejection
or termination (by operation of law or otherwise) of this Agreement by
the Borrower. If a Proceeding shall occur, NRG agrees after the
occurrence of such Proceeding to reconfirm its prepetition waiver of
any protection it may be entitled to under Section 365(c)(1) and (2)
and Section 365(e)(1) and (2) of the Bankruptcy Code and, to give
effect to such waiver, NRG consents to the
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<PAGE>
assumption and enforcement of each provision of this Agreement by the
debtor-in-possession or the Borrower's trustee in bankruptcy, as the
case may be.
18. Amendments. This Agreement or any provision hereof may not
be rescinded, canceled, modified, changed or waived by any party hereto
without the prior written consent of the Collateral Agent (as directed
by the Agent Bank, acting upon the instructions of the Required Banks).
19. Governing Law. This Agreement is a contract made under the
Laws of the State of New York of the United States and shall for all
purposes be governed by and construed in accordance with the Laws of
such State without regard to the conflict of law rules thereof (other
than Section 5-1401 of the New York General Obligations Law).
20. Consent to Jurisdiction.
a. Any legal action or proceeding against either NRG or the
Borrower with respect to this Agreement may be brought in the
courts of the State of New York in the County of New York or
of the United States for the Southern District of New York
and, by execution and delivery of this Agreement, each of NRG
and the Borrower hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts. NRG and
the Borrower each agrees that a judgment, after exhaustion of
all available appeals, in any such action or proceeding shall
be conclusive and binding upon such party, and may be
enforced in any other jurisdiction by a suit upon such
judgment, a certified copy of which shall be conclusive
evidence of the judgment. NRG and the Borrower each hereby
irrevocably designates, appoints and empowers CT Corporation
System, with offices on the date hereof at 1633 Broadway, New
York, New York 10019, as its designee, appointee and agent of
any to receive, accept and acknowledge for and on its behalf,
and in respect of its property, service of any and all legal
process, summons, notices and documents which may be served
in any such action or proceeding. If for any reason such
designee, appointee and agent shall cease to be available to
act as such, NRG and the Borrower each agrees to designate a
new designee, appointee and agent in New York City on the
terms and for the purposes of this provision satisfactory to
the Collateral Agent. NRG and the Borrower each further
irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified
mail, postage prepaid, to such party, at its address referred
to in Section 15 hereof, such service to become effective
thirty (30) days after such mailing. Nothing herein shall
affect the right of the Collateral Agent or any other Person
to serve process in any other manner permitted by
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<PAGE>
Law or to commence legal proceedings or otherwise proceed
against either party in any other jurisdiction.
b. NRG and the Borrower each hereby irrevocably waives any
objection which it may now or hereafter have to the laying of
venue of any of the aforesaid actions or proceedings arising
out of or in connection with this Agreement brought in the
courts referred to in clause (a) above and hereby further
irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
c. WITH REGARD TO THIS AGREEMENT AND EACH OTHER TRANSACTION
DOCUMENT TO WHICH EITHER NRG OR THE BORROWER IS A PARTY, EACH
OF NRG, THE BORROWER, THE AGENT BANK, THE BANKS (BY ACCEPTING
THE BENEFITS OF THIS AGREEMENT) AND THE COLLATERAL AGENT
HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY.
21. No Waiver. No failure to exercise and no delay in exercise,
on the part of the Collateral Agent, of any right, remedy, power or
privilege provided herein or by statute or at law or in equity shall
operate as a waiver thereof; nor shall any single or partial exercise
of any thereof preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned has executed this Equity
Commitment Agreement as of the date first above written.
NRG Energy, Inc.
By: /s/ James J. Bender
Name: James J. Bender
Title: Vice President
Address for Notices:
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attn: Chief Financial Officer
(with a copy to General Counsel at the same ad
dress)
NRG (Morris) Cogen, LLC
By: /s/ James J. Bender
Name: James J. Bender
Title: Management Committee Member
Address for Notices:
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attn: President
THE CHASE MANHATTAN BANK,
as Collateral Agent
By: /s/ Annette M. Marsula
Name: Annette M. Marsula
Title: Assistant Vice President
Address for Notices:
450 West 33 Street
15th Floor
New York, New York 10001
Attn: Annette M. Marsula
[Signature page to Equity Commitment Agreement among NRG Energy, Inc.,
NRG (Morris) Cogen, LLC and The Chase Manhattan Bank, as Collateral
Agent]
<PAGE>
EXHIBIT A
FORM OF EQUITY REQUISITION CERTIFICATE
[DATE]
NRG Energy, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attn:
Ladies and Gentlemen:
This Equity Requisition Certificate is delivered to you pursuant
to Section 1 of that certain Equity Commitment Agreement, dated as of
September 15, 1997 (the "Equity Commitment Agreement"), by and among
you ("NRG"), the undersigned (the "Borrower") and The Chase Manhattan
Bank, in its capacity as Collateral Agent (the "Collateral Agent").
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned thereto in the Equity Commitment Agreement.
The Borrower hereby requests that NRG make an Equity Contribution
to the Borrower on the date and in the amount requested below (the
"Requested Equity Contribution"), which amount is to be paid to the
Construction Account:
Date of funding: ___________________
Amount of
Contribution: $__________________
The Borrower hereby certifies that as of the date of funding:
(1) the Dollar amount of all Construction Loan Borrowings made to
or for the benefit of the Borrower under the Loan Agreement is equal to
or greater than $84,000,000;
(2) the total amount of the Requested Equity Contribution, plus
the amount of all prior Equity Contributions, is equal to $
, which amount is less than or equal to the lesser of (y) $
representing twenty percent (20%) of the total
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Project Costs (as set forth in the current Construction Budget), or (z)
Twenty-Two Million Dollars ($22,000,000); and
(3) the Construction Loan Maturity Date has not occurred.
Very truly yours,
NRG (MORRIS) COGEN, LLC
By: _______________________
Name:
Title:
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<PAGE>
EXHIBIT B
FORM OF EQUITY COMMITMENT GUARANTY
This EQUITY COMMITMENT GUARANTY (this "Guaranty" or this
"Agreement"), dated as of [INSERT DATE], by NRG ENERGY, INC., a
Delaware corporation ("Guarantor"), in favor of NRG (MORRIS) COGEN, LLC
(the "Borrower") and THE CHASE MANHATTAN BANK, as collateral agent for
the Banks (as defined below) (in such capacity, the "Collateral Agent")
under the Construction and Term Loan Agreement, dated as of September
15, 1997 (the "Credit Agreement"), among the Borrower, the Collateral
Agent, the banks party thereto (the "Banks") and The Chase Manhattan
Bank, as agent for the Banks (in such capacity, the "Agent Bank").
RECITALS
A. As a condition precedent to the Agent Bank, the
Collateral Agent and the Banks entering into the Credit Agreement and
the Banks making the Loans and extending other credit to the Borrower
thereunder, Guarantor executed an Equity Commitment Agreement, dated as
of September 15, 1997 (the "Equity Commitment Agreement"), in favor of
the Borrower and the Collateral Agent.
B. Pursuant to an [INSERT NAME OF AGREEMENT], dated as of
the date hereof, Guarantor is selling all of its membership interests
in the Borrower to NRG Generating (U.S.) Inc. ("NRG Generating").
C. Pursuant to an Assignment and Assumption Agreement, dated
as of the date hereof (the "Assignment and Assumption Agreement"),
between Guarantor and NRG Generating, NRG Generating is assuming all of
Guarantor's obligations under the Equity Commitment Agreement.
D. Guarantor owns [INSERT PERCENTAGE] of the outstanding
shares of capital stock of NRG Generating.
E. It is a condition to the Banks' willingness to continue
to make Loans and extend other credit to the Borrower under the Credit
Agreement that Guarantor enter into this Agreement.
F. Guarantor acknowledges that it will obtain substantial
benefit if the Banks continue to make Loans and extend other credit to
the Borrower under the Credit Agreement.
<PAGE>
G. The obligations of Guarantor hereunder are being incurred
concurrently with the assumption by NRG Generating of Guarantor's
obligations under the Equity Commitment Agreement pursuant to the
Assignment and Assumption Agreement.
H. Capitalized terms used but not otherwise defined herein
shall have the respective meanings given them in the Equity Commitment
Agreement (including terms incorporated therein from the Credit
Agreement).
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth
above and other good and valuable consideration, receipt of which is
hereby acknowledged, Guarantor hereby agrees as follows:
1. Guaranty by Guarantor of NRG Generating Obligation.
Guarantor unconditionally and irrevocably guarantees payment to the
Borrower and to the Collateral Agent, for the benefit of the Agent Bank
and the Banks, when due of any and all amounts payable by NRG
Generating to the Borrower from time to time pursuant to Sections 1 and
2 of the Equity Commitment Agreement and performance in full of all of
NRG Generating's obligations under Sections 1 and 2 of the Equity
Commitment Agreement.
2. Additional Provisions to Guarantor Obligations.
(a) In addition to the obligations under Section 1 of
this Agreement, Guarantor agrees to pay upon demand all fees and
expenses incurred by the Collateral Agent and the Borrower in
successfully enforcing against Guarantor any of its obligations
and liabilities hereunder or the terms hereof, including, without
limitation, reasonable fees and expenses of legal counsel.
Guarantor waives notice of acceptance of this Agreement and of any
obligation to which it applies or may apply under the terms
hereof, and waives diligence, presentment, demand of payment,
notice of dishonor or non-payment, protest, notice of protest, of
any such obligations, suit or taking other action by the
Collateral Agent or the Borrower against, and giving any notice of
default or other notice to, or making any demand on, any party
liable thereon (including Guarantor).
(b) Guarantor's obligation under this Agreement is an
absolute, unconditional, continuing and irrevocable guaranty of
payment and performance and is in no way conditioned on or
contingent upon any attempt to enforce in whole or in part NRG
Generating's obligations to the Collateral Agent and the Borrower
under the Equity Commitment Agreement. If NRG Generating fails to
pay or perform any liabilities or obligations to the Collateral
Agent or the Borrower under Section 1 or 2 of the Equity
Commitment Agreement as and when
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<PAGE>
they are due, Guarantor shall forthwith pay and perform such
liabilities or obligations, with any such payment to be made in
immediately available funds. Each failure by NRG Generating to
pay or perform any liabilities or obligations arising under
Section 1 or 2 of the Equity Commitment Agreement shall give rise
to a separate cause of action hereunder, and separate suits may be
brought hereunder as each cause of action arises.
(c) The Collateral Agent and the Borrower may, at any
time and from time to time without the consent of or notice to
Guarantor, except such notice as may be required by applicable Law
which cannot be waived, without incurring responsibility to
Guarantor or impairing or releasing the obligations of Guarantor
hereunder, upon or without any terms or conditions and in whole or
in part, (i) exercise or refrain from exercising any rights
against NRG Generating or others (including Guarantor) or
otherwise act or refrain from acting; (ii) release any other
guarantor from its obligations without obtaining the consent of
Guarantor and without affecting or impairing the obligations of
Guarantor hereunder; (iii) settle or compromise any obligations
hereby guaranteed and/or any obligations incurred directly or
indirectly in respect thereof or hereof, and may subordinate the
payment of all or any part thereof to the payment of any
obligations which may be due to the Collateral Agent, the Borrower
or others; (iv) sell, exchange, release, surrender, realize upon
or otherwise deal with in any manner or in any order any property
by whomsoever pledged or mortgaged to secure or howsoever securing
the liabilities or obligations hereby guaranteed or any
liabilities or obligations incurred directly or indirectly in
respect thereof or hereof and/or any offset thereagainst; (v)
apply any sums by whomsoever paid or howsoever realized to any
obligations of NRG Generating to the Collateral Agent or the
Borrower regardless of what obligations remain unpaid; (vi)
consent to or waive any breach of, or any act, omission or default
under, the Equity Commitment Agreement or otherwise amend, modify
or supplement the Equity Commitment Agreement or any of such other
instruments or agreements; and/or (vii) act or fail to act in any
manner referred to in this Agreement which may deprive Guarantor
of its right, if any, to subrogation or reimbursement against NRG
Generating or any other Person to recover full indemnity for any
payments made pursuant to this Agreement or of its right of
contribution against any other party.
(d) No invalidity, irregularity or unenforceability of
the obligations hereby guaranteed shall affect, impair or be a
defense to this Agreement.
(e) In the event that, notwithstanding the provisions
of Section 2(b) hereof, this Agreement shall be deemed revocable
in accordance with applicable Law, then any such revocation shall
become effective only upon actual receipt by the Collateral Agent
and the Borrower of written notice of revocation
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<PAGE>
signed by Guarantor. No revocation or termination hereof shall
affect in any manner rights arising under this Agreement with
respect to obligations and liabilities outstanding on the date of
receipt by the Collateral Agent and the Borrower of written notice
of such revocation or termination and the sole effect of any
revocation and termination hereof shall be to exclude from this
Agreement obligations and liabilities thereafter arising which are
unconnected with obligations and liabilities theretofore arising
or transactions theretofore entered into (Guarantor shall remain
liable for all obligations incurred hereunder prior to such
revocation or termination).
3. Representations and Warranties. Guarantor makes the
representations and warranties set forth below to the Borrower and to
the Collateral Agent, acting for its own benefit and for the benefit of
the other Secured Parties, which representations and warranties shall
survive the execution and delivery of this Agreement:
(a) Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder.
(b) Guarantor has taken all necessary corporate action
to authorize its execution and delivery of this Agreement and the
performance of its obligations hereunder.
(c) This Agreement has been duly executed and delivered
by Guarantor and constitutes the legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in
accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar Laws affecting creditors' rights
generally and subject to general equitable principles.
(d) All Governmental Approvals and actions necessary in
connection with the execution and delivery by Guarantor of this
Agreement and the performance of its obligations hereunder have
been obtained or performed and remain valid and in full force and
effect.
(e) The execution, delivery and performance of this
Agreement, the compliance by Guarantor with the provisions hereof
and the consummation of the transactions contemplated hereby, will
not (i) conflict with or result in a breach or violation of any of
the respective charters or bylaws of Guarantor or any of its
subsidiaries or any material franchise or license of Guarantor or
any of the terms or provisions thereof, (ii) constitute a default
or cause an acceleration of any obligation under, or result in the
imposition or creation of (or the obligation to create or impose)
any Lien with respect to, any bond, note, debenture or other
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<PAGE>
evidence of Indebtedness or any indenture, mortgage, deed of trust
or other agreement or instrument to which Guarantor or any of its
subsidiaries is a party or by which it or any of them is bound, or
to which any properties of Guarantor or any of its subsidiaries is
or may be subject, (iii) contravene any order of any court or
Governmental Authority or body having jurisdiction over Guarantor
or any of its subsidiaries or any of their properties or (iv) or
conflict with any statute, rule or regulation or administrative or
court decree applicable to Guarantor or any of its subsidiaries or
any of their respective properties, in the case of clauses (ii),
(iii) and (iv) which conflict, breach, violation, default or
contravention, singly or in the aggregate with each other
conflict, breach, violation, default or contravention, could
reasonably be expected to result in a Material Adverse Effect. As
used in this clause (e) and otherwise in this Agreement, the term
"Material Adverse Effect" shall mean a material adverse effect on
either (A) the operations, business, financial condition or
property of Guarantor or any of its subsidiaries on a consolidated
basis or (B) the ability of Guarantor to perform in a timely
manner its obligations under this Agreement.
(f) There is no legislation, litigation, action, suit,
proceeding or investigation pending or (to the best of Guarantor's
knowledge after due inquiry) threatened against Guarantor before
or by any court, administrative agency, arbitrator or Governmental
Authority which if adversely determined individually or in the
aggregate, (i) could reasonably be expected to result in a
Material Adverse Effect or (ii) questions the validity, binding
effect or enforceability hereof, any action taken or to be taken
pursuant hereto or any of the transactions contemplated hereby.
(g) All quarterly and annual financial statements
heretofore delivered by or in respect of Guarantor to the
Collateral Agent, the Agent Bank, the Banks or the Borrower are
true, correct and complete as of the dates referred to therein, do
not fail to disclose any material liabilities, whether direct or
contingent, fairly present the financial condition of Guarantor as
of the date thereof and are prepared in accordance with GAAP.
(h) Guarantor possesses all franchises, certificates,
licenses, permits and other Governmental Approvals necessary for
it to own its properties, conduct its business and perform its
obligations under this Agreement.
(i) Guarantor (i) is not an "investment company", or a
company "controlled" by an "investment company", within the
meaning of the ICA, and (ii) is not subject to regulation as a
"holding company," a "public utility company," or an "affiliate"
or a "subsidiary company" of a "registered holding company" as
defined in PUHCA.
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<PAGE>
4. Covenants: Guarantor agrees that:
(a) Guarantor shall 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 and
will obtain any that may become necessary in the future.
(b) Guarantor shall 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.
(c) (i) Annual Financial Statements. Guarantor shall
deliver to the Collateral Agent and the Borrower, within one
hundred twenty (120) days after the close of each fiscal year
of Guarantor, the consolidated and consolidating balance
sheets of Guarantor and its consolidated Affiliates as at the
end of such fiscal year and the related consolidated and
consolidating statements of income, retained earnings and
cash flows for such fiscal year, in each case setting forth
comparative figures for the preceding fiscal year and
certified, in the case of the consolidated financial
statements, by independent certified public accountants of
recognized national standing in the United States.
(ii) Notice of Default or Litigation. Promptly,
and in any event within two (2) Business Days after an
Authorized Officer of Guarantor obtains knowledge thereof,
Guarantor shall give to the Collateral Agent and the Borrower
notice of the occurrence of any event or of any litigation or
governmental proceeding pending (a) against Guarantor or any
of its Affiliates which could affect the business,
operations, property, assets, condition (financial or
otherwise) or prospects of Guarantor so as to materially and
adversely affect the ability of Guarantor to perform its
obligations hereunder or (b) with respect to this Agreement,
which event or pending proceeding is likely to materially and
adversely affect the business, operations, property, assets,
condition (financial or otherwise) or prospects of Guarantor
and its Affiliates taken as a whole.
(iii) Other Information. From time to time,
Guarantor shall provide to the Collateral Agent and the
Borrower such other information or documents (financial or
otherwise) regarding Guarantor as the Collateral Agent or the
Borrower may reasonably request and as may be available to
Guarantor without undue cost or effort.
5. Subrogation. Guarantor shall not exercise any rights
which it may acquire by way of subrogation under this Agreement, by any
payment made hereunder or
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otherwise, until all of the liabilities and obligations of NRG
Generating to the Collateral Agent and the Borrower under the Equity
Commitment Agreement shall have indefeasibly been paid in full in cash
or cash equivalents. If any amount shall be paid to Guarantor on
account of such subrogation rights at any time when all such
liabilities and obligations shall not have been indefeasibly paid in
full in cash or cash equivalents, such amount shall be held in trust
for the benefit of the Collateral Agent and the Borrower and shall
forthwith be paid to the Collateral Agent or the Borrower, as
applicable, and applied to such liabilities and obligations, whether
matured or unmatured.
6. Successions or Assignments.
(a) This Agreement shall inure to the benefit of the
respective successors or assigns of the Collateral Agent and the
Borrower who shall have, to the extent of their interest, the
rights of the Collateral Agent and the Borrower hereunder.
(b) This Agreement is binding upon Guarantor and its
successors and assigns. Guarantor is not entitled to assign its
obligations hereunder to any other Person without the written
consent of the Collateral Agent and the Borrower, which may be
granted or withheld in the Collateral Agent's or the Borrower's
sole discretion (in the case of the Collateral Agent, as directed
by the Agent Bank, acting in accordance with the Credit
Agreement), and any purported assignment in violation of this
provision shall be void.
7. Waivers.
(a) No delay on the part of the Collateral Agent or the
Borrower in exercising any of its rights (including those
hereunder) and no partial or single exercise thereof and no action
or non-action by the Collateral Agent or the Borrower, with or
without notice to Guarantor or anyone else, shall constitute a
waiver of any rights or shall affect or impair this Agreement.
(b) Guarantor agrees that, if the Collateral Agent or
the Borrower bring any judicial proceedings in relation to any
such matter, Guarantor will not interpose any counterclaim or
setoff of any nature.
(c) If any amount payable by Guarantor hereunder is not
paid as and when due, then Guarantor authorizes the Collateral
Agent and the Borrower to proceed, without prior notice, by right
of set-off, counterclaim or otherwise, against any assets of
Guarantor that may at any time be in the possession of the
Collateral Agent or the Borrower or any branch or office thereof,
to the full extent of all amounts payable to the Collateral Agent
and the Borrower hereunder.
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(d) Guarantor waives any and all notice of the
creation, renewal, extension or accrual of any of the obligations
of NRG Generating under Sections 1 and 2 of the Equity Commitment
Agreement and notice of or proof of reliance by the Collateral
Agent or the Borrower upon this Agreement.
(e) Guarantor waives diligence, presentment, protest,
demand for payment and notice of default to or upon NRG Generating
with respect to the obligations under Sections 1 and 2 of the
Equity Commitment Agreement.
8. Interpretation. The Section headings in this Agreement
are for the convenience of reference only and shall not affect the
meaning or construction of any provision hereof.
9. Notices. All notices in connection with this Agreement
shall be given by notice in writing, hand-delivered or sent by
facsimile transmission, or by certified mail return-receipt requested
(airmail, if overseas), postage prepaid. All such notices shall be
sent to the appropriate telecopier number or address, as the case may
be, set forth below or to such other number or address as shall have
been subsequently specified by written notice to each other party
hereto, and shall be sent with copies, if any, as indicated below. All
such notices shall be effective upon receipt. The addresses for notice
shall be as follows:
(a) The address of Guarantor is:
NRG ENERGY, INC.
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attention: President
Telephone No.: (612) 373-5400
Telecopier No.: (612) 373-5430
With a copy to:
NRG ENERGY, INC.
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attention: General Counsel
(b) The address of the Collateral Agent is:
THE CHASE MANHATTAN BANK
450 West 33rd Street, 15th Floor
New York, NY 10001
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Attention: A. Marsula, Assistant Vice President,
International Project Finance, Global Trust
Services
Telephone No.: (212) 946-7557
Telecopier No.: (212) 946-8177/8178
(c) The address of the Borrower is:
NRG (MORRIS) COGEN, LLC
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attention: President
Telephone No.: (612) 373-5400
Telecopier No.: (612) 373-5430
With a copy to:
NRG (MORRIS) COGEN, LLC
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attention: General Counsel
10. Amendments. Notwithstanding anything contained herein
that may be construed to the contrary, as between Guarantor, the
Collateral Agent and the Borrower, this Agreement may be amended only
with the written consent of the Collateral Agent, the Borrower and
Guarantor, with the Collateral Agent acting as directed by the Agent
Bank (acting upon the instructions of the Required Banks).
11. Jurisdiction; Governing Law.
(a) Any action or proceeding relating in any way to
this Agreement may be brought and enforced in the courts of the
State of New York. Any such process or summons in connection with
any such action or proceeding may be served by mailing a copy
thereof by certified or registered mail, or any substantially
similar form of mail, addressed to the applicable party as
provided for notices hereunder. By execution and delivery of this
Agreement, Guarantor irrevocably agrees to designate, appoint and
empower CT Corporation System, with its offices as of the date
hereof at 1633 Broadway, New York, New York 10019, to receive for
an on its behalf service of process in the State of New York and
further irrevocably consents to the service of process outside the
territorial jurisdiction of said courts by mailing copies thereof
in accordance with the immediately preceding sentence. Guarantor
represents and warrants that it has taken, and will continue to
take, all actions necessary to retain CT Corporation
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System as its registered agent for service of process in the State
of New York for the term hereof.
(b) This Agreement and the rights and obligations of
the parties hereto shall be governed by and construed in
accordance with the Laws of the State of New York without
reference to principles of conflict of laws (other than Section 5-
1401 of the New York General Obligations Law).
12. Integration of Terms. This Agreement contains the
entire agreement among the parties hereto relating to the subject
matter hereof and supersedes all oral statements and prior writings
with respect thereto.
13. Termination; Reinstatement of Guaranty.
(a) Subject to the provisions of Section 13(b) hereof,
this Agreement shall terminate following the payment in full of
all amounts due hereunder or under Sections 1 and 2 of the Equity
Commitment Agreement.
(b) Notwithstanding the provisions of Section 13(a)
hereof, this Agreement shall be reinstated if at any time
following the termination of this Agreement under Section 13(a)
hereof, any payment or performance by Guarantor under this
Agreement or NRG Generating under Section 1 or 2 of the Equity
Commitment Agreement is rescinded or must otherwise be returned by
the Collateral Agent, the Borrower or any other Person upon the
insolvency, bankruptcy, reorganization, dissolution or liquidation
of NRG Generating or Guarantor and is so rescinded or returned to
the party or parties making such payment or performance, all as
though such payment had not been made. Such period of
reinstatement shall continue until satisfaction of the conditions
contained in, and shall continue to be subject to, the provisions
of this Section 13.
14. Waiver of Jury Trial. THE COLLATERAL AGENT (AND THE
AGENT BANK AND THE BANKS AS THIRD PARTY BENEFICIARIES HEREUNDER), THE
BORROWER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE COLLATERAL
AGENT, THE BORROWER, GUARANTOR OR NRG GENERATING. THIS PROVISION IS
MATERIAL INDUCEMENT FOR THE COLLATERAL AGENT, THE BORROWER AND
GUARANTOR TO ENTER INTO THIS AGREEMENT.
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IN WITNESS WHEREOF, Guarantor has caused this Equity
Commitment Guaranty to be duly executed and delivered as of the day and
year first written above.
NRG ENERGY, INC.
By:__________________________
Name:
Title:
Acknowledged and Accepted:
THE CHASE MANHATTAN BANK,
as Collateral Agent
By: __________________________
Name:
Title:
NRG (MORRIS) COGEN, LLC
By: ___________________________
Name:
Title:
S-1
<PAGE>
Exhibit 10.27.3
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of
December 10, 1997 (this "Agreement"), is made and entered into
by and between NRG ENERGY, INC., a Delaware corporation ("NRG
Energy"), and NRGG FUNDING INC., a Delaware corporation ("NRGG
Funding").
RECITALS
WHEREAS, NRG (Morris) Cogen, LLC (the "Borrower") entered
into the Construction and Term Loan Agreement, dated as of
September 15, 1997 (the "Credit Agreement"), with the banks
party thereto (the "Banks"), The Chase Manhattan Bank as agent
for the Banks (in such capacity, the "Agent Bank") and The
Chase Manhattan Bank as collateral agent for the Banks (in such
capacity, the "Collateral Agent"), pursuant to which the Banks
have agreed to make construction and term loans and extend
other credit to the Borrower for the purpose of financing the
cost of developing, constructing, starting-up and operating an
approximately 117 megawatt gas-fired cogeneration facility in
Morris, Illinois (the "Project");
WHEREAS, as a condition precedent to the Banks, the Agent
Bank and the Collateral Agent entering into the Credit
Agreement and the Banks extending credit to the Borrower
thereunder, NRG Energy executed and delivered the Equity
Commitment Agreement, dated as of September 15, 1997 (the
"Equity Commitment Agreement"), in favor of the Borrower and
the Collateral Agent, pursuant to which NRG Energy agreed to
make equity contributions to the Borrower from time to time;
WHEREAS, pursuant to the Membership Interest Purchase
Agreement, dated as of the date hereof (the "Purchase
Agreement"), NRG Energy is transferring all of its equity
interest in the Borrower to NRGG Funding;
WHEREAS, upon execution and delivery of the Purchase
Agreement, NRGG Funding will own 99% of the membership
interests in the Borrower and, accordingly, will derive
substantial benefit from the extension of credit by the Banks
to the Borrower under the Credit Agreement; and
WHEREAS, it is condition precedent to the Banks continuing
to extend credit to the Borrower under the Credit Agreement
that NRG Energy and NRGG Funding execute and deliver this
Agreement, the form and substance of which must be consented to
by the Required Banks;
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINED TERMS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Defined Terms. (a) Unless otherwise defined
herein, capitalized terms used in this Agreement shall have the
meanings given to such terms in the Equity Commitment Agreement
(including terms incorporated therein from the Credit
Agreement).
(b) The following terms shall have the following
respective meanings:
"Amended LLC Agreement" shall have the meaning given
to the term "LLC Agreement" in the Pledge Agreement.
"Equity Guarantee" shall mean the Equity Commitment
Guaranty, dated as of the date hereof, by NRG Energy in favor
of the Borrower and the Collateral Agent.
"First Amendment to the Credit Agreement" shall mean
the Amendment and Consent, dated as of the date hereof, among
the Borrower and the Banks.
"NRGG Documents" shall mean, collectively, the NRGG
Financing Documents and the NRGG Purchase Documents.
"NRGG Financing Documents" shall mean this Agreement,
the Equity Commitment Agreement, the Equity Guarantee, the
Pledge Agreement, the Subordination Agreement, the First
Amendment to the Credit Agreement and the Financing Statements
(as defined under the Pledge Agreement) filed in connection
with the Liens granted to the Collateral Agent in the Pledge
Agreement.
"NRGG Purchase Documents" shall mean the Purchase
Agreement, the Amended LLC Agreement, the Supplemental Loan
Agreement and the Subordinated Pledge Agreement.
"Pledge Agreement" shall mean the Pledge and Security
Agreement, dated as of the date hereof, among NRGG Funding, NRG
MI and the Collateral Agent.
"Purchase Agreement" shall mean the Membership
Interest Purchase Agreement, dated as of the date hereof,
between NRG Energy, NRG Generating and NRGG Funding.
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"Subordinated Pledge Agreement" shall mean the
Subordinated Pledge and Security Agreement, dated as of the
date hereof, among NRGG Funding, NRG MI and NRG Energy.
"Subordination Agreement" shall mean the
Subordination Agreement, dated as of the date hereof, between
NRG Energy and the Collateral Agent.
"Supplemental Loan Agreement" shall mean the
Supplemental Loan Agreement, dated as of the date hereof,
between NRG Energy and NRGG Funding.
Section 1.2 Principles of Construction. Unless otherwise
expressly provided herein, the principles of construction set
forth in Section 1.4 of the Credit Agreement shall apply to
this Agreement.
ARTICLE II
ASSIGNMENT AND ASSUMPTION; ACKNOWLEDGMENT
Section 2.1 Assignment and Assumption. NRG Energy hereby
assigns, conveys and transfers all of NRG Energy's estate,
right, title and interest in, to and under the Equity
Commitment Agreement to NRGG Funding and NRGG Funding hereby
assumes all liabilities, obligations and duties thereunder.
Section 2.2 Acknowledgment and Consent. By executing
this Agreement, the parties hereto acknowledge, consent and
agree that, upon the satisfaction of the conditions set forth
in Article IV of this Agreement, NRG Energy shall be released
from all liabilities, obligations and duties under the Equity
Commitment Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
NRGG Funding represents and warrants as follows, which
representations and warranties shall survive the execution and
delivery of this Agreement:
Section 3.1 Due Incorporation; Qualification. NRGG
Funding is a corporation duly organized and validly existing
under the Laws of the State of Delaware, and is qualified to
own property and transact business in every jurisdiction where
the ownership of its property and the nature of its business as
currently conducted and as contemplated to be conducted
requires it to be qualified, except where the failure to so
qualify could not reasonably be expected to result in a
Material Adverse Effect (as herein defined). For purposes of
this Agreement, "Material Adverse Effect" shall mean a material
adverse effect on any of (i) the operations, business,
financial condition or property of NRGG Funding and its
subsidiaries on a consolidated basis, (ii) the ability of NRGG
Funding to perform in a timely manner its material obligations
under the NRGG Documents to which
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it is or is intended to be a party or (iii) the rights and
interests of the Banks, the Agent Bank and the Collateral Agent
under the Transaction Documents.
Section 3.2 Authority; Authorization, Execution and
Delivery; Enforceability. NRGG Funding has full power,
authority and legal right to enter into this Agreement and the
other NRGG Documents to which it is or is intended to be a
party and to perform its obligations hereunder and thereunder.
The execution, delivery and performance of the NRGG Documents
to which NRGG Funding is or is intended to be a party have been
duly authorized by all necessary corporate action on the part
of NRGG Funding. The NRGG Documents to which NRGG Funding is
or is intended to be a party have been duly executed and
delivered by NRGG Funding and constitute legal, valid and
binding obligations of NRGG Funding enforceable against NRGG
Funding in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar Laws affecting
creditors' rights generally and except as enforceability may be
limited by general principles of equity (whether considered in
a suit at law or in equity).
Section 3.3 Consents; Governmental Approvals. No consent
of any other party (including, without limitation, stockholders
or creditors of NRGG Funding) and no Governmental Approval is
required which has not been obtained for the execution,
delivery and performance by NRGG Funding of the NRGG Documents
to which it is or is intended to be a party, other than any
consent or Governmental Approval not required as of the date
this representation is made or deemed made and that will be
obtained on or before the date on which such consent or
Governmental Approval is required to be obtained.
Section 3.4 No Conflicts. The execution, delivery and
performance by NRGG Funding of the NRGG Documents to which it
is or is intended to be a party will not (i) require any
consent or approval of the Board of Directors of NRGG Funding
which has not been obtained, (ii) violate the provisions of
NRGG Funding's certificate of incorporation or bylaws, (iii)
violate the provisions of any Law (including, without
limitation, any usury Laws), regulation or order of any
Governmental Authority applicable to NRGG Funding, (iv) result
in a breach of or constitute a default under any material
agreement relating to the management or affairs of NRGG
Funding, or any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which NRGG
Funding is or is intended to be a party or by which NRGG
Funding or any of its material properties may be bound or (v)
result in or create any Lien (other than Permitted Liens)
under, or require any consent which has not been obtained
under, any indenture or loan or credit agreement or any other
material agreement, instrument or document, or the provisions
of any order, writ, judgment, injunction, decree, determination
or award of any Governmental Authority binding upon NRGG
Funding or any of its properties.
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Section 3.5 Litigation. No Event of Bankruptcy has
occurred with respect to NRGG Funding and there is no action,
suit or proceeding at Law or in equity or by or before any
Governmental Authority, arbitral tribunal or other body now
pending against NRGG Funding or, to the best knowledge of NRGG
Funding, threatened against NRGG Funding which questions the
validity or legality of or seeks damages in connection with the
NRGG Documents to which NRGG Funding is or is intended to be a
party.
Section 3.6 Compliance with Laws. NRGG Funding has been
in the past and is in current compliance with all Laws
applicable to it, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect
(as defined in Section 3.1 hereof).
Section 3.7 Financial Statements. The financial
statements of NRGG Funding provided or to be provided as
contemplated in Section 4.5 hereof or in any other Financing
Document are or will be true, correct and complete as of the
dates specified therein and fully and accurately present the
financial condition of NRGG Funding as of the dates and for the
periods specified. There has been no material adverse change
in the financial condition of NRGG Funding from the date of
NRGG Funding's most recent audited financial statements
delivered to the Agent Bank (except as heretofore disclosed to
the Agent Bank in a writing delivered by or on behalf of NRGG
Funding).
Section 3.8 Regulation. NRGG Funding is not (a) an
"investment company" or a company "controlled" by an
"investment company," within the meaning of the ICA. NRGG
Funding is a "subsidiary company" of a "holding company," as
those terms are defined in PUHCA, but NRGG Funding is exempt
from all provisions of PUHCA except Section 9(a) thereof by
virtue of Section 3(a)(2) thereof. NRGG Funding is not a
"public utility" or similar entity under applicable federal or
state Law.
ARTICLE IV
CONDITIONS PRECEDENT
The release of NRG Energy of its liabilities, obligations
and duties under the Equity Commitment Agreement is subject to
the following conditions precedent:
Section 4.1 NRGG Financing Documents. The Agent Bank
shall have received each NRGG Financing Document (together with
all amendments, supplements, schedules and exhibits thereto),
each of which (a) shall have been duly authorized, executed and
delivered by each Person party thereto (other than the Agent
Bank, the Collateral Agent and the Banks), (ii) shall be in
form and substance reasonably satisfactory to each Bank and
(iii) shall be in full force and effect. All representations
and warranties contained in each NRGG Financing Document shall
be true and correct in all material respects and no default or
event of default shall have occurred thereunder.
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Section 4.2 NRGG Purchase Documents. The Agent Bank
shall have received copies of each NRGG Purchase Document
(together with all amendments, supplements, schedules and
exhibits thereto), each of which (a) shall have been duly
authorized, executed and delivered by each Person party thereto
(other than the Agent Bank, the Collateral Agent and the
Banks), (ii) shall be in form and substance reasonably
satisfactory to the Agent Bank and (iii) shall be in full force
and effect. All representations and warranties contained in
each NRGG Purchase Document shall be true and correct in all
material respects and no default or event of default shall have
occurred thereunder.
Section 4.3 Pledged Collateral. Pursuant to the terms of
the Pledge Agreement, the Liens on the Pledged Collateral (as
defined in the Pledge Agreement) shall have been duly created
or attached and such Liens shall have been perfected to create
a first priority security interest in and charge over the
Pledged Collateral (as defined in the Pledge Agreement) in
favor of the Collateral Agent for the benefit of itself and the
other Secured Parties. All Taxes, fees and other charges
payable in connection therewith shall have been paid in full by
NRGG Funding or the Borrower.
Section 4.4 Corporate Documents. The Agent Bank shall
have received each of the following in form and substance
satisfactory to it:
(a) a certificate of an Authorized Officer of NRGG
Funding, dated as of the date hereof, certifying as true,
complete and correct attached copies of (i) the
certificate of incorporation of NRGG Funding, (ii) the
bylaws of NRGG Funding and (iii) the resolutions of the
board of directors of NRGG Funding approving and
authorizing the execution, delivery and performance of the
NRGG Documents to which NRGG Funding is or is intended to
be a party;
(b) a certificate of an Authorized Officer of NRGG
Funding, dated as of the date hereof, certifying the names
and true signatures of the incumbent officers of NRGG
Funding authorized to sign the NRGG Documents to which
NRGG Funding is or is intended to be a party; and
(c) evidence that NRGG Funding is duly authorized to
carry on its business as now being conducted by it, and as
proposed to be conducted by it, in each jurisdiction in
which it is required to be so authorized.
Section 4.5 Financial Statements. The Agent Bank shall
have received true, correct and complete copies of the audited
financial statements for the most recently completed fiscal
year of NRGG Funding.
Section 4.6 Legal Opinions. The Agent Bank shall have
received (a) an opinion of counsel to NRGG Funding
substantially in the form of Exhibit A hereto and otherwise in
form and substance satisfactory to the Agent Bank and (b) an
opinion of counsel to
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NRG Energy substantially in the form of Exhibit B hereto and
otherwise in form and substance satisfactory to the Agent Bank.
Section 4.7 Appointment of Agent. NRGG Funding shall
have appointed an agent for service of process on terms
satisfactory to the Agent Bank and shall have paid all fees
necessary for such process agent to act as such through the
Final Maturity Date.
ARTICLE V
MISCELLANEOUS
Section 5.1 Notices. NRGG Funding's address and
telephone and telecopier numbers for the provision of notices
under each NRGG Document to which it is or is intended to be a
party are as follows:
NRGG Funding Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, MN 55403
Attention: President and Chief Executive
Officer
Telephone: (612) 373-5300
Telecopier: (612) 373-5430
Section 5.2 Third Party Beneficiaries. The agreements of
the parties hereto are intended to benefit the Banks, the Agent
Bank and the Collateral Agent and their respective successors
and assigns.
Section 5.3 Severability. In case any provision in or
obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or
of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.
Section 5.4 Counterparts. This Agreement may be executed
in any number of counterparts and by the different parties
hereto on separate counterparts, each of which when so executed
and delivered shall be an original, but all of which shall
together constitute one and the same instrument.
Section 5.5 Headings Descriptive. The headings of the
several Sections of this Agreement are inserted for convenience
only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
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<PAGE>
Section 5.6 Governing Law. This Agreement is a contract
made under the Laws of the State of New York of the United
States and shall for all purposes be governed by and construed
in accordance with the Laws of such State without regard to the
conflict of law rules thereof (other than Section 5-1401 of the
New York General Obligations Law).
Section 5.7 Entire Agreement. This Agreement, together
with any other agreement executed in connection herewith, is
intended by the parties as a final expression of their
agreement as to the matters covered hereby and is intended as a
complete and exclusive statement of the terms and conditions
thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Assignment and Assumption Agreement to be duly executed
and delivered by their officers thereunto duly authorized as of
the date first above written.
NRG ENERGY, INC.
By:/s/ David H. Peterson
Name: David H. Peterson
Title: President
NRGG FUNDING INC.
By: /s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: VP-CFO
Acknowledged and consented to:
THE CHASE MANHATTAN BANK,
as a Bank
By: /s/ Kevin P. O'Neill
Name: Kevin P. O'Neill
Title: Vice President
THE CHASE MANHATTAN BANK,
as Agent Bank
By: /s/ Kevin P. O'Neill
Name: Kevin P. O'Neill
Title: Vice President
THE CHASE MANHATTAN BANK,
as Collateral Agent
By: /s/ Annette M. Marsula
Name: Annette M. Marsula
Title: Assistant Vice President
<PAGE>
Acknolwedged and consented to:
THE BANK OF NEW YORK
By: /s/ John N. Wyatt
Name: John N. Wyatt
Title: Vice President
NATEXIS BANQUE
By: /s/ D.J.R. Osten
Name: D.J.R. Osten
Title: First VP
THE SUMITOMO TRUST AND BANKING COMPANY, LTD.
By: /s/ Suraj P. Bhatia
Name: Suraj P. Bhatia
Title: Senior Vice President
<PAGE>
Exhibit A to
Assignment and Assumption Agreement
FORM OF OPINION OF COUNSEL TO NRGG FUNDING
1. NRGG Funding Inc. (the "Company") is a
corporation duly organized and validly existing under the laws
of the State of Delaware and is qualified to do business in
each jurisdiction in which such qualification is required.
2. The Company has the corporate or other applicable
power and authority and full legal right to execute and deliver
each of the NRGG Documents to which it is a party and to
perform its obligations thereunder.
3. The execution, delivery and performance by the
Company of each NRGG Document to which it is a party have been
duly authorized by all requisite action on the part of the
Company.
4. Each of the NRGG Documents to which the Company
is a party has been duly executed and delivered by the Company.
5. Neither the execution and delivery by the Company
of each NRGG Document to which it is a party, nor the
performance by it of its obligations under each such NRGG
Document, contravenes or conflicts with (i) its Certificate of
Incorporation, or other applicable constituent documents, as
the case may be, (ii) any agreement or instrument (including,
without limitation, each other NRGG Document) to which it is a
party or by which its properties or assets are bound and (iii)
any judicial or administrative judgment, injunction, order or
decree that is binding upon it or its properties or assets.
6. No order, consent, approval, license,
authorization or validation of, or filing, recording or
registration with, or exemption by, any court, governmental
body or authority, or any subdivision thereof, is required to
authorize or is required in connection with the execution and
delivery by the Company of any NRGG Document to which it is a
party, or in connection with the performance of its obligations
thereunder or the consummation of the transactions contemplated
thereby other than those that have been obtained or made and
are in full force and effect or will be obtained or made prior
to the time the same is required and thereafter remains in full
force and effect.
7. Each of the NRGG Documents to which the Company
is a party constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms.
<PAGE>
8. Neither the execution, delivery and performance
by the Company of each of the NRGG Documents to which it is
party, nor the consummation by the Company of the transactions
contemplated therein, violates any Applicable Laws.
9. All Government Approvals which under Applicable
Laws are required to be obtained or made by the Company in
connection with the due execution and delivery of, or
performance by the Company of its obligations under, each of
the NRGG Documents to which it is party have been obtained or
made.
This opinion may be relied upon by the Banks,
the Agent Bank, the Collateral Agent and any assignees of
or participants in the interests of the Banks under the
Credit Agreement.
<PAGE>
Exhibit B to
Assignment and Assumption Agreement
FORM OF OPINION OF COUNSEL TO NRG ENERGY
1. NRG Energy, Inc. (the "Company") is a corporation
duly organized and validly existing under the laws of the State
of Delaware and is qualified to do business in each
jurisdiction in which such qualification is required.
2. The Company has the corporate or other applicable
power and authority and full legal right to execute and deliver
each of the NRGG Documents to which it is a party and to
perform its obligations thereunder.
3. The execution, delivery and performance by the
Company of each NRGG Document to which it is a party have been
duly authorized by all requisite action on the part of the
Company.
4. Each of the NRGG Documents to which the Company
is a party has been duly executed and delivered by the Company.
5. Neither the execution and delivery by the Company
of each NRGG Document to which it is a party, nor the
performance by it of its obligations under each such NRGG
Document, contravenes or conflicts with (i) its Certificate of
Incorporation, or other applicable constituent documents, as
the case may be, (ii) any agreement or instrument (including,
without limitation, each other NRGG Document) to which it is a
party or by which its properties or assets are bound and (iii)
any judicial or administrative judgment, injunction, order or
decree that is binding upon it or its properties or assets.
6. No order, consent, approval, license,
authorization or validation of, or filing, recording or
registration with, or exemption by, any court, governmental
body or authority, or any subdivision thereof, is required to
authorize or is required in connection with the execution and
delivery by the Company of any NRGG Document to which it is a
party, or in connection with the performance of its obligations
thereunder or the consummation of the transactions contemplated
thereby other than those that have been obtained or made and
are in full force and effect or will be obtained or made prior
to the time the same is required and thereafter remains in full
force and effect.
7. Each of the NRGG Documents to which the Company
is a party constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms.
<PAGE>
8. Neither the execution, delivery and performance
by the Company of each of the NRGG Documents to which it is
party, nor the consummation by the Company of the transactions
contemplated therein, violates any Applicable Laws.
9. All Government Approvals which under Applicable
Laws are required to be obtained or made by the Company in
connection with the due execution and delivery of, or
performance by the Company of its obligations under, each of
the NRGG Documents to which it is party have been obtained or
made.
This opinion may be relied upon by the Banks, the
Agent Bank, the Collateral Agent and any assignees of or
participants in the interests of the Banks under the Credit
Agreement.
<PAGE>
Exhibit 10.27.4
EQUITY COMMITMENT GUARANTY
This EQUITY COMMITMENT GUARANTY (this "Guaranty" or this
"Agreement"), dated as of December 10, 1997, by NRG ENERGY, INC., a
Delaware corporation ("Guarantor"), in favor of NRG (MORRIS) COGEN, LLC
(the "Borrower") and THE CHASE MANHATTAN BANK, as collateral agent for
the Banks (as defined below) (in such capacity, the "Collateral Agent")
under the Construction and Term Loan Agreement, dated as of September
15, 1997 (the "Credit Agreement"), among the Borrower, the Collateral
Agent, the banks party thereto (the "Banks") and The Chase Manhattan
Bank, as agent for the Banks (in such capacity, the "Agent Bank").
RECITALS
A. As a condition precedent to the Agent Bank, the Collateral Agent
and the Banks entering into the Credit Agreement and the Banks making
the Loans and extending other credit to the Borrower thereunder,
Guarantor executed an Equity Commitment Agreement, dated as of
September 15, 1997 (the "Equity Commitment Agreement"), in favor of the
Borrower and the Collateral Agent.
B. Pursuant to that certain Membership Interest Purchase Agreement,
dated as of the date hereof, Guarantor is selling all of its membership
interests in the Borrower to NRGG Funding Inc. ("NRGG Funding").
C. Pursuant to an Assignment and Assumption Agreement, dated as of
the date hereof (the "Assignment and Assumption Agreement"), between
Guarantor and NRGG Funding, NRGG Funding is assuming all of Guarantor's
obligations under the Equity Commitment Agreement.
D. Guarantor owns 45% of the outstanding shares of capital stock of
NRG Generating and NRG Generating owns 100% of the outstanding shares
of capital stock of NRGG Funding.
E. It is a condition to the Banks' willingness to continue to make
Loans and extend other credit to the Borrower under the Credit
Agreement that Guarantor enter into this Agreement.
<PAGE>
F. Guarantor acknowledges that it will obtain substantial benefit if
the Banks continue to make Loans and extend other credit to the
Borrower under the Credit Agreement.
G. The obligations of Guarantor hereunder are being incurred
concurrently with the assumption by NRGG Funding of Guarantor's
obligations under the Equity Commitment Agreement pursuant to the
Assignment and Assumption Agreement.
H. Capitalized terms used but not otherwise defined herein shall have
the respective meanings given them in the Equity Commitment Agreement
(including terms incorporated therein from the Credit Agreement).
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above
and other good and valuable consideration, receipt of which is hereby
acknowledged, Guarantor hereby agrees as follows:
1. Guaranty by Guarantor of NRGG Funding Obligation. Guarantor
unconditionally and irrevocably guarantees payment to the Borrower and
to the Collateral Agent, for the benefit of the Agent Bank and the
Banks, when due of any and all amounts payable by NRGG Funding to the
Borrower from time to time pursuant to Sections 1 and 2 of the Equity
Commitment Agreement and performance in full of all of NRGG Funding's
obligations under Sections 1 and 2 of the Equity Commitment Agreement.
2. Additional Provisions to Guarantor Obligations.
(a) In addition to the obligations under Section 1 of this Agreement,
Guarantor agrees to pay upon demand all fees and expenses incurred by
the Collateral Agent and the Borrower in successfully enforcing against
Guarantor any of its obligations and liabilities hereunder or the terms
hereof, including, without limitation, reasonable fees and expenses of
legal counsel. Guarantor waives notice of acceptance of this Agreement
and of any obligation to which it applies or may apply under the terms
hereof, and waives diligence, presentment, demand of payment, notice of
dishonor or non-payment, protest, notice of protest, of any such
obligations, suit or taking other action by the Collateral Agent or the
Borrower against, and giving any notice of default or other notice
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<PAGE>
to, or making any demand on, any party liable thereon (including
Guarantor).
(b) Guarantor's obligation under this Agreement is an absolute,
unconditional, continuing and irrevocable guaranty of payment
and performance and is in no way conditioned on or contingent
upon any attempt to enforce in whole or in part NRGG
Funding's obligations to the Collateral Agent and the
Borrower under the Equity Commitment Agreement. If NRGG
Funding fails to pay or perform any liabilities or
obligations to the Collateral Agent or the Borrower under
Section 1 or 2 of the Equity Commitment Agreement as and when
they are due, Guarantor shall forthwith pay and perform such
liabilities or obligations, with any such payment to be made
in immediately available funds. Each failure by NRGG Funding
to pay or perform any liabilities or obligations arising
under Section 1 or 2 of the Equity Commitment Agreement shall
give rise to a separate cause of action hereunder, and
separate suits may be brought hereunder as each cause of
action arises.
(b) The Collateral Agent and the Borrower may, at any time and from
time to time without the consent of or notice to Guarantor, except
such notice as may be required by applicable Law which cannot be
waived, without incurring responsibility to Guarantor or impairing
or releasing the obligations of Guarantor hereunder, upon or without
any terms or conditions and in whole or in part, (i) exercise or
refrain from exercising any rights against NRGG Funding or others
(including Guarantor) or otherwise act or refrain from acting; (ii)
release any other guarantor from its obligations without obtaining
the consent of Guarantor and without affecting or impairing the
obligations of Guarantor hereunder; (iii) settle or compromise any
obligations hereby guaranteed and/or any obligations incurred
directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment
of any obligations which may be due to the Collateral Agent, the
Borrower or others; (iv) sell, exchange, release, surrender,
realize upon or otherwise deal with in any manner
or in any order any property by whomsoever pledged or mortgaged to
secure or howsoever securing the liabilities or obligations hereby
guaranteed or any liabilities or obligations incurred directly or
indirectly in respect thereof or hereof and/or any offset there
against; (v) apply any sums by
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<PAGE>
whomsoever paid or howsoever realized to any obligations of NRGG
Funding to the Collateral Agent or the Borrower regardless of what
obligations remain unpaid; (vi) consent to or waive any breach of, or
any act, omission or default under, the Equity Commitment Agreement or
otherwise amend, modify or supplement the Equity Commitment Agreement
or any of such other instruments or agreements; and/or (vii) act or
fail to act in any manner referred to in this Agreement which may
deprive Guarantor of its right, if any, to subrogation or reimbursement
against NRGG Funding or any other Person to recover full indemnity for
any payments made pursuant to this Agreement or of its right of
contribution against any other party.
(d) No invalidity, irregularity or unenforceability of the
obligations hereby guaranteed shall affect, impair or be a
defense to this Agreement.
(e) In the event that, notwithstanding the provisions of Section
2(b) hereof, this Agreement shall be deemed revocable in
accordance with applicable Law, then any such revocation
shall become effective only upon actual receipt by the
Collateral Agent and the Borrower of written notice of
revocation signed by Guarantor. No revocation or termination
hereof shall affect in any manner rights arising under this
Agreement with respect to obligations and liabilities
outstanding on the date of receipt by the Collateral Agent
and the Borrower of written notice of such revocation or
termination and the sole effect of any revocation and
termination hereof shall be to exclude from this Agreement
obligations and liabilities thereafter arising which are
unconnected with obligations and liabilities theretofore
arising or transactions theretofore entered into (Guarantor
shall remain liable for all obligations incurred hereunder
prior to such revocation or termination).
3. Representations and Warranties. Guarantor makes the
representations and warranties set forth below to the Borrower and to
the Collateral Agent, acting for its own benefit and for the benefit of
the other Secured Parties, which representations and warranties shall
survive the execution and delivery of this Agreement:
(a) Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware
and has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations
hereunder.
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<PAGE>
(b) Guarantor has taken all necessary corporate action to
authorize its execution and delivery of this Agreement and
the performance of its obligations hereunder.
(c) This Agreement has been duly executed and delivered by
Guarantor and constitutes the legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in
accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar Laws affecting creditors' rights
generally and subject to general equitable principles.
(d) All Governmental Approvals and actions necessary in
connection with the execution and delivery by Guarantor of
this Agreement and the performance of its obligations
hereunder have been obtained or performed and remain valid
and in full force and effect.
(e) The execution, delivery and performance of this Agreement, the
compliance by Guarantor with the provisions hereof and the consumma-
tion of the transactions contemplated hereby, will not (i) conflict
with or result in a breach or violation of any of the respective char-
ters or bylaws of Guarantor or any of its subsidiaries or any material
franchise or license of Guarantor or any of the terms or provisions
thereof, (ii) constitute a default or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the
obligation to create or impose) any Lien with respect to, any bond,
note, debenture or other evidence of Indebtedness or any indenture,
mortgage, deed of trust or other agreement or instrument to which
Guarantor or any of its subsidiaries is a party or by which it or any
of them is bound, or to which any properties of Guarantor or any of
its subsidiaries is or may be subject, (iii) contravene any order of
any court or Governmental Authority or body having jurisdiction over
Guarantor or any of its subsidiaries or any of their properties or
(iv) or conflict with any statute, rule or regulation or administra-
tive or court decree applicable to Guarantor or any of its subsid-
iaries or any of their respective properties, in the case of
clauses (ii), (iii) and (iv) which conflict, breach, violation,
default or contravention, singly or in the aggregate with each other
conflict, breach, violation, default or contravention, could
reasonably be expected to result in a Material Adverse Effect.
As used in this clause (e) and otherwise in this Agree-
5
<PAGE>
ment, the term "Material Adverse Effect" shall mean a material
adverse effect on either (A) the operations, business, financial
condition or property of Guarantor or any of its subsidiaries on a
consolidated basis or (B) the ability of Guarantor to perform in a
timely manner its obligations under this Agreement.
(f) There is no legislation, litigation, action, suit, proceeding
or investigation pending or (to the best of Guarantor's
knowledge after due inquiry) threatened against Guarantor
before or by any court, administrative agency, arbitrator or
Governmental Authority which if adversely determined
individually or in the aggregate, (i) could reasonably be
expected to result in a Material Adverse Effect or (ii)
questions the validity, binding effect or enforceability
hereof, any action taken or to be taken pursuant hereto or
any of the transactions contemplated hereby.
(g) All quarterly and annual financial statements heretofore
delivered by or in respect of Guarantor to the Collateral
Agent, the Agent Bank, the Banks or the Borrower are true,
correct and complete as of the dates referred to therein, do
not fail to disclose any material liabilities, whether direct
or contingent, fairly present the financial condition of
Guarantor as of the date thereof and are prepared in
accordance with GAAP.
(h) Guarantor possesses all franchises, certificates, licenses,
permits and other Governmental Approvals necessary for it to
own its properties, conduct its business and perform its
obligations under this Agreement.
(i) Guarantor is not an "investment company", or a company
"controlled" by an "investment company", within the meaning
of the ICA.
(j) Guarantor is a "subsidiary company" of a "holding company" as
those terms are defined in the Public Utility Holding Company
Act of 1935, as amended ("PUHCA"); however, Guarantor is
exempt from all provisions of PUHCA by virtue of Section
3(a)(2) thereof.
6
<PAGE>
4. Covenants: Guarantor agrees that:
(a) Guarantor shall 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
and will obtain any that may become necessary in the future.
(b) Guarantor shall 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.
(i) Annual Financial Statements. Guarantor shall deliver to
the Collateral Agent and the Borrower, within one
hundred twenty (120) days after the close of each fiscal
year of Guarantor, the consolidated and consolidating
balance sheets of Guarantor and its consolidated
Affiliates as at the end of such fiscal year and the
related consolidated and consolidating statements of
income, retained earnings and cash flows for such fiscal
year, in each case setting forth comparative figures for
the preceding fiscal year and certified, in the case of
the consolidated financial statements, by independent
certified public accountants of recognized national
standing in the United States.
(ii) Notice of Default or Litigation. Promptly, and in any
event within two (2) Business Days after an Authorized
Officer of Guarantor obtains knowledge thereof,
Guarantor shall give to the Collateral Agent and the
Borrower notice of the occurrence of any event or of any
litigation or governmental proceeding pending (a)
against Guarantor or any of its Affiliates which could
affect the business, operations, property, assets,
condition (financial or otherwise) or prospects of
Guarantor so as to materially and adversely affect the
ability of Guarantor to perform its obligations
hereunder or (b) with respect to this Agreement, which
event or pending proceeding is likely to materially and
adversely affect the business, operations, property,
assets, condition (financial or otherwise) or prospects
of Guarantor and its Affiliates taken as a whole.
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<PAGE>
(iii) Other Information. From time to time, Guarantor
shall provide to the Collateral Agent and the Borrower
such other information or documents (financial or
otherwise) regarding Guarantor as the Collateral Agent
or the Borrower may reasonably request and as may be
available to Guarantor without undue cost or effort.
5. Subrogation. Guarantor shall not exercise any rights which it may
acquire by way of subrogation under this Agreement, by any payment made
hereunder or otherwise, until all of the liabilities and obligations of
NRGG Funding to the Collateral Agent and the Borrower under the Equity
Commitment Agreement shall have indefeasibly been paid in full in cash
or cash equivalents. If any amount shall be paid to Guarantor on
account of such subrogation rights at any time when all such
liabilities and obligations shall not have been indefeasibly paid in
full in cash or cash equivalents, such amount shall be held in trust
for the benefit of the Collateral Agent and the Borrower and shall
forthwith be paid to the Collateral Agent or the Borrower, as
applicable, and applied to such liabilities and obligations, whether
matured or unmatured.
6. Successions or Assignments.
(a) This Agreement shall inure to the benefit of the respective
successors or assigns of the Collateral Agent and the
Borrower who shall have, to the extent of their interest, the
rights of the Collateral Agent and the Borrower hereunder.
(b) This Agreement is binding upon Guarantor and its successors
and assigns. Guarantor is not entitled to assign its
obligations hereunder to any other Person without the written
consent of the Collateral Agent and the Borrower, which may
be granted or withheld in the Collateral Agent's or the
Borrower's sole discretion (in the case of the Collateral
Agent, as directed by the Agent Bank, acting in accordance
with the Credit Agreement), and any purported assignment in
violation of this provision shall be void.
7. Waivers.
(a) No delay on the part of the Collateral Agent or the Borrower in
exercising any of its rights (including those hereunder) and no
partial or single
8
<PAGE>
exercise thereof and no action or non-action by the Collateral
Agent or the Borrower, with or without notice to Guarantor or anyone
else, shall constitute a waiver of any rights or shall affect or impair
this Agreement.
(b) Guarantor agrees that, if the Collateral Agent or the
Borrower bring any judicial proceedings in relation to any
such matter, Guarantor will not interpose any counterclaim or
setoff of any nature.
(c) If any amount payable by Guarantor hereunder is not paid as
and when due, then Guarantor authorizes the Collateral Agent
and the Borrower to proceed, without prior notice, by right
of set-off, counterclaim or otherwise, against any assets of
Guarantor that may at any time be in the possession of the
Collateral Agent or the Borrower or any branch or office
thereof, to the full extent of all amounts payable to the
Collateral Agent and the Borrower hereunder.
(d) Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the obligations of NRGG
Funding under Sections 1 and 2 of the Equity Commitment
Agreement and notice of or proof of reliance by the
Collateral Agent or the Borrower upon this Agreement.
(e) Guarantor waives diligence, presentment, protest, demand for
payment and notice of default to or upon NRGG Funding with
respect to the obligations under Sections 1 and 2 of the
Equity Commitment Agreement.
8. Interpretation. The Section headings in this Agreement are for
the convenience of reference only and shall not affect the meaning or
construction of any provision hereof.
9. Notices. All notices in connection with this Agreement shall be
given by notice in writing, hand-delivered or sent by facsimile
transmission, or by certified mail return-receipt requested (airmail,
if overseas), postage prepaid. All such notices shall be sent to the
appropriate telecopier number or address, as the case may be, set forth
below or to such other number or address as shall have been
subsequently specified by written notice to each other party hereto,
and shall be sent with copies, if any, as indicated below. All such
notices shall be effective upon receipt. The addresses for notice
shall be as follows:
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<PAGE>
(a) The address of Guarantor is:
NRG ENERGY, INC.
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attention: President
Telephone No.: (612) 373-5400
Telecopier No.: (612) 373-5430
With a copy to:
NRG ENERGY, INC.
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attention: General Counsel
(b) The address of the Collateral Agent is:
THE CHASE MANHATTAN BANK
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: A. Marsula, Assistant Vice President,
International Project Finance,
Global Trust Services
Telephone No.: (212) 946-7557
Telecopier No.: (212) 946-8177/8178
(c) The address of the Borrower is:
NRG (MORRIS) COGEN, LLC
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attention: President
Telephone No.: (612) 373-5400
Telecopier No.: (612) 373-5430
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<PAGE>
With a copy to:
NRG (MORRIS) COGEN, LLC
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attention: General Counsel
10. Amendments. Notwithstanding anything contained herein that may be
construed to the contrary, as between Guarantor, the Collateral Agent
and the Borrower, this Agreement may be amended only with the written
consent of the Collateral Agent, the Borrower and Guarantor, with the
Collateral Agent acting as directed by the Agent Bank (acting upon the
instructions of the Required Banks).
11. Jurisdiction; Governing Law.
(a) Any action or proceeding relating in any way to this
Agreement may be brought and enforced in the courts of the
State of New York. Any such process or summons in connection
with any such action or proceeding may be served by mailing a
copy thereof by certified or registered mail, or any
substantially similar form of mail, addressed to the
applicable party as provided for notices hereunder. By
execution and delivery of this Agreement, Guarantor
irrevocably agrees to designate, appoint and empower CT
Corporation System, with its offices as of the date hereof at
1633 Broadway, New York, New York 10019, to receive for an on
its behalf service of process in the State of New York and
further irrevocably consents to the service of process
outside the territorial jurisdiction of said courts by
mailing copies thereof in accordance with the immediately
preceding sentence. Guarantor represents and warrants that
it has taken, and will continue to take, all actions
necessary to retain CT Corporation System as its registered
agent for service of process in the State of New York for the
term hereof.
(b) This Agreement and the rights and obligations of the parties
hereto shall be governed by and construed in accordance with
the Laws of the State of New York without reference to
principles of conflict of laws (other than Section 5-1401 of
the New York General Obligations Law).
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<PAGE>
12. Integration of Terms. This Agreement contains the entire
agreement among the parties hereto relating to the subject matter
hereof and supersedes all oral statements and prior writings with
respect thereto.
13. Termination; Reinstatement of Guaranty.
(a) Subject to the provisions of Section 13(b) hereof, this
Agreement shall terminate following the payment in full of
all amounts due hereunder or under Sections 1 and 2 of the
Equity Commitment Agreement.
(b) Notwithstanding the provisions of Section 13(a) hereof, this
Agreement shall be reinstated if at any time following the
termination of this Agreement under Section 13(a) hereof, any
payment or performance by Guarantor under this Agreement or
NRGG Funding under Section 1 or 2 of the Equity Commitment
Agreement is rescinded or must otherwise be returned by the
Collateral Agent, the Borrower or any other Person upon the
insolvency, bankruptcy, reorganization, dissolution or
liquidation of NRG Generating or Guarantor and is so
rescinded or returned to the party or parties making such
payment or performance, all as though such payment had not
been made. Such period of reinstatement shall continue until
satisfaction of the conditions contained in, and shall
continue to be subject to, the provisions of this Section 13.
14. Waiver of Jury Trial. THE COLLATERAL AGENT (AND THE AGENT BANK
AND THE BANKS AS THIRD PARTY BENEFICIARIES HEREUNDER), THE BORROWER AND
GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE COLLATERAL AGENT, THE
BORROWER, GUARANTOR OR NRG GENERATING. THIS PROVISION IS MATERIAL
INDUCEMENT FOR THE COLLATERAL AGENT, THE BORROWER AND GUARANTOR TO
ENTER INTO THIS AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Equity Commitment
Guaranty to be duly executed and delivered as of the day and year first
written above.
NRG ENERGY, INC.
By:/s/ David H. Peterson
Name: David H. Peterson
Title: President & CEO
Acknowledged and Accepted:
THE CHASE MANHATTAN BANK,
as Collateral Agent
By: /s/ Annette M. Marsula
Name: Annette M. Marsula
Title: Assistant Vice President
NRG (MORRIS) COGEN, LLC
By: /s/ Craig Mataczynski
Name: Craig Mataczynski
Title: President
December 10, 1997 among Cogen, LLC and the banks ("Banks")
party to the Credit Agreement, dated as of September 15,
1997, among Cogen, LLC, the Banks and Chase.
<PAGE>
Exhibit 10.27.5
AMENDMENT AND CONSENT
AMENDMENT AND CONSENT, dated as of December 10, 1997
(this "Amendment and Consent"), among NRG (MORRIS) COGEN, LLC
(the "Borrower"), a Delaware corporation, and the banks party
to the Credit Agreement (as defined below) (the "Banks").
RECITALS
WHEREAS, the Borrower entered into that certain Construction
and Term Loan Agreement, dated as of September 15, 1997 (the
"Credit Agreement"), with the Banks, The Chase Manhattan Bank
as agent for the Banks (in such capacity, the "Agent Bank") and
The Chase Manhattan Bank as collateral agent for the Banks (in
such capacity, the "Collateral Agent"), to obtain funds to
finance the ownership, development, engineering, construction,
start-up, testing, operation and maintenance of an
approximately 117 MW gas fired cogeneration plant in Morris,
Illinois (the "Project"). Capitalized terms used but not
defined in this Amendment and Consent shall have the meanings
given to such terms in the Credit Agreement;
WHEREAS, pursuant to the Membership Interest Purchase
Agreement, dated as of the date hereof (the "Purchase
Agreement"), between NRG Energy and NRGG Funding Inc., a
Delaware corporation ("NRGG Funding"), NRG Energy is
transferring all of its equity interests in the Borrower to
NRGG Funding;
WHEREAS, the Borrower and the Banks would like to
amend the Credit Agreement as set forth herein to reflect the
transactions contemplated by the Purchase Agreement and the
documents executed in connection therewith;
NOW, THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Borrower and the
Banks hereby agree as follows:
Section 1. Amendments.
1.1. Section 1.1 of the Credit Agreement is
hereby amended by inserting the following definitions after the
definition of "Equity Commitment Agreement" therein:
"Equity Guarantee" shall mean the Equity
Commitment Guaranty, dated as of December 10, 1997, by NRG
Energy in favor of the Borrower and the Collateral Agent.
"Equity Guarantor" shall mean NRG Energy.
<PAGE>
1.2. Section 1.1 of the Credit Agreement is
hereby amended by inserting the following definition after the
definition of "NRG Morris Consent" therein:
"NRGG Funding" shall mean NRGG Funding Inc., a
Delaware corporation.
1.3. The definition of "Financing Documents" in
Section 1.1 of the Credit Agreement is hereby amended by
deleting " and" after the word "Consents" in the second line
thereof and replacing such deleted text with ","; and is hereby
further amended by inserting the words " and the Equity
Guarantee" after the words "Equity Commitment Agreements" in
the second line thereof.
1.4. The definition of "Pledge Agreement" in
Section 1.1 of the Credit Agreement is hereby amended by
deleting the current definition in its entirety and replacing
such deleted provision with the following:
"Pledge Agreement" shall mean the Pledge and Security
Agreement, dated as of December 10, 1997, among NRGG
Funding, NRG MI and the Collateral Agent.
1.4. Section 3.2(a) of the Credit Agreement is
hereby amended by inserting " the Equity Guarantor," after "any
Equity Contributor," in the tenth line thereof.
1.5. Section 8.1(f) of the Credit Agreement is
hereby amended by deleting " or" in the second line thereof and
replacing such deleted text with ","; and is hereby further
amended by inserting " or the Equity Guarantor if it has
continuing obligations under the Equity Guarantee" at the end
of such Section.
Section 2. Consent. Each Bank hereby (a) consents
to the transactions contemplated in the Purchase Agreement and
(b) agrees that the transfer by NRG Energy of its membership
interests in the Borrower to NRGG Funding pursuant to the
Purchase Agreement constitutes a Permitted Transfer (as defined
in the Pledge and Security Agreement, dated as of September 15,
1997 (the "Original Pledge Agreement"), among NRG Energy, NRG
MI and the Collateral Agent) under Section 4.1(a) of the
Original Pledge Agreement.
Section 3. Amendments and Consent Limited Precisely
as Written; Ratification; References. The amendments and the
consent herein are limited precisely as written and shall not
be deemed to be a consent or waiver to, or modification of, any
other term or condition in the Credit Agreement or any of the
documents referred to herein or therein. Except as expressly
amended hereby, the Credit Agreement is ratified and confirmed
in all respects. On and after the date hereof, whenever the
Credit Agreement is referred to in any of the Transaction
Documents or in any of the other documents or
2
<PAGE>
papers to be executed and delivered in connection therewith or
with the Credit Agreement, such term shall be deemed to mean
the Credit Agreement as amended hereby.
Section 4. Governing Law. This Amendment and
Consent shall be construed in accordance with and shall be
governed by the Laws of the State of New York (without giving
effect to the principles thereof relating to conflicts of law
except Section 5-1401 of the New York General Obligations Law).
Section 5. Waiver of Jury Trial. EACH OF THE
BORROWER AND THE BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT OF
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR IN CONNECTION WITH THIS AMENDMENT AND CONSENT OR ANY
MATTER ARISING HEREUNDER.
Section 6. Headings Descriptive. The headings of
the several Sections of this Amendment and Consent are inserted
for convenience only and shall not in any way affect the
meaning or construction of any provision of this Amendment and
Consent.
Section 7. Counterparts. This Amendment and Consent
may be executed in one or more counterparts and when signed by
all parties listed below shall constitute a single binding
agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Amendment and Consent to be duly executed by their officers
thereunto duly authorized as of the day and year first written
above.
NRG (MORRIS) COGEN, LLC
By: /s/ Craig
Mataczynski
Name: Craig Mataczynski
Title: President
THE CHASE MANHATTAN BANK,
as a Bank
By: /s/ Kevin P. O'Neill
Name: Kevin P. O'Neill
Title: Vice President
<PAGE>
THE BANK OF NEW YORK
By: /s/ John N. Watt
Name: John N. Watt
Title: Vice President
NATEXIS BANQUE
By: /s/ D.J.R. Osten
Name: D.J.R. Osten
Title: First V.P.
THE SUMITOMO TRUST AND BANKING
COMPANY, LTD.
By: /s/ Suraj P. Bhatia
Name: Suraj P. Bhatia
Title: Senior Vice President
<PAGE>
Exhibit 10.27.6
CONSTRUCTION SERVICES CONTRACT
This Construction Services Contract (this "Contract") is made and
entered into as of the 29th day of August, 1997, by and between NRG
Energy, Inc. ("NRG") and NRG (Morris) Cogen, LLC ("Client"). Client
accepts performance of the work outlined under "Scope of NRG's
Services" in accordance with the attached General Terms and Conditions,
Construction Management Services Contract.
ARTICLE 1 - SCOPE OF NRG'S SERVICES
A. NRG shall furnish the construction management services set forth
on Attachment 1 (the "Work") to Client.
B. NRG's work shall be performed in connection with the construction
of a 118 MW natural gas fired electrical steam generating facility at
Millenium Petrochemical's Morris, Illinois plant ("Project").
ARTICLE 2 - NRG'S COMPENSATION
Client shall pay NRG for the Work as set forth on Attachment 2.
ARTICLE 3 - ACCEPTANCE
Client and NRG agree to accept the Scope of NRG's Services and NRG's
Compensation set forth above in accordance with the attached General
Terms and Conditions, Construction Management Services Contract.
Acceptance of this offer by ordering the start of the Work or otherwise
is limited to acceptance of the terms and conditions of this Contract.
Notwithstanding any additional terms that may be embodied in Client's
purchase order or acknowledgment issued in response to this offer, the
Work is performed only on the condition that Client assents to the
terms and conditions set forth herein and objection is made to any
varying or additional terms or conditions contained in Client's
purchase order or acknowledgment.
<PAGE>
NRG (MORRIS) COGEN, LLC NRG ENERGY, INC.
By: /s/ Craig Mataczynski
By: /s/ Ronald J. Will
Printed Name: Craig A. Mataczynski Printed Name: Ronald
J. Will
Title: Management Committee Title: Vice President
Operations
Representative
and Engineering
Date: 29 August, 1997 Date: August 29, 1997
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<PAGE>
GENERAL TERMS AND CONDITIONS
CONSTRUCTION MANAGEMENT SERVICES CONTRACT
INTRODUCTION: These general terms and conditions apply to the Work to
be performed by NRG as set forth on the face of this Contract and
generally apply to the services of one or more engineers or technicians
performing engineering and/or consulting services in or for the
Project.
SCOPE OF SERVICES: The scope of services to be performed under this
Contract shall be as set forth on the face of this Contract. Client
may add to or delete services from the scope of Work and the provisions
of this Contract shall apply to such changes. In the event of any such
change or any delay, change, or occurrence beyond the reasonable
control of NRG, NRG shall be entitled to an equitable adjustment of
compensation and schedule.
COMPENSATION, PAYMENT, AND AUDIT: Compensation for the Work shall be
as set forth on the face of this Contract. NRG shall invoice Client
monthly for the Work performed and Client shall pay such invoice in
full within ten (10) days after its receipt. For a period of one (1)
year following completion of the Work, Client, its auditor, or other
authorized representatives shall be afforded access at reasonable times
to NRG's accounting records relating to the Work in order to audit all
charges for the Work (except fixed mark-ups, fixed fees, lump sum
amounts, and NRG's standard rates).
CHARGES FOR THE WORK: Client shall reimburse NRG for all costs,
charges, expenses, taxes, fees, and losses not compensated by
insurance, which are incurred by NRG in the performance of the Work.
These shall include, but not be limited to:
1. Charges for time of all personnel employed by NRG in the
performance of the Work, plus a fixed mark-up of one hundred percent
(100%) of the time charges to cover Federal and State payroll taxes and
insurance, company benefit programs, overhead, and profit. This fixed
mark-up shall be subject to appropriate adjustment for any changes in
payroll taxes or insurance, or changes in company benefit programs.
2. Transportation, traveling, hotel, and living expenses, including
use of employees' personal cars at NRG's current standard rates. All
reasonable moving, relocation, travel, and living expenses incurred in
connection with assignment of NRG's permanent personnel to a location
other than NRG's permanent offices and from such location at the
conclusion of assignment.
3. Miscellaneous expenses, including but not limited to telegrams,
telex, telefacsimile, telephone services, postage, and similar
miscellaneous items incurred in connection with the Work (all at NRG's
current standard rates).
4. Reproduction costs of all drawings, manuals, specifications, and
other documents required for the Work; and costs for the use of
computer, all at NRG's current standard
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<PAGE>
rates or at actual cost to NRG if prepared by others.
5. Cost of any permits, fees, licenses, or royalties required for the
Work. Costs of any sales, use, or similar taxes or fees imposed by a
Federal, State, Municipal, or other government or agency thereof.
6. Fees, costs, damages, or disbursements incurred in connection with
any labor, patent, or commercial litigation or any third party claim,
suit, or cause of action, arising out of or in connection with the
performance of the Contract by NRG (except disputes between NRG and
Client), or claims, suits or causes of action pursued on behalf of
Client by NRG.
7. Premiums and brokerage fees on all bonds and insurance policies
which may be required by Client in addition to those listed herein, and
any loss under the deductible features of any insurance policies,
whether furnished by NRG or Client.
Notwithstanding the foregoing, or any estimates contained in Attachment
2, NRG agrees that its total compensation for Work, including the
Administrative Fee of $200,000, shall not exceed $1.2 million.
PROSECUTION OF THE WORK; FORCE MAJEURE: NRG shall substantially
complete the Work in accordance with the Project Schedule mutually
agreed upon between Client and NRG. Any completion dates specified are
tentative only and NRG shall have no liability to Client for late
completion. If the prosecution of the Work is delayed or affected by
any of the following force majeure occurrences: acts or failures to
act by Client, or any separate contractors, engineers, vendors, or
consultants employed by Client, or any other party not in privity of
contract with NRG; acts of God or the elements; acts or failures to act
by government or any agency thereof; changes, inaccuracies,
incompleteness, or differences in site conditions or any data or
information supplied to NRG; changes in laws or regulations; delays in
permitting; delays in receipt of engineering data or vendor drawings;
fire; unusually severe weather, natural disasters, or unavoidable
casualties; riot; civil disorders; labor shortages or disputes;
strikes, picketing, or arbitration proceedings; delays in
transportation, material, or equipment deliveries; material, equipment,
or fuel shortages; or any other causes beyond NRG's reasonable control,
the Project Schedule shall be extended for the period of time
attributable to such delay and all fixed elements of pricing, if any,
shall be equitably adjusted.
LIABILITY INSURANCE: During performance of this Contract, NRG shall
keep in force Worker's Compensation Insurance/Employer's Liability
Insurance for its employees with limits required by law; Comprehensive
or Commercial General Liability Insurance, with a $1,000,000 combined
occurrence and combined aggregate bodily injury and property damage
limit, and Automobile Liability Insurance, with a combined single limit
of $1,000,000.
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<PAGE>
WAIVER OF SUBROGATION: Client waives all rights and any subrogation
rights such as it or its insurers may have against NRG, its vendors and
subcontractors and their employees, agents, officers, directors, and
any of their affiliated or associated companies, for any losses or
damages, including without limitation loss of use and all consequential
damages thereof, to its existing plant or other property, including
without limitation property to be incorporated into the Project,
resulting from any and all risks and losses, however and whenever
arising, including without limitation those arising from risks of fire,
or other extended coverage or similar perils, business interruption,
transit damages or losses, vandalism and malicious mischief, or other
risks covered under a broad form All Risks Difference In Conditions
insurance policy. In the event that the constructor of the facilities
or Project is to carry insurance on the Project, Client agrees to
include a provision in its contract with the constructor requiring the
constructor to supply NRG with a written waiver of its rights of
recovery and its insurance carrier's right of subrogation as provided
above.
INDEMNITY: NRG agrees to indemnify and save Client harmless from any
loss, cost or expense claimed by third parties for property damage and
bodily injury including death, to the extent caused by the negligence
or willful misconduct of NRG, its agents, employees or NRG's affiliates
in connection with NRG's work hereunder. Client agrees to indemnify
and save NRG harmless from any loss, cost or expense claimed by third
parties for property damage and bodily injury, including death, to the
extent caused by the negligence or willful misconduct of Client, its
agents or employees in connection with NRG's work hereunder. If the
negligence or willful misconduct of both NRG and Client (or a person
identified above for whom each is liable) is the cause of such damage
or injury, the loss, cost or expense shall be shared between NRG and
Client in proportion to their relative degrees of negligence or willful
misconduct and the right of indemnity shall apply for such proportion.
LIMITED WARRANTY:
1. NRG warrants that the services performed under this Contract will
be in accordance with accepted professional standards and practices
existing as of the date that such services are performed. The sole and
exclusive remedy for breach of this warranty shall for NRG to re-
perform the item of defective Work, written notice of which is promptly
given by Client to NRG within a period of one (1) year from the date
that the defective work is performed under this Contract. All costs of
any re-performance shall be reimbursed by Client to NRG, but NRG shall
receive no additional profit thereon.
2. NRG shall not be responsible for the construction means, methods,
techniques, sequences, or procedures, or safety precautions (including
without limitation and by way of example, any duty imposed by any
occupational safety and health legislation), and programs incident
thereto; or for the acts or omissions of Client or any constructor of
the Project or any of the constructor's agents, employees, or
subcontractors; or for the acts or omissions of material or equipment
manufacturers or suppliers; or for the acts or omissions of any
engineer on the Project.
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<PAGE>
3. THERE ARE NO WARRANTIES OTHER THAN THE ABOVE, EITHER EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR PARTICULAR PURPOSE, APPLICALE TO NRG'S SERVICES OR THE
WORK UNDER OR OTHERWISE ARISING OUT OF THIS CONTRACT.
LIMITATION OF LIABILITY: Whether due to delay, breach of contract or
warranty, tort (including without limitation negligence), or any other
cause, neither NRG nor its vendors or subcontractors shall be liable
for any special, indirect, punitive, or consequential damages of any
nature, including without limitation loss of actual or anticipated
profits, revenues, or product, loss by reason of shutdown,
nonoperation, or increased expense of manufacturing or operation, or
any costs, labor, or materials required for reconstruction or repairs.
NRG's liability under or arising out of this Contract shall in no event
exceed the Administrative Fee of $200,000.
COMPLIANCE WITH LAWS:
1. NRG shall comply with all laws and regulations existing as of the
date of this Contract applicable to NRG in the performance of its
obligations under this Contract, including without limitation
applicable Federal, State, and local wage and hour laws and
regulations, and all other laws and regulations pertaining to employer-
employee relations.
2. NRG shall not have any responsibility or obligation in obtaining
approvals of governmental bodies or boards, but shall assist Client in
obtaining necessary permits or approvals. As it is recognized that
laws and regulations, including but not limited to those governing the
emissions of gases, odor, liquids, solids, and sounds, are or may be
changing from time to time, any modification of or addition to the
Project which may be required after the effective date of this Contract
in order to cause the Project to comply with any applicable law or
regulation pertaining to the control or emission of gases, odor,
liquids, solids, or sounds shall be considered a change in the Work and
the applicable adjustment therefor shall be accomplished.
GOVERNING LAW: The terms of this Contract shall be construed and
interpreted under, and all respective rights and duties of the parties
shall be governed by, the laws of the State of Minnesota.
TERM; TERMINATION: This Agreement shall continue in force through the
commercial operations and final acceptance of the Project.
Notwithstanding the foregoing, this Agreement may be terminated in the
event of a material breach if the breaching party fails to cure such
breach within thirty (30) days of receipt of written notice thereof
from the other party. Upon termination, NRG will promptly turn over to
Client all specifications, requisitions, construction instructions, and
all other documents, whether in final form or not, which were prepared
by NRG while performing the Work pursuant to this Contract. Client
shall thereafter assume all obligations, commitments, or other
liabilities that NRG shall have
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<PAGE>
theretofore incurred or made in connection with its performance of the
Work and for which NRG has not been paid and released.
RELATIONSHIPS TO OTHERS: This Contract shall be binding upon and inure
to the benefit of the respective successors, executors, administrators,
and assigns of Client and NRG. NRG may subcontract a portion of this
Contract or the Work to an affiliated or associated company of NRG. If
NRG makes any such subcontract, all liability protections, releases,
and disclaimers for the benefit of NRG under this Contract shall also
be for the benefit of said affiliated or associated company. Client
acknowledges and agrees that the obligations and liabilities of NRG, as
well as the limitation thereon, all as set forth in this Contract,
shall be applicable to NRG's associated or affiliated companies to the
same extent as if such associated or affiliated companies were a
signatory party to the Contract. Client further acknowledges and
agrees that such liabilities and obligations of, and remedies against,
NRG and its said associated or affiliated companies are sole and
exclusive, are in lieu of all other rights and remedies, whether in
contract, tort (including without limitation negligence), law or
equity, and in no event shall exceed, in the aggregate, NRG's liability
and obligations to and remedies of Client under or related to this
Contract.
SCOPE OF THE CONTRACT: All negotiations, proposals, and agreements
prior to the date of this Contract are merged herein and superseded
hereby, there being no agreements, warranties, liabilities (negligence
or otherwise), or understandings other than those written or specified
in this Contract. This Contract constitutes the entire agreement
between the parties. No obligation or covenant of good faith or fair
dealing shall be implied or interpreted as conferring upon either party
any right, duty, obligation, or benefit other than expressly set forth
in this Contract, notwithstanding the fact that certain of the terms
and conditions of this Contract may give either party discretion in the
manner of performance under this Contract. No changes, modifications,
or amendments to this Contract shall be valid unless agreed to by the
parties in writing and signed by their authorized officers. Client and
NRG represent that this Contract constitutes a bargained-for allocation
of the full risks of loss and damages related to the Contract and that
each party has relied on such provisions as being an effective and
enforceable expression of, and limitation on, the rights and duties of
the parties. Titles and headings used in this Contract are for ease of
reference only and shall not be considered in interpreting this
Contract. This Contract shall not be construed as granting any rights
to any third party based on the theory of third party beneficiary or
otherwise.
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<PAGE>
Exhibit 10.27.7
FIRST AMENDMENT
to
CONSTRUCTION SERVICES AGREEMENT
This FIRST AMENDMENT to CONSTRUCTION SERVICES AGREEMENT is entered into as of
December 10, 1997 by and between NRG (Morris) Cogen, LLC, a Delaware
limited liability company (the "Client") and NRG Energy, Inc. ("NRG").
WHEREAS, Client and NRG are parties to that certain Construction Services
Agreement dated as of August 29, 1997 (the "Construction Services
Agreement");
WHEREAS, Client and NRG wish to amend the Construction Services Agreement as
herein provided;
NOW, THEREFORE, Client and NRG hereby agree as follows:
1. Article 1 of the Construction Services Agreement shall be
amended by adding the following paragraph C to the end thereof:
C. Client shall have the right, upon 30 days written notice
documenting the basis for such action, to require NRG to remove for
cause the person selected as the Construction Manager from such
position, subject to NRG's rights to a 30-day cure period (but absent
such a cure, NRG will remove such person from such position following
such a request by Client). As soon as practical after any such
removal, NRG shall appoint a new Construction Manager, after first
obtaining Client's consent to such new appointment which consent shall
not be unreasonably withheld.
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision
of the Construction Services Agreement or any other agreement referred
to therein, or prejudice any right or rights which Client or NRG may
now have or may have in the future under or in connection with the
Construction Services Agreement. Except as expressly modified hereby,
the terms and provisions of the Construction Services Agreement shall
continue in full force and effect. All references to the Construction
Services Agreement shall hereafter be deemed to refer to the
Construction Services Agreement as modified hereby.
3. This Amendment may be executed in separate counterparts by
Client and NRG, each of which when so executed and delivered shall be
an original, but all of which shall constitute one and the same
instrument.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF MINNESOTA, BUT WITHOUT GIVING EFFECT TO.CONFLICTS
OF LAW PROVISIONS.
<PAGE>
IN WITNESS WHEREOF, Client and NRG have caused their duly
authorized representatives to execute and deliver this Amendment as of
the date first above written.
NRG (MORRIS) COGEN, LLC
By /s/ Craig Mataczynski
Name: Craig Mataczynski
Title: President
NRG ENERGY, INC.
By /s/ David H. Peterson
Name: David H. Peterson
Title: President & CEO
<PAGE>
Exhibit 10.27.8
Execution Version
CONSTRUCTION AND TERM LOAN AGREEMENT
dated as of September 15, 1997
among
NRG (MORRIS) COGEN, LLC,
as Borrower
THE BANKS, as herein defined
THE CHASE MANHATTAN BANK,
as Agent Bank
and
THE CHASE MANHATTAN BANK,
as Collateral Agent
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION 1
Section 1.1 . Definitions 1
Section 1.2. Accounting Terms and Determinations 29
Section 1.3. Types of Loans 30
Section I.4. Certain Principles of Interpretation 30
ARTICLE II. AMOUNT AND TERMS OF CREDIT FACILITIES 31
Section 2.1. Construction Loans 31
Section 2.2. Letters of Credit 32
Section 2.3. Term Loans 35
Section 2.4. Notice of Borrowing 36
Section 2.5. Disbursement of Funds 37
Section 2.6. Notes 39
Section 2.7. Interest 39
Section 2.8. Interest Periods 41
Section 2.9. Minimum Amount and Maximum Number of
LIBOR Rate Loans 42
Section 2.10. Conversion or Continuation 42
Section 2.11. Reduction of Commitments 43
Section 2.12. Optional Prepayments 43
Section 2.13. Mandatory Prepayments 43
Section 2.14. Method and Place of Payment 45
Section 2.15. Fees 45
Section 2.16. Interest Rate Unascertainable; Increased Costs;
Illegality 46
Section 2.17. Funding Losses 48
Section 2.18. Increased Capital 49
Section 2.19. Taxes 49
Section 2.20. Notice of Increased Amounts 51
Section 2.21. Use of Proceeds 51
Section 2.22. Sharing of Payments, Etc. 51
ARTICLE III. CONDITIONS PRECEDENT 52
Section 3.1. Conditions Precedent to Initial Construction Loans 52
Section 3.2. Conditions Precedent to the Making of All Loans and
Issuance of Letters of Credit 60
Section 3.3. Conditions Precedent to Conversion to Term Loans 62
Section 3.4. Conditions; General Principles 65
ARTICLE IV. REPRESENTATIONS AND WARRANTIES 65
Section 4.1. Status; Power and Authority; Due Authorization;
Enforceability 66
Section 4.2. No Violation 67
Section 4.3. Litigation 67
Section 4.4. Financial Statements; Financial Condition; Etc 67
Section 4.5. Material Adverse Change 67
Section 4.6. Use of Proceeds; Margin Regulations 67
Section 4.7. Governmental Approvals 67
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Section 4.8. Compliance with Applicable Laws 68
Section 4.9. Sole Purpose Nature; Business 68
Section 4.10. Collateral 69
Section 4.11. Security Interests and Liens 69
Section 4.12. Patents, Trademarks, Etc. 69
Section 4.13. Investment Company Act; Public Utility Holding
Company Act 69
Section 4.14. Governmental Regulation 69
Section 4.15. Sufficient Rights 70
Section 4.16. Property Rights, Utilities, Etc. 70
Section 4.17. No Defaults 70
Section 4.18. Payment of Taxes 71
Section 4.19. ERISA 71
Section 4.20. Transaction Documents 71
Section 4.21. True and Complete Disclosure; Assumptions 71
Section 4.22. Ownership and Related Matters 72
Section 4.23. Environmental Matters 72
Section 4.24. Other Filings 73
Section 4.25. Qualifying Facility Status 73
Section 4.26. Subsidiaries, Etc. 73
ARTICLE V. AFFIRMATIVE COVENANTS 73
Section 5.1. Information Covenants 73
Section 5.2. Maintenance of Existence 76
Section 5.3. Books, Records and Inspections 76
Section 5.4. Taxes and Claims 77
Section 5.5. Governmental Approvals 77
Section 5.7. Insurance 77
Section 5.8. Mobilization Budget; Operating Budget; Major
Maintenance Budget; Spare Parts List; Heat Rate 78
Section 5.9. Project Implementation 81
Section 5.10. Further Assurances 81
Section 5.11. Use of Proceeds 82
Section 5.12. Title 82
Section 5.13. Project Documents 82
Section 5.14. Qualifying Facility Status 82
Section 5.15. Application of Revenues 82
Section 5.16. Interest Rate Protection Agreements 82
Section 5.17. Long Term Service Agreement 82
Section 5.18. RO EPC Contract 83
Section 5.19. Payment 83
Section 5.20. ERISA 83
Section 5.21. Punch List 83
Section 5.22. Operator Termination 83
Section 5.23. Minor Punch List Items 84
Section 5.24. Gas Agreement 84
Section 5.25. Millennium Letter of Credit 84
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ARTICLE VI. NEGATIVE COVENANTS 84
Section 6.1. Distributions 84
Section 6.2. Indebtedness 84
Section 6.3. Liens 86
Section 6.4. Restriction on Fundamental Changes 86
Section 6.5. Subsidiaries; Advances, Investments and Loans 87
Section 6.6. Arm's Length Transactions 87
Section 6.7. Sole Purpose Nature 87
Section 6.8. Certain Restrictions 87
Section 6.9. Sale of Assets 87
Section 6.10. Amendment of Project Documents 87
Section 6.11. Change Orders; Budgets 87
Section 6.12. Margin Regulations 88
Section 6.13. Additional Project Agreements 88
Section 6.14. Expenditures 88
Section 6.15. Amendments to Construction Schedule or Progress
Payment Schedule; Test Procedures 88
Section 6.16. Restricted Uses 89
Section 6.17. NGC Agreement 89
ARTICLE VII. ACCOUNTS AND CASH FLOWS 89
Section 7.1. Establishment and Maintenance of Project Accounts 89
Section 7.2 Permitted Investments 90
Section 7.3. Funding of the Construction Account 91
Section 7.4. Funding of the Revenue Account and Payment of
Operation and Maintenance Expenses 91
Section 7.5. Debt Payment Account 92
Section 7.7. Funding of the Maintenance Reserve Account 93
Section 7.8. Funding of the Debt Service Reserve Account 93
Section 7.8. Funding of the NGC Reserve Account 94
Section 7.9. Funding of the Distribution Retention Account;
Distributions 94
Section 7.10. Funding of the Proceeds Account; Application of
Proceeds 95
Section 7.11. Letter of Credit Account 100
Section 7.12. Event of Default 101
ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES 101
Section 8.1. Events of Default 101
Section 8.2. Rights and Remedies 104
Section 8.3. Application of Proceeds 105
ARTICLE IX. THE AGENT BANK 106
Section 9.1. Appointment 106
Section 9.2. Delegation of Duties 106
Section 9.3. Exculpatory Provisions 107
Section 9.4. Reliance by Agent Bank 107
Section 9.5. Notice of Default 107
Section 9.6. Non-Reliance on Agent Bank and Other Banks 108
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Section 9.7. Bank Indemnification 108
Section 9.8. Agent Bank in its Individual Capacity 109
Section 9.9. Successor Agent Bank 109
ARTICLE X. THE COLLATERAL AGENT 109
Section 10.1. Appointment 109
Section 10.2. Delegation of Duties 110
Section 10.3. Exculpatory Provisions 110
Section 10.4. Reliance by Collateral Agent 110
Section 10.5. Notice of Default 111
Section 10.6. Non-Reliance on Collateral Agent and Other Banks 111
Section 10.7. Bank Indemnification 112
Section 10.8. Collateral Agent in its Individual Capacity 112
Section 10.9. Successor Collateral Agent 112
Section 10.10. Administration of the Collateral 113
ARTICLE XI. MISCELLANEOUS 113
Section 11.1. Payment of Expenses and Indemnity 113
Section 11.2. Right of Set-off 116
Section 11.3. Notices 117
Section 11.4. Successors and Assigns; Participation; Assignments 117
Section 11.5. Amendments and Waivers 120
Section 11.6. No Waiver; Remedies Cumulative 121
Section 11.7. No Third Party Beneficiaries 121
Section 11.8. Counterparts 121
Section 11.9. Effectiveness 122
Section 11.10. Headings Descriptive 122
Section 11.11. Marshalling; Recapture 122
Section 11.12. Severability 122
Section 11.13. Survival 122
Section 11.14. Domicile of Loans 122
Section 11.15. Independence of Covenants 122
Section 11.16. Limitation of Liability 123
Section 11.17. Governing Law; Submission to Jurisdiction; Waiver
of Jury Trial 123
Section 11.18. Confidentiality 124
Section 11.19. Removal by Assignment of Banks 125
Section 11.20. Change of Lending Office 126
SCHEDULES
Schedule 1.1: Accounts
Schedule 1.1(A): Banks and Commitments
Schedule 1.1(B): Maintenance Reserve Amounts
Schedule 1.1(C): Site Description
Schedule 1.1(D): Sample Debt Service
Coverage Ratio and Excess Cash Flow
Calculations
Schedule 3.1(g)(i)(A): Filing Jurisdictions
Schedule 3.1(g)(i)(B): Results of Lien Searches
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Schedule 3.1(o): Governmental Approvals
Schedule 4.20: Material Contracts
Schedule 4.23: Environmental Matters
Schedule 5.7: Required Insurance
EXHIBITS
Exhibit A: Form of Consent and Agreement
Exhibit B: Form of Construction Note
Exhibit C: Form of Term Note
Exhibit D: Form of Notice of Borrowing
Exhibit E: Form of Request for Issuance
Exhibit F: Form of Notice of Conversion or
Continuation
Exhibit G: Form of Restoration Requisition
Exhibit H: Form of Independent Engineer's
Initial Drawing Certificate
Exhibit I: Form of Independent
Engineer's Subsequent Drawing Certificate
Exhibit J: Form of Independent Engineer's Conversion
Certificate
Exhibit K: Form of Transfer Supplement
Exhibit L: Form of Confidentiality Agreement
Exhibit M: Form of Disbursement Certificate
Exhibit N: Form of NGC Letter of Credit
Exhibit O: Form of Millennium Letter of Credit
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CONSTRUCTION AND TERM LOAN AGREEMENT, dated as
of September 15, 1997, among NRG (MORRIS) COGEN, LLC, a
Delaware limited liability company (the "Borrower"), the
Banks (as hereinafter defined), THE CHASE MANHATTAN BANK,
acting in its capacity as agent for the Banks (together
with its successors in such capacity, the "Agent Bank"),
and THE CHASE MANHATTAN BANK, acting in its capacity as
collateral agent for the Banks (together with its
successors in such capacity, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Borrower wishes to obtain funds to
finance the ownership, development, engineering, construction,
start-up, testing, operation and maintenance of the Project (as
hereinafter defined) in Grundy County, located at the Energy
Purchaser's (as hereinafter defined) Morris Plant (as
hereinafter defined) complex in the State of Illinois; and
WHEREAS, subject to and upon the terms and conditions
herein set forth, the Banks are willing to provide financing to
the Borrower as provided for herein;
NOW, THEREFORE, it is agreed:
ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION.
Section 1.1 . Definitions. As used herein, the
following terms shall have the meanings herein specified unless
the context otherwise requires.
"Acceptance" shall have the meaning provided in
Section 2.4 of the EPC Contract or in a similar provision of
the RO EPC Contract, as applicable.
"Acceptance Date" shall mean the first date on which
all of the conditions which must be satisfied in order to
achieve Acceptance shall have been satisfied.
"Additional Project Documents" shall mean any
contract, agreement, letter of intent, understanding or
instrument entered into by or on behalf of the Borrower after
the Closing Date in connection with the development,
construction, testing, operation, maintenance or repair of the
Project and/or the use of the Site, including, without
limitation, the RO EPC Contract, the Long Term Service
Agreement and the NGC Guarantee.
"Additional Project Party" shall mean each Person
(other than the Agent Bank, the Collateral Agent and the Banks)
party to an Additional Project Document.
<PAGE>
"Affiliate" shall mean, with respect to any Person,
any other Person directly or indirectly controlling (including
but not limited to all directors and officers of such Person),
controlled by or under direct or indirect common control with
such Person. A Person shall be deemed to "control" another
Person if such Person possesses, directly or indirectly, the
power to (i) vote fifteen percent (15%) or more of the
securities having ordinary voting power for the election of
directors of such other Person or (ii) direct or cause the
direction of the management and policies of such other Person,
whether through the ownership of voting securities, by contract
or otherwise.
"Agent Bank" shall have the meaning set forth in the
preamble hereof, and shall include any successor agent bank
appointed in accordance with Section 9.9.
"Agent Bank's Office" shall mean One Chase Manhattan
Plaza, New York, New York 10081, or such other office as the
Agent Bank may hereafter designate in writing as such to the
other parties hereto.
"Agreement" shall mean this Construction and Term
Loan Agreement.
"Ancillary Documents" shall mean, with respect to
each Additional Project Document, (i) each security instrument
(which may consist of an amendment to a Security Document)
necessary or desirable to grant to the Collateral Agent a first
priority perfected Lien in such Additional Project Document and
all property interests received by the Borrower in connection
therewith, (ii) all recorded financing statements and other
filings required to perfect such Liens, (iii) opinions of
counsel for the Borrower and the other parties to such
Additional Project Document, (iv) a Consent with respect to
such Additional Project Document from such other parties, (v)
formation documents and similar documents for such other
parties and (vi) evidence of the Borrower's and such other
parties' authorization of such Additional Project Document, all
of the items described in clauses (i) through (vi) immediately
above in form and substance reasonably satisfactory to the
Required Banks.
"Applicable Margin" shall mean:
(i) at all times with respect to the Base Rate Loans,
0.000%; and
(ii) with respect to the LIBOR Rate Loans, (a) 0.750%
from the Closing Date to but excluding the Conversion Date, (b)
1.000% from and including the Conversion Date to but excluding
the second anniversary thereof, (c) 1.125% from and including
the second anniversary of the Conversion Date to but excluding
the fourth anniversary thereof and (d) 1.250% from and
including the fourth anniversary of the Conversion Date to and
including the Final Maturity Date.
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<PAGE>
"Approved Restoration Plan" shall mean a plan
(including details as to budget, schedule and sources of funds)
submitted to and approved in writing by the Agent Bank (in
consultation with the Independent Engineer), which approval
shall not be unreasonably withheld or delayed, relating to the
rebuilding, repairing, restoring or replacing of the Project
upon damage to or destruction of, or upon condemnation or
appropriation or any similar event with respect to, all or a
portion of the Project.
"Asset Sale Proceeds" shall have the meaning provided
in Section 7.10(a)(v).
"Assignee" shall have the meaning provided in Section
11.4(c).
"Auditors" shall mean Price Waterhouse LLP or such
other firm of independent public accountants as the Borrower
may, with the prior written consent of the Agent Bank, from
time to time appoint as its auditors.
"Authorized Officer" shall mean, (i) with respect to
any Person that is a corporation or a limited liability
company, the president, any vice president, the treasurer, the
chief financial officer or, for any limited liability company,
the manager of such Person, (ii) with respect to any Person
that is a partnership, an Authorized Officer of a general
partner of such Person, or (iii) with respect to any Person,
such other representative of such Person that is approved by
the Agent Bank in writing. No Person shall be deemed to be an
Authorized Officer unless named on a certificate of incumbency
of such Person delivered to the Agent Bank on or after the
Closing Date.
"Bankruptcy Code" shall mean Title 11, Section 101 et
seq. of the United States Code titled "Bankruptcy", as amended
from time to time, and any successor statute thereto.
"Banks" shall mean the Persons listed on Schedule
1.1(A) and the Purchasing Banks which from time to time become
parties hereto in accordance with Section 11.4(d).
"Base Case Forecasts" shall mean the financial
projections relating to the operation of the Project which
satisfy the requirements of Section 3.1(t).
"Base Rate" shall mean, for any day, the higher of
(i) the rate of interest from time to time announced by the
Agent Bank at the Agent Bank's Office as its prime commercial
lending rate (which rate is not intended to be the lowest rate
of interest charged by the Agent Bank in connection with
extensions of credit to debtors) or (ii) the Federal Funds Rate
for such day plus 0.500% per annum.
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<PAGE>
"Base Rate Loans" shall mean Loans made and/or being
maintained at a rate of interest based upon the Base Rate.
"Borrower" shall have the meaning set forth in the
preamble hereof.
"Borrowing" shall mean the incurrence of one Type of
Loan on a given date (or resulting from conversions or
continuations on a given date), having, in the case of LIBOR
Rate Loans, the same Interest Period.
"Business Day" shall mean (i) for all purposes other
than as covered by clause (ii) below, any day that is not a
Saturday or a Sunday in the United States or a day on which
banking institutions chartered by the State of New York or the
United States are required or authorized by Law or other
government actions to be closed and (ii) with respect to all
notices and determinations in connection with, and payments of
principal of and interest on, LIBOR Rate Loans, any date which
is a Business Day described in clause (i) and which is also a
day for trading by and between banks for United States Dollar
deposits in the London interbank market.
"Capital Lease" shall mean any lease which in
accordance with GAAP is required to be capitalized on the
balance sheet of the Borrower, and for purposes of this
Agreement, the amount of obligations of the Borrower under any
Capital Lease shall be the amount so capitalized.
"Cash Flow" shall mean, for any period, the sum of
the following: (i) all cash paid to the Borrower during such
period in connection with the Energy Services Agreement; (ii)
all interest and investment earnings paid to the Borrower or
the Project Accounts during such period on amounts on deposit
in the Project Accounts; (iii) all cash paid to the Borrower
during such period under any insurance policy as business
interruption insurance proceeds; and (iv) all other cash paid
to the Borrower during such period; provided, however, that,
notwithstanding the foregoing, Cash Flow shall not include any
amounts received by the Borrower as Liquidated Performance
Damages, as Liquidated Delay Damages, as Loss Proceeds, as
Condemnation Proceeds, as Asset Sale Proceeds, as Other
Proceeds, as Loans, under any Interest Rate Protection
Agreement or as an Equity Contribution (including any Default
Equity Contribution).
"Change Orders" shall have the meaning provided in
Section 2.4 of the EPC Contract or in a similar provision of
the RO EPC Contract, as applicable.
"Chase" shall mean The Chase Manhattan Bank, a New
York banking corporation.
"Claim" shall have the meaning provided in Section
11.1(d).
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<PAGE>
"Closing Date" shall mean the date on which the
initial Construction Loans are advanced hereunder.
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any successor statute.
"Collateral" shall mean all property and interests in
property now owned or hereafter acquired by the Borrower,
including any property or interest in or upon which a Lien has
been or is purported to have been granted to the Collateral
Agent or any other Secured Party under any of the Security
Documents, including without limitation, the Mortgaged
Property.
"Collateral Agent" shall have the meaning set forth
in the preamble hereof, and shall include any successor
collateral agent appointed in accordance with Section 10.9.
"Collateral Agent's Office" shall mean 450 West 33rd
Street, 15th Floor, New York, New York 10001, or such other
office as the Collateral Agent may hereafter designate in
writing as such to the other parties hereto.
"Commercial Operation" shall have the meaning
provided in Section 1 of the Energy Services Agreement.
"Commercial Operation Date" shall mean the date on
which the Project shall have achieved Commercial Operation in
accordance with the terms of the Energy Services Agreement.
"Commitment Fee" shall have the meaning provided in
Section 2.15(a).
"Commitments" shall mean, the Construction Loan
Commitments, the Letter of Credit Commitments and the Term Loan
Commitments, each as in effect at the time to which such
reference relates.
"Condemnation Proceeds" shall have the meaning
provided in Section 7.10(a)(ii).
"Confidential Information" shall have the meaning
provided in each Confidentiality Agreement.
"Confidentiality Agreement" shall have the meaning
provided in Section 11.18.
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<PAGE>
"Consent" shall mean any of the Millennium Consent,
the Kiewit Indus trial Consent, the Kiewit Construction
Consent, the NRG Morris Consent, the NRG Energy Consent, the
NGC Consent or, with respect to any Additional Project
Document, a consent and agreement of each party to such
Additional Project Document (other than the Borrower),
substantially in the form of Exhibit A, with such modifications
as may be approved in writing by the Agent Bank.
"Construction Account" shall mean the account of such
name described on Schedule 1.1 established at the Collateral
Agent's Office, or any other account at the Collateral Agent's
Office designated by the Borrower with the consent of the
Collateral Agent to serve as the Construction Account.
"Construction Budget" shall mean a budget, in form
and substance satisfactory to the Agent Bank and certified as
true and correct by an Authorized Officer of the Borrower,
which sets forth all costs anticipated to be incurred for the
development, construction, start-up and testing of the Project
(including items set forth on the Progress Payment Schedule),
as the same may be modified from time to time in accordance
with Section 6.11.
"Construction Guarantor" shall mean Kiewit
Construction Company, a Delaware corporation.
"Construction Loan Commitment" shall mean at any
time, for any Bank, the amount set forth opposite such Bank's
name on Schedule 1.1(A) under the heading "Construction Loan
Commitment", as such amount may be reduced from time to time
pursuant to Section 2.11 and Section 11.4(d) or increased
pursuant to Section 11.4(c) in the case of an assignment
thereunder of Credit Exposure to such Bank from another Bank.
"Construction Loan Maturity Date" shall mean the
earliest to occur of (i) the Conversion Date, (ii) the Date
Certain and (iii) the date on which all outstanding Loans shall
have become due and payable pursuant to Section 8.2 .
"Construction Loans" shall have the meaning provided
in Section 2.1(a).
"Construction Schedule" shall have the meaning
provided in Section 2.4 of the EPC Contract or in a similar
provision of the RO EPC Contract, as applicable, each as the
same may be modified from time to time in accordance with
Section 6.15.
"Construction Note" shall mean a promissory note of
the Borrower dated the Closing Date in the form of Exhibit B.
"Contest" shall mean, with respect to any Tax, Lien
or claim, a contest pursued in good faith and by appropriate
proceedings diligently conducted, so long as (i)
6
<PAGE>
adequate reserves have been established with respect thereto in
accordance with GAAP, (ii) any Lien filed in connection
therewith shall have been removed from the record by the
bonding of such Lien by a reputable surety company satisfactory
to the Required Banks, or security satisfactory to the Required
Banks is otherwise provided to assure the discharge of the
obligation thereunder and of any additional charge, penalty or
expense arising from or incurred as a result of such contest,
(iii) if it becomes necessary to prevent the delivery of a tax
deed or other similar instrument conveying the Mortgaged
Property or any portion thereof because of non-payment of any
such Tax, Lien or claim being contested, then the Borrower
shall pay the same in sufficient time to prevent the delivery
of such tax deed or other similar instrument, (iv) the failure
to pay any such Tax, Lien or claim during the pendency of such
contest would not otherwise result in a material adverse effect
on the Person subject to any such Tax, Lien or claim and (v)
the Person subject to any such Tax, Lien or claim has no
knowledge of any actual or proposed additional deficiency or
additional assessment in connection therewith that is not
provided for in any of clauses (i) through (iv) immediately
above.
"Contingent Obligation" shall mean, with respect to
any Person, (i) any indemnity or similar obligation of such
Person under any agreement or instrument and (ii) any
obligation of such Person guaranteeing or intended to guarantee
any Indebtedness, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary
obligation or any property constituting direct or indirect
security therefor, (b) to advance or supply funds (1) for the
purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of
the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to
assure or hold harmless the owner of such primary obligation
against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of
business.
"Contractor Parent Company Guarantee" shall mean the
Contractor Parent Company Guarantee, dated July 10, 1997,
between the Construction Guarantor and the Borrower.
"Control Agreement" shall mean the Securities Account
Control Agreement, dated as of September 15, 1997, among the
Borrower, the Collateral Agent and The Chase Manhattan Bank as
Securities Intermediary.
"Controlled Group" means all members of a controlled
group of corporations and all trades and businesses (whether or
not incorporated) under common control
7
<PAGE>
that together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Conversion Date" shall mean the date, occurring on
or before the Construction Loan Maturity Date, on which all of
the conditions precedent to the making of the Term Loans set
forth in Section 3.2 and Section 3.3 are satisfied or waived by
the Banks and the Construction Loans then outstanding (after
giving effect to any prepayment made on such date) are
converted to Term Loans.
"Credit Exposure" shall have the meaning provided in
Section 11.4(b).
"Date Certain" shall mean the date which is twenty
(20) months from the Closing Date; provided that such date may
be extended at the written request of the Borrower and subject
to the prior written consent of each Bank.
"Date of Issuance" shall mean, with respect to any
Letter of Credit, the date on which such Letter of Credit is
issued for the account of the Borrower.
"Debt Payment Account" shall mean the account of such
name described on Schedule 1.1 established at the Collateral
Agent's Office, or any other account at the Collateral Agent's
Office designated by the Borrower with the consent of the
Collateral Agent to serve as the Debt Payment Account.
"Debt Service Coverage Ratio" shall mean, for any
period of four (4) consecutive fiscal quarters ending on a
Quarterly Date (provided that in the event that all or any part
of one or more of such fiscal quarters is prior to the
Acceptance Date, there shall be substituted for such fiscal
quarter or quarters, the Base Case Forecasts for an equal
number of fiscal quarters commencing immediately after such
Quarterly Date), the ratio of (i) (a) Cash Flow, minus (b) the
aggregate amount of Operation and Maintenance Expenses paid or
payable during such period (other than those funded by a
transfer from the Maintenance Reserve Account), minus (c) any
deposit into the Maintenance Reserve Account for such period,
to (ii) the sum of Mandatory Debt Service (after adjustment for
any net Interest Rate Protection Payments by or to the
Borrower) payable by the Borrower with respect to such period
and the aggregate amount of overdue Mandatory Debt Service
(after adjustment for any net Interest Rate Protection Payments
by or to the Borrower) from previous periods, all as determined
on a cash basis, but otherwise in accordance with GAAP;
provided that principal of the Term Loans due on the Final
Maturity Date will be excluded from any calculation of the Debt
Service Coverage Ratio. As an example and without limiting the
foregoing, a sample calculation of the Debt Service Coverage
Ratio is set forth on Schedule 1.1(D).
"Debt Service Reserve Account" shall mean the account
of such name described on Schedule 1.1 established at the
Collateral Agent's Office, or any other ac-
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<PAGE>
count at the Collateral Agent's Office designated by the
Borrower with the consent of the Collateral Agent to serve as
the Debt Service Reserve Account.
"Debt Service Reserve Letter of Credit" shall mean
any letter of credit in form and substance satisfactory to the
Agent Bank issued by a bank rated at least "A" by S&P and "A2"
by Moody's, credited to the Debt Service Reserve Account and
naming the Collateral Agent as beneficiary thereunder.
"Debt Service Reserve Required Balance" shall mean an
amount equal to the sum of the next two (2) quarterly principal
and interest payments coming due on the Loans.
"Default" shall mean any event, act or condition
which with notice or lapse of time, or both, would constitute
an Event of Default.
"Default Equity Contribution" shall have the meaning
given to such term in Section 2 of each Equity Commitment
Agreement.
"Default Equity Proceeds" shall mean the proceeds of
any Default Equity Contribution.
"Default Rate" shall have the meaning provided in
Section 2.7(c).
"Defaulted Amount" shall have the meaning provided in
Section 2.5(c).
"Defaulting Bank" shall have the meaning provided in
Section 2.5(c).
"Deferred Approvals" shall have the meaning provided
in Section 4.7.
"Development Fee" shall have the meaning provided in
clause (ii) of the definition of Project Costs.
"Disbursement Certificate" shall mean a certificate,
signed by an Authorized Officer of the Borrower, in the form of
Exhibit M.
"Distribution Conditions" shall have the meaning
provided in Section 7.9.
"Distribution Retention Account" shall mean the
account of such name described on Schedule 1.1 established at
the Collateral Agent's Office, or any other account at the
Collateral Agent's Office designated by the Borrower with the
consent of the Collateral Agent to serve as the Distribution
Retention Account.
"Distributions" shall have the meaning provided in
Section 6.1.
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<PAGE>
"Dollars" shall mean the lawful currency of the
United States.
"Domestic Lending Office" shall mean, with respect to
any Bank, the office designated to the Agent Bank and the
Borrower by such Bank from time to time as its Domestic Lending
Office.
"Energy Adjustment Payments" shall have the meaning
provided in Section 1 of the Energy Services Agreement.
"Energy Purchaser" shall mean Millennium
Petrochemicals Inc., a Virginia corporation.
"Energy Services Agreement" shall mean the Energy
Services Agreement, dated June 3, 1997, between the Borrower
and the Energy Purchaser, as amended by the Letter Agreement
and the Second Letter Agreement.
"Environmental Approvals" shall mean any Governmental
Approval required under any applicable Environmental Law.
"Environmental Claim" shall mean any written notice,
claim, demand or similar communication by any Person alleging
potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages,
personal injuries, fines or penalties) arising out of, based on
or resulting from (i) the presence, or release into the
environment, of any Material of Environmental Concern at any
location, whether or not owned by such Person or (ii)
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law or Environmental Approval.
"Environmental Laws" shall mean all Laws relating to
pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including
without limitation, Laws relating to emissions, discharges,
releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern.
"EPC Contract" shall mean the EPC Contract for an
Approximately 118 mW Cogeneration Plant in Aux Sable Township,
Grundy County, Illinois, dated as of July 7, 1997, between the
Borrower and the EPC Contractor.
"EPC Contractor" shall mean Kiewit Industrial, Co., a
Delaware corporation.
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<PAGE>
"Equipment Lease" shall mean the Equipment Lease
Agreement, dated June 3, 1997, between the Borrower and the
Energy Purchaser, as amended by Amendment No. 1 to Equipment
Lease, dated September 13, 1997, between the Borrower and the
Energy Purchaser.
"Equity Contribution" shall mean the proceeds
received by the Borrower pursuant to any Equity Commitment
Agreement,
"Equity Contributor" shall mean any Person (other
than the Borrower or the Collateral Agent) party to any Equity
Commitment Agreement.
"Equity Commitment Agreement" shall mean (i) the
Equity Commitment Agreement, dated as of September 15, 1997,
among NRG Energy, the Borrower and the Collateral Agent, and
(ii) any equity commitment agreement in form and substance
satisfactory to the Agent Bank entered into by any future
Equity Contributor.
"Equity Holder" shall mean any Person holding a
membership interest in the Borrower.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time. Section
references to ERISA are to ERISA as in effect at the date of
this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted
therefor.
"Event of Bankruptcy" shall mean, with respect to any
Person, the occurrence of any of the following events:
(i) the commencement by such Person of a
voluntary case concerning itself under the Bankruptcy Code
or similar Law;
(ii) an involuntary case is commenced
against such Person and the petition is not
controverted within ten (10) days, or is not
dismissed within sixty (60) days, after commencement
of the case;
(iii) a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of such
Person or such Person commences any other proceedings
under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or
liquidation or similar Law of any jurisdiction
whether now or hereafter in effect relating to such
Person or there is commenced against such Person any
such proceeding which remains undismissed for a
period of sixty (60) days;
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(iv) the entrance of any order of
relief or other order approving any such case or
proceeding involving such Person;
(v) such Person is adjudicated
insolvent or bankrupt;
(vi) such Person suffers any
appointment of any custodian or the like for it or
any substantial part of its property to continue
undischarged or unstayed for a period of sixty (60)
days;
(vii) such Person makes a general
assignment for the benefit of creditors;
(viii) such Person shall fail to pay,
or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become
due;
(ix) such Person shall by any act or
failure to act consent to, approve of or acquiesce in
any of the foregoing; or
(x) any partnership, corporate or
limited liability company action, as the case may be,
is taken by such Person for the purpose of effecting
any of the foregoing.
"Event of Condemnation" shall have the meaning
provided in Section 7.10(a)(ii).
"Event of Default" shall mean the occurrence of any
of the events described in Section 8.1.
"Event of Loss" shall have the meaning provided in
Section 7.10(a)(i).
"Excess Cash Flow" shall mean, for any period, the
excess of (i) (a) all Cash Flow for such period, plus (b) any
excess amount redeposited into the Revenue Account from the
other Project Accounts pursuant to Article VII, minus (ii) the
sum of (a) all Operation and Maintenance Expenses with respect
to such period which are not funded by a transfer from the
Maintenance Reserve Account, (b) Mandatory Secured Debt Service
(after adjustment for any net Interest Rate Protection Payments
by or to the Borrower) payable by the Borrower with respect to
such period, (c) the aggregate amount of overdue Mandatory
Secured Debt Service (after adjustment for any net Interest
Rate Protection Payments by or to the Borrower) from previous
periods, (d) Mandatory Unsecured Debt Service (after adjustment
for any net Interest Rate Protection Payments by or to the
Borrower) payable by the Borrower with respect to such period,
(e) the aggregate
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amount of overdue Mandatory Unsecured Debt Service (after
adjustment for any net Interest Rate Protection Payments by or
to the Borrower) from previous periods, (f) all deposits made
into the Maintenance Reserve Account, the Debt Service Reserve
Account and the NGC Reserve Account during such period and (g)
all other required payments and prepayment of obligations
during such period, all as determined on a cash basis, but
otherwise in accordance with GAAP. As an example and without
limiting the foregoing, a sample calculation of Excess Cash
Flow is set forth on Schedule 1.1(D).
"Expiration Date" shall mean the expiration date of
the relevant Letter of Credit as set forth therein.
"Federal Funds Rate" shall mean, for any day, the
rate per annum, rounded upwards, if necessary, to the nearest
1/100th of one percent (1%), equal to the weighted average of
the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers
on such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day; provided
that (i) if such day is not a Business Day, the Federal Funds
Rate for such day shall be the rate on such transactions on the
immediately preceding Business Day as so published on the next
succeeding Business Day and (ii) if no such rate is so
published on the next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to
the Agent Bank on such day on such transactions as determined
by the Agent Bank.
"Federal Reserve Board" shall mean the Board of
Governors of the Federal Reserve System as constituted from
time to time, or any successor thereto.
"Fees" shall mean all fees payable from time to time
pursuant to Section 2.15.
"Final Maturity Date" shall mean the earlier of (i)
the date which is five (5) years after the Conversion Date and
(ii) the date on which all outstanding Loans shall become due
and payable pursuant to Section 8.2.
"Financing Documents" shall mean the Loan Documents,
the Security Documents, the Consents and the Equity Commitment
Agreements.
"Force Majeure" shall mean any event or circumstance
that constitutes "force majeure" or an "uncontrollable
circumstance" under any Project Document.
"Forward Market Price" shall have the meaning given
to such term in Section 1.16 of the NGC Agreement.
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"Fuel Consultant" shall mean Reed Consulting Group or
any other Person from time to time appointed by the Agent Bank
(at the direction of the Required Banks) to act as fuel
consultant for the purposes of this Agreement and as notified
to the Borrower.
"Fuel Expenses" shall mean, for any period, the cost
of supply and transportation for all fuel delivered to the
Project.
"GAAP" shall mean generally accepted accounting
principles in the United States as in effect from time to time,
consistently applied.
"Gas Contracts" shall mean collectively, the NIGAS
Agreement, the NIGAS Letter Agreement and the NGC Agreement.
"Governmental Approval" shall mean any action, order,
authorization, consent, approval, license, lease, ruling,
permit, tariff, rate, certification, exemption, filing or
registration by or with any Governmental Authority.
"Governmental Authority" shall mean any United States
government, governmental department, commission, board, bureau,
agency, regulatory authority, instrumentality, judicial or
administrative body, federal, state or local, having
jurisdiction over the matter or matters in question.
"Ground Lease" shall mean the Ground Lease and
Easement Agreement, dated June 3, 1997, between the Borrower
and the Energy Purchaser, as amended by Amendment No. 1 to
Ground Lease and Easement Agreement, dated September 13, 1997,
between the Borrower and the Energy Purchaser.
"Guaranteed Heat Rate" shall have the meaning set
forth for such term in the Operation and Maintenance Agreement.
"Heat Rate Formula" shall have the meaning provided
in Section 5.8(f).
"ICA" shall mean the Investment Company Act of 1940,
as amended.
"Indebtedness" shall mean, with respect to any
Person, without duplication, (i) all obligations of such Person
for borrowed money or for the deferred purchase price of
property or services (other than trade payables on terms of
sixty (60) days or less incurred in the ordinary course of
business of such Person but only to the extent paid on such
terms), (ii) all obligations of such Person evidenced by a
note, bond, debenture or similar instrument, (iii) all
obligations of such Person under Capital Leases, (iv) the
stated amount of all letters of credit issued for the account
of such Person and, without duplication, all unreimbursed
amounts drawn thereunder, (v) all Indebtedness of any other
Person secured by any Lien on any property owned by such
Person, whether or not such
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<PAGE>
Indebtedness has been assumed, (vi) all obligations of such
Person under any Interest Rate Protection Agreement and any
currency swap or similar agreement and (vii) all Contingent
Obligations of such Person.
"Indemnitee" shall have the meaning provided in
Section 11.1(d).
"Independent Engineer" shall mean R.W. Beck, Inc. or
any other Person from time to time appointed by the Agent Bank
(at the direction of the Required Banks) to act as independent
engineer for the purposes of this Agreement and as notified to
the Borrower.
"Insurance Consultant" shall mean Aon Risk Services
or any other person from time to time appointed by the Agent
Bank (at the direction of the Required Banks) to act as
insurance consultant for the purposes of this Agreement and as
notified to the Borrower.
"Interest Period" shall have the meaning provided in
Section 2.8(a).
"Interest Rate Protection Agreement" shall mean any
interest rate ex change, collar, cap or similar agreement
providing interest rate protection entered into by the
Borrower.
"Interest Rate Protection Payment" shall mean any net
payment made in respect of any Interest Rate Protection
Agreement.
"Investment Grade Rating" shall mean a rating of "BBB-
" or higher from S&P or a rating of "Baa3" or higher from
Moody's.
"Issuing Bank" shall mean Chase, as a Bank and in its
capacity as issuer of the Letters of Credit, or such other Bank
as the Agent Bank may select from time to time.
"Kiewit Construction Consent" shall mean the Consent
and Agreement, dated as of September 15, 1997, between the
Construction Guarantor and the Collateral Agent.
"Kiewit Industrial Consent" shall mean the Consent
and Agreement, dated as of September 15, 1997, between the EPC
Contractor and the Collateral Agent.
"Law" shall mean, with respect to any Governmental
Authority, any constitutional provision, law, statute, rule,
regulation, ordinance, treaty, order, decree, judgment,
decision, certificate, holding, injunction, Governmental
Approval or requirement of such Governmental Authority along
with the interpretation and administration thereof by any
Governmental Authority charged with the interpretation or
administration
15
<PAGE>
thereof. Unless the context clearly requires otherwise, the
term "Law" shall include each of the foregoing (and each
provision thereof) as in effect at the time in question,
including any amendments, supplements, replacements or other
modifications thereto or thereof, and whether or not in effect
at the date of this Agreement.
"Letter Agreement" shall mean the letter agreement,
dated August 28, 1997, between the Borrower and the Energy
Purchaser.
"Letter of Credit" shall have the meaning provided in
Section 2.2(a).
"Letter of Credit Account" shall mean the account of
such name described on Schedule 1.1 established at the
Collateral Agent's Office and designated as the Letter of
Credit Account or any other account at the Collateral Agent's
Office designated by the Borrower with the consent of the
Collateral Agent to serve as the Letter of Credit Account.
"Letter of Credit Availability Date" shall have the
meaning provided in Section 2.2(a).
"Letter of Credit Commitment" shall mean at any time,
for any Bank, the amount set forth opposite such Bank's name on
Schedule 1.1(A) hereto under the heading "Letter of Credit
Commitment", as such amount may be reduced from time to time
pursuant to Section 2.11 or 11.4(d), or increased pursuant to
Section 11.4(c) in the case of an assignment thereunder of
Credit Exposure to such Bank from another Bank.
"Letter of Credit Fee" shall have the meaning
provided in Section 2.15(d).
"Letter of Credit Termination Date" shall mean the
Final Maturity Date.
"LIBOR" shall mean the London Interbank Offered Rate.
"LIBOR Rate" shall mean with respect to each day
during each Interest Period pertaining to any LIBOR Rate Loan,
the rate per annum equal to (i) the rate (rounded upwards to
the nearest 1/16th of one percent (1%)) for one, two, three or
six months (at the election of the Borrower) Dollar deposits as
it appears on the display designated as "Telerate British
Bankers Assoc. Interest Settlement Rates Page" on Telerate
System Incorporated, or such other page as may replace such
page on that service, at or about 11:00 a.m. London time, two
London Banking Days prior to the beginning of such Interest
Period for delivery on the first day of such Interest Period or
(ii) if such service is not available, the rate at which one,
two, three or six months (at the election of the Borrower)
Dollar deposits offered by the principal London office of the
Agent Bank at or about 11:00 a.m. London time in the London
interbank market two (2) London Banking Days prior to the
beginning of such Interest Period for delivery on the first day
of such
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<PAGE>
Interest Period in an aggregate amount comparable to the
principal amount of the relevant LIBOR Rate Loan.
"LIBOR Rate Lending Office" shall mean, with respect
to any Bank, the office designated to the Agent Bank and the
Borrower by such Bank from time to time as its LIBOR Rate
Lending Office.
"LIBOR Rate Loans" shall mean Loans made and/or being
maintained at a rate of interest based upon the LIBOR Rate.
"Lien" shall mean any mortgage, pledge,
hypothecation, assignment, mandatory deposit arrangement with
any party owning Indebtedness of the Borrower, encumbrance,
lien (statutory or other), or preference, priority or other
security agreement of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially
the same effect as any of the foregoing and the filing of any
financing statement or similar instrument under the Uniform
Commercial Code or comparable Law.
"Liquidated Damages" shall mean any Liquidated Delay
Damages or Liquidated Performance Damages.
"Liquidated Delay Damages" shall mean any amount
payable to or for the account of the Borrower under Section
12.1 of the EPC Contract or any other agreement as a result of
delayed delivery or performance with respect to the Project or
any goods or services supplied in connection with the Project.
"Liquidated Performance Damages" shall mean any
amount payable to or for the account of the Borrower under (i)
Section 12.2, 12.3, 12.4 or 12.5 of the EPC Contract, (ii)
Section 8.2 or 8.3 of the Operation and Maintenance Agreement,
(iii) Section 2 of the O&M Guarantee, (iv) a similar provision
of the RO EPC Contract or (v) any other agreement as a result
of failure, diminished performance or efficiency with respect
to the Project or any goods or services supplied in connection
with the Project.
"Loan Agreement Termination Date" shall mean the date
on which all of the Commitments have been terminated and the
Obligations (other than amounts in respect of indemnities
hereunder that are not then due) are indefeasibly paid in full.
"Loan Documents" shall mean this Agreement and the
Notes.
"Loans" shall mean the Construction Loans and/or the
Term Loans, as applicable.
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<PAGE>
"London Banking Days" shall mean (i) for all purposes
other than as covered by clause (ii) below, any day that is not
a Saturday or a Sunday in London, England or on which banking
institutions in London, England are required or authorized by
Law or other government actions to be closed and (ii) with
respect to all notices and determinations in connection with,
and payments of principal of and interest on, LIBOR Rate Loans,
any day which is a London Banking Day described in clause (i)
and which is also a day for trading by and between banks for
United States Dollar deposits in the London interbank market.
"Long-Term Service Agreement" shall mean the long
term service program to be entered into between the Borrower
and the Maintenance Contractor in accordance with Section 5.17
to provide for major maintenance to the Project's combustion
turbines.
"Loss Proceeds" shall have the meaning provided in
Section 7.10(a)(i).
"Maintenance Contractor" shall mean a third party
provider of gas turbine overhaul and service maintenance with
recognized industry experience and standing which is reasonably
acceptable to the Agent Bank (in consultation with the
Independent Engineer).
"Maintenance Reserve Account" shall mean the account
of such name described on Schedule 1.1 established at the
Collateral Agent's Office, or any other ac count at the
Collateral Agent's Office designated by the Borrower with the
consent of the Collateral Agent to serve as the Maintenance
Reserve Account.
"Maintenance Reserve Amount" shall mean, for any
calendar year, the amount set forth opposite such calendar year
on Schedule 1.1(B), as the same may be modified from time to
time with the prior written consent of the Agent Bank (in
consultation with the Independent Engineer), such consent not
to be unreasonably withheld.
"Major Maintenance Budget" shall have the meaning
provided in Section 5.8(b).
"Major Maintenance Expenses" shall mean all
expenditures by the Borrower on regularly scheduled (or
reasonably anticipated) maintenance of the Project in
accordance with good utility practice and vendor and supplier
requirements constituting major maintenance (including, without
limitation, teardowns, overhauls, capital improvements,
replacements and/or refurbishment of major components of the
Project).
"Make-up Amount" shall have the meaning provided in
Section 2.5(c).
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<PAGE>
"Mandatory Debt Service" shall mean Mandatory Secured
Debt Service and/or Mandatory Unsecured Debt Service, as
applicable.
"Mandatory Secured Debt Service" shall mean, without
duplication, all payments of principal, interest and other
amounts due with respect to the Loans and any other senior
secured Permitted Debt of the Borrower.
"Mandatory Unsecured Debt Service" shall mean,
without duplication, all payments of principal, interest and
other amounts due with respect to any senior unsecured
Permitted Debt of the Borrower.
"Margin Stock" shall have the meaning provided in
Regulation U and Regulation G.
"Material Adverse Effect" shall mean a material
adverse effect on one or more of the following: (i) the
operations, business, financial condition or property of the
Borrower; (ii) the ability of the Borrower to perform in a
timely manner its material obligations under the Transaction
Documents to which it is a party; (iii) the rights and
interests of the Banks, the Agent Bank and the Collateral Agent
under the Transaction Documents; or (iv) the value of the
Collateral or the validity or priority of the security
interests therein granted to the Collateral Agent.
"Materials of Environmental Concern" shall mean
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products.
"Millennium Consent" shall mean the Consent and
Agreement, dated as of September 15, 1997, between the Energy
Purchaser and the Collateral Agent.
"Minimum Performance Standards" shall have the
meaning provided in Section 2.4 of the EPC Contract.
"Minor Punch List Items" shall mean any Punch List
item which is not necessary for completion of the Performance
Tests or Acceptance and for which the Borrower has retained two
hundred percent (200%) of the cost thereof (as approved by the
Independent Engineer) as provided in Section 10.3 of the EPC
Contract.
"Monthly Progress Invoice" shall mean any monthly
progress invoice delivered to the Borrower by the EPC
Contractor pursuant to Section 5.2.2 of the EPC Contract.
"Moody's" shall mean Moody's Investors Services, Inc.
or any successor thereto which is a nationally recognized
rating agency.
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<PAGE>
"Morris Plant" shall have the meaning provided in
Section 1 of the Energy Services Agreement.
"Mortgage" shall mean the Leasehold Construction and
Term Mortgage, Security Agreement and Fixture Financing
Statement in the Aggregate Principal Amount of up to
$91,000,000, dated as of September 15, 1997, from the Borrower
to the Collateral Agent.
"Mortgaged Property" shall mean the property and
interests that the Mortgage purports to encumber.
"MW" shall mean megawatt.
"Necessary Project Approvals" shall have the meaning
provided in Section 4.7.
"NGC" shall mean Natural Gas Clearinghouse, a
Colorado general partnership.
"NGC Agreement" shall mean the Natural Gas Purchase
and Sale Agreement, dated as of September 12, 1997, by and
between the Borrower and NGC.
"NGC Consent" shall mean the Consent and Agreement,
dated as of September 15, 1997, between NGC and the Collateral
Agent.
"NGC Guarantee" shall mean the corporate guarantee by
NGC Corporation in favor of the Borrower required to be
provided by NGC on or before August 1, 1998 pursuant to Section
6.1(a) of the NGC Agreement.
"NGC Reserve Account" shall mean the account of such
name described on Schedule 1.1 established at the Collateral
Agent's Office, or any other account at the Collateral Agent's
Office designated by the Borrower with the consent of the
Collateral Agent to serve as the NGC Reserve Account.
"NGC Reserve Required Balance" shall have the meaning
provided in Section 7.8.
"NIGAS" shall mean the Northern Illinois Gas Company,
an Illinois corporation.
"NIGAS Agreement" shall mean the Agreement, dated as
of August 26, 1997, between the Borrower and NIGAS.
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<PAGE>
"NIGAS Letter Agreement" shall mean the Letter
Agreement, dated September 18, 1997, among the Collateral
Agent, the Borrower and NIGAS.
"Non-Defaulting Bank" shall have the meaning provided
in Section 2.5(c).
"Note" shall mean any Construction Note and/or any
Term Note, as applicable.
"Notice of Borrowing" shall mean a Notice of
Borrowing substantially in the form of Exhibit D.
"Notice of Conversion or Continuation" shall mean a
Notice of Conversion or Continuation in the form of Exhibit F.
"Notice to Proceed" shall have the meaning provided
in Section 2.4 of the EPC Contract.
"NRG Energy" shall mean NRG Energy, Inc., a Delaware
corporation.
"NRG Energy Consent" shall mean the Consent and
Agreement, dated as of September 15, 1997, between the O&M
Guarantor and the Collateral Agent.
"NRG Generating" shall mean NRG Generating (U.S.)
Inc., a Delaware corporation.
"NRG MI" shall mean NRG Morris Inc., a Delaware
corporation.
"NRG Morris Consent" shall mean the Consent and
Agreement, dated as of September 15, 1997, between the Operator
and the Collateral Agent.
"O&M Change Order" shall have the meaning provided
for the term "Change Order" in the Operation and Maintenance
Agreement.
"O&M Deliverable" shall mean any of the following:
(i) any safety plan developed pursuant to
Section 4.1.2 of the Operation and Maintenance Agreement;
(ii) any procedures for handling hazardous
substances developed pursuant to Section 4.1.3 of the
Operation and Maintenance Agreement;
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<PAGE>
(iii) any administrative procedures, reporting
procedures or other procedures developed pursuant to
Section 4.1.4 of the Operation and Maintenance Agreement;
or
(iv) any management plan developed pursuant to
Section 4.1.18 of the Operation and Maintenance Agreement.
"O&M Guarantee" shall mean the Limited Guaranty,
dated September 19, 1997, by the O&M Guarantor for the benefit
of the Borrower.
"O&M Guarantor" shall mean NRG Energy.
"Obligations" shall mean all obligations, liabilities
and Indebtedness of every nature of the Borrower from time to
time owing to any Secured Party under any Financing Document
including, without limitation, (i) all principal, interest and
fees, (ii) any amounts (including, without limitation,
insurance premiums, licensing fees, recording and filing fees
and taxes) which the Secured Parties expend on behalf of the
Borrower because the Borrower fails to make any such payment
when required under the terms of any Transaction Document,
(iii) all amounts required to be paid under any indemnification
or similar provision, (iv) all fees and expenses required to be
paid by or on behalf of the Borrower pursuant to Section 11.1
and similar sections of the other Financing Documents and (v)
any obligations under any Secured Interest Rate Protection
Agreement.
"Operating Budget" shall have the meaning provided in
Section 5.8(a).
"Operating Year" shall have the meaning provided for
such term in the Operation and Maintenance Agreement.
"Operation and Maintenance Account" shall mean the
account of such name described on Schedule 1.1 established at
the Collateral Agent's Office, or any other account at the
Collateral Agent's Office designated by the Borrower with the
consent of the Collateral Agent to serve as the Operation and
Maintenance Account.
"Operation and Maintenance Agreement" shall mean the
Operation and Maintenance Agreement, dated September 19, 1997,
between the Borrower and the Operator.
"Operation and Maintenance Expenses" shall mean, for
any period, the sum without duplication of (i) payments due
under the Operation and Maintenance Agreement, (ii) Fuel
Expenses, (iii) reasonable and necessary insurance costs, (iv)
property, sales and franchise taxes (other than taxes imposed
on or measured by income or receipts) to which the Project may
be subject (or payments in lieu of such taxes to which the
Project may be subject), (v) reasonable and necessary costs and
fees incurred in connection with
22
<PAGE>
obtaining and maintaining in effect the Necessary Project
Approvals (including the Deferred Approvals), (vi) reasonable
and necessary legal, accounting and other professional fees
incurred in connection with any of the foregoing items, (vii)
the reasonable costs of administration and enforcement of the
Transaction Documents and (viii) any other expenses approved in
writing by the Required Banks (it being understood that the
reasonableness and necessity of all such expenses shall be
determined by the Required Banks after consultation with the
Independent Engineer and the Insurance Consultant or the
Banks', the Agent Bank's or the Collateral Agent's other
advisors or counsel, as appropriate). In no event shall
Project Costs be considered Operation and Maintenance Expenses.
"Operator" shall mean NRG Morris Operations Inc., a
Delaware corporation.
"Other Proceeds" shall have the meaning provided in
Section 7.10(a)(vi).
"Participant" shall have the meaning provided in
Section 11.4(b).
"Payment Date" shall mean the last Business Day of
any calendar month.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation established under ERISA, or any successor thereto.
"Performance Tests" shall have the meaning provided
in Section 2.4 of the EPC Contract.
"Permitted Debt" shall have the meaning provided in
Section 6.2.
"Permitted Investments" shall mean any of the
following: (i) marketable direct obligations of the United
States; (ii) marketable obligations directly and fully
guaranteed as to interest and principal by the United States;
(iii) demand deposits with the Collateral Agent and time
deposits, certificates of deposit and banker's acceptances
issued by any member bank of the Federal Reserve System which
is organized under the Laws of the United States or any state
thereof or any United States branch of a foreign bank; (iv)
commercial paper or tax-exempt obligations given the highest
rating by each of S&P and Moody's; (v) obligations of the
Collateral Agent or any bank described in clause (iii)
immediately above in respect of the repurchase of obligations
of the type as described in clauses (i) and (ii) immediately
above, provided that such repurchase obligations shall be fully
secured by obligations of the type described in said clauses
(i) and (ii) and the possession of such obligations shall be
owned by the Collateral Agent; (vi) instruments issued by
investment companies having a portfolio consisting ninety-five
percent (95%) or more of obligations of the type described in
clauses (i), (ii) and (v) immediately above and
23
<PAGE>
having a maturity of ninety (90) days or less; and (vii)
eurodollar certificates of deposit issued by the Collateral
Agent or any bank described in clause (iii) above.
"Permitted Liens" shall have the meaning provided in
Section 6.3.
"Person" shall mean any individual, partnership,
joint venture, firm, limited liability company, corporation,
association, trust or other enterprise or any Governmental
Authority.
"Petrochemical Industry Consultant" shall mean Chem
Systems Inc. or any other Person from time to time appointed by
the Agent Bank (at the direction of the Required Banks) to act
as petrochemical industry consultant for the purposes of this
Agreement and as notified to the Borrower.
"Plan" shall mean at any time an employee pension
benefit plan covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code that is
either (i) maintained by a member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement
or any other arrangement under which more than one employer
makes contributions and to which a member of the Controlled
Group is then making or accruing an obligation to make
contributions or has within the preceding five (5) plan years
made contributions.
"Planned Date Certain" shall have the meaning
provided in Section 2.3(c).
"Pledge Agreement" shall mean the Pledge Agreement,
dated as of September 15, 1997, among NRG Energy, NRG MI and
the Collateral Agent.
"Preliminary Operating Budget" shall have the meaning
provided in Section 3.3(h).
"Proceeds Account" shall mean the account of such
name described on Schedule 1.1 established at the Collateral
Agent's Office, or any other account at the Collateral Agent's
Office designated by the Borrower with the consent of the
Collateral Agent to serve as the Proceeds Account.
"Progress Payment Schedule" shall mean the Work
Breakdown Schedule and the Guaranteed Maximum Drawdown Schedule
set forth in Schedule E to the EPC Contract, or any similar
schedule (or schedules) contained in the RO EPC Contract, as
applicable.
"Project" shall mean, at all times, the Site and the
facilities constructed or being constructed pursuant to the EPC
Contract and the RO EPC Contract.
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<PAGE>
"Project Accounts" shall have the meaning provided in
Section 7.1.
"Project Costs" shall mean the following costs and
expenses incurred by the Borrower and approved by the Agent
Bank (in consultation with the Independent Engineer) in the
Construction Budget or otherwise in writing:
(i) costs incurred by the Borrower under
the EPC Contract and the RO EPC Contract (except for
Change Orders and O&M Change Orders not approved in
accordance with Section 6.11) and other costs directly
related to the design, engineering, permitting,
construction, installation, testing, start-up and
operation and maintenance during start-up of the Project;
(ii) fees and expenses incurred by or on
behalf of the Borrower in connection with the development
of the Project and the consummation of the transactions
contemplated by this Agreement, including, without
limitation, financial, accounting, legal, surveying and
consulting fees, the costs of preliminary engineering, the
costs of obtaining the Necessary Project Approvals
(including the Deferred Approvals), security deposits or
other amounts payable under the Project Documents, the
Energy Adjustment Payments to the Energy Purchaser and a
development fee (the "Development Fee") payable to NRG
Energy not to exceed $5,000,000 in the aggregate; provided
that (i) no more than $4,000,000 of the Development Fee
shall be paid prior to the Conversion Date and (ii) the
remaining $1,000,000 of the Development Fee shall be paid
on or after the Conversion Date to the extent, and only to
the extent, that all other Project Costs have been paid in
full;
(iii) interest on the Construction Loans;
(iv) financing fees and expenses in
connection with the Commitments, including, without
limitation, Fees payable prior to the Conversion Date,
fees and expenses associated with any Interest Rate
Protection Agreement and the fees and expenses of the
Agent Bank's and the Collateral Agent's counsel, the
Independent Engineer, the Fuel Consultant, the
Petrochemical Industry Consultant and the Insurance
Consultant;
(v) taxes incurred in connection with the
Project;
(vi) insurance premiums with respect to the
Title Insurance Policy and the insurance required pursuant
to Section 5.7; and
(vii) initial funding requirements of the
Debt Service Reserve Account and Maintenance Reserve
Account up to their respective initial required balances.
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"Project Documents" shall mean the Energy Services
Agreement, the EPC Contract, the Contractor Parent Company
Guarantee, the Operation and Maintenance Agreement, the O&M
Guarantee, the Gas Contracts, the Ground Lease and the
Equipment Lease.
"Project Equity Amount" shall mean twenty percent
(20%) of the aggregate amount of all Project Costs; provided,
however, that the Project Equity Amount shall not at any time
exceed $22,000,000.
"Project Party" shall mean each Person (other than
the Agent Bank, the Collateral Agent and the Banks) that is a
party to any Transaction Document (including any Additional
Project Party).
"Pro Rata Share" shall mean, as to any Bank, a
fraction (expressed as a percentage), the numerator of which
shall be the aggregate amount of such Bank's outstanding Loans
and Letters of Credit (or Commitments (x) if no Loans are then
outstanding and (y) for any application of such term pursuant
to Section 2.4(c), 2.5(a), 2.5(c), 2.11 or 11.19), and the
denominator of which shall be the aggregate amount of
outstanding Loans and Letters of Credit for all Banks (or the
total Commitments if no Loans are then outstanding).
"PUHCA" shall mean the Public Utility Holding Company
Act of 1935, as amended from time to time.
"Punch List" shall have the meaning provided in
Section 2.4 of the EPC Contract or in a similar provision of
the RO EPC Contract, as applicable.
"Purchasing Banks" shall have the meaning provided in
Section 11.4(d).
"Qualifying Facility" shall mean a "small power
production facility" or a "qualifying cogeneration facility" in
accordance with the Public Utility Regulatory Policies Act of
1978, as amended from time to time.
"Quarterly Dates" shall mean the last Business Day of
each March, June, September and December of each fiscal year of
the Borrower, the first of which shall be the first such day
after the Conversion Date.
"Regulations D, G, T, U and X" shall mean such
regulations of the Federal Reserve Board as may be from time to
time in effect and any successor to all or any portion thereof.
"Regulatory Counsel" shall mean Troutman Sanders LLP.
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<PAGE>
"Reimbursement Obligation" shall have the meaning
provided in Section 2.2(d).
"Request for Issuance" shall have the meaning
provided in Section 2.2(b).
"Required Banks" shall mean Banks holding more than
sixty-six and two thirds percent (66_%) of the principal amount
of Loans outstanding, or, if no Loans are outstanding,
Commitments.
"Restoration Requisition" shall mean a certificate,
signed by an Authorized Officer of the Borrower, in the form of
Exhibit G.
"Revenue Account" shall mean the account of such name
described on Schedule 1.1 established at the Collateral Agent's
Office, or any other account at the Collateral Agent's Office
designated by the Borrower with the consent of the Collateral
Agent to serve as the Revenue Account.
"RO EPC Contract" shall mean an agreement to be
entered into between the Borrower and the supplier of the
reverse osmosis water purification system in accordance with
Section 5.18 to provide for the engineering, procurement and
construction of such system.
"RO EPC Contractor" shall mean the party which enters
into the RO EPC Contract with the Borrower and provides
services thereunder.
"Second Letter Agreement" shall mean the letter
agreement, dated September 19, 1997, between the Borrower and
the Energy Purchaser.
"Secured Interest Rate Protection Agreement" shall
mean any Interest Rate Protection Agreement entered into by the
Borrower with a Bank in accordance with Section 6.2.
"Secured Party" shall mean any of the Agent Bank, the
Collateral Agent or any of the Banks.
"Security Agreement" shall mean the Assignment and
Security Agreement, dated as of September 15, 1997, between the
Borrower and the Collateral Agent.
"Security Documents" shall mean all documents under
which a security interest is granted to the Collateral Agent to
secure the Borrower's obligations under the Financing
Documents, including, without limitation, the Security
Agreement, the Pledge Agreement, the Mortgage and the Control
Agreement.
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"Site" shall mean those certain parcels described on
Schedule 1.1(C) and all easements, licenses and other rights
necessary for access to and enjoyment of the Project site for
the purposes contemplated in the Transaction Documents.
"Spare Parts List" shall have the meaning provided in
Section 5.8(d).
"S&P" shall mean Standard & Poor's Corporation or any
successor thereto which is a nationally recognized rating
agency.
"Stated Amount" shall mean the face amount of the
relevant Letter of Credit as set forth therein.
"Subsidiary" shall mean, with respect to any Person,
(i) any corporation fifty percent (50%) or more of whose stock
of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock
of any class or classes of such corporation shall have or might
have voting power by reason of the happening of any
contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries, and (ii) any partnership,
association, joint venture or other entity in which such
Person, directly or indirectly through Subsidiaries, is either
a general partner or has a fifty percent (50%) or greater
equity interest at the time.
"Taxes" shall have the meaning provided in Section
4.18.
"Technical Specifications" shall have the meaning
provided in Section 2.4 of the EPC Contract or in a similar
provision of the RO EPC Contract, as applicable.
"Term Loan" shall have the meaning provided in
Section 2.3(a).
"Term Loan Commitment" shall mean, at any time, for
any Bank, the lesser of (i) the amount set forth opposite such
Bank's name in Schedule 1.1(A) under the heading "Term Loan
Commitment", as the same may be reduced from time to time
pursuant to Sections 2.11 and 11.4(d) or increased pursuant to
Section 11.4(c) in the case of an assignment thereunder of
Credit Exposure to such Bank from another Bank and (ii) the
outstanding principal amount of such Bank's Construction Loans
(prior to giving effect to any payment of Construction Loans on
the Conversion Date), together with accrued and unpaid interest
and Commitment Fees and Letter of Credit Fees thereon.
"Term Note" shall mean a promissory note of the
Borrower dated the Conversion Date in the form of Exhibit C.
"Title Insurance Policy" shall have the meaning
provided in Section 3.1(l)(ii).
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"Total Construction Loan Commitment" shall mean the
sum of the Construction Loan Commitments of all of the Banks.
"Total Letter of Credit Commitment" shall mean the
sum of the Letter of Credit Commitments of all of the Banks.
"Total Term Loan Commitment" shall mean the sum of
the Term Loan Commitments of all of the Banks.
"Transaction Documents" shall mean the Financing
Documents and the Project Documents.
"Transferee" shall have the meaning provided in
Section 11.4(f).
"Transfer Supplement" shall have the meaning provided
in Section 11.4(d).
"Type" shall have the meaning provided in Section
1.3.
"Uniform Commercial Code" shall mean the Uniform
Commercial Code as in effect from time to time in the State of
New York or in any other relevant jurisdiction.
"United States" shall mean the United States of
America.
"Welfare Plan" shall mean a "welfare plan," as
defined in Section 3(1) of ERISA.
"Withholding Taxes" shall have the meaning provided
in Section 2.19(a).
Section 1.2. Accounting Terms and Determinations.
(a) Except as otherwise expressly provided
herein, all accounting terms used herein shall be interpreted,
and all financial statements and certificates and reports as to
financial matters required to be delivered to the Agent Bank,
the Collateral Agent or the Banks hereunder shall (unless
otherwise disclosed to the Agent Bank, the Collateral Agent or
the Banks, as the case may be, in writing at the time of
delivery thereof in the manner described in subsection (b)
below) be prepared in accordance with GAAP (other than, in the
case of interim financial statements, the absence of normally
recurring year-end adjustments and notes) applied on a basis
consistent with that used in the preparation of the latest
financial statements furnished to the Agent Bank, the
Collateral Agent or the Banks, as the case may be, hereunder
(which, prior to the first financial statements delivered under
Section 5.1, shall mean the financial statements referred to in
Section 3.1(n)). All calculations made for the purposes of
determining compliance with the terms
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of this Agreement shall (except as otherwise expressly provided
herein) be made by application of GAAP applied on a basis
consistent with that used in the preparation of the annual or
quarterly financial statements furnished to the Agent Bank
pursuant to Section 5.1 unless (i) the Borrower shall have
objected to determining such compliance on such basis at the
time of delivery of such financial statements or (ii) the
Required Banks shall so object in writing within thirty (30)
days after delivery of such financial statements, in either of
which events such calculations shall be made on a basis
consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have
been made (which, if objection is made in respect of the first
financial statements delivered under Section 5.1, shall mean
the financial statements referred to in Section 3.1(n)).
(b) The Borrower shall deliver to the Agent
Bank at the same time as the delivery of any annual or
quarterly financial statement under Section 5.1 a description
in reasonable detail of any material variation between the
application of accounting principles employed in the
preparation of such statement and the application of accounting
principles employed in the preparation of the next preceding
annual or quarterly financial statements as to which no
objection has been made in accordance with the last sentence of
subsection (a) above, and reasonable estimates of the
differences between such statements arising as a consequence
thereof.
(c) To enable the ready and consistent
determination of compliance with the covenants set forth in
Section 5.1, the Borrower shall not change the last day of its
fiscal year from December 31 of each year, or the last days of
the first three (3) fiscal quarters in each of its fiscal years
from March 31, June 30 and September 30 of each year,
respectively, each except with the prior written consent of the
Required Banks.
Section 1.3. Types of Loans. Loans hereunder are
distinguished by "Type". The "Type" of a Loan refers to
whether such Loan is a Base Rate Loan or a LIBOR Rate Loan,
each of which constitutes a Type.
Section I.4. Certain Principles of Interpretation.
(a) Unless otherwise expressly specified
herein, any agreement, contract or document defined or referred
to herein shall mean such agreement, contract or document in
the form (including all amendments and letter agreements
relating thereto) delivered to the Agent Bank and the Banks on
the Closing Date as the same may thereafter be amended,
supplemented or otherwise modified (including, without
limitation, in the case of the EPC Contract or the RO EPC
Contract, Change Orders, and in the case of the Operation and
Maintenance Agreement, O&M Change Orders) from time to time in
accordance with the terms of this Agreement and of the other
Loan Documents. Unless otherwise stated, any reference in this
Agreement to any Person shall include its permitted
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successors and assigns and, in the case of any Government
Authority, any Person succeeding to its functions and
capacities.
(b) Defined terms in this Agreement shall
include in the singular number the plural and in the plural
number the singular.
(c) The words "hereof", "herein" and
"hereunder" and words of similar import when used in this
Agreement shall, unless otherwise expressly specified herein,
refer to this Agreement as a whole and not to any particular
provision of this Agreement and all references to Sections,
Schedules or Exhibits shall be references to Sections of or
Schedules or Exhibits to, as the case may be, this Agreement
unless otherwise expressly specified herein.
ARTICLE II. AMOUNT AND TERMS OF CREDIT FACILITIES.
Section 2.1. Construction Loans.
(a) Subject to and upon the terms and
conditions herein set forth, each Bank severally and not
jointly agrees, at any time and from time to time on and after
the Closing Date and prior to the Construction Loan Maturity
Date, to make loans, including any amounts to refinance
drawings under any Letter of Credit issued pursuant to Section
2.2(a) (collectively, "Construction Loans"), to the Borrower,
which Construction Loans shall not exceed in aggregate
principal amount at any time the outstanding Construction Loan
Commitment of such Bank. The Total Construction Loan
Commitment shall expire, and each Construction Loan shall
either be converted to a Term Loan upon satisfaction of the
terms and conditions set forth herein or shall mature and be
due and payable, on the Construction Loan Maturity Date,
without further action on the part of any Bank, the Agent Bank
or the Collateral Agent. Once repaid, Construction Loans may
not be reborrowed. Construction Loans converted into Term
Loans shall not be deemed to be repaid or discharged, but shall
be deemed to be continued as Term Loans as provided herein.
(b) The requested amount of any Borrowing of
Construction Loans to pay interest on the Construction Loans
arising after the Commercial Operation Date shall be reduced by
any amount then on deposit in the Revenue Account to the extent
not reasonably anticipated by the Borrower to be needed to pay
Operation and Maintenance Expenses on the Business Day
immediately prior to the day on which the Borrowing request was
made. Each Borrowing of Construction Loans shall, after giving
effect to the reduction provided for in the preceding sentence,
be in the aggregate minimum amount of $1,000,000 or any
integral multiple of $500,000 in excess thereof, except for the
final Construction Loan Borrowing which may be in the amount of
the Project Costs remaining at the time of such Borrowing.
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(c) The Borrower shall not be required to make
scheduled principal payments on the Construction Loans. The
outstanding principal amount of any Construction Loan which
shall not have converted to a Term Loan pursuant to Section 3.3
on or prior to the Date Certain, together with interest accrued
thereon, shall be due and payable on the Date Certain. If the
Borrower does not repay such amounts within five (5) days after
the Date Certain, the Collateral Agent, if directed by the
Agent Bank (acting upon the instructions of the Required Banks)
and without prejudice to any other remedies available to the
Banks hereunder or under any other Financing Document
including, without limitation, the declaration of an Event of
Default, acceleration of the Obligations and the exercise of
remedies in respect thereof, shall thereafter apply all Excess
Cash Flow to the repayment of outstanding Construction Loans.
All such Excess Cash Flow shall be applied first to any
interest or Fees that are then due on any such Construction
Loans and then to the unpaid principal amount of such
Construction Loans in the inverse order of maturity.
Section 2.2. Letters of Credit.
(a) Subject to and upon the terms and
conditions hereof, the Letter of Credit Commitments may be
utilized, upon the written request of the Borrower, by the
issuance by the Issuing Bank of (i) an irrevocable stand-by
letter of credit substantially in the form of Exhibit N for the
account of the Borrower and naming NGC as the beneficiary
thereof to secure the Borrower's obligations under Section
6.1(b) of the NGC Agreement or (ii) an irrevocable stand-by
letter of credit substantially in the form of Exhibit O for the
account of the Borrower and naming the Energy Purchaser as
beneficiary to satisfy the Borrower's obligations under Section
32.1 of the Energy Services Agreement (the letters of credit
described in clauses (i) and (ii) are herein collectively
referred to as "Letters of Credit"); provided that in no event
shall (i) the aggregate Stated Amount of all Letters of Credit,
including all unreimbursed drawings thereon, exceed the Total
Letter of Credit Commitment as in effect from time to time or
(ii) the expiration date of any Letter of Credit extend beyond
the Letter of Credit Termination Date. The Letters of Credit
shall, subject to the satisfaction of the terms and conditions
set forth herein, be available on and after the date which is
twelve (12) months after the Closing Date (such date, the
"Letter of Credit Availability Date").
(b) The Borrower shall give the Agent Bank at
least four (4) Business Days irrevocable prior written notice,
substantially in the form of Exhibit E (effective upon
receipt), specifying the date (which shall be no later than
ninety (90) days preceding the Letter of Credit Termination
Date) each Letter of Credit is to be issued, describing in
reasonable detail the proposed terms of such Letter of Credit
(including the Stated Amount thereof) and the nature of the
transactions or obligations proposed to be supported thereby
(such notice, a "Request for Issuance"); provided that the
expiration date of any Letter of Credit shall be on or prior to
the Letter of Credit Termination Date. Upon receipt of any
Request for Issuance, the Agent Bank shall advise the Issuing
Bank of
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the contents thereof. The Total Letter of Credit Commitment
shall expire on the Letter of Credit Termination Date.
(c) On each day during the period commencing
with the issuance by the Issuing Bank of any Letter of Credit
and until such Letter of Credit shall have expired or been
terminated, the Letter of Credit Commitment of each Bank shall
be deemed to be utilized for all purposes hereof in an amount
equal to such Bank's Pro Rata Share of the then undrawn face
amount of such Letter of Credit. Each Bank (other than the
Issuing Bank) agrees that, upon the issuance of any Letter of
Credit hereunder, it shall automatically acquire a
participation in the Issuing Bank's liability under such Letter
of Credit in an amount equal to such Bank's Pro Rata Share of
such liability, and each Bank (other than the Issuing Bank)
thereby shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and shall be
unconditionally obligated to the Issuing Bank to pay and
discharge when due, its Pro Rata Share of the Issuing Bank's
liability under such Letter of Credit.
(d) Upon any drawing under any Letter of
Credit, the Borrower hereby unconditionally agrees to pay and
reimburse the Agent Bank for the account of the Issuing Bank
for the amount of such drawing (the "Reimbursement Obligation")
at or prior to the date on which payment is to be made by the
Issuing Bank in accordance with the terms of such Letter of
Credit to the beneficiary thereunder, without further action on
the part of the Issuing Bank, the Agent Bank, the Collateral
Agent or any Bank, and without presentment, demand, notice,
protest or other formalities of any kind. In the event that
the Borrower does not pay the full amount of any proposed
drawing with respect to any such Letter of Credit referred to
in the preceding sentence on or prior to the date payment is to
be made by the Issuing Bank, the Borrower shall also pay, to
the Agent Bank for the account of the Banks, interest on such
amount at a rate per annum equal to the Base Rate plus the
Applicable Margin for Base Rate Loans plus two percent (2%).
(e) If the Borrower fails to reimburse the
Issuing Bank for a demand for payment under any Letter of
Credit by the date of payment by the Issuing Bank thereunder,
the Agent Bank shall give each Bank prompt notice of the amount
of the demand for payment, specifying such Bank's Pro Rata
Share of the amount of the related demand for payment.
(f) Each Bank (other than the Issuing Bank)
shall pay to the Agent Bank for account of the Issuing Bank at
the Agent Bank's Office in dollars and in immediately available
funds, the amount of such Bank's Pro Rata Share of any payment
under any Letter of Credit upon notice by the Issuing Bank
(through the Agent Bank) to such Bank requesting such payment
and specifying such amount. Each such Bank's obligation to
make such payments to the Agent Bank for account of the Issuing
Bank under this clause (f), and the Issuing Bank's right to
receive the same, shall be absolute and unconditional and shall
not be affected by any circumstance whatsoever, including,
without limitation,
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the failure of any other Bank to make its payment under this
clause (f), the financial condition of the Borrower (or any
other account party), the existence of any Default or Event of
Default or the termination of the Commitments. Each such
payment to the Issuing Bank shall be made without any offset,
abatement, withholding or reduction whatsoever.
(g) Upon the making of each payment by a Bank
to the Issuing Bank pursuant to clause (f) above in respect of
any Letter of Credit, such Bank shall, automatically and
without any further action on the part of the Agent Bank, the
Collateral Agent, the Issuing Bank or such Bank, acquire (i) a
participation in an amount equal to such payment in the
Reimbursement Obligation owing to the Issuing Bank by the
Borrower hereunder and (ii) a participation in a percentage
equal to such Bank's Pro Rata Share in any interest or other
amounts payable by the Borrower hereunder in respect of such
Reimbursement Obligation. Upon receipt by the Issuing Bank
from or for the account of the Borrower of any payment in
respect of any Reimbursement Obligation or any such interest or
other amount (including by way of set-off or application of
proceeds of any collateral security), the Issuing Bank shall
promptly pay to the Agent Bank for the account of each Bank
entitled thereto, such Bank's Pro Rata Share of such payment,
each such payment by the Issuing Bank to be made in the same
money and funds in which received by the Issuing Bank. In the
event any payment received by the Issuing Bank and so paid to
the Banks hereunder is rescinded or must otherwise be returned
by the Issuing Bank, each Bank shall, upon the request of the
Issuing Bank (through the Agent Bank) repay to the Issuing Bank
(through the Agent Bank) the amount of such payment paid to
such Bank, with interest from the date of such request at the
rate specified in clause (j) of this Section 2.2.
(h) Promptly following the end of each calendar
month, the Issuing Bank shall deliver (through the Agent Bank)
to each Bank and the Borrower a notice describing the aggregate
amount of all Letters of Credit outstanding at the end of such
month. Upon the request of any Bank from time to time, the
Issuing Bank shall deliver any other information reasonably
requested by such Bank with respect to each Letter of Credit
then outstanding.
(i) The issuance by the Issuing Bank of each
Letter of Credit shall, in addition to the conditions precedent
set forth in Section 3, be subject to the conditions precedent
that (i) such Letter of Credit shall be in such form and
contain such terms as shall be satisfactory to the Issuing Bank
consistent with its then current practices and procedures with
respect to letters of credit of the same type, (ii) such Letter
of Credit shall be posted in connection with the Borrower's
obligations under Section 6.1(b) of the NGC Agreement or
Section 32.1 of the Energy Services Agreement, as applicable,
and (iii) the Borrower shall have executed and delivered such
other instruments and agreements relating to such Letter of
Credit as the Issuing Bank shall have reasonably requested
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consistent with its then current practices and procedures with
respect to letters of credit of the same type.
(j) To the extent that any Bank fails to pay
any amount required to be paid pursuant to clause (f) or (g) of
this Section 2.2 on the due date therefor, such Bank shall pay
interest to the Issuing Bank (through the Agent Bank) on such
amount from and including such due date to but excluding the
date such payment is made (i) during the period from and
including such due date to but excluding the date three (3)
Business Days thereafter, at a rate per annum equal to the Base
Rate and (ii) thereafter, at a rate per annum equal to the
Default Rate.
(k) The Borrower hereby indemnifies and holds
harmless each Bank, the Agent Bank and the Collateral Agent
from and against any and all claims and damages, losses,
liabilities, costs or expenses which such Bank, the Agent Bank
or the Collateral Agent may incur (or which may be claimed
against such Bank, the Agent Bank or the Collateral Agent by
any Person whatsoever) by reason of or in connection with the
execution and delivery or transfer of or payment or refusal to
pay by the Issuing Bank under any Letter of Credit; provided
that the Borrower shall not be required to indemnify any Bank,
the Agent Bank or the Collateral Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only
to the extent, caused by (i) the willful misconduct or gross
negligence of the Issuing Bank in determining whether a request
presented under any Letter of Credit complies with the terms of
such Letter of Credit or (ii) in the case of the Issuing Bank,
such Bank's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the
terms and conditions of such Letter of Credit. Nothing in this
Section 2.2(k) is intended to limit the other rights and
obligations of the Borrower, any Bank, the Agent Bank or the
Collateral Agent under this Agreement or under applicable Law.
(l) If an Event of Default shall have occurred
and be continuing, the Borrower shall, immediately upon the
request of the Agent Bank, make a deposit into the Letter of
Credit Account in accordance with the provisions of Section
7.11; provided, however, that if an Event of Bankruptcy with
respect to the Borrower has occurred, the request described in
this clause (l) shall not be required and shall be deemed to
have been made upon the occurrence of the subject Event of
Default.
Section 2.3. Term Loans.
(a) Subject to and upon the terms and
conditions herein set forth, each Bank severally and not
jointly agrees on the Conversion Date to convert all or a
portion of the Construction Loans outstanding on such date,
after giving effect to any prepayment of Construction Loans
made on such date, to term loans (collectively, "Term Loans").
No Bank shall be obligated to make Term Loans in excess of the
Term Loan Commitment of such Bank. Each Term Loan shall mature
and be due and payable on the
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Final Maturity Date without further action on the part of any
Bank, the Agent Bank or the Collateral Agent. Once repaid,
Term Loans may not be reborrowed.
(b) Each Term Loan shall be repaid by the
Borrower, without premium or penalty, in amounts equal to the
following percentages of the aggregate amount of such Term
Loan, on the Quarterly Dates specified below:
Quarterly % of Term Quarterly % of Term
Date Loan Date Loan
1 0.000% 11 0.720%
2 0.000% 12 0.720%
3 0.000% 13 0.852%
4 0.000% 14 0.852%
5 0.000% 15 0.852%
6 0.000% 16 0.852%
7 0.000% 17 0.944%
8 0.000% 18 0.944%
9 0.720% 19 0.944%
10 0.720% 20 90.880%
Any remaining outstandings shall be due and payable at the
Final Maturity Date.
(c) The schedule set forth in clause (b) of
this Section 2.3 assumes that the Conversion Date shall occur
on or prior to the date (the "Planned Date Certain") which is
twenty (20) months after the Closing Date. If the Conversion
Date occurs after the Planned Date Certain, such schedule will
be adjusted accordingly by eliminating the applicable Quarterly
Dates(s) (in direct order of maturity) and increasing the
percentages set forth opposite the remaining Quarterly Dates,
on a pro rata basis, by the percentage attributable to such
eliminated Quarterly Date.
Section 2.4. Notice of Borrowing.
(a) Whenever the Borrower desires to borrow
Loans hereunder, it shall submit a Notice of Borrowing to the
Agent Bank at the Agent Bank's Office prior to 10:00 A.M., New
York City time, at least one (1) Business Day prior to each
Base Rate Loan and at least three (3) Business Days prior to
each LIBOR Rate Loan to be made hereunder. Each such Notice of
Borrowing shall be irrevocable, shall be signed by an
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Authorized Officer of the Borrower and shall specify (i) the
aggregate principal amount of the requested Loans, (ii) the
date of Borrowing (which shall be a Business Day) and (iii)
whether such Loans shall consist of Base Rate Loans or LIBOR
Rate Loans and, if LIBOR Rate Loans, the initial Interest
Period to be applicable thereto.
(b) No more than one (1) Notice of Borrowing
may be submitted in any calendar month.
(c) Promptly but in any event on the same day
as the Agent Bank's receipt of such Notice of Borrowing
pursuant to Section 2.4(a), the Agent Bank shall provide each
Bank with a copy thereof and inform each Bank as to its Pro
Rata Share of the Loans requested thereunder after giving
effect to any reduction in the requested amount thereof
pursuant to Section 2.1(b).
Section 2.5. Disbursement of Funds.
(a) No later than 1:00 P.M., New York City
time, on the date specified in each Notice of Borrowing, each
Bank will make available its Pro Rata Share of the Construction
Loans requested to be made on such date, in Dollars and
immediately available funds, at the Agent Bank's Office. After
the Agent Bank's receipt of the proceeds of any Construction
Loans (including, without limitation, any Make-up Amounts), the
Agent Bank will promptly thereafter make available to the
Borrower, in the manner specified in Article VII, the aggregate
of the amounts so made available in the type of funds actually
received plus the amount then on deposit in the Revenue Account
by virtue of which the requested amount of Construction Loans
was reduced pursuant to Section 2.1(b).
(b) Unless the Agent Bank shall have been
notified by any Bank prior to the date of a Borrowing that such
Bank does not intend to make available to the Agent Bank its
portion of the Construction Loans to be made on such date, the
Agent Bank may assume that such Bank has made such amount
available to the Agent Bank on such date and the Agent Bank in
its sole discretion may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent
Bank by such Bank, or provided to the Agent Bank pursuant to
clause (c) of this Section 2.5, and the Agent Bank has made
such amount available to the Borrower, the Agent Bank shall be
entitled to recover such corresponding amount on demand from
such Bank. If the Agent Bank notifies the Borrower at the time
of any disbursement that the Agent Bank has made an amount
available upon the failure of a Bank to do so, then if such
Bank does not pay such corresponding amount forthwith upon the
Agent Bank's demand therefor, and the Agent Bank has not
received such amount pursuant to clause (c) of this Section
2.5, the Agent Bank may notify the Borrower and the Borrower
shall immediately thereupon repay such corresponding amount to
the Agent Bank. The Agent Bank shall also be entitled to
recover from such Bank or the
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Borrower, without duplication, interest on such corresponding
amount in respect of each day from the date such corresponding
amount was made available by the Agent Bank to the Borrower to
the date such corresponding amount is recovered by the Agent
Bank, at a rate per annum equal to the then applicable rate of
interest, calculated in accordance with Section 2.7, for the
respective Type of Loans. Nothing herein shall be construed to
relieve any Bank from its obligation to fulfill its commitments
hereunder or to prejudice any rights which the Borrower may
have against any Bank as a result of any default by such Bank
hereunder. Notwithstanding anything contained herein or in any
other Loan Document to the contrary, the Agent Bank may apply
all funds and the proceeds of Collateral available for the
payment of any Obligations first to repay any amount owing by
any Bank or the Borrower to the Agent Bank as a result of any
Bank's failure to fund its Loans hereunder.
(c) If the Agent Bank determines that any Bank
(a "Defaulting Bank") will not make available to the Agent Bank
its portion (the "Defaulted Amount") of Construction Loans to
be made on the date specified in the relevant Notice of
Borrowing, the Agent Bank shall promptly notify each other Bank
(each a "Non-Defaulting Bank") of the Defaulted Amount and
provide each Non-Defaulting Bank the opportunity to fund all or
a portion of the Defaulted Amount by providing such Non-
Defaulting Bank's Make-up Amount (as defined below) to the
Agent Bank in Dollars and immediately available funds at the
Agent Bank's Office on the date specified in the relevant
Notice of Borrowing; provided, however, that notwithstanding
anything in this clause (c) to the contrary, (i) neither the
Agent Bank nor any Non-Defaulting Bank shall in any way be
obligated to fund any portion of the Defaulted Amount and (ii)
any funding by any Non-Defaulting Bank of all or any portion of
a Defaulted Amount shall not increase the Commitments of such
Non-Defaulting Bank or obligate such Non-Defaulting Bank to
fund all or any portion of further Defaulted Amounts. Any Non-
Defaulting Bank which intends to fund all or a portion of the
Defaulted Amount shall promptly provide written notice to the
Agent Bank indicating such intention and specifying the portion
of the Defaulted Amount which such Non-Defaulting Bank intends
to fund (such Bank's "Make-up Amount"). If the aggregate of
the Make-up Amounts specified in the notices received by the
Agent Bank from the Non-Defaulting Banks pursuant to the
preceding sentence exceeds the Defaulted Amount, the Agent Bank
shall (x) determine each Non-Defaulting Bank's Make-up Amount
on a pro rata basis with reference to such Non-Defaulting
Bank's Commitment divided by the aggregate of the Commitments
of all Non-Defaulting Banks and (y) notify such Non-Defaulting
Bank thereof. Any Non-Defaulting Bank funding all or any
portion of a Defaulted Amount shall agree with the Borrower on
the fees, if any, such Non-Defaulting Bank shall charge with
respect to such funding. Nothing in this clause (c) shall
alter or modify any rights the Borrower may have against a
Defaulting Bank.
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Section 2.6. Notes.
(a) The Borrower's obligation to pay the
principal of and interest on each Bank's Construction Loans
shall be evidenced by a Construction Note and the Borrower's
obligation to pay principal of and interest on each Bank's Term
Loans shall be evidenced by a Term Note. Each such Note shall
be duly executed and delivered by the Borrower in favor of the
appropriate Bank in a principal amount equal to such Bank's
Construction Loan Commitment or Term Loan Commitment, as
applicable, with blanks appropriately completed in conformity
herewith. On the date on which the Construction Loans are
converted to Term Loans in accordance with Section 3, or, if
the Construction Loans are not so converted, on the date all of
the Obligations are indefeasibly paid in full in cash or cash
equivalents, each Bank shall return its Construction Note to
the Borrower, which Construction Note shall be marked "Paid in
Full."
(b) Each Bank is hereby authorized, at its
option, either (i) to endorse on the schedule attached to each
of its Notes (or on a continuation of such schedule attached to
such Note and made a part thereof) an appropriate notation
evidencing the date and amount of each Loan evidenced thereby
and the date and amount of each principal and interest payment
in respect thereof, or (ii) to record such Loans and such
payments in its books and records. Such schedule or such books
and records, as the case may be, shall constitute prima facie
evidence of the accuracy of the information contained therein.
Section 2.7. Interest.
(a) Base Rate. The Borrower agrees to pay
interest in respect of the unpaid principal amount of each Base
Rate Loan from the date of the making of such Base Rate Loan
until such Base Rate Loan shall be paid in full or converted to
a LIBOR Rate Loan at a rate per annum which shall be equal to
the sum of the Applicable Margin plus the Base Rate in effect
from time to time. Interest accruing at the Base Rate will be
calculated on the basis of the actual number of days elapsed in
a year of three hundred sixty-five (365) or three hundred sixty-
six (366) days, as appropriate.
(b) LIBOR Rate. The Borrower agrees to pay
interest in respect of the unpaid principal amount of each
LIBOR Rate Loan from the date of the making of such LIBOR Rate
Loan until such LIBOR Rate Loan shall be paid in full or
converted to a Base Rate Loan at a rate per annum which shall
be equal to the sum of the Applicable Margin plus the relevant
LIBOR Rate. The Agent Bank shall determine the LIBOR Rate at
the beginning of each Interest Period. Interest accruing at
the LIBOR Rate will be calculated on the basis of the actual
number of days elapsed in a year of three hundred sixty (360)
days.
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(c) Default Rate. In the event that, and for
so long as, an Event of Default specified in Section 8.1 shall
have occurred and be continuing, the outstanding principal
amount of all Loans and, to the extent permitted by Law,
accrued interest in respect of all Loans, shall bear interest
at a rate per annum (the "Default Rate") equal to the sum of
two percent (2%) plus the interest rate otherwise applicable
hereunder to such principal amount in effect from time to time
until such Loan has been paid in full or such Event of Default
has ceased to exist.
(d) Payments. Interest on each Loan shall
accrue from and including the date of the Borrowing thereof to
but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in
arrears on each Payment Date, (ii) in respect of each LIBOR
Rate Loan, on the last day of each Interest Period applicable
to such Loan and, in the case of an Interest Period for LIBOR
Rate Loans of six (6) months, on the date occurring three (3)
months from the first day of such Interest Period and on the
last day of such Interest Period, and (iii) in the case of all
Loans, on any prepayment or conversion (on the amount prepaid
or converted), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand.
(e) Notification of Rates. The Agent Bank
shall, upon deter mining a LIBOR Rate for any Interest Period,
promptly notify the Borrower and the Banks thereof.
(f) Excessive Interest. It is the intention of
the parties hereto to conform strictly to applicable usury Laws
and, anything herein or elsewhere to the contrary
notwithstanding, the Obligations shall be subject to the
limitation that the Borrower shall not be required to pay, and
the Secured Parties shall not be entitled to charge or receive,
any interest to the extent that such interest exceeds the
maximum rate of interest which the Secured Parties are
permitted by applicable Law to contract for, charge or receive
and which would not give rise to any claim or defense of usury.
If, as a result of any circumstances whatsoever, performance of
any provision hereof or of any of the Loan Documents shall, at
the time performance of such provision is due, violate
applicable usury Law, then, ipso facto, the obligation to be
performed shall be reduced to the highest lawful rate, and if,
from any such circumstance, the Secured Parties shall ever
receive interest or anything which might be deemed interest
under applicable Law which would exceed the highest lawful
rate, the amount of such excess interest shall be applied to
the reduction of the principal amount owing on account of the
Notes or the amounts owing on other Obligations and not to the
payment of interest, or if such excessive interest exceeds the
unpaid principal balance of the Obligations, such excess shall
be refunded to the Borrower.
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Section 2.8. Interest Periods.
(a) The Borrower shall, in each Notice of
Borrowing or Notice of Conversion or Continuation in respect of
the making of, conversion into or continuation of a LIBOR Rate
Loan, select the interest period (each an "Interest Period")
applicable to such LIBOR Rate Loan, which Interest Period
shall, at the option of the Borrower, be either a one-month,
two-month, three-month or six-month period; provided, that:
(i) the initial Interest Period for
any LIBOR Rate Loan shall commence on the date of the
making of such LIBOR Rate Loan (including the date of
any conversion from a Base Rate Loan) and each
Interest Period occurring thereafter in respect of
such LIBOR Rate Loan shall commence on the date on
which the immediately preceding Interest Period, if
any, expires;
(ii) if any Interest Period would
otherwise expire on a day which is not a Business
Day, such Interest Period shall expire on the next
succeeding Business Day; provided, however, that if
any Interest Period applicable to a Borrowing of
LIBOR Rate Loans would otherwise expire on a day
which is not a Business Day but is a day of the month
after which no further Business Day occurs in such
month, such Interest Period shall expire on the
Business Day preceding the day of scheduled
expiration;
(iii) if any Interest Period
applicable to a Borrowing of LIBOR Rate Loans begins
on a day for which there is no numerically
corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end
on the last Business Day of such calendar month;
(iv) no Interest Period in respect of
any Construction Loan or Term Loan shall extend (A)
in the case of any Construction Loan, beyond the
Construction Loan Maturity Date to the extent that
Construction Loans are not to be converted on the
Construction Loan Maturity Date to Term Loans, or (B)
in the case of any Term Loan, beyond the Final
Maturity Date; and
(v) no Interest Period in respect of
a Term Loan shall extend beyond any date upon which a
repayment of the Term Loans is required to be made
pursuant to Section 2.13 unless the aggregate
principal amount of Term Loans which are Base Rate
Loans or which have Interest Periods which will
expire on or before such date is equal to or in
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excess of the amount of the Term Loan repayment
required to be made on such date.
(b) If upon the expiration of any Interest
Period, the Borrower shall have failed to elect a new Interest
Period to be applicable to the respective LIBOR Rate Loan as
provided above, the Borrower shall be deemed to have elected to
convert such LIBOR Rate Loan into a Base Rate Loan effective as
of the expiration date of such current Interest Period.
Section 2.9. Minimum Amount and Maximum Number of
LIBOR Rate Loans. All borrowings, conversions, continuations,
payments, prepayments and selection of Interest Periods
hereunder shall be made or selected so that, after giving
effect thereto, (i) the aggregate principal amount of any
Borrowing comprised of LIBOR Rate Loans shall not be less than
$1,000,000 or an integral multiple of $500,000 in excess
thereof, and (ii) there shall be no more than six (6)
Borrowings comprised of LIBOR Rate Loans outstanding at any
time.
Section 2.10. Conversion or Continuation.
(a) The Borrower shall have the option (i) to
convert at any time all or any part of outstanding Base Rate
Loans to LIBOR Rate Loans, (ii) to convert all or any part of
outstanding LIBOR Rate Loans to Base Rate Loans on the
expiration date of the Interest Period applicable to such LIBOR
Rate Loans or (iii) to continue all or any part of outstanding
LIBOR Rate Loans as LIBOR Rate Loans for an additional Interest
Period on the expiration of the Interest Period applicable to
such outstanding LIBOR Rate Loans; provided that no Loan may be
continued at the end of an Interest Period as, or converted
into, a LIBOR Rate Loan when any Default or Event of Default
has occurred and is continuing if the Required Banks shall have
notified the Borrower through the Agent Bank that LIBOR Rate
Loans shall not be available during such period.
(b) In order to elect to convert or continue a
Loan under this Section 2.10, the Borrower shall deliver an
irrevocable Notice of Conversion or Continuation to the Agent
Bank no later than 10:00 A.M., New York City time, (i) at least
one (1) Business Day in advance of the proposed conversion date
in the case of a conversion to a Base Rate Loan, and (ii) at
least three (3) Business Days in advance of the proposed
conversion or continuation date in the case of a conversion to,
or a continuation of, a LIBOR Rate Loan. A Notice of
Conversion or Continuation shall specify (w) the requested
conversion or continuation date (which shall be a Business
Day), (x) the amount and Type of the Loan to be converted or
continued, (y) whether a conversion or continuation is
requested, and if a conversion, into what Type of Loan and (z)
in the case of a conversion to, or a continuation of, a LIBOR
Rate Loan, the requested Interest Period. Promptly after
receipt of a Notice of Conversion or Continuation under this
Section 2.10, the Agent Bank shall provide each Bank with a
copy thereof.
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Section 2.11. Reduction of Commitments. Upon at
least five (5) Business Days' prior irrevocable written notice
(or telephonic notice promptly confirmed in writing) to the
Agent Bank (which notice the Agent Bank shall promptly transmit
to each of the Banks), the Borrower shall have the right,
without premium or penalty, to permanently reduce each Bank's
Pro Rata Share of all or part of the unused Total Construction
Loan Commitment or Total Letter of Credit Commitment; provided
that any partial reduction shall be in a minimum aggregate
amount of $1,000,000; and provided, further that the Borrower
shall have the right to reduce the amount of the unused Total
Construction Loan Commitment pursuant to this Section 2.11 only
if the sum of the Total Construction Loan Commitment remaining
after such reduction, together with the Project Equity Amount,
is sufficient, in the judgment of the Required Banks, for the
Project to achieve Final Completion (as defined in the EPC
Contract) and for the Borrower to pay all obligations due and
owing or to become due and owing with respect thereto. The
Total Term Loan Commitment shall be automatically reduced pro
rata with any reduction of the Total Construction Loan
Commitment.
Section 2.12. Optional Prepayments. The Borrower
shall have the right to prepay outstanding Loans in whole or in
part from time to time without penalty or premium on the
following terms and conditions: (i) the Borrower shall give
the Agent Bank written notice, which notice shall be
irrevocable, of its intent to prepay Loans, at least five (5)
Business Days prior to the prepayment, which notice shall
specify the amount of such prepayment and what Types of Loans
are to be prepaid, and, in the case of LIBOR Rate Loans, the
specific Borrowing(s) of LIBOR Rate Loans which are to be
prepaid, and which notice the Agent Bank shall promptly
transmit to each of the Banks; (ii) each prepayment shall be in
an aggregate principal amount of $1,000,000 or any integral
multiple of $500,000 in excess thereof; and (iii) prepayments
of LIBOR Rate Loans made pursuant to this Section 2.12 may be
made only on the last day of the Interest Period applicable
thereto unless accompanied by a payment for all funding losses
in accordance with Section 2.17. All prepayments shall be
applied first to any interest or Fees accrued in respect of the
Loans designated to be prepaid, and then to the unpaid
principal of such Loans on a pro rata basis among all Loans of
the same Type.
Section 2.13. Mandatory Prepayments.
(a) Unless converted to Term Loans, the
Borrower shall repay all outstanding Construction Loans on the
Construction Loan Maturity Date. On the Final Maturity Date,
the Borrower shall pay the entire amount of the Loans.
(b) The Borrower shall repay outstanding
Construction Loans in accordance with Section 2.1(c).
(c) If an Event of Loss shall occur, the
Borrower shall prepay the Loans to the extent required and at
the times specified in Section 7.10(b) and in an amount
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equal to the amount, if any, that the Collateral Agent is
required to withdraw from the Proceeds Account for such
purpose.
(d) If an Event of Condemnation shall occur,
the Borrower shall prepay the Loans to the extent required and
at the times specified in Section 7.10(c) and in an amount
equal to the amount, if any, that the Collateral Agent is
required to withdraw from the Proceeds Account for such
purpose.
(e) If any Liquidated Performance Damages are
received by or on behalf of the Borrower, the Borrower shall
prepay the Loans to the extent required and at the times
specified in Section 7.10(d) and in an amount equal to the
amount, if any, that the Collateral Agent is required to
withdraw from the Proceeds Account for such purpose.
(f) If any Liquidated Delay Damages are
received by or on behalf of the Borrower, the Borrower shall
prepay the Loans to the extent required and at the times
specified in Section 7.10(e) and in an amount equal to the
amount, if any, that the Collateral Agent is required to
withdraw from the Proceeds Account for such purpose.
(g) If any Asset Sale Proceeds are received by
or on behalf of the Borrower, the Borrower shall prepay the
Loans to the extent required and at the times specified in
Section 7.10(f) and in an amount equal to the amount, if any,
that the Collateral Agent is required to withdraw from the
Proceeds Account for such purpose.
(h) If any Other Proceeds are received by or on
behalf of the Borrower, the Borrower shall prepay the Loans to
the extent required and at the times specified in Section
7.10(g) and in an amount equal to the amount, if any, that the
Collateral Agent is required to withdraw from the Proceeds
Account for such purpose.
(i) If on any Quarterly Date the Debt Service
Coverage Ratio for the previous four fiscal quarters is less
than 1.1 to 1, the Borrower shall prepay the Loans with all
Excess Cash Flow available on each Payment Date following such
Quarterly Date until the next Quarterly Date on which the Debt
Service Coverage Ratio for the then previous four fiscal
quarters is at least 1.1 to 1.
(j) If any Default Equity Proceeds are received
by or on behalf of the Borrower, the Borrower shall prepay the
Loans to the extent required and at the times specified in
Section 7.10(h) and in an amount equal to the amount, if any,
that the Collateral Agent is required to withdraw from the
Proceeds Account for such purpose.
(k) All prepayments of Loans made pursuant to
any of clauses (c) through (j) of this Section 2.13 shall be
applied first to any interest or Fees that are due on any Loan,
next to interest or Fees accrued in respect of the Loans to be
prepaid, and then to the unpaid principal of Loans to be
prepaid in the inverse order of maturity.
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(l) With respect to each prepayment required to
be made pursuant to any of clauses (c) through (j) of this
Section 2.13, the Borrower may designate, by written notice to
the Agent Bank on or before the date of such prepayment, the
Types of Loans which are to be prepaid and, in the case of
LIBOR Rate Loans, the specific Borrowing(s) of LIBOR Rate Loans
which are to be prepaid; provided that (i) if the Borrower
fails to make any such designation on or before any date on
which Loans are to be prepaid pursuant to this Section 2.13,
all outstanding Base Rate Loans shall be repaid in full prior
to the prepayment of any LIBOR Rate Loans; (ii) prepayments of
LIBOR Rate Loans may only be made on the last day of an
Interest Period applicable thereto unless all Base Rate Loans
have been repaid in full; and (iii) if any prepayment of LIBOR
Rate Loans made pursuant to a single Borrowing shall reduce the
outstanding Loans made pursuant to such Borrowing to an amount
less than $1,000,000, such Borrowing shall immediately be
converted into Base Rate Loans.
Section 2.14. Method and Place of Payment.
(a) Except as otherwise specifically provided
therein, all payments and prepayments under the Loan Documents
shall be made to the Agent Bank for the account of the Banks
entitled thereto not later than 12:00 Noon, New York City time,
on the date when due and shall be made in Dollars and
immediately available funds at the Agent Bank's Office, and any
funds received by the Agent Bank after such time shall, for all
purposes hereof (including the following sentence), be deemed
to have been paid on the next succeeding Business Day. Except
as otherwise specifically provided herein, the Agent Bank shall
thereafter cause to be distributed on the date of receipt
thereof to each Bank in like funds its Pro Rata Share of the
payments so received.
(b) Unless otherwise provided herein, whenever
any payment to be made hereunder or under any Note shall be
stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business
Day and the amount of such payment shall bear interest at the
applicable rate during such extension.
(c) All payments made by the Borrower hereunder
and under the other Financing Documents shall be made
irrespective of, and without any reduction for, any set-offs or
counterclaims.
Section 2.15. Fees.
(a) The Borrower agrees to pay to the Agent
Bank for the account of each Bank a commitment fee (the
"Commitment Fee") of 0.375% per annum on each Bank's Pro Rata
Share of the daily average unutilized portion of the Total
Construction Loan Commitment during the period from the date
hereof through and including the Final Maturity Date. The
accrued and unpaid Commitment Fee shall be payable in arrears
for
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the period from and including the Closing Date through and
including the Final Maturity Date, quarterly on each Payment
Date. The Commitment Fee shall be calculated on the actual
number of days elapsed in a year of three hundred sixty (360)
days.
(b) The Borrower shall pay to the Agent Bank
for account of the Issuing Bank all charges, costs, fees and
expenses in the amounts customarily charged by the Issuing Bank
from time to time in like circumstances with respect to the
issuance of each Letter of Credit, drawings thereunder and
other transactions relating thereto.
(c) The Borrower shall pay when due to the
Agent Bank and the Collateral Agent such other fees as shall
have been separately agreed to by the Agent Bank and/or the
Collateral Agent and the Borrower in writing.
(d) On the last Business Day in each calendar
quarter (or portion thereof) commencing on the Closing Date and
ending on the Letter of Credit Termination Date and on the
Expiration Date of each Letter of Credit, the Borrower shall
pay to the Agent Bank for the benefit of the Banks a letter of
credit fee (the "Letter of Credit Fee") for such quarter then
ending and such Expiration Date, as applicable, at the rates
per annum described below and computed in the following manner.
From and including the Closing Date to but excluding the Letter
of Credit Availability Date, the Letter of Credit Fee shall be
equal to the Total Letter of Credit Commitment multiplied by
0.375%. On and after the Letter of Credit Availability Date,
the Letter of Credit Fee shall be equal to the sum of: (i) for
each outstanding Letter of Credit, the product of (A) (1) from
and including the date of issuance of such Letter of Credit to
but excluding the Conversion Date, 0.750% (2) from and
including the Conversion Date to but excluding the date which
is two (2) years after the Conversion Date, 1.000%, (3) from
and including the date which is two years after the Conversion
Date to but excluding the date which is four (4) years after
the Conversion Date, 1.125%, and (4) from and including the
date which is four (4) years after the Conversion Date to and
including the date which is five (5) years after the Conversion
Date, 1.250%, multiplied by (B) the daily average Stated Amount
of such Letter of Credit multiplied by (C) a fraction the
numerator of which is the number of days in such quarter (or
portion thereof) or the number of days in the period beginning
on the last day of the previous quarter and ending on the
Expiration Date of such Letter of Credit, as applicable, and
the denominator of which is three hundred sixty (360); plus
(ii) (A) the daily average for such quarter of the excess of
(1) the Total Letter of Credit Commitment over (2) the
aggregate of the Stated Amounts of all outstanding Letters of
Credit, multiplied by (B) 0.375%.
Section 2.16. Interest Rate Unascertainable;
Increased Costs; Illegality.
(a) In the event that the Agent Bank, in the
case of clause (i) below, or any Bank, in the case of clauses
(ii) and (iii) below, shall have reasonably
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determined (which determination shall, absent manifest error,
be final and conclusive and binding upon all parties hereto):
(i) on any date for determining a
LIBOR Rate for any Interest Period, that by reason of
any changes arising after the date of this Agreement
affecting the London interbank market, adequate and
fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in
the definition of the LIBOR Rate; or
(ii) at any time, that the relevant
LIBOR Rate shall not represent the effective cost to
such Bank of funding or maintaining a LIBOR Rate
Loan, or such Bank shall incur increased costs or
reductions in the amounts received or receivable
hereunder in respect of any LIBOR Rate Loan, in any
such case because of (x) any change since the later
of (1) the date of this Agreement or (2) the date
upon which such Bank became a Bank pursuant to
Section 11.4(d) (such date, the "Bank Effective
Date") in any applicable Law and including the
introduction of any new Law (such as but not limited
to a change in official reserve requirements) whether
or not having the force of Law and whether or not
failure to comply therewith would be unlawful, and/or
(y) other circumstances arising after the applicable
Bank Effective Date affecting such Bank or the London
interbank market or the position of such Bank in such
market; or
(iii) at any time, that the making or
continuance by it of any LIBOR Rate Loan has become
unlawful by compliance by such Bank in good faith
with any Law (whether or not having the force of Law
and whether or not failure to comply therewith would
be unlawful) in place as of the applicable Bank
Effective Date or has become impracticable as a
result of a contingency occurring after the
applicable Bank Effective Date which materially and
adversely affects the London interbank market;
then, and in any such event, the Agent Bank or such Bank shall,
promptly after making such determination, give notice (by
telephone promptly confirmed in writing) to the Borrower and
(if applicable) the Agent Bank of such determination (which
notice the Agent Bank shall promptly transmit to each of the
other Banks). Thereafter (A) in the case of clause (i) above,
the Borrower's right to request LIBOR Rate Loans of the Type
affected shall be suspended, and any Notice of Borrowing or
Notice of Conversion or Continuation given by the Borrower with
respect to any Borrowing of such LIBOR Rate Loans which has not
yet been made, converted or continued (as the case may be)
shall be deemed canceled and rescinded by the Borrower, (B) in
the case of clause (ii) above, the Borrower shall pay to such
Bank, upon such Bank's delivery of a written demand therefor
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to the Borrower, with a copy to the Agent Bank, such additional
amounts (in the form of an increased rate of interest, or a
different method of calculating interest, or otherwise, as such
Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or
reduction in amounts received or receivable hereunder and (C)
in the case of clause (iii) above, the Borrower shall take one
of the actions specified in clause (b) below as promptly as
possible and, in any event, within the time period required by
Law. The written demand provided for in clause (B) immediately
above shall specify the bases for, and set forth the
computation of, the claimed amount in reasonable detail and,
absent manifest error, shall be final, conclusive and binding
upon all of the parties hereto.
(b) In the case of any LIBOR Rate Loan affected
by the circumstances described in clause (a)(ii) above the
Borrower may, and in the case of any LIBOR Rate Loan affected
by the circumstances described in clause (a)(iii) above the
Borrower shall, either (x) if any such LIBOR Rate Loan has not
yet been made but is then the subject of a Notice of Borrowing
or a Notice of Conversion or Continuation, be deemed to have
canceled and rescinded such notice, or (y) if any such LIBOR
Rate Loan is then outstanding, require the affected Bank to
convert each such LIBOR Rate Loan into a Loan of a different
Type at the end of the applicable Interest Period or such
earlier time as may be required by Law, in each case by giving
the Agent Bank notice thereof on the Business Day that the
Borrower was notified by the Bank pursuant to clause (a) above;
provided, however, that all Banks whose LIBOR Rate Loans are
affected by the circumstances described in clause (a) above
shall be treated in the same manner under this clause (b).
(c) In the event that the Agent Bank determines
at any time following its giving of notice based on the
conditions described in clause (a)(i) above that such
conditions no longer exist, the Agent Bank shall promptly give
notice thereof to the Borrower and the Banks, whereupon the
Borrower's right to request LIBOR Rate Loans of the affected
Type from the Banks and the Banks' obligation to make such
LIBOR Rate Loans shall be restored.
(d) In the event that a Bank determines at any
time following its giving of a notice based on the conditions
described in clause (a)(iii) above that such conditions no
longer exist, such Bank shall promptly give notice thereof to
the Borrower and the Agent Bank, whereupon the Borrower's right
to request LIBOR Rate Loans of the affected Type from such Bank
and such Bank's obligation to make such LIBOR Rate Loans shall
be restored.
Section 2.17. Funding Losses. The Borrower shall
compensate each Bank, upon such Bank's delivery of a written
demand therefor to the Borrower, with a copy to the Agent Bank
(which demand shall, absent manifest error, be final and
conclusive and binding upon all of the parties hereto), for all
reasonable losses, expenses and
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liabilities (including, without limitation, any loss, expense
or liability incurred by such Bank in connection with the
liquidation or reemployment of deposits or funds required by it
to make or carry its LIBOR Rate Loans, and including losses of
anticipated profits), that such Bank actually sustains: (i) if
for any reason (other than a default by such Bank) a Borrowing
of, or conversion from or into, or a continuation of, LIBOR
Rate Loans does not occur on a date specified therefor in a
Notice of Borrowing or Notice of Conversion or Continuation
(whether or not rescinded, canceled or withdrawn or deemed
rescinded, canceled or withdrawn); (ii) if any repayment
(including, without limitation, payment after acceleration) or
conversion of any of its LIBOR Rate Loans occurs on a date
which is not the last day of the Interest Period applicable
thereto; (iii) if any prepayment of any of its LIBOR Rate Loans
is not made on any date specified in a notice of prepayment
given by the Borrower; or (iv) as a consequence of any default
by the Borrower in repaying its LIBOR Rate Loans or any other
amounts owing hereunder in respect of its LIBOR Rate Loans when
required by the terms of this Agreement. Calculation of all
amounts payable to a Bank under this Section 2.17 shall be made
on the assumption that such Bank has funded its relevant LIBOR
Rate Loan through the purchase of a LIBOR deposit, bearing
interest at the LIBOR Rate, in an amount equal to the amount of
such LIBOR Rate Loan, with a maturity equivalent to the
Interest Period applicable to such LIBOR Rate Loan and through
the transfer of such LIBOR deposit from an offshore office of
such Bank to a domestic office of such Bank in the United
States, provided that each Bank may fund its LIBOR Rate Loans
in any manner that it in its sole discretion chooses and the
foregoing assumption shall only be made in order to calculate
amounts payable under this Section 2.17.
Section 2.18. Increased Capital. If any Bank shall
have determined that compliance with any applicable Law,
guideline, request or directive enacted after the Bank
Effective Date applicable to such Bank (whether or not having
the force of Law), has or would have the effect of reducing the
rate of return on the capital or assets of such Bank or any
Person controlling such Bank as a consequence of its
commitments or obligations hereunder, then from time to time,
upon such Bank's delivery of a written demand therefor to the
Borrower (with a copy to the Agent Bank), the Borrower shall
pay to such Bank such additional amount or amounts as will
compensate such Bank or Person for such reduction. Each
written demand for compensation under this Section 2.18 shall
specify the bases for, and set forth the computation of, the
claimed amount in reasonable detail, and, absent manifest
error, shall be final, conclusive and binding upon all of the
parties hereto.
Section 2.19. Taxes.
(a) All payments made by the Borrower under
this Agreement shall be made free and clear of, and without
reduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or
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assessed by any Governmental Authority excluding, in the case
of the Agent Bank and each Bank, net income and franchise taxes
imposed on the Agent Bank or such Bank by (i) the jurisdiction
under the Laws of which the Agent Bank or such Bank is
organized or any political subdivision or taxing authority
thereof or therein, (ii) by any jurisdiction in which such
Bank's Domestic Lending Office or LIBOR Rate Lending Office, as
the case may be, is located or any political subdivision or
taxing authority thereof or therein, or (iii) the State of
Illinois as a result of the presence or activities of the Agent
Bank or any Bank in such jurisdictions that are not related to
the transactions contemplated by the Loan Documents (all such
non-excluded taxes, levies, imposts, deductions, charges or
withholdings being hereinafter called "Withholding Taxes"). If
any Withholding Taxes are required to be withheld from any
amounts payable to the Agent Bank, the Collateral Agent or any
Bank hereunder or under the Notes as a result of a change in
Law occurring after the Closing Date, the amounts so payable to
the Agent Bank, the Collateral Agent or such Bank shall be
increased to the extent necessary to yield to the Agent Bank,
the Collateral Agent or such Bank (after payment of all
Withholding Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this
Agreement and the Notes. Whenever any Withholding Taxes are
payable by the Borrower, as promptly as possible thereafter,
the Borrower shall send to the Agent Bank for its own account
or for the account of the Collateral Agent or such Bank, as the
case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the
Borrower fails to pay any Withholding Taxes when due to the
appropriate taxing authority or fails to remit to the Agent
Bank the required receipts or other required documentary
evidence, the Borrower shall indemnify the Agent Bank, the
Collateral Agent and the Banks for any incremental taxes,
interest or penalties that become payable by the Agent Bank,
the Collateral Agent or any Bank as a result of any such
failure. The provisions of this Section 2.19 shall survive the
termination of this Agreement and the payment of the Notes and
all other Obligations.
(b) Each Bank that is not incorporated under
the Laws of the United States or a state thereof (including
each Purchasing Bank that becomes a party to this Agreement
pursuant to Section 11.4(d)) represents and warrants that it is
entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal
income taxes or is entitled to an exemption from backup
withholding tax and agrees that, prior to the first date on
which any payment is due to it hereunder, it will deliver to
the Borrower and the Agent Bank (i) two duly completed copies
of United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in
each case that such Bank is entitled to receive payments under
this Agreement and the Notes payable to it without deduction or
withholding of any United States federal income taxes and (ii)
an Internal Revenue Service Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption
from United States backup withholding tax. Each Bank which
delivers to the Borrower and the Agent Bank a Form 1001 or 4224
and Form W-8 or W-9 pursuant to the preceding sentence further
undertakes to deliver to the Borrower and the Agent Bank two
further
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copies of Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms, or other manner of certification, as the case
may be, on or before the date that any such form expires or
becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to
the Borrower, and such extensions or renewals thereof as may
reasonably be requested by the Borrower, certifying in the case
of a Form 1001 or 4224 that such Bank is entitled to receive
payments under this Agreement without deduction or withholding
of any United States federal income taxes, unless in any such
case an event (including, without limitation, any change in
Law) has occurred prior to the date on which any such delivery
would otherwise be required which renders all such forms
inapplicable or which would prevent such Bank from duly
completing and delivering any such form with respect to it and
such Bank advises the Borrower that it is not capable of
receiving payments without any deduction or withholding of
United States federal income tax, and in the case of a Form W-8
or W-9, establishing an exemption from United States backup
withholding tax.
Section 2.20. Notice of Increased Amounts.
Notwithstanding anything herein to the contrary, no Bank shall
be entitled to demand compensation or be compensated under this
Article II other than under Section 2.19 to the extent that
such compensation relates to any period of time more than
ninety (90) days prior to the date upon which such Bank first
notified the Borrower of the occurrence of the event entitling
such Bank to such compensation (unless, and to the extent, that
any such compensation so demanded shall relate to the
retroactive application of any event so notified to the
Borrower).
Section 2.21. Use of Proceeds. The Borrower shall
use the proceeds of the Construction Loans solely to pay
Project Costs. The Borrower shall use the proceeds of the Term
Loans solely to repay the outstanding Construction Loans and
accrued and unpaid interest and Fees thereof.
Section 2.22. Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to
(and without limitation of) any right of set-off, banker's lien
or counterclaim which a Bank may otherwise have, each Bank
shall be entitled, at its option, to offset balances held by it
for the account of the Borrower at any of its offices, in
Dollars or in any other currency, against any principal of or
interest on any of such Bank's Loans, the Reimbursement
Obligations or any other amount payable to such Bank hereunder,
that is not paid when due (regardless of whether such balances
are then due to the Borrower), in which case it shall promptly
notify the Borrower and the Agent Bank thereof, provided that
such Bank's failure to give such notice shall not affect the
validity thereof.
(b) If any Bank shall obtain from the Borrower
payment of any principal of or interest on any Loan or
Reimbursement Obligation owing to it or payment of any other
amount under this Agreement or any Note held by it or any other
Loan
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Document through the exercise of any right of set-off, banker's
lien or counterclaim or similar right or otherwise (other than
from the Agent Bank as provided herein), and, as a result of
such payment, such Bank shall have received a greater
percentage of the principal of or interest on the Loans or
Reimbursement Obligations or such other amounts then due
hereunder by the Borrower to such Bank than the percentage
received by any of the other Banks, it shall promptly purchase
from such other Banks participations in (or, if and to the
extent specified by such Bank, direct interests in) the Loans
or Reimbursement Obligations or such other amounts,
respectively, owing to such other Banks (or in interest due
thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to
the end that all of the Banks shall share the benefit of such
excess payment (net of any expenses which may be incurred by
such Bank in obtaining or preserving such excess payment) pro
rata in accordance with the unpaid principal of and/or interest
on the Loans or Reimbursement Obligations or such other
amounts, respectively, owing to each of the Banks. To such end
all of the Banks shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored.
(c) The Borrower agrees that any Bank so
purchasing such a participation (or direct interest) may
exercise all rights of set-off, banker's lien, counterclaim or
similar rights with respect to such participation as fully as
if such Bank were a direct holder of Loans or other amounts (as
the case may be) owing to such Bank in the amount of such
participation.
(d) Nothing contained herein shall require any
Bank to exercise any such right or shall affect the right of
any Bank to exercise, and retain the benefits of exercising,
any such right with respect to any other Indebtedness or
obligation of the Borrower. If, under any applicable
bankruptcy, insolvency or other similar Law, any Bank receives
a secured claim in lieu of a set-off to which this Section 2.22
applies, such Bank shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner
consistent with the rights of the Banks entitled under this
Section 2.22 to share in the benefits of any recovery on such
secured claim.
ARTICLE III. CONDITIONS PRECEDENT.
Section 3.1. Conditions Precedent to Initial
Construction Loans. The obligation of each Bank to make its
initial Construction Loan is subject to the satisfaction on the
Closing Date of the following conditions precedent, all of
which shall be satisfactory to each of the Banks:
(a) Loan Documents. The Agent Bank shall have
received this Agreement (together with all amendments,
supplements, schedules, and exhibits thereto) and an
appropriately completed Construction Note for each Bank, each
of which (i) shall
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have been duly authorized, executed and delivered by each
Person party thereto (other than the Agent Bank, the Collateral
Agent and the Banks), (ii) shall be substantially in the form
of the appropriate form attached hereto (if such form is
attached) or otherwise in form and substance reasonably
satisfactory to each Bank, and (iii) shall be in full force and
effect. All representations and warranties contained in each
Loan Document shall be true and correct in all material
respects and no default or event of default shall have occurred
thereunder.
(b) Project Documents. The Agent Bank shall
have received copies of each Project Document (together with
all amendments, supplements, schedules and exhibits thereto)
(other than the Long Term Service Agreement, the RO EPC
Contract and the NGC Guarantee), each of which (i) shall have
been duly authorized, executed and delivered by each Person
party thereto (other than the Agent Bank, the Collateral Agent
and the Banks), (ii) shall be substantially in the form of the
appropriate form attached hereto (if such form is attached) or
otherwise in form and substance reasonably satisfactory to the
Agent Bank, and (iii) shall be in full force and effect. All
representations and warranties contained in each Project
Document shall be true and correct in all material respects and
no default or event of default shall have occurred thereunder
which could reasonably be expected to result in a Material
Adverse Effect.
(c) Security Documents. The Agent Bank shall
have received each Security Document (together with all
amendments, supplements, schedules and exhibits thereto), each
of which (i) shall have been duly authorized, executed and
delivered by each Person party thereto (other than the Agent
Bank, the Collateral Agent and the Banks), (ii) shall be
substantially in the form of the appropriate form attached
hereto (if such form is attached) or otherwise in form and
substance reasonably satisfactory to each Bank, and (iii) shall
be in full force and effect. All representations and
warranties contained in each Security Document shall be true
and correct in all material respects and no default or event of
default shall have occurred thereunder.
(d) Equity Commitment Agreements. The Agent
Bank shall have received an Equity Commitment Agreement from
each Equity Holder (other than NRG MI) (together with all
amendments, supplements, schedules and exhibits thereto), each
of which (i) shall have been duly authorized, executed and
delivered by each Person party thereto (other than the Agent
Bank, the Collateral Agent and the Banks), (ii) shall be
substantially in the form of the appropriate form attached
hereto (if such form is attached) or otherwise in form and
substance reasonably satisfactory to each Bank, and (iii) shall
be in full force and effect. All representations and
warranties contained in each Equity Commitment Agreement shall
be true and correct in all material respects and no default or
event of default shall have occurred thereunder which could
reasonably be expected to result in a Material Adverse Effect.
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(e) Due Diligence Review. The Agent Bank shall
have completed to its satisfaction a review of the Borrower,
the Project and the Site, and nothing shall have come to the
attention of the Agent Bank during such review that, in the
reasonable view of the Agent Bank, would result in a Material
Adverse Effect.
(f) Consents. Each Project Party (other than
the Borrower and any Additional Project Party) shall have
entered into a Consent with respect to each Project Document to
which it is a party, each of which shall be unconditional and
in full force and effect in accordance with its respective
terms and shall be in form and substance reasonably
satisfactory to each Bank. The Agent Bank shall have received
true and correct copies of each such Consent.
(g) Filings and Searches; Survey and Easements.
(i) Pursuant to the terms of the Security Documents, the Liens
on the Collateral shall have been duly created or attached. In
addition, such Liens on all of the Collateral shall have been
perfected and, where appropriate, registered, to create a first
priority security interest in and charge over the Collateral
(subject only to Permitted Liens) in favor of the Collateral
Agent for the benefit of itself and the other Secured Parties.
All Taxes (including, but not limited to, mortgage recording
taxes and recording fees), fees and other charges payable in
connection therewith shall have been paid in full by the
Borrower. Without limiting the preceding sentence, the
Borrower shall have duly authorized, executed and delivered or,
as the case may be, provided:
(A) financing statements or other instruments to be
duly filed on the Closing Date under the applicable Law of
each jurisdiction listed on Schedule 3.1(g)(i)(A),
including evidence of payment of all recording and other
taxes, as may be necessary or, in the reasonable opinion
of the Agent Bank, the Collateral Agent and the Banks,
desirable to perfect such Liens on the Collateral;
(B) to the extent available in the applicable
jurisdiction, certified copies of requests for information
or copies, or equivalent reports, which shall be issued
within a reasonable time prior to the Closing Date,
listing all effective financing statements that name the
Borrower or any Equity Holder as debtor and that are filed
in any jurisdiction in which the Borrower, any Equity
Holder or the Collateral owned by any of them is located
(or deemed located by reason of the location of the
Borrower or any Equity Holder, as the case may be, or by
operation of applicable Law), a list of which is attached
hereto as Schedule 3.1(g)(i)(B), together with copies of
such other financing statements and instruments (none of
which shall reveal Liens on any of the Collateral except
to the extent evidencing Permitted Liens or Liens
otherwise acceptable to the Agent Bank, the Collateral
Agent and the Banks);
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(C) evidence of the completion of all other
recordings and filings of, or with respect to, the
Security Documents as may be necessary or, in the opinion
of the Agent Bank, the Collateral Agent and the Banks,
desirable to perfect the Liens on the Collateral purported
to be created thereby; and
(D) evidence of the completion of all other actions
necessary or, in the reasonable opinion of the Agent Bank
and the Collateral Agent, desirable to perfect and protect
the Liens purported to be created by the Security
Documents on all of the Collateral.
(ii) The Agent Bank shall have received a current survey
of the Site, conforming with First American Title Insurance
Company survey standards and otherwise acceptable to each Bank,
prepared by a registered or licensed surveyor acceptable to
each Bank and the title company insuring the Collateral Agent's
interest in the Mortgaged Property, certified to the Borrower,
the Agent Bank, the Collateral Agent, the Banks and said title
company, showing: (i) the location of the Site; (ii) all
easements benefiting the Site (or constituting a portion of the
Site), all easements affecting the Site and all rights of way
and existing utility lines referred to in the Title Insurance
Policy or disclosed by a physical inspection of the Site; (iii)
any established building lines, whether by zoning or agreement,
and areas affected by restrictive covenants affecting the Site;
(iv) adequate access to the Mortgaged Property; (v)
encroachments, if any, and the extent thereof in feet and
inches upon the Site and onto property adjacent to the Site;
and (vi) any improvements, whether existing or to the extent
constructed, and the relationship of such improvements by
distances to the perimeter of the Site, established building
lines and street lines.
(iii) The Agent Bank shall have received evidence
satisfactory to each Bank that the Borrower has obtained all
easements, licenses, rights-of-way and any other rights
necessary for the construction, operation and maintenance of
the Project free and clear of all Liens (other than Permitted
Liens).
(h) Independent Engineer's Report. The Agent
Bank shall have received (i) a report of the Independent
Engineer, in form and substance satisfactory to the Agent Bank,
addressing, among other matters, (A) the technical feasibility
of the Project, (B) the reasonableness of the Construction
Schedule and the Construction Budget, (C) the sufficiency of
the completion and performance tests contained in the EPC
Contract, (D) the adequacy of environmental permitting and the
environmental site assessment, and (E) the reasonableness of
the primary assumptions upon which the projections of sales of
excess electrical power are based and (ii) a certificate of the
Independent Engineer substantially in the form of Exhibit H.
(i) Fuel Consultant's Report. The Agent Bank
shall have received a report of the Fuel Consultant, in form
and substance satisfactory to the Agent Bank, addressing
certain items with respect to the adequacy of the gas supply
plan for the Project,
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including, without limitation, (i) the short- and long-term
risk of insufficient gas supply for the Project, (ii) the
reasonableness of the gas supply, transportation, distribution
and storage arrangements for the Project and (iii) the
consistency of the gas supply arrangements for the Project with
the Energy Services Agreement and the other relevant Project
Documents.
(j) Petrochemical Industry Consultant's Report.
The Agent Bank shall have received a report of the
Petrochemical Industry Consultant, in form and substance
satisfactory to the Agent Bank, addressing the long-term
viability of the Morris Plant.
(k) Insurance Consultant's Report. The Agent
Bank shall have received a certificate of the Insurance
Consultant stating that (i) all insurance coverages required to
be obtained by or on behalf of the Borrower, the EPC Contractor
or the Energy Purchaser have been obtained and (ii) all such
insurance coverages are in full force and effect.
(l) Insurance. (i) The Agent Bank shall have
received insurance certificates evidencing that all insurance
coverages required under Section 5.7 to be obtained by or on
behalf of the Borrower or the EPC Contractor have been obtained
and are in full force and effect.
(ii) The Agent Bank shall have received a paid policy of
mortgage title insurance (the "Title Insurance Policy"), in an
amount equal to $91,000,000, in form and substance satisfactory
to the Agent Bank, issued by a title insurance company
satisfactory to the Agent Bank (with such reinsurance in such
amounts and with such title insurance companies as may be
required and approved by the Agent Bank), containing no
exceptions (printed or otherwise) other than those approved by
the Agent Bank, and insuring that the Collateral Agent has a
good, valid and enforceable first Lien of record on the
Mortgaged Property free and clear of all defects and
encumbrances.
(m) Opinions of Counsel. The Agent Bank shall
have received the following legal opinions, each of which shall
be in form and substance satisfactory to the Agent Bank and
shall be dated the Closing Date:
(i) Opinion of Counsel of James J. Bender, Esq., as
corporate counsel to the Borrower, NRG Energy and the
Operator;
(ii) Opinion of Counsel of Maslon, Edelman, Borman &
Brand LLP, as outside counsel to the Borrower, NRG Energy
and the Operator;
(iii) Opinion of Counsel of Pedersen & Houpt, as
local counsel to the Borrower, NRG Energy and the
Operator;
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(iv) Opinion of Counsel of Troutman Sanders LLP, as
regulatory counsel to the Borrower;
(v) Opinion of Counsel of Henley R. Webb, Esq., as
corporate counsel to the Energy Purchaser, and Opinion of
Counsel of Mayer, Brown & Platt, as outside counsel to the
Energy Purchaser,
(vi) Opinion of Counsel of Bruce W. Ballai, Esq., as
corporate counsel to the EPC Contractor;
(vii) Opinion of Counsel of Thomas C. Stortz, Esq.,
as corporate counsel to the Construction Guarantor;
(viii) Opinion of Counsel of Alexander C. Allison,
Esq., as corporate counsel to NIGAS, and Opinion of
Counsel of Mayer, Brown & Platt, as outside counsel to
NIGAS; and
(ix) Opinion of Counsel of Charles H. Brownman, Esq.,
as corporate counsel to NGC, and Opinion of Counsel of
John C. Herbert, Esq., as corporate counsel to NGC.
(n) Financial Statements and Information. The
Agent Bank shall have received (i) true, correct and complete
copies of audited financial statements for the most recently
completed fiscal year for each Equity Holder (other than NRG
MI), each Equity Contributor, the Energy Purchaser, the EPC
Contractor, the Construction Guarantor and the O&M Guarantor,
and (ii) true, correct and complete copies of unaudited pro
forma financial statements (if audited statements are not
otherwise available) for the most recent fiscal quarter for the
Borrower and the Operator, each in form and substance
satisfactory to each Bank.
(o) Governmental Approvals. (i) Schedule
3.1(o) shall list all Necessary Project Approvals (including
all Deferred Approvals), (ii) all Necessary Project Approvals
(other than Deferred Approvals) shall be in full force and
effect as of the Closing Date and (iii) the Agent Bank shall
have received (A) true, correct and complete copies of all
Necessary Project Approvals and (B) a certificate of an
Authorized Officer of the Borrower stating that (1) Schedule
3.1(o) lists all Necessary Project Approvals (including all
Deferred Approvals), (2) all Necessary Project Approvals (other
than Deferred Approvals) are in full force and effect as of the
Closing Date and (3) the copies of Necessary Project Approvals
received by the Agent Bank are true, correct and complete
copies of the originals of such Necessary Project Approvals.
(p) No Default, Etc. (i)(A) No default or
event of default shall have occurred and be continuing under
any Transaction Document, (B) all representations
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and warranties made by the Borrower, and to the best of its
knowledge each other Project Party, in the Transaction
Documents shall be true and correct in all material respects,
(C) no litigation or other proceeding shall be pending, or, to
the best of the Borrower's knowledge, threatened against the
Borrower or, to the best of its knowledge, any other Project
Party that could reasonably be expected to result in a Material
Adverse Effect and (D) there shall have been no material
adverse change in the projected Project Costs or the business
operations, prospects or financial or other condition of the
Borrower or, to the best of the Borrower's knowledge, any
Equity Holder, any Equity Contributor, the Energy Purchaser,
the EPC Contractor, the Construction Guarantor, the Operator,
the O&M Guarantor or any other Project Party (excluding
Additional Project Parties) and (ii) the Agent Bank shall have
received a certificate of an Authorized Officer of the Borrower
certifying as to the foregoing.
(q) Qualifying Facility Status. The Agent Bank
shall have received evidence reasonably satisfactory to it and
to the Independent Engineer demonstrating that, on or prior to
the Commercial Operation Date, either (i) the Project will be
able to attain Qualifying Facility status through self
certification (including, without limitation (A) efficiency
calculations in form and substance satisfactory to the
Independent Engineer and (B) an opinion of Regulatory Counsel
to that effect in form and substance satisfactory to the Agent
Bank), or (ii) the Borrower will otherwise be able to sell
electricity and steam to the Energy Purchaser and to wholesale
purchasers without being regulated as an "electric utility" or
an "electric utility holding company" under applicable federal
and state Law.
(r) Utility Regulation. The Agent Bank shall
have received evidence reasonably satisfactory to it that the
sale of electricity by the Project will not result in the
regulation of the Borrower, NRG Energy or any other Project
Party as an "electric utility" or an "electric utility holding
company" under applicable federal or state Law, including,
without limitation, an opinion of Regulatory Counsel and/or
other counsel to the Borrower to that effect in form and
substance satisfactory to the Agent Bank.
(s) Construction Budget, Construction Schedule
and Progress Payment Schedule. The Agent Bank shall have
received the Construction Budget, the Construction Schedule and
the Progress Payment Schedule for the Project, each (i)
certified as complete and accurate in all material respects by
an Authorized Officer of the Borrower and (ii) in form and
substance satisfactory to the Agent Bank.
(t) Base Case Forecasts. The Agent Bank shall
have received the Base Case Forecasts for the Project, in form
and substance satisfactory to the Agent Bank and the
Independent Engineer, evidencing, after giving effect to the
financing of the Project, an average projected Debt Service
Coverage Ratio of at least 1.4 to 1 and a minimum projected
Debt Service Coverage Ratio of at least 1.2 to 1, each through
the Final Maturity Date.
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(u) Notice to Proceed. The Borrower shall have
issued, and the EPC Contractor shall have acknowledged the
receipt of, the Notice to Proceed.
(v) Certificate of EPC Contractor. The Agent
Bank shall have received a certificate of the EPC Contractor,
in form and substance satisfactory to the Agent Bank, stating
that (i) the Borrower is not in default under the EPC Contract,
(ii) no Change Orders are required under the EPC Contract other
than Change Orders which have been delivered to the Agent Bank
and reviewed and approved by the Independent Engineer and (iii)
to the best of its knowledge, after reasonable inquiry, no
event constituting Uncontrollable Circumstances (as defined in
the EPC Contract) has occurred and is continuing under the EPC
Contract.
(w) Fees and Expenses. The Agent Bank shall
have received on the Closing Date, for its account and for the
account of each Bank, as applicable, all Fees and other fees,
costs and expenses of the Independent Engineer, the Fuel
Consultant, the Insurance Consultant, the Petrochemical
Industry Consultant and any legal counsel retained by the Agent
Bank or the Collateral Agent due and payable hereunder on or
before the Closing Date, including, without limitation, the
fees and expenses accrued and invoiced through the Closing
Date.
(x) No Material Adverse Effect. No event shall
have occurred which could reasonably be expected to result in a
Material Adverse Effect.
(y) Appointment of Independent Auditors.
Arrangements satisfactory to the Agent Bank shall have been
made for the appointment of the Auditors, and the Agent Bank
shall have received a copy of the documents authorizing the
Auditors to communicate directly with the Agent Bank and the
Collateral Agent.
(z) Appointment of Agent for Service of
Process. The Borrower and all other obligors under the
Financing Documents shall have appointed an agent for service
of process on terms satisfactory to the Agent Bank and shall
have paid all fees necessary for such process agent to act as
such through the Final Maturity Date.
(aa) Notice of Borrowing The Agent Bank shall
have received an executed Notice of Borrowing in respect of the
Loans to be made on the Closing Date which Notice of Borrowing
shall contain the certifications required hereunder each made
as of the date of such Notice of Borrowing and as of the date
on which the Loan is to be made.
(bb) Corporate Documents. The Agent Bank shall
have received each of the following in form and substance
satisfactory to it:
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(i) a certificate of an Authorized Officer of each
Project Party (other than Additional Project Parties),
dated as of the Closing Date, certifying as true, complete
and correct attached copies of (A) the certificate of
formation or certificate of incorporation, as applicable,
of such Project Party, (B) the bylaws or similar document
of such Project Party and (C) the resolutions of the
managers or board of directors, as applicable, of such
Project Party approving and authorizing the execution,
delivery and performance of all Transaction Documents to
which such Project Party is a party;
(ii) a certificate of an Authorized Officer of each
Project Party (other than Additional Project Parties),
dated as of the Closing Date, certifying the names and
true signatures of the incumbent officers of such Project
Party authorized to sign the Transaction Documents to
which such Project Party is a party; and
(iii) evidence that each Project Party (other than
Additional Project Parties) is duly authorized to carry on
its business as now being conducted by it, and as proposed
to be conducted by it, in each jurisdiction in which it is
required to be so authorized.
(cc) Environmental Matters. The Agent Bank
shall (i) be satisfied that the Borrower does not have any
present or contingent liability relating to any Environmental
Approval, Environmental Claim or Environmental Law which is not
covered by an indemnity agreement satisfactory to the Agent
Bank in form and substance, (ii) be satisfied that the Borrower
presently is in compliance with all Environmental Laws and all
Environmental Approvals in all material respects, and (iii)
have received evidence that all Environmental Approvals
necessary to construct and operate the Project (other than
Environmental Approvals that are Deferred Approvals) have been
obtained and are in full force and effect.
(dd) Payment of Subcontractors. If all or any
part of the proceeds of the Loans to be made on the Closing
Date are to be paid to the EPC Contractor, the Agent Bank shall
have received a certificate of the EPC Contractor substantially
in the form of Schedule Q to the EPC Contract.
Section 3.2. Conditions Precedent to the Making of
All Loans and Issuance of Letters of Credit. The obligation of
each Bank to extend any credit, including the obligation to
make, extend or increase Loans (including any Loan made on the
Closing Date) and the obligation of the Issuing Bank to issue
any Letter of Credit, is subject to the satisfaction on the
date such Loan is to be made or such Letter of Credit is to be
issued, of the following conditions precedent, all of which
shall be satisfactory to each Bank:
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(a) No Defaults, Etc. (i)(A) No default or event of
default shall have occurred and be continuing under any
Transaction Document, (B) all representations and warranties
made by the Borrower, and to the best of its knowledge each
other Project Party, in the Transaction Documents shall be true
and correct in all material respects, (C) no litigation or
other proceeding shall be pending, or, to the best of its
knowledge, threatened against the Borrower or, to the best of
its knowledge, any other Project Party that could reasonably be
expected to result in a Material Adverse Effect and (D) there
shall have been no material adverse change in the projected
Project Costs or the business operations, prospects or
financial or other condition of the Borrower or, to the best of
the Borrower's knowledge, any Equity Holder, any Equity
Contributor, the Energy Purchaser, the EPC Contractor, the
Construction Guarantor, the Operator, the O&M Guarantor or any
other Project Party and (ii) the Agent Bank shall have received
a certificate of an Authorized Officer of the Borrower
certifying as to the foregoing.
(b) Independent Engineer's Certificate. The Agent
Bank shall have received a certificate of the Independent
Engineer substantially in the form of Exhibit I.
(c) Insurance. The Agent Bank shall have received
(i) a certificate of an Authorized Officer of the Borrower, in
form and substance satisfactory to the Agent Bank, stating that
(A) all insurance coverages required to be obtained by or on
behalf of the Borrower are in place and are in full force and
effect and (B) to the best knowledge of the Borrower, all
insurance coverages required to be obtained by or on behalf of
the EPC Contractor or the Energy Purchaser are in place and in
full force and effect, and (ii) a notice of title continuation
or an endorsement of the title company insuring the Collateral
Agent's interest in the Mortgaged Property updating the Title
Insurance Policy to the date of disbursement of such Loan or
the issuance of such Letter of Credit, as the case may be,
showing no intervening Liens (other than Permitted Liens) or
encumbrances on the Mortgaged Property and showing that there
has been no change in the state of title and no survey
exceptions not theretofore approved by each Bank, which
endorsements shall have the effect of setting the coverage of
the Title Insurance Policy.
(d) Governmental Approvals. All Necessary Project
Approvals required to be in place as of such date shall be in
full force and effect and the Agent Bank shall have received
(i) true, correct and complete copies of all such Necessary
Project Approvals and (ii) a certificate of an Authorized
Officer of the Borrower confirming the statements set forth in
this clause (d).
(e) Payment of Subcontractors. If all or any
portion of the Loans to be made on such date are to be paid to
the EPC Contractor, the Agent Bank shall have received a
certificate from the EPC Contractor substantially in the form
of Schedule Q to the EPC Contract.
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(f) Material Adverse Effect. No event or condition
shall have occurred that could reasonably be expected to result
in a Material Adverse Effect.
(g) Additional Project Documents. The Agent Bank
shall have received copies of Additional Project Documents
required to be in place as of such date and not previously
delivered to the Agent Bank (together with all amendments,
supplements and exhibits thereto) and all Ancillary Documents
in respect of such Additional Project Documents, each of which
(i) shall have been duly authorized, executed and delivered by
each Person party thereto (other than the Agent Bank, the
Collateral Agent and the Banks), (ii) shall be in the form of
the appropriate form attached hereto (if such form is attached)
or otherwise in form and substance satisfactory to the Agent
Bank, and (iii) shall be in full force and effect. All
representations and warranties contained in each such
Additional Project Document shall be true and correct in all
material respects and no default or event of default shall have
occurred thereunder which could reasonably be expected to
result in a Material Adverse Effect.
(h) Notice of Borrowing; Request for Issuance. The
Agent Bank shall have received an executed Notice of Borrowing
in respect of the Loans to be made, or a Request for Issuance
in respect of any Letter of Credit to be issued, on such date,
which Notice of Borrowing or Request for Issuance shall contain
the certifications required hereunder, each made as of the date
of such Notice of Borrowing or Request for Issuance and as of
the date on which the Loans are to be made or the Letter of
Credit is to be issued.
(i) Equity Contribution. Each Equity Contributor
shall have made all Equity Contributions required under the
Equity Commitment Agreement to which such Equity Contributor is
a party; provided, however, that the condition precedent set
forth in this clause (i) shall apply only if the aggregate
Dollar amount of all Construction Loan Borrowings equals or
exceeds $84,000,000.
Section 3.3. Conditions Precedent to Conversion to
Term Loans. The obligation of the Banks to convert
Construction Loans to Term Loans is subject to the satisfaction
on the date of such conversion of the following conditions
precedent, all of which shall be satisfactory to each Bank:
(a) Acceptance; Commercial Operation. Each of the
following shall have occurred and the Agent Bank shall have
received a certificate of an Authorized Officer of the Borrower
confirming the occurrence thereof:
(i) the Project shall have achieved Acceptance;
(ii) all Punch List items (other than Minor
Punch List Items) shall have been completed; and
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(iii) the Project shall have achieved
Commercial Operation.
(b) Independent Engineer's Certificate. The Agent
Bank shall have received a certificate of the Independent
Engineer substantially in the form of Exhibit J.
(c) Transaction Documents. Each Transaction
Document entered into by or on behalf of the Borrower with a
Project Party which has obligations that continue after the
Conversion Date shall be in full force and effect and the Agent
Bank shall have received a certificate of an Authorized Officer
of the Borrower confirming the foregoing.
(d) No Defaults, Etc. (i)(A) No default or event of
default shall have occurred and be continuing under any
Transaction Document, (B) all representations and warranties
made by the Borrower, and to the best of its knowledge each
other Project Party, in the Transaction Documents shall be true
and correct in all material respects, (C) no litigation or
other proceeding shall be pending, or, to the best of the
Borrower's knowledge, threatened against the Borrower or, to
the best of its knowledge, any other Project Party that could
reasonably be expected to result in a Material Adverse Effect
and (D) there shall have been no material adverse change in the
projected Project Costs or the business operations, prospects
or financial or other condition of the Borrower or, to the best
of the Borrower's knowledge, any other Project Party and (ii)
the Agent Bank shall have received a certificate of an
Authorized Officer of the Borrower certifying as to the
foregoing.
(e) Legal Opinions. The Agent Bank shall have
received the following legal opinions, each of which shall be
in form and substance satisfactory to the Agent Bank and shall
be dated the Conversion Date:
(i) Opinion of Counsel of corporate counsel to
the Borrower, NRG Energy (so long as the O&M Guarantee is
in effect) and the Operator;
(ii) Opinion of Counsel of outside counsel to
the Borrower, NRG Energy (so long as the O&M Guarantee is
in effect) and the Operator;
(iii) Opinion of Counsel of local counsel to the
Borrower, NRG Energy (so long as the O&M Guarantee is in
effect) and the Operator;
(iv) Opinion of Counsel of regulatory counsel to
the Borrower;
(v) Opinion of Counsel of counsel to the Energy
Purchaser;
(vi) Opinion of Counsel of counsel to NIGAS;
(vii) Opinion of Counsel of counsel to NGC; and
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(viii) Opinion of Counsel of counsel to the
Maintenance Contractor.
(f) Insurance; Title. The Agent Bank shall have
received (i) insurance certificates evidencing that all
insurance coverages required to be obtained by or on behalf of
the Borrower, the Operator or the Energy Purchaser under
Section 5.7 have been obtained and are in full force and
effect, (ii) a certificate of the Insurance Consultant stating
that (A) all insurance coverages required to be obtained by or
on behalf of the Borrower, the Operator or the Energy Purchaser
have been obtained and (B) all such insurance coverages are in
full force and effect and (iii) a notice of title continuation
or an endorsement of the title company insuring the Collateral
Agent's interest in the Mortgaged Property updating the Title
Insurance Policy to the Conversion Date, showing no intervening
Liens (other than Permitted Liens) or encumbrances on the
Mortgaged Property and showing that there has been no change in
the state of title and no survey exceptions not theretofore
approved by each Bank, which endorsements shall have the effect
of setting the coverage of the Title Insurance Policy.
(g) Government Approvals. (i) All Necessary Project
Approvals required to be obtained by the Conversion Date shall
be in full force and effect and (ii) the Agent Bank shall have
received (A) true, correct and complete copies of such
Necessary Project Approvals and (B) a certificate of an
Authorized Officer of the Borrower stating that (1) such
Necessary Project Approvals are in full force and effect as of
the Conversion Date and (2) the copies of such Necessary
Project Approvals received by the Agent Bank are true, correct
and complete copies of the originals of such Necessary Project
Approvals.
(h) Operating Budget. The Agent Bank shall have
received the initial operating budget prepared pursuant to
Section 4.17 of the Operation and Maintenance Agreement (the
"Preliminary Operating Budget"), together with any completed
extensions thereto prepared pursuant to Section 6.2.1 of the
Operation and Maintenance Agreement, all in form and substance
satisfactory to the Agent Bank.
(i) Equity Commitments. Each Equity Contributor
shall have fully satisfied its obligations under its Equity
Commitment Agreement and the Agent Bank shall have received a
certificate of an Authorized Officer of the Borrower confirming
that such obligations have been satisfied.
(j) Debt Service Reserve. Amounts on deposit in the
Debt Service Reserve Account, together with any Debt Service
Reserve Letter of Credit credited thereto, shall equal or
exceed the Debt Service Reserve Required Balance and the Agent
Bank shall have received evidence thereof in form and substance
satisfactory to it.
(k) Material Adverse Effect. No event shall have
occurred which could reasonably be expected to result in a
Material Adverse Effect.
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(l) Qualifying Facility Status. The Agent Bank
shall have received evidence satisfactory to it that the
Project has obtained Qualifying Facility status through self-
certification.
(m) Term Notes. The Agent Bank shall have received
an appropriately completed Term Note for each Bank, each of
which (i) shall have been duly authorized, executed and
delivered by the Borrower, (ii) shall be substantially in the
form of Exhibit C and (iii) shall be in full force and effect.
All representations and warranties contained in each Term Note
shall be true and correct in all material respects and no
default or event of default shall have occurred thereunder.
Section 3.4. Conditions; General Principles.
(a) The acceptance of the proceeds of each Loan
shall constitute a representation and warranty by the Borrower
to each of the Banks that all of the conditions required to be
satisfied under this Article III in connection with the making
of such Loan have been satisfied.
(b) All of the agreements, instruments, reports,
opinions and other documents and papers referred to in this
Article III, unless otherwise expressly specified, shall be
delivered to the Agent Bank for the account of each of the
Banks and, except for the Notes, in sufficient counterparts for
each of the Banks, and shall be satisfactory in form and
substance to each Bank.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES.
In order to induce the Agent Bank, the Collateral
Agent and the Banks to enter into this Agreement and the Banks
to make the Loans, and to induce the Issuing Bank to issue the
Letters of Credit, the Borrower makes the following
representations and warranties, which shall survive the
execution and delivery of this Agreement and the Notes, the
making of each Loan and the issuance of each Letter of Credit.
Any reference in any representation or warranty to a
Transaction Document shall include only Transaction Documents
that have been entered into on or prior to the date such
representation or warranty is made or deemed made.
Section 4.1. Status; Power and Authority; Due
Authorization; Enforceability.
(a) The Borrower (i) is a limited liability company
duly organized, validly existing and in good standing in
accordance with the laws of the State of Delaware and (ii) has
duly qualified and is authorized to do business and is in good
standing as a foreign limited liability company under the laws
of each other jurisdiction in
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which it owns or leases real property or in which the nature of
its business requires it to be so qualified, except where the
failure to be so qualified could not reasonably be expected to
result in a Material Adverse Effect.
(b) The Borrower has full power and authority to (i)
own the property and assets owned by it and lease the property
and assets leased by it, (ii) transact the business in which it
is engaged or proposes to be engaged, (iii) execute and deliver
each of the Transaction Documents to which it is or is intended
to be a party and (iv) perform its obligations under and
consummate the transactions contemplated by the Transaction
Documents to which it is or is intended to be a party.
(c) The Borrower has taken all necessary action to
authorize the execution, delivery and performance of the
Transaction Documents to which it is or is intended to be a
party. No consent or authorization of, filing with or other
act by or in respect of any Governmental Authority or other
Person is required in connection with the execution, delivery
and performance by the Borrower of the Transaction Documents to
which it is or is intended to be a party or the validity and
enforceability of the Transaction Documents, except for the
Deferred Approvals.
(d) This Agreement and each other Transaction
Document to which the Borrower is or is intended to be a party,
when executed and delivered by the Borrower, will constitute a
legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms except as the
enforcement thereof may be limited by applicable bankruptcy,
insolvency or similar Laws affecting the enforcement of rights
of creditors generally and except to the extent that
enforcement of rights and remedies set forth therein may be
limited by equitable principles (regardless of whether
enforcement is considered in a court of law or a proceeding in
equity).
Section 4.2. No Violation. Neither the execution,
delivery or performance by the Borrower of the Transaction
Documents to which it is or is intended to be a party, nor
compliance with or performance of the terms thereof (a) will
contravene or violate any applicable provision of Law to which
the Borrower or any of its assets is subject, (b) will conflict
or be inconsistent with, result in any breach of, or constitute
a default under, any agreement to which the Borrower is a party
or to which it or any of its assets is subject, (c) result in
the creation or imposition of (or the obligation to create or
impose) any Lien (other than Permitted Liens) upon any of the
property or assets of the Borrower, except, in the case of each
of clauses (a), (b) and (c), any contravention, violation,
conflict, inconsistency, breach, default, creation or
imposition that could not reasonably be expected to result in a
Material Adverse Effect, or (d) will violate the certificate of
formation, agreement of limited liability company or any other
constitutive documents of the Borrower.
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Section 4.3. Litigation. There are no actions,
suits, investigations or proceedings by or before any
Governmental Authority or arbitrator pending or, to the best of
the Borrower's knowledge, threatened against the Borrower, the
Project or, to the best of the Borrower's knowledge, any other
Project Party which could reasonably be expected to result in a
Material Adverse Effect.
Section 4.4. Financial Statements; Financial
Condition; Etc. The financial statements of the Borrower
delivered to the Agent Bank pursuant to Section 3.1(n)
(including the related notes and schedules thereto) were
prepared in accordance with GAAP and fairly present the
financial condition and the results of operations of the
Borrower on the dates and for the periods covered thereby,
except as disclosed in the notes thereto and, with respect to
interim financial statements, subject to normally recurring
year-end adjustments. As of the Closing Date, the Borrower has
no Contingent Obligations or other undisclosed material
obligations not shown on such financial statements except for
indemnity obligations under the Transaction Documents.
Section 4.5. Material Adverse Change. Since the
ending date of the most recent audited (or unaudited if audited
statements were not available) financial statements delivered
pursuant to Section 3.1(n), no event, condition or circumstance
has existed or has occurred which has resulted in or could
reasonably be expected to result in a Material Adverse Effect.
Section 4.6. Use of Proceeds; Margin Regulations.
All proceeds of each Loan will be used by the Borrower only in
accordance with the provisions of Section 5.11. No part of the
proceeds of any Loan will be used by the Borrower to purchase
or carry any Margin Stock (as defined in Regulation U) or to
extend credit to others for the purpose of purchasing or
carrying any Margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof will violate or be inconsistent
with the provisions of Regulations G, T, U or X.
Section 4.7. Governmental Approvals. All
Governmental Approvals which under applicable Law are required
to have been obtained in connection with (i) the due execution,
delivery and performance by the Borrower of the Transaction
Documents to which it is or is intended to be a party, (ii) the
construction and operation of the Project as contemplated by
the Transaction Documents and (iii) the grant by the Borrower
of the Liens granted under the Security Documents or the
validity, perfection and enforceability thereof or for the
exercise by the Collateral Agent of its rights and remedies
thereunder (all of the foregoing, the "Necessary Project
Approvals"), have been obtained, are in full force and effect,
if so required are in the name of the Borrower and are final
and all appeal periods with respect thereto have expired or
terminated, except those approvals listed on Part B of Schedule
3.1(o) but only to the extent such approvals are not required
to have been obtained prior to the date this representation is
made or deemed made (collectively, the "Deferred Approvals").
Each such Necessary Project Approval (other
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than the Deferred Approvals) is listed on Part A of Schedule
3.1(o) and the information set forth in each application
submitted by or on behalf of the Borrower in connection with
each such Necessary Project Approval was accurate and complete
in all material respects at the time of submission and
continues to be accurate and complete in all material respects
to the extent required for the issuance or continued
effectiveness of the related Necessary Project Approval, and
the Borrower has no knowledge of any event, act, condition or
state of facts inconsistent with such information. The
Borrower reasonably believes that each Deferred Approval shall
be obtained in a final and non-appealable form in the ordinary
course prior to the time it is required to be obtained
hereunder or under the other Transaction Documents. There is
no action, suit, investigation or proceeding pending, or, to
the best knowledge of the Borrower, threatened, that could
result in the modification, rescission, termination or
suspension of any Governmental Approval referred to in Schedule
3.1(o) obtained prior to the date this representation is made
or deemed made.
Section 4.8. Compliance with Applicable Laws.
(a) The Borrower has been and is currently in
compliance with all applicable Laws, except where the failure
to so comply could not reasonably be expected to result in a
Material Adverse Effect.
(b) With respect to any date prior to the
Conversion Date, the Project is being owned, developed and
constructed in compliance with all applicable Laws and in
compliance with the requirements of all Necessary Project
Approvals except such noncompliance as could not, singly and in
the aggregate, result in a Material Adverse Effect.
(c) As constructed, the Project will conform to
and comply with all federal, state and local zoning,
environmental, land use and other Laws and the requirements of
all Necessary Project Approvals and Deferred Approvals except
such noncompliance as could not, singly and in the aggregate,
result in a Material Adverse Effect.
(d) With respect to any date after the
Conversion Date, the Project is being owned, operated and
maintained in compliance with all applicable Laws and in
compliance with the requirements of all Necessary Project
Approvals and Deferred Approvals except such noncompliance as
could not, singly and in the aggregate, result in a Material
Adverse Effect.
Section 4.9. Sole Purpose Nature; Business. The
Borrower (i) does not engage in any business other than
business relating to the ownership, development, financing,
construction, operation and maintenance of the Project and the
activities related thereto as contemplated by the Transaction
Documents and (ii) is not a party to any agreement, contract or
commitment other than the Transaction Documents and those
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agreements and instruments which it is permitted to enter into
in accordance with the terms of the Transaction Documents.
Section 4.10. Collateral. The Borrower has good,
marketable and valid title in and to all of the Collateral,
free and clear of all Liens other than Permitted Liens.
Section 4.11. Security Interests and Liens. The
Security Documents create, as security for the Obligations, a
valid and enforceable perfected first priority security
interest in all of the Collateral, in favor of the Collateral
Agent, subject to no Liens other than Permitted Liens. All
Governmental Approvals necessary or desirable to perfect such
security interest have been duly effected or taken.
Section 4.12. Patents, Trademarks, Etc. The Borrower
owns or has the right to use all patents, trademarks,
copyrights, licenses, franchises and other such rights or
adequate licenses therein, free from burdensome restrictions,
which are reasonably necessary for the ownership, development,
construction, operation and maintenance of the Project, to the
extent required as of the date on which the representation set
forth in this Section 4.12 is made or deemed made, except where
failure to do so could not reasonably be expected to result in
a Material Adverse Effect.
Section 4.13. Investment Company Act; Public Utility
Holding Company Act. The Borrower is not (i) an "investment
company" or a company "controlled" by an "investment company,"
within the meaning of the ICA, (ii) subject to regulation as a
"holding company," a "public utility company," or an
"affiliate" or a "subsidiary company" of a "registered holding
company," as defined in PUHCA, or (iii) subject to any other
Law which purports to restrict or regulate its ability to
borrow money.
Section 4.14. Governmental Regulation.
(a) The Borrower is not, and, by reason of (i)
the ownership of the Project or the operation thereof by the
Borrower or (ii) any other transaction contemplated by this
Agreement or any of the other Transaction Documents, will not
be deemed by any Governmental Authority to be, subject to
financial, organizational or rate regulation as (A) a "public
utility" within the meaning of Section 201(e) of the Federal
Power Act, (B) an "electric utility company", a "public utility
company", or a "holding company" under PUHCA or (C) a "public
utility" within the meaning of Section 3-105 of the Public
Utilities Act of the State of Illinois, 220 ILCS 5/3-105
(1997).
(b) None of the Agent Bank, the Collateral
Agent or the Banks will, solely by reason of (i) the ownership,
construction, operation and maintenance of the Project by the
Borrower as contemplated by the Notice of Self-Certification of
a Qualifying Cogeneration Facility filed by the Borrower with
the Federal Energy Regulatory Commission on September 5, 1997
on Docket No. QF97-140-000, (ii) the making of any
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Loans or (iii) the securing of the Obligations by Liens on the
Collateral, be deemed by any Governmental Authority to be, or
to be subject to regulation as (A) a "public utility" within
the meaning of Section 201(e) of the Federal Power Act, (B) an
"electric utility company", a "public utility company", or a
"holding company" under PUHCA or (C) a "public utility" within
the meaning of Section 3-105 of the Public Utilities Act of the
State of Illinois, 220 ILCS 5/3-105 (1997).
(c) If (i) the Project continues to be operated
as contemplated by the Notice of Self-Certification of a
Qualifying Cogeneration Facility filed by the Borrower with the
Federal Energy Regulatory Commission on September 5, 1997 on
Docket No. QF97-140-000 and (ii) none of the Agent Bank, the
Collateral Agent or any of the Banks is otherwise a "person
primarily engaged in the generation or sale of electric power
(other than electric power solely from cogeneration facilities
or small power production facilities)" within the meaning of 18
C.F.R. 292.206, none of the Agent Bank, the Collateral Agent
or any of the Banks will, solely by reason of ownership or
operation of the Project upon the exercise of its remedies
under the Security Documents, be deemed by any Governmental
Authority to be subject to financial, organizational or rate
regulation as (A) a "public utility" within the meaning of
Section 201(e) of the Federal Power Act, (B) an "electric
utility company", a "public utility company", or a "holding
company" under PUHCA or (C) a "public utility" within the
meaning of Section 3-105 of the Public Utilities Act of the
State of Illinois, 220 ILCS 5/3-105 (1997).
Section 4.15. Sufficient Rights. The services to be
performed and the materials to be supplied pursuant to the
Project Documents and the land use and other rights granted to
the Borrower in the Project will provide the Borrower with all
rights and property interests necessary for the development,
construction, operation and maintenance of the Project, other
than those services, materials or rights which the Borrower can
obtain in the ordinary course of business without material
expense or material delay.
Section 4.16. Property Rights, Utilities, Etc. The
Borrower has secured all utility services, means of
transportation, facilities and other materials necessary for
the construction and operation of the Project (including as
necessary, gas, electrical, water and sewage services and
facilities), and any utility services which will be required at
a later date for the operation of the Project will be available
in the ordinary course of business.
Section 4.17. No Defaults. No default, event of
default, breach or event of Force Majeure has occurred or is
continuing under any Transaction Document. Neither the
Borrower, or to the best of the Borrower's knowledge, any
Project Party is in breach of, or in default under, any
Transaction Document, nor is the Borrower in breach of or in
default under any other agreement or instrument to which it is
a party or by which it or its properties or assets may be
bound.
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Section 4.18. Payment of Taxes. The Borrower has
filed or caused to be filed all federal, state and other tax
returns which are required to be filed by it and has paid or
has caused to be paid (prior to their delinquency dates) all
taxes, fees, charges and assessments ("Taxes") which have
become due pursuant to such returns or pursuant to any
assessment received by it, other than Taxes the payment of
which is subject to a Contest.
Section 4.19. ERISA. With respect to each Plan, the
Borrower and each other member of the Controlled Group has
fulfilled its obligations under the minimum funding standards
of and is in compliance in all material respects with ERISA and
with the Code the extent applicable to it and has not incurred
any liability to the PBGC or a Plan under Title IV of ERISA
other than a liability to the PBGC for premiums under Section
4007 of ERISA. The Borrower does not have any contingent
liabilities for any post- retirement benefits under a Welfare
Plan, other than liability for continuation coverage described
in Part 6 of Title I of ERISA.
Section 4.20. Transaction Documents.
(a) Set forth on Schedule 4.20 is a list of all
material contracts, agreements, letters of intent,
understandings and instruments to which the Borrower is
currently a party or by which it or any of its properties is
bound or to which it is (or was as of the Closing Date)
contemplated to become a party or by which it or any of its
properties is (or was as of the Closing Date) contemplated to
become bound (including, without limitation, all amendments,
supplements, waivers, letter agreements, interpretations and
other documents amending, supplementing or otherwise modifying
or clarifying such agreements and instruments), true, correct
and complete copies of all of which have been delivered to the
Agent Bank on the Closing Date.
(b) Each of the Transaction Documents (other
than any Transaction Document which has terminated in
accordance with its terms) is in full force and effect and all
representations, warranties and other factual statements of the
Borrower and, to the best of the Borrower's knowledge, each
other Project Party in the Transaction Documents are true and
correct in all material respects.
Section 4.21. True and Complete Disclosure;
Assumptions.
(a) All representations, warranties and other
factual statements (excluding projections) furnished by or on
behalf of the Borrower in this Agreement, in any other
Transaction Document or otherwise in writing to the Agent Bank,
any Secured Party, the Independent Engineer, the Fuel
Consultant, the Insurance Consultant, the Petrochemical
Industry Consultant or any appraiser on or prior to the Closing
Date, are, and all other representations, warranties and other
factual statements hereafter furnished by or on behalf of the
Borrower in writing to the Agent Bank, any Secured Party, the
Independent Engineer, the Fuel Consultant, the Insurance
Consultant, the Petrochemical Industry
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Consultant or any appraiser will be true and correct in all
material respects on the date as of which such information is
or was dated or furnished and not incomplete by the omission of
any material fact necessary to make such information (taken as
a whole) not misleading at such time.
(b) The assumptions constituting the basis on
which the Borrower prepared the Construction Budget, the
Construction Schedule, the Progress Payment Schedule and the
Base Case Forecasts and developed the numbers set forth therein
were developed and consistently utilized in good faith and are
reasonable in all respects and fairly present the Borrower's
expectations as to the matters covered thereby. The Borrower
has no reason to believe that the Project will not be completed
in accordance with the Construction Budget, the Construction
Schedule and the Progress Payment Schedule.
Section 4.22. Ownership and Related Matters.
(a) As of the Closing Date, the equity of the
Borrower is one hundred percent (100%) owned, directly or
indirectly, by NRG Energy.
(b) Other than the rights of the Energy
Purchaser set forth in Section 19.5 of the Energy Services
Agreement, the Borrower does not have outstanding any
securities convertible into or exchangeable for any of its
equity or any rights to subscribe for or to purchase, or any
warrants or options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, any
such equity.
Section 4.23. Environmental Matters.
(a) Except as described in Schedule 4.23, the
Borrower (i) is in compliance with all applicable Environmental
Laws in all material respects, (ii) has obtained all
Environmental Approvals (other than any Deferred Approvals not
required to be obtained as of the date this representation is
made or deemed made) required to operate its business as
presently conducted or as reasonably anticipated to be
conducted and is in compliance with the terms and conditions
thereof, and (iii) to the Borrower's best knowledge after due
inquiry, there are no circumstances that may prevent or
interfere with such full compliance in the future, except in
each case where such noncompliance could not reasonably be
expected to result in a Material Adverse Effect.
(b) Except as described in Schedule 4.23, the
Borrower has not received any communication (written or oral),
whether from a Governmental Authority, citizens group, employee
or otherwise, that alleges that the Borrower is not in full
compliance with all Environmental Laws and Environmental
Approvals.
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(c) Except as described in Schedule 4.23, there
are no Environmental Claims pending or, to the best of the
Borrower's knowledge, threatened against the Borrower in
connection with the Project, except where such Environmental
Claims could not reasonably be expected to result in a Material
Adverse Effect.
(d) Except as described in Schedule 4.23, there
have been no releases or discharges of any Material of
Environmental Concern in excess of permitted levels at the
Project, except where such releases or discharges could not
reasonably be expected to result in a Material Adverse Effect.
Section 4.24. Other Filings. Except as set forth in
the Title Insurance Policy and the Lien searches completed
pursuant to Section 3.1(g)(i)(B), no mortgage, financing
statement or other instrument or recordation has been filed or
authorized by the Borrower or, to the best of its knowledge,
any other Person, covering all or any part of the Borrower's
property or assets, except with respect to Permitted Liens.
Section 4.25. Qualifying Facility Status. The
Project is, or prior to the Commercial Operation Date will be,
a Qualifying Facility, or the Borrower is, or prior to the
Commercial Operation Date will be, otherwise able to sell
electricity and steam to the Energy Purchaser and to wholesale
purchasers without being regulated as an "electric utility" or
an "electric utility holding company" under applicable federal
or state Law.
Section 4.26. Subsidiaries, Etc. The Borrower has
no Subsidiaries and owns no equity interest in any other
corporation, partnership, joint venture or other entity.
ARTICLE V. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that on and after the
Closing Date and until the Loan Agreement Termination Date,
unless otherwise agreed by the Required Banks:
Section 5.1. Information Covenants. The Borrower
shall furnish to the Agent Bank:
(a) Quarterly Unaudited Financial Statements of
the Borrower. Within forty-five (45) days after the close of
each fiscal quarter in each fiscal year of the Borrower, the
balance sheet of the Borrower as at the end of such quarterly
period and the related statements of income, cash flows and
changes in financial position for such quarterly period and for
the elapsed portion of the fiscal year ended with the last day
of such quarterly period, and in each case setting forth
comparative figures for the related periods in the prior fiscal
year.
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(b) Annual Audited Financial Statements of the
Borrower. Within one hundred twenty (120) days after the close
of each fiscal year of the Borrower, the balance sheet of the
Borrower as at the end of such fiscal year and the related
statements of income, cash flows and changes in financial
position for such fiscal year, setting forth comparative
figures for the preceding fiscal year and certified without
qualification by the Auditors, together with a report of the
Auditors stating that in the course of their regular audit of
the financial statements of the Borrower, which audit was
conducted in accordance with GAAP, the Auditors have obtained
no knowledge of any Default or Event of Default, or if in the
opinion of the Auditors a Default or an Event of Default has
occurred and is continuing, a statement as to the nature
thereof.
(c) Officer's Certificates. At the time of the
delivery of the financial statements under clauses (a) and (b)
above, a certificate of an Authorized Officer of the Borrower
which certifies (i) that such financial statements fairly
present the financial condition and the results of operations
of the Borrower on the dates and for the periods indicated in
accordance with GAAP, subject, in the case of interim financial
statements, to the absence of notes and normally recurring year-
end adjustments, and (ii) that such Authorized Officer has
reviewed the terms of the Financing Documents and has made, or
caused to be made under his or her supervision, a review in
reasonable detail of the business and financial condition of
the Borrower during the accounting period covered by such
financial statements, and that as a result of such review such
Authorized Officer has concluded that no Default or Event of
Default has occurred during the period commencing at the
beginning of the accounting period covered by the financial
statements accompanied by such certificate and ending on the
date of such certificate or, if any Default or Event of Default
has occurred, specifying the nature and extent thereof and, if
continuing, the action the Borrower proposes to take in respect
thereof. Such certificate shall set forth the calculations
required to establish the Debt Service Coverage Ratio and
Excess Cash Flow for the fiscal period covered by such
financial statements.
(d) Management Letters. Promptly after the
Borrower's receipt thereof, a copy of any "management letter"
or other material report received by the Borrower from the
Auditors.
(e) Annual Audited Financial Statements of
other Project Parties. Within one hundred twenty (120) days
after the close of the respective fiscal years of each of the
Energy Purchaser, the Operator, the O&M Guarantor (so long as
the O&M Guarantee is in effect) and the Maintenance Contractor,
the balance sheet of such Project Party as at the end of such
fiscal year and the related statements of income, cash flows
and changes in financial position for such fiscal year, setting
forth comparative figures for the preceding fiscal year and
certified (with customary qualifications and exceptions) by
independent certified public accountants of recognized national
standing acceptable to the Agent Bank.
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(f) Amendments to Construction Budget and
Construction Schedule; Change Orders. (i) Written notice of
any proposed amendments to the Construction Schedule, the
Construction Budget or the Progress Payment Schedule and (ii) a
copy of any proposed Change Order (which shall be provided to
the Independent Engineer simultaneously with delivery thereof
to the Agent Bank pursuant to this clause (f)); provided,
however, that any such amendment or Change Order shall not
become effective (and, if applicable, the then effective budget
or schedule, as the case may be, shall continue to remain in
effect) unless and until it has been approved in accordance
with the terms hereof.
(g) Notice of Default, Litigation, Etc.
Promptly and in any event within two (2) Business Days after an
Authorized Officer of the Borrower obtains actual knowledge
thereof, notice of:
(i) any Default or Event of Default,
specifying the nature thereof and the action which
the Borrower is taking and proposes to take with
respect to the same;
(ii) any breach or default under any
Project Document (if such breach could reasonably be
expected to result in a Material Adverse Effect),
specifying the nature thereof and the action which
the Borrower is taking and proposes to take with
respect to the same;
(iii) any event of Force Majeure or
similar event under any Project Document;
(iv) any pending or threatened
litigation, arbitration or proceeding against the
Borrower, the Operator or the O&M Guarantor, or, to
the best knowledge of the Borrower, any other Project
Party related to the Project, which could reasonably
be expected to result in a Material Adverse Effect;
(v) any loss or threat to any
Necessary Project Approval that could reasonably be
expected to result in a Material Adverse Effect;
(vi) any Environmental Claim or any
event relating to the environment or any
Environmental Law which could reasonably be expected
to result in a Material Adverse Effect;
(vii) any notice from any
Governmental Authority with respect to the
acquisition by condemnation, seizure or otherwise of
all
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or any portion of the Project if such acquisition
could reasonably be expected to result in a Material
Adverse Effect; and
(viii) any other event or condition
which could reasonably be expected to result in a
Material Adverse Effect;
(h) Monthly Progress Invoices. Promptly and in
any event within five (5) Business Days after the Borrower's
receipt thereof, all Monthly Progress Invoices delivered to the
Borrower pursuant to the EPC Contract;
(i) O&M Deliverables. Promptly and in any
event within five (5) Business Days after the Borrower's
receipt thereof, copies of all O&M Deliverables (which shall be
provided to the Independent Engineer simultaneously with
delivery thereof to the Agent Bank pursuant to this clause
(i));
(j) Scheduled Major Maintenance. Written
notice of any scheduled major maintenance to be performed in
accordance with Section 4.2.14 of the Operation and Maintenance
Agreement (which shall be provided to the Independent Engineer
simultaneously with delivery thereof to the Agent Bank pursuant
to this clause (j));
(k) Amendments to Operating Budget and Major
Maintenance Budget; O&M Change Orders. (i) Written notice of
any proposed amendments to any Operating Budget or Major
Maintenance Budget and (ii) copies of any proposed O&M Change
Orders (each of which shall be provided to the Independent
Engineer simultaneously with delivery thereof to the Agent Bank
pursuant to this clause (k)); provided, however, that any such
amendment or O&M Change Order shall not become effective unless
and until it has been approved in accordance with the terms
hereof; and
(l) Other Information. From time to time, such
other information or documents (financial or otherwise) as the
Agent Bank or any Bank through the Agent Bank may reasonably
request.
Section 5.2. Maintenance of Existence. The Borrower
shall at all times preserve and maintain in full force and
effect (a) its existence as a limited liability company in good
standing in the State of Delaware, (b) its qualification to do
business in each other jurisdiction where such qualification is
necessary and (c) all of its powers, rights, privileges and
franchises necessary for the construction, ownership,
maintenance and operation of the Project.
Section 5.3. Books, Records and Inspections. The
Borrower shall (a) keep proper books of record and accounts in
which full, true and correct entries in conformity with GAAP
and all requirements of Law shall be made of all dealings and
transactions in
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relation to its business and activities, (b) provide the
officers and designated representatives of the Agent Bank, the
Collateral Agent and the Independent Engineer reasonable rights
to visit and inspect any of the properties of the Borrower
(subject to all safety standards and procedures of the
Borrower, the Operator and the Energy Purchaser), and to
examine the books of record and accounts of the Borrower, and
discuss the affairs, finances and accounts of the Borrower
with, and be advised as to the same by, it and its officers,
and (c) authorize the Auditors to communicate directly with the
Agent Bank and the Collateral Agent.
Section 5.4. Taxes and Claims. The Borrower shall
file all tax returns required to be filed by it and pay or
cause to be paid when due all Taxes and all charges,
betterments or other assessments relating to the Mortgaged
Property, and all other lawful claims required to be paid by
it, except to the extent any of the same are subject to a
Contest.
Section 5.5. Governmental Approvals. The Borrower
shall (i) obtain and maintain in full force and effect all
Necessary Project Approvals (including all Environmental
Approvals) and (ii) use its best efforts to obtain all Deferred
Approvals (all of which shall be satisfactory to the Required
Banks (in consultation with the Independent Engineer)) as
promptly as practicable but in any event no later than the date
required to be obtained under applicable Law, except in each
case where the failure to do so could not reasonably be
expected to result in a Material Adverse Effect. Any Necessary
Project Approvals and Deferred Approvals relating to the supply
or transportation of natural gas to or on behalf of any
supplier of gas under any Gas Contract shall name the Borrower
as permitted.
Section 5.6. Compliance with Law. The Borrower
shall comply with all applicable Laws (including all applicable
Environmental Laws) and all Necessary Project Approvals, except
where the failure to so comply could not reasonably be expected
to result in a Material Adverse Effect.
Section 5.7. Insurance. The Borrower shall obtain
and maintain, or cause to be obtained and maintained, the types
and amounts of insurance listed and described on Schedule 5.7
in accordance with the terms and provisions set forth in such
Schedule. The Borrower shall obtain and maintain such other
insurance policies reasonably required by, and in form and
substance reasonably satisfactory to, the Agent Bank (i)
insuring the Collateral against loss by fire, explosion, theft
and other casualties and (ii) insuring the Borrower, and the
Secured Parties as additional loss payees, against liability
for personal injury and property damage relating to the
Collateral. In the event the Borrower fails to take out or
maintain the full insurance coverage required by this Section
5.7, the Agent Bank, upon ten (10) days prior notice (unless
the aforementioned insurance would lapse within such period, in
which event notice shall not be required) to the Borrower of
any such failure, may (but shall not be obligated to) take out
the required policies of insurance
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and pay the premiums on the same. All amounts so advanced by
the Agent Bank shall become an additional Obligation of the
Borrower under this Agreement and the Borrower shall forthwith
pay such amounts to the Agent Bank, together with interest from
the date of payment by the Agent Bank at the Default Rate.
Section 5.8. Mobilization Budget; Operating Budget;
Major Maintenance Budget; Spare Parts List; Heat Rate.
(a) (i) The Borrower shall provide a copy of
any proposed budget (the "Mobilization Budget") prepared in
accordance with Section 4.1.20 of the Operation and Maintenance
Agreement to the Agent Bank and the Independent Engineer
promptly upon, and in any event within five (5) Business Days
after, receipt by the Borrower of any proposed Mobilization
Budget from the Operator. The Agent Bank (in consultation with
the Independent Engineer) shall have fifteen (15) days from
receipt thereof by the Agent Bank to approve or reject any
proposed Mobilization Budget delivered to the Agent Bank
pursuant to the preceding sentence. If the Agent Bank (in
consultation with the Independent Engineer) approves or fails
to reject any proposed Mobilization Budget within fifteen (15)
days of receipt thereof by the Agent Bank, such Mobilization
Budget shall become effective. If the Agent Bank (in
consultation with the Independent Engineer) rejects any
proposed Mobilization Budget within fifteen (15) days of
receipt thereof by the Agent Bank, such Mobilization Budget
shall not be effective and the Borrower shall submit a revised
version of such Mobilization Budget to the Agent Bank and the
Independent Engineer for approval in accordance with this
clause (a).
(ii) The Borrower shall, not later than
thirty (30) days before the Conversion Date, adopt an operating
plan and budget with respect to the Project for the period from
such date to the conclusion of the then current calendar year
and provide a copy of such operating plan and budget at such
time to the Agent Bank and the Independent Engineer. No less
than forty-five (45) days in advance of the beginning of each
calendar year thereafter, the Borrower shall similarly adopt an
operating plan and budget for the ensuing calendar year and
provide a copy of such operating plan and budget at such time
to the Agent Bank and the Independent Engineer. (Each such
operating plan and budget is herein called an "Operating
Budget".) Each Operating Budget shall become effective if it
shall have not been rejected by the Required Banks (in
consultation with the Independent Engineer) within fifteen (15)
days of receipt thereof by the Agent Bank. If the Borrower
shall not have adopted an annual Operating Budget before the
beginning of any calendar year or any Operating Budget adopted
by the Borrower shall not have been accepted by the Required
Banks (in consultation with the Independent Engineer) before
the beginning of any upcoming calendar year, the Operating
Budget for the preceding calendar year (as increased or
decreased in accordance with Section 6.2.4 of the Operation and
Maintenance Agreement) shall, until the adoption of an annual
Operating Budget by the Borrower and acceptance of such
Operating Budget by the Required Banks (in consultation with
the Independent Engineer), as the case may be, be deemed to be
in force and
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effective as the annual Operating Budget for such upcoming
calendar year; provided that if the initial Operating Budget is
not approved by the Required Banks (in consultation with the
Independent Engineer), the Borrower may use a budget that is
consistent with the Base Case Forecasts until an initial
Operating Budget is approved, and shall work diligently to
prepare an initial Operating Budget that is acceptable to the
Required Banks (in consultation with the Independent Engineer).
(b) No less than forty-five (45) days in
advance of the beginning of each calendar year following the
Conversion Date, the Borrower shall adopt a plan and budget for
major maintenance tasks for the five (5) year period commencing
with the subsequent calendar year and provide a copy of such
plan and budget at such time to the Agent Bank and the
Independent Engineer. (Each such plan and budget is herein
called a "Major Maintenance Budget".) Each Major Maintenance
Budget shall become effective if it shall not have been
rejected by the Required Banks (in consultation with the
Independent Engineer) within fifteen (15) days of receipt
thereof by the Agent Bank. If the Borrower shall not have
adopted an annual Major Maintenance Budget before the beginning
of any calendar year or any Major Maintenance Budget adopted by
the Borrower shall not have been accepted by the Required Banks
(in consultation with the Independent Engineer) before the
beginning of any upcoming calendar year, the Major Maintenance
Budget for the preceding calendar year shall, until the
adoption of an annual Major Maintenance Budget by the Borrower
and acceptance of such Major Maintenance Budget by the Required
Banks (in consultation with the Independent Engineer), as the
case may be, be deemed to be in force and effective as the
annual Major Maintenance Budget for such upcoming calendar
year; provided that if the initial Major Maintenance Budget is
not approved by the Required Banks (in consultation with the
Independent Engineer), the Borrower may use a budget that is
consistent with the Base Case Forecasts until an initial Major
Maintenance Budget is approved, and shall work diligently to
prepare an initial Major Maintenance Budget that is acceptable
to the Required Banks (in consultation with the Independent
Engineer).
(c) Each Operating Budget and each Major
Maintenance Budget delivered to the Agent Bank and the
Independent Engineer pursuant to this Section 5.8 shall be
accompanied by a memorandum detailing all material assumptions
used in the preparation of such Operating Budget or Major
Maintenance Budget, as the case may be, shall contain a line
item for each budget category (which budget categories shall be
acceptable to the Required Banks (in consultation with the
Independent Engineer)), and shall specify for each month and
for each such budget category, the amount budgeted for such
category for such month.
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(d) The Borrower shall provide a copy of any
list of spare parts and related items (each a "Spare Parts
List") developed pursuant to Section 4.1.5 of the Operation and
Maintenance Agreement to the Agent Bank and the Independent
Engineer. The Agent Bank (in consultation with the Independent
Engineer) shall have fifteen (15) days from receipt thereof by
the Agent Bank to approve or reject any Spare Parts List
delivered to the Agent Bank pursuant to the preceding sentence.
If the Agent Bank (in consultation with the Independent
Engineer) approves or fails to reject any Spare Parts List
within fifteen (15) days of receipt thereof by the Agent Bank,
such Spare Parts List shall become effective. If the Agent
Bank (in consultation with the Independent Engineer) rejects
any Spare Parts List within fifteen (15) days of receipt
thereof by the Agent Bank, such Spare Parts List shall not be
effective and the Borrower shall submit a revised version of
such Spare Parts List to the Agent Bank and the Independent
Engineer for approval in accordance with this clause (d).
(e) The Borrower shall present in writing any
proposed Guaranteed Heat Rate curve to the Agent Bank and the
Independent Engineer promptly and in any event within five (5)
Business Days of receipt thereof by the Borrower pursuant to
the Operation and Maintenance Agreement. The Agent Bank (in
consultation with the Independent Engineer) shall have fifteen
(15) days from receipt thereof by the Agent Bank to approve or
reject any Guaranteed Heat Rate curve presented to the Agent
Bank pursuant to the preceding sentence. If the Agent Bank (in
consultation with the Independent Engineer) approves or fails
to reject any Guaranteed Heat Rate curve within fifteen (15)
days of receipt thereof by the Agent Bank, such Guaranteed Heat
Rate curve shall become effective. If the Agent Bank (in
consultation with the Independent Engineer) rejects any
Guaranteed Heat Rate curve within fifteen (15) days of receipt
thereof by the Agent Bank, such Guaranteed Heat Rate curve
shall not be effective and the Borrower shall submit a revised
version of such Guaranteed Heat Rate curve to the Agent Bank
and the Independent Engineer for approval in accordance with
this clause (e).
(f) The Borrower shall present in writing any
formula (each a "Heat Rate Formula") for determination of the
heat rate of the Project to the Agent Bank and the Independent
Engineer promptly and in any event within five (5) Business
Days of completion thereof pursuant to Section 6.6 of the
Operation and Maintenance Agreement. The Agent Bank (in
consultation with the Independent Engineer) shall have fifteen
(15) days from receipt thereof by the Agent Bank to approve or
reject any Heat Rate Formula presented to the Agent Bank
pursuant to the preceding sentence. If the Agent Bank (in
consultation with the Independent Engineer) approves or fails
to reject any Heat Rate Formula within fifteen (15) days of
receipt thereof by the Agent Bank, such Heat Rate Formula shall
become effective. If the Agent Bank (in consultation with the
Independent Engineer) rejects any Heat Rate Formula within
fifteen (15) days of receipt thereof by the Agent Bank, such
Heat Rate Formula shall not be effective and the Borrower shall
submit a revised version of such Guaranteed Heat Rate curve to
the Agent Bank and the Independent Engineer for approval in
accordance with this clause (f).
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Section 5.9. Project Implementation.
(a) The Borrower shall duly construct and
complete, or cause the construction and completion of, the
Project in accordance with the Construction Budget, the
Construction Schedule and the Technical Specifications, use
reasonable efforts to cause the Conversion Date to occur on or
before the date which is seventeen (17) months from the Closing
Date, and in any case shall cause the Conversion Date to occur
on or before the Date Certain, and shall cause Final Completion
(as defined in the EPC Contract) to occur as promptly as
practicable after the Acceptance Date.
(b) The Borrower shall keep, or cause to be
kept, in good working order and condition, ordinary wear and
tear excepted, the Project and all of its other properties
necessary or useful in the proper conduct of its business.
(c) The Borrower shall, or shall cause the
Operator to, as applicable, carry out and operate and maintain
the Project in accordance with (i) the terms of this Agreement
and the other Transaction Documents, (ii) all Necessary Project
Approvals and Deferred Approvals and (iii) industry standards
and good utility practice.
Section 5.10. Further Assurances. (
(a) The Borrower shall (i) execute and deliver
all documents as shall be necessary and advisable or that the
Agent Bank or the Collateral Agent shall reasonably request in
connection with the rights and remedies of the Banks, the Agent
Bank and the Collateral Agent under the Transaction Documents
and (b) take all reasonable actions requested by the Agent Bank
or the Collateral Agent or that the Borrower knows are
necessary to establish, maintain, protect and perfect the Liens
of the Collateral Agent on the Collateral.
(b) The Borrower shall take all action
reasonably required to cause each Additional Project Document
to be or become subject to the Lien of the Security Documents
(whether by amendment to the applicable Security Document or
otherwise) and shall deliver or cause to be delivered to the
Agent Bank such legal opinions, certificates or other documents
with respect to such Additional Project Document as the Agent
Bank, the Collateral Agent or the Required Banks may reasonably
request. The Borrower will execute and deliver, and will use
commercially reasonable efforts to cause each Person (other
than the Borrower) to execute and deliver, a Consent in
writing, which Consent shall be in a form and substance
satisfactory to the Agent Bank, to the Liens created by the
Security Documents (or otherwise) on each Additional Project
Document entered into by the Borrower with the prior consent of
the Agent Bank (as contemplated by Section 6.13) and such legal
opinions relating to such Additional Project Document and such
consents as the Agent Bank or the Required Banks may reasonably
request.
(c) To the extent and at such time as the
Borrower acquires additional property, easements and rights-of-
way, the Borrower shall promptly cause such
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property, easements and rights-of-way to be subjected to the
Lien of the Security Documents. At the request of the
Collateral Agent, the Borrower will execute and deliver all
necessary amendments to the Security Documents in respect
thereto and file and record all Governmental Approvals
necessary or advisable to enable the Collateral Agent to obtain
a first priority perfected Lien on such additional property,
easements and rights-of-way.
Section 5.11. Use of Proceeds. The Borrower shall
use all proceeds of Loans made hereunder, all Letters of Credit
issued hereunder and all Equity Contributions received pursuant
to any Equity Commitment Agreement only in accordance with this
Agreement and the other Financing Documents.
Section 5.12. Title. The Borrower shall maintain
good, legal and valid title to its assets and properties,
subject to no Liens other than Permitted Liens.
Section 5.13. Project Documents. The Borrower shall
maintain in full force and effect, perform its obligations
under, protect, defend and enforce its rights under and take
all action necessary to prevent the termination of each of the
Project Documents (other than in accordance with the terms of
such Project Documents).
Section 5.14. Qualifying Facility Status. Following
the Commercial Operation Date, the Borrower shall (a) maintain
the Project as a Qualifying Facility or (b) otherwise be able
to sell electricity and steam to the Energy Purchaser and to
wholesale purchasers without being regulated as an "electric
utility" or an "electric utility holding company" under
applicable federal or state Law.
Section 5.15. Application of Revenues. The Borrower
shall deposit and apply, or cause to be deposited and applied,
all revenues received by or on behalf of it in accordance with
the terms set forth in Article VII.
Section 5.16. Interest Rate Protection Agreements.
The Borrower shall enter into Interest Rate Protection
Agreements satisfactory to the Agent Bank which, (a) if the
average LIBOR over any thirty (30) day period equals or exceeds
a level of 6.35% at any time prior to the Conversion Date, fix
or cap the rate of interest payable on at least fifty percent
(50%) of outstanding Construction Loans through the
Construction Loan Maturity Date, and (b) if the average LIBOR
over any thirty (30) day period equals or exceeds a level of
6.85% at any time after the Conversion Date, fix or cap the
rate of interest payable on at least fifty percent (50%) of
outstanding Term Loans through the Final Maturity Date.
Section 5.17. Long Term Service Agreement. On or
prior to December 31, 1997, the Borrower shall enter into the
Long Term Service Agreement and shall deliver to the Agent Bank
an executed version of the Long Term Service Agreement and
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each Ancillary Document in respect thereof, all of which shall
be in form and substance satisfactory to the Agent Bank.
Section 5.18. RO EPC Contract. On or prior to
December 31, 1997, the Borrower shall enter into the RO EPC
Contract and shall deliver to the Agent Bank an executed
version of RO EPC Contract and each Ancillary Document in
respect thereof, all of which shall be in form and substance
satisfactory to the Agent Bank.
Section 5.19. Payment. The Borrower shall promptly
pay or cause to be paid when due all principal of and interest
on the Loans and all Fees and other amounts due hereunder in
accordance with the terms hereof.
Section 5.20. ERISA. The Borrower shall promptly
pay and discharge all obligations and liabilities arising under
ERISA of a character which if unpaid or unperformed might
result in the imposition of a Lien against any of its
properties or assets and shall promptly notify the Agent Bank
of (i) the occurrence of any reportable event (as defined in
ERISA) affecting a Plan, other than any such event of which the
PBGC has waived notice by regulation, (ii) receipt of any
notice from the PBGC of its intention to seek termination of
any Plan or appointment of a trustee therefor, (iii) its
intention to terminate or withdraw from any Plan, and (iv) the
occurrence of any event affecting any Plan which could result
in the incurrence by the Borrower of any material liability,
fine or penalty, or any material increase in the contingent
liability of the Borrower under any post-retirement Welfare
Plan benefit.
Section 5.21. Punch List. The Borrower shall
provide a copy of any proposed Punch List prepared in
accordance with Section 10.3 of the EPC Contract (or in
accordance with any similar provision in the RO EPC Contract,
if applicable) to the Agent Bank and the Independent Engineer
promptly upon, and in any event within five (5) Business Days
after, receipt by the Borrower of any proposed Punch List from
the EPC Contractor (or the RO EPC Contractor, if applicable).
The Agent Bank (in consultation with the Independent Engineer)
shall have fifteen (15) days from receipt thereof by the Agent
Bank to approve or reject any proposed Punch List delivered to
the Agent Bank pursuant to the preceding sentence. If the
Agent Bank (in consultation with the Independent Engineer)
approves or fails to reject any proposed Punch List within
fifteen (15) days of receipt thereof by the Agent Bank, such
Punch List shall become effective. If the Agent Bank (in
consultation with the Independent Engineer) rejects any
proposed Punch List within fifteen (15) days of receipt thereof
by the Agent Bank, such Punch List shall not be effective and
the Borrower shall submit a revised version of such Punch List
to the Agent Bank and the Independent Engineer for approval in
accordance with this Section 5.21.
Section 5.22. Operator Termination. The Borrower
shall terminate the Operator pursuant to Section 12.4 of the
Operation and Maintenance Agreement if the
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Borrower is required to pay more than $1,900,000 in Operator
Standby Power Costs (as defined in the Operation and
Maintenance Agreement) in any Operating Year.
Section 5.23. Minor Punch List Items. The Borrower
shall cause all Minor Punch List Items to be completed on or
prior to the date which is twelve (12) months after the
Provisional Acceptance Date (as defined in the EPC Contract).
Section 5.24. Gas Agreement. Within four (4) years
of the Commercial Operation Date, the Borrower shall either (i)
enter into one or more contracts which shall be in form and
substance satisfactory to the Required Banks and which in the
aggregate (a) have a term of not less than twenty (20) years
and (b) provide the Borrower with natural gas transportation
and storage services substantially equivalent in quality and
quantity to the natural gas transportation and storage services
required to be provided by NIGAS under the NIGAS Agreement, or
(ii) provide other arrangements which shall be in form and
substance satisfactory to the Required Banks.
Section 5.25. Millennium Letter of Credit. At any
time the Borrower is required under Section 32.1 of the Energy
Services Agreement to cause the letter of credit described in
such Section to be in full force and effect, the Borrower,
pursuant to such Section, shall deliver an extension of such
letter of credit or a replacement letter of credit no later
than three hundred sixty-five (365) days prior to the
termination of the existing letter of credit.
ARTICLE VI. NEGATIVE COVENANTS.
The Borrower covenants and agrees that on and after the
Closing Date until the Loan Agreement Termination Date, unless
otherwise agreed by the Required Banks:
Section 6.1. Distributions. The Borrower shall not
make, pay or declare any distributions or return any capital to
its members or authorize or make any other distribution,
payment or delivery of property or cash to its members as such,
or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any membership interests, units or other equity
interests of the Borrower now or hereafter outstanding (or any
options or rights issued with respect thereto), or set aside
any funds for any of the foregoing purposes (all the foregoing
"Distributions"), except upon satisfaction of the Distribution
Conditions and otherwise in accordance with the Section 7.9.
Section 6.2. Indebtedness. The Borrower shall not
create, incur, assume, suffer to exist or otherwise become or
remain directly or indirectly liable with respect to any
Indebtedness, other than the following (such Indebtedness,
"Permitted Debt"):
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(a) Indebtedness incurred hereunder and under
the other Financing Documents;
(b) Indebtedness incurred under any Debt
Service Reserve Letter of Credit;
(c) Indebtedness incurred to finance the making
of capital improvements to the Project to the extent such
capital improvements are reasonably required by applicable Law;
provided that (i) the Independent Engineer shall confirm that
such capital improvements are required to comply with
applicable Law and (ii) after giving effect to the incurrence
of such Indebtedness, the average projected Debt Service
Coverage Ratio shall not be less than 1.4 to 1 and the minimum
projected Debt Service Coverage Ratio shall not be less than
1.2 to 1, each through the Final Maturity Date, as certified by
an Authorized Officer of the Borrower and confirmed as
reasonable by the Independent Engineer;
(d) Indebtedness incurred to finance the making
of capital improvements to the Project which are not required
by applicable Law; provided that (i) no Default or Event of
Default shall have occurred and be continuing or shall result
from the incurrence of such Indebtedness and (ii) after giving
effect to the incurrence of such Indebtedness, the average
projected Debt Service Coverage Ratio shall not be less than
1.5 to 1 and the minimum projected Debt Service Coverage Ratio
shall not be less than 1.3 to 1, each through the Final
Maturity Date, as certified by an Authorized Officer of the
Borrower and confirmed as reasonable by the Independent
Engineer;
(e) Indebtedness incurred for working capital
purposes in an amount not to exceed $5,000,000;
(f) Indebtedness incurred in connection with
Interest Rate Protection Agreements entered into to provide for
a hedge against interest payable on other Permitted Debt;
(g) Trade Indebtedness, (other than for
borrowed money), arising in the ordinary course of business;
provided that such Indebtedness shall not be more than ninety
(90) days past due, unless such Indebtedness is subject to a
Contest;
(h) To the extent deemed Indebtedness (other
than for borrowed money), obligations under the Project
Documents; and
(i) Purchase money debt in an amount not to
exceed $1,000,000.
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Section 6.3. Liens. The Borrower shall not create,
incur, assume or suffer or permit to exist, directly or
indirectly, any Lien on any of its property now owned or
hereafter acquired, other than the following (such Liens,
"Permitted Liens"):
(a) Liens granted to the Collateral Agent for
the benefit of the Secured Parties pursuant to the Security
Documents;
(b) Liens to secure Permitted Debt; provided
that (i) no Liens shall secure Indebtedness pursuant to clause
(e), (f) (except with respect to Secured Interest Rate
Protection Agreements entered into by the Borrower with a
Bank), (g), or (h) of Section 6.2, (ii) Indebtedness incurred
pursuant to clause (i) of Section 6.2 shall be secured only by
Liens on the assets financed with such Indebtedness and (iii)
any creditor providing Indebtedness pursuant to clause (b), (c)
or (d) of Section 6.2 shall enter into an intercreditor
agreement in form and substance satisfactory to the Agent Bank;
(c) Liens (other than any Lien imposed by
ERISA) in connection with workmen's compensation, unemployment
insurance or other social security or pension obligations;
(d) Mechanics', workmen's, materialmen's,
suppliers', construction or like Liens, in each case (i) for
amounts not yet due and payable or (ii) for amounts due and
payable with respect to ordinary course claims which are
subject to a Contest, unless the existence of such Liens could
reasonably be expected to result in a Material Adverse Effect;
(e) Servitudes, easements, rights-of-way,
restrictions or minor defects or irregularities in title and
such other encumbrances or charges against real property or
interests therein referred to in the Title Insurance Policy as
are of a nature generally existing with respect to properties
of a similar character and which do not in any way materially
interfere with the use thereof;
(f) Liens for Taxes not yet delinquent or, if
delinquent, which are subject to a Contest; and
(g) Attachment or judgment Liens; provided that
(i) the existence of such Liens could not reasonably be
expected to result in a Material Adverse Effect and (ii) such
Liens are discharged within thirty (30) days of the creation
thereof.
Section 6.4. Restriction on Fundamental Changes.
The Borrower shall not enter into any merger or consolidation,
or liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution of) itself or discontinue its business.
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Section 6.5. Subsidiaries; Advances, Investments and
Loans. The Borrower shall not form or have any Subsidiaries,
make investments, loans or advances or otherwise acquire any
stock, obligations or securities of any Person, except that the
Borrower may maintain the Project Accounts and invest amounts
on deposit therein in Permitted Investments in accordance with
Section 7.2.
Section 6.6. Arm's Length Transactions. The
Borrower shall not enter into any transaction or series of
related transactions with any person (including any Affiliate
of the Borrower) other than on an arm's-length basis.
Section 6.7. Sole Purpose Nature. The Borrower
shall not enter into or engage in any business other than the
ownership, development, financing, construction, operation and
maintenance of the Project and the activities related thereto.
Section 6.8. Certain Restrictions. Except in
connection with Permitted Debt and Permitted Liens, the
Borrower shall not enter into any agreement (other than the
Transaction Documents as in effect on the Closing Date) which
restricts the ability of the Borrower to amend any Transaction
Document, sell any of its assets, create Liens, incur
Indebtedness or make Distributions.
Section 6.9. Sale of Assets. The Borrower shall not
sell, assign, dispose of or abandon the Project or any of its
other assets (other than electricity, steam and any by-products
produced by the Project) or assign any rights other than (so
long as no Default or Event of Default has occurred and is
continuing) (a) those in the ordinary course of its business
for cash equal to the fair market value of such assets at the
time of sale, (b) sales of equipment which is uneconomic or
obsolete or sales of assets that are no longer used or useful
to the Borrower, (c) any sale, assignment or transfer by the
Borrower to any Affiliate of the Borrower, provided that the
assets so sold, assigned, or transferred are (i) not integral
to the proper and efficient operation and maintenance of the
Project, (ii) sold for fair market value and (iii) sold for
consideration consisting of cash, cash equivalents (other than
notes or other obligations of the Person to whom such assets
are transferred or such Person's Affiliates) or other assets
useful to the operation and maintenance of the Project, or (d)
any assignment of rights constituting a Permitted Lien.
Section 6.10. Amendment of Project Documents. The
Borrower shall not terminate, assign, modify or waive any
provision of, or consent to the termination, assignment,
modification or waiver of any provision of, any Project
Document without the prior written consent of the Agent Bank.
Section 6.11. Change Orders; Budgets.
(a) The Borrower shall not(x) enter into any Change
Order or (y) modify or permit any modification of the
Construction Budget; provided that the Borrower may enter into
Change Orders or any such modifications which do not exceed
$1,000,000 individually or $3,000,000 in the
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aggregate and which have been reviewed and approved by the
Independent Engineer, if, after giving effect to such Change
Orders or modifications, (a) the Project when completed will
have at least 117 MW installed capacity and at least a 114 MW
net capacity and will have boiler capacity to produce 1,080,000
pounds per hour of steam, (b) the Project will achieve
Acceptance and Commercial Operation and all Punch List items
(other than Minor Punch List Items) will be completed on or
before the Date Certain and (c) total Project Costs will not
exceed the sum of the Project Equity Amount and the Total
Construction Loan Commitment.
(b) The Borrower shall not (x) enter into any O&M
Change Order or (y) modify or permit any modification of any
Operating Budget or Major Maintenance Budget; provided that the
Borrower may enter into O&M Change Orders or any such
modifications (i) which do not exceed $250,000 individually or
$500,000 in the aggregate in any one Operating Year, if, after
giving effect to such O&M Change Orders or modifications, the
projected Debt Service Coverage Ratio for such Operating Year
shall be equal to or greater than 1.2 to 1, or (ii) which are
required pursuant to Section 6.3.1, 6.3.2, 6.3.3 or 6.4 of the
Operation and Maintenance Agreement.
Section 6.12. Margin Regulations. No part of the
proceeds of any Loan shall be used by the Borrower to purchase
or carry any Margin Stock (as defined in Regulation U) or to
extend credit to others for the purpose of purchasing or
carrying any Margin Stock. The Borrower shall not use the
proceeds of any Loan in a manner that will violate or be
inconsistent with the provisions of Regulations G, T, U or X.
Section 6.13. Additional Project Agreements. The
Borrower shall not enter into any material agreement relating
to the construction, operation, maintenance or use of the
Project, except as contemplated on the Closing Date or as
approved in writing by the Agent Bank.
Section 6.14. Expenditures. The Borrower shall not
make any expenditures for operation and maintenance or any
capital expenditures except (a) in accordance with the
Construction Budget or the current annual Operating Budget, as
the case may be, (b) for the payment of Fuel Expenses or (c) as
approved in writing by the Agent Bank.
Section 6.15. Amendments to Construction Schedule or
Progress Payment Schedule; Test Procedures.
(a) The Borrower shall not change or permit any
change to be made to the Construction Schedule or the Progress
Payment Schedule, except changes which have been reviewed and
approved by the Independent Engineer and which do not impair
the ability of the Project to achieve Acceptance and Commercial
Operation, or the ability of the EPC Contractor or the RO EPC
Contractor, as the case may be, to complete all Punch List
items (other than Minor Punch List Items), on or prior to the
Date Certain; provided that the Borrower shall not change or
permit any change to be made to Schedule
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O to the EPC Contract without the prior written consent of the
Agent Bank, (in consultation with the Independent Engineer).
(b) The Borrower shall not approve the Performance
Tests unless such Performance Tests have been reviewed and
approved by the Independent Engineer, which approval shall not
be unreasonably withheld.
Section 6.16. Restricted Uses. The Borrower shall
not use, maintain, operate or occupy or allow the use,
maintenance or occupancy of any portion of the Project or the
Site for any purpose:
(a) which is reasonably likely to create a
significant hazard, unless safeguarded as required by
applicable Law; provided, however, that this clause (a) shall
not be deemed to prohibit the Borrower from carrying out the
Project in accordance with the terms of the Project Documents
in a reasonable and prudent manner;
(b) which may constitute a public or private
nuisance that could reasonably be expected to result in a
Material Adverse Effect;
(c) which may make void, voidable or
cancelable, or increase the premium of, any insurance then in
force with respect to the Site or the Project or any part
thereof unless, in the case of an increase in premium, the
Borrower gives proof of payment of such increase; or
(d) other than for the intended purpose thereof
in connection with the development, construction, operation and
maintenance of the Project.
Section 6.17. NGC Agreement. The Borrower shall not
reject any proposed Commodity Price (as defined in the NGC
Agreement) and/or any proposed Reservation Charge (as defined
in the NGC Agreement) except as approved in writing by the
Agent Bank.
ARTICLE VII. ACCOUNTS AND CASH FLOWS.
Section 7.1. Establishment and Maintenance of
Project Accounts.
(a) The Borrower hereby establishes with the
Collateral Agent each of the Construction Account, the Revenue
Account, the Operation and Maintenance Account, the Debt
Payment Account, the Debt Service Reserve Account, the
Maintenance Reserve Account, the NGC Reserve Account, the
Distribution Retention Account, the Letter of Credit Account
and the Proceeds Account (collectively, the "Project Accounts")
in the name of the Collateral Agent. All Project Accounts
shall be in the exclusive possession of, and under the
exclusive dominion and control of, the Collateral Agent. The
Borrower hereby irrevocably di-
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rects and authorizes the Collateral Agent to deposit into and
withdraw funds from such Project Accounts in accordance with
the terms and conditions of this Agreement. The Borrower shall
have no right of withdrawal in respect of any of the Project
Accounts except in accordance with this Article VII. Each
transfer of funds to be made hereunder shall be made only to
the extent that funds are on deposit in the affected Project
Account, and the Collateral Agent shall have no responsibility
to make additional funds available in the event that funds on
deposit are insufficient. All instructions regarding the
Project Accounts, monies on deposit therein and Permitted
Investments credited thereto shall be delivered to the
Collateral Agent at its address specified below its signature
hereto (x) in writing or (y) by facsimile with an original
writing to be delivered within five (5) Business Days thereof;
provided that the Collateral Agent may discontinue the ability
to provide such instructions by facsimile at any time by
delivery of written notice of such discontinuation to each
other party hereto in accordance with Section 11.3. Upon the
occurrence and during the continuance of any Default or Event
of Default, the Collateral Agent shall accept instructions with
respect to the Project Accounts solely from the Agent Bank and
shall not accept such instructions from the Borrower or any
representative thereof. On or before the fifteenth (15th)
Business Day of each month, the Collateral Agent shall provide
to the Borrower statements reflecting all deposits to,
withdrawals from and other activities in respect of each of the
Project Accounts during the preceding month.
Section 7.2 Permitted Investments.
(a) Upon the written request of the Borrower,
the Collateral Agent shall invest and reinvest any balances in
any Project Account from time to time in Permitted Investments
as instructed by the Borrower in such written request; provided
that (i) if the Borrower fails to so instruct the Collateral
Agent with respect to any amounts on deposit in any of the
Project Accounts, such amounts shall be invested in accordance
with standing instructions set forth in a side letter between
the Borrower and the Collateral Agent, (ii) upon the occurrence
and during the continuance of a Default or an Event of Default,
the Collateral Agent shall invest and reinvest such balances in
Permitted Investments as instructed by the Agent Bank, (iii)
all such Permitted Investments shall be held in the name of the
Collateral Agent, (iv) no Permitted Investment shall be made
unless the Collateral Agent shall retain a perfected first
priority Lien on such Permitted Investment securing the
Obligations and all filings and other actions necessary to
ensure the validity, perfection and priority of such Lien have
been taken, and (v) no more than ten (10) Permitted Investments
may be maintained at any time. All funds in any Project
Account that are invested in a Permitted Investment are deemed
to be held in such Project Account for all purposes of this
Agreement and the Security Documents. All investments and
reinvestments shall be held in the name and be under the sole
dominion and control of the Collateral Agent. The Collateral
Agent shall have no liability for any loss in investments of
funds in any Project Account that are invested in Permitted
Investments.
(b) The Collateral Agent agrees that the
interest paid or other earnings on the Permitted Investments
made hereunder shall be credited to the Project
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Account from which the monies used to make such Permitted
Investment were drawn on the date received by the Collateral
Agent and held therein.
Section 7.3. Funding of the Construction Account.
The proceeds of all Construction Loans and all Equity
Contributions (other than Default Equity Contributions) shall
be deposited in the Construction Account. So long as no
Default or Event of Default shall have occurred and be
continuing, the Collateral Agent shall make any payment out of
the Construction Account in accordance with the instructions
set forth in any Disbursement Certificate delivered to the
Collateral Agent by the Borrower at least three (3) Business
Days prior to the day on which such payment is to be made.
Section 7.4. Funding of the Revenue Account and
Payment of Operation and Maintenance Expenses.
(a) The Borrower agrees and confirms (i) that
it has irrevocably instructed each of the other parties to each
Project Document in effect as of the Closing Date pursuant to
which payments may be made to or received by the Borrower, and
that it will so instruct all parties to any Additional Project
Document, that all payments due or to become due to the
Borrower under each such Project Document (other than payments
the proceeds of which are required to be deposited into the
Proceeds Account pursuant to Section 7.10) shall be made
directly to the Collateral Agent for deposit in the Revenue
Account and (ii) that each of such other parties to such
Project Document has agreed (or will be caused by the Borrower
to agree) to make all such payments (other than payments the
proceeds of which are required to be deposited into the
Proceeds Account pursuant to Section 7.10) directly to the
Collateral Agent for deposit in the Revenue Ac count. If,
notwithstanding the foregoing, any payments due to the Borrower
are remitted directly to the Borrower (or any Affiliate of the
Borrower), the Borrower shall (or shall cause any such
Affiliate to) hold such payments in trust for the Collateral
Agent and shall promptly remit such payments (other than
payments the proceeds of which are required to be deposited
into the Proceeds Account pursuant to Section 7.10) to the
Collateral Agent for deposit in the Revenue Account, in the
form received, with any necessary endorsements. All business
interruption insurance proceeds shall also be deposited into
the Revenue Account.
(b) Between the Commercial Operation Date and
the Conversion Date, if no Event of Default shall have occurred
and be continuing, the Collateral Agent shall, on one Business
Day of each month specified by the Borrower in a writing
delivered to the Collateral Agent in accordance with Section
7.1, transfer from the Revenue Account to the Operation and
Maintenance Account the amount required to bring the balance of
the Operation and Maintenance Account to the amount specified
in the Preliminary Operating Budget in respect of budgeted
Operation and Maintenance Expenses for the Project for the next
month. If no Event of Default shall have occurred and be
continuing, then the Collateral Agent shall on the Conversion
Date and on each Payment Date thereafter (i) transfer to the
Operation and Maintenance Account from the Revenue Account the
amount required to bring the balance of the Operation and
Maintenance Account to an amount
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equal to the sum of (A) the estimated Fuel Expenses incurred
during the current month (or with respect to the transfer
occurring on the Conversion Date, any Fuel Expenses not paid
with the proceeds of the Construction Loans made pursuant to
the final Notice of Borrowing delivered hereunder), as notified
to the Collateral Agent by the Borrower in a writing delivered
to the Collateral Agent in accordance with Section 7.1, plus
(B) the amount specified in the current Operating Budget in
respect of other budgeted Operation and Maintenance Expenses
for the Project for the next month, and (ii) transfer to the
Operation and Maintenance Account from the Maintenance Reserve
Account such amounts as are necessary to pay any Major
Maintenance Expenses to be paid in the next month as notified
to the Collateral Agent by the Borrower in a writing delivered
to the Collateral Agent in accordance with Section 7.1 and
approved by the Agent Bank and the Independent Engineer in the
Major Maintenance Budget for that year or otherwise approved by
the Agent Bank and the Independent Engineer in writing. The
Operation and Maintenance Account shall be maintained as a
revolving fund, from which the Borrower may draw and pay from
time to time such amounts as shall be required to pay Operation
and Maintenance Expenses upon delivery to the Collateral Agent
of a Disbursement Certificate at least three (3) Business Days
prior to the day upon which any of such payments are to be
made.
(c) If the Borrower determines reasonably and
in good faith that the amount available in the Operation and
Maintenance Account is insufficient to pay the reasonable and
necessary Operation and Maintenance Expenses for the Project
for the current calendar month, an Authorized Officer of the
Borrower shall deliver a certificate to the Collateral Agent
and the Banks setting forth the amount of such insufficiency
and the cause therefor. The Collateral Agent shall transfer
into the Operations and Maintenance Account such amounts as
shall be necessary to fund such insufficiency, first, from the
Revenue Account, then from the Distribution Retention Account,
then from the Proceeds Account, then from the Maintenance
Reserve Account, then from the NGC Reserve Account and finally
from the Debt Service Reserve Account (in each case to the
extent funds are available in each such Project Account).
Section 7.5. Debt Payment Account. The Collateral
Agent shall, on each Payment Date occurring after the
Conversion Date, transfer from the Revenue Account to the Debt
Payment Account, to the extent of funds remaining on deposit in
the Revenue Account after the application of funds provided for
in Section 7.4 on such Payment Date: () first, an amount equal
to one-third (1/3) of the next quarterly payment of Mandatory
Secured Debt Service, and () second, an amount equal to one-
third (1/3) of the next quarterly payment of Mandatory
Unsecured Debt Service. If at any time amounts on deposit in
the Debt Payment Account are insufficient to make all payments
of Mandatory Secured Debt Service and Mandatory Unsecured Debt
Service, then the Collateral Agent shall transfer to the Debt
Payment Account such amounts as shall be necessary to fund such
insufficiency, first from the Revenue Account, then from the
Distribution Retention Account, then from the Debt Service
Reserve Account, then from the NGC Reserve
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Account, then from the Proceeds Account and finally from the
Maintenance Reserve Account; provided that the Collateral Agent
shall transfer from the Debt Service Reserve Account only the
portion of such insufficiency which is attributable to the
principal of, interest on and Fees and other amounts due in
respect of the Loans. Amounts on deposit in the Debt Payment
Account shall be applied to make payments on Mandatory Secured
Debt Service and Mandatory Unsecured Debt Service () with
respect to amounts due on the Loans, when due and payable in
accordance with the terms hereof, and () with respect to
amounts due on other Mandatory Secured Debt Service and
Mandatory Unsecured Debt Service, as requested in a
Disbursement Certificate delivered by the Borrower to the
Collateral Agent at least three (3) Business Days prior to the
day on which any of such payments are to be made; provided that
no payments on Mandatory Unsecured Debt Service shall be made
while any amounts remain due and unpaid on any Mandatory
Secured Debt Service.
Section 7.6. Funding of the Maintenance Reserve
Account. The Collateral Agent shall, on each Payment Date
occurring after the Conversion Date, transfer from the Revenue
Account to the Maintenance Reserve Account, to the extent of
funds remaining on deposit in the Revenue Account after the
application of funds provided for in Sections 7.4 and 7.5 on
such Payment Date, an amount equal to the sum of (a) one
twelfth (1/12th) of the Maintenance Reserve Amount applicable
to the calendar year in which such Payment Date occurs plus (b)
the shortfall (if any) in the amount transferred pursuant to
this Section 7.6 in the immediately preceding calendar months.
In each month in which a Major Maintenance Expense is to be
paid, the Collateral Agent shall transfer funds from the
Maintenance Reserve Account to the Operation and Maintenance
Account as provided in Section 7.4(b).
Section 7.7. Funding of the Debt Service Reserve
Account. The Borrower shall initially fund the Debt Service
Reserve Fund up to the Debt Service Reserve Required Balance on
or before the Conversion Date with the making of a cash deposit
and/or the delivery of a Debt Service Reserve Letter of Credit
to the Collateral Agent. The Collateral Agent shall, on each
Payment Date occurring after the Conversion Date, transfer an
amount from the Revenue Account to the Debt Service Reserve
Account, to the extent of funds remaining on deposit in the
Revenue Account after the application of funds provided for in
Sections 7.4, 7.5 and 7.6 on such Payment Date, the sum of
which amount and the amounts then on deposit therein and the
amount available for drawing under any Debt Service Reserve
Letter of Credit shall equal the Debt Service Reserve Required
Balance. Funds on deposit in the Debt Service Reserve Account
shall be transferred to the Debt Payment Account as and when
needed pursuant to Section 7.5. If at any time amounts on
deposit in the Debt Service Reserve Account, together with the
amount available for drawing under any Debt Service Reserve
Letter of Credit, shall exceed the then current Debt Service
Reserve Required Balance, such excess shall be transferred to
the Revenue Account.
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Section 7.8. Funding of the NGC Reserve Account.
The Collateral Agent shall, on each Payment Date occurring
after the Conversion Date, transfer an amount from the Revenue
Account to the NGC Reserve Account, to the extent of funds
remaining on deposit in the Revenue Account after the
application of funds provided for in Sections 7.4, 7.5, 7.6 and
7.7 on such Payment Date, such that the sum of such amount and
the amounts then on deposit in the NGC Reserve Account shall be
at least equal to the greater of: (a) (i) the average of the
Forward Market Price in effect on the days that the Forward
Market Price is published during the period beginning on the
Payment Date immediately preceding such Payment Date and ending
on such Payment Date multiplied by sixty (60) multiplied by
fourteen thousand five hundred (14,500) less (ii) $3,000,000;
or (b) the amount by which the face amount of the letter of
credit required to be maintained by the Borrower pursuant to
Section 6.1(b) of the NGC Agreement exceeds $3,000,000 (the
greater of the amounts described in clauses (a) and (b), the
"NGC Reserve Required Balance"). If at any time the Forward
Market Price is greater than one hundred thirty-three percent
(133%) of the Forward Market Price in effect as of the date of
the NGC Agreement, then the Collateral Agent, upon receipt of
written notice thereof from the Agent Bank, shall use all
amounts then on deposit in the NGC Reserve Account to cash
collateralize the letter of credit required to be maintained by
the Borrower pursuant to Section 6.1(b) of the NGC Agreement.
If at any time the amounts on deposit in the NGC Reserve
Account shall exceed the then current NGC Reserve Required
Balance, such excess shall be transferred to the Revenue
Account.
Section 7.9. Funding of the Distribution Retention
Account; Distributions. The Collateral Agent shall, on each
Payment Date occurring after the Conversion Date, transfer from
the Revenue Account to the Distribution Retention Account all
amounts remaining on deposit in the Revenue Account after the
application of funds provided for in Sections 7.4, 7.5, 7.6,
7.7 and 7.8 on such Payment Date. On each Quarterly Date
following the Conversion Date, the Collateral Agent shall
disburse all or any portion of funds on deposit in the
Distribution Retention Account to or as directed by the
Borrower upon receipt by the Collateral Agent of a certificate
of an Authorized Officer of the Borrower correctly stating that
the following conditions (the "Distribution Conditions") have
been satisfied and will continue to be satisfied as of such
Quarterly Date, which certificate shall be delivered to the
Collateral Agent at least three (3) Business Days prior to such
Quarterly Date:
(i) the Conversion Date has occurred;
(ii) no default or event of default under any
Transaction Document has occurred and is continuing or
will result from such disbursement;
(iii) all Project Accounts have been funded to their
then current required levels; and
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(iv) (A) the Debt Service Coverage Ratio for the
previous four (4) fiscal quarters was at least 1.2 to 1 or
(B) with respect to any Quarterly Date occurring during
the period ending twelve (12) months after the Conversion
Date, the Debt Service Coverage Ratio for the period from
the Conversion Date through the end of the most recent
fiscal quarter was at least 1.2 to 1.
Section 7.10. Funding of the Proceeds Account;
Application of Proceeds.
(a) Deposit of Proceeds. The Borrower shall
deposit or cause to be deposited each of the following into the
Proceeds Account:
(i) all proceeds in respect of any
property insurance policy (other than proceeds of business
interruption insurance or delayed opening insurance)
received by or on behalf of the Borrower in connection
with partial or total damage to or destruction of the
Project (such proceeds, "Loss Proceeds" and such event, an
"Event of Loss");
(ii) all proceeds received by or on behalf
of the Borrower in connection with any action to condemn,
seize or appropriate all or any portion of the Project
(such proceeds, "Condemnation Proceeds" and such event, an
"Event of Condemnation");
(iii) all Liquidated Performance Damages
received by or on behalf of the Borrower (except
Liquidated Performance Damages received pursuant to the
Operation and Maintenance Agreement or the O&M Guarantee,
which shall be deposited in the Revenue Account);
(iv) all Liquidated Delay Damages received
by or on behalf of the Borrower;
(v) all proceeds received by or on behalf
of the Borrower in connection with any sales of assets
(other than electricity and steam produced by the Project
and sold pursuant to the Energy Services Agreement or
otherwise) of the Borrower (such proceeds, "Asset Sale
Proceeds");
(vi) all proceeds received by or on behalf
of the Borrower (A) as indemnification or contribution
payments, (B) pursuant to warranties contained in the
Project Documents, (C) as a judgment, decree or arbitral
award or (D) as a result of any similar provision or
circumstance (such proceeds, "Other Proceeds"); and
(vii) all Default Equity Proceeds received
by or on behalf of the Borrower.
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(b) Application of Loss Proceeds.
(i) The Collateral Agent shall transfer
any Loss Proceeds in an amount less than or equal to
$5,000,000 which are received by or on behalf of the
Borrower and deposited in the Proceeds Account in
accordance with clause (a)(i) of this Section 7.10 to (x)
prior to the Conversion Date, the Construction Ac count,
and (y) after the Conversion Date, the Revenue Account,
each for application in accordance with the other
provisions of this Article VII.
(ii) If (A) Loss Proceeds in excess of
$5,000,000 are received by or on behalf of the Borrower
and deposited in the Proceeds Account in accordance with
clause (a)(i) of this Section 7.10 and (B) no Approved
Restoration Plan with respect to the relevant Event of
Loss shall have been developed within ninety (90) days
after the date such Loss Proceeds were received, the
Collateral Agent shall apply such Loss Proceeds to the
prepayment of outstanding Loans and accrued interest
thereon in accordance with Section 2.13(c).
(iii) If (A) Loss Proceeds in excess of
$5,000,000 are received by or on behalf of the Borrower
and deposited in the Proceeds Account in accordance with
clause (a)(i) of this Section 7.10 and (B) an Approved
Restoration Plan with respect to the relevant Event of
Loss shall have been developed within ninety (90) days
after the date such Loss Proceeds were received, the
Collateral Agent shall, upon satisfaction of the
conditions set forth in clause (i) of this Section 7.10
and provided no Event of Default (other than an Event of
Default under Section 8.1(c) resulting from a breach of
the covenants set forth in Section 5.9) shall have
occurred and be continuing, withdraw and pay to the
Borrower portions of such Loss Proceeds from time to time
in installments sufficient to effect such Approved
Restoration Plan. After completion of such Approved
Restoration Plan, the Collateral Agent shall apply any of
such Loss Proceeds in excess of the amount needed to
effect such Approved Restoration Plan to the prepayment of
outstanding Loans and accrued interest thereon in
accordance with Section 2.13(c).
(c) Application of Condemnation Proceeds.
(i) The Collateral Agent shall transfer
any Condemnation Proceeds in an amount less than or equal
to $5,000,000 which are received by or on behalf of the
Borrower and deposited in the Proceeds Account in
accordance with clause (a)(ii) of this Section 7.10 to (x)
prior to the Conversion Date, the Construction Account,
and (y) after the Conversion Date, the Revenue Account,
each for application in accordance with the other
provisions of this Article VII.
(ii) If (A) Condemnation Proceeds in
excess of $5,000,000 are received by or on behalf of the
Borrower and deposited in the
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Proceeds Account in accordance with clause (a)(ii) of this
Section 7.10 and (B) no Approved Restoration Plan with
respect to the relevant Event of Condemnation shall have
been developed within ninety (90) days after the date such
Condemnation Proceeds were received, the Collateral Agent
shall apply such Condemnation Proceeds to the prepayment
of outstanding Loans and accrued interest thereon in
accordance with Section 2.13(d).
(iii) If (A) Condemnation Proceeds in
excess of $5,000,000 are received by or on behalf of the
Borrower and deposited in the Proceeds Account in
accordance with clause (a)(ii) of this Section 7.10 and
(B) an Approved Restoration Plan with respect to the
relevant Event of Condemnation shall have been developed
within ninety (90) days after the date such Condemnation
Proceeds were received, the Collateral Agent shall, upon
satisfaction of the conditions set forth in clause (i) of
this Section 7.10 and provided no Event of Default (other
than an Event of Default under Section 8.1(c) resulting
from a breach of the covenants set forth in Section 5.9)
shall have occurred and be continuing, withdraw and pay to
the Borrower portions of such Condemnation Proceeds from
time to time in installments sufficient to implement such
Approved Restoration Plan. After completion of such
Approved Restoration Plan, the Collateral Agent shall
apply any of such Condemnation Proceeds in excess of the
amount needed to effect such Approved Restoration Plan to
the prepayment of outstanding Loans and accrued interest
thereon in accordance with Section 2.13(d).
(d) Liquidated Performance Damages.
(i) Upon deposit of any Liquidated
Performance Damages in the Proceeds Account, the
Collateral Agent shall transfer an amount of such
Liquidated Performance Damages to the Construction Account
that is needed to pay any Project Costs due or which are
projected to become due in accordance with the
Construction Budget, the Construction Schedule and the
Progress Payment Schedule, as set forth in a certificate
of an Authorized Officer of the Borrower; provided,
however, that none of such Liquidated Performance Damages
shall be applied to the payment of Energy Adjustment
Payments without the prior written consent of the Required
Banks, which consent shall not be unreasonably withheld or
delayed.
(ii) The Collateral Agent shall apply any
Liquidated Performance Damages remaining on deposit in the
Proceeds Account after application of clause (i)
immediately above to the prepayment of outstanding Loans
and accrued interest thereon in accordance with Section
2.13(e).
(e) Liquidated Delay Damages.
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(i) Upon deposit of any Liquidated Delay
Damages in the Proceeds Account, the Collateral Agent
shall transfer an amount of such Liquidated Delay Damages
to the Construction Account that is needed to pay any
Project Costs due or which are projected to become due in
accordance with the Construction Budget, the Construction
Schedule and the Progress Payment Schedule, as set forth
in a certificate of an Authorized Officer of the Borrower.
(ii) The Collateral Agent shall apply any
Liquidated Delay Damages remaining on deposit in the
Proceeds Account after application of clause (i)
immediately above to the prepayment of outstanding Loans
and accrued interest thereon in accordance with Section
2.13(f).
(f) Asset Sale Proceeds.
(i) The Collateral Agent shall transfer
any Asset Sale Proceeds in an amount less than or equal to
$5,000,000 which are received by or on behalf of the
Borrower and deposited in the Proceeds Account in
accordance with clause (a)(v) of this Section 7.10 to (x)
prior to the Conversion Date, the Construction Account,
and (y) after the Conversion Date, the Revenue Account,
each for application in accordance with the other
provisions of this Article VII.
(ii) If (A) Asset Sale Proceeds in excess
of $5,000,000 are received by or on behalf of the Borrower
and deposited in the Proceeds Account in accordance with
clause (a)(v) of this Section 7.10 and (B) the Collateral
Agent shall not receive within ninety (90) days from the
receipt of such Asset Sale Proceeds a certificate of an
Authorized Officer of the Borrower stating that such
proceeds shall be used to purchase assets for use in the
Project and setting forth all relevant information
regarding such assets, including, without limitation, the
price and proposed use thereof, the Collateral Agent shall
apply the first $5,000,000 of such Asset Sale Proceeds in
accordance with clause (i) immediately above and the
excess of such Asset Sale Proceeds to the prepayment of
outstanding Loans and accrued interest thereon in
accordance with Section 2.13(g).
(iii) If (A) Asset Sale Proceeds in excess
of $5,000,000 are received by or on behalf of the Borrower
and deposited in the Proceeds Account in accordance with
clause (a)(v) of this Section 7.10 and (B) the Collateral
Agent shall have received within ninety (90) days from the
receipt of such Asset Sale Proceeds a certificate of an
Authorized Officer of the Borrower stating that such
proceeds shall be used to purchase assets for use in the
Project and setting forth all relevant information
regarding such assets, including, without limitation, the
price and proposed use thereof, the Collateral Agent
shall, provided no Event of Default shall have occurred
and be continuing, withdraw from the Proceeds Account and
pay to the Borrower an amount (as specified in such
certificate)
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necessary to purchase such assets. The Collateral Agent
shall apply any of such Asset Sale Proceeds in excess of
such amount to the prepayment of outstanding Loans and
accrued interest thereon in accordance with Section
2.13(g).
(g) Application of Other Proceeds.
(i) The Collateral Agent shall transfer
any Other Proceeds in an amount less than or equal to
$5,000,000 which are received by or on behalf of the
Borrower and deposited in the Proceeds Account in
accordance with clause (a)(vi) of this Section 7.10 to (x)
prior to the Conversion Date, the Construction Account,
and (y) after the Conversion Date, the Revenue Account,
each for application in accordance with the other
provisions of this Article VII.
(ii) If (A) Other Proceeds in excess of
$5,000,000 are received by or on behalf of the Borrower
and deposited in the Proceeds Account in accordance with
clause (a)(vi) of this Section 7.10 and (B) the Collateral
Agent shall not receive within ninety (90) days from the
receipt of such Other Proceeds a certificate of an
Authorized Officer of the Borrower stating that such
proceeds shall be used to pay costs associated with the
development, construction, operation or maintenance of the
Project, the Collateral Agent shall apply the first
$5,000,000 of such Other Proceeds in accordance with
clause (i) immediately above and the excess of such Other
Proceeds to the prepayment of outstanding Loans and
accrued interest thereon in accordance with Section
2.13(h).
(iii) If (A) Other Proceeds in excess of
$5,000,000 are received by or on behalf of the Borrower
and deposited in the Proceeds Account in accordance with
clause (a)(vi) of this Section 7.10 and (B) the Collateral
Agent shall have received within ninety (90) from the
receipt of such Other Proceeds a certificate of an
Authorized Officer of the Borrower stating that such
proceeds shall be used to pay costs associated with the
development, construction, operation or maintenance of the
Project, the Collateral Agent shall, provided no Event of
Default shall have occurred and be continuing, withdraw
from the Proceeds Account and pay to the Borrower an
amount (as specified in such certificate) necessary to pay
such costs. The Collateral Agent shall apply any of such
Other Proceeds in excess of such amount to the prepayment
of outstanding Loans and accrued interest thereon in
accordance with Section 2.13(h).
(h) Application of Default Equity
Contributions. Any Default Equity Contributions deposited into
the Proceeds Account pursuant to any Equity Commitment
Agreement shall be applied by the Collateral Agent, at the
direction of the Required Banks, to (i) the payment of Project
Costs and/or (ii) the prepayment of outstanding Loans and
accrued interest thereon, in such proportions as the Required
Banks shall specify. The Collateral Agent shall transfer any
amounts specified by the Required Banks for applica-
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tion to the payment of Project Costs to the Construction
Account upon receipt by the Collateral Agent of a certificate
of an Authorized Officer of the Borrower that such amounts will
be used toward the payment of Project Costs. The Collateral
Agent shall apply any amounts specified by the Required Banks
for application to the prepayment of outstanding Loans and
accrued interest thereon to such prepayment in accordance with
Section 2.13(j).
(i) Application of Funds to an Approved
Restoration Plan. Prior to the withdrawal of monies on deposit
in the Proceeds Account for use in the implementation of an
Approved Restoration Plan in accordance with clause (b) or (c)
of this Section 7.10, the Collateral Agent shall have received
(i) for the initial release of monies in respect of an Approved
Restoration Plan, a copy of such Approved Restoration Plan
approved by all Persons required to approve the same as
provided in the definition of "Approved Restoration Plan" set
forth in Section 1.1 and (ii) for the initial and each
subsequent release of monies in respect of such Approved
Restoration Plan, an executed Restoration Requisition
substantially in the form of Exhibit G, which Restoration
Requisition shall be delivered to the Collateral Agent at least
three (3) Business Days prior to the day on which such release
is to occur.
(j) Excess Proceeds. Any amounts which remain
on deposit in the Proceeds Account after all transfers and
payments required by this Section 7.10 have been made shall be
transferred to (x) prior to the Conversion Date, the
Construction Account, and (y) after the Conversion Date, the
Revenue Account and, in each case, applied in accordance with
the other Sections of this Article VII.
Section 7.11. Letter of Credit Account.
(a) Upon the occurrence of the circumstances
described in Section 2.2(l), the Borrower shall deposit with
the Collateral Agent an amount in cash equal to the aggregate
Stated Amount of all outstanding Letters of Credit. In the
event that the Borrower shall fail to make or fully fund such
payment, the Collateral Agent shall transfer into the Letter of
Credit Account such amounts as shall be necessary to fund such
insufficiency, first, from the Revenue Account, then from the
Distribution Retention Account, then from the Proceeds Account,
then from the Maintenance Reserve Account, then from the Debt
Service Reserve Account and finally from the NGC Reserve
Account (in each case to the extent funds are available in each
such Project Account).
(b) Amounts on deposit in the Letter of Credit
Account shall be held by the Collateral Agent for the benefit
of the Issuing Bank and the other Banks to be used to repay any
Reimbursement Obligation or other Obligation of the Borrower,
or until all Letters of Credit have terminated and all
Reimbursement Obligations and other Obligations have been paid
in full.
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Section 7.12. Event of Default. Notwithstanding any
provision of this Agreement to the contrary, if an Event of
Default shall have occurred and be continuing, all amounts on
deposit in the Project Accounts shall be applied by the
Collateral Agent toward payment of the Obligations or as
otherwise directed by the Agent Bank (acting upon the
instructions of the Required Banks).
ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES.
Section 8.1. Events of Default. Each of the
following events, acts, occurrences or conditions shall
constitute an Event of Default under this Agreement, regardless
of whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of Law
or pursuant to or as a result of compliance by any Person with
any judgment, decree, order, rule or regulation of any
Governmental Authority:
(a) Failure to Make Payments. The Borrower
shall default in the payment when due of any principal of or
interest on the Loans (including any mandatory prepayments
required hereunder or any Fees or other Obligations) and such
default shall continue uncured for five (5) or more days.
(b) Breach of Representation or Warranty. Any
representation or warranty made by the Borrower in this
Agreement or any other Transaction Document to which it is a
party or any representation, warranty or statement in any
certificate, financial statement or other document furnished to
the Agent Bank or the Collateral Agent by or on behalf of the
Borrower hereunder or thereunder, shall prove to have been
untrue or misleading in any material respect as of the time
made, confirmed or furnished, and such misrepresentation shall
continue uncured for thirty (30) or more days after the earlier
of (i) the date upon which an Authorized Officer of the
Borrower obtains actual knowledge of such misrepresentation or
(ii) the date upon which the Borrower receives notice of such
misrepresentation from the Agent Bank; provided that, if any
Event of Bankruptcy occurs with respect to the Borrower, the
notice referred to in clause (ii) immediately above shall not
be required and shall be deemed to have been received upon the
occurrence of the event giving rise to such misrepresentation.
(c) Breach of Covenants. (i) The Borrower
shall fail to perform or observe any covenant or obligation
arising under Article VI or under Section 5.1(g), 5.2(a), 5.7,
5.11 or 5.13 and any applicable grace period expressly provided
therein shall have expired, or (ii) the Borrower shall fail to
perform or observe any covenant, term or agreement arising
under this Agreement or any other Financing Document (except
those described in clauses (a) and (b) and subsection (c)(i)
above) and such failure shall continue uncured for thirty (30)
or more days after an Authorized Officer of the Borrower
obtains actual knowledge thereof; provided that if such failure
cannot reasonably be cured in such
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thirty (30) day period but is susceptible to cure within a
longer period, the Borrower may have an additional sixty (60)
days to cure such failure if the Borrower is diligently
pursuing such cure and such extension of the cure period does
not result in a Material Adverse Effect.
(d) Default Under Other Financing Documents.
An event of default under any Financing Document other than
this Agreement shall occur and be continuing beyond the
applicable grace period expressly provided therefor in such
Financing Document.
(e) Nonperformance Under Financing Documents.
Any Project Party (other than the Borrower) shall fail to
perform or observe any covenant, term or agreement contained in
any Financing Document to which it is a party and such failure
shall (i) continue uncured after the expiration of the
applicable grace period expressly provided therefor in such
Financing Document and (ii) result in a Material Adverse
Effect.
(f) Event of Bankruptcy. Any Event of
Bankruptcy shall occur with respect to the Borrower or any
Equity Contributor which has continuing obligations under any
Equity Commitment Agreement.
(g) Judgments. One or more final judgments or
decrees shall be entered by a court or courts of competent
jurisdiction against the Borrower involving in the aggregate a
liability of $5,000,000 or more and none of such judgments or
decrees shall have been bonded, stayed, discharged or vacated
within thirty (30) days after entry thereof.
(h) Environmental Matters. (i) Any
Environmental Claim shall have been asserted against the
Borrower which (after a consideration of (x) reasonably
available and reasonably feasible plans of mitigation or
remediation and (y) the indemnification provisions set forth in
Section 21 of the Ground Lease) could reasonably be expected to
result in a Material Adverse Effect or (ii) any release,
emission, discharge or disposal of any Material of
Environmental Concern in violation of any applicable
Environmental Laws shall have been caused by the Borrower or
the Project and such event could reasonably be expected to
result in a Material Adverse Effect.
(i) Eminent Domain. There shall have occurred
an Event of Condemnation involving a material portion of the
assets or operations of the Project and receipt by or on behalf
of the Borrower of Condemnation Proceeds in excess of
$5,000,000, and the Borrower shall not deliver an Approved
Restoration Plan in respect thereof within sixty (60) days
after the occurrence thereof.
(j) Event of Loss. There shall have occurred
an Event of Loss involving a material portion of the assets or
operations of the Project and receipt by or on
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behalf of the Borrower of Loss Proceeds in excess of
$5,000,000, and the Borrower shall not deliver an Approved
Restoration Plan in respect of such damage or destruction
within sixty (60) days after the occurrence thereof.
(k) Governmental Approvals. Any Necessary
Project Approval or Deferred Approval required to have been
obtained shall not have been obtained, or shall be revoked,
terminated, withdrawn, suspended, modified in any material
adverse respect, withheld or shall otherwise cease to be in
full force and effect for a period of thirty (30) or more days
after the date on which an Authorized Officer of the Borrower
obtains actual knowledge thereof and such event shall result in
a Material Adverse Effect.
(l) Invalidity of Project Documents. Any of
the Project Documents shall cease to be valid and binding and
in full force and effect (other than any Project Document which
expires in accordance with the terms thereof) and the Borrower
shall not replace such Project Document with another contract
acceptable to the Agent Bank (i) immediately if such event
relates to the Energy Services Agreement and (ii) within sixty
(60) days if such event relates to any other Project Document.
(m) Security Interest. Any Security Document
shall cease to be in full force and effect or any Lien
purported to be granted thereby shall cease to be a perfected,
first priority Lien in favor of the Collateral Agent for the
benefit of the Secured Parties and such cessation shall
continue uncured for thirty (30) or more days after the date on
which an Authorized Officer of the Borrower obtains actual
knowledge thereof.
(n) Nonperformance Under Project Documents.
Except to the extent waived or consented to in writing by the
Required Banks, any Project Party (other than the Borrower)
shall fail to perform its obligations or shall assign any of
its rights or obligations under any Project Document, which
failure or assignment shall result in a Material Adverse Effect
and the Borrower shall not cause such Project Party to resume
performance or replace such Project Party with another project
party acceptable to the Agent Bank (i) immediately if such
event relates to the Energy Services Agreement and (ii) within
sixty (60) days if such event relates to any other Project
Document.
(o) Obligations under Equity Commitment
Agreements. Any Equity Contributor shall fail to satisfy its
obligations under its Equity Commitment Agreement.
(p) Acceleration of Debt. Indebtedness of the
Borrower (other than Indebtedness incurred under this
Agreement) in excess of $5,000,000 shall be required to be
prepaid, or shall be declared to be due and payable, other than
by regular scheduled required repayment, prior to the stated
maturity thereof, as the result of the acceleration of the
stated maturity thereof following an event of default
thereunder.
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(q) Ownership of the Borrower. NRG Energy
shall cease to beneficially own, directly or indirectly, at
least thirty percent (30%) of the membership interests in the
Borrower or NRG Energy and/or NRG Generating shall cease to be
the managing member of the Borrower; provided, however, that
such event shall not be an Event of Default if upon the
occurrence of such event, NRG Generating shall (i) directly own
at least fifty percent (50%) of the membership interests in the
Borrower, (ii) have an Investment Grade Rating and (iii) be the
managing member of the Borrower.
(r) Federal Regulation. The Borrower shall
become subject to regulation as (i) an "investment company" or
a company "controlled by" an "investment company" under the
ICA, or (ii) a "holding company," a "public utility company" or
a "subsidiary company" of a "registered holding company" under
PUHCA.
(s) Qualifying Facility. At any time after the
Commercial Operation Date, the Project shall cease to be a
Qualifying Facility and the Borrower shall not otherwise be
able to sell electricity and steam to the Energy Purchaser and
to wholesale purchasers without being regulated as an "electric
utility" or an "electric utility holding company" under
applicable federal or state Law.
(t) Material Adverse Effect. An event or
condition shall occur that could reasonably be expected to
result in a Material Adverse Effect; provided, however, that if
the occurrence of any such event or condition also results in
an Event of Default as specified in any of clauses (a) through
(s) of this Section 8.1, any grace period expressly set forth
in such clause for such event or condition shall apply
notwithstanding that such event or condition could reasonably
be expected to result in a Material Adverse Effect.
Section 8.2. Rights and Remedies.
(a) Notwithstanding any provision of this
Agreement to the contrary, upon the occurrence of any Event of
Default described in Section 8.1(f) and without declaration or
notice of any kind, the Commitments shall automatically and
immediately terminate and the unpaid principal amount of and
any and all accrued interest on the Loans and any and all
accrued Fees and other Obligations shall automatically become
immediately due and payable, with all additional interest from
time to time accrued thereon and without presentation, demand
or protest or other requirements of any kind (including,
without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and
notice of acceleration), all of which are hereby expressly
waived by Borrower, and the obligation of each Bank to make any
Loan hereunder shall thereupon terminate.
(b) Notwithstanding any provision of this
Agreement to the contrary, upon the occurrence and during the
continuance of any Event of Default (other
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than an Event of Default described in Section 8.1(f)), the
Agent Bank shall at the request, or may with the consent, of
the Required Banks, by written notice to the Borrower (i)
declare that the Commitments are terminated, whereupon the
Commitments and the obligation of each Bank to make any Loan
hereunder shall immediately terminate, and (ii) declare the
unpaid principal amount of and any and all accrued and unpaid
interest on the Loans and any and all accrued and unpaid Fees
and other Obligations to be, and the same shall thereupon be,
immediately due and payable with all additional interest from
time to time accrued thereon and without presentation, demand
or protest or other requirements of any kind (including,
without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and
notice of acceleration), all of which are hereby expressly
waived by the Borrower.
(c) In addition to the foregoing, upon the
occurrence and during the continuance of any Event of Default,
the Agent Bank shall at the request, or may with the consent,
of the Required Banks, (i) exercise, or direct the Collateral
Agent to exercise, all of its rights as a secured party under
the Security Documents or under applicable Law or otherwise
(and all remedial provisions in the Security Documents are
hereby incorporated by reference), and (ii) apply, or direct
the Collateral Agent to apply, all amounts on deposit in the
Project Accounts to the Obligations in such order as it shall
select in its sole discretion.
Section 8.3. Application of Proceeds.
(a) Except as otherwise expressly provided herein
(including, without limitation, the terms and conditions of
Article VII), following an Event of Default and the
acceleration of the maturity date of the Obligations (whether
automatically, by declaration or otherwise), the proceeds of
any collection, sale or other realization of all or any part of
the Collateral pursuant to the Security Documents, and any
other cash at the time of such collection, sale or other
realization held by the Collateral Agent under the Security
Documents or this Agreement, shall be applied by the Collateral
Agent in the following order of priority:
(i) first, to the payment of (A) all costs and
expenses relating to the sale of the Collateral and the
collection of all amounts owing hereunder, including
reasonable attorneys' fees and disbursements and the just
compensation of the Collateral Agent for services rendered
in connection therewith or in connection with any
proceeding to sell if a sale is not completed, and (B) all
charges, expenses and advances incurred or made by the
Collateral Agent in order to protect the Liens of the
Security Documents or the security afforded thereby,
together with interest at the rate per annum equal to the
Base Rate then in effect plus the Applicable Margin plus
two percent (2%), computed on the basis of the actual
number of days elapsed and a year of three hundred sixty-
five (365) or three hundred sixty-six (366) days, as
appropriate;
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(ii) second, to the payment in full of all
Obligations (to be paid to the Secured Parties pro rata in
accordance with the aggregate outstanding amounts of the
Obligations owed to each Secured Party), each such payment
to be applied by each Secured Party as follows: first
against indemnities, charges, fees, costs and expenses
with respect to the Obligations; then against interest on
interest which became overdue with respect to the
Obligations; then against interest on principal of the
Obligations which became overdue; then against interest
due on the Obligations; and finally to the principal of
the Obligations; and
(iii) finally, to the payment to the Borrower,
or its successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining.
(b) As used in this Section 8.3, "proceeds" of
Collateral shall mean cash, securities or other property
realized in respect of, and distributions in kind of,
Collateral, including any thereof received under a
reorganization, liquidation or adjustment of Indebtedness of
the Borrower or any issuer of or obligor on any of the
Collateral.
ARTICLE IX. THE AGENT BANK.
Section 9.1. Appointment. Each Bank hereby
irrevocably designates and appoints the Agent Bank (subject to
the first sentence of Section 9.9) as the agent of such Bank
under this Agreement and each other Financing Document, and
each such Bank irrevocably authorizes the Agent Bank to take
such actions on its behalf under the provisions of this
Agreement and each other Financing Document and to exercise
such powers and perform such duties as are expressly delegated
to the Agent Bank by the terms of this Agreement and each other
Financing Document, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision
to the contrary elsewhere in this Agreement, the Agent Bank
shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with
any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the
part of the Agent Bank shall be read into this Agreement or
otherwise exist against the Agent Bank. The provisions of this
Article IX are solely for the benefit of the Agent Bank and the
Banks and the Borrower shall not have any rights as a third
party beneficiary or otherwise under any of the provisions
hereof. In performing its functions and duties hereunder and
under the other Financing Documents, the Agent Bank shall act
solely as the agent of the Banks and does not assume nor shall
be deemed to have assumed any obligation or relationship of
trust or agency with or for the Borrower or any of its
successors and assigns.
Section 9.2. Delegation of Duties. The Agent Bank
may execute any of its duties under this Agreement or the other
Financing Documents by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all
matters pertaining to such duties so long as such counsel is
selected with reasonable due care. The Agent
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Bank shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with
reasonable care.
Section 9.3. Exculpatory Provisions. The Agent Bank
shall not be (i) liable for any action lawfully taken or
omitted to be taken by it or any Person described in Section
9.2 under or in connection with this Agreement or any other
Financing Document (except for its or such Person's own gross
negligence or willful misconduct), or (ii) responsible in any
manner to any of the Banks for any recitals, statements,
representations or warranties made by any Project Party
contained in this Agreement or any other Transaction Document
or in any certificate, report, statement or other document
referred to or provided for in, or received under or in
connection with, this Agreement or any other Transaction
Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or
any other Transaction Document or for any failure of any
Project Party to perform its obligations hereunder or
thereunder. The Agent Bank shall not be under any obligation
to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or
conditions of, this Agreement or any other Transaction
Document, or to inspect the properties, books or records of any
Project Party. This Section 9.3 is intended solely to govern
the relationship between the Agent Bank, on the one hand, and
the Banks, on the other.
Section 9.4. Reliance by Agent Bank. The Agent Bank
shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including,
without limitation, counsel to any Project Party), independent
accountants and other experts selected by the Agent Bank with
reasonable due care. The Agent Bank may deem and treat the
payee of any Note as the owner thereof for all purposes unless
the Agent Bank shall have received an executed Transfer
Supplement in respect thereof. The Agent Bank shall have no
liability for failing or refusing to take any action under this
Agreement or any other Financing Document if it shall first
receive such advice or concurrence of the Required Banks as it
deems appropriate or it shall first be indemnified to its
satisfaction by the Banks 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 Agent Bank shall in
all cases have no liability in acting, or in refraining from
acting, under this Agreement and the other Financing Documents
in accordance with a request of the Required Banks, and such
request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks and all future holders
of the Notes. This Section 9.4 does not govern the
relationship of the Borrower and the Banks.
Section 9.5. Notice of Default. The Agent Bank
shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default unless the
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Agent Bank has received written notice from a Bank or the
Borrower referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a "notice
of default". In the event that the Agent Bank receives such a
notice, the Agent Bank shall promptly deliver copies thereof to
the Banks. The Agent Bank shall take such action with respect
to such Default or Event of Default as shall be directed by the
Required Banks; provided that unless and until the Agent Bank
shall have received such directions, the Agent Bank may (but
shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of
Default as the Agent Bank shall deem advisable and in the best
interests of the Banks.
Section 9.6. Non-Reliance on Agent Bank and Other
Banks. Each Bank expressly acknowledges that neither the Agent
Bank, nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by the Agent Bank hereafter
taken, including, without limitation, any review of the affairs
of any Project Party, shall be deemed to constitute any
representation or warranty by the Agent Bank. Each Bank
represents and warrants to the Agent Bank that it has,
independently and without reliance upon the Agent Bank or any
other Bank and based on such documents and information as it
has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness
of the Project Parties and made its own decision to make its
Loans hereunder and enter into this Agreement. Each Bank also
represents that it will, independently and without reliance
upon the Agent Bank or any other Bank, and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, prospects,
financial and other condition and creditworthiness of the
Project Parties. Except for notices, reports and other
documents expressly required under the Financing Documents to
be furnished to the Banks by the Agent Bank, the Agent Bank
shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the business,
operations, property, prospects, financial and other condition
or creditworthiness of the Project Parties which may come into
the possession of the Agent Bank or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
Section 9.7. Bank Indemnification. The Banks agree
to indemnify the Agent Bank and its officers, directors,
employees, representatives and agents (to the extent not
reimbursed by the Borrower and without limiting the obligation
of the Borrower to do so), ratably according to their Pro Rata
Shares, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of
counsel for the Agent Bank or such Person in connection with
any investigative, administrative or judicial proceeding
commenced or threatened, whether or not the Agent Bank or such
Person shall be designated a party thereto) that may at any
time
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(including, without limitation, at any time following the
payment of the Obligations) be imposed on, incurred by or
asserted against the Agent Bank or such Person as a result of,
or arising out of, or in any way related to or by reason of,
any of the transactions contemplated hereby or the execution,
delivery or performance of any Transaction Document (but
excluding any such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements to the extent resulting from the gross negligence
or willful misconduct of the Agent Bank or such Person as
finally determined by a court of competent jurisdiction).
Section 9.8. Agent Bank in its Individual Capacity.
The Agent Bank and its Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with
the Project Parties as though the Agent Bank were not the Agent
Bank hereunder. With respect to Loans made or renewed by it
and any Note issued to it, the Agent Bank shall have the same
rights and powers under this Agreement as any Bank and may
exercise the same as though it were not the Agent Bank, and the
terms "Bank" and "Banks" shall include the Agent Bank in its
individual capacity.
Section 9.9. Successor Agent Bank. The Agent Bank
may resign as Agent Bank upon thirty (30) days notice to the
Borrower and the Banks and the Agent Bank may be removed from
its position as Agent Bank at any time by the vote of the
Required Banks. If the Agent Bank shall resign as Agent Bank
under this Agreement or be removed pursuant to the preceding
sentence, then the Required Banks during such 30-day period
shall appoint from among the Banks a successor agent, and upon
the acceptance by such successor Agent Bank and its execution
of a Confidentiality Agreement, the successor agent shall
succeed to the rights, powers and duties of the Agent Bank and
the term "Agent Bank" shall mean such successor agent,
effective upon its appointment and acceptance, and the former
Agent Bank's rights, powers and duties as Agent Bank shall then
be terminated, without any other or further act or deed on the
part of such former Agent Bank or any of the parties to this
Agreement or any holders of the Notes. After any retiring
Agent Bank's resignation hereunder as Agent Bank, the
provisions of this Article IX and Section 11.1 shall inure to
its benefit as to any actions taken or omitted to be taken by
it while it was Agent Bank under this Agreement.
ARTICLE X. THE COLLATERAL AGENT.
Section 10.1. Appointment. Each Bank hereby
irrevocably designates and appoints the Collateral Agent
(subject to the first sentence of Section 10.9) as the
collateral agent of such Bank under this Agreement and each
other Financing Document, and each such Bank irrevocably
authorizes the Collateral Agent to take such actions on its
behalf under the provisions of this Agreement and each other
Financing Document and to exercise such powers and perform such
duties as are expressly delegated to the Collateral Agent by
the terms of this Agreement and each other Financing Document,
together with
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such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Collateral Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Collateral Agent shall be read
into this Agreement or otherwise exist against the Collateral
Agent. The provisions of this Article X are solely for the
benefit of the Collateral Agent and the Banks and the Borrower
shall not have any rights as a third party beneficiary or
otherwise under any of the provisions hereof. In performing
its functions and duties hereunder and under the other
Financing Documents, the Collateral Agent shall act solely as
the collateral agent of the Banks and does not assume nor shall
be deemed to have assumed any obligation or relationship of
trust or agency with or for the Borrower or any of its
successors and assigns.
Section 10.2. Delegation of Duties. The Collateral
Agent may execute any of its duties under this Agreement or the
other Financing Documents by or through agents or attorneys-in-
fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties so long as such counsel was
selected with reasonable due care. The Collateral Agent shall
not be responsible for the negligence or misconduct of any
agents or attorneys-in- fact selected by it with reasonable
care.
Section 10.3. Exculpatory Provisions. The
Collateral Agent shall not be (i) liable for any action
lawfully taken or omitted to be taken by it or any Person
described in Section 10.2 under or in connection with this
Agreement or any other Financing Document (except for its or
such Person's own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by any
Project Party contained in this Agreement or any other
Transaction Document or in any certificate, report, statement
or other document referred to or provided for in, or received
under or in connection with, this Agreement or any other
Transaction Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or
any other Transaction Document or for any failure of any
Project Party to perform their obligations hereunder or
thereunder. The Collateral Agent shall not be under any
obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Transaction
Document, or to inspect the properties, books or records of any
Project Party. This Section 10.3 is intended solely to govern
the relation ship between the Collateral Agent, on the one
hand, and the Banks, on the other.
Section 10.4. Reliance by Collateral Agent. The
Collateral Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order
or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal
counsel (including, without limitation,
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counsel to any Project Party), independent accountants and
other experts selected by the Collateral Agent with reasonable
due care. The Collateral Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless the
Collateral Agent shall have received an executed Transfer
Supplement in respect thereof. The Collateral Agent shall have
no liability for failing or refusing to take any action under
this Agreement or any other Financing Document if it shall
first receive such advice or concurrence of the Required Banks
as it deems appropriate or it shall first be indemnified to its
satisfaction by the Banks 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 have no liability in acting, or in refraining from
acting, under this Agreement and the other Financing Documents
in accordance with a request of the Required Banks, and such
request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks and all future holders
of the Notes. This Section 10.4 does not govern the
relationship of the Borrower and the Banks.
Section 10.5. Notice of Default. The Collateral
Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default unless the
Collateral Agent has received written notice from a Bank or the
Borrower referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a "notice
of default". In the event that the Collateral Agent receives
such a notice, the Collateral Agent shall promptly deliver
copies thereof to the Agent Bank, which shall promptly deliver
copies thereof to the Banks. The Collateral Agent shall take
such action with respect to such Default or Event of Default as
shall be directed by the Agent Bank (acting upon the
instructions of the Required Banks); provided that unless and
until the Collateral Agent shall have received such directions,
the Collateral Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect
to such Default or Event of Default as the Collateral Agent
shall deem advisable and in the best interests of the Banks.
Section 10.6. Non-Reliance on Collateral Agent and
Other Banks. Each Bank expressly acknowledges that neither the
Collateral Agent, nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the
Collateral Agent hereafter taken, including, without
limitation, any review of the affairs of any Project Party,
shall be deemed to constitute any representation or warranty by
the Collateral Agent. Each Bank represents and warrants to the
Collateral Agent that it has, independently and without
reliance upon the Collateral Agent or any other Bank and based
on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business,
operations, property, prospects, financial and other conditions
and creditworthiness of the Project Parties and made its own
decision to make its Loans hereunder and enter into this
Agreement. Each Bank also represents that it will,
independently and without reliance upon the Collateral Agent or
any other Bank, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own
credit analysis,
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appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, operations,
property, prospects, financial and other conditions and
creditworthiness of the Project Parties. Except for notices,
reports and other documents expressly required under the
Financing Documents to be furnished to the Banks by the
Collateral Agent, the Collateral Agent shall not have any duty
or responsibility to provide any Bank with any credit or other
information concerning the business, operations, property,
prospects, financial and other conditions or creditworthiness
of the Project Parties which may come into the possession of
the Collateral Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
Section 10.7. Bank Indemnification. The Banks agree
to indemnify the Collateral Agent and its officers, directors,
employees, representatives and agents (to the extent not
reimbursed by the Borrower and without limiting the obligation
of the Borrower to do so), ratably according to their Pro Rata
Shares, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of
counsel for the Collateral Agent or such Person in connection
with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not the Collateral Agent or
such Person shall be designated a party thereto) that may at
any time (including, without limitation, at any time following
the payment of the Obligations) be imposed on, incurred by or
asserted against the Collateral Agent or such Person as a
result of, or arising out of, or in any way related to or by
reason of, any of the transactions contemplated hereby or the
execution, delivery or performance of any Transaction Document
(but excluding any such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses
or disbursements to the extent resulting from the gross
negligence or willful misconduct of the Collateral Agent or
such Person as finally determined by a court of competent
jurisdiction).
Section 10.8. Collateral Agent in its Individual
Capacity. The Collateral Agent and its Affiliates may make
loans to, accept deposits from and generally engage in any kind
of business with the Project Parties as though the Collateral
Agent were not the Collateral Agent hereunder. With respect to
Loans made or renewed by it and any Note issued to it, the
Collateral Agent shall have the same rights and powers under
this Agreement as any Bank and may exercise the same as though
it were not the Collateral Agent, and the terms "Bank" and
"Banks" shall include the Collateral Agent in its individual
capacity.
Section 10.9. Successor Collateral Agent. The
Collateral Agent may resign as Collateral Agent upon thirty
(30) days notice to the Borrower and the Banks and the
Collateral Agent may be removed from its position as Collateral
Agent at any time by the vote of the Required Banks. If the
Collateral Agent shall resign as Collateral Agent under this
Agreement or be removed pursuant to the preceding sentence,
then the Re-
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quired Banks during such 30-day period shall appoint from among
the Banks a successor collateral agent with an office in the
State of New York, and upon the acceptance by such successor
Collateral Agent and its execution of a Confidentiality
Agreement, the successor collateral agent shall succeed to the
rights, powers and duties of the Collateral Agent and the term
"Collateral Agent" shall mean such successor collateral agent,
effective upon its appointment and acceptance, and the former
Collateral Agent's rights, powers and duties as Collateral
Agent shall then be terminated, without any other or further
act or deed on the part of such former Collateral Agent or any
of the parties to this Agreement or any holders of the Notes.
After any retiring Collateral Agent's resignation hereunder as
Collateral Agent, the provisions of this Article X and Section
11.1 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Collateral Agent under
this Agreement.
Section 10.10. Administration of the Collateral.
The Collateral Agent shall hold the Collateral and any Lien
thereon for the benefit of the Secured Parties pursuant to the
terms of this Agreement, the Security Documents and the other
Financing Documents. The Collateral Agent shall administer the
Collateral in the manner contemplated by this Agreement, the
Security Documents and the other Financing Documents and shall
apply the balances from time to time held in the Project
Accounts in the manner provided in Article VII. The Collateral
Agent shall exercise such rights and remedies with respect to
the Collateral (subject to applicable notice and cure period
provisions) as are granted to it under this Agreement, the
Security Documents and the other Financing Documents, except as
otherwise expressly provided in this Agreement, the Security
Documents and the other Financing Agreements, as shall be
directed by the Agent Bank (acting upon the instructions of the
Required Banks). Except as otherwise expressly provided in
this Agreement, the Security Documents and the other Financing
Documents, no Bank or group of Banks (other than the Required
Banks) shall have any right to direct the Collateral Agent to
take any action in respect of the Collateral, and no Bank shall
have any right to sell, exchange or otherwise deal with any
property at any time pledged, assigned or mortgaged to secure
the Obligations, or to take action with respect to the
Collateral independently of the Collateral Agent, other than to
direct the Collateral Agent to take action as provided herein.
ARTICLE XI. MISCELLANEOUS
Section 11.1. Payment of Expenses and Indemnity.
(a) The Borrower shall, whether or not the
transactions hereby contemplated are consummated, pay all out-
of-pocket costs and expenses of the Agent Bank, the Collateral
Agent and each Bank in connection with (i) the negotiation,
preparation, execution and delivery of the Financing Documents
and the documents and instruments referred to therein, (ii) the
syndication, management and agenting of the Loans (in-
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cluding fees and expenses of the Independent Engineer, the Fuel
Consultant, the Petrochemical Industry Consultant and the
Insurance Consultant in the performance of services
contemplated by the terms of this Agreement, or otherwise in
providing expertise reasonably deemed necessary by the Agent
Bank in connection with any consent or approval by the Banks,
the Required Banks or the Agent Bank, or in connection with the
reasonably deemed necessary review of any circumstance or
condition affecting the Project), (iii) the creation,
perfection or protection of the Collateral Agent's Liens on the
Collateral (including, without limitation, fees and expenses
for title and lien searches and filing and recording fees),
(iv) the Agent Bank's review and due diligence (including,
without limitation, the review of the other Transaction
Documents and the fees and expenses of the Independent
Engineer, the Fuel Consultant, the Petrochemical Industry
Consultant and the Insurance Consultant), and (v) any
amendment, waiver or consent relating to any of the Financing
Documents (including, without limitation, as to each of the
foregoing, the fees and disbursements of counsel to the Agent
Bank and the Collateral Agent and any other attorneys retained
by the Agent Bank and the Collateral Agent and allocated costs
of internal counsel).
(b) The Borrower shall pay all out-of-pocket
costs and expenses of the Agent Bank, the Collateral Agent and
each Bank in connection with the preservation of rights under,
and enforcement of, the Financing Documents and the documents
and instruments referred to therein or in connection with any
restructuring or rescheduling of the Obligations (including,
without limitation, the fees and disbursements of counsel for
the Agent Bank, the Collateral Agent and the Banks and
allocated costs of internal counsel).
(c) The Borrower shall pay, and hold the Agent
Bank, the Collateral Agent and each of the Banks harmless from
and against, any and all present and future stamp, excise,
mortgage recording and other similar taxes and fees with
respect to the foregoing matters and hold the Agent Bank, the
Collateral Agent and each Bank harmless from and against any
and all liabilities with respect to or resulting from any delay
or omission (other than to the extent attributable to such
Bank) to pay such taxes.
(d) The Borrower shall indemnify the Agent
Bank, the Collateral Agent and each Bank and their respective
officers, directors, employees, representatives and agents
(each an "Indemnitee") from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages,
expenses, obligations, penalties, actions, judgments, suits,
costs or disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of
counsel for such Indemnitee in connection with any
investigative, administrative or judicial proceeding commenced
or threatened, whether or not such Indemnitee shall be
designated a party thereto) (each a "Claim") that may at any
time (including, without limitation, at any time following the
payment of the Obligations) be imposed on, asserted against or
incurred by any Indemnitee as a result of, or arising out of,
or in any way related to or by reason of, (i) any of the
transactions
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contemplated hereby or the execution, delivery or performance
of any other Financing Document or Transaction Document, (ii)
any violation by the Borrower of any applicable Environmental
Law or Environmental Approval, (iii) any Environmental Claim
arising out of the management, use, control, ownership or
operation of property or assets by the Borrower, including,
without limitation, all on-site and off-site activities
involving Materials of Environmental Concern, (iv) the breach
of any environmental representation or warranty set forth in
Section 4.23, (v) the grant to the Collateral Agent and the
Secured Parties of any Lien on any property or assets of the
Borrower or any equity interest in the Borrower, and (vi) the
exercise by the Collateral Agent and the Secured Parties of
their rights and remedies (including, without limitation,
foreclosure) under any agreements creating any such Lien (but
excluding, as to any Indemnitee, any such losses, liabilities,
claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements to the extent caused
by reason of the gross negligence or willful misconduct of such
Indemnitee as finally determined by a court of competent
jurisdiction). If the Borrower shall obtain actual knowledge
of any Claim indemnified against under this clause (d), the
Borrower shall give prompt notice thereof to the appropriate
Indemnitee or Indemnitees, and if any Indemnitee shall obtain
actual knowledge of any Claim indemnified under this clause
(d), such Indemnitee shall give prompt notice thereof to the
Borrower; provided that failure to so notify the Borrower shall
not release the Borrower from its obligations to indemnify
hereunder. With respect to any amount that the Borrower is
requested by an Indemnitee to pay by reason of this clause (d),
such Indemnitee shall, if so requested by the Borrower and
prior to any payment, submit such additional information to the
Borrower as the Borrower may reasonably request and which is
reasonably available to such Indemnitee to substantiate
properly the requested payment. In case any action, suit or
proceeding shall be brought against any Indemnitee for which
the Indemnitee is indemnified under this clause (d), such
Indemnitee shall notify the Borrower of the commencement
thereof, and the Borrower shall be entitled, at its expense,
acting through counsel reasonably acceptable to such
Indemnitee, to participate in, and, to the extent that the
Borrower desires to, assume and control the defense thereof;
provided, however, that the Borrower shall have acknowledged in
writing its obligation to fully indemnify such Indemnitee in
respect of such action, suit or proceeding; and provided,
further, that the Borrower shall not be entitled to assume and
control the defense of any such action, suit or proceeding if
and to the extent that, (A) in the reasonable opinion of such
Indemnitee, (x) (i) such action, suit or proceeding involves
any risk of imposition of criminal liability or (ii) such
action, suit or proceeding involves any material risk of
material civil liability on such Indemnitee or will involve a
material risk of the sale, forfeiture or loss of, or the
creation of any Lien (other than a Permitted Lien) on, the
Collateral or any part thereof, unless, in the case of this
clause (x) (ii), the Borrower shall have posted a bond or other
security satisfactory to the relevant Indemnitees in respect to
such risk or (y) the control of such action, suit or proceeding
would involve a bona fide conflict of interest, (B) such
proceeding involves Claims not fully indemnified by the
Borrower which the Borrower and the Indemnitee have been unable
to sever from the indemnified Claim(s), (C) a Default or an
Event of Default has occurred and is continuing or (D) such
action, suit or
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proceeding involves matters which extend beyond or are
unrelated to the transactions contemplated by the Transaction
Documents and if determined adversely could be materially
detrimental to the interests of such Indemnitee notwithstanding
indemnification by the Borrower. The Indemnitee, on the one
hand, and the Borrower, on the other hand, may participate in a
reasonable manner at its own expense and with its own counsel
in any proceeding conducted by the other in accordance with the
foregoing. Each Indemnitee shall at the Borrower's expense
supply the Borrower with such information and documents
reasonably requested by the Borrower as are necessary or
advisable for the Borrower to participate in any action, suit
or proceeding to the extent permitted by this clause (d).
Unless an Event of Default shall have occurred and be
continuing, no Indemnitee shall enter into any settlement or
other compromise with respect to any Claim which is entitled to
be indemnified under this clause (d) without the prior written
consent of the Borrower, which consent shall not be
unreasonably withheld or delayed, unless such Indemnitee waives
its right to be indemnified under this clause (d) with respect
to such Claim. In addition, if an Indemnitee, in violation of
the Borrower's right to assume and control the defense of any
Claim, refuses to permit the Borrower to control the defense
after written demand by the Borrower for such control, such
Indemnitee waives its right to be indemnified under this clause
(d) with respect to such Claim. Upon payment in full of any
Claim by the Borrower pursuant to this clause (d) to or on
behalf of an Indemnitee, the Borrower without any further
action shall be subrogated to any and all claims that such
Indemnitee may have relating thereto (other than claims in
respect of insurance policies maintained by such Indemnitee at
its own expense), and such Indemnitee shall execute such
instruments of assignment and conveyance, evidence of claims
and payment and such other documents, instruments and
agreements as may be necessary to preserve any such claims and
otherwise cooperate with the Borrower and give such further
assurances as are necessary or advisable to enable the Borrower
vigorously to pursue such claims. The Borrower's obligations
and rights under this Section 11.1 shall survive the repayment
of all Obligations and the termination of this Agreement.
Section 11.2. Right of Set-off. In addition to any
rights now or hereafter granted under applicable Law or
otherwise, and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of
Default, each Bank is hereby authorized at any time or from
time to time, without presentment, demand, protest or other
notice of any kind to the Borrower or to any other Person, any
such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special,
time or demand, provisional or final) and any other
Indebtedness at any time held or owing by such Bank (including,
without limitation, by branches and agencies of such Bank
wherever located) to or for the credit or the account of the
Borrower against and on account of the Obligations of the
Borrower to such Bank under this Agreement or under any of the
other Financing Documents, including, without limitation, all
interests in Obligations purchased by such Bank pursuant to
Section 2.22, and all other claims of any nature or description
arising out of or connected with this Agreement or any other
Financing Document, irrespective of whether or not such Bank
shall have made any
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demand hereunder and although said Obligations, liabilities or
claims, or any of them, shall be contingent or unmatured.
Section 11.3. Notices. Except as otherwise
expressly provided herein, all notices, requests and demands to
or upon the respective parties hereto to be effective shall be
in writing (including by telecopy, telex or cable
communication), and shall be deemed to have been duly given or
made when delivered by hand, or upon actual receipt if
deposited in the United States mail, postage prepaid, or, in
the case of telex notice, when answerback is received, or, in
the case of telecopy notice, when confirmation is received, or,
in the case of a nationally recognized overnight courier
service, one Business Day after delivery to such courier
service, addressed, in the case of each party hereto, at its
address specified opposite its signature below or on the
appropriate Transfer Supplement, or to such other address as
may be designated by any party in a written notice to the other
parties hereto; provided that notices and communications to the
Agent Bank, the Collateral Agent or the Banks by the Borrower
shall not be effective until received by the Agent Bank, the
Collateral Agent or the Banks, as the case may be.
Section 11.4. Successors and Assigns; Participation;
Assignments.
(a) Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the Borrower,
the Banks, the Agent Bank, the Collateral Agent, all future
holders of the Notes and their respective successors and
assigns, except that the Borrower may not assign or transfer
any of its rights or obligations under this Agreement without
the prior written consent of each Bank. No Bank may
participate, assign or sell any of its Credit Exposure (as
defined in clause (b) below) except as required by operation of
Law, in connection with the merger, consolidation or
dissolution of any Bank or as provided in this Section 11.4.
(b) Participation. Subject to the terms of the
Financing Documents, the Banks may at any time sell to one or
more Persons (each a "Participant") participating interests in
any Loan owing to such Bank, any Note held by such Bank, any
Commitment of such Bank and/or any other interest of such Bank
hereunder (in respect of any such Bank, its "Credit Exposure");
provided, however, that Chase shall at all times retain the
leadership position among all Participants in the aggregate
Credit Exposures of all Banks. No sale of a participating
interest of less than $2,500,000 shall be permitted.
Notwithstanding any such sale by a Bank of participating
interests to a Participant, such Bank's rights and obligations
under this Agreement shall remain unchanged, such Bank shall
remain solely responsible for the performance thereof, such
Bank shall remain the holder of any such Note for all purposes
under this Agreement (except as expressly provided below), and
the Borrower, the Agent Bank and the Collateral Agent shall
continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this
Agreement. The Borrower agrees that if any Obligations are due
and unpaid, or shall have been declared or shall have become
due and payable upon
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the occurrence and during the continuance of an Event of
Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts
owing under this Agreement and any Note to the same extent as
if the amount of its participating interest were owing directly
to it as a Bank under this Agreement or any Note; provided that
such right of set-off shall be subject to the obligations of
such Participant to share with the Banks, and the Banks agree
to share with such Participant, as provided in Section 2.22.
The Borrower acknowledges that each Participant shall be
entitled to the benefits of Sections 2.15, 2.16, 2.17, 2.18,
2.19 and 2.22; provided that no Participant shall be entitled
to receive any greater amount pursuant to such Sections than
the transferor Bank would have been entitled to receive in
respect of the amount of the participating interest transferred
by such transferor Bank to such Participant had no such
transfer occurred. Each Bank agrees that any agreement between
such Bank and any such Participant in respect of such
participating interest shall not restrict such Bank's right to
agree to any amendment, supplement, waiver or modification to
this Agreement or any other Transaction Document, except where
the result of any of the foregoing would be to extend the final
maturity of any Obligation or any regularly scheduled
installment thereof, reduce the rate of interest or Fees,
extend the time of payment of interest thereon, reduce the
principal amount thereof or release all or substantially all of
the Collateral.
(c) Assignments. Subject to the terms of the
Financing Documents, each of the Banks may, in the ordinary
course of its business and in accordance with applicable Law,
at any time assign to any Person (each an "Assignee") with the
consent of the Agent Bank all or any part of its Credit
Exposure. No assignment of Credit Exposure in an amount less
than $2,500,000 shall be permitted. The Borrower, the Agent
Bank, the Collateral Agent and the Banks agree that to the
extent of any such assignment the Assignee shall be deemed to
have the same rights and benefits under the Financing Documents
and the same rights of set-off and obligation to share pursuant
to Section 2.22 as it would have had if it were a Bank
hereunder; provided that the Borrower, the Agent Bank and the
Collateral Agent shall be entitled to continue to deal solely
and directly with the assignor Bank in connection with the
interests so assigned to the Assignee and the assignor Bank
shall continue to be responsible for the performance of its
obligations under this Agreement unless and until such Assignee
becomes a Purchasing Bank pursuant to clause (d) below.
(d) Assignments to Purchasing Banks. Any Bank
may at any time and from time to time assign to one or more
Persons ("Purchasing Banks") all or any part of its Credit
Exposure pursuant to a supplement to this Agreement
substantially in the form of Exhibit K (a "Transfer
Supplement"), executed by such Purchasing Bank, such transferor
Bank, the Agent Bank and the Collateral Agent. Any Purchasing
Bank must be rated at least "A" by S&P and "A2" by Moody's. No
assignment of Credit Exposure in an amount less than $2,500,000
shall be permitted. Any such partial assignment shall be an
assignment of an identical percentage of the transferor Bank's
Loans and Commitments. Upon (i) such execution of such
Transfer Supplement, (ii) delivery of an executed copy
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thereof to the Borrower and the Agent Bank and (iii) payment by
such Purchasing Bank to such transferor Bank of an amount equal
to the purchase price agreed between such transferor Bank and
such Purchasing Bank, such transferor Bank shall be released
from its obligations hereunder to the extent of such assignment
and such Purchasing Bank shall for all purposes be a Bank party
to this Agreement and shall have all of the rights and
obligations of a Bank under this Agreement to the same extent
as if it were an original party hereto, and no further consent
or action by the Borrower, the Banks, the Collateral Agent or
the Agent Bank shall be required. Such Transfer Supplement
shall be deemed to amend this Agreement to the extent, and only
to the extent, necessary to reflect the addition of such
Purchasing Bank as a Bank and the resulting adjustment of the
Commitments, if any, arising from the purchase by such
Purchasing Bank of all or a portion of the Credit Exposure of
such transferor Bank. Promptly after the consummation of any
transfer to a Purchasing Bank pursuant hereto, the transferor
Bank, the Agent Bank and the Borrower shall make appropriate
arrangements so that a replacement Note is issued to such
transferor Bank and a new Note is issued to such Purchasing
Bank, in each case in principal amounts reflecting such
transfer.
(e) Additional Provisions for Letters of
Credit. In connection with any acquisition of Credit Exposure
in respect of Letters of Credit, each Transferee further agrees
as follows:
(i) The Issuing Bank is hereby
appointed as agent by each Transferee for the limited
purpose of making and receiving payments, and
examining, accepting or rejecting drafts in respect
of any Letters of Credit and, in this connection,
shall have such additional powers as are reasonably
incidental thereto;
(ii) Any Fee paid or payable to the
Issuing Bank (including, without limitation,
commitment fees and issuance fees) in respect of any
Letter of Credit shall, to the extent that such Fee
relates to the time after a Transferee has acquired
Credit Exposure in respect of such Letter of Credit,
be payable to such Transferee in accordance with the
terms hereof so that each such Transferee shall share
in such Fee to the extent paid or payable for (or in
the case of issuance fees to the extent allocable to)
the period commencing on the date its respective
Credit Exposure was acquired; and
(iii) Upon the issuance by the
Issuing Bank of any Letter of Credit on or after the
Closing Date, each Transferee having Credit Exposure
in respect of Letters of Credit shall automatically
acquire a participation in the liability under such
Letter of Credit in an amount equal to its applicable
percentage of the Stated Amount of such Letter of
Credit.
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(f) Disclosure of Information; Cooperation.
The Borrower authorizes each Bank to disclose to any
Participant, Assignee or Purchasing Bank (each, a "Transferee")
and any prospective Transferee (provided that such Transferee
has agreed to be bound by and complies with the confidentiality
requirements set forth in Section 11.18) any and all financial
and other information in such Bank's possession concerning the
Borrower which has been delivered to such Bank by the Borrower
pursuant to this Agreement or which has been delivered to such
Bank by the Borrower or the Agent Bank in connection with such
Bank's credit evaluation of the Borrower prior to entering into
this Agreement. The Borrower shall cooperate with the Agent
Bank and the Banks in connection with any sale of a
participation in, or assignment of, Credit Exposure in
accordance with this Section 11.4.
(g) Regulation A. Notwithstanding any other
language in this Agreement, any Bank may at any time assign all
or any portion of its rights under this Agreement and the Notes
to a Federal Reserve Bank as collateral in accordance with
Regulation A of the Board of Governors of the Federal Reserve
System and the applicable operating circular of such Federal
Reserve Bank.
(h) Notice to Borrower. So long as no Default
or Event of Default has occurred and is continuing, the Agent
Bank shall notify the Borrower of the occurrence of any sale or
assignment pursuant to this Section 11.4.
(i) Violation of Law. No Bank shall sell or
assign all or any portion of its Credit Exposure if such sale
or assignment would result in a violation of Law by the
Borrower or any Bank.
Section 11.5. Amendments and Waivers. Neither this
Agreement, any Note, any other Financing Document to which the
Borrower is a party nor any terms hereof or thereof may be
amended, supplemented, modified or waived except in accordance
with the provisions of this Section 11.5. The Required Banks
and the Borrower may, from time to time, enter into written
amendments or waivers of this Agreement, the Notes or the other
Financing Documents to which the Borrower is a party; provided
that no such amendment or waiver shall (i) extend either the
Final Maturity Date or any installment or required payment or
prepayment of any Obligations or reduce the rate or extend the
time of payment of interest on any Obligations, or reduce the
principal amount of any Obligations or reduce any fee payable
to the Banks hereunder, or release all or substantially all of
the Collateral (except as expressly permitted by the Security
Documents) or change the amount of any Commitment of any Bank,
or amend, modify or waive any provision of this Section 11.5 or
the definition of Required Banks, or consent to or permit the
assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or any other Financing
Document, or release any Equity Contributor from its obligation
to make Equity Contributions under the Equity Commitment
Agreement, or change the number or percentage of Banks who must
approve the satisfaction of any
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condition precedent, or eliminate or reduce any requirement set
forth in Article IV in each case without the written consent of
all of the Banks, or (ii) amend, modify or waive any provision
of Article IX or any other provision of any Financing Document
if the effect thereof is to affect the rights or duties of the
Agent Bank, without the written consent of the then Agent Bank,
or (iii) amend, modify or waive any provision of Article X or
any other provision of any Financing Document if the effect
thereof is to affect the rights or duties of the Collateral
Agent, without the written consent of the then Collateral
Agent. Any such amendment, supplement, modification or waiver
shall apply to each of the Banks equally and shall be binding
upon the Borrower, the Banks, the Agent Bank, the Collateral
Agent and all future holders of the Notes. In the case of any
waiver, the Borrower, the Banks, the Agent Bank and the
Collateral Agent shall be restored to their former positions
and rights hereunder and under the outstanding Notes, and any
Default or Event of Default waived shall be deemed to be cured
and not continuing, but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any
right consequent thereon.
Section 11.6. No Waiver; Remedies Cumulative. No
failure or delay on the part of the Agent Bank, the Collateral
Agent or any Bank or any holder of a Note in exercising any
right, power or privilege hereunder or under any other
Financing Document and no course of dealing between the
Borrower and the Agent Bank, the Collateral Agent or any Bank
or the holder of any Note shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Financing Document
preclude any other or further exercise thereof of the exercise
of any other right, power or privilege hereunder or thereunder.
The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which
the Agent Bank, the Collateral Agent or any Bank or the holder
of any Note would otherwise have. No notice to or demand on
the Borrower in any case shall entitle the Borrower to any
other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent
Bank, the Collateral Agent or any Bank or the holder of any
Note to any other or further action in any circumstances
without notice or demand.
Section 11.7. No Third Party Beneficiaries. The
agreement of the Banks to make the Loans on the terms and
conditions set forth in this Agreement are solely for the
benefit of the Borrower, and no other Person (including any
other Project Party, obligor, contractor, subcontractor,
supplier or materialman furnishing supplies, goods or services
to or for the benefit of the Project) shall have any rights
hereunder, as against the Agent Bank, the Collateral Agent or
any Bank, under any other Transaction Document or with respect
to the Loans or the proceeds thereof.
Section 11.8. Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each
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of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same
instrument.
Section 11.9. Effectiveness. This Agreement shall
become effective on the date on which all of the parties hereto
shall have signed a counterpart hereof and shall have delivered
the same to the Agent Bank, which delivery, in the case of the
Banks and the Collateral Agent, may be given to the Agent Bank
by telecopy (with the originals delivered promptly to the Agent
Bank via overnight courier service).
Section 11.10. Headings Descriptive. The headings
of the several Sections and subsections of this Agreement are
inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
Section 11.11. Marshalling; Recapture. None of the
Agent Bank, the Collateral Agent nor any Bank shall be under
any obligation to marshall any assets in favor of the Borrower
or any other party or against or in payment of any or all of
the Obligations. To the extent any Bank receives any payment
by or on behalf of the Borrower, which payment or any part
thereof is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid to the
Borrower or its estate, trustee, receiver, custodian or any
other party under any bankruptcy Law, state or federal Law,
common Law or equitable cause, then to the extent of such
payment or repayment, the obligation or part thereof which has
been paid, reduced or satisfied by the amount so repaid shall
be reinstated by the amount so repaid and shall be included
within the liabilities of the Borrower to such Bank as of the
date such initial payment, reduction or satisfaction occurred.
Section 11.12. Severability. In case any provision
in or obligation under this Agreement, the Notes or the other
Financing Documents shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability
of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in
any way be affected or impaired thereby.
Section 11.13. Survival. All representations,
warranties and indemnities set forth herein including, without
limitation, in Sections 2.15, 2.16, 2.17, 2.18, 2.19, 2.22 and
11.1 shall survive the execution and delivery of this Agreement
and the Notes and the making and repayment of the Loans.
Section 11.14. Domicile of Loans. Each Bank may
transfer and carry its Loans to or for the account of any
branch office, subsidiary or Affiliate of such Bank.
Section 11.15. Independence of Covenants. All
covenants hereunder shall be given independent effect so that
if a particular action or condition is not permitted by any of
such covenants, the fact that it would be permitted by an
exception to, or be
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otherwise within the limitations of, another covenant shall not
avoid the occurrence of a Default or Event of Default if such
action is taken or condition exists.
Section 11.16. Limitation of Liability. No Equity
Holder or any other Person shall be personally liable (whether
by operation of Law or otherwise) for payments due hereunder or
under any other Financing Document for the performance of any
Obligations except as expressly provided in such Financing
Document. The sole recourse of the Secured Parties for
satisfaction of the Obligations shall be against the Borrower
and its assets and not against any other Person; provided,
however, that (i) nothing in this Section 11.16 shall limit or
otherwise prejudice in any way the right of the Secured Parties
to proceed against any Person with respect to the enforcement
of such Person's obligations (or the enforcement of the Secured
Parties' rights) under any Transaction Document to which it is
a party, and (ii) recourse against a Person for such Person's
fraud or intentional misrepresentation shall not be limited by
this Section 11.16.
Section 11.17. Governing Law; Submission to
Jurisdiction; Waiver of Jury Trial.
(a) THIS AGREEMENT, EACH OTHER FINANCING
DOCUMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS
OF LAW EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW).
(b) ANY LEGAL ACTION OR PROCEEDING AGAINST ANY
PARTY HERETO WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT AND ANY ACTION FOR ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
APPELLATE COURTS FROM ANY THEREOF. THE BORROWER HEREBY
IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT CORPORATION
SYSTEM WITH OFFICES ON THE DATE HEREOF AT 1633 BROADWAY, NEW
YORK, NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE AND ACCEPT FOR AND ON ITS BEHALF SERVICE OR ANY AND ALL
LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE
SERVED IN SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH
DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO
ACT AS SUCH, THE BORROWER AGREES TO DESIGNATE A NEW DESIGNEE,
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APPOINTEE AND AGENT IN NEW YORK CITY ON TERMS AND FOR PURPOSES
OF THIS PROVISION SATISFACTORY TO THE AGENT BANK. THE BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS
REFERRED TO IN SECTION 11.3. THE BORROWER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT BROUGHT IN THE COURTS REFERRED TO
ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, NOT TO PLEAD OR CLAIM IN
ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER
JURISDICTION.
(c) EACH OF THE BORROWER AND THE SECURED
PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
Section 11.18. Confidentiality. Each of the Agent
Bank, the Collateral Agent and the Banks agrees (on behalf of
itself and each of its Affiliates, directors, officers,
employees and representatives) to execute and deliver a
confidentiality agreement substantially in the form of Exhibit
L (each a "Confidentiality Agreement") and in accordance
therewith to use reasonable precautions to keep confidential,
in accordance with its customary procedures for handling
Confidential Information and in accordance with safe and sound
banking practices, any Confidential Information received by
such Person; provided that nothing herein shall limit the
disclosure of information to the extent that such information
(i) is in the public domain at the time of disclosure, (ii)
following disclosure, becomes generally known or available
through no act or omission of the Agent Bank, the Collateral
Agent or any Bank, as the case may be, (iii) is known, or
becomes known, to the Agent Bank, the Collateral Agent or any
Bank, as the case may be, from a source other than the Borrower
(provided that disclosure by such source is not in breach of a
confidentiality agreement with the Borrower), (iv) is
independently required to be disclosed by the Agent Bank, the
Collateral Agent or any Bank, as the case may be, without
violating any of such Person's obligations under the
Confidentiality Agreement to which such Person is a party or
(v) is legally required to be disclosed by Law or judicial
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or other governmental action; provided that prompt notice of
such legal requirement or such judicial or other governmental
action shall have been given to the Disclosing Party (as
defined in each Confidentiality Agreement) and that the
Disclosing Party shall be afforded the opportunity (consistent
with the legal obligations of the Receiving Party (as defined
in each Confidentiality Agreement)) to exhaust all reasonable
legal remedies to maintain the Confidential Information in
confidence; provided, further that nothing herein shall limit
the disclosure of Confidential Information to (i) the Agent
Bank's, the Collateral Agent's or any Bank's, as the case may
be, Affiliates, directors, officers, employees, attorneys,
accountants, consultants, advisors or agents or (ii) any
Transferee (or prospective Transferee) so long as such
Transferee (or prospective Transferee) first executes and
delivers to the respective Bank a Confidentiality Agreement;
provided, further that, unless specifically prohibited by
applicable Law or court order, the Agent Bank, the Collateral
Agent or the affected Bank shall, prior to disclosure thereof,
notify the Borrower of any request for disclosure of any
Confidential Information (x) by any governmental agency or
representative thereof (other than any such request in
connection with an examination of the financial condition of
the Agent Bank or the Collateral Agent or effected by such
governmental agency) or (y) pursuant to legal process; and
provided finally that in no event shall the Agent Bank, the
Collateral Agent or any Bank be obligated or required to return
any materials furnished by the Borrower (except as may be
required under any Confidentiality Agreement). The obligations
of the Agent Bank, the Collateral Agent or any Bank under this
Section 11.18 shall supersede and replace the obligations of
the Agent Bank, the Collateral Agent or any Bank under any
other confidentiality agreement in respect of this financing
signed and delivered by Agent Bank, the Collateral Agent or any
Bank to the Borrower prior to the date hereof or prior to the
date on which any Person becomes a Transferee.
Section 11.19. Removal by Assignment of Banks. If
any Bank shall (i) make any demand for payment under Section
2.16(a)(B), 2.18 or 2.19, (ii) give notice to the Borrower
pursuant to Section 2.16(a)(iii), or (iii) fails to make
available to the Agent Bank its Pro Rata Share of Loans to be
made on the date specified in any Notice of Borrowing in
accordance with Section 2.5(a), the Borrower may demand and the
affected Bank or the Defaulting Bank, as the case may be, shall
assign in accordance with Section 11.4(c) to one or more other
Banks designated by the Borrower all (but not less than all) of
such Bank's Commitment. If any such Bank designated by the
Borrower shall fail to consummate such assignment on terms
acceptable to the affected Bank, or if the Borrower shall fail
to designate any such other Bank for all of the affected Bank's
commitment, then such demand by the Borrower shall become
ineffective; it being understood for purposes of this Section
11.19 that such assignment shall be conclusively deemed to be
on terms acceptable to the affected Bank, and the affected Bank
shall be compelled to consummate such assignment to such other
Bank designated by the Borrower, if such other Bank (1) shall
agree to such assignment and (2) shall offer compensation to
the affected Bank in an amount equal to all amounts then owing
by the Borrower to the affected Bank hereunder
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and under the Notes made by the Borrower to the affected Bank,
whether for principal, interest, Fees, costs or expenses.
Section 11.20. Change of Lending Office. If an
event occurs with respect to a lending office of any Bank that
obligates the Borrower to pay any amount under Section 2.7(d),
2.17, 2.18 or 2.19, makes operable Section 2.16(a)(iii) or
entitles the Bank to make a claim under Section 2.16(a)(B),
such Bank shall, if requested by the Borrower, use reasonable
efforts to designate another lending office or offices the
designation of which will reduce the amount the Borrower is so
obligated to pay, eliminate such operability or reduce the
amount the Bank is so entitled to claim; provided that such
designation would not, in the sole discretion of the Bank, be
disadvantageous to such Bank in any manner or contrary to such
Bank's policy. Any Bank may at any time and from time to time
change any lending office and shall give notice of any such
change to the Agent Bank, the Collateral Agent and the
Borrower.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Credit Agreement as of the date first above written.
NRG (MORRIS) COGEN, LLC,
as the Borrower
By: /s/ James J. Bender
Name: James J. Bender
Title: Member Representative
Address for Notices:
1221 Nicollet Mall
Suite 700
Minneapolis, Minnesota 55403-2445
Attention: President
Telephone: (612) 373-5400
Facsimile: (612) 373-5430
THE CHASE MANHATTAN BANK,
as a Bank
By: /s/ Thomas Case
Name: Thomas L. Case
Title: Vice President
Address for Notices:
One Chase Manhattan Plaza
New York, New York 10081
Attention: Global Power and
Environmental Group
Telephone:
Facsimile:
<PAGE>
THE CHASE MANHATTAN BANK,
as the Agent Bank
By: /s/ Thomas Case
Name: Thomas L. Case
Title: Vice President
Address for Notices:
One Chase Manhattan Plaza
New York, New York 10081
Attention: Global Power and
Environmental Group
Telephone:
Facsimile:
THE CHASE MANHATTAN BANK,
as the Collateral Agent
By: /s/ Annette M. Marsula
Name: Annette M. Marsula
Title: Assistant Vice President
Address for Notices:
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Annette Marsula
Telephone: (212) 946-7557
Facsimile: (212) 946-8177/8178
<PAGE>
Exhibit 10.27.9
CONSENT AND AMENDMENT
CONSENT AND AMENDMENT, dated as of December 10, 1997
(this "Consent and Amendment"), among NRG (MORRIS) COGEN, LLC
(the "Borrower"), the banks party to the Credit Agreement (as
defined below) (the "Banks"), and THE CHASE MANHATTAN BANK, in
its capacity as Agent Bank (as defined below) under the Credit
Agreement (as defined below).
RECITALS
WHEREAS, the Borrower entered into that certain
Construction and Term Loan Agreement, dated as of September 15,
1997 (the "Credit Agreement"), with the Banks, The Chase
Manhattan Bank, as agent for the Banks (in such capacity, the
"Agent Bank"), and The Chase Manhattan Bank, as collateral
agent for the Banks (in such capacity, the "Collateral Agent"),
to obtain funds to finance the ownership, development,
engineering, construction, start-up, testing, operation and
maintenance of an approximately 117 MW gas fired cogeneration
plant in Morris, Illinois (the "Project"). Capitalized terms
used but not defined in this Consent and Amendment shall have
the meanings given to such terms in the Credit Agreement;
WHEREAS, the Borrower entered into that certain
Operation and Maintenance Agreement, dated September 19, 1997
(the "Operation and Maintenance Agreement"), with NRG Morris
Operations Inc. (the "Operator") to provide for the operation
and maintenance of the Project;
WHEREAS, NRG Energy, Inc. ("NRG Energy") issued that
certain Limited Guaranty, dated September 19, 1997 (the "O&M
Guarantee"), in favor of the Borrower, pursuant to which NRG
Energy guarantees, to a limited extent, payment by the Operator
of liquidated damages under the Operation and Maintenance
Agreement;
WHEREAS, (i) the Borrower and the Operator would like
to modify certain provisions of the Operation and Maintenance
Agreement in accordance with the terms thereof and (ii) the
Borrower would like to consent to the modification of certain
provisions of the O&M Guarantee;
WHEREAS, pursuant to the Credit Agreement, the
Borrower must obtain the prior written consent of the Agent
Bank to modify, or consent to the modification of, any
provision of the Operation and Maintenance Agreement or the O&M
Guarantee;
WHEREAS, the Borrower is requesting that the Agent
Bank consent to the proposed modifications of the Operation and
Maintenance Agreement and the O&M Guarantee and the Agent Bank
is willing to grant such consent;
<PAGE>
WHEREAS, the Borrower has also requested that
Schedule 5.7 to the Credit Agreement be amended as set forth
herein and the Banks are willing to enter into such amendment;
NOW, THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Borrower, the
Banks and the Agent Bank hereby agree as follows:
1. Acknowledgment and Consent. The Agent Bank, in
its capacity as such under the Credit Agreement, hereby (a)
acknowledges that it has reviewed the form and substance of (i)
the proposed First Amendment to Operation and Maintenance
Agreement to be entered into between the Borrower and the
Operator (the "O&M Amendment"), a copy of which is attached
hereto as Exhibit A, and (ii) the proposed First Amendment to
Limited Guaranty to be executed by the O&M Guarantor (the "O&M
Guarantee Amendment"), a copy of which is attached hereto as
Exhibit B, and (b) consents to (i) the execution by the
Borrower of the O&M Amendment and the performance by the
Borrower of the terms thereof in accordance with the Credit
Agreement and (ii) the consent by the Borrower to the execution
of the O&M Guarantee Amendment.
2. Amendment to Credit Agreement. Section (C) of
Schedule 5.7 to the Credit Agreement is hereby amended by
deleting the phrase "at its own expense" from the first and
second lines thereof.
3. Consent and Amendment Limited Precisely as
Written; Ratification; References. Each of the consents set
forth in Section 1 hereof is limited precisely as written and
shall not be deemed to be a consent to any modification of any
other term of the Operation and Maintenance Agreement or the
O&M Guarantee, or any of the documents referred to herein or
therein or a consent to any modification of any other
Transaction Document. The amendment set forth in Section 2
hereof is limited precisely as written and shall not be deemed
to be a consent or waiver to, or modification of, any other
term or condition in the Credit Agreement or any of the
documents referred to herein or therein. Except as expressly
amended hereby, the Credit Agreement is ratified and confirmed
in all respects. On and after the date hereof, whenever the
Credit Agreement is referred to in any of the Transaction
Documents or in any of the other documents or papers to be
executed and delivered in connection therewith or with the
Credit Agreement, such term shall be deemed to mean the Credit
Agreement as amended hereby.
4. Governing Law. This Consent and Amendment shall
be construed in accordance with and shall be governed by the
Laws of the State of New York (without giving effect to the
principles thereof relating to conflicts of law except Section
5-1401 of the New York General Obligations Law).
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<PAGE>
5. Waiver of Jury Trial. EACH OF THE BORROWER, THE
BANKS AND THE AGENT BANK HEREBY IRREVOCABLY WAIVES ALL RIGHT OF
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR IN CONNECTION WITH THIS CONSENT AND AMENDMENT OR ANY
MATTER ARISING HEREUNDER.
6. Counterparts. This Consent and Amendment may be
executed in one or more counterparts and when signed by all
parties listed below shall constitute a single binding
agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Consent and Amendment to be duly executed by their officers
thereunto duly authorized as of the day and year first written
above.
NRG (MORRIS) COGEN, LLC
By: /s/ Craig
Mataczynski
Name: Craig Mataczynski
Title: President
THE CHASE MANHATTAN BANK,
as a Bank
By: /s/ Kevin P. O'Neill
Name: Kevin P. O'Neill
Title: Vice President
THE CHASE MANHATTAN BANK,
as Agent Bank
By: /s/ Kevin P. O'Neill
Name: Kevin P. O'Neill
Title: Vice President
<PAGE>
THE BANK OF NEW YORK
By: /s/ John N. Watt
Name: John N. Watt
Title: Vice President
NATEXIS BANQUE
By: /s/ D.J.R. Osten
Name: D.J.R. Osten
Title: First V.P.
THE SUMITOMO TRUST AND BANKING
COMPANY, LTD.
By: /s/ Suraj P. Bhatia
Name: Suraj P. Bhatia
Title: Senior Vice President
<PAGE>
Exhibit 10.27.10
Execution Version
PLEDGE AND SECURITY AGREEMENT
dated as of December 10, 1997
among
NRGG FUNDING INC.,
as a Pledgor
NRG MORRIS INC.,
as a Pledgor
and
THE CHASE MANHATTAN BANK,
as Collateral Agent
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINED TERMS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Defined Terms 2
Section 1.2 Principles of Construction 2
ARTICLE 2
PLEDGE
Section 2.1 Pledged Collateral 3
Section 2.2 Pledgors' Rights 4
Section 2.3 Secured Parties Not Liable 5
Section 2.4 Attorney-in-Fact 5
Section 2.5 Collateral Agent May Perform 6
Section 2.6 Reasonable Care 6
Section 2.7 Security Interest Absolute 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PLEDGORS
Section 3.1 Ownership of Pledged Collateral; Other
Financing Statements 7
Section 3.2 Due Incorporation; Qualification 7
Section 3.3 Authority; Authorization, Execution
and Delivery; Enforceability 7
Section 3.4 Consents; Governmental Approvals 8
Section 3.5 No Conflicts 8
Section 3.6 Litigation 8
Section 3.7 Necessary Filings 8
Section 3.8 Compliance with Laws 9
Section 3.9 No Defaults 9
Section 3.10 Chief Executive Office 9
ARTICLE 4
COVENANTS OF THE PLEDGORS
Section 4.1 Transfer of Interests 9
Section 4.2 No Other Liens 10
Section 4.3 Maintenance of Existence 10
Section 4.4 Compliance with Laws; Governmental Approvals 10
Section 4.5 Payment of Taxes 10
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<PAGE>
Section 4.6 Amendment of LLC Agreement 11
Section 4.7 Chief Executive Office 11
Section 4.8 Supplements; Further Assurances 11
Section 4.9 Certificated Interests 11
Section 4.10 Records; Statements and Schedules 12
Section 4.11 Improper Distributions 12
Section 4.12 Bankruptcy 12
ARTICLE 5
EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT
Section 5.1 Remedies Generally 12
Section 5.2 Sale of Pledged Collateral 12
Section 5.3 Purchase of Pledged Collateral 13
Section 5.4 Application of Proceeds 14
Section 5.5 Expenses 14
ARTICLE 6
MISCELLANEOUS PROVISIONS
Section 6.1 Notices 14
Section 6.2 Continuing Security Interest 15
Section 6.3 Release 15
Section 6.4 Reinstatement 15
Section 6.5 Independent Security 15
Section 6.6 Amendments 16
Section 6.7 Successors and Assigns 16
Section 6.8 Third Party Beneficiaries 16
Section 6.9 Survival 16
Section 6.10 No Waiver; Remedies Cumulative 16
Section 6.11 Counterparts 16
Section 6.12 Headings Descriptive 17
Section 6.13 Severability 17
Section 6.14 Governing Law; Submission to Jurisdiction
and Venue; Waiver of Jury Trial 17
Section 6.15 Entire Agreement 18
Section 6.16 Indemnity 18
Section 6.17 Independent Obligations 20
Section 6.18 Waiver of Defenses 20
Section 6.19 Subrogation, Etc.
21
Section 6.20 Joint and Several Liability 21
Section 6.21 Recourse Limited to Collateral 21
ii
<PAGE>
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (this
"Agreement"), dated as of December 10, 1997, among NRGG FUNDING
INC., a Delaware corporation ("NRGG FUNDING"), NRG MORRIS INC.,
a Delaware corporation ("NRGMI"), and THE CHASE MANHATTAN BANK,
as Collateral Agent (as defined below) and grantee hereunder
for the benefit of the Secured Parties (as defined below).
NRGG Funding and NRGMI are sometimes referred to herein
collectively as the "Pledgors" and each individually as a
"Pledgor."
W I T N E S S E T H :
WHEREAS, NRG (Morris) Cogen, LLC, a Delaware limited
liability company (the "Borrower") entered into the
Construction and Term Loan Agreement, dated as of September 15,
1997 (as amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), with the banks party thereto
(the "Banks"), The Chase Manhattan Bank, as agent for the Banks
(in such capacity, the "Agent Bank"), and The Chase Manhattan
Bank, as collateral agent for the Banks and the Agent Bank (in
such capacity, the "Collateral Agent" and, collectively with
the Banks and the Agent Bank, the "Secured Parties"), pursuant
to which the Banks make construction and term loans and other
extensions of credit to the Borrower;
WHEREAS, NRG Energy, Inc. ("NRG Energy"), NRGMI and
the Collateral Agent entered into the Pledge and Security
Agreement, dated as of September 15, 1997 (the "Original Pledge
Agreement"), pursuant to which NRG Energy and NRGMI granted a
security interest in the Pledged Collateral (as defined
therein) to the Collateral Agent to secure the Borrower's
obligations under the Credit Agreement;
WHEREAS, pursuant to the Membership Interest Purchase
Agreement, dated as of December 10, 1997 (the "Purchase
Agreement"), between NRGG Funding and NRG Energy, NRGG Funding
will purchase all of NRG Energy's membership interests in the
Borrower;
WHEREAS, upon execution and delivery of the Purchase
Agreement, the Pledgors together will own one hundred percent
(100%) of the membership interests in the Borrower and,
accordingly, will benefit from the extensions of credit made by
the Banks to the Borrower under the Credit Agreement;
WHEREAS, it is a condition precedent to (i) obtaining
the consent of the Collateral Agent and the Agent Bank to the
form and substance of the Purchase Agreement and (ii) to the
Banks continuing to extend credit to the Borrower under the
Credit Agreement that the Pledgors execute and deliver this
Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
Pledgors hereby agree with the Collateral Agent as follows:
ARTICLE 1
DEFINED TERMS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Defined Terms. (a) Unless otherwise defined
herein, terms defined in the Credit Agreement shall have such
defined meanings when used herein.
(b) The following terms shall have the following
respective meanings:
"Expenses" shall have the meaning ascribed thereto in
Section 6.16(a).
"Financing Statement" shall mean all financing
statements, recordings, filings or other instruments of
registration necessary and appropriate to perfect a security
interest or Lien by filing in any appropriate filing or
recording office in accordance with the Uniform Commercial Code
as enacted in any and all relevant jurisdictions or any other
relevant applicable Law.
"Indemnitee" shall have the meaning ascribed thereto
in Section 6.16(a).
"LLC Agreement" shall mean the Amended and Restated
Limited Liability Company Agreement of NRG (Morris) Cogen, LLC,
dated December 10, 1997, between the Pledgors, and all
amendments, modifications and supplements thereto and
restatements thereof made in accordance with Section 4.6.
"LLC Interests" shall have the meaning ascribed
thereto in Section 2.1(a)(i).
"NRG Energy Lien" shall have the meaning ascribed
thereto in Section 3.1.
"Permitted Liens" shall mean: (a) Liens granted
pursuant to this Agree ment; (b) Liens granted pursuant to the
Subordinated Pledge Agreement; (c) Liens (other than any Lien
imposed by ERISA) in connection with workmen's compensation,
unemployment insurance or other social security or pension
obligations; (d) Liens for taxes not yet delinquent or, if
delinquent, which are subject to a Contest; and (e) attachment
or judgment Liens, provided that (i) the existence of such
Liens could not reasonably be expected to result in a Material
Adverse Effect (as defined in Section 3.2) and (ii) such Liens
are discharged within thirty (30) days of the creation thereof.
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<PAGE>
"Pledged Collateral" shall have the meaning ascribed
thereto in Section 2.1(a).
"Secured Obligations" shall mean (i) the Obligations
and (ii) the Pledgors' obligations hereunder.
"Securities Act" shall have the meaning ascribed
thereto in Section 5.2(b).
"Subordinated Pledge Agreement" shall mean the
Subordinated Pledge and Security Agreement, dated as of the
date hereof, among the Pledgors and NRG Energy.
Section 1.2 Principles of Construction. Unless otherwise
expressly provided herein, the principles of construction set
forth in Section 1.4 of the Credit Agreement shall apply to
this Agreement.
ARTICLE 2
PLEDGE
Section 2.1 Pledged Collateral. (a) As collateral
security for the prompt and complete payment and performance
when due, whether at stated maturity, by acceleration or
otherwise (including the payment of amounts which would become
due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. 362(a)), of all of the
Secured Obligations, whether now existing or hereafter arising
and howsoever evidenced, each Pledgor hereby pledges, grants,
assigns, hypothecates, transfers and delivers to the Collateral
Agent, for its benefit and the benefit of the other Secured
Parties, a first priority security interest in the following,
whether now existing or hereafter from time to time acquired
(collectively, the "Pledged Collateral"):
(i) all of such Pledgor's membership interests
in the Borrower (such Pledgor's "LLC Interests") and all
of such Pledgor's rights to acquire membership interests
in the Borrower in addition to or in exchange or
substitution for such Pledgor's LLC Interests;
(ii) all of such Pledgor's rights, privileges,
authority and powers as a member of the Borrower under the
LLC Agreement;
(iii) all certificates or other documents (if
any) representing any and all of the foregoing in clauses
(i) and (ii);
(iv) all dividends, distributions, cash,
securities, instruments and other property of any kind to
which such Pledgor may be entitled in its capacity as a
member of the Borrower by way of distribution, return of
capital or otherwise;
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<PAGE>
(v) any other claim which such Pledgor now has
or may in the future acquire in its capacity as a member
of the Borrower against the Borrower and its property; and
(vi) all proceeds, products and accessions of
and to any of the property described in the preceding
clauses (i) through (v).
(b) As used herein, the term "proceeds" shall be
construed in its broadest sense and shall include whatever is
received or receivable when any of the Pledged Collateral, or
any proceeds thereof, is sold, collected, exchanged or
otherwise disposed of, whether voluntarily or involuntarily,
and shall include, without limitation, all rights to payment,
including interest and premiums, with respect to any of the
Pledged Collateral or any proceeds thereof.
Section 2.2 Pledgors' Rights.
(a) Distributions. Unless an Event of Default shall
have occurred and be continuing, the Pledgors shall be entitled
to receive and retain any and all distributions paid in respect
of the Pledged Collateral in compliance with the terms of the
Credit Agreement; provided, however, that any and all
(i) distributions paid or payable in respect of
any Pledged Collateral (whether paid in cash, securities
or other property) in connection with (A) any partial or
total liquidation or dissolution of the Borrower, (B) any
distribution of capital of the Borrower, (C) any
recapitalization or reclassification of the capital of the
Borrower or (D) any reorganization of the Borrower, and
(ii) all property (whether cash, securities or
other property) paid, payable or otherwise distributed in
redemption of, or in exchange for, the property described
in clause (i) immediately above,
shall be, and shall be forthwith delivered to the Collateral
Agent to hold as, Pledged Collateral and shall, if received by
either of the Pledgors, be received in trust for the benefit of
the Collateral Agent, be segregated from the other property or
funds of such Pledgor, and be forthwith delivered to the
Collateral Agent as Pledged Collateral in the same form as so
received (with any necessary endorsement). All cash and cash
equivalents received by the Collateral Agent pursuant to the
preceding sentence shall be deposited in the appropriate
Project Account in accordance with the Credit Agreement. Upon
the occurrence and during the continuance of an Event of
Default, all rights of the Pledgors to receive the
distributions which they would otherwise be authorized to
receive and retain pursuant to this clause (a) shall cease, and
all such rights shall thereupon become vested in the Collateral
Agent which shall thereupon have the sole right to receive and
hold as Pledged Collateral such distributions; provided that,
notwithstanding anything
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<PAGE>
herein to the contrary, if such Event of Default is cured or
waived in accordance with the terms of the Credit Agreement,
any such distribution previously paid to the Collateral Agent
shall, upon request of the relevant Pledgor, be returned to
such Pledgor.
(b) Other Rights. Unless an Event of Default shall
have occurred and be continuing, each Pledgor shall be entitled
to exercise all voting and other rights with respect to such
Pledgor's LLC Interests; provided, however, that no vote shall
be cast, right exercised or other action taken which could
impair the Pledged Collateral or which would be inconsistent
with or result in any violation of any provision of this
Agreement or any other Transaction Document. Upon the
occurrence and during the continuance of an Event of Default,
all voting and other rights of each Pledgor with respect to
such Pledgor's LLC Interests which such Pledgor would otherwise
be entitled to exercise pursuant to the terms of this Agreement
shall cease, and all such rights shall be vested in the
Collateral Agent which shall thereupon have the sole right to
exercise such rights.
(c) Turnover. All distributions and other amounts
which are received by any Pledgor contrary to the provisions of
this Agreement shall be received in trust for the benefit of
the Collateral Agent, shall be segregated from other funds of
such Pledgor and shall be forthwith paid over to the Collateral
Agent as Pledged Collateral in the same form as so received
(with any necessary endorsement).
Section 2.3 Secured Parties Not Liable. Notwithstanding
any other provision contained in this Agreement, the Pledgors
shall remain liable under the LLC Agreement to observe and
perform all of the conditions and obligations to be observed
and performed by the Pledgors thereunder. None of the
Collateral Agent, any other Secured Party or any of their
respective directors, officers, employees or agents shall have
any obligations or liability under or with respect to any
Pledged Collateral by reason of or arising out of this
Agreement or the receipt by the Collateral Agent of any payment
relating to any Pledged Collateral, nor shall any of the
Collateral Agent, any other Secured Party or any of their
respective directors, officers, employees or agents be
obligated in any manner to (a) perform any of the obligations
of either Pledgor under or pursuant to the LLC Agreement or any
other agreement to which either Pledgor is a party, (b) make
any payment or to inquire as to the nature or sufficiency of
any payment or performance with respect to any Pledged
Collateral, (c) present or file any claim or collect the
payment of any amounts or take any action to enforce any
performance with respect to the Pledged Collateral or (d) take
any other action whatsoever with respect to the Pledged
Collateral.
Section 2.4 Attorney-in-Fact. (a) Each Pledgor hereby
appoints the Collateral Agent, on behalf of the Secured
Parties, or any Person, officer or agent whom the Collateral
Agent may designate, as its true and lawful attorney-in-fact,
with full irrevocable power and authority in the place and
stead of such Pledgor and in the name of such Pledgor or in its
own name, at such Pledgor's cost and expense, from time to time
in the Collateral Agent's reasonable discretion (as directed by
the Agent Bank, acting in
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<PAGE>
accordance with the Credit Agreement) to take any action and to
execute any instrument which the Collateral Agent may
reasonably deem necessary or advisable to enforce its rights
under this Agreement, including, without limitation, authority
to receive, endorse and collect all instruments made payable to
such Pledgor representing any distribution, interest payment or
other payment in respect of the Pledged Collateral or any part
thereof and to give full discharge for the same; provided,
however, that the Collateral Agent will not exercise its powers
under this Section 2.4 unless an Event of Default has occurred
and is continuing (except that the Collateral Agent may at any
time, in the name of either Pledgor or in its own name,
prepare, sign and file any Financing Statement for the purpose
of perfecting the security interest granted hereunder).
(b) Each Pledgor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue
hereof, in each case pursuant to the powers granted hereunder.
Each Pledgor hereby acknowledges and agrees that in acting
pursuant to the power-of-attorney granted in clause (a)
immediately above, the Collateral Agent shall be acting in its
own interest and on behalf of the Secured Parties, and each
Pledgor acknowledges and agrees that the Collateral Agent and
the other Secured Parties shall have no fiduciary duties to
such Pledgor and such Pledgor hereby waives any claims or
rights of a beneficiary of a fiduciary relationship hereunder.
Section 2.5 Collateral Agent May Perform. If either
Pledgor fails to perform any agreement contained herein after
receipt of a written request to do so from the Collateral
Agent, the Collateral Agent may itself perform, or cause
performance of, such agreement, and the reasonable expenses of
the Collateral Agent, including the reasonable fees and
expenses of its counsel, incurred in connection therewith shall
be payable by such Pledgor under Section 6.16; provided that if
an Event of Bankruptcy shall have occurred with respect to such
Pledgor, the notice described in this Section 2.5 shall not be
required and shall be deemed to have been delivered upon the
failure of such Pledgor to perform such agreement.
Section 2.6 Reasonable Care. The Collateral Agent shall
be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if the
Pledged Collateral is accorded treatment substantially
equivalent to that which the Collateral Agent accords its own
property of the type of which the Pledged Collateral consists,
it being understood that the Collateral Agent shall have no
responsibility for () ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Pledged Collateral, whether or
not the Collateral Agent has or is deemed to have knowledge of
such matters, or () taking any necessary steps to preserve
rights against any parties with respect to any Pledged
Collateral.
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Section 2.7 Security Interest Absolute. All rights of
the Collateral Agent and security interests hereunder, and all
obligations of the Pledgors hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of any of
the Transaction Documents or any other agreement or
instrument relating thereto (other than against the
Collateral Agent);
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of
or any consent to any departure from the Transaction
Documents or any other agreement or instrument relating
thereto;
(c) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of
or consent to any departure from any guaranty, for all or
any of the Secured Obligations; or
(d) any other circumstance (other than the
indefeasible payment in full of the Secured Obligations in
cash or cash equivalents and/or application of the
purchase price of any or all of the Pledged Collateral
purchased by the Collateral Agent pursuant to Section 5.3)
which might otherwise constitute a defense avail able to,
or a discharge of, the Pledgors.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PLEDGORS
Each Pledgor represents and warrants as follows, which
representations and warranties shall survive the execution and
delivery of this Agreement and the making and repayment of the
Secured Obligations; provided that (i) prior to the effective
date of this Agreement, such representations and warranties
shall be made by the Pledgors on a several basis, and (ii) on
and after the effective date of this Agreement, such
representations and warranties shall be made by the Pledgors on
a joint and several basis:
Section 3.1 Ownership of Pledged Collateral; Other
Financing Statements. Such Pledgor is the sole legal and
beneficial owner of the Pledged Collateral pledged by it
hereunder free and clear of any Lien other than (a) the Lien
created pursuant to this Agreement and (b) the subordinated
Lien (the "NRG Energy Lien") created in favor of NRG Energy
pursuant to the Subordinated Pledge Agreement. No security
agreement, Financing Statement or other public notice with
respect to all or any part of the Pledged Collateral is on file
or of record in any public office, except such as may have been
filed (x) in favor of the Collateral Agent pursuant to this
Agreement or (y) in favor of NRG Energy pursuant to the
Subordinated Pledge Agreement.
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Section 3.2 Due Incorporation; Qualification. Such
Pledgor is a corporation duly organized and validly existing
under the Laws of the State of Delaware, and is qualified to
own property and transact business in every jurisdiction where
the ownership of its property and the nature of its business as
currently conducted and as contemplated to be conducted
requires it to be qualified, except where the failure to so
qualify could not reasonably be expected to result in a
Material Adverse Effect (as herein defined). For purposes of
this Section 3.2, "Material Adverse Effect" shall mean a
material adverse effect on any of (i) the operations, business,
financial condition or property of NRGG Funding and its
subsidiaries on a consolidated basis, (ii) the ability of
either Pledgor to perform in a timely manner its material
obligations under this Agreement or any other Transaction
Document to which it is a party, (iii) the rights and interests
of the Banks, the Agent Bank and the Collateral Agent under the
Transaction Documents or (iv) the value of the Pledged
Collateral or the validity or priority of the security
interests therein granted to the Collateral Agent.
Section 3.3 Authority; Authorization, Execution and
Delivery; Enforceability. Such Pledgor has full power,
authority and legal right to enter into this Agreement and to
perform its obligations hereunder and to pledge all of the
Pledged Collateral pledged by it pursuant to this Agreement.
The pledge of such Pledged Collateral pursuant to this
Agreement has been duly authorized by such Pledgor. This
Agreement has been duly authorized, executed and delivered by
such Pledgor and constitutes a legal, valid and binding
obligation of such Pledgor enforceable against such Pledgor in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or
other similar Laws affecting creditors' rights generally and
except as enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity).
Section 3.4 Consents; Governmental Approvals. No consent
of any other party (including, without limitation, stockholders
or creditors of such Pledgor) and no Governmental Approval is
required which has not been obtained either (a) for the
execution, delivery and performance by such Pledgor of this
Agreement, (b) for the pledge by such Pledgor of the Pledged
Collateral pledged by it pursuant to this Agreement, or (c) for
the exercise by the Collateral Agent of the rights provided for
in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement.
Section 3.5 No Conflicts. The execution, delivery and
performance of this Agreement and each other Transaction
Document to which such Pledgor is a party will not (i) require
any consent or approval of the Board of Directors of such
Pledgor which has not been obtained, (ii) violate the
provisions of such Pledgor's Certificate of Incorporation or By-
laws, (iii) violate the provisions of any Law (including,
without limitation, any usury Laws), regulation or order of any
Governmental Authority applicable to such Pledgor, (iv) result
in a breach of or constitute a default under any material
agreement relating to the management or affairs of such
Pledgor, or any indenture or loan or credit
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agreement or any other material agreement, lease or instrument
to which such Pledgor is a party or by which such Pledgor or
any of its material properties may be bound or (v) result in or
create any Lien (other than Permitted Liens) under, or require
any consent which has not been obtained under, any indenture or
loan or credit agreement or any other material agreement,
instrument or document, or the provisions of any order, writ,
judgment, injunction, decree, determination or award of any
Governmental Authority binding upon such Pledgor or the
Borrower or any of their respective properties.
Section 3.6 Litigation. No Event of Bankruptcy has
occurred with respect to such Pledgor and there is no action,
suit or proceeding at Law or in equity or by or before any
Governmental Authority, arbitral tribunal or other body now
pending against such Pledgor or, to the best knowledge of such
Pledgor, threatened against such Pledgor which questions the
validity or legality of or seeks damages in connection with
this Agreement or any other Transaction Document to which such
Pledgor is a party.
Section 3.7 Necessary Filings. Upon the filing with the
Minnesota Secretary of State of all necessary Financing
Statements executed by the Pledgors in favor of the Collateral
Agent with respect to the Pledged Collateral, all filings,
registrations and recordings necessary or appropriate to
create, preserve, protect and perfect the security interest
granted by such Pledgor to the Collateral Agent hereby in
respect of the Pledged Collateral shall have been accomplished
and the security interest granted by such Pledgor to the
Collateral Agent pursuant to this Agreement in the Pledged
Collateral constitutes a valid and enforceable perfected
security interest therein superior and prior to the rights of
all other Persons therein and, in each case, subject to no
other Liens, sales, assignments, conveyances, settings over or
transfers.
Section 3.8 Compliance with Laws. Such Pledgor has been
in the past and is in current compliance with all applicable
Laws () in respect of the conduct of its business and the
ownership of its property, () in connection with the
procurement of any Transaction Document to which it is a party
and () in connection with the execution, delivery and
performance of any Transaction Document to which it is a party,
except in each case where such Pledgor's failure to comply
could not reasonably be expected to result in a Material
Adverse Effect.
Section 3.9 No Defaults. Such Pledgor is not in default
in the performance, observance or fulfillment of any of the
material obligations, covenants or conditions applicable to
such Pledgor contained in any Transaction Document to which it
is a party.
Section 3.10 Chief Executive Office. (a) The chief
executive office of NRGG Funding and the office where NRGG
Funding keeps its records concerning the Borrower and the
Project and all contracts relating thereto is located at:
1221 Nicollet Mall, Suite 610
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Minneapolis, MN 55403.
(b) The chief executive office of NRGMI and the office
where NRGMI keeps its records concerning the Borrower and the
Project and all contracts relating thereto is located at:
1221 Nicollet Mall, Suite 610
Minneapolis, MN 55403.
ARTICLE 4
COVENANTS OF THE PLEDGORS
Each Pledgor hereby covenants and agrees from and after
the date of this Agreement until the termination of this
Agreement in accordance with the provisions of Section 6.3:
Section 4.1 Transfer of Interests. (a) Such Pledgor
shall not sell or otherwise dispose of the Pledged Collateral
or any interest therein without the prior written consent of
the Collateral Agent (as directed by the Agent Bank, acting
upon the instructions of the Required Banks); provided,
however, that such Pledgor may, without the prior written
consent of the Collateral Agent (as directed by the Agent Bank,
acting upon the instructions of the Required Banks), sell,
together with any sale of LLC Interests made by the other
Pledgor pursuant to this provisio, less than or equal to ten
percent (10%) of its LLC Interests to the Energy Purchaser
within one hundred twenty (120) days after the Closing Date
pursuant to Section 19.5 of the Energy Services Agreement if
(i) such sale does not cause a Default or an Event of Default
under the Credit Agreement and (ii) such sale is consummated
under documentation that is acceptable in form and substance
satisfactory to the Collateral Agent and the Agent Bank and
which causes the Energy Purchaser to pledge its membership
interests in the Borrower so purchased to the Collateral Agent
for the benefit of the Secured Parties as security for the
Secured Obligations; provided that no sale of LLC Interests
shall be permitted under this clause (a) unless NRGG Funding
remains obligated under the Equity Commitment Agreement, dated
as of September 15, 1997, among NRG Energy, the Borrower and
the Collateral Agent, as assumed by NRGG Funding pursuant to
the Assignment and Assumption Agreement, dated as of the date
hereof, between NRG Energy and NRGG Funding.
(b) If either Pledgor transfers all of its LLC
Interests pursuant to any transfer permitted under clause (a)
of this Section 4.1, then the Secured Parties, upon the request
and at the expense of such Pledgor, shall execute and deliver
all such documentation reasonably necessary to release such
Pledgor from the terms of this Agreement.
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Section 4.2 No Other Liens. Such Pledgor shall not
create, incur or permit to exist, shall defend the Pledged
Collateral against and shall take such other action as is
necessary to remove, any Lien or claim on or to the Pledged
Collateral (other than Permitted Liens), and shall defend the
right, title and interest of the Collateral Agent in and to any
of the Pledged Collateral against the claims and demands of all
Persons whomsoever.
Section 4.3 Maintenance of Existence. Such Pledgor shall
preserve and maintain its legal existence as a corporation in
good standing under the Laws of the State of Delaware; provided
that NRGMI shall be permitted to merge into NRGG Funding if, in
connection with such merger, NRGG Funding and NRGMI execute
such documentation as is reasonably necessary to continue the
Lien of the Collateral Agent on the Pledged Collateral.
Section 4.4 Compliance with Laws; Governmental Approvals.
Such Pledgor (i) shall comply with all Laws and (ii) shall
obtain, maintain and comply with all Governmental Approvals as
shall now or hereafter be necessary under applicable Law, rule
or regulation, in each case in connection with the making and
performance by such Pledgor of any material provision of the
Transaction Documents to which it is a party, except where the
failure to do so could not reasonably be expected to result in
a Material Adverse Effect (as defined in Section 3.2).
Section 4.5 Payment of Taxes. Such Pledgor shall pay and
discharge all taxes, assessments and governmental charges or
levies imposed on it or on its income or profits or on any of
its property prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, could
reasonably be expected to become a Lien (other than a Permitted
Lien) upon the Pledged Collateral, unless such matters are
subject to a Contest. Such Pledgor will promptly pay or cause
to be paid any valid, final judgment enforcing any such tax,
assessment, charge, levy or claim and cause the same to be
satisfied of record.
Section 4.6 Amendment of LLC Agreement. Such Pledgor
shall not, without the prior written consent of the Collateral
Agent (as directed by the Agent Bank, acting upon the
instructions of the Required Banks), agree to or permit (a) the
cancellation or termination of the LLC Agreement, except upon
the expiration of the stated term thereof or (b) any amendment,
supplement, or modification of, or waiver with respect to any
of the provisions of, the LLC Agreement (except with respect to
(x) any sale of LLC Interests in accordance with Section 4.1 or
(y) with the prior written consent of the Collateral Agent and
the Agent Bank (which consent shall not be unreasonably
withheld), any amendment that could not reasonably be expected
to have an adverse effect on any of the rights of any of the
Secured Parties under this Agreement).
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Section 4.7 Chief Executive Office. Such Pledgor shall
not establish a new location for its chief executive office or
change its name until (i) it has given to the Collateral Agent
not less than thirty (30) days prior written notice of its
intention so to do, clearly describing such new location or
specifying such new name, as the case may be, and (ii) with
respect to such new location or such new name, as the case may
be, it shall have taken all action, satisfactory to the
Collateral Agent, to maintain the security interest of the
Collateral Agent in the Pledged Collateral intended to be
granted hereby at all times fully perfected and in full force
and effect.
Section 4.8 Supplements; Further Assurances. Such
Pledgor shall at any time and from time to time, at the expense
of such Pledgor, promptly execute and deliver all further
instruments and documents, and take all further action, that
may be necessary or desirable, or that the Collateral Agent may
reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or
to enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder with respect to any Pledged
Collateral.
Section 4.9 Certificated Interests. If such Pledgor
shall become entitled to receive or shall receive any
certificate, instrument, option or rights, whether as an
addition to, in substitution of or in exchange for the Pledged
Collateral or any part thereof, or otherwise, such Pledgor
shall accept any such certificate, instrument, option or rights
as the Collateral Agent's agent, shall hold them in trust for
the Collateral Agent and shall deliver them forthwith to the
Collateral Agent in the exact form received, with such
Pledgor's endorsement when necessary or accompanied by duly
executed instruments of transfer or assignment in blank or, if
requested by the Collateral Agent, an additional pledge
agreement or security agreement executed and delivered by such
Pledgor, all in form and substance satisfactory to the
Collateral Agent, to be held by the Collateral Agent, subject
to the terms hereof, as further collateral security for the
Secured Obligations.
Section 4.10 Records; Statements and Schedules. Such
Pledgor shall keep and maintain, at its own cost and expense,
records of the Pledged Collateral, including, but not limited
to, records of all payments received with respect thereto, and
such Pledgor shall make the same available to the Collateral
Agent and the other Secured Parties for inspection at such
Pledgor's chief executive office, at such Pledgor's own cost
and expense, at any and all times upon demand. Such Pledgor
shall furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the
Pledged Collateral and such other reports in connection with
the Pledged Collateral as the Collateral Agent may reasonably
request, all in reasonable detail.
Section 4.11 Improper Distributions. Notwithstanding any
other provision contained in this Agreement, such Pledgor shall
not accept any distributions, dividends or other payments (or
any collateral in lieu thereof) in respect of the Pledged
Collateral,
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except to the extent the same are expressly permitted by the
terms of this Agreement and the Credit Agreement.
Section 4.12 Bankruptcy. Such Pledgor shall not
authorize or permit the Borrower to make a general assignment
for the benefit of the Borrower's creditors. Such Pledgor
shall not commence or join with any other Person (other than
the Collateral Agent) in commencing any proceeding against the
Borrower under any bankruptcy, reorganization, liquidation or
insolvency law or statute now or hereafter in effect in any
jurisdiction.
ARTICLE 5
EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT
Section 5.1 Remedies Generally. If an Event of Default
shall have occurred and be continuing, the Collateral Agent (as
directed by the Agent Bank, acting in accordance with the
Credit Agreement) may exercise, in addition to all other rights
and remedies granted in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the
Secured Obligations, all rights and remedies of a secured party
under the Uniform Commercial Code in effect from time to time
in any relevant jurisdiction and all other rights and remedies
available at Law or in equity.
Section 5.2 Sale of Pledged Collateral. (a) Without
limiting the generality of Section 5.1, the Collateral Agent
(as directed by the Agent Bank, acting in accordance with the
Credit Agreement) may, without notice except as specified
below, sell the Pledged Collateral or any part thereof in one
or more parcels at public or private sale or at any of the
Collateral Agent's Office or elsewhere, for cash, on credit or
for future delivery, and at such price or prices and upon such
other terms as the Collateral Agent may reasonably deem
commercially reasonable, irrespective of the impact of any such
sales on the market price of the Pledged Collateral at any such
sale. Each purchaser at any such sale shall hold the property
sold absolutely, free from any claim or right on the part of
the Pledgors, and the Pledgors hereby waive (to the extent
permitted by Law) all rights of redemption, stay and/or
appraisal which they now have or may at any time in the future
have under any rule of Law or statute now existing or hereafter
enacted. The Pledgors agree that, to the extent notice of sale
shall be required by Law, at least ten (10) days' notice to the
Pledgors of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be
obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Collateral Agent may
adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place
to which it was so adjourned. Assuming that such sales are
made in compliance with federal and state securities Laws, the
Collateral Agent shall incur no liability as a result of the
sale of the Pledged Collateral,
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or any part thereof, at any public or private sale. The
Pledgors hereby waive any claims against the Collateral Agent
arising by reason of the fact that the price at which any
Pledged Collateral may have been sold at such a private sale,
if commercially reasonable, was less than the price which might
have been obtained at a public sale, even if the Collateral
Agent accepts the first offer received and does not offer such
Pledged Collateral to more than one offeree.
(b) The Pledgors recognize that the Collateral Agent
(as directed by the Agent Bank, acting in accordance with the
Credit Agreement) may elect to sell all or a part of the
Pledged Collateral to one or more purchasers in privately
negotiated transactions in which the purchasers will be
obligated to agree, among other things, to acquire the Pledged
Collateral for their own account, for investment and not with a
view to the distribution or resale thereof. The Pledgors
acknowledge that any such private sales may be at prices and on
terms less favorable than those obtainable through a public
sale (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act
of 1933, as amended (the "Securities Act")), and the Pledgors
and the Collateral Agent agree that such private sales shall be
made in a commercially reasonable manner and that the
Collateral Agent has no obligation to engage in public sales
and no obligation to delay sale of any Pledged Collateral to
permit the issuer thereof to register the Pledged Collateral
for a form of public sale requiring registration under the
Securities Act.
Section 5.3 Purchase of Pledged Collateral. The
Collateral Agent may be a purchaser of the Pledged Collateral
or any part thereof or any right or interest therein at any
sale thereof, whether pursuant to foreclosure, power of sale or
otherwise hereunder and the Collateral Agent may apply the
purchase price to the payment of the Secured Obligations. Any
purchaser of all or any part of the Pledged Collateral shall,
upon any such purchase, acquire good title to the Pledged
Collateral so purchased, free of the security interests created
by this Agreement.
Section 5.4 Application of Proceeds. The Collateral
Agent shall apply any proceeds from time to time held by it and
the net proceeds of any collection, recovery, receipt,
appropriation, realization or sale with respect to the Pledged
Collateral in accordance with the relevant provisions of the
Credit Agreement. For avoidance of doubt, it is understood
that the Borrower shall remain liable to the extent of any
deficiency between the amount of proceeds of the Pledged
Collateral and the aggregated amount of the Secured
Obligations.
Section 5.5 Expenses. The Pledgors shall upon demand pay
to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, and any transfer taxes,
in each case payable upon sale of the Pledged Collateral, which
the Collateral Agent may incur in connection with () the
custody or preservation of, or the sale of, collection from or
other
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realization upon, any of the Pledged Collateral pursuant to the
exercise or enforcement of any of the rights of the Collateral
Agent hereunder or (b) the failure by the Pledgors to perform
or observe any of the provisions hereof, together with interest
thereon from the date of demand at the rate per annum equal to
the Base Rate plus the Applicable Margin plus two percent (2%).
Any amount payable by the Pledgors pursuant to this Section 5.5
shall be payable on demand and shall constitute Secured
Obligations secured hereby.
ARTICLE 6
MISCELLANEOUS PROVISIONS
Section 6.1 Notices. Except as otherwise expressly
provided herein, all notices, requests and demands to or upon
the respective parties hereto to be effective shall be in
writing (including by telecopy, telex or cable communication),
and shall be deemed to have been duly given or made when
delivered by hand, or upon actual receipt if deposited in the
United States mail, postage prepaid, or, in the case of telex
notice, when answerback is received, or, in the case of
telecopy notice, when confirmation is received, or, in the case
of a nationally recognized overnight courier service, one
Business Day after delivery to such courier service, addressed,
in the case of each party hereto, at its address specified
below its signature hereto or to such other address as may be
designated by any party in a written notice to the other
parties hereto; provided that notices and communications to the
Collateral Agent shall not be effective until received by the
Collateral Agent.
Section 6.2 Continuing Security Interest. This Agreement
shall create a continuing security interest in the Pledged
Collateral until the release thereof pursuant to Section 6.3.
Section 6.3 Release. Upon the indefeasible payment in
full of the Secured Obligations in cash or cash equivalents
and/or application of the purchase price of any or all of the
Pledged Collateral purchased by the Collateral Agent pursuant
to Section 5.3, the Collateral Agent, upon the request, and at
the expense, of the Pledgors, shall execute and deliver all
such documentation necessary to release the security interest
created pursuant to this Agreement.
Section 6.4 Reinstatement. This Agreement shall continue
to be effective or be reinstated, as the case may be, if at any
time any amount received by the Collateral Agent or any other
Secured Party hereunder or pursuant hereto is rescinded or must
otherwise be restored or returned by the Collateral Agent or
such Secured Party, as the case may be, upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of
either of the Pledgors or the Borrower or upon the appointment
of any intervenor or conservator of, or trustee or similar
official for, either of the Pledgors or the Borrower or any
substantial part of either of the Pledgors' or the Borrower's
assets, or upon the entry of an order by any
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court avoiding the payment of such amount, or otherwise, all as
though such payments had not been made.
Section 6.5 Independent Security. The security provided
for in this Agreement shall be in addition to and shall be
independent of every other security which the Secured Parties
may at any time hold for any of the Secured Obligations hereby
secured, whether or not under the Security Documents. The
execution of any other Security Document shall not modify or
supersede the security interest or any rights or obligations
contained in this Agreement and shall not in any way affect,
impair or invalidate the effectiveness and validity of this
Agreement or any term or condition hereof. The Pledgors hereby
waive their rights to plead or claim in any court that the
execution of any other Security Document is a cause for
extinguishing, invalidating, impairing or modifying the
effectiveness and validity of this Agreement or any term or
condition contained herein. The Collateral Agent shall be at
liberty to accept further security from the Pledgors or from
any third party and/or release such security without notifying
the Pledgors and without affecting in any way the obligations
of the Pledgors under the Security Documents or the other
Transaction Documents. The Collateral Agent (as directed by
the Agent Bank, acting in accordance with the Credit Agreement)
shall determine if any security conferred upon the Secured
Parties under the Security Documents shall be enforced by the
Collateral Agent, as well as the sequence of securities to be
so enforced.
Section 6.6 Amendments. No waiver, amendment,
modification or termination of any provision of this Agreement,
or consent to any departure by the Pledgors therefrom, shall in
any event be effective without the prior written consent of the
Collateral Agent and none of the Pledged Collateral shall be
released without the written consent of the Collateral Agent.
Any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 6.7 Successors and Assigns. This Agreement shall
be binding upon the Pledgors and their respective successors
and assigns and shall inure to the benefit of the Collateral
Agent and the other Secured Parties and their respective
successors and assigns (subject to Section 11.4 of the Credit
Agreement). Subject to Section 4.1, the Pledgors may not
assign or otherwise transfer any of their respective rights or
obligations under this Agreement without the written consent of
the Collateral Agent.
Section 6.8 Third Party Beneficiaries. The agreements of
the parties hereto are intended to benefit the Banks and the
Agent Bank and their respective successors and assigns.
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Section 6.9 Survival. All agreements, statements,
representations and warranties made by the Pledgors herein or
in any certificate or other instrument delivered by the
Pledgors or on their behalf under this Agreement shall be
considered to have been relied upon by the Collateral Agent and
the Secured Parties and shall survive the execution and
delivery of this Agreement and the other Transaction Documents
until termination thereof or the indefeasible payment in full
in cash or cash equivalents of all of the Secured Obligations
regardless of any investigation made by the Collateral Agent or
the Secured Parties, or made on their behalf.
Section 6.10 No Waiver; Remedies Cumulative. No failure
or delay on the part of the Collateral Agent in exercising any
right, power or privilege hereunder and no course of dealing
between the Pledgors and the Collateral Agent shall operate as
a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right,
power or privilege hereunder or thereunder. The rights and
remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies which the Collateral Agent
would otherwise have.
Section 6.11 Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
Section 6.12 Headings Descriptive. The headings of the
several Sections and sub sections of this Agreement are
inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
Section 6.13 Severability. In case any provision
contained in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or
impaired thereby.
Section 6.14 Governing Law; Submission to Jurisdiction
and Venue; Waiver of Jury Trial. (a) This Agreement is a
contract made under the Laws of the State of New York of the
United States and shall for all purposes be governed by and
construed in accordance with the Laws of such State without
regard to the conflict of Law rules thereof (other than Section
5-1401 of the New York General Obligations Law).
(b) Any legal action or proceeding against the
Pledgors with respect to this Agreement may be brought in the
courts of the State of New York in the County of New York or of
the United States for the Southern District of New York and, by
execution and delivery of this Agreement, each Pledgor hereby
irrevocably accepts for itself and in
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respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Pledgors agree that
a judgment, after exhaustion of all available appeals, in any
such action or proceeding shall be conclusive and binding upon
the Pledgors and may be enforced in any other jurisdiction by a
suit upon such judgment, a certified copy of which shall be
conclusive evidence of the judgment. Each Pledgor hereby
irrevocably designates, appoints and empowers CT Corporation
System, with its offices as of the date hereof at 1633
Broadway, New York, New York 10019, as its designee, appointee
and agent to receive and accept for and on its behalf service
of any and all legal process, summons, notices and documents
which may be served in any such action or proceeding. If for
any reason such designee, appointee and agent shall cease to be
available to act as such, each Pledgor agrees to designate a
new designee, appointee and agent in New York City on the terms
and for the purposes of this provision satisfactory to the
Collateral Agent. The Pledgors further irrevocably consent to
the service of process out of any of the aforementioned courts
in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to
each Pledgor at its address referred to in Section 6.1, such
service to become effective thirty (30) days after such
mailing. Nothing herein shall affect the right of the
Collateral Agent to serve process in any other manner permitted
by Law or to commence legal proceedings or otherwise proceed
against the Pledgors in any other jurisdiction.
(c) The Pledgors hereby irrevocably waive any
objection which they may now or hereafter have to the laying of
venue of any of the aforesaid actions or proceedings arising
out of or in connection with this Agreement or any other
Transaction Document brought in the courts referred to in
clause (b) above and hereby further irrevocably waive and agree
not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an
inconvenient forum.
(d) WITH REGARD TO THIS AGREEMENT, THE PLEDGORS AND THE
COLLATERAL AGENT HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY.
Section 6.15 Entire Agreement. This Agreement, together
with any other agree ment executed in connection herewith, is
intended by the parties as a final expression of their
agreement as to the matters covered hereby and is intended as a
complete and exclusive statement of the terms and conditions
thereof.
Section 6.16 Indemnity. (a) Each Pledgor agrees to
indemnify, reimburse and hold the Collateral Agent and the
other Secured Parties and their respective officers, directors,
employees, and agents (each individually, an "Indemnitee," and
collectively, "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims,
demands, actions, suits, judgments and any and all costs and
expenses (including reasonable attorneys' fees and
disbursements) (such expenses, for purposes of this Section
6.16, hereinafter "Expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the
Indemnitees in any way relating to this Agree-
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ment or the Pledged Collateral and arising out of (i) this
Agreement or the documents executed in connection herewith or
in any other way connected with the administration of the
transactions contemplated hereby, or the enforcement of any of
the terms hereof, or the preservation of any rights hereunder,
(ii) the ownership, purchase, delivery, control, acceptance,
financing, possession, condition, sale, return or other
disposition, or use of, the Pledged Collateral (including,
without limitation, latent or other defects, whether or not
discoverable), (iii) the violation of any Laws, (iv) any tort
(including, without limitation, claims arising or imposed under
the doctrine of strict liability, or for or on account of
injury to or the death of any Person including any Indemnitee)
or property damage, or (v) any contract claim, excluding in all
cases those Expenses, claims and liabilities finally judicially
determined to have arisen solely from the gross negligence or
willful misconduct of any Indemnitee. Each Indemnitee agrees
to use its best efforts to promptly notify such Pledgor of any
assertion of any such liability, damage, injury, penalty,
claim, demand, action, judgment or suit of which such
Indemnitee has knowledge. In case any action, suit or
proceeding shall be brought against any Indemnitee for which
the Indemnitee is indemnified under this clause (a), such
Indemnitee shall notify the relevant Pledgor of the
commencement thereof, and such Pledgor shall be entitled, at
its expense, acting through counsel reasonably acceptable to
such Indemnitee, to participate in, and, to the extent that
such Pledgor desires to, assume and control the defense
thereof; provided, however, that such Pledgor shall have
acknowledged in writing its obligation to fully indemnify such
Indemnitee in respect of such action, suit or proceeding; and
provided, further, that such Pledgor shall not be entitled to
assume and control the defense of any such action, suit or
proceeding if and to the extent that, (A) in the reasonable
opinion of such Indemnitee, (x) (i) such action, suit or
proceeding involves any risk of imposition of criminal
liability or (ii) such action, suit or proceeding involves any
material risk of material civil liability on such Indemnitee or
will involve a material risk of the sale, forfeiture or loss
of, or the creation of any Lien (other than a Permitted Lien)
on, the Pledged Collateral or any part thereof, unless, in the
case of this clause (x) (ii), such Pledgor shall have posted a
bond or other security satisfactory to the relevant Indemnitees
in respect to such risk or (y) the control of such action, suit
or proceeding would involve a bona fide conflict of interest,
(B) such proceeding involves Expenses not fully indemnified by
such Pledgor which such Pledgor and the Indemnitee have been
unable to sever from the indemnified Expense(s), (C) a Default
or an Event of Default has occurred and is continuing or (D)
such action, suit or proceeding involves matters which extend
beyond or are unrelated to the transactions contemplated by the
Transaction Documents and if determined adversely could be
materially detrimental to the interests of such Indemnitee
notwithstanding indemnification by such Pledgor. The
Indemnitee, on the one hand, and such Pledgor, on the other
hand, may participate in a reasonable manner at its own expense
and with its own counsel in any proceeding conducted by the
other in accordance with the foregoing. Each Indemnitee shall
at such Pledgor's expense supply such Pledgor with such
information and documents reasonably requested by such Pledgor
as are necessary or advisable for such Pledgor to participate
in any action, suit or proceeding to the extent permitted by
this clause (a). Unless an Event of Default shall have
occurred and be continuing, no Indemnitee shall
19
<PAGE>
enter into any settlement or other compromise with respect to
any Expense which is entitled to be indemnified under this
clause (a) without the prior written consent of the relevant
Pledgor, which consent shall not be unreasonably withheld or
delayed, unless such Indemnitee waives its right to be
indemnified under this clause (a) with respect to such Expense.
In addition, if an Indemnitee, in violation of either Pledgor's
right to assume and control the defense of any Expense, refuses
to permit such Pledgor to control the defense after written
demand by such Pledgor for such control, such Indemnitee waives
its right to be indemnified under this clause (a) with respect
to such Expense. Upon payment in full of any Expense by either
Pledgor pursuant to this clause (a) to or on behalf of an
Indemnitee, such Pledgor without any further action shall be
subrogated to any and all claims that such Indemnitee may have
relating thereto (other than claims in respect of insurance
policies maintained by such Indemnitee at its own expense), and
such Indemnitee shall execute such instruments of assignment
and conveyance, evidence of claims and payment and such other
documents, instruments and agreements as may be necessary to
preserve any such claims and otherwise cooperate with such
Pledgor and give such further assurances as are necessary or
advisable to enable such Pledgor vigorously to pursue such
claims. The obligations and rights of each Pledgor under this
Section 6.16 shall survive the repayment of all Secured
Obligations and the termination of this Agreement.
(b) Without limiting the application of clause (a)
immediately above, each Pledgor agrees to pay, or reimburse the
Collateral Agent for, any and all fees, costs and Expenses of
whatever kind or nature incurred in connection with the
creation, preservation, protection or validation of the
Collateral Agent's Liens on, and security interest in, the
Pledged Collateral, including, without limitation, all fees and
taxes in connection with the recording or filing of instruments
and documents in public offices, payment or discharge of any
taxes or Lien upon or in respect of the Pledged Collateral,
premiums for insurance with respect to the Pledged Collateral
and all other fees, costs and expenses in connection with
protecting, maintaining or preserving the Pledged Collateral
and the Collateral Agent's interest therein, whether through
judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or
relating to the Pledged Collateral.
(c) Without limiting the application of clause (a)
immediately above, each Pledgor agrees to pay, indemnify and
hold each Indemnitee harmless from and against any loss, costs,
damages and Expenses which such Indemnitee may suffer, expend
or incur in consequence of or growing out of any failure of
such Pledgor to comply with its obligations under this
Agreement, or any misrepresentation by such Pledgor in this
Agreement, or in any statement or writing contemplated by or
made or delivered pursuant to or in connection with this
Agreement.
(d) If and to the extent that the obligations of the
Pledgors under this Section 6.16 are unenforceable for any
reason, each Pledgor hereby agrees to make the
20
<PAGE>
maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable Law.
(e) Any amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement, together with
interest on such amounts from the date paid until reimbursement
in full at a rate per annum equal at all times to the Base Rate
plus the Applicable Margin plus two percent (2%), shall
constitute Secured Obligations secured by the Pledged
Collateral.
Section 6.17 Independent Obligations. The Pledgors'
obligations under this Agreement are independent of those of
the Borrower. The Collateral Agent may bring a separate action
against the Pledgors without first proceeding against the
Borrower or any other Person or any other security held by the
Collateral Agent and without pursuing any other remedy.
Section 6.18 Waiver of Defenses. The Pledgors hereby
waive: (a) any defense of a statute of limitations; (b) any
defense based on the legal disability of the Borrower or any
discharge or limitation of the liability of the Borrower to the
Collateral Agent or the Secured Parties, whether consensual or
arising by operation of law; (c) presentment, demand, protest
and notice of any kind; and (d) any defense based upon or
arising out of any defense (other than the indefeasible payment
in full in cash or cash equivalents of the Secured Obligations)
which the Borrower may have to the payment or performance of
any part of the Secured Obligations.
Section 6.19 Subrogation, Etc. Notwithstanding any
payment or payments made by the Pledgors or the exercise by the
Collateral Agent of any of the remedies provided under this
Agreement or any other Financing Document, until the Secured
Obligations have been indefeasibly paid in full in cash or cash
equivalents, the Pledgors shall have no claim (as defined in 11
U.S.C. 101(5)) of subrogation to any of the rights of the
Collateral Agent against the Borrower, the Pledged Collateral
or any guaranty held by the Collateral Agent for the
satisfaction of any of the Secured Obligations, nor shall the
Pledgors have any claims (as defined in 11 U.S.C. 101(5)) for
reimbursement, indemnity, exoneration or contribution from the
Borrower in respect of payments made by the Pledgors hereunder.
Notwithstanding the foregoing, if any amount shall be paid to
the Pledgors on account of such subrogation, reimbursement,
indemnity, exoneration or contribution rights at any time, such
amount shall be held by the Pledgors in trust for the
Collateral Agent segregated from other funds of the Pledgors,
and shall be turned over to the Collateral Agent in the exact
form received by the Pledgors (duly endorsed by the Pledgors to
the Collateral Agent if required) to be applied against the
Secured Obligations in such amounts and in such order as the
Collateral Agent (as directed by the Agent Bank, acting in
accordance with the Credit Agreement) may elect.
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<PAGE>
Section 6.20 Joint and Several Liability. Prior to the
effective date of this Agreement, the obligations of the
Pledgors hereunder shall be several and not joint. On and
after the effective date of this Agreement, the obligations of
the Pledgors under this Agreement shall be joint and several.
Section 6.21 Recourse Limited to Collateral.
Notwithstanding anything herein to the contrary, including,
without limitation, Section 6.16, the Collateral Agent
acknowledges and agrees on behalf of itself and each Secured
Party, that neither of the Pledgors, nor any past or present
shareholder, officer, employee, servant, controlling Person,
executive, director, agent or authorized representative or
Affiliate (other than the Borrower) of either of the Pledgors,
shall be personally liable for any deficiency in the payment or
satisfaction of the Secured Obligations and that the sole
recourse of the Collateral Agent and each Secured Party for
payment and performance of the obligations of the Pledgors
hereunder shall be to the Pledged Collateral. This provision
shall not be deemed to waive any cause of action the Collateral
Agent or any Secured Party may have against the Pledgors for
their nonperformance or against any Person for fraud or willful
misconduct by such Person.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Pledge and Security Agreement to be duly executed and
delivered by their officers thereunto duly authorized as of the
date first above written.
NRGG FUNDING INC.
By: /s/
Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: VP-CFO
Address for Notices:
1221 Nicollet Mall, Suite 610
Minneapolis, MN 55403
NRG MORRIS INC.
By: /s/ Craig Mataczynski
Name: Craig Mataczynski
Title: President
Address for Notices:
1221 Nicollet Mall, Suite 610
Minneapolis, MN 55403
THE CHASE MANHATTAN BANK,
as Collateral Agent
By: /s/ Annette M. Marsula
Name: Annette M. Marsula
Title: Assistant Vice President
Address for Notices:
450 West 33rd Street, 15th Floor
New York, NY 10001
<PAGE>
Exhibit 10.27.11
SUPPLEMENTAL LOAN AGREEMENT
dated as of December 10, 1997
between
NRG ENERGY, INC.,
as Lender,
and
NRG GENERATING (U.S.) INC.
and
NRGG Funding Inc.
as Borrowers
<PAGE>
THIS SUPPLEMENTAL LOAN AGREEMENT, dated as of December 10,
1997, is between NRG GENERATING (U.S.) INC., a Delaware corporation
("NRGG"), NRGG Funding, Inc., a Delaware corporation ("Funding") and
NRG Energy, Inc., a Delaware corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, NRGG and Funding (each, a "Borrower" and
collectively, the "Borrowers") wish to borrow up to $22,000,000 to meet
their joint and several obligation to fund equity commitments to NRG
(Morris) Cogen, LLC, a Delaware limited liability company ("Morris
Cogen"), and the Lender agrees to lend such amount to the Borrowers on
the terms and conditions set forth below;
NOW, THEREFORE, the Borrowers and the Lender agree as
follows:
ARTICLE 1
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
terms defined in the caption hereto shall have the meanings set forth
therein, and the following terms have the following meanings:
"Affiliate" of any specified person means (i) any other
Person, directly or indirectly, controlling or controlled by or under
direct or indirect common control with such specified Person or (ii)
any Person who is a director or officer (a) of such Person, (b) of any
Subsidiary of such Person or (c) of any Person described in clause (i)
above. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" means this Supplemental Loan Agreement, as
amended, supplemented or modified from time to time.
"Amortization Schedule" shall have the meaning assigned
thereto in Section 2.05(b).
"Assignment and Assumption Agreement" shall have the meaning
assigned thereto in Section 2.02.
<PAGE>
"Bankruptcy Law" shall mean any applicable liquidation,
dissolution, conservatorship, bankruptcy, moratorium, rearrangement,
insolvency, reorganization, readjustment of debt or similar laws
affecting the rights and remedies of creditors generally, as in effect
from time to time.
"Base Rate" means, for any date, a rate per annum equal to
the prime rate for that date plus one and one-half percent (1.5%).
"Borrower" and "Borrowers" mean the parties named as such in
this Agreement until one or more successors replace the Borrowers, and
thereafter such successor(s).
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York City, New York or
Minneapolis, Minnesota are authorized or required by law to close.
"Chase Pledge Agreement" shall have the meaning assigned
thereto in Section 8.01.
"Closing Date" means the date this Agreement is executed and
delivered by each party hereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" shall mean all assets of Funding and NRG Morris
Inc. in which the Lender is granted a security interest under the
Pledge Agreement.
"Credit Documents" means the collective reference to this
Agreement, the Note and the Security Documents.
"Default" means any event which is, or after notice or
passage of time or both would be, an Event of Default.
"Distributions" shall mean dividends or other payments of any
kind, whether in cash, in kind, or in securities or other property.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Environmental Approval" shall have the meaning assigned
thereto in Section 5(u)(ii).
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<PAGE>
"Environmental Claim" shall have the meaning assigned
thereto in Section 5(u).
"Environmental Laws" shall have the meaning assigned thereto
in Section 5(u).
"Equity Commitment Agreement" shall have the meaning
assigned thereto in Section 2.02.
"ERISA" means the Employment Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" means a trade or business (whether or not
incorporated) which is under common control with either of the
Borrowers within the meaning of Sections 414(b), (c), (m) or (o) of the
Code.
"Event of Default" shall have the meaning assigned thereto in
Section 7.01.
"Funding Date" means the date not later than the date equity
must be infused into Morris Cogen pursuant to the Equity Commitment
Agreement, upon which the Borrowers shall request that the Loan be made
available.
"GAAP" means generally accepted accounting principles in the
Unites States of America as in effect from time to time.
"Good Faith Contest" means the contest of an item if the item
is diligently contested in good faith by appropriate proceedings timely
instituted and (i) adequate cash reserves (or at the applicable
entity's option, bonds or other security reasonably satisfactory to the
Lender) are established with respect to the contested item, and (ii)
during the period of such contest, the enforcement of any contested
item is effectively stayed.
"Governmental Authority" means the United States Federal
Government, any state or other political subdivision thereof, including
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to such government.
"Highest Lawful Rate" shall have the meaning assigned thereto
in Section 9.09.
3
<PAGE>
"Indemnified Liabilities" shall have the meaning assigned
thereto in Section 9.04.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such
Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or
other similar instruments (including reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the
deferred and unpaid purchase price of property or services, which
purchase price is due more than six months after the date of placing
such property in service or taking delivery thereof or the completion
of such services, except trade payables, (v) all obligations on account
of principal of such Person as lessee under capitalized leases, (vi)
all indebtedness of other Persons secured by a lien on any asset of
such Person, whether or not such indebtedness is assumed by such
Person; provided that the amount of such indebtedness shall be the
lesser of (a) the fair market value of such asset at such date of
determination and (b) the amount of such indebtedness, and (vii) all
indebtedness of other Persons guaranteed by such Person to the extent
such indebtedness is guaranteed by such Person. The amount of
Indebtedness of any Person at any date shall be the outstanding balance
at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided
that the amount outstanding at any time of any indebtedness issued with
original issue discount is the face amount of such indebtedness less
the remaining unamoritized portion of the original issue discount of
such indebtedness at such time as determined in conformity with GAAP;
and provided further that Indebtedness shall not include any liability
for current or deferred federal, state, local or other taxes, or any
trade payables; provided, however, in the case of the Borrowers,
"Indebtedness" shall not include (i) any Lien granted by the Borrowers
on any equity interest of Borrowers in any Subsidiary of a Borrower
(other than Funding, NRG Morris, Inc. or Morris Cogen) as security for
any debt of such Subsidiary in respect of any energy project acquired
or developed after the date hereof or any debt with respect to such
Subsidiary's project or project owner in respect of any such project,
or (ii) subject to the limitations set forth herein, any equity funding
commitment made or guaranteed by either of the Borrowers, regardless of
whether such equity funding commitment is assigned or otherwise pledged
as security for any debt of any Subsidiary in respect of any energy
project acquired or developed after the date hereof or any debt with
respect to such Subsidiary's project or project owner in respect of any
energy project acquired or developed after the date hereof. For
purposes of calculating the amount of any Indebtedness hereunder, there
shall be no double-counting of direct obligations, guarantees and
reimbursement obligations for letter of credit.
4
<PAGE>
"Interest Payment Date" means each principal reduction date
set forth on Schedule B hereto, and, for periods after the last date
reflected thereon, the last day of each fiscal quarter of the
Borrowers.
"Investments" in any Person means (i) any loan, extension of
credit or advance to such Person, (ii) any purchase or other
acquisition of any capital stock, warrants, rights, options,
obligations or other securities of such Person, or (iii) any capital
contribution to such Person.
"Lender" means the party named in this Agreement until one or
more successors replace it, and thereafter means the successor or
successors.
"Loan" shall have the meaning assigned thereto in Section
2.01.
"Material Adverse Effect" means a material adverse effect on
(i) the ability of either Borrower or NRG Morris Inc. to perform its
obligations to the Lender under this Agreement, the Note or any of the
Security Documents or (ii) the business, property, assets, liabilities,
operations or condition (financial or otherwise) of the Borrowers and
their respective Subsidiaries, taken as a whole.
"Material Governmental Approvals" means all Governmental
Approvals which are required under applicable law in connection with
the operation, maintenance, ownership or leasing of the facility other
than such Governmental Approvals as are immaterial in nature.
"Maturity Date" shall have the meaning assigned thereto in
Section 2.04.
"Maximum Amount" shall have the meaning assigned thereto in
Section 2.05(c).
"Membership Interest Purchase Agreement" shall have the
meaning assigned thereto in Section 3.01(d).
"Morris Cogen" shall have the meaning assigned thereto in the
first recital hereto.
"Notes" means the joint and several Note of the Borrowers
substantially in the form attached hereto as Exhibit A.
"NRG Equity Guaranty" shall have the meaning assigned thereto
in Section 2.02.
5
<PAGE>
"NRGG Equity Guaranty" shall have the meaning assigned
thereto in Section 2.03.
"Permitted Liens" means any Liens that are: (a) Liens for
taxes, or other governmental levies and assessments that (i) do not
arise under ERISA or Environmental Laws and (ii) are not yet due or
which are subject to a Good Faith Contest; (b) carriers,'
warehousemen's, mechanics,' materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which are not past due
for a period of more than 90 days or which are subject to a Good Faith
Contest; (c) pledges or deposits in connection with workmen's
compensation, unemployment insurance and other social security
legislation; (d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business; (e) easements, rights-of-way, restrictions (including
landmarking and zoning restrictions), royalties, leasehold and fee
interest covenants and other similar encumbrances incurred or imposed
in the ordinary course of business which are not of the nature of a
Lien for security purposes and which do not in any case materially
detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of either Borrower, NRG
Morris Inc. or Morris Cogen; (f) liens in favor of MeesPierson Capital
Corporation in connection with a certain Credit Agreement for NRGG to
be arranged by MeesPierson Capital Corporation, (the "Proposed
MeesPierson Credit Agreement); (g) liens for purchase money
obligations, provided that any such lien encumbers only the asset so
purchased; (h) liens arising from legal proceedings, as long as such
proceedings are being contested in a Good Faith Contest and so long as
execution is stayed on all judgments resulting from any such
proceedings; (i) liens arising on the title insurance policies to be
delivered in connection with the Proposed MeesPierson Credit Agreement;
(j) liens securing indebtedness of NRGG permitted under this Agreement,
including without limitation pledges by NRGG of its equity interest in
any electrical cogeneration project(s) hereafter owned and operated, in
whole or in part, by NRGG or any Subsidiary of NRGG (other than
Funding) as security for such indebtedness; and (k) the Lien in favor
of the Lender on the shares of stock of O'Brien Schuykill owned by NRGG
pursuant to that certain NRG Subordinated Stock Pledge Agreement dated
as of March 1, 1996 among the Lender, NRGG, O'Brien Schuykill and The
Chase Manhattan Bank.
"Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agent or political subdivision thereof
or any other entity.
"Plan" means any employee benefit plan covered by Title IV of
ERISA.
6
<PAGE>
"Pledge Agreement" shall have the meaning assigned thereto in
Section 3.01(b).
"Pledged Interests" means the membership interests pledged to
the Lender by Funding and NRG Morris Inc. pursuant to the Pledge
Agreement.
"Project Agreement" means any agreements, contracts or leases
of any kind whatsoever pursuant to which, NRG Morris Inc. or Morris
Cogen is entitled directly, indirectly, by assignment or otherwise to
receive payments in respect the Morris Cogen facility.
"PURPA" means the Public Utility Regulatory Policies Act of
1978, as amended from time to time, and all rules and regulations
adopted thereunder .
"Register" shall have the meaning assigned thereto in Section
2.11(b).
"Security Documents" shall have the meaning assigned in
Section 3.01(b).
"Subsidiary" of any Person means any corporation,
association, partnership or other business entity of which more than
50% of the total voting power of shares of capital stock or other
interests (including partnership interests) entitled (without regard to
the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person or (ii) one or
more Subsidiaries of such Person.
"Uniform Commercial Code" means the Minnesota Uniform
Commercial Code as in effect from time to time.
SECTION 1.02. Rules of Construction. Unless the context
otherwise requires:
1. a term has the meaning assigned to it;
2. "or" is not exclusive;
3. "including" means including without limitation;
4. words in the singular include the plural and words in the plural
include the singular;
7
<PAGE>
5. unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Note or any
certificate or other document made or delivered pursuant hereto; and
6. the words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and
section, Section, schedule and exhibit references are to this Agreement
unless otherwise specified.
ARTICLE 2
Loan
SECTION 2.01. Loan. Subject to the terms and conditions
hereof, the Lender agrees to make a loan in Dollars to the Company on
the Funding Date, in an aggregate principal amount of up to
$22,000,000, (if drawn upon, the "Loan").
SECTION 2.02. Use of Proceeds; Manner of Funding. The
proceeds of the Loan shall be used exclusively to make equity
contributions to Morris Cogen in accordance with and in satisfaction of
the obligations of Funding under the Equity Commitment Agreement among
the Lender, Morris Cogen and The Chase Manhattan Bank, as Agent Bank
and as Collateral Agent, dated as of September 15, 1997 which have been
assumed by Funding (as so assumed, the "Equity Commitment Agreement")
pursuant to that certain Assignment and Assumption Agreement dated as
of December 10, 1997 between the Lender and Funding (the "Assignment
and Assumption Agreement") or to satisfy the obligations of NRGG under
the Equity Commitment Guaranty executed by NRGG in favor of the Lender
dated as of December 10, 1997 (the "NRGG Equity Guaranty"). The
proceeds of the Loan shall be transferred by wire in immediately
available funds directly to an account of Morris Cogen as directed by
the Borrowers pursuant to Section 2.07 or to such other account as the
Lender may specify in accordance with Section 2.03.
SECTION 2.03. Deemed Borrowing. If any amount becomes due
and owing under the Equity Commitment Agreement or the Equity
Commitment Guaranty dated December 10, 1997 by the Lender in favor of
Morris Cogen and The Chase Manhattan Bank, as Collateral Agent, (the
"NRG Equity Guaranty"), the Lender may elect, in its sole discretion,
to fund the Loan in the manner contemplated by Section 2.02, without
receiving a notice of borrowing pursuant to Section 2.07. In such
cases, notice of borrowing shall be deemed to have been given upon the
Lender receiving notice that amounts are due under the Equity
Commitment Agreement or the NRG Equity Guaranty. The Lender may, in
its sole discretion, elect to direct that all or a portion of the
proceeds
8
<PAGE>
of the Loan be deposited in its own account to repay amounts under the
NRG Equity Guaranty Such elections shall be in addition to and shall
not affect the remedies of the Lender hereunder, or under the other
Credit Documents, the Equity Commitment Guaranty or the NRG Equity
Guaranty.
SECTION 2.04. Maturity. The Loan will mature on the date
that is six years following the Funding Date (the "Maturity Date").
SECTION 2.05. Optional and Mandatory Prepayments; Repayments
of Loan.
(a) The Borrowers may at any time and from time to time prepay the
Loan, in whole or in part, without premium or penalty, upon at least
five days irrevocable notice to the Lender. If such notice is given,
the Borrowers shall make such prepayment, and the payment amount
specified in such notice shall be due and payable, on the date
specified therein.
(b) The Borrowers shall pay, in reduction of the principal amount of
the Loan then outstanding, the principal amounts set forth on the
amortization schedule attached hereto as Exhibit B (the "Amortization
Schedule") on the dates specified on the Amortization Schedule.
(c) In the event that, on any date, the outstanding principal of the
Loan outstanding exceeds the maximum permitted amount of the Loan set
forth on the Amortization Schedule for such date (the "Maximum
Amount"), then Funding shall pay in reduction of the principal and
interest then outstanding, promptly after receipt, an amount equal to
the amount of any Distributions thereafter received by Funding in
respect of the Pledged Interests until the outstanding principal does
not exceed such Maximum Amount. The Borrowers shall give the Lender at
least one Business Day's notice of each mandatory prepayment pursuant
to this Section 2.05(c) setting forth the date and amount thereof.
(d) Accrued interest on the amount of any prepayments shall be paid
on the date of such prepayment.
SECTION 2.06. Interest Rate and Payment Dates.
(a) The Loan shall bear interest for the period from and including
the date the Loan is made to, but excluding, the maturity date thereof on
the unpaid principal thereof at a rate per annum equal to the Base
Rate.
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(b) If all or a portion of (i) the principal amount of the Loan or
(ii) any interest payable thereon shall not be paid when due, whether
at the stated maturity (including, without limitation, amortization
payments as required by Section 2.05(b)), by acceleration or otherwise,
the Loan shall, without limiting the rights of the Lender under Article
7, bear interest at a rate per annum which is 2.00% above the Base Rate
from the date of such non-payment until paid in full (as well after as
before judgment).
(c) Interest shall be payable in arrears on each Interest Payment
Date.
SECTION 2.07. Notice of Loan. The Loan shall be made upon
written notice, by way of a notice of borrowing executed by an officer
of each of the Borrowers, given by telecopy, mail, or personal service,
delivered to the Lender at its office at 1221 Nicollet Mall,
Minneapolis, Minnesota (Attn: Treasurer) at least three Business Days
prior to the day on which the Loan to be made and such notice shall
specify that the Loan is requested and state the amount thereof
(subject to the provisions of this Article 2) and shall specify the
account of Morris Cogen to which the proceeds of the Loan shall be
deposited, with wire transfer instructions.
SECTION 2.08. Computation of Interest and Fees. Interest in
respect of the Loan shall be calculated on the basis of a 365 (or 366,
as the case may be) day year for the actual days elapsed.
SECTION 2.09. Treatment of Payments.
(a) Whenever any payment received by the Lender under this Agreement
or the Note is insufficient to pay in full all amounts then due and
payable to the Lender under this Agreement or the Note, including,
without limitation, any amount outstanding in excess of the Maximum
Amount, such payment shall be applied by the Lender in the following
order: First, to the payment of fees and expenses due and payable to
the Lender under and in connection with this Agreement and the Note,
including the payment of all expenses due and payable under Section
9.04; Second, to the payment of interest then due and payable on the
Loan; and Third, to the payment of the principal amount of the Loan
which is then due and payable; or
(b) All payments (including prepayments) to be made by the Borrowers
on account of principal, interest and fees shall be made without set-
off or counterclaim and shall be made to the Lender, for the account of
the Lender at its office located at 1221 Nicollet Mall, Minneapolis,
Minnesota (or by wire transfer to: LaSalle National Bank, Chicago,
Illinois; ABA No.: 071-000-505; Account No.: 5800-07-6852; Recipient:
NRG Energy, Inc.), in lawful money of the United States of America and
in immediately available funds. If any payment hereunder would become
due and payable on a day other
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than a Business Day, such payment shall become due and payable the next
succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during
such extension.
SECTION 2.10. Indemnity. The Borrowers agree jointly and
severally to indemnify the Lender and to hold the Lender harmless from
any loss or expense (but without duplication of any amounts payable as
default interest and excluding lost profits; provided, for the
avoidance of doubt that interest and/or default interest accruing prior
to payment in full of the Loan shall not be deemed to be `lost
profits') which the Lender may sustain or incur as a consequence of
default by the Borrowers in making any prepayment after Borrowers have
given a notice in accordance with Section 2.05. Any amounts payable
hereunder shall be due within thirty (30) days following receipt by the
Borrowers of a certificate signed by an officer of the Lender showing
in reasonable detail the calculation of such costs and expenses, which
certificate shall constitute prima facie evidence of such amounts.
This covenant shall survive termination of this Agreement and repayment
of the Loan; provided, that the Borrowers shall not be liable to the
Lender for any costs or expense incurred more than ninety (90) days
prior to the delivery of the applicable certificate pursuant to this
Section 2.10.
SECTION 2.11. Repayment of the Loan; Evidence of Debt.
(a) Each Borrower hereby jointly, severally, and unconditionally
promises to pay to the Lender the then unpaid principal amount of the
Loan in accordance with the terms hereof and the Note. Each Borrower
hereby further agrees, jointly, severally and unconditionally, to pay
interest on the unpaid principal amount of the Loan from time to time
outstanding from the date hereof until payment in full thereof at the
rates per annum, and on the dates, set forth in Section 2.06.
(b) The Lender shall maintain a Register (the "Register") in which
shall be recorded (i) the amount of the Loan made hereunder, (ii) the
amount of any principal or interest due and payable or to become due
and payable from Borrowers to the Lender hereunder and (iii) the amount
of any sum received by the Lender hereunder from Borrowers.
(c) The entries made in the Register to the extent permitted by
applicable law, shall be prima facie evidence of the existence and
amounts of the obligations of Borrowers therein recorded; provided,
however, that the failure of the Lender to maintain the Register, or
any error therein, shall not in any manner affect the obligation of
Borrowers to repay (with applicable interest) the Loan made to
Borrowers by the Lender in accordance with the terms of this Agreement.
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ARTICLE 3
Conditions Precedent
SECTION 3.01. Conditions to Loan. The obligation of the
Lender to make the Loan on the Funding Date is subject to the
satisfaction, or waiver by the Lender, immediately prior to or
concurrently with the making of the Loan, of the following conditions:
(a) Note. The Lender shall have received the Note conforming to the
requirements hereof and executed by a duly authorized officer of each
Borrower.
(b) Security Documents. The Lender shall have received the
Subordinated Pledge and Security Agreement dated as of December 10,
1997 by Funding and NRG Morris Inc. in favor of the Lender (the "Pledge
Agreement") and the other documents and instruments referenced therein
or to be delivered in connection therewith (the "Security Documents")
conforming to the requirements hereof and executed by a duly authorized
officer of each of Funding and NRG Morris Inc.
(c) Opinion of Counsel. The Lender shall have received the opinion
of counsel to the Borrowers in form and substance satisfactory to the
Lender.
(d) Purchase. Funding shall have consummated the purchase of the
membership interests in Morris Cogen in accordance with that certain
Membership Interest Purchase Agreement dated December 10, 1997 among
the Lender, Funding and NRGG (the "Membership Interest Purchase
Agreement"), and an equity contribution by Funding to Morris Cogen
shall be payable pursuant to the Equity Commitment Agreement.
(d) Representations True; No Default. Each representation
and warranty of the Borrowers hereunder and under the Pledge Agreement
and the other Credit Documents shall be accurate and complete in all
material respects as of the Funding Date and no Default or Event of
Default shall have occurred hereunder.
(e) Fees and Expenses. The Borrowers shall have paid to the Lender
the fees and expenses set forth in Section 9.04.
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ARTICLE 4
Security Interest
To secure the obligations of the Borrowers hereunder and the
other obligations described therein, Funding and NRG Morris Inc. have
executed the Pledge Agreement and the other Security Documents.
ARTICLE 5
Representations and Warranties
In order to induce the Lender to enter into this Agreement
and to make the Loan available, each Borrower hereby represents and
warrants to the Lender (which representations and warranties shall
survive the execution and delivery of this Agreement and the Note and
the drawdown of the Loan hereunder) that, as of the Funding Date:
(a) Due Organization and Power. Each Borrower is duly organized and
is validly existing in good standing under the laws of its jurisdiction
of organization and is properly qualified to do business and in good
standing in every jurisdiction where the failure to maintain such
qualification or good standing could reasonably be expected to result
in a Material Adverse Effect. Each Borrower has full power to carry on
its business as now being conducted and has complied with all
statutory, regulatory and other requirements relative to such business
and such agreements, except where non-compliance could not reasonably
be expected to result in a Material Adverse Effect. Each of the
Borrowers and NRG Morris Inc. has full power and authority to enter
into and perform its obligations under the Credit Documents to which it
is a party.
(b) Capitalization. The authorized capital stock or other equity
interests of Funding, NRG Morris Inc. and Morris Cogen are held as set
forth on Schedule 5(b) and except as set forth thereon. No other
shares of the capital stock or other equity interests of Funding, NRG
Morris Inc. or Morris Cogen are issued and outstanding. All of the
issued and outstanding shares of capital stock of Funding, NRG Morris
Inc. and Morris Cogen are duly authorized and validly issued, fully
paid, nonassessable, and free and clear of all Liens (other than
Permitted Liens), and such shares were issued in compliance with all
applicable state, federal and foreign laws concerning the issuance of
securities. Except as set forth in the Energy Services Agreement
between Morris Cogen and Millennium Petrochemicals Inc. dated June 6,
1997, there are no preemptive or other outstanding rights, options,
warrants, conversion rights or similar agreements or understandings for
the
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purchase or acquisition of shares of capital stock or other securities
or equity interests of Funding, NRG Morris Inc. or Morris Cogen.
(c) Authorization and Consents. All necessary corporate action has
been taken to authorize, and all necessary consents and authorities
have been obtained and remain in full force and effect to permit, each
of the Borrowers and NRG Morris Inc. to enter into and perform
obligations under the Credit Documents to which it is a party and, in
the case of the Borrowers, to borrow and repay the Loan. No further
consents or authorities are necessary for the repayment of the Loan or
any part thereof, including, without limitation, any consent or
approval of, or notice to, or other action with or by, any Governmental
Authority, regulatory body or any other Person which has not been made
or obtained and is in full force and effect.
(d) Binding Obligations. Each Credit Document constitutes or when
executed and delivered, will constitute the legal, valid and binding
obligations of each of the Borrowers and NRG Morris Inc. as is a party
thereto, enforceable against such parties in accordance with their
respective terms, except to the extent that such enforcement may be
limited by equitable principles, principles of public policy or
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws affecting generally the enforcement of creditors' rights.
(e) No Violation. The execution and delivery of, and the performance
of the provisions of, each Credit Document to which it is or will be a
party by each of the Borrowers and NRG Morris Inc. do not contravene
any applicable law or regulation existing at the date hereof, any
Governmental Approval or any contractual restriction binding on such
party or the certificate of incorporation or by-laws (or equivalent
instruments) thereof.
(f) Litigation. Except as set forth on Schedule 5(f), no action,
suit or proceeding is pending or, to the Borrowers' knowledge, threatened
against either Borrower, NRG Morris Inc. or Morris Cogen before any
court, board of arbitration or administrative agency which could
reasonably be expected to result in any Material Adverse Effect. There
is no injunction, writ, preliminary restraining order or any order of
any nature issued by an arbitrator or other Governmental Authority
directing that any material aspect of the transactions provided for in
this Agreement not be consummated as herein or therein provided.
(g) No Default. None of the Borrowers, NRG Morris Inc. and Morris
Cogen are in default under any material agreement by which it is bound,
or is in default in respect of any financial commitment or obligation,
in either case the default of which could reasonably be expected to
result in a Material Adverse Effect.
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(h) Project Agreements. Upon the Funding Date:
(i) Each Material Governmental Approval required in connection with
the Morris Cogen facility has been obtained, is validly issued,
is in full force and effect, is not subject to appeal by any
Person, and, to the knowledge of the Borrowers, is free from
conditions or requirements compliance with which could
reasonably be expected to result in a Material Adverse
Effect. There is no proceeding pending or, to the
knowledge of the Borrowers, threatened which is reasonably
likely to result in the rescission, revocation, material
modification, suspension, determination of invalidity or
limitation of effectiveness of any Material Governmental
Approval. To the knowledge of the Borrowers, the information
set forth in each application and other written material
submitted by or on behalf of the Borrowers, NRG Morris
Inc. and Morris Cogen to the applicable Governmental Authority in
connection with such Material Governmental Approval was
accurate and complete in all material respects at the time
such application or other written material was submitted.
Each of the Borrowers, NRG Morris Inc. and Morris Cogen
complies in all material respects with all covenants,
conditions, restrictions and reservations in the Material
Governmental Approvals relating to the facilities of Morris
Cogen and the Project Agreements applicable thereto and all
laws applicable thereto, except to the extent any non-
compliance could not reasonably be expected to result in a
Material Adverse Effect;
(ii) Each Project Agreement to which the Borrowers, NRG Morris
Inc. or Morris Cogen is a party is a legal, valid and binding
agreement of such party enforceable against such party in
accordance with its terms, except to the extent
enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or other similar
laws affecting the enforcement of creditors' rights and
subject to general equitable principles;
(iii) All representations and warranties set forth in each
Project Agreement by any of the Borrowers, NRG Morris Inc.
or Morris Cogen which is a party thereto are true and
correct in all material
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respects (the determination of such material truth and correctness
to be made by the Lender in good faith) as though made as of the date
hereof, except to the extent any such representation or warranty
relates to a prior date;
(iv) The facilities of Morris Cogen will be able to be operated on
a safe and commercially sound basis in compliance with all Governmental
Approvals and applicable Project Agreements and laws, so that the
performance and facility guarantees and specifications provided for in
the applicable Project Agreements and Governmental Approvals can be
substantially met during the term of this Agreement and each of NRG
Morris Inc. and Morris Cogen can duly and punctually meet its
obligations under the applicable Project Agreements and Governmental
Approvals in accordance with the terms thereof, except to the extent
any inadvertent non-compliance with such Governmental Approvals and
Project Agreements could not reasonably be expected to have a Material
Adverse Effect; provided, however, that such inadvertent noncompliance
must be remedied or cured within 30 days of NRG Morris Inc. or Morris
Cogen obtaining knowledge thereof. Morris Cogen has adequate
inventories and spare parts to operate its facility in accordance with
the Project Agreements, Governmental Approvals and applicable law;
(v) Morris Cogen has facilities for the storage of alternative fuel
sufficient to meet its obligations under the Project Agreements,
Governmental Approvals and laws applicable thereto; and
(i) Funding is the sole owner of 99% of the outstanding equity of
Morris Cogen, free and clear of all Liens (other than Permitted Liens
and except as set forth in the Energy Services Agreement between Morris
Cogen and Millennium Petrochemicals Inc. dated June 6, 1997), and NRG
Morris Inc. is the sole owner of 1% of the outstanding equity of Morris
Cogen, free and clear of all liens (other than Permitted Liens).
Insurance. Schedule 5(i) (which shall be updated by the Borrowers and
provided to the Lender not less often than annually) sets forth a
complete and accurate description of all material policies of insurance
that will be in effect as of the Funding Date. To the knowledge of the
Borrowers, such policies are with companies rated "A-" or better by
Best's Insurance Guide and Key Rating or other insurance companies of
recognized responsibility satisfactory to the Lender and the coverages
provided by such policies are in amounts and cover such risks as are
usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which Morris Cogen
operates and,
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in any event, other than to account for amortization of loan
repayments, the insurance coverages shall not be less than the
insurance coverages set forth in Schedule 5(i).
(j) Financial Information. Except as otherwise disclosed in writing
to the Lender on or prior to the date hereof, all financial statements,
information and other data furnished by the Borrowers to the Lender are
complete and correct, such financial statements have been prepared in
accordance with GAAP (except, in the case of interim financial
statements, for the absence of footnotes) and accurately and fairly
present the financial condition of the parties covered thereby as of
the respective dates thereof and the results of the operations thereof
for the period or respective periods covered by such financial
statements and since such date or dates, there has been no Material
Adverse Effect as to any of such parties and none thereof has any
contingent obligations, liabilities for taxes or other outstanding
financial obligations which are material in the aggregate except as
disclosed in such statements, information and data.
(k) Tax Returns. Each Borrower, NRG Morris Inc. and Morris Cogen,
has filed all material tax returns required to be filed thereby and has
paid all taxes payable thereby which have become due, other than those
not yet delinquent or the nonpayment of which would not have a Material
Adverse Effect on such party and except for those taxes the amount or
validity of which is currently being contested in a Good Faith Contest.
(l) ERISA. The execution and delivery of the Credit Documents and
the consummation of the transactions hereunder will not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of
the Code and no condition exists or event or transaction has occurred
in connection with any Plan maintained or contributed to by a Borrower,
NRG Morris Inc. or Morris Cogen or any ERISA Affiliate resulting from
the failure of any thereof to comply with ERISA insofar as ERISA
applies hereto which is reasonably likely to result in such party or
any ERISA Affiliate incurring any liability, fine or penalty which
individually or in the aggregate would have a Material Adverse Effect.
Prior to the Funding Date, the Borrowers have delivered to the Lender a
list of all Plans to which a Borrower, NRG Morris Inc. or Morris Cogen
or any ERISA Affiliate is a "party in interest" (within the meaning of
Section 2(14) of ERISA) or a "disqualified person" (within the meaning
of Section 4975(e)(2) of the Code).
(m) Margin Regulations. Neither Borrower is engaged in the business
of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation G, T, U, or X of the Board of
Governors of the Federal Reserve System) and no proceeds of any Loan
will be used in a manner which would violate or result in a violation
of, such Regulation, G, T, U, or X.
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(n) Investment Company Act. Neither Borrower is an "investment
company" nor a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(o) Security Interests. Except for the consents set forth on
Schedule 5(o), no consents are required to create a second priority perfected
security interest in the Collateral under and as that term is defined
in the Pledge Agreement, and the security interests created in favor of
the Lender under the Security Documents are valid and perfected, second
priority security interests (subject only to Permitted Liens) superior
and prior to the rights of all Persons (except those rights of the
holders of Permitted Liens), whether the property subject to the
security interests is now owned by the party granting such security
interest or is hereafter acquired. The Security Documents (including
Uniform Commercial Code financing statements) have been filed, recorded
and/or registered in each office and in each jurisdiction where
required to create and perfect the lien and security interest described
above. The chief executive office and chief place of business of
Funding and NRG Morris Inc. and the office in which the records
relating to the earnings and other receivables of each such party are
kept is located, as of the date hereof, at the locations set forth on
Schedule 5(o) for such party. Such locations are the sole offices or
places of business maintained by each such party as of the date hereof.
To the knowledge of the Borrowers, no such party has transacted any
business during the five year period prior to the date of this
Agreement under any name other than those set forth on Schedule 5(o).
(p) Business of Project Entities. None of Funding, NRG Morris Inc.
and Morris Cogen have engaged in any business other than the operation
of the Morris Cogen facilities nor is any such party a party to any
contract, operating lease, agreement or commitment which, either
individually, or in the aggregate is material to the operation of the
Morris Cogen project other than the Project Agreements applicable
thereto.
(q) Qualifying Cogeneration Facility Status. All necessary filings
have been made to establish and maintain "qualifying facility" status
under PURPA for the Morris Cogen project, provided that Morris Cogen
will promptly file a recertification certificate with the Federal
Energy Regulatory Commission. The Morris Cogen project is owned and
will be operated in the manner contemplated by the certificate
conferring upon it "qualifying facility" status.
(r) Title to and Sufficiency of Assets. Except as set forth on
Schedule 5(r)), each of the Borrowers, NRG Morris Inc. and Morris Cogen
has good, valid and sufficient title to (or a leasehold interest in)
its assets and properties. Each of the Borrowers, NRG Morris Inc. and
Morris Cogen has good, marketable, indefeasible and insurable title in
fee simple (or its equivalent under applicable law) to the real
property owned by it. None of
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the real property owned or leased by either Borrowers, NRG Morris Inc.
or Morris Cogen is located within any federal, state or municipal flood
plain. All leases necessary for the conduct of the business of each
Borrower, NRG Morris Inc. and Morris Cogen as presently conducted and
as proposed to be conducted are valid and subsisting and are in full
force and effect. Each of the Borrowers, NRG Morris Inc. and Morris
Cogen enjoy peaceful and undisturbed possession under all material
leases to which they are parties. The services to be performed, the
materials to be supplied and the easements, licenses and other rights
granted or to be granted to Funding, NRG Morris Inc. and Morris Cogen,
pursuant to the Project Agreements and Governmental Approvals
applicable thereto provide or will provide such party with all rights
and property interests required to enable such party to obtain all
services, materials or rights (including access) required for the
operation and maintenance of the Morris Cogen project, including such
party's full and prompt performance of its obligations, and full and
timely satisfaction of all conditions precedent to the performance by
others of their obligations under such Project Agreements and
Governmental Approvals.
(s) Labor Matters. There are no strikes or other material labor
disputes or grievances, charges or complaints with respect to any
employee or group of employees pending or, to the knowledge of the
Borrowers, threatened against Funding, NRG Morris Inc. or Morris Cogen.
(t) Transactions with Affiliates. Set forth on Schedule 5(t) is a
true, accurate and complete description of all transactions between
Funding, NRG Morris Inc. or Morris Cogen and any Affiliate of any such
party (other than the Lender or Power Operations, Inc. or any
subsidiary of Power Operations, Inc.) which required or which will
require in the case of Funding, NRG Morris Inc. or Morris Cogen the
payment by such party of an aggregate amount equal to or greater than
$100,000 during any twelve-month period.
(u) Environmental Matters and Claims.
(i) Each of NRG Morris Inc. and Morris Cogen is in compliance with
all applicable United States federal, state and local laws,
regulations, rules and orders relating to pollution prevention or
protection of the environment or exposure to Materials of Environ-
mental Concern (including, without limitation, ambient air, surface
water, ground water, navigable waters, waters of the contiguous
zone, ocean waters and international waters), including, without
limitation, laws, regulations, rules and orders ("Environmental
Laws") relating to (A) emissions, discharges, releases or
threatened releases of substances defined as
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"hazardous substances," "hazardous materials," "contaminants,"
"pollutants," "hazardous wastes" or "toxic substances" in (1) the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act,
42 U.S.C. 9601 et seq., (2) the Hazardous Materials Transportation
Act, 49 U.S.C. 1801 et seq., (3) the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., (4) the Federal Water Pollution
Control Act, as amended, 33 U.S.C. 1251 et seq., (5) the Clean Air
Act, 33 U.S.C. 7401 et seq., (6) the Toxic Substances Control Act, 15
U.S.C. 2601 et seq. or (7) the Safe Drinking Water Act, 42 U.S.C.
300f et seq. (collectively, "Materials of Environmental Concern"), or
(B) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern,
all except to the extent the failure to comply with Environmental Laws
could not reasonably be expected to have a Material Adverse Effect;
(ii) each of NRG Morris Inc. and Morris Cogen has all permits,
licenses, approvals , consents or other authorizations required under
applicable Environmental Laws ("Environmental Approvals") and is in
compliance with all Environmental Approvals required to operate its
respective business as then being conducted, all except to the extent
the failure to maintain or comply with an Environmental Approval could
not reasonably be expected to have a Material Adverse Effect;
(iii) none of NRG Morris Inc. or Morris Cogen has received any
notice of any claim, action, cause of action, investigation or demand
by any person, entity, enterprise or government, or any political
subdivision, intergovernmental body or agency, department or
instrumentality thereof, alleging potential liability for, or a
requirement to incur, material investigatory costs, cleanup costs,
response and/or remedial costs (whether incurred by governmental entity
or otherwise), natural resources damages, property damages, personal
injuries, attorneys' fees and expenses, or fines or penalties, in each
case arising out of, based on or resulting from (A) the presence, or
release or threat of release into the environment, of any Materials of
Environmental Concern at any location, whether or not owned by such
person, or (B) circumstances forming the basis of any violation, or
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alleged violation, of any Environmental Law or Environmental
Approval, and in each case which could reasonably be expected to have
Material Adverse Effect ("Environmental Claim") (other than
Environmental Claims that have been fully and finally adjudicated or
otherwise determined and all fines, penalties and other costs, if any,
payable by NRG Morris Inc. or Morris Cogen in respect thereof have
been paid in full or which are fully covered by insurance (including
permitted deductibles));
(iv) there are no circumstances that may prevent or interfere with
such compliance in the future, except to the extent the same could not
reasonably be expected to have a Material Adverse Effect;
(v) no Materials of Environmental Concern are currently located at,
in, or under or about or are being released from any of the properties
on which the Morris Cogen project is located (or any other property
with respect to which any of Funding, NRG Morris Inc. or Morris Cogen
has or may have liability either contractually or by operation of law)
in a manner which violates any applicable Environmental Law, or for
which cleanup or corrective action of any kind is required under any
applicable Environmental Law where such violation, cleanup or
corrective action could reasonably be expected to have a Material
Adverse Effect;
(vi) no notice of violation, Lien, complaint, suit, order or other
notice with respect to the environmental condition of any of the
properties on which the NRG Morris facility is located (or any other
property with respect to which either NRG Morris Inc. or Morris Cogen
has or may have liability either contractually or by operation of law)
is outstanding or, to either such Person's knowledge, threatened
against any such party which could reasonably be expected to result in
a Material Adverse Effect.
To the extent the representations and warranties in this Article 5
specifically relating to (i) NRG Morris Inc. or Morris Cogen,
including, without limitation those concerning the Project Agreements
of NRG Morris Inc. or Morris Cogen, or Environmental Approvals,
Environmental Claims or Environmental Laws specifically relating to NRG
Morris Inc. or Morris Cogen or (ii) the representations and warranties
concerning the assets and properties of NRG Morris Inc. and Morris
Cogen are untrue or
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incorrect on the Funding Date due to facts, circumstances, conditions
or events that exist on or occurred prior to the date hereof, the same
shall not be considered to be, and shall not be, a breach of
representation or warranty or of the Agreement.
ARTICLE 6
Covenants
The Borrowers hereby covenant and undertake with the Lender
that, from the date hereof and so long as any principal, interest or
other moneys are owing in respect of this Agreement, under the Note or
under any of the Security Documents:
SECTION 6.01. The Borrowers will, and will procure that NRG
Morris Inc. and Morris Cogen will:
(a) Performance of Credit Documents. Duly perform and observe, and
procure the observance and performance by all other parties thereto
(other than the Lender) of, the terms of the Credit Documents;
(b) Notice of Default, Etc. Promptly upon obtaining knowledge thereof
(and in any event within ten (10) days thereof), inform the Lender of
the occurrence of (i) any Event of Default or of any event which, with
the giving of notice or lapse of time, or both, would constitute an
Event of Default, (ii) any litigation or governmental proceeding
pending or threatened against it or against any Affiliate of a Borrower
which could reasonably be expected to have a Material Adverse Effect,
and (iii) any other event or condition which is reasonably likely to
have a Material Adverse Effect on its ability, or the ability of NRG
Morris Inc. to perform its obligations under the Credit Documents;
(c) Obtain Consents. Obtain every consent and do all other acts and
things which may from time to time be necessary or advisable for the
continued due performance of all obligations of each Borrower and NRG
Morris Inc. under the Credit Documents;
(d) Financial Information. At the expense of the Borrowers, deliver
to the Lender:
(i) as soon as available but not later than 105 days after the end of
each fiscal year of the Borrowers complete copies of the consolidated
financial reports of the Borrowers, all in reasonable detail, which
shall include at least the consolidated balance sheet of such entity
and its Subsidiaries as of the end of such year and
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the related consolidated statements of income and sources and uses
of funds for such year, which shall be audited reports prepared by an
accounting firm reasonably acceptable to the Lender;
(ii) as soon as available but not less than 60 days after the end
of each of the first three quarters of each fiscal year of the
Borrowers a quarterly interim consolidated balance sheet of the
Borrowers and their Subsidiaries and the related consolidated profit
and loss statements and sources and uses of funds, all in reasonable
detail, unaudited, but certified to be true and complete by the chief
financial officer of NRGG;
(iii) within 30 days of the filing thereof, copies of all
registration statements and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) and other material filings which either Borrower
shall have filed with the Securities and Exchange Commission or any
similar governmental authority;
(iv) promptly upon the mailing thereof to the shareholders of the
Borrowers, copies of all financial statements, reports, proxy
statements and other communications provided to the Borrowers'
shareholders; and
(v) such other statements (including, without limitation, monthly
consolidated statements of operating revenues and expenses), operating
logs for the Morris Cogen facilities, lists of assets and accounts,
budgets, forecasts, reports and other financial information with
respect to the business of the Borrowers as the Lender may from time to
time reasonably request, certified to be true and complete by the chief
financial officer of NRGG;
(e) Corporate Existence. Do or cause to be done, and procure that NRG
Morris Inc. and Morris Cogen shall do or cause to be done, all things
necessary to: (a) preserve and keep in full force and effect its
corporate or limited liability company existence; and (b) preserve and
keep in full force and effect all licenses, franchises, permits and
assets necessary to the conduct of its business, except, in the case of
clause (b) only, where the failure to do so could not reasonably be
expected to result in a Material Adverse Effect;
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(f) Books and Records. Keep, and cause NRG Morris Inc. and Morris
Cogen to keep, proper and accurate books of record and account in
accordance with GAAP;
(g) Taxes and Assessments. Pay and discharge, and cause NRG Morris
Inc. and Morris Cogen to pay and discharge, all material taxes,
assessments and governmental charges or levies imposed upon it or upon
its income or property prior to the date upon which penalties attach
thereto; provided, however, that it shall not be required to pay and
discharge, or cause to be paid and discharged, any such tax,
assessment, charge or levy so long as the legality thereof shall be
contested in good faith and by appropriate proceedings or other acts
and it shall set aside on its books adequate reserves with respect
thereto;
(h) Inspection. Allow, and cause NRG Morris Inc. and Morris Cogen to
allow, any representative or representatives designated by the Lender,
subject to applicable laws and regulations, to visit and inspect any of
its properties, and, on the reasonable request thereof, to examine (at
a location where normally kept) its books of account, records, reports
and other papers and to discuss its affairs, finances and accounts with
its officers, at reasonable times and upon reasonable prior notice;
(i) Compliance with Statutes, Etc. Do or cause to be done, and cause
NRG Morris Inc. and Morris Cogen to do and cause to be done, all things
necessary to comply in all material respects with all material laws,
and the rules and regulations thereunder, applicable to either
Borrower, NRG Morris Inc. or Morris Cogen, including, without
limitation, those laws, rules and regulations relating to employee
benefit plans and environmental matters;
(j) Environmental Matters. Promptly upon the occurrence of any of the
following conditions, provide to the Lender a certificate of an officer
thereof, specifying in detail the nature of such condition and its
proposed response or the response of its Affiliates:
(i) its receipt or the receipt by NRG Morris Inc. or Morris Cogen of
any written communication whatsoever that alleges that such person is
not in compliance with any applicable Environmental Law or
Environmental Approval, if such noncompliance could reasonably be
expected to have a Material Adverse Effect,
(ii) knowledge by it, or by NRG Morris Inc. or Morris Cogen that
there exists any Environmental Claim pending or threatened against any
such person, which could reasonably be expected to have a Material
Adverse Effect, or
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(iii) any release, emission, discharge or disposal of any Material
of Environmental Concern that could form the basis of any Environmental
Claim against it, NRG Morris Inc. or Morris Cogen under applicable
Environmental Law, if such Environmental Claim could reasonably be
expected to have a Material Adverse Effect. Upon the written request
by the Lender, it will submit to the Lender at reasonable intervals, a
report providing an update of the status of any issue or claim
identified in any notice or certificate required pursuant to this
subsection;
(k) ERISA. Forthwith upon learning of the occurrence of any material
liability of the Borrower, NRG Morris Inc. or Morris Cogen or any ERISA
Affiliate pursuant to ERISA in connection with the termination of any
Plan or withdrawal or partial withdrawal of any multi-employer plan (as
defined in ERISA) or of a failure to satisfy the minimum funding
standards of Section 412 of the Code or Part 3 of Title I of ERISA by
any Plan for which the Borrower, NRG Morris Inc. or Morris Cogen or any
ERISA Affiliate is plan administrator (as defined in ERISA), furnish or
cause to be furnished to the Lender written notice thereof;
(l) Maintenance of Properties, Etc. Preserve and maintain good and
marketable title to all of its properties and assets which are
necessary in the conduct of its business in good working order and
condition, ordinary wear and tear excepted, subject to no Liens other
than Permitted Liens;
(m) Distributions. Cause Morris Cogen to make all permissible
Distributions and cause all such Distributions to be paid by Funding
when funds are needed to reduce the Loan hereunder to the extent
required by Section 2.05(c).
(n) Performance of Project Agreements. Cause Morris Cogen to (i)
perform and observe all of its covenants and agreements contained in
the Governmental Approvals and any of the Project Agreements to which
it is a party, unless the failure to perform or observe such covenants
and agreements could not reasonably be expected to result in a Material
Adverse Effect, (ii) preserve, protect and defend its rights contained
in the Governmental Approvals and any of the Project Agreements to
which it is a party, unless the failure to preserve, protect or defend
such rights could not reasonably be expected to result in a Material
Adverse Effect and (iii) maintain in full force and effect each of the
Project Agreements to which it is a party and all contracts, permits
and Governmental Approvals relating thereto which are necessary for the
maintenance and operation of its facilities.
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(o) Operating Logs. Cause Morris Cogen at its sole cost and expense
to (i) maintain daily operating logs showing, among other things, the
electrical output of its facilities, (ii) keep maintenance and repair
reports in sufficient detail to indicate the nature and date of all
work done, (iii) maintain a current operating manual and complete set
of plans, accounting records and specifications reflecting all
alterations and (iv) maintain all other records, logs and other
materials required by the relevant Project Agreements or any
Governmental Approval;
(p) Maintenance of Insurance. Maintain or cause to be maintained with
insurance companies rated "A-" or better by Best's Insurance Guide and
Key Ratings or other insurance companies of recognized responsibility
reasonably satisfactory to the Lender, insurance in such amounts and
covering such risks as are usually carried by companies engaged in
similar businesses and owning similar properties in the same general
areas in which Morris Cogen operates, and in any event the insurance
coverages shall not be less than the insurance coverages set forth on
Schedule 5(i). The Borrowers shall, upon the request of the Lender,
promptly provide a schedule indicating the policies maintained by each
of the Borrowers, NRG Morris Inc. and Morris Cogen, coverage limits of
liability, effective dates of coverage, insurance carrier names and
policy numbers. Prior to the Funding Date, the Borrowers shall cause
the Lender to be named as an insured party in respect of the Morris
Cogen project, for the account of the Lender. Evidence of payment of
premiums for such insurance policies shall be delivered to the Lender
at least thirty (30) days prior to the expiration thereof and such
insurance policies shall be delivered to the Lender promptly upon its
request therefor;
(q) Use of Proceeds. Use the proceeds of the Loan only as set forth
in Section 2.02.
(r) Additional Documents; Filings and Recordings. Execute and deliver
from time to time as reasonably requested by the Lender, at the
Borrowers' expense, such other documents in connection with the rights
and remedies provided for by the Security Documents, as applicable,
which are necessary to consummate the transactions contemplated
therein. Each Borrower and NRG Morris Inc. shall, at its own expense,
take all reasonable actions that have been or shall be requested by the
Lender to establish, maintain, protect, perfect and continue the
perfection of the security interests of the Lender created by the
Security Documents including the execution of such instruments, and
providing such other information as may be required to enable the
Lender to effect any such action. Without limiting the generality of
the foregoing, each Borrower and NRG Morris Inc. shall execute or cause
to be executed and shall file or cause to be filed such financing
statements, continuation statements, fixture filings, assignments,
mortgages or deed of trust in all places necessary or advisable (in the
opinion of counsel for the
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Lender) to establish, maintain and perfect such security interests and
in all other places that the Lender shall reasonably request.
SECTION 6.02. Each Borrower will not, and will procure that
NRG Morris Inc. and Morris Cogen will not, without the prior written
consent of the Lender:
(a) Liens. Create, assume or permit to exist, any mortgage, pledge,
lien, charge, encumbrance or any security interest whatsoever upon any
Collateral or the assets of Funding, NRG Morris Inc. or Morris Cogen
except Permitted Liens;
(b) Capital Expenditures. Make any capital expenditures (excluding
ordinary or scheduled maintenance) in any calendar year, exceeding
$1,000,000 other than those contemplated by the Project Agreements
relating to the Morris Cogen facility;
(c) Indebtedness. Incur any Indebtedness except (i) Indebtedness
existing as of the Closing Date, or (ii) so long as no Event of Default
occurs and is continuing: (A) if non-recourse to the Borrowers,
Indebtedness of any Subsidiary of the Borrowers which is formed after
the Funding Date; (B) Indebtedness of Subsidiaries of the Borrowers of
up to $1,000,000 during each calendar year; (C) unsecured Indebtedness
of a Borrower, if subordinated, pursuant to a subordination agreement,
to the Borrower's obligations under the Credit Documents, the terms of
any such Indebtedness to be acceptable to the Lender; (D) Indebtedness
of any Subsidiary of the Borrowers (other than Funding and Morris
Cogen) if non-recourse to the Borrowers, under interest rate swap
agreements to hedge interest rate exposure for permitted non-recourse
financings; and (E) Indebtedness owing by NRGG under a certain Credit
Agreement expected to be arranged by MeesPierson Capital Corporation
(d) Change in Business. Materially change the nature of its business
or commence any business materially different from its current
business;
(e) Sale or Pledge of Shares. Sell, assign, transfer, pledge or
otherwise convey or dispose of any of the shares or direct or indirect
interest (including by way of spin-off, installment sale or otherwise)
of the capital stock of or other equity interests in Funding, NRG
Morris Inc. or Morris Cogen, other than in respect of Permitted Liens;
(f) Sale of Assets. Sell, or otherwise dispose of, the assets of
Morris Cogen or any other asset (including by way of spin-off,
installment sale or otherwise) which is substantial in relation to its
assets taken as a whole, except for sales and dispositions of obsolete,
worn or replaced property not used or useful in a Borrower's or any
Subsidiary's business;
(g) Changes in Offices or Names. Change the location of the chief
executive office of the Borrowers, NRG Morris Inc. or Morris Cogen, the
office of the
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chief place of business any such parties, the office of such parties in
which the records relating to the earnings or insurances of or relating
to Morris Cogen are kept unless the Lender shall have received thirty
(30) days prior written notice of such change;
(h) Consolidation and Merger. Consolidate with, or merge into, any
corporation or other entity, or merge any corporation or other entity
into either Borrower, NRG Morris Inc. or Morris Cogen;
(i) Limitation on Dividends. Directly or indirectly declare or pay
any dividend or make any Distribution on its capital stock or to
members, as the case may be; provided, however, that (A) Morris Cogen
shall make Distributions when permissible to Funding; and (B)
Distributions may be paid by Funding to NRGG and by NRGG to its
shareholders if; not less than thirty (30) days prior to the proposed
date of payment of such Distribution the Borrowers shall have delivered
to the Lender a certificate signed by the chief financial officer of
each Borrower stating that principal and interest outstanding on the
Loan does not exceed the Maximum Amount and is not reasonably projected
to exceed the Maximum Amount of the next two Interest Payment Dates and
that after giving effect to such proposed Distribution, no Default or
Event of Default would occur or reasonably be anticipated to occur
and/or be continuing. Distributions may be made to NRGG if the
Certificate contemplated by clause (B) above is delivered;
(j) Amendment, Termination, Etc. of Project Agreements. Terminate,
cancel or suspend, or permit or consent to any termination,
cancellation or suspension of, or enter into or consent to or permit
the assignment of the rights or obligations of any party to, any of the
Project Agreements or Governmental Approvals (other than assignment
thereof to the Collateral Agent). The Borrowers shall not permit
Funding, NRG Morris Inc. or Morris Cogen to, directly or indirectly,
amend, modify, supplement or waive, or permit or consent to the
amendment, modification, supplement or waiver of, any of the provisions
of, or give any consent under, any of the Project Agreements without
(i) first submitting to the Lender a copy of such proposed amendment,
modification, supplement, waiver or consent and (ii) if in the
reasonable judgment of the Lender, such proposed amendment,
modification, supplement, waiver or consent could reasonably be
expected to result in a Material Adverse Effect, the express prior
written consent of the Lender;
(k) Fiscal Year. Change its fiscal year;
(l) Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any Affiliate except for
(A) transactions contemplated by existing operations and maintenance
agreements and/or management agreements in respect of the Morris Cogen
facility; (B) transactions contemplated by the April 30, 1996
Management Services
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Agreement between NRGG and the Lender, and (C) other transactions in
the ordinary course of business and pursuant to the reasonable
requirements of business and upon fair and reasonable terms no less
favorable than would be obtained in an comparable arm's length
transaction with a Person not an Affiliate; and
(m) Investments. Make any Investments, other than Investments made by
NRGG when no Default or Event of Default exists hereunder.
ARTICLE 7
Defaults and Remedies
SECTION 7.01. Events of Default. An "Event of Default"
occurs if:
1. Borrowers default in any payment of interest of any other amount
(other than those specified in (2) below) with respect to the Loan when
the same becomes dues and payable and such default continues for a
period of 30 days;
2. Borrowers default in the payment of the principal of the Loan when
the same become due and payable on the Maturity Date, upon mandatory
prepayment, or otherwise; provided, however, that so long as Borrowers
comply with Section 2.05(c) hereof, no failure to make a scheduled
amortization payment pursuant to Section 2.05(b) shall constitute a
default.
3. Any representation or warranty made by a Borrower, herein, in the
Credit Documents, the Membership Interest Purchase Agreement, the
Assignment and Assumption Agreement or the NRGG Equity Guaranty fails
to be accurate or complete in any material respect or a Borrower fails
to comply with any of its respective agreements contained herein, the
Credit Documents (other than those referred to in (1) or (2) above),
the Membership Interest Purchase Agreement, the Equity Commitment
Agreement or the NRGG Equity Guaranty and such failure continues for 30
days after the notice specified below;
4. An event occurs which entitles the holders of Indebtedness
aggregating in excess of $2,000,000 of a Borrower or any Subsidiary of
a Borrower to accelerate such Indebtedness;
5. A Borrower or any Subsidiary of a Borrower pursuant to or within
the meaning of any Bankruptcy Law;
(a) commences a voluntary case;
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(b) consents to the entry of an order for relief against it in an
involuntary case;
(c) consents to the appointment of a custodian of it or for any
substantial part of its property; or
(d) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
6. A court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against a Borrower or any Subsidiary of a Borrower
in an involuntary case;
(b) appoints a custodian of a Borrower of any Subsidiary of a Borrower
or for any substantial part of its property; or
(c) orders the winding up or liquidation of a Borrower or any
Subsidiary of a Borrower;
or any similar relief is granted under any foreign laws and the
order or decree remains unstayed and in effect for 60 days;
7. Any judgment or decree for payment of money in excess of
$2,000,000 or its foreign currency equivalent at the time is entered
against a Borrower or any Subsidiary of a Borrower and is not
discharged and either (a) an enforcement proceeding has been commenced
by any creditor upon such judgment or decree of (b) there is a period
of 60 days following the entry of such judgment or decree during which
such judgment or decree is not discharged, waived or the execution
thereof stayed; or
8. This Agreement, any Credit Document, the Membership Interest
Purchase Agreement, the Equity Commitment Agreement or the NRGG Equity
Guaranty shall cease, for any reason, to be in full force and effect or
a Borrower or any Subsidiary of a Borrower shall so assert in writing.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body.
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A Default under clause (3) is not an Event of Default until
the Lender notifies a Borrower of the Default and the Borrowers do not
cure such Default within the time specified after receipt of such
notice. Such notice must specify the Default, demand that it be
remedied and state that such notice is a "Notice of Default".
SECTION 7.02. Acceleration. If an Event of Default (other
than an Event of Default specified in Section 7.01(5) or (6) with
respect to a Borrower) occurs and is continuing, the Lender by notice
to a Borrower may declare the principal of and accrued interest on the
Loan to be due and payable. Upon such a declaration, such principal
and interest shall be due and payable immediately. If an Event of
Default specified in Section 7.01(5) or (6) with respect to a Borrower
occurs, the principal of and interest on the Loans shall ipso facto
become and be immediately due and payable without any declaration or
other act on the part of the Lender. The Lender by notice to a
Borrower may rescind an acceleration and its consequences. No such
rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 7.03. Default and Remedies.
(a) If, following the Funding Date, and so long as there shall remain
outstanding any Indebtedness hereunder, an Event of Default occurs and
is continuing, the Lender shall have all of the remedies of a secured
party under the Uniform Commercial Code, including, without limitation,
the right, to notify Morris Cogen to pay directly to the Lender any
amount payable to either Borrower in respect of the Pledged Interests.
In addition to and not in derogation of any or all of the rights and
remedies granted hereunder to the Lender or otherwise available to the
Lender under applicable law, following the Funding Date and such an
Event of Default, so long as there shall remain any outstanding
Indebtedness hereunder, the Lender shall have the further right and
power, at its sole option, to sell, or otherwise dispose of, the
Collateral (other than Collateral consisting of cash), or any part
thereof, at any one or more public or private sales as permitted by
applicable law, and for that purpose the Lender may take immediate and
exclusive possession of such Collateral, or any part thereof, to the
extent capable of possession.
(b) To the fullest extent permitted by law, each Borrower irrevocably
and expressly waives any right to receive any notice of sale or notice
of any other disposition of all or any part of the Collateral that does
not consist of cash, except that to the extent a Borrower may be
entitled by applicable law to any notice of sale or other disposition
of such Collateral, each Borrower agrees that if such notice is mailed,
postage prepaid, to a Borrower at such Borrower's address hereinafter
specified not less than five (5) days before the time of the sale or
other disposition contemplated therein, such notice shall conclusively
be deemed commercially reasonable and shall fully satisfy any
requirement for giving of said notice. The Lender shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Lender may adjourn any public or
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private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at
the time and place which it was so adjourned.
(c) The proceeds realized upon any such disposition, after deduction
for the expenses of retaking, holding, preparing for sale, selling or
the like and reasonable attorneys' fees, legal expenses and costs
incurred by the Lender, shall be applied in accordance with Section
7.06.
(d) The remedies of the Lender hereunder are cumulative and the
exercise of any one or more of the remedies provided herein, or under
the Uniform Commercial Code, shall not be construed as a waiver of any
other rights or remedies of the Lender so long as any part of the
indebtedness evidenced by the Note remains unsatisfied or unperformed.
The making of this Agreement shall not waive or impair any other
security the Lender may have or hereafter acquire for the payment or
performance of the indebtedness evidenced by the Note, nor shall the
making of any such additional security waive or impair this Agreement;
but the Lender may resort to any security it may have in the order it
may be deemed proper.
SECTION 7.04. Other Remedies. If, following the Funding
Date, and so long as there shall remain outstanding any indebtedness
hereunder, an Event of Default occurs and is continuing, the Lender may
pursue any available remedy to collect the payment of principal of or
interest on the Note or to enforce the performance of any provision of
the Note or this Agreement. The Lender may maintain a proceeding even
if it does not possess the Note or does not produce it in the
proceeding. A delay or omission by the Lender 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. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 7.05. Waiver of Past Defaults. The Lender by notice
to Borrowers may waive an existing Default and its consequences. When
a Default is waived, it is deemed cured, but no such waiver shall
extend to any subsequent or other Default or impair any consequent
right.
SECTION 7.06. Priorities. If the Lender collects any money
or property pursuant to this Article 7, it shall pay out the money or
property in the following order:
FIRST: to itself in accordance with the priority set forth
in Section 2.09; and
SECOND: to the extent of any excess, to NRGG.
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SECTION 7.07. Undertaking for Costs. In any suit for the
enforcement of any right of remedy under this Agreement 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.
SECTION 7.08. Waiver of Stay or Extension Laws. The
Borrowers (to the extent permitted by applicable law) shall not at any
time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Agreement; and each Borrower (to
the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and shall not hinder, delay or
impede the execution of any power herein granted to the Lender, but
shall suffer and permit the execution of every such power as though no
such law had been enacted.
ARTICLE 8
Subordination; Waivers
SECTION 8.01. Subordination. The Indebtedness evidenced by
the Note is subordinate in certain respects to (a) the Secured
Obligations under and as that term is defined in the Pledge and
Security Agreement by Funding and NRG Morris Inc. in favor of the
Collateral Agent under and as that term is defined in the Construction
and Term Loan Agreement dated as of September 15, 1997 by and between
Morris Cogen, The Chase Manhattan Bank, as Collateral Agent and as
Agent Bank, and the other Banks party thereto, to the extent and in
the manner provided in that certain Subordination Agreement dated as of
December 10, 1997 by and between The Chase Manhattan Bank as Collateral
Agent and the Lender, and (b) the Indebtedness (the "MeesPierson
Obligations") under and as that term is defined in that certain Credit
Agreement expected to be entered into by and between NRGG, MeesPierson
Capital Corporation and the other Lenders party thereto (collectively
the "MeesPierson Lenders"), to the extent and in the manner provided
in that certain Subordination Agreement by and between those parties
and the Lender dated as of December 10, 1997. Each Borrower shall
cause all other Indebtedness incurred by it to be subordinated on terms
and conditions satisfactory to the Lender, to the prior payment in full
of the Note and that the subordination is for the benefit of and
enforceable by the holders of the Note. Each Borrower acknowledges and
agrees that the terms of the subordination agreements contemplated in
this paragraph define the relative rights of its creditors between such
creditors and in no way affect the obligations of the Borrowers to the
Lender.
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SECTION 8.02. Waiver of Contribution, Subrogation, Other Rights.
Each Borrower hereby agrees that, from the date of this Agreement until
the MeesPierson Obligations have each been indefeasibly paid in full,
or this Agreement has been earlier terminated, it will not exercise
any rights which it may have or acquire, at law or in equity, by way of
contribution, subrogation, indemnity or similar principles as a result
of payments made by either Borrower to the Lender hereunder. Each
Borrower expressly acknowledges that it will benefit directly from the
Loan hereunder and that the obligations hereunder are intended to be
direct obligations and not a guarantee or in the nature of a guarantee.
If, notwithstanding the express intention of the parties to the
contrary, all or any portion of the obligations of either Borrower
hereunder are deemed a guarantee or in the nature of a guarantee, then
each Borrower hereby agrees that, from the date of this Agreement until
the MeesPierson Obligations have each been indefeasibly paid in full,
or this Agreement has been earlier terminated it will not exercise any
suretyship and similar defenses and rights arising as a result of the
Loan hereunder. This Section 8.02 shall inure to the benefit of the
Lender and to the benefit of the MeesPierson Lenders.
ARTICLE 9
Miscellaneous
SECTION 9.01. Amendments and Waivers. Except as otherwise
expressly set forth in this Agreement, no Credit Document nor any terms
thereof may be amended, supplemented, waived or modified except in
writing signed by the Lender and the Borrowers.
SECTION 9.02. Notices. All notices, requests and demands to
or upon the respective parties hereto to be effective shall be in
writing (including by telecopy or telex, if one is listed), and, unless
otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or three Business Days after
being deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when sent, confirmation of receipt received, or, in
the case of telex notice, when sent, answer back received, address as
follows, or to such other address as may be hereafter notified by the
respective parties hereto and any further holders of the Note:
If to NRGG: NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, MN 55403
Attention: President and Chief Executive
Officer
Telephone: (612) 373-5300
Telecopier:(612) 373-5430
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With a copy to: Troutman Sanders
NationsBank Plaza, Suite 5200
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Attention: M. Stuart Sutherland
Telephone: (404) 885-3000
Telecopier:(404) 885-3900
If to NRGG Funding: NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, MN 55403
Attention: President and Chief Executive
Officer
Telephone: (612) 373-5300
Telecopier:(612) 373-5430
With a copy to: Troutman Sanders
NationsBank Plaza, Suite 5200
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Attention: M. Stuart Sutherland
Telephone: (404) 885-3000
Telecopier:(404) 885-3900
If to Lender: NRG Energy, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403
Attention: Treasurer
Telephone: (612) 373-5300
Telecopier:(612) 373-5430
With a copy to: NRG Energy, Inc.
Legal Department
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403
Attention: Vice President and General
Counsel
Telephone: (612) 373-5300
Telecopier (612) 373-5392
provided that any notice, request or demand to or upon the Lender
pursuant to Section 2.05 shall not be effective until received.
35
<PAGE>
SECTION 9.03. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Lender, any
right, remedy, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise
thereof or the exercise or any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
SECTION 9.04. Payment of Expenses and Taxes. The Borrowers
jointly and severally agree (a) to pay the Lender on the Funding Date a
fee in the amount of $100,000; (b) to pay the Lender on the Funding
Date and on each anniversary of the Funding Date the amount of $50,000
in respect of expenses incurred in connection with the development,
preparation and the execution and general administration of the Credit
Documents and in addition, to pay or reimburse the Lender for all its
reasonable costs and expenses incurred in connection with any
amendment, supplement or modification to the Credit Documents,
including the reasonable fees and disbursements of counsel to the
Lender, (c) to pay or reimburse the Lender for all its costs and
expenses incurred in connection with, and to pay, indemnify, and hold
the Lender harmless from and against, any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever
arising out of or in connection with the enforcement or preservation of
any rights under any Credit Document, including reasonable fees and
disbursements of counsel to the Lender incurred in connection with the
foregoing, (d) to pay, indemnify, and to hold the Lender harmless from
any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and
other similar taxes (other than withholding taxes), if any, which may
be payable or determined to be payable in connection with the execution
and delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or
any waiver or consent under or in respect of, any Credit Document and
any such other documents, and (e) to pay, indemnify, and hold the
Lender and its respective Affiliates, officers and directors harmless
from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including reasonable
fees and disbursements of counsel) which may be incurred by or asserted
against the Lender or such Affiliates, officers or directors arising
out of or in connection with any investigation, litigation or
proceeding related to this Agreement, the other Credit Documents, the
proceeds of the Loan and the transactions contemplated by or in respect
of such use of proceeds, or any of the other transactions contemplated
hereby, whether or not the Lender or such Affiliates, officers or
directors is a party thereto, including any of the foregoing relating
to the violation of, noncompliance with or liability under, any
environmental law or regulation applicable to the operations of a
Borrower or any Subsidiary of a Borrower or any of the facilities and
properties owned,
36
<PAGE>
leased or operated by a Borrower or any Subsidiary of a Borrower (all
the foregoing, collectively, the "Indemnified Liabilities"); provided
that the Borrowers shall have no obligation hereunder with respect to
indemnified liabilities of the Lender or any of its respective
Affiliates, officers and directors arising from (i) the gross
negligence or willful misconduct of the Lender or its directors or
officers or (ii) legal proceedings commenced against the Lender by any
security holder or creditor thereof arising out of and based upon
rights afforded any such security holder or creditor solely in its
capacity as such. The agreements in this Section 9.04 shall survive
repayment of the Note and all other documents payable hereunder.
SECTION 9.05. Successors and Assigns; Participations and
Assignments. This Agreement shall be binding upon and insure to the
benefit of the Borrowers, the Lender, all future holders of the Note
and the Loan, and their respective successors and assigns, except that
no party hereto may assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of the other
parties hereto.
SECTION 9.06. Counterparts. This Agreements may be executed
by one or more of the parties to this Agreement on any number of
separate counterparts and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
SECTION 9.07. Governing Law; No Third Party Rights. This
Agreement and the Note and the rights and obligations of the parties
under this Agreement and the Note shall be governed by, and construed
and interpreted in accordance with, the law of the State of Minnesota
and applicable laws of the United States of America. This Agreement is
solely for the benefit of the parties hereto and their respective
successors and assigns, and, except as expressly provided in Section
8.02, no other Person shall have any right, benefit, priority or
interest under, or because of the existence of, this Agreement.
SECTION 9.08. Submission to Jurisdiction; Waivers.
9
(a) Each party to this Agreement hereby irrevocably and
unconditionally;
(i) submits for itself and its property in any legal action or
proceedings relating to this Agreement or any of the other Credit
Documents, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of Minnesota, the courts of the United States of
America for Minnesota and appellate courts from any thereof;
37
<PAGE>
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address et forth in Section 9.02; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction.
(b) Each party hereto unconditionally waives trial by jury in any
legal action or proceeding referred to in paragraph (a) above and any
counterclaim therein.
SECTION 9.09. Interest. Each provision in this Agreement
and each other Credit Document is expressly limited so that in no event
whatsoever shall the amount paid, or otherwise agreed to be paid, by
the Borrowers for the use, forbearance or detention of the money to be
loaned under this Agreement or any other Credit Document or otherwise
(including any sums paid as required by any covenant or obligation
contained herein or in any other Credit Document which is for the use,
forbearance or detention of such money), exceed that amount of money
which would cause the effective rate of interest to exceed the highest
lawful rate permitted by applicable law (the "Highest Lawful Rate"),
and all amounts owed under this Agreement and each other Credit
Document shall be held to be subject to reduction to the effect that
such amounts so paid or agreed to be paid which are for the use,
forbearance or detention of money under this Agreement or such Credit
Document shall in no event exceed that amount of money which would
cause the effective rate of interest to exceed the Highest Lawful Rate.
Notwithstanding any provision in this Agreement or any other Credit
Document to the contrary, if the maturity of the Loan or the
obligations in respect of the other Credit Documents are accelerated
for any reason, or in the event of any prepayment of all or any portion
of the Loan or the obligations in respect of the other Credit Documents
by the Borrowers or in any other event, earned interest on the Loan and
such other obligations of the Borrowers may never exceed the Highest
Lawful Rate, and any unearned interests otherwise payable on the Loan
or the obligations in respect of the other Credit Documents that is in
excess of the Highest Lawful Rate shall be canceled automatically as
of the date of such acceleration or prepayment or other such event and
(if theretofore paid) shall, at the option of the holder
38
<PAGE>
of the Loan or such other obligations, be either refunded to the
Borrowers or credited on the principal of the Loan. In determining
whether or not the interest paid or payable, under any specific
contingency, exceeds the Highest Lawful Rate, the Borrowers and the
Lender shall, to the maximum extent permitted by applicable law,
amortize, prorate, allocate and spread, in equal parts during the
period of the actual term of this Agreement, all interest at any time
contracted for, charged, received or reserved in connection with this
Agreement.
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
NRG GENERATING (U.S.) INC.
/s/ Robert t. Sherman, Jr.
Robert T. Sherman, Jr.
President and Chief Executive Officer
NRGG FUNDING INC.
/s/ Robert t. Sherman, Jr.
Robert T. Sherman, Jr.
President and Chief Executive Officer
NRG ENERGY, INC.
David H. Peterson
David H. Peterson
Chairman, President and Chief Executive
Officer
40
<PAGE>
EXHIBIT A
December 10, 1997
NOTE
FOR VALUE RECEIVED, the undersigned, NRG GENERATING (U.S.)
INC., a Delaware corporation ("NRGG") and NRGG Funding Inc., a Delaware
corporation ("Funding"), hereby jointly, severally and unconditionally
promise to pay to the order of NRG ENERGY, INC., a Delaware
corporation, or registered assigns (the "Lender"), at the office of the
Lender at 1221 Nicollet Mall, Suite 700, Minneapolis, MN 55403 or by
wire transfer in accordance with such instructions as the Lender may
require, in lawful money of the United States of America and in
immediately available funds, the principal amount of up to $22,000,000
or, if less, the aggregate unpaid principal amount of the Loan made by
the Lender pursuant to Section 2.01 of the Loan Agreement referred to
below (in either case, to be paid together with any accrued interest
not required to be paid currently in cash), which sum shall be due and
payable in such amounts and on such dates as are set forth in the
Supplemental Loan Agreement, dated as of December 10, 1997among NRGG
and Funding (each a "Borrower" and collectively the "Borrowers") and
the Lender (the "Loan Agreement"; terms defined therein being used
herein as so defined). The undersigned further agrees to pay interest
at said office or to such account, in like money, from the date hereof
on the unpaid principal amount hereof from time to time outstanding at
the rates and on the dates specified in Section 2.06 of the Loan
Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or
otherwise, hereby waive diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder of this
Note of any of its rights hereunder in any particular instance shall
not constitute a waiver thereof in that of any subsequent instance.
This Note is the Note referred to in the Loan Agreement,
which Loan Agreement, among other things, contains provisions for the
acceleration of the maturity hereof upon the happening of certain
events, for optional and mandatory prepayment of the principal hereof
prior to the maturity hereof and for the amendment or waiver of certain
provisions of the Loan Agreement, all upon the terms and conditions
therein specified.
This Note shall be construed in accordance with and governed
by the laws of the State of Minnesota and any applicable laws of the
United States of America.
<PAGE>
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH
THE TERMS OF THE LOAN AGREEMENT. TRANSFERS OF THIS NOTE MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE LENDER PURSUANT TO THE TERMS
OF THE LOAN AGREEMENT.
THIS NOTE IS SUBJECT TO THE SUBORDINATION AGREEMENT, DATED AS
OF DECEMBER 10, 1997, AMONG NRGG, THE LENDER AND MEESPIERSON CAPITAL
CORPORATION UNDER WHICH THIS NOTE AND NRGG'S OBLIGATIONS HEREUNDER ARE,
SUBORDINATED IN THE MANNER SET FORTH THEREIN TO THE PRIOR PAYMENT OF
CERTAIN OBLIGATIONS TO THE HOLDERS OF SENIOR INDEBTEDNESS AS DEFINED
THEREIN.
THIS NOTE IS FURTHER SUJECT TO THE SUBORDINATION PROVISIONS
SET FORTH IN THE SUBORDINATION AGREEMENT, DATED AS OF DECEMBER 10,
1997, BETWEEN THE LENDER AND THE CHASE MANHATTAN BANK IN ITS CAPACITY
AS COLLATERAL AGENT. A COPY OF THAT SUBORDINATION AGREEMENT IS ON
FILE WITH NRGG, FUNDING AND NRG MORRIS INC. AND IS AVAILABLE FOR
INSPECTION AT THEIR RESPECTIVE OFFICES.
NRG GENERATING (U.S.) INC.
______________________________
Robert T. Sherman, Jr.
President and Chief Executive Officer
NRGG FUNDING INC.
______________________________
Robert T. Sherman, Jr.
President and Chief Executive Officer
2
<PAGE>
EXHIBIT B
AMORTIZATION SCHEDULE
Principal Reduction
Date Reduction Amount Maximum Amount
3/31/99 $927,190.45 $21,070,441.55
6/30/99 $950,370.21 $20,120,071.34
9/30/99 $974,129.47 $19,145,941.87
12/31/99 $998,482.70 $18,147,459.17
3/31/00 $1,226,559.77 $16,920,899.40
6/30/00 $1,257,223.77 $15,663,675.63
9/30/00 $1,288,654.36 $14,375,021.27
12/31/00 $1,320,870.72 $13,054,150.56
3/31/01 $666,826.74 $12,387,323.82
6/30/01 $683,497.40 $11,703,826.42
9/30/01 $700,584.84 $11,003,241.58
12/31/01 $718,099.46 $10,285,142.12
3/31/02 $623,366.45 $9,661,775.67
6/30/02 $638,950.61 $9,022,825.06
9/30/02 $654,924.37 $8,367,900.69
12/31/02 $671,297.48 $7,696,603.20
3/31/03 $570,433.67 $7,126,169.53
6/30/03 $584,694.51 $6,541,475.02
9/30/03 $599,311.87 $5,942,163.15
12/31/03 $614,294.67 $5,327,868.48
3/31/04 $626,391.54 $4,701,476.94
6/30/04 $642,051.33 $4,059,425.61
9/30/04 $658,102.61 $3,401,323.00
12/31/04 $3,401,323.00 $0.00
<PAGE>
Schedule 5(b)
Capitalization
NRG Generating (U.S.) Inc.
20,000,000 shares of $.01 par value preferred stock are authorized
None of these shares of preferred stock are issued or outstanding
50,000,000 shares of $.01 par value common stock are authorized
6,871,069 shares of $.01 par value common stock are issued
6,836,769 shares of $.01 par value common stock are outstanding
34,300 shares of $.01 par value common stock held as treasury stock
NRGG Funding Inc.
1000 shares of common stock without par value are authorized
1000 shares are issued and outstanding to NRG Generating (U.S.) Inc.
As of the date of the consummation of the transactions contemplated by
the Membership Interest Purchase Agreement:
NRG Morris Inc.
1,000 shares of common stock with $1.00 par value are authorized
1,000 shares are issued are issued and outstanding to NRGG Funding
Inc.
NRG (Morris) Cogen, LLC
Indeterminate number of membership interests
99% of such interests are owned by NRGG Funding Inc.
1% of such interests are owned by NRG Morris Inc.
<PAGE>
Schedule 5(f)
Litigation
NRG Generating (U.S.) Inc.
1. Stevens, et al. v. O'Brien Environmental Energy, Inc., et al.,
United States District Court for the Eastern District of Pennsylvania,
Civil Action No. 94-cv-4577, filed July 27, 1997.
This action was filed by certain purchaser's of NRG Generating
(U.S.) Inc.'s (the "Company") Class A Common Stock (the "Common Stock")
during the class period who allege various violations of the Federal
securities laws. The plaintiffs claim that certain material
misrepresentations and nondisclosures concerning the Company's
financial conditions and prospects allegedly caused the price of the
Common Stock to be artificially inflated during the class period.
Plaintiff's counsel has been engaging in discovery. Troutman
Sanders LLP entered an appearance on behalf of the Company. Motions to
dismiss by the director defendants remain pending.
2. Blackman and Frantz v. O'Brien, United States District Court,
Eastern District of Pennsylvania, Civil Action No. 94-CV-5686, filed
October 25, 1995.
This action was filed by purchasers of O'Brien debentures during
the class period. The plaintiffs object to treatment of the class
under the bankruptcy plan. This matter has been consolidate with the
Stevens class action case described in paragraph number 1 above.
Plaintiff's counsel has been engaging in discovery. Troutman Sanders
LLP entered an appearance on behalf of the Company. Motions to dismiss
by the director defendants remain pending.
3. Mazzaro Coal & Disposal, Inc. v. Robert O. Lampl, Esq., O'Brien
Energy Systems, Inc., and Manus Corporation, Court of Common Pleas of
Allegheny County, Pennsylvania, Civil action No. GD96-2005, filed
February 2, 1996.
This action arises out of a permanent consent decree in Manus
Corporation v. O'Brien Energy Services, Inc. and Mazzaro Coal &
Disposal, Inc., Court of Common Pleas of Allegheny County,
Pennsylvania, Civil Action No. GD94-5785 in which the parties agreed to
a certain payment schedule for the extraction of gas from a landfill
site. The decree contemplated an escrow/lockbox arrangement (the
"Arrangement") whereby the Company made payments to the escrow/lockbox
instead of to Manus for collection by the landfill owner, Mazzaro. The
Arrangement was not implemented due to O'Brien's
2
<PAGE>
bankruptcy; however, the Company advises that all payments due were
paid to Manus. The plaintiff and co-defendants are in agreement as to
this fact and the Company appears to be named simply as a party to the
prior consent decree. Plaintiff's counsel's staff reports that this
matter has been resolved, and the Company is awaiting confirmation of
the final order.
4. Stewart & Stevenson Operations, Inc. v. NRG Generating (U.S.)
Inc.; NRG Generating (Newark) Cogeneration Inc.; NRG Generating
(Parlin) Cogeneration Inc.; NRG Energy, Inc., Superior Court of New
Jersey, Middlesex County, No. L-5071-97
The suit alleges a claim based on contract and tort seeking to
recover for allegedly wrongful termination of the operations and
maintenance contracts of the Newark and Parlin facilities. Stewart &
Stevenson Operations, Inc.. ("SSOI") is seeking $300,000 in special
damages and an unspecified amount in general and punitive damages. NRG
Generating (U.S.) Inc. ("NRGG") has counterclaim for damages due to
permit violations and the Newark and Parlin facilities while SSOI was
the operator in those facilities.
5. In re: O'Brien Environmental Energy, Case No. 94-26723, U.S.
Bankruptcy Court
The confirmation plan in the O'Brien Environmental Energy, Inc.
bankruptcy was consummated on April 30, 1996. Subsequent to
consummation, the reorganized debtor and the unsecured creditors'
committee have been working to conclude certain matters still pending
before the bankruptcy court. Such matters include objections to claims
and the payment of professional fees. Presently, there are still a few
claims and objections which have to be litigated. In addition, several
orders of the bankruptcy court are under appeal including the order
confirming the reorganization plan and an order denying compensation to
the unsuccessful bidder at the January 1996 auction.
6. Juanita Tustin v. NRG Generating (U.S.) Inc., NRG Energy, Inc.,
and Michael J. Brady, Superior Court of New Jersey, Camden County,
Docket No. L-4283-97, filed on or about May 20, 1997.
Plaintiff alleges sexual harassment in violation of the New Jersey
Law Against Discrimination, intentional infliction of emotional
distress, negligent infliction of emotional distress, invasion of
privacy, negligent supervision, and negligent retention. Defendant
Michael J. Brady was Plaintiff's supervisor and is her alleged
harasser. An Answer was filed on behalf of NRG Generating (U.S.) Inc.
on or about July 18, 1997, and a Motion to Dismiss was filed on behalf
on NRG Energy, Inc. on that same date. The Motion to Dismiss was
denied, and NRG Energy, Inc. subsequently filed its answer in early
October.
7. Additional Potential Litigation
3
<PAGE>
NRG Generating (U.S.) Inc. has been contacted by a lawyer in
Philadelphia regarding a possible slip and fall claim from Patricia
McGinty, a former O'Brien employee, based upon an accident which
occurred in front of the former O'Brien headquarters in January 1996
while she was on her way to work.
8. Litigation Defended by Insurer
NRG Generating (U.S.) Inc. has other litigation that is being
defended by its insurer.
NRGG Funding Inc.
None.
NRG Morris Inc. and NRG (Morris) Cogen, LLC
To the Borrowers' knowledge, except as set forth on Schedule 4.5
to the Membership Interest Purchase Agreement, there is no pending
litigation against either NRG Morris Inc. or NRG (Morris) Cogen, LLC.
4
<PAGE>
Schedule 5(i)
Insurance
A list of NRG Generating (U.S.) Inc.'s material insurance policies is
attached.
NRGG Funding has no material insurance policies.
As wholly-owned subsidiaries of NRG Energy, Inc., NRG Morris Inc. and
NRG (Morris) Cogen, LLC have the following insurance policies:
1. Commercial General Liability for $1 million/$2 million is with
Federal Insurance Company;
2. Excess Liability for $25 million is with Associated Electric & Gas
Insurance Services Limited;
3. Auto is with Federal Insurance Company; and
4. Workers Compensation is with Lumberman's Underwriting Alliance.
5
<PAGE>
Schedule 5(o)
Security Interests
1. Required Consents
(a) Consent of The Chase Manhattan Bank and such other banks as
required by the Construction and Term Loan Agreement dated as
of September 15, 1997 among NRG (Morris) Cogen, LLC, the
Banks (as defined by that agreement), The Chase Manhattan
Bank, as Agent Bank and The Chase Manhattan Bank, as
Collateral Agent.
(b) Expiration or early termination of the applicable waiting
period under the Hart-Scott-Rodino Act, consent of The Chase
Manhattan Bank and such other banks as are necessary to
effectuate the arrangements contemplated in Sections 2.2(a)
through 2.2(d) of the Membership Interest Purchase Agreement,
completion of the arrangement contemplated in Section 2.2(b)
of the Membership Interest Purchase Agreement regarding the
ESA Obligations, and completion of the arrangement
contemplated in Section 2.2(d) of the Membership Purchase
Agreement regarding the Supplemental Loan Agreement.
(c) Execution of one or more Subordination Agreements in
connection with a certain Credit Agreement to be entered into
among NRGG, MeesPiersen Capital Corporation and the other
Lenders party thereto.
2. Principal Place of Business
(a) NRGG Funding Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403
(b) As of the date of the consummation of the transactions
contemplated by the Membership Interest Purchase Agreement:
NRG Morris Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403
3. Corporate and Trade Names
(a) NRGG Funding Inc.
None
6
<PAGE>
(b) NRG Morris Inc.
To the Borrowers' knowledge, NRG Morris Inc. has not
transacted any business during the five year period prior to
the date of this Agreement under any other name than NRG
Morris Inc.
7
<PAGE>
Schedule 5(r)
Assets
1. Exemptions to valid and sufficient title:
(a) Permitted Liens
(b) The option in favor of Millennium Petrochemicals Inc. under
the Energy Services Agreement between it and NRG (Morris)
Cogen, LLC dated June 6, 1997.
(c) Exceptions to valid and sufficient title on real property
leased or owned by the Borrowers include all encumbrances
listed on this schedule, all matters of public record as of
the date hereof, and all taxes for 1997 and subsequent years.
2. Other security interests in the collateral :
(a) Security Interests granted in connection with Permitted
Liens.
8
<PAGE>
Schedule 5(t)
Transactions
None.
9
<PAGE>
Exhibit 10.27.12
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT (this "Agreement"), dated as
of December 12, 1997, between NRG ENERGY, INC., a Delaware
corporation ("NRG Energy"), and THE CHASE MANHATTAN BANK as
Collateral Agent (as defined below) for the Secured Parties (as
defined below) under the Credit Agreement (as defined below).
RECITALS
WHEREAS, NRG (Morris) Cogen, LLC (the "Borrower")
entered into the Construction and Term Loan Agreement, dated as
of September 15, 1997 (the "Credit Agreement") with the banks
party thereto (the "Banks"), The Chase Manhattan Bank as agent
for the Banks (in such capacity, the "Agent Bank"), and The
Chase Manhattan Bank as collateral agent for the Banks (in such
capacity, the "Collateral Agent" and, together with the Banks
and the Agent Bank, the "Secured Parties"), pursuant to which
the Banks will make construction and term loans and extend
other credit to the Borrower for the purpose of financing the
cost of developing, constructing, starting-up and operating an
approximately 117 megawatt gas-fired cogeneration facility in
Morris, Illinois (the "Project");
WHEREAS, as conditions precedent to the Banks, the
Agent Bank and the Collateral Agent entering into the Credit
Agreement and the Banks extending credit to the Borrower
thereunder, (i) NRG Energy executed and delivered the Equity
Commitment Agreement, dated as of September 15, 1997 (the
"Equity Commitment Agreement"), in favor of the Borrower and
the Collateral Agent, pursuant to which NRG Energy agreed to
make equity contributions to the Borrower from time to time,
and (ii) NRG Energy executed and delivered the Pledge and
Security Agreement, dated as of September 15, 1997, in favor of
the Collateral Agent, pursuant to which NRG Energy granted a
security interest in its membership interests in the Borrower
(and related assets) to the Collateral Agent;
WHEREAS, pursuant to the Membership Interest Purchase
Agreement, dated as of the date hereof (the "Purchase
Agreement"), NRG Energy is transferring all of its equity
interests in the Borrower to NRGG Funding Inc. ("NRGG
Funding");
WHEREAS, in connection with the execution and
delivery of the Purchase Agreement, and as conditions precedent
to the Banks continuing to extend credit to the Borrower under
the Credit Agreement, (i) NRGG Funding is assuming all of NRG
Energy's obligations under the Equity Commitment Agreement
pursuant to an Assignment and Assumption Agreement, dated as of
the date hereof (the "Assignment Agreement"), between NRG
Energy and NRGG Funding, and (ii) NRGG Funding and NRG Morris
Inc. ("NRGMI") are executing and delivering a Pledge and
Security Agreement, dated as of the
<PAGE>
date hereof (the "Senior Pledge Agreement"), pursuant to which
NRGG Funding and NRGMI are granting a security interest in
their membership interests in the Borrower (and related assets)
to the Collateral Agent;
WHEREAS, pursuant to the Supplemental Loan Agreement,
dated as of the date hereof (the "NRGG Loan Agreement"),
between NRG Energy, NRGG Funding and NRG Generating (U.S.) Inc.
("NRG Generating"), NRG Energy is making a loan to NRGG Funding
to permit NRGG Funding to make its required equity contribution
under the Equity Commitment Agreement;
WHEREAS, to secure NRGG Funding's obligations under the NRGG
Loan Agreement, NRGG Funding and NRGMI are granting a security
interest in their membership interests in the Borrower (and
related assets) to NRG Energy pursuant to the Subordinated
Pledge and Security Agreement, dated as of the date hereof (the
"Subordinated Pledge Agreement"), between NRGG Funding, NRGMI
and NRG Energy;
WHEREAS, NRG Energy has agreed to subordinate its
claims under the NRGG Loan Agreement and the Subordinated
Pledge Agreement to the claims of the Secured Parties under the
Credit Agreement, the Senior Pledge Agreement and the other
Financing Documents with respect to the Shared Collateral (as
defined herein);
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. Defined Terms. (a) Capitalized terms used but
not defined herein shall have the meanings given to such terms
in the Credit Agreement.
(b) All terms defined in the foregoing Recitals
shall have the meanings given to such terms therein.
(c) The following terms shall have the following
meanings:
"NRGG Loan Note" shall mean the Note, dated December
10, 1997, executed by NRGG Funding and NRG Generating in favor
of NRG Energy evidencing the indebtedness incurred under the
NRGG Loan Agreement.
"Proceeding" shall mean any (a) insolvency,
bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding relating
to NRGG Funding or NRGMI, its property or its creditors as
such, (b) proceeding for any liquidation, dissolution or other
winding-up of NRGG Funding or NRGMI, voluntary or
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<PAGE>
involuntary, whether or not involving insolvency or bankruptcy
proceedings, (c) assignment for the benefit of creditors of
NRGG Funding or NRGMI or (d) other marshalling of the assets of
NRGG Funding or NRGMI, in each case, under the law of the
United States or any other jurisdiction.
"Senior Agreements" shall mean, collectively, the
Senior Pledge Agree ment, the other Financing Documents, all
Secured Interest Rate Protection Agreements and all other
agreements or instruments evidencing any Senior Claim.
"Senior Claims" shall mean all Secured Obligations
(as defined in the Senior Pledge Agreement).
"Shared Collateral" shall mean all collateral in
which (i) a security interest was granted or purported to be
granted to the Collateral Agent under the Senior Pledge
Agreement and (ii) a security interest was granted or purported
to be granted to NRG Energy under the Subordinated Pledge
Agreement.
"Subordinated Agreements" shall mean, collectively,
the NRGG Loan Agreement, the NRGG Loan Note, the Subordinated
Pledge Agreement and all other agreements or instruments
evidencing any Subordinated Claim.
"Subordinated Claims" shall mean all Secured
Obligations (as defined in the Subordinated Pledge Agreement).
2. Subordination Generally. (a) With respect to
the Shared Collateral, the Senior Claims shall be and at all
times remain senior, paramount and prior in right of payment
and enforcement to the Subordinated Claims and, notwithstanding
(i) any other agreement or instrument, (b) the actual time,
order or method of creation, attachment or perfection of the
respective Liens on and security interests in the Shared
Collateral granted to NRG Energy or the Collateral Agent, as
the case may be, (ii) the date or manner of the filing of
financing statements with respect thereto, (iii) the time or
order of taking possession of any Shared Collateral or (iv) the
giving or failure to give notice of the acquisition or expected
acquisition of purchase money or other security interests in
the Shared Collateral. Notwithstanding any provision of the
Uniform Commercial Code governing perfection thereof, or any
other applicable Law or decision, as between NRG Energy and the
Collateral Agent the Lien on and security interest in the
Shared Collateral held at any time by NRG Energy, and any other
rights NRG Energy may have with respect to the Shared
Collateral, shall be fully subject and subordinate to the
Collateral Agent's Lien on and security interest in the Shared
Collateral to the full extent of the Senior Claims and to all
of the rights of the Secured Parties in the Shared Collateral
with respect to the Senior Claims as set forth in the Credit
Agreement and the other Financing Documents and otherwise
available to the Secured Parties at law or in equity.
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<PAGE>
(b) In furtherance of the foregoing, NRG Energy
shall not take or cause to be taken any action, the purpose or
effect of which would give NRG Energy a preference or priority
over the Secured Parties with respect to any Shared Collateral.
In accordance with the terms of the Financing Documents, the
Secured Parties shall have the right (but not the obligation)
hereunder at all times and from time to time to apply all or
any part of the Shared Collateral, including the proceeds
thereof and all collections and remittances thereof (including,
without limitation, insurance proceeds), to the repayment of
Senior Claims and NRG Energy shall not have any right, as
against any of the Secured Parties or any other Person, to
receive all or any portion of the Shared Collateral until the
Senior Claims are indefeasibly paid and satisfied in full in
cash or cash equivalents and all Commitments have been
terminated.
3. Payments on Subordinated Claims. So long as no
Default or Event of Default shall have occurred and be
continuing or would occur as a result of such payments, a
holder of a Subordinated Claim may receive payments on such
Subordinated Claim with amounts received by the obligor on such
Subordinated Claim as Distributions from the Borrower.
4. Subordination in a Bankruptcy Proceeding. In
the event of any Proceeding:
(a) All Senior Claims shall first be
indefeasibly paid and satisfied in full in cash or cash
equivalents before any payment (including any payment which
may be payable to the holder of any Subordinated Claim by
reason of the subordination of any indebtedness or other
obligation to or guarantee of such Subordinated Claim) or
distribution, whether in cash, securities or other property,
shall be made to any holder of any Subordinated Claim on
account of such Subordinated Claim;
(b) Any payment (including any payment which
may be payable to the holder of any Subordinated Claim by
reason of the subordination of any indebtedness or other
obligation to or guarantee of such Subordinated Claim) or
distribution of any kind or character, whether in cash,
securities or other property which would otherwise (but for
this Agreement) be payable or deliverable in respect of any
Subordinated Claim shall be paid or delivered directly to the
holders of Senior Claims for application in payment of the
Senior Claims in accordance with the priorities then existing
among such holders until all Senior Claims have been
indefeasibly paid and satisfied in full in cash or cash
equivalents;
(c) The holders of Senior Claims shall be
authorized and empowered (but shall not be obligated) (i) to
demand, sue for, collect and receive any payment or
distribution made in respect of Subordinated Claims in such
Proceeding and give acquittance therefor, (ii) to file claims
and proofs of claims on behalf of holders of Subordinated
Claims in such Proceeding, (iii) to vote all amounts owing
with respect to the Subordinated Claims in their sole
discretion in connection with any resolution, ar-
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<PAGE>
rangement, plan of reorganization, compromise, settlement or
extension and to take all such other action (including,
without limitation, the right to participate in any
composition of creditors and the right to vote at creditors'
meetings for the election of trustees, acceptance of plans and
otherwise), in their own names or in the names of the holders
of Subordinated Claims or otherwise, as the holders of Senior
Claims may deem necessary or advisable for the enforcement of
this Agreement; and
(d) Each holder of Subordinated Claims shall
duly and promptly take such action as may be requested at any
time and from time to time by any of the holders of Senior
Claims to collect hereunder and to file appropriate proofs of
claim in respect thereof and to execute and deliver such
powers of attorney, assignments or other instruments as may be
requested by any of the holders of Senior Claims in order to
enable the holders of Senior Claims to enforce any and all
claims upon or in respect of the Subordinated Agreements and
to collect and receive any and all payments or distributions
which may be payable or deliverable at any time upon or in
respect of any Subordinated Claim.
5. Subordination Upon an Event of Default. Upon
the occurrence of a Default or an Event of Default, or any
event that constitutes a "default" or an "event of default"
under any Financing Document (other than in circumstances when
the provisions of Section 4 of this Agreement are applicable),
then, unless and until such Default, Event of Default or other
event, as the case may be, shall have been remedied or waived
or shall have ceased to exist, no direct or indirect payment
(in cash, property or securities or by set-off or otherwise),
including any payment to the holder of any Subordinated Claim
by reason of the subordination of any indebtedness or other
obligation to or any guarantee of such Subordinated Claim,
shall be made or agreed to be made on account of any
Subordinated Claim, or as a sinking fund for any Subordinated
Claim, or in respect of any redemption, retirement, purchase
or other acquisition of any Subordinated Claim.
6. Turnover of Improper Payments. If any payment
or distribution of any character, whether in cash, securities
or other property, or any security, shall be received by any
holder of any Subordinated Claim in contravention of any of
the terms hereof and before all Senior Claims have been
indefeasibly paid in full in cash or cash equivalents and all
Commitments have been terminated, such payment or distribution
or security shall be received in trust for the benefit of, and
shall forthwith be paid over or delivered and transferred to,
the holders of Senior Claims at the time outstanding in
accordance with the priorities then existing among such
holders for application to the payment of all Senior Claims
remaining unpaid, to the extent necessary to pay all such
Senior Claims in full. In the event of the failure of any
holder of any Subordinated Claim to endorse or assign any such
payment, distribution or security, each holder of any Senior
Claim is hereby irrevocably authorized to endorse or assign
the same.
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<PAGE>
7. Limitation on Actions. (a) Each holder of a
Subordinated Claim (or any instrument evidencing the same) by
acceptance thereof agrees and undertakes that, without the
prior written consent of the Collateral Agent (as directed by
the Agent Bank, acting in accordance with the Credit
Agreement), prior to the date on which all Senior Claims shall
have been indefeasibly paid in full in cash or cash
equivalents and all Commitments shall have been terminated:
(i) such holder will not take, obtain or hold
(or permit anyone acting on its behalf to take, obtain or
hold) any assets of NRGG Funding or NRGMI, whether as a
result of any administrative, legal or equitable action,
or otherwise, in violation of this Agreement;
(ii) such holder will not accelerate payment of
such Subordinated Claim or otherwise require such
Subordinated Claim to be paid prior to its stated or
scheduled maturity date;
(iii) such holder will not commence, prosecute
or participate in (A) any administrative, legal or
equitable action against NRGG Funding or NRGMI relating
to any Subordinated Claim, including, without limitation,
any Proceeding, (B) any other administrative, legal or
equitable action relating to any Subordinated Claim or
(C) any action to enforce or collect any judgment
obtained in respect of, or to enforce or exercise
remedies arising under or pursuant to any Lien or other
security interest securing, any Subordinated Claim; and
(iv) such holder shall not in any manner
foreclose upon, take possession of or attempt to realize
on any of the Shared Collateral.
(b) If any holder of a Subordinated Claim, in
violation of the provisions herein set forth, shall commence,
prosecute or participate in any suit, action, case or
Proceeding referred to in clause (a) above, NRGG Funding or
NRGMI, as the case may be, may interpose as a defense or plea
the provisions set forth herein, and any holder of any Senior
Claim may intervene and interpose such defense or plea in its
own name or in the name of NRGG Funding or NRGMI, as the case
may be, and shall, in any event, be entitled to restrain the
enforcement of the provisions of the Subordinated Claims in
its own name or in the name of NRGG Funding or NRGMI, as the
case may be, in the same suit, action, case or Proceeding or
in any independent suit, action, case or Proceeding.
8. Disposition or Release of Collateral. If at
any time or from time to time after the occurrence of an Event
of Default, the Shared Collateral, or any portion thereof, is
in any manner sold or otherwise transferred, each holder of a
Subordinated Claim shall be deemed to have given irrevocable
consent to such disposition if the Collateral Agent (as
directed by the Agent Bank, acting in accordance with the
Credit
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<PAGE>
Agreement) for any reason consents to such disposition, and in
any event no holder of a Subordinated Claim shall be entitled
to receive any proceeds (cash or non-cash) of such disposition
unless and until all of the Senior Claims have been
indefeasibly paid in full in cash or cash equivalents and all
Commitments have been terminated. In the event of such
disposition of all or any portion of the Shared Collateral,
each holder of a Subordinated Claim shall, without further
consideration, execute any and all instruments of release as
the Collateral Agent shall require, failing which the
Collateral Agent shall have the right to execute any such
release on behalf of and as attorney-in-fact for such holder,
which power of attorney shall be irrevocable.
9. Breach of Agreement. If NRG Energy or any
other holder of a Subordinated Claim breaches any of the
provisions of this Agreement, or if any payment is made on any
Subordinated Claim that is not permitted by the provisions of
this Agreement, the holders of Senior Claims shall have the
right to declare any or all of such Senior Claims due and
payable and pursue all of their rights and remedies under
applicable state or federal Law. Nothing herein contained,
however, is intended to compel NRG Energy or the Secured
Parties at any time to declare NRGG Funding, NRGMI or the
Borrower, as the case may be, to be in default under their
respective agreements with NRGG Funding, NRGMI or the
Borrower, as the case may be. All rights and remedies of NRG
Energy and the Secured Parties, respectively, with respect to
the Shared Collateral, the Borrower, NRGG Funding, or NRGMI
and any other obligor concerning the Senior Claims or the
Subordinated Claims, respectively, are cumulative and not
alternative.
10. No Prejudice or Impairment. (a) The rights
under these subordination provisions of the holders of any of
the Senior Claims as against the holders of any of the
Subordinated Claims shall remain in full force and effect
without regard to, and shall not be impaired or affected by:
(i) any act or failure to act on the part of
the Borrower, NRGG Funding or NRGMI;
(ii) any extension or indulgence in respect of
any payment or prepayment of any Senior Claim or any part
thereof or in respect of any other amount payable to any
holder of any Senior Claim;
(iii) any amendment, modification or waiver of,
or addition or supplement to, or deletion from, or
compromise, release, consent or other action in respect
of, any of the terms of any Senior Claim, any Senior
Agreement or any other agreement which may be made
relating to any Senior Claim;
(iv) any exercise or non-exercise by the holder
of any Senior Claim of any right, power, privilege or
remedy under or in respect of such Senior Claim, the
Senior Agreements or this Agreement or any waiver of any
such right,
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<PAGE>
power, privilege or remedy or of any default in respect
of such Senior Claim, the Senior Agreements or this
Agreement, or any receipt by the holder of any Senior
Claim of any security, or any failure by such holder to
perfect a security interest in, or any release by such
holder of, any security for the payment of such Senior
Claim;
(v) any merger or consolidation of the
Borrower, NRGG Funding or NRGMI or any of their
respective subsidiaries into or with any other Person, or
any sale, lease or transfer of any or all of the assets
of the Borrower, NRGG Funding or NRGMI or any of their
respective subsidiaries to any other Person;
(vi) absence of any notice to, or knowledge by,
any holder of any Subordinated Claim of the existence or
occurrence of any of the matters or events set forth in
the foregoing subdivisions (i) through (v); or
(vii) any other circumstance.
(b) Each holder of a Subordinated Claim
unconditionally waives (i) notice of any of the matters
referred to in clause (a) of this Section 10, (ii) all notices
which may be required, whether by statute, rule of law or
otherwise, to preserve intact any rights of any holder of any
Senior Claim against the Borrower, NRGG Funding or NRGMI,
including, without limitation, any demand, presentment and
protest, proof of notice of nonpayment under any Senior Claim
or the Senior Agreements, and notice of any failure on the
part of the Borrower, NRGG Funding or NRGMI to perform and
comply with any covenant, agreement, term or condition of the
Senior Claims or the Senior Agreements, (iii) any right to the
enforcement, assertion or exercise by any holder of any Senior
Claim of any right, power, privilege or remedy conferred in
such Senior Claim or the Senior Agreements, or otherwise, (iv)
any requirement of diligence on the part of any holder of any
Senior Claim, (v) any requirement on the part of any holder of
any Senior Claim to mitigate damages resulting from any
default under such Senior Claim or the Senior Agreements, and
(vi) any notice of any sale, transfer or other disposition of
any Senior Claim by any holder thereof.
(c) The obligations of the holders of
Subordinated Claims under this Agreement shall continue to be
effective, or be reinstated, as the case may be, if at any
time any payment in respect of any Senior Claim, or any other
payment to any holder of any Senior Claim in its capacity as
such, is rescinded or must otherwise be restored or returned
by the holder of such Senior Claim upon the occurrence of any
Proceeding, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar
official for, the Borrower, NRGG Funding, NRGMI or any
substantial part of their respective properties, or otherwise,
all of though such payment had not been made.
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11. Subrogation. No holder of any Subordinated
Claim shall have any subrogation or other rights as the holder
of a Senior Claim, and each holder of any Subordinated Claim
hereby waives all such rights of subrogation and all rights of
reimbursement or indemnity whatsoever and all rights of
recourse to any security for any Senior Claim, until such time
as all of the Senior Claims have been indefeasibly paid in
full in cash or cash equivalents and all Commitments have been
terminated.
12. Legend on Subordinated Claims. Each instrument
evidencing a Subordinated Claim including, without limitation,
the NRGG Loan Note, shall contain the following legend
conspicuously noted on the face thereof: "THIS [NAME OF
INSTRUMENT] IS SUBJECT TO THE SUBORDINATION PROVISIONS SET
FORTH IN THE SUBORDINATION AGREEMENT, DATED AS OF DECEMBER 10,
1997, BETWEEN NRG ENERGY, INC. AND THE CHASE MANHATTAN BANK IN
ITS CAPACITY AS COLLATERAL AGENT"; and shall specifically
state that a copy of this Agreement is on file with the
Borrower, NRGG Funding and NRGMI and is available for
inspection at their respective offices.
13. Notices. Except as otherwise expressly
provided herein, all notices, requests and demands to or upon
the respective parties hereto to be effective shall be in
writing (including by telecopy, telex or cable communication),
and shall be deemed to have been duly given or made when
delivered by hand, or upon actual receipt if deposited in the
United States mail, postage prepaid, or, in the case of telex
notice, when answerback is received, or, in the case of
telecopy notice, when confirmation is received, or, in the
case of a nationally recognized overnight courier service, one
Business Day after delivery to such courier service,
addressed, in the case of each party hereto, at its address
specified below, or to such other address as may be designated
by any party in a written notice to the other parties hereto;
provided that notices and communications to the Collateral
Agent shall not be effective until received by the Collateral
Agent:
If to NRG Energy:
NRG Energy, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445
Attention: President
Telephone: (612) 373-5400
Facsimile: (612) 373-5430
If to the Collateral Agent:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Annette M. Marsula, Assistant Vice President
Telephone: (212) 946-7557
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<PAGE>
Facsimile: (212) 946-8177/8178
14. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties hereto
and each of their respective successors and assigns; provided
that prior to any transfer by NRG Energy of any of its
interests under any Subordinated Agreement, whether now
existing or hereafter arising, the transferee of such
interests shall acknowledge this Agreement and agree, in
writing, to be bound by the terms and conditions hereof.
15. Third Party Beneficiaries. The agreements of
the parties hereto are intended to benefit the Banks and the
Agent Bank and their respective successors and assigns.
16. No Waiver; Remedies Cumulative. No failure to
exercise, and no delay in exercising, any right, power or
privilege under this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any
right, power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided
in this Agreement and in any agreement relating to any of the
Senior Claims and all other agreements, instruments and
documents referred to in any of the foregoing are cumulative
and shall not be exclusive of any rights or remedies provided
by law.
17. Severability. In case any provision contained
in or obligation under this Agreement shall be invalid,
illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired
thereby.
18. Governing Law; Submission to Jurisdiction and
Venue; Waiver of Jury Trial. (a) This Agreement is a contract
made under the Laws of the State of New York of the United
States and shall for all purposes be governed by and construed
in accordance with the Laws of such State without regard to
the conflict of Law rules thereof (other than Section 5-1401
of the New York General Obligations Law).
(b) Any legal action or proceeding against NRG
Energy with respect to this Agreement may be brought in the
courts of the State of New York in the County of New York or
of the United States for the Southern District of New York
and, by execution and delivery of this Agreement, NRG Energy
hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of
the aforesaid courts. NRG Energy agrees that a judgment,
after exhaustion of all available appeals, in any such action
or proceeding shall be conclusive and binding upon NRG Energy
and may be enforced in any other jurisdiction by a suit upon
such judgment, a certified copy of which shall be conclusive
evidence of the judgment. NRG Energy irre-
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<PAGE>
vocably consents for itself and its property to the service of
process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to NRG Energy
at its address referred to in Section 13, such service to
become effective thirty (30) days after such mailing. Nothing
herein shall affect the right of the Collateral Agent to serve
process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against NRG Energy in
any other jurisdiction.
(c) NRG Energy hereby irrevocably waives any
objection which it may now or hereafter have to the laying of
venue of any of the aforesaid actions or proceedings arising
out of or in connection with this Agreement brought in the
courts referred to in clause (b) above and hereby further
irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
(D) WITH REGARD TO THIS AGREEMENT, NRG ENERGY
AND THE COLLATERAL AGENT HEREBY WAIVE THE RIGHT TO A TRIAL BY
JURY.
19. Counterparts. This Agreement may be executed
in any number of counterparts and by the different parties
hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
20. Further Assurances. NRG Energy shall execute
and deliver to the Collateral Agent such further instruments,
agreements, certificates and documents as the Collateral Agent
shall reasonably request and shall take such further action as
the Collateral Agent may at any time or times reasonably
request in order to carry out the provisions or intent of this
Agreement.
21. Amendments. Neither this Agreement nor any
Subordinated Agreement shall be amended, waived, terminated or
modified without the prior written consent of the Collateral
Agent (as directed by the Agent Bank, acting in accordance
with the Credit Agreement).
22. Headings Descriptive. The headings of the
several Sections and subsections of this Agreement are
inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this
Agreement.
23. Entire Agreement. This Agreement, together
with any other agreement executed in connection herewith, is
intended by the parties as a final expression of their
agreement as to the matters covered hereby and is intended as
a complete and exclusive statement of the terms and conditions
thereof.
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IN WITNESS WHEREOF, the parties hereto have caused
this Subordination Agreement to be duly executed and delivered
by their officers thereunder duly authorized as of the date
first above written.
NRG ENERGY, INC.
By: David
H. Peterson
Name: David H. Peterson
Title: President & CEO
THE CHASE MANHATTAN BANK,
as Collateral Agent
By: Annette
M. Marsula
Name: Annette M. Marsula
Title: Assistant Vice President
<PAGE>
Exhibit 10.27.12
SUBORDINATED PLEDGE AND SECURITY AGREEMENT
dated as of December 10, 1997
among
NRGG FUNDING INC.,
as a Pledgor
NRG MORRIS INC.,
as a Pledgor
and
NRG ENERGY, INC.
<PAGE>
SUBORDINATED PLEDGE AND SECURITY AGREEMENT
This SUBORDINATED PLEDGE AND SECURITY AGREEMENT (this
"Agreement"), dated as of December 10, 1997, among NRGG
Funding Inc., a Delaware corporation ("NRGG Funding"), NRG
MORRIS INC., a Delaware corporation ("NRGMI", and NRG ENERGY,
INC., a Delaware corporation ("NRG Energy"). NRGG Funding
and NRGMI are sometimes referred to herein collectively as
the "Pledgors" and each individually as a "Pledgor."
W I T N E S S E T H :
WHEREAS, NRG Energy entered into an Equity Commitment Agreement
dated as of September 15, 1997 (the "Equity Commitment Agreement") for
the benefit of NRG (Morris) Cogen, LLC, a Delaware limited liability
company (the "Company") and The Chase Manhattan Bank, as collateral
agent (in such capacity, the "Collateral Agent") for the banks (the
"Banks") party to that certain Construction and Term Loan Agreement
dated as of September 15, 1997 (the "Credit Agreement"), by and between
the Company, the Banks, the Collateral Agent and The Chase Manhattan
Bank, as agent for the Banks (in such capacity, the "Agent");
WHEREAS, NRG Energy has agreed to sell, and NRGG Funding has
agreed to purchase, all of NRG Energy's beneficial interest in the
Company (the "Membership Interests"), pursuant to the terms of that
certain Membership Interest Purchase Agreement, dated as of December
10, 1997 (the "Purchase Agreement") by and between NRG Energy and NRGG
(such sale and purchase is hereinafter referred to as the
"Transaction");
WHEREAS, in connection with the Transaction, NRG Energy has
assigned, and NRGG Funding has assumed, all of the rights and
obligations of NRG Energy under the Equity Commitment Agreement,
pursuant to the terms of that certain Assignment and Assumption
Agreement dated as of December 10, 1997 (the "Assignment and Assumption
Agreement") by and between NRG Energy and NRGG Funding;
WHEREAS, NRG Energy has guaranteed, pursuant to that certain
Equity Commitment Guaranty (the "Equity Guaranty") in favor of The
Chase Manhattan Bank, in its capacity as Collateral Agent for the banks
party to the Credit Agreement, certain equity funding and related
obligations of NRGG Funding under the Equity Commitment Agreement
assumed by NRGG Funding pursuant to the Assignment and Assumption
Agreement;
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WHEREAS, NRGG has guaranteed the obligations of NRGG Funding
under the Equity Commitment Agreement for the benefit of NRG Energy,
pursuant to an Equity Commitment Guaranty dated as of December 10, 1997
(the "NRGG Equity Guaranty");
WHEREAS, NRGG and NRGG Funding have entered into a
Supplemental Loan Agreement, (as amended, supplemented or otherwise
modified from time to time, the "NRG Loan Agreement") with NRG Energy
pursuant to which NRG Energy shall commit to make loans to NRGG and
NRGG Funding to enable NRGG and NRGG Funding to meet their respective
obligations under the Equity Commitment Agreement and the NRGG Equity
Guaranty;
WHEREAS, upon execution and delivery of the Purchase
Agreement, the Pledgors together will own one hundred percent (100%) of
the membership interests in the Company (the "Membership Interests"),
and the Pledgors will benefit from the (i) loan under the NRG Loan
Agreement, as the proceeds thereof may be used to meet the equity
commitments of NRGG Funding to the Company and the Collateral Agent,
and (ii) the Equity Guaranty and the NRGG Equity Guaranty, as the
Collateral Agent and the Banks would not consent to the transfer of the
Membership Interests without delivery by NRG Energy of the Equity
Guaranty;
WHEREAS, it is a condition precedent to (i) NRG Energy's
execution of the Equity Guaranty and (ii) the funding of the Loan
under the NRG Loan Agreement that the Pledgors execute this
Subordinated Pledge and Security Agreement.
NOW, THEREFORE, in consideration of the foregoing premises
and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Pledgors hereby agree with NRG
Energy as follows:
ARTICLE 1
DEFINED TERMS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Credit Agreement shall have such defined meanings
when used herein.
(b) The following terms shall have the following respective
meanings:
"Agent" shall have the meaning ascribed thereto in the first
recital hereto.
"Agreement" shall have the meaning ascribed thereto in the
introduction paragraph hereto.
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"Assignment and Assumption Agreement" shall have the meaning
ascribed thereto in the third recital hereto.
"Bank Closing Date" shall have the meaning ascribed to the
term "Closing Date" in the Credit Agreement.
"Bank Pledge Agreement" shall mean the Pledge and Security
Agreement dated as of December 10, 1997 by and between NRGG Funding,
NRGMI and the Collateral Agent.
"Banks" shall have the meaning ascribed thereto in the first
recital hereto.
"Collateral Agent" shall have the meaning ascribed thereto in
the first recital hereto.
"Company" shall have the meaning ascribed thereto in the
first recital hereto.
"Contest" shall mean, with respect to any tax, Lien or claim,
a contest pursued in good faith and by appropriate proceedings
diligently conducted, so long as (i) adequate reserves have been
established with respect thereto in accordance with GAAP, (ii) any Lien
filed in connection therewith shall have been removed from the record
by the bonding of such Lien by a reputable surety company satisfactory
to NRG Energy, or security satisfactory to NRG Energy is otherwise
provided to assure the discharge of the obligation thereunder and of
any additional charge, penalty or expense arising from or incurred as a
result of such contest, (iii) if it becomes necessary to prevent the
delivery of a tax deed or other similar instrument conveying the
Pledged Collateral or any portion thereof because of non-payment of any
such tax, Lien or claim being contested, then the Pledgors shall pay
the same in sufficient time to prevent the delivery of such tax deed or
other similar instrument, (iv) the failure to pay any such tax, Lien or
claim during the pendency of such contest would not otherwise result in
a material adverse effect on the Person subject to any such tax, Lien
or claim and (v) the Person subject to any such tax, Lien or claim has
no knowledge of any actual or proposed additional deficiency or
additional assessment in connection therewith that is not provided for
in any of clauses (i) through (iv) of this definition.
"Credit Agreement" shall have the meaning ascribed thereto in
the first recital hereto.
"Expenses" shall have the meaning ascribed thereto in Section
6.15(a).
"Equity Commitment Agreement" shall have the meaning ascribed
thereto in the first recital hereto.
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"Financing Statement" shall mean all financing statements,
recordings, filings or other instruments of registration necessary and
appropriate to perfect a security interest or Lien by filing in any
appropriate filing or recording office in accordance with the Uniform
Commercial Code as enacted in any and all relevant jurisdictions or any
other relevant applicable Law.
"Indemnitee" shall have the meaning ascribed thereto in
Section 6.15(a).
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, mandatory deposit arrangement with any party owning
indebtedness of either Pledgor, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever, including, without limitation, any conditional sale or
other title retention agreement, any financing lease having
substantially the same effect as any of the foregoing and the filing of
any financing statement or similar instrument under the Uniform
Commercial Code or comparable law.
"LLC Agreement" shall mean the Amended and Restated Limited
Liability Company Agreement of NRG (Morris) Cogen, LLC, dated December
10, 1997, between the Pledgors, and all amendments, modifications and
supplements thereto and restatements thereof made in accordance with
Section 4.6.
"LLC Interests" shall have the meaning ascribed thereto in
Section 2.1(a)(i).
"Material Adverse Effect" shall mean a material adverse
effect on any of (i) the operations, business, financial condition or
property of NRGG Funding and its subsidiaries on a consolidated basis,
(ii) the ability of either Pledgor to perform in a timely manner its
material obligations under this Agreement or any other Transaction
Document to which it is a party, (iii) the rights and interests of NRG
Energy under the NRGG Equity Guaranty or the Credit Documents (as that
term is defined in the NRG Loan Agreement) or (iv) the value of the
Pledged Collateral or the validity or priority of the security
interests therein granted to NRG Energy.
"NRG Energy" shall have the meaning ascribed thereto in the
introductory paragraph hereto.
"NRG Loan Agreement" shall have the meaning ascribed thereto
in the fourth recital hereto.
"NRGG" shall mean NRG Generating (U.S.) Inc., a Delaware
corporation.
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"NRGG Equity Guaranty" shall have the meaning ascribed
thereto in the fifth recital hereto.
"NRGMI" shall have the meaning ascribed thereto in the
introductory paragraph hereto.
"Permitted Liens" shall mean:
(a) Liens granted to NRG Energy pursuant to this Agreement;
(b) Liens granted to the Collateral Agent;
(c) Liens (other than any Lien imposed by ERISA) in
connection with workmen's compensation, unemployment insurance or other
social security or pension obligations;
(d) Liens for taxes not yet delinquent or, if delinquent,
which are subject to a Contest; and
(e) Attachment or judgment Liens; provided that (i) the
existence of such Liens could not reasonably be expected to result in a
Material Adverse Effect and (ii) such Liens are discharged within
thirty (30) days of the creation thereof.
"Pledged Collateral" shall have the meaning ascribed thereto
in Section 2.1(a).
"Pledgor" and "Pledgors" shall have the meaning ascribed
thereto in the introductory paragraph hereto.
"Purchase Agreement shall have the meaning ascribed thereto
in the second recital hereto.
"Secured Obligations" shall mean (i) the obligations of NRGG
Funding and NRGG under the NRG Loan Agreement and the other Credit
Documents (as that term is defined in the NRG Loan Agreement), (ii) the
obligations of NRGG Funding to pay subrogation and related claims of
NRG Energy relating to and arising under the Equity Commitment
Agreement, as assumed by NRGG Funding pursuant to the Assignment and
Assumption Agreement, (iii) the obligations of NRGG under the Equity
Commitment Guaranty by NRGG in favor of NRG Energy of even date
herewith and (iv) the Pledgors' obligations hereunder.
"Securities Act" shall have the meaning ascribed thereto in
Section 5.2(b).
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"Transactions" shall have the meaning ascribed thereto in the
second recital hereto.
Section 1.2 Principles of Construction. Unless otherwise
expressly provided herein, the principles of construction set forth in
Section 1.4 of the Credit Agreement shall apply to this Agreement.
ARTICLE 2
PLEDGE
Section 2.1 Pledged Collateral. (a) As collateral security for
the prompt and complete payment and performance when due, whether at
stated maturity, by acceleration or otherwise (including the payment of
amounts which would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ? 362(a)),
of all of the Secured Obligations, whether now existing or hereafter
arising and howsoever evidenced, each Pledgor hereby pledges, grants,
assigns, hypothecates, transfers and delivers to NRG Energy a second
priority security interest in the following, whether now existing or
hereafter from time to time acquired (collectively, the "Pledged
Collateral"):
(i) all of such Pledgor's membership interests in the
Company (such Pledgor's "LLC Interests") and all of such Pledgor's
rights to acquire membership interests in the Company in addition
to or in exchange or substitution for such Pledgor's LLC
Interests;
(ii) all of such Pledgor's rights, privileges, authority
and powers as a member of the Company under the LLC Agreement;
(iii) all certificates or other documents (if any)
representing any and all of the foregoing in clauses (i) and (ii);
(iv) all dividends, distributions, cash, securities,
instruments and other property of any kind to which such Pledgor
may be entitled in its capacity as a member of the Company by way
of distribution, return of capital or otherwise;
(v) any other claim which such Pledgor now has or may in
the future acquire in its capacity as a member of the Company
against the Company and its property; and
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(vi) all proceeds, products and accessions of and to any
of the property described in the preceding clauses (i) through
(v).
(b) As used herein, the term "proceeds" shall be construed in its
broadest sense and shall include whatever is received or receivable
when any of the Pledged Collateral, or any proceeds thereof, is sold,
collected, exchanged or otherwise disposed of, whether voluntarily or
involuntarily, and shall include, without limitation, all rights to
payment, including interest and premiums, with respect to any of the
Pledged Collateral or any proceeds thereof.
Section 2.2 Distributions. At any time when an Event of Default
has occurred and is continuing or distributions are otherwise
restricted pursuant to the Loan Agreement, any and all
(i) distributions paid or payable in respect of any
Pledged Collateral (whether paid in cash, securities or other
property), and
(ii) property (whether cash, securities or other
property) paid, payable or otherwise distributed in redemption of,
or in exchange for, the property described in clause (i)
immediately above,
shall be, and shall be forthwith delivered to NRG Energy to hold as,
Pledged Collateral and shall be applied to reduce the Loan in
accordance with the Loan Agreement and shall, if received by either of
the Pledgors, be received in trust for the benefit of NRG Energy, be
segregated from the other property or funds of such Pledgor, and be
forthwith delivered to NRG Energy (to the extent and in the manner set
forth in the NRG Loan Agreement) as Pledged Collateral in the same form
as so received (with any necessary endorsement); provided, however,
that at all other times the Pledgors shall be entitled to receive and
retain any and all distributions paid in respect of the Pledged
Collateral in compliance with the terms of the Credit Agreement. All
cash and cash equivalents received by NRG Energy pursuant to the
preceding sentence shall be applied to the Secured Obligations as
provided in Section 5.4. All other property received by NRG Energy
pursuant to this Section 2.2 may be sold by NRG Energy and the proceeds
applied to the Secured Obligations, all as provided in Article V.
Section 2.3 Voting Rights. Unless an Event of Default shall have
occurred and be continuing, each Pledgor shall be entitled to exercise
all voting with respect to such Pledgor's LLC Interests; provided,
however, that no vote shall be cast, right exercised or other action
taken which could impair the Pledged Collateral or which would be
inconsistent with or result in any violation of any provision of this
Agreement or any other Credit Document. Upon the occurrence and during
the continuance of an Event of Default, all voting and other rights of
each Pledgor with respect to such Pledgor's LLC Interests
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which such Pledgor would otherwise be entitled to exercise pursuant to
the terms of this Agreement shall cease, and all such rights shall be
vested in NRG Energy which shall thereupon have the sole right to
exercise such rights.
Section 2.4 Secured Party Not Liable. Notwithstanding any other
provision contained in this Agreement, the Pledgors shall remain liable
under the LLC Agreement to observe and perform all of the conditions
and obligations to be observed and performed by the Pledgors
thereunder. Neither NRG Energy nor any of its directors, officers,
employees or agents shall have any obligations or liability under or
with respect to any Pledged Collateral by reason of or arising out of
this Agreement or the receipt by NRG Energy of any payment relating to
any Pledged Collateral, nor shall any of NRG Energy or any of its
directors, officers, employees or agents be obligated in any manner to
(a) perform any of the obligations of either Pledgor under or pursuant
to the LLC Agreement or any other agreement to which either Pledgor is
a party, (b) make any payment or to inquire as to the nature or
sufficiency of any payment or performance with respect to any Pledged
Collateral, (c) present or file any claim or collect the payment of any
amounts or take any action to enforce any performance with respect to
the Pledged Collateral or (d) take any other action whatsoever with
respect to the Pledged Collateral.
Section 2.5 Attorney-in-Fact. (a) Each Pledgor hereby appoints
NRG Energy, or any Person, officer or agent whom NRG Energy may
designate, as its true and lawful attorney-in-fact, with full
irrevocable power and authority in the place and stead of such Pledgor
and in the name of such Pledgor or in its own name, at such Pledgor's
cost and expense, from time to time in NRG Energy's reasonable
discretion to take any action and to execute any instrument which NRG
Energy may reasonably deem necessary or advisable to enforce its rights
under this Agreement, including, without limitation, authority to
receive, endorse and collect all instruments made payable to such
Pledgor representing any distribution, interest payment or other
payment in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; provided, however, that NRG Energy
will not exercise its powers under this Section 2.5 unless an Event of
Default has occurred and is continuing (except that NRG Energy may at
any time, in the name of either Pledgor or in its own name, prepare,
sign and file any Financing Statement for the purpose of perfecting the
security interest granted hereunder).
(b) Each Pledgor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof, in each case pursuant
to the powers granted hereunder. Each Pledgor hereby acknowledges and
agrees that in acting pursuant to the power-of-attorney granted in
clause (a) immediately above, NRG Energy shall be acting in its own
interest, and each Pledgor acknowledges and agrees that NRG Energy
shall have no fiduciary duties to such Pledgor and such Pledgor hereby
waives any claims or rights of a beneficiary of a fiduciary
relationship hereunder.
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Section 2.6 NRG Energy May Perform. If either Pledgor fails to
perform any agreement contained herein after receipt of a written
request to do so from NRG Energy, NRG Energy may itself perform, or
cause performance of, such agreement, and the reasonable expenses of
NRG Energy, including the reasonable fees and expenses of its counsel,
incurred in connection therewith shall be payable by such Pledgor under
Section 6.15; provided that if an Event of Bankruptcy shall have
occurred with respect to such Pledgor, the notice described in this
Section 2.5 shall not be required and shall be deemed to have been
delivered upon the failure of such Pledgor to perform such agreement.
Section 2.7 Reasonable Care. NRG Energy shall be deemed to have
exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is
accorded treatment substantially equivalent to that which NRG Energy
accords its own property of the type of which the Pledged Collateral
consists, it being understood that NRG Energy shall have no
responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters
relative to any Pledged Collateral, whether or not NRG Energy has or is
deemed to have knowledge of such matters, or (b) taking any necessary
steps to preserve rights against any parties with respect to any
Pledged Collateral.
Section 2.8 Security Interest Absolute. All rights of NRG Energy
and security interests hereunder, and all obligations of the Pledgors
hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any of the
Credit Documents or any other agreement or instrument relating
thereto (other than against NRG Energy);
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations, or
any other amendment or waiver of or any consent to any departure
from the Credit Documents or any other agreement or instrument
relating thereto;
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
any departure from any guaranty, for all or any of the Secured
Obligations; or
(d) any other circumstance (other than the indefeasible
payment in full of the Secured Obligations in cash or cash
equivalents and/or application of the purchase price of any or all
of the Pledged Collateral purchased by NRG Energy pursuant to
Section 5.3) which might otherwise constitute a defense available
to, or a discharge of, the Pledgors.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PLEDGORS
Each Pledgor represents and warrants as follows, which
representations and warranties shall survive the execution and delivery of
this Agreement and the making and repayment of the Secured Obligations;
provided that (i) prior to the effective date of this Agreement, such
representations and warranties shall be made by the Pledgors on a several
basis, and (ii) on and after the effective date of this Agreement, such
representations and warranties shall be made by the Pledgors on a joint
and several basis:
Section 3.1 Ownership of Pledged Collateral; Other Financing
Statements. Such Pledgor is the sole legal and beneficial owner of the
Pledged Collateral pledged by it hereunder free and clear of any Lien
other than the Lien created pursuant to this Agreement, other than the
Lien of the Collateral Agent under the Bank Pledge Agreement. No
security agreement, Financing Statement or other public notice with
respect to all or any part of the Pledged Collateral is on file or of
record in any public office, except such as may have been filed in
favor of NRG Energy pursuant to this Agreement or the Collateral Agent
pursuant to the Bank Pledge Agreement.
Section 3.2 Due Incorporation; Qualification. Such Pledgor is a
corporation duly organized and validly existing under the Laws of the
State of Delaware, and is qualified to own property and transact
business in every jurisdiction where the ownership of its property and
the nature of its business as currently conducted and as contemplated
to be conducted requires it to be qualified, except where the failure
to so qualify could not reasonably be expected to result in a Material
Adverse Effect.
Section 3.3 Authority; Authorization, Execution and Delivery;
Enforceability. Such Pledgor has full power, authority and legal right
to enter into this Agreement and to perform its obligations hereunder
and to pledge all of the Pledged Collateral pledged by it pursuant to
this Agreement. The pledge of such Pledged Collateral pursuant to this
Agreement has been duly authorized by such Pledgor. This Agreement has
been duly authorized, executed and delivered by such Pledgor and
constitutes a legal, valid and binding obligation of such Pledgor
enforceable against such Pledgor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or other similar Laws affecting creditors' rights generally
and except as enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity).
Section 3.4 Consents; Governmental Approvals. No consent of any
other party (including, without limitation, stockholders or creditors
of such Pledgor) and no Governmental Approval is required which has not
been obtained either (a) for the execution, delivery and performance by
such Pledgor of this Agreement, (b) for the pledge by such
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Pledgor of the Pledged Collateral pledged by it pursuant to this
Agreement, or (c) for the exercise by NRG Energy of the rights provided
for in this Agreement (except to the extent that a consent of another
party or a Governmental Approval may be required for NRG Energy to so
act) or the remedies in respect of the Pledged Collateral pursuant to
this Agreement.
Section 3.5 No Conflicts. The execution, delivery and
performance of this Agreement and each other Transaction Document to
which such Pledgor is a party will not (i) require any consent or
approval of the Board of Directors of such Pledgor which has not been
obtained, (ii) violate the provisions of such Pledgor's Certificate of
Incorporation or By-laws, (iii) violate the provisions of any Law
(including, without limitation, any usury Laws), regulation or order of
any Governmental Authority applicable to such Pledgor, (iv) result in a
breach of or constitute a default under any material agreement relating
to the management or affairs of such Pledgor, or any indenture or loan
or credit agreement or any other material agreement, lease or
instrument to which such Pledgor is a party or by which such Pledgor or
any of its material properties may be bound or (v) result in or create
any Lien (other than Permitted Liens) under, or require any consent
which has not been obtained under, any indenture or loan or credit
agreement or any other material agreement, instrument or document, or
the provisions of any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority binding upon such
Pledgor or the Company or any of their respective properties.
Section 3.6 Litigation. No Event of Bankruptcy has occurred with
respect to such Pledgor and there is no action, suit or proceeding at
Law or in equity or by or before any Governmental Authority, arbitral
tribunal or other body now pending against such Pledgor or, to the best
knowledge of such Pledgor, threatened against such Pledgor which
questions the validity or legality of or seeks damages in connection
with this Agreement or any other Transaction Document to which such
Pledgor is a party.
Section 3.7 Necessary Filings. Upon the filing with the
Minnesota Secretary of State of all necessary Financing Statements
executed by the Pledgors in favor of NRG Energy with respect to the
Pledged Collateral, all filings, registrations and recordings necessary
or appropriate to create, preserve, protect and perfect the security
interest granted by such Pledgor to NRG Energy hereby in respect of the
Pledged Collateral shall have been accomplished and the security
interest granted by such Pledgor to NRG Energy pursuant to this
Agreement in the Pledged Collateral constitutes a valid and enforceable
perfected security interest therein superior and prior to the rights of
all other Persons therein (other than the rights of the Collateral
Agent and the Banks pursuant to the Bank Pledge Agreement) and, in each
case, subject to no other Liens, sales, assignments, conveyances,
settings over or transfers, other than the Lien of the Collateral Agent
under the Bank Pledge Agreement.
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Section 3.8 Compliance with Laws. Such Pledgor has been in the
past and is in current compliance with all applicable Laws in respect
of the conduct of its business and the ownership of its property.
Section 3.9 No Defaults. Such Pledgor is not in default in the
performance, observance or fulfillment of any of the material
obligations, covenants or conditions applicable to such Pledgor
contained in any Transaction Document to which it is a party.
Section 3.10 Chief Executive Office. (a) The chief executive
office of NRGG Funding and the office where NRGG Funding keeps its
records concerning the Company and the Project and all contracts
relating thereto is located at:
1221 Nicollet Mall
Suite 610
Minneapolis, MN 55403
(b) The chief executive office of NRGMI and the office where NRGMI
keeps its records concerning the Company and the Project and all
contracts relating thereto is located at:
1221 Nicollet Mall
Suite 610
Minneapolis, MN 55403.
ARTICLE 4
COVENANTS OF THE PLEDGORS
Each Pledgor hereby covenants and agrees from and after the date
of this Agreement until the termination of this Agreement in accordance
with the provisions of Section 6.3:
Section 4.1 Transfer of Interests. (a) Such Pledgor shall not
sell or otherwise dispose of the Pledged Collateral or any interest
therein without the prior written consent of NRG Energy; provided,
however, that such Pledgor may, without the prior written consent of
NRG Energy, sell, together with any sale of LLC Interests made by the
other Pledgor pursuant to this proviso, less than or equal to ten
percent (10%) of the total LLC Interests to the Energy Purchaser within
one hundred twenty (120) days after the Bank Closing Date pursuant to
Section 19.5 of the Energy Services Agreement if (i) such sale does not
cause a Default or an Event of Default under the NRG Loan Agreement or
the Credit Agreement and (ii) such sale is consummated under
documentation that is
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acceptable in form and substance satisfactory to NRG Energy; provided
that no sale of LLC Interests shall be permitted under this clause (a)
unless NRGG Funding remains obligated under the Equity Commitment
Agreement, dated as of September 15, 1997, among NRG Energy, the
Borrower and the Collateral Agent, as assumed by NRGG Funding pursuant
to the Assignment and Assumption Agreement, and NRGG remains obligated
under the NRGG Equity Guaranty.
(b) If either Pledgor transfers all of its LLC Interests pursuant
to any transfer permitted under clause (a) of this Section 4.1, then
NRG Energy, upon the request and at the expense of such Pledgor, shall
execute and deliver all such documentation reasonably necessary to
release such Pledgor from the terms of this Agreement.
Section 4.2 No Other Liens. Such Pledgor shall not create, incur
or permit to exist, shall defend the Pledged Collateral against and
shall take such other action as is necessary to remove, any Lien or
claim on or to the Pledged Collateral (other than Permitted Liens), and
shall defend the right, title and interest of NRG Energy in and to any
of the Pledged Collateral against the claims and demands of all Persons
whomsoever (other that the Collateral Agent).
Section 4.3 Maintenance of Existence. Such Pledgor shall
preserve and maintain its legal existence as a corporation in good
standing under the laws of the State of Delaware; provided that NRGMI
shall be permitted to merge into NRGG Funding if, in connection with
such merger, NRGG Funding and NRGMI execute such documentation as is
reasonably necessary to continue the Lien of NRG Energy on the Pledged
Collateral.
Section 4.4 Compliance with Laws; Governmental Approvals. Such
Pledgor (i) shall comply with all Laws and (ii) shall obtain, maintain
and comply with all Governmental Approvals as shall now or hereafter be
necessary under applicable Law, rule or regulation, in each case in
connection with the making and performance by such Pledgor of any
material provision of the Transaction Documents to which it is a party,
except where the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.
Section 4.5 Payment of Taxes. Such Pledgor shall pay and
discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its property
prior to the date on which penalties attach thereto, and all lawful
claims which, if unpaid, could reasonably be expected to become a Lien
upon the Pledged Collateral, unless such matters are subject to a
Contest. Such Pledgor will promptly pay or cause to be paid any valid,
final judgment enforcing any such tax, assessment, charge, levy or
claim and cause the same to be satisfied of record.
Section 4.6 Amendment of LLC Agreement. Such Pledgor shall not,
without the prior written consent of NRG Energy, agree to or permit (a)
the cancellation or termina-
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tion of the LLC Agreement, except upon the expiration of the
stated term thereof or (b) any amendment, supplement, or modification
of, or waiver with respect to any of the provisions of, the LLC
Agreement (except with respect to (x) any sale of LLC Interests in
accordance with Section 4.1 or (y) with the prior written consent of
NRG Energy (which consent shall not be unreasonably withheld), any
amendment that could not reasonably be expected to have an adverse
effect on any of the rights of any of the Secured Parties under this
Agreement).
Section 4.7 Chief Executive Office. Such Pledgor shall not
establish a new location for its chief executive office or change its
name until (i) it has given to NRG Energy not less than thirty (30)
days prior written notice of its intention so to do, clearly describing
such new location or specifying such new name, as the case may be, and
(ii) with respect to such new location or such new name, as the case
may be, it shall have taken all action, satisfactory to NRG Energy, to
maintain the security interest of NRG Energy in the Pledged Collateral
intended to be granted hereby at all times fully perfected and in full
force and effect.
Section 4.8 Supplements; Further Assurances. Such Pledgor shall
at any time and from time to time, at the expense of such Pledgor,
promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that
NRG Energy may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to
enable NRG Energy to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral.
Section 4.9 Certificated Interests. If such Pledgor shall become
entitled to receive or shall receive any certificate, instrument,
option or rights, whether as an addition to, in substitution of or in
exchange for the Pledged Collateral or any part thereof, or otherwise,
such Pledgor shall accept any such certificate, instrument, option or
rights as NRG Energy's agent, shall hold them in trust for NRG Energy
and shall deliver them forthwith to NRG Energy in the exact form
received, with such Pledgor's endorsement when necessary or accompanied
by duly executed instruments of transfer or assignment in blank or, if
requested by NRG Energy, an additional pledge agreement or security
agreement executed and delivered by such Pledgor, all in form and
substance satisfactory to NRG Energy, to be held by NRG Energy, subject
to the terms hereof, as further collateral security for the Secured
Obligations.
Section 4.10 Records; Statements and Schedules. Such Pledgor
shall keep and maintain, at its own cost and expense, records of the
Pledged Collateral, including, but not limited to, records of all
payments received with respect thereto, and such Pledgor shall make the
same available to NRG Energy for inspection at such Pledgor's chief
executive office, at such Pledgor's own cost and expense, at any and
all times upon demand. Such Pledgor shall furnish to NRG Energy from
time to time statements and
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schedules further identifying and describing the Pledged Collateral and
such other reports in connection with the Pledged Collateral as NRG
Energy may reasonably request, all in reasonable detail.
Section 4.11 Improper Distributions. Notwithstanding any other
provision contained in this Agreement, such Pledgor shall not accept
any distributions, dividends or other payments (or any collateral in
lieu thereof) in respect of the Pledged Collateral, except to the
extent the same are expressly permitted by the terms of this Agreement
and the NRG Loan Agreement.
Section 4.12 Bankruptcy. Such Pledgor shall not authorize or
permit the Company to make a general assignment for the benefit of the
Company's creditors. Such Pledgor shall not commence or join with any
other Person (other than the Collateral Agent) in commencing any
proceeding against the Company under any bankruptcy, reorganization,
liquidation or insolvency law or statute now or hereafter in effect in
any jurisdiction.
ARTICLE 5
EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT
Section 5.1 Remedies Generally. If an Event of Default shall
have occurred and be continuing, NRG Energy may exercise, in addition
to all other rights and remedies granted in this Agreement and in any
other instrument or agreement securing, evidencing or relating to the
Secured Obligations, all rights and remedies of a secured party under
the Uniform Commercial Code in effect from time to time in any relevant
jurisdiction and all other rights and remedies available at Law or in
equity.
Section 5.2 Sale of Pledged Collateral. (a) Without limiting the
generality of Section 5.1, NRG Energy may, without notice except as
specified below, sell the Pledged Collateral or any part thereof in one
or more parcels at public or private sale or at any of NRG Energy's
offices or elsewhere, for cash, on credit or for future delivery, and
at such price or prices and upon such other terms as NRG Energy may
reasonably deem commercially reasonable, irrespective of the impact of
any such sales on the market price of the Pledged Collateral at any
such sale. Each purchaser at any such sale shall hold the property
sold absolutely, free from any claim or right on the part of the
Pledgors, and the Pledgors hereby waive (to the extent permitted by
Law) all rights of redemption, stay and/or appraisal which they now
have or may at any time in the future have under any rule of Law or
statute now existing or hereafter enacted. The Pledgors agree that, to
the extent notice of sale shall be required by Law, ten (10) days' or
more notice to the Pledgors of the time and place of any public sale or
the time after which any private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be
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obligated to make any sale of Pledged Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Assuming that such
sales are made in compliance with federal and state securities Laws,
NRG Energy shall incur no liability as a result of the sale of the
Pledged Collateral, or any part thereof, at any public or private sale.
The Pledgors hereby waive any claims against NRG Energy arising by
reason of the fact that the price at which any Pledged Collateral may
have been sold at such a private sale, if commercially reasonable, was
less than the price which might have been obtained at a public sale,
even if NRG Energy accepts the first offer received and does not offer
such Pledged Collateral to more than one offeree.
(b) The Pledgors recognize that NRG Energy may elect to sell all
or a part of the Pledged Collateral to one or more purchasers in
privately negotiated transactions in which the purchasers will be
obligated to agree, among other things, to acquire the Pledged
Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. The Pledgors acknowledge that any
such private sales may be at prices and on terms less favorable than
those obtainable through a public sale (including, without limitation,
a public offering made pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Securities Act")), and the
Pledgors and NRG Energy agree that such private sales shall be made in
a commercially reasonable manner and that NRG Energy has no obligation
to engage in public sales and no obligation to delay sale of any
Pledged Collateral to permit the issuer thereof to register the Pledged
Collateral for a form of public sale requiring registration under the
Securities Act.
Section 5.3 Purchase of Pledged Collateral. NRG Energy may be a
purchaser of the Pledged Collateral or any part thereof or any right or
interest therein at any sale thereof, whether pursuant to foreclosure,
power of sale or otherwise hereunder and NRG Energy may apply the
purchase price to the payment of the Secured Obligations. Any
purchaser of all or any part of the Pledged Collateral shall, upon any
such purchase, acquire good title to the Pledged Collateral so
purchased, free of the security interests created by this Agreement.
Section 5.4 Application of Proceeds. NRG Energy shall apply any
proceeds from time to time held by it and the net proceeds of any
collection, recovery, receipt, appropriation, realization or sale with
respect to the Pledged Collateral in accordance with the relevant
provisions of the Credit Agreement. For avoidance of doubt, it is
understood that the NRGG shall remain liable to the extent of any
deficiency between the amount of proceeds of the Pledged Collateral and
the aggregated amount of the Secured Obligations.
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Section 5.5 Expenses. The Pledgors shall upon demand pay to NRG
Energy the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and
agents, and any transfer taxes, in each case payable upon sale of the
Pledged Collateral, which NRG Energy may incur in connection with (a)
the custody or preservation of, or the sale of, collection from or
other realization upon, any of the Pledged Collateral pursuant to the
exercise or enforcement of any of the rights of NRG Energy hereunder or
(b) the failure by the Pledgors to perform or observe any of the
provisions hereof, together with interest thereon from the date of
demand at the rate per annum equal to the Base Rate plus the Applicable
Margin plus two percent (2%). Any amount payable by the Pledgors
pursuant to this Section 5.5 shall be payable on demand and shall
constitute Secured Obligations secured hereby.
ARTICLE 6
MISCELLANEOUS PROVISIONS
Section 6.1 Notices. Except as otherwise expressly provided
herein, all notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by
telecopy), and shall be deemed to have been duly given or made when
delivered by hand, or upon actual receipt if deposited in the United
States mail, postage prepaid, or, in the case of telecopy notice, when
confirmation is received, or, in the case of a nationally recognized
overnight courier service, one Business Day after delivery to such
courier service, addressed, in the case of each party hereto, at its
address specified below its signature hereto or to such other address
as may be designated by any party in a written notice to the other
parties hereto; provided that notices and communications to NRG Energy
shall not be effective until received by NRG Energy.
Section 6.2 Continuing Security Interest. This Agreement shall
create a continuing security interest in the Pledged Collateral until
the release thereof pursuant to Section 6.3.
Section 6.3 Release. Upon (a) termination of the Equity
Commitment Guaranty and (b) the indefeasible payment in full of the
Secured Obligations in cash or cash equivalents and termination of NRG
Energy's commitments under the NRG Loan Agreement, NRG Energy's
security interest hereunder shall be deemed automatically to be and to
have been extinguished and NRG Energy, upon the request of the
Pledgors, shall execute and deliver all such documentation necessary to
release, and to evidence the release of, the security interest created
pursuant to this Agreement.
Section 6.4 Reinstatement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any
amount received by NRG Energy hereunder or pursuant hereto is rescinded
or must otherwise be restored or returned by NRG
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Energy, upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of either of the Pledgors or upon the appointment of any
intervenor or conservator of, or trustee or similar official for,
either of the Pledgors or any substantial part of either of the
Pledgors' assets, or upon the entry of an order by any court avoiding
the payment of such amount, or otherwise, all as though such payments
had not been made.
Section 6.5 Independent Security. The security provided for in
this Agreement shall be in addition to and shall be independent of
every other security which NRG Energy may at any time hold for any of
the Secured Obligations hereby secured. The execution of any other
security agreement or other document by a Pledgor or any other party
shall not modify or supersede the security interest or any rights or
obligations contained in this Agreement and shall not in any way
affect, impair or invalidate the effectiveness and validity of this
Agreement or any term or condition hereof. The Pledgors hereby waive
their rights to plead or claim in any court that the execution of any
other security agreement or other document is a cause for
extinguishing, invalidating, impairing or modifying the effectiveness
and validity of this Agreement or any term or condition contained
herein. NRG Energy shall be at liberty to accept further security from
the Pledgors or from any third party and/or release such security
without notifying the Pledgors and without affecting in any way the
obligations of the Pledgors hereunder, under the other Credit
Documents, under the Equity Commitment Agreement or under the NRGG
Equity Guaranty. NRG Energy shall determine, in its sole discretion,
if any security conferred upon NRG Energy hereunder or otherwise shall
be enforced by NRG Energy, as well as the sequence of security
interests to be so enforced.
Section 6.6 Amendments. No waiver, amendment, modification or
termination of any provision of this Agreement, or consent to any
departure by the Pledgors therefrom, shall in any event be effective
without the prior written consent of NRG Energy and none of the Pledged
Collateral shall be released without the written consent of NRG Energy,
except as provided in Section 6.3. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose
for which given.
Section 6.7 Successors and Assigns. This Agreement shall be
binding upon the Pledgors and their respective successors and assigns
and shall inure to the benefit of NRG Energy and its successors and
assigns. Subject to Section 4.1 hereof, the Pledgors may not assign or
otherwise transfer any of their respective rights or obligations under
this Agreement without the written consent of NRG Energy.
Section 6.8 Survival. All agreements, statements,
representations and warranties made by the Pledgors herein or in any
certificate or other instrument delivered by the Pledgors or on their
behalf under this Agreement shall be considered to have been relied
upon by NRG Energy and shall survive the execution and delivery of this
Agreement and the other Credit Documents until termination thereof or
the indefeasible payment in full
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in cash or cash equivalents of all of the Secured Obligations
regardless of any investigation made by NRG Energy or made on its
behalf.
Section 6.9 No Waiver; Remedies Cumulative. No failure or delay
on the part of NRG Energy in exercising any right, power or privilege
hereunder and no course of dealing between the Pledgors and NRG Energy
shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or
remedies which NRG Energy would otherwise have.
Section 6.10 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
Section 6.11 Headings Descriptive. The headings of the several
Sections and subsections of this Agreement are inserted for convenience
only and shall not in any way affect the meaning or construction of any
provision of this Agreement.
Section 6.12 Severability. In case any provision contained in or
obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way
be affected or impaired thereby.
Section 6.13 Governing Law; Submission to Jurisdiction and Venue;
Waiver of Jury Trial.
(a) This Agreement is a contract made under the Laws of the State
of Minnesota of the United States and shall for all purposes be
governed by and construed in accordance with the laws of such State
without regard to the conflict of law rules thereof.
(b) Each party to this Agreement hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement,
any of the other Credit Documents, the Equity
Commitment Agreement and the NRGG Equity Guaranty,
or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of
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Minnesota, the courts of the United States of
America for Minnesota and appellate courts from any
thereof;
(ii) consents that any such action or proceeding may be
brought in such courts, and waives any objection
that it may now or hereafter have to the venue of
any such action or proceeding in any such court or
that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim
the same;
(iii)agrees that service of process in any such action
or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any
substantially similar form of mail), postage
prepaid, to such party at its address set forth
below its signature hereto;
(iv) agrees that nothing herein shall affect the right
to effect service of process in any other manner
permitted by law or shall limit the right to sue in
any other jurisdiction.
(c) The Pledgors hereby irrevocably waive any objection which
they may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Agreement, any other Credit Document, the Equity Commitment
Agreement and the NRGG Equity Guaranty brought in the courts referred
to in clause (b) above and hereby further irrevocably waive and agree
not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an
inconvenient forum.
(d) WITH REGARD TO THIS AGREEMENT, THE PLEDGORS AND NRG ENERGY
HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY.
Section 6.14 Entire Agreement. This Agreement, together with any
other agreement executed in connection herewith, is intended by the
parties as a final expression of their agreement as to the matters
covered hereby and is intended as a complete and exclusive statement of
the terms and conditions thereof.
Section 6.15 Indemnity. (a) Each Pledgor agrees to indemnify,
reimburse and hold NRG Energy and its officers, directors, employees,
and agents (each individually, an "Indemnitee," and collectively,
"Indemnitees") harmless from any and all liabilities, obligations,
damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all costs and expenses (including reasonable
attorneys' fees and disbursements) (such expenses, for purposes of this
Section 6.15, hereinafter "Expenses") of whatsoever
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kind and nature imposed on, asserted against or incurred by any of the
Indemnitees in any way relating to this Agreement or the Pledged
Collateral and arising out of (i) this Agreement or the documents
executed in connection herewith or in any other way connected with the
administration of the transactions contemplated hereby, or the
enforcement of any of the terms hereof, or the preservation of any
rights hereunder, (ii) the ownership, purchase, delivery, control,
acceptance, financing, possession, condition, sale, return or other
disposition, or use of, the Pledged Collateral (including, without
limitation, latent or other defects, whether or not discoverable),
(iii) the violation of any laws, (iv) any tort (including, without
limitation, claims arising or imposed under the doctrine of strict
liability, or for or on account of injury to or the death of any Person
including any Indemnitee) or property damage, or (v) any contract
claim, excluding in all cases those Expenses, claims and liabilities
finally judicially determined to have arisen solely from the gross
negligence or willful misconduct of any Indemnitee. Each Indemnitee
agrees to use its best efforts to promptly notify such Pledgor of any
assertion of any such liability, damage, injury, penalty, claim,
demand, action, judgment or suit of which such Indemnitee has
knowledge. In case any action, suit or proceeding shall be brought
against any Indemnitee for which the Indemnitee is indemnified under
this clause (a), such Indemnitee shall notify the relevant Pledgor of
the commencement thereof, and such Pledgor shall be entitled, at its
expense, acting through counsel reasonably acceptable to such
Indemnitee, to participate in, and, to the extent that such Pledgor
desires to, assume and control the defense thereof; provided, however,
that such Pledgor shall have acknowledged in writing its obligation to
fully indemnify such Indemnitee in respect of such action, suit or
proceeding; and provided, further, that such Pledgor shall not be
entitled to assume and control the defense of any such action, suit or
proceeding if and to the extent that, (A) in the reasonable opinion of
such Indemnitee, (x) (i) such action, suit or proceeding involves any
risk of imposition of criminal liability or (ii) such action, suit or
proceeding involves any material risk of material civil liability on
such Indemnitee or will involve a material risk of the sale, forfeiture
or loss of, or the creation of any Lien (other than a Permitted Lien)
on, the Pledged Collateral or any part thereof, unless, in the case of
this clause (x) (ii), such Pledgor shall have posted a bond or other
security agreement or satisfactory to the relevant Indemnitees in
respect to such risk or (y) the control of such action, suit or
proceeding would involve a bona fide conflict of interest, (B) such
proceeding involves Expenses not fully indemnified by such Pledgor
which such Pledgor and the Indemnitee have been unable to sever from
the indemnified Expense(s), (C) a Default or an Event of Default has
occurred and is continuing or (D) such action, suit or proceeding
involves matters which extend beyond or are unrelated to the
transactions contemplated hereunder and if determined adversely could
be materially detrimental to the interests of such Indemnitee
notwithstanding indemnification by such Pledgor. The Indemnitee, on
the one hand, and such Pledgor, on the other hand, may participate in a
reasonable manner at its own expense and with its own counsel in any
proceeding conducted by the other in accordance with the foregoing.
Each Indemnitee shall at such Pledgor's expense supply such Pledgor
with such information and documents reasonably requested by such
Pledgor as are necessary or advisable for such Pledgor to participate
in any action, suit or
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proceeding to the extent permitted by this Section 6.15(a). Unless an
Event of Default shall have occurred and be continuing, no Indemnitee
shall enter into any settlement or other compromise with respect to any
Expense which is entitled to be indemnified under this Section 6.15(a)
without the prior written consent of the relevant Pledgor, which
consent shall not be unreasonably withheld or delayed, unless such
Indemnitee waives its right to be indemnified under this Section
6.15(a) with respect to such Expense. In addition, if an Indemnitee,
in violation of either Pledgor's right to assume and control the
defense of any Expense, refuses to permit such Pledgor to control the
defense after written demand by such Pledgor for such control, such
Indemnitee waives its right to be indemnified under this Section
6.15(a) with respect to such Expense. Upon payment in full of any
Expense by either Pledgor pursuant to this Section 6.15(a) to or on
behalf of an Indemnitee, such Pledgor without any further action shall
be subrogated to any and all claims that such Indemnitee may have
relating thereto (other than claims in respect of insurance policies
maintained by such Indemnitee at its own expense), and such Indemnitee
shall execute such instruments of assignment and conveyance, evidence
of claims and payment and such other documents, instruments and
agreements as may be necessary to preserve any such claims and
otherwise cooperate with such Pledgor and give such further assurances
as are necessary or advisable to enable such Pledgor vigorously to
pursue such claims. The obligations and rights of each Pledgor under
this Section 6.15 shall survive the repayment of all Secured
Obligations and the termination of this Agreement.
(b) Without limiting the application of Section 6.15(a)
immediately above, each Pledgor agrees to pay, or reimburse NRG Energy,
any and all fees, costs and Expenses of whatever kind or nature
incurred in connection with the creation, preservation, protection or
validation of NRG Energy's Liens on, and security interest in, the
Pledged Collateral, including, without limitation, all fees and taxes
in connection with the recording or filing of instruments and documents
in public offices, payment or discharge of any taxes or Lien upon or in
respect of the Pledged Collateral, premiums for insurance with respect
to the Pledged Collateral and all other fees, costs and expenses in
connection with protecting, maintaining or preserving the Pledged
Collateral and NRG Energy's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions,
suits or proceedings arising out of or relating to the Pledged
Collateral.
(c) Without limiting the application of Section 6.15(a),
each Pledgor agrees to pay, indemnify and hold each Indemnitee harmless
from and against any loss, costs, damages and Expenses which such
Indemnitee may suffer, expend or incur in consequence of or growing out
of any failure of such Pledgor to comply with its obligations under
this Agreement, or any misrepresentation by such Pledgor in this
Agreement, or in any statement or writing contemplated by or made or
delivered pursuant to or in connection with this Agreement.
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(d) If and to the extent that the obligations of the
Pledgors under this Section 6.15 are unenforceable for any reason, each
Pledgor hereby agrees to make the maximum contribution to the payment
and satisfaction of such obligations which is permissible under
applicable Law.
(e) Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement, together with interest on
such amounts from the date paid until reimbursement in full at a rate
per annum equal at all times to the Base Rate plus two percent (2%),
shall constitute Secured Obligations secured by the Pledged Collateral.
Section 6.16 Independent Obligations. Each Pledgor's obligations
under this Agreement are independent of those of the other Pledgor.
NRG Energy may bring a separate action against either Pledgor without
first proceeding against the other Pledgor, the Company or any other
Person or any other security held by NRG Energy and without pursuing
any other remedy.
Section 6.17 Waiver of Defenses. The Pledgors hereby waive: (a)
any defense of a statute of limitations; (b) any defense based on the
legal disability of the other Pledgor or the Company or any discharge
or limitation of the liability of the other Pledgor or the Company to
NRG Energy, whether consensual or arising by operation of law; (c)
presentment, demand, protest and notice of any kind; and (d) any
defense based upon or arising out of any defense (other than the
indefeasible payment in full in cash or cash equivalents of the Secured
Obligations) which NRGG Funding or NRGG may have to the payment or
performance of any part of the Secured Obligations.
Section 6.18 Subrogation, Etc. Notwithstanding any payment or
payments made by the Pledgors or the exercise by NRG Energy of any of
the remedies provided under this Agreement or any other Financing
Document, until the Secured Obligations have been indefeasibly paid in
full in cash or cash equivalents, neither Pledgor shall have any claim
(as defined in 11 U.S.C. ? 101(5)) of subrogation to any of the rights
of NRG Energy against the Company or the other Pledgor, the Pledged
Collateral or any guaranty held by for the satisfaction of any of the
Secured Obligations, nor shall either Pledgor have any claims (as
defined in 11 U.S.C. ? 101(5)) for reimbursement, indemnity,
exoneration or contribution from the Company or the other Pledgor in
respect of payments made by the Pledgors hereunder. Notwithstanding
the foregoing, if any amount shall be paid to the Pledgors on account
of such subrogation, reimbursement, indemnity, exoneration or
contribution rights at any time, such amount shall be held by the
Pledgors in trust for NRG Energy segregated from other funds of the
Pledgors, and shall be turned over to NRG Energy in the exact form
received by the Pledgors (duly endorsed by the Pledgors to NRG Energy
if required) to be applied against the Secured Obligations in such
amounts and in such order as NRG Energy may elect.
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Section 6.19 Joint and Several Liability. Prior to the effective
date of this Agreement, the obligations of the Pledgors hereunder shall
be several and not joint. On and after the effective date of this
Agreement, the obligations of the Pledgors under this Agreement shall
be joint and several.
Section 6.20 Subordination. Notwithstanding anything contained
herein to the contrary, all of the Pledgors' obligations hereunder, and
all of NRG Energy's rights hereunder, are subject to the terms of that
certain Subordination Agreement dated as of December 10, 1997 between
NRG Energy and the Collateral Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this
Subordinated Pledge and Security Agreement to be duly executed and
delivered by their officers thereunto duly authorized as of the date
first above written.
NRGG FUNDING, INC.
By: /s/ Timothy P. Hunstad
Name: Timothy P. Hunstad
Title: VP-CFO
Address for Notices:
1221 Nicollet Mall
Suite 610
Minneapolis, MN 55403
NRG MORRIS INC.
By: /s/ Craig Mataczynski
Name: Craig Mataczynski
Title: President
Address for Notices:
1221 Nicollet Mall, Suite 610
Minneapolis, MN 55403
NRG ENERGY, INC.
By: /s/ David H. Peterson
Name: David H. Peterson
Title: President & CEO
Address for Notices:
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403
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Exhibit 10.27.14
OPERATION AND MAINTENANCE AGREEMENT
This Operation and Maintenance Agreement (hereinafter this
"Agreement") is entered into this 19th day of September, 1997, by and
between NRG (Morris) Cogen, LLC, a Delaware limited liability company
with its principal offices located at 1221 Nicollet Mall, Minneapolis,
Minnesota (hereinafter "Owner"), and NRG Morris Operations Inc., a
Delaware corporation with its principal offices located at 1221
Nicollet Mall, Minneapolis, Minnesota (hereinafter "Operator"). Owner
and Operator are sometimes collectively referred to as the "Parties,"
and individually as a "Party."
R E C I T A L S
Whereas, Owner is in the process of developing a nominal 117
megawatt gas fired cogeneration project at the Morris, Illinois,
chemical facility owned by Millennium Petrochemicals Inc. (hereinafter
"Millennium"); and
Whereas, Owner desires to contract to Operator the operation and
maintenance of the cogeneration facility and certain related steam
production and water treatment equipment leased by Millennium to Owner;
and
Whereas, Operator possesses the required skills, personnel, and
technical experience to operate and maintain the cogeneration project
and associated leased equipment; and
Whereas, certain of Operator's obligations hereunder will be
backed by a limited guarantee furnished by NRG Energy, Inc., an
affiliate of Operator; and
Whereas, the Parties desire to reduce their agreement to writing;
Now, therefore, in consideration of the mutual covenants set out
herein, the sufficiency of which is acknowledged by both Parties, the
Parties hereby agree as follows:
<PAGE>
I. DEFINITIONS
"Acceptance Date" shall have the meaning applied to such term in
the EPC Contract and RO Contract, provided that each Punch List item
shall have been completed.
"Acceptance Schedule" means the schedule indicating any defects in
the Project and setting out the achieved levels of performance under
the applicable performance tests set out in the EPC Contract and the RO
Contract.
"Affiliate" means, with reference to a specified Person, any
other Person or entity, which, directly or indirectly through one
or more intermediaries, controls, is controlled by, or is under
common control with such Person. A Person or entity is
controlled by another Person or entity if the second Person or
entity holds a sufficient number of securities in the first
Person or entity to elect a majority of the directors of the
first Person or entity.
"Agent" means the agent for the Lender(s) under the
Financing Agreements.
"Annual Operator's Fee" has the meaning set forth in Section
7.2 hereof.
"Annual Operating Plan and Budget" means a plan and budget
substantially in the form of the initial Annual Operating Plan
and Budget attached hereto as Exhibit A-1 and setting out, among
other things, the projected Steam and electric requirements of
Millennium for the applicable year, and the operations and
maintenance plan (including scheduled maintenance periods and
operating procedures) and the budget necessary to provide such
requirements.
"Approvals and Permits" means all approvals, permits,
licenses, certificates, inspections and authorizations required
by any Governmental Authority, arising out of, incident to, or
related to the operation and maintenance of the Project and/or
the Leased Equipment.
"Boilers 1-3" means Millennium's Boilers 1 through 3 as
defined in Exhibit A to the Equipment Lease.
"Boilers 5 and 6" means Millennium's Boilers 5 and 6 as
defined in Exhibit A to the Equipment Lease.
"Btu" means one British thermal unit.
<PAGE>
"Business Day" means any day other than a Saturday or Sunday
or a legal holiday observed in the states of Illinois or
Minnesota.
"Change" means any of the following: (a) a change in the
then current Annual Operating Plan and Budget; (b) a change in
connection with the services to be provided by Operator
hereunder; (c) a change made necessary to avoid injury to persons
or property or to mitigate losses as a result of the occurrence
of an Emergency; and (d) a change enabling Operator to accomplish
or contract for a Major Project Repair.
"Change in Law" means (a) any modification, amendment, or
other change in the laws affecting the operation or maintenance
of the Project and/or the Leased Equipment which becomes
effective after the execution date of this Agreement and includes
any material change in interpretation of existing laws, or any
modifications of enforcement policies with respect to such
existing laws; and (b) the imposition by a Governmental Authority
of any material conditions after the execution date of this
Agreement in connection with any Approval and Permit which, as
reasonably determined by Owner, establishes requirements
materially more burdensome or stringent than (i) those in effect
prior to the execution date of this Agreement, or (ii) the
requirements set out in any approval or permit previously
obtained by Owner for the design, construction, operation or
maintenance of the Project.
"Change in Project Agreements" means any amendment after the
execution date of this Agreement to the Project Agreements which
establishes requirements affecting the operation and/or
maintenance of the Project and/or Leased Equipment materially
more burdensome to the Operator than the requirements contained
in the Project Agreements as of the execution date.
"Change Order" means the written approval of a proposed
Change and the related Change Order Budget Statement by Operator
and Owner as further provided for in Section 6.3.
"Change Order Budget Statement" means the statement prepared
by Operator with respect to a proposed Change setting forth in
reasonable detail: (i) the direct cost or savings to Owner of the
proposed Change; (ii) the indirect costs or savings of the
proposed Change, including, without limitation, any loss of
electricity revenues or steam host revenues and any increased
insurance, operating, maintenance or other costs during or
following the implementation of the proposed Change;
(iii) changes in the operating efficiency of the Project; and
(v) any other material effect on the operation, maintenance,
efficiency or profitability of the Project or the provision of
the services hereunder.
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"ComEd" means the interconnecting utility, formerly known as
Commonwealth Edison Company.
"Commercial Operation" means the ability of the Project to
deliver the Reserved Quantities of Steam and electricity meeting
the requirements of the ESA to Millennium on a continuing basis.
"Commercial Operation Date" means the date on which Owner
shall have achieved Commercial Operation of the Project, based on
a written notice from Owner to Millennium.
"Construction Contractors" means Kiewit Industrial Company,
the contractor for the RO System, any successor to any such
person, or any other contractor selected by Owner.
"Effective Date" means the date first set forth above.
"Electric Capacity" means a nominal generating capacity of
the Project equal to approximately 117 megawatts.
"Emergency" means any event or occurrence which, in the
judgment of Operator or Owner, as the case may be, requires
immediate action and which constitutes a serious hazard to the
safety of persons or property or may materially interfere with
the safe, lawful or environmentally sound operation of the
Project.
"Environmental Laws" means all applicable codes, laws,
rules, and regulations issued by any Governmental Authority
relating to actual or potential affects on the environment.
"EPC Contract" means the EPC Contract entered into between
Owner and Kiewit Industrial Company dated July 7, 1997, for the
engineering, procurement, and construction of the Project.
"E/P Mix Gas" means the mixture of ethane and propane gas
meeting the specifications set out in Exhibit C-2 of the ESA
provided by Millennium for use in Boilers 5 and 6 at such times
as natural gas or Methane Off Gas is unavailable in sufficient
quantities to meet the fuel requirements of such boilers.
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"Equipment Lease" means the lease entered into by Owner and
Millennium dated June 3, 1997, and any amendments thereto, with
respect to Millennium's Boilers 1-3, Boilers 5 and 6,
Millennium's water treatment equipment, boiler feedwater system
and certain other property described in Exhibit A to such lease.
"ESA" means the Energy Services Agreement entered into by
Owner and Millennium dated June 3, 1997, together with the
attached Schedules and Exhibits, as the same may be amended from
time-to-time.
"Event of Default" means each of the events set forth in
Sections 12.1 and 12.2.
"Excess Sales" means sales of electricity by the Project in
excess of the amounts required by Millennium.
"Excused Event(s)" shall mean Force Majeure events, the
failure of Owner and/or Millennium to furnish sufficient fuel,
makeup water, waste disposal services, and other services
required to be provided to Operator hereunder, events arising out
of latent defects, or the failure to perform maintenance
recommended by Operator but excluded from any Major Maintenance
Budget or any Annual Operating Plan and Budget by Owner, or any
event occurring prior to the Acceptance Date.
"Excused Standby Power Costs" means Standby Power Costs
incurred as a result of an Excused Event.
"Expenses" has the meaning set forth in Section 6.2
"Financing Agreements" means any loan, lease financing,
security or related agreements entered into at any time by and
among Owner and the lending institutions providing financing for
the Project.
"Firm Gas" means Natural Gas purchased by Owner on behalf of
the Project (with the consent of Millennium) under contracts
where the supply and delivery of Natural Gas is on an
uninterruptible basis.
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"Firm Gas Supply Agreement" means any agreement or
agreements between Owner and third party suppliers under which
Firm Gas meeting the Project's requirement is supplied to the
Project.
"Firm Gas Transportation Agreement" means any agreement or
agreement between Owner and a third party transporter under which
Firm Gas is transported to the Project Site.
"Force Majeure" means any act, event or condition that
effectively prevents either Party to this Agreement from
performing its obligations under this Agreement, if such act,
event, or condition and its effects could not be prevented by the
exercise of due diligence, and are beyond the reasonable control
of the Party relying thereon (or any third party for whom the
Party relying thereon is directly responsible), including, but
not limited to, the following:
(a) any act of God;
(b) any of the following, whether or not an act of God:
landslide, lightning, fire, earthquake, explosion,
hurricane, tornado, drought, flood (but not including
customary weather conditions for the geographic area of
the Project which should have been reasonably
anticipated) and perils of the sea and air;
(c) extortion, sabotage, theft or similar occurrence, acts
of a public enemy, war (whether declared or undeclared)
or governmental intervention resulting therefrom,
blockade, embargo, insurrection, riot, or civil
disturbance;
(d) strikes or labor disputes (but solely to the extent
such strikes or disputes are of a general nature, and
not limited to the Project or Project Site);
(e) after the date hereof, any order and/or judgment of any
federal, state, or local court, administrative agency
or governmental body, if such order and/or judgment is
not the result of actions of Owner or Operator;
(f) after the date hereof, any delay in, or the failure by
a regulatory agency to issue or renew, or the
suspension, termination, interruption or denial of, any
permit, license, consent, authorization or approval
essential to the operation and maintenance of the
Project, where such action is not due to the fault or
negligence of the Party claiming Force Majeure.
"Governmental Authority" means any federal, state, or local
agency or any court having jurisdiction over any aspect of the
Project or the Leased Equipment.
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"Guaranteed Heat Rate" means the heat rate curve provided to
the Owner by Kiewit Industrial Company not later than the date
which is twelve months after the date hereof and approved by
Operator and Owner, plus or minus a band of one percent (1%).
"Guarantor" means NRG Energy, Inc., and any successor
thereto.
"Hazardous Substance or Substances" shall mean hazardous
waste as defined in the Resource Conservation Recovery Act of
1976, or Hazardous Substances as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as each may be amended from time-to-time.
"HRSG" means heat recovery steam generator.
"Inflation Escalation Index" means the U.S. Producer Price
Index for Finished Goods, published by the U.S. Department of
Labor, Bureau of Labor Statistics, or any successor thereto.
"Interconnection Facilities" means the equipment and related
devices required to interconnect the Project outputs and inputs
to the Morris Plant including interconnections for electricity,
steam, fuel, raw water, fire water, feed water, wastewater
discharges, and condensate return, and to interconnect Project
electrical output and standby power access to ComEd, all as
further described in Exhibit D to the ESA.
"Leased Equipment" means all that steam production and
water treatment equipment leased to Owner by Millennium, more
particularly described in Exhibit A to the Equipment Lease.
"Leased Equipment Mobilization Date" means the date on which
Operator shall commence its mobilization responsibilities
relating to the Leased Equipment as set out herein. Owner shall
notify Operator of the Leased Equipment Mobilization Date, which
shall occur at least four (4) months prior to the Leased
Equipment Operations Date and at least six (6) months prior to
the Project Operations Date.
"Leased Equipment Operations Date" means the date on which
the Owner turns over care, custody and control of the Leased
Equipment to Operator, pursuant to a written notice of such event
from Owner to Operator.
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"Legal and Contractual Requirements" shall mean all
(a) laws, permits, approvals, regulations or orders of any
Governmental Authority applicable to the ESA, the Project, the
Leased Equipment, Owner's obligations under this Agreement as
Owner of the Project and Operator's scope of work hereunder;
(b) the Project Agreements; (c) the Consent and Agreement between
Operator and the Agent, (d) agreements, warranties and
specifications of Operator's or Owner's suppliers or vendors; and
(e) operating and maintenance manuals and procedures furnished by
Owner applicable to the Project or the components thereof (such
operating manuals to reflect Prudent Engineering and Operating
Practices).
"Lenders" means the financing institution(s) providing
construction and/or term financing for the Project.
"Major Electric Loads" means electric loads greater than
three (3) megawatts.
"Major Maintenance Budget" means a five year budget for the
major maintenance requirements of the Project.
"Major Maintenance Contractor" means the party with which
Owner has entered into a long term service agreement to provide
for major maintenance of the combustion turbines.
"Major Subcontractors" means those subcontractors who
provide services to Operator in connection with the fulfillment
of its responsibilities hereunder with a total value in excess of
two hundred fifty thousand dollars ($250,000) over the term of
the subcontract. Major Subcontractors specifically do not
include equipment suppliers.
"Maximum Liquidated Damages" means with respect to (i) the
liquidated damages payable by Operator as a result of excess
Operator Standby Power Costs pursuant to Section 8.1, an amount
equal to eighty percent (80%) of the Annual Operator's Fee set
out in Section 7.2 and (ii) with respect to liquidated damages
payable for failure to meet the Heat Rate Guarantee set out in
Section 8.2, an amount equal to twenty percent (20%) of the
Annual Operator's Fee.
"Methane Off Gas" means the commercial gas provided by
Millennium to the Project meeting the specifications set out in
Exhibit C-1 of the ESA.
"Millennium" means Millennium Petrochemicals Inc., the owner
of the Morris Plant.
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"Minor Leased Equipment Repairs" means all maintenance and
repairs of the Leased Equipment up to an aggregate of $120,000
in any Agreement Year, adjusted at the beginning of the second
Agreement Year and each Agreement Year thereafter by the change
in the Inflation Escalation Index.
"Mobilization Period" means the period commencing on the
earlier of the Leased Equipment Mobilization Date or the Project
Mobilization Date and extending through the Project Operations
Date.
"Monomer Start Up Steam" has the meaning set out in
Section 5.5 of the ESA.
"Morris Plant" means the Millennium chemical plant located
in Grundy County, Illinois.
"Morris Plant Site" means the site occupied by the Morris
Plant on property owned by Millennium.
"Natural Gas" means pipeline quality gas with a minimum Btu
content of 1000 Btu's per standard cubic foot.
"NIGAS Agreement" means the gas distribution agreement
between Owner and Northern Illinois Gas Company covering the
transmission of gas to the Project Site.
"NRG Guaranty" means the guaranty of certain of the
obligations of Operator by NRG Energy, Inc., substantially in the
form of Exhibit B.
"Operating Year" means the period commencing each January 1
and ending on the subsequent December 31; provided that the first
Operating Year shall commence on the Project Operations Date and,
if applicable, shall end on the last day of the extension period
provided for in Section 6.2.1, and the last Operating Year during
the term shall end on the last day of the term.
"Operator Standby Power Costs" means (a) Standby Power Costs
incurred other than as a result of Excused Events and (b) Standby
Power Costs which would have been incurred but for the prior
incurrence of Excused Standby Power Costs.
"Person" means any corporation, trust, partnership, limited
liability company or other entity or natural person.
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"Process Safety Management Standards" means those safety
standards set out in 29 C.F.R. 1910.119 dealing with chemical
process safety standards.
"Producer Price Index" means the U. S. Producer Price Index
for All Items, as currently published in the United States
Department of Labor, Bureau of Labor Statistics monthly
publication, PPI Detailed Report, or any successor publication of
such information. If such Index is no longer published or the
method of computation thereof is substantially modified,
"Producer Price Index" shall mean a mutually agreeable
alternative index.
"Project" means the electrical and steam generating facility
of Owner capable of producing the Project Capacity (and such
additional equipment as may be added by Owner on the Project Site
pursuant to the provisions of Section 6.3 of the ESA), located
principally on the Project Site at the Morris Plant, including
the Interconnection Facilities, the RO System, the Step Up
Substation Equipment and the Step Down Substation Equipment, all
as more fully described in Section 2.1 of the ESA.
"Project Agreements" shall mean the ESA, the Ground Lease,
the Equipment Lease, the EPC Contract, the RO Contract, the Firm
Gas Supply Agreement, the Firm Gas Transportation Agreement, the
NIGAS Agreement, and this Operation and Maintenance Agreement, as
each of the foregoing may be amended or supplemented from time-to-
time; provided, that if any such amendment or supplement could
reasonably be expected to affect Operator's performance of its
obligations hereunder, such amendment or supplement shall not be
effective with respect to Operator without Operator's consent
thereto.
"Project Capacity" means the "Electric Capacity" and the
"Steam Capacity."
"Project Mobilization Date" means the date on which Operator
shall commence its mobilization responsibilities relating to the
Project as set out herein. Owner shall notify Operator of the
Project Mobilization Date, which shall in no event be later than
six (6) months prior to the Project Operations Date.
"Project Operations Date" means the date immediately
following the Provisional Acceptance Date on which Operator
assumes care, custody and control of the Project, or if
Provisional Acceptance is not achieved, the date the Owner turns
over care, custody and control of the Project to Operator,
pursuant to a written notice of such event from Owner to
Operator.
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"Project Site" means the plot of land owned by Millennium
and leased to Owner pursuant to the Ground Lease on which most of
the Project is located, approximately 3.6 acres in area, and
located on a portion of the Morris Plant Site, as such plot is
more fully described in Exhibit A to the ESA.
"Provisional Acceptance" shall have the meaning which
applies to such term in the EPC Contract and RO Contract.
"Prudent Utility Practices" mean those procedures, methods,
techniques, and acts which are in accordance with prudent
professional standards adopted by the independent power
generation industry of the United States for the operation and
maintenance of similar power generation facilities. Prudent
Utility Practices are intended to result in the safe, reliable,
lawful, economic and prudent operation and maintenance of the
Project and the Leased Equipment, in a manner consistent with
long-term, reliable operation of all Project equipment and the
Leased Equipment. Operating procedures and maintenance and
preventative maintenance programs will be consistent with this
objective. Prudent Utility Practices are not intended to be
limited to optimum practices or methods to the exclusion of all
others, but rather to be a spectrum of reasonable and prudent
practices and methods that must take into consideration the
conditions specific to any given facility.
"PURPA" has the meaning set out in Section 2.7 of the ESA.
"Rate 18" means that certain Rate 18 Standby Service tariff
filed by ComEd with the Illinois Commerce Commission on January
10, 1995 and issued pursuant to Order of the Illinois Commerce
Commission entered January 9, 1995, in Docket No. 94-0065.
"Reserved Quantities" means the full electric output of two
of the three combustion turbines installed by Owner and the full
steam output of the two associated HRSG's installed by Owner.
The nominal electric output of two of the three combustion
turbines is 78 MW (based on an average of 68 MW during the summer
and 82 MW during the winter), and the maximum steam output of the
two HRSG's is 720,000 pounds of steam per hour.
"RO Contract" means the Engineering, Procurement and
Construction Agreement for the engineering, procurement and
construction of the RO System.
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"RO System" means the reverse osmosis water treatment
facility of Owner capable of producing 750 gpm, located on the
Morris Plant Site, all as more fully described in Section 2.1 of
the ESA.
"Standby Power Costs" shall mean the cost of standby power
paid by Owner to ComEd pursuant to Rate 18 (or other source of
standby electricity) to provide a supply of backup power to
Millennium, or the amount paid by Owner to Millennium to
reimburse it for all standby costs paid by Millennium to ComEd
pursuant to Rate 18 (or other source of standby electricity).
"Steam" means steam meeting the requirements set out in
Exhibit C-3 of the ESA.
"Steam Capacity" means the ability of the Project to produce
a nominal 1,080,000 pounds per hour of 600 psig Steam.
"Step Down Substation Equipment" means the four Step Down
Transformers designed to serve the loads of the existing monomer
and polymer substations, plus future monomer substation expansion
and the associated protective relays and switch gear, as more
fully described in Schedule 1 of the ESA.
"Step Up Substation Equipment" means the two Step Up
Transformers, each sized to handle the output of two combustion
turbine generators and the associated protective relays and
switch gear, as more fully described in Schedule 1 of the ESA.
"Suspension Events" shall have the meaning provided in
Section 12.6.1.
II. ENGAGEMENT OF OPERATOR
2.1 Engagement. Commencing with the Effective Date, Owner
hereby engages Operator to operate and maintain the Project and
the Leased Equipment and perform certain duties, all as
hereinafter set forth in this Agreement, and Operator accepts
such engagement to operate and maintain the Project and Leased
Equipment and perform the duties specified in this Agreement in
accordance with its terms and conditions.
2.2 Employment of Personnel. All operating and management
personnel involved in the performance of Operator's duties
hereunder shall be employees of Operator or its Affiliates and
shall not, for any purpose, be deemed employees of Owner.
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III. TERM
The initial term of this Agreement shall extend for a period
of fifteen (15) years from the Project Operations Date, unless
terminated earlier in accordance with Section 12.4 of this
Agreement. Thereafter, the term of this Agreement shall be
automatically extended for two (2) additional terms of five (5)
years each, on the same terms and conditions; provided, that this
Agreement may be terminated by Operator for its convenience at
the end of the original fifteen (15) year term or the first five
(5) year extension period, in either case upon written notice by
Operator to Owner no later than six (6) months prior to the end
of either such period; provided further, that if Millennium shall
exercise its purchase option as set forth in Section 4.1 of the
ESA, Millennium shall, at the time that it takes possession of
the Project, have the right, subject to Section 7.4, to terminate
this Agreement.
IV. SCOPE OF SERVICES TO BE PROVIDED BY OPERATOR
4.1 Mobilization Period. During the Mobilization
Period (and with respect to those matters set forth in Exhibit C
hereto, by no later than the respective dates set forth in such
Exhibit C with respect to such matters), Operator shall, subject
to Owner's review, take all actions necessary or desirable to
prepare the Project for operation on the Project Operations Date
and to prepare the Leased Equipment for operation on the Leased
Equipment Operations Date, including, but not limited to, the
following services:
4.1.1 Staffing. Operator shall develop a plan and
schedule to staff the operation and maintenance of the
Project and the Leased Equipment and submit such plan
for Owner's approval. Upon approval, Operator shall
recruit, hire, and train the permanent staff and
specialists required for operation and maintenance of
the Project and the Leased Equipment in accordance with
the terms of this Agreement. All full-time personnel
provided by Operator for the operation and maintenance
of the Project and the Leased Equipment shall be fully
qualified and available to perform services to support
Project operation and maintenance as required by the
staffing plan to be developed by Operator and approved
by Owner.
4.1.2 Safety Plan. Operator shall develop a safety plan
governing the operation and maintenance of the Project
and the Leased Equipment which shall comply with the
published safety policies of Millennium with respect to
any operation and maintenance work performed on the
Morris Plant Site. In addition, the plan shall comply
with Millennium's work permitting,
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emergency response procedures, lock-out/tag-out
procedures and applicable OSHA requirements (including
29 CFR 1910.119 dealing with the Process Safety
Management Standards (including a process hazard
review)); provided, that the fees and expenses of any
third party consultants retained by Operator in
connection with the preparation of such plans shall be
for the account of Owner. The plan shall also set out
Emergency response procedures, including responses to
Emergencies caused by Hazardous Substances, and such
procedures shall be consistent with Millennium's
emergency response procedures. All Operator personnel,
as well as the personnel of any subcontractors, shall
undergo the Three Rivers Training Program. All
personnel, contractors, guests and any other person who
enters the Project will review Millennium's safety
video. All such plans shall be submitted to Owner for
approval.
4.1.3 Procedures for Handling of Hazardous Substances:
Operator shall develop chemical handling and disposal
procedures, including procedures for the handling of
Hazardous Substances; provided, however, that Owner
shall retain title to all Hazardous Substances used in
connection with the services provided by Operator, and
Operator shall act solely as a custodian for Owner with
respect to such Hazardous Substances. All such
procedures shall be submitted to Owner for approval.
Operator further acknowledges that removal of Hazardous
Substances may only be appropriate in certain
circumstances, and Operator will ensure that its
personnel do not disturb asbestos or other Hazardous
Substances which are part of the Leased Equipment.
4.1.4 Administration; Reporting Procedures. Operator
shall develop administrative procedures, incident
reporting and management procedures, security
procedures, performance monitoring and reporting
procedures, planned maintenance schedules,
environmental monitoring and reporting procedures, fire
fighting procedures, inventory storage and monitoring
procedures, all in compliance with the Project
Agreements. All such procedures shall be submitted to
Owner for approval.
4.1.5 Spare Parts List. Operator shall submit to Owner
for its approval a proposed list of spare parts, a
budget and a plan for acquiring the required initial
spare parts for the Project (incorporating the list of
initial spare parts provided by the Construction
Contractors under the EPC Contract and the RO
Contract), as well as a list of supplies, consumables,
tools and other
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items required for the operation and maintenance of the
Project and the Leased Equipment.
4.1.6 Procurement of Spare Parts, Supplies, Etc.
Operator shall procure on behalf of, and with the
approval of Owner, the initial inventory of all spare
parts (other than the initial spare parts provided by
Construction Contractors under the EPC Contract and RO
Contract), supplies, consumables, furniture, laboratory
equipment, office equipment, vehicles, tools and other
items set out in paragraph 4.1.5 above. Operator shall
establish a computerized inventory of such items and
provide a copy to Owner.
4.1.7 Personnel Training by Construction Contractors.
Operator shall make its personnel available for
training by the Construction Contractors as
contemplated by the EPC Contract and RO Contract, and
in accordance with Schedule K to the EPC Contract and
the RO Contract.
4.1.8 Participation in Start-up and Related Activities.
Operator shall participate in the start-up, performance
testing, and commissioning of the Project under the
direction of the Owner, and Owner shall coordinate such
participation with the Construction Contractors.
4.1.9 Performance Test Monitoring. Operator shall
assist Owner in the monitoring of the performance
testing of the Project. At Owner's request, Operator
shall obtain staff who are not the normal compliment of
operators operating the equipment for the Construction
Contractors.
4.1.10 Punch List. Operator shall assist Owner in the
preparation of the punch list to be prepared under the
EPC Contract and the RO Contract.
4.1.11 Review of Manuals, Drawings, Etc. Operator shall
assist Owner in its review, comment and approval of
operation and maintenance manuals, turnover packages,
drawings, specifications, diagrams, the spare parts
list, and other information with respect to the Project
obtained by Owner from the Construction Contractors
under the EPC Contract and the RO Contract and from
Millennium with respect to the Leased Equipment.
4.1.12 Acceptance Schedule. Under the direction of
Owner, Operator shall help prepare the Acceptance
Schedule setting out any deficiencies in the work
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performed by Construction Contractors, as well as any
warranty claims under the EPC Contract and RO Contract.
4.1.13 Personnel Training by Millennium. Operator shall
make its personnel available for training on the Leased
Equipment to be conducted by personnel of Millennium,
and shall train its personnel to identify and work
around without disturbing asbestos and other Hazardous
Substances which may be associated with such Leased
Equipment. Such personnel shall be instructed not to
disturb any such asbestos or other Hazardous
Substances, and to report the presence of such
materials (or in the case of asbestos, the disturbance
thereof) to Owner as soon as possible.
4.1.14 Major Electric and Steam Loads Procedures.
Operator shall establish procedures with Millennium for
prior notice of engagement of Major Electric Loads or
major changes in steam flow or condensate return within
the Morris Plant.
4.1.15 Inspection of Leased Equipment. In conjunction
with Owner, Operator shall conduct a complete
inspection of the Leased Equipment to identify any
safety hazards, environmental hazards, or operating
problems in advance of assumption of care, custody and
control of such Leased Equipment. Operator shall
provide a report identifying such issues to Owner. To
the extent that remediation of asbestos or other
Hazardous Substances is required, Operator shall not
undertake any such remediation itself, but rather shall
report such remediation requirements to Owner.
4.1.16 Appointment of Plant Manager. Operator shall
appoint a Plant Manager (subject to Owner's approval)
who shall supervise the performance of Operator's
employees at the Project Site and who shall have
authority to bind Operator, except as such authority
may be specifically limited in writing. The Plant
Manager shall coordinate operation of the Project with
Millennium, as directed by Owner.
4.1.17 Development of Final Initial Annual Operating Plan
and Budget and Major Maintenance Plan. Attached hereto
as Exhibit A-1 is the base case pro forma Annual
Operating Plan and Budget for the twelve (12) month
period commencing on the Project Operations Date. In
conjunction with Owner and representatives of
Millennium, Operator shall develop a final Annual
Operating Plan and Budget for such twelve (12) month
period setting out,
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among other things, the projected Steam and electric
requirements of Millennium Petrochemicals for such
period. Such Annual Operating Plan and Budget shall
also set out all scheduled maintenance periods and
Project operating procedures. If Owner and Operator
are unable to agree on such final initial Annual
Operating Plan and Budget, Operator may use an Annual
Operating Plan and Budget consistent with the base case
pro forma Annual Operating Plan and Budget attached
hereto as Exhibit A-1. Attached hereto as Exhibit A-2
is the base case pro forma Major Maintenance Budget for
the five (5) year period commencing on the Project
Operations Date. In conjunction with Owner, Operator
shall develop a final Major Maintenance Budget for such
five (5) year period including, among other things, any
long term service agreements entered into by Owner and
the Major Maintenance Contractor with respect to the
combustion turbines. If Owner and Operator are unable
to agree on such final initial Major Maintenance
Budget, Operator may use a Major Maintenance Budget
consistent with the base case pro forma Major
Maintenance Budget attached hereto as Exhibit A-2.
4.1.18 Management Plan. Operator shall develop a written
management plan for approval by Owner to ensure optimal
performance, responsiveness and cost effectiveness in
the operation and maintenance of the Project and the
Leased Equipment. The program shall include provisions
regarding:
(a) budget tracking, analysis and adjustments;
(b) monthly environmental reports and annual tracking;
(c) QF analysis monthly report;
(d) personnel policies, including policies regarding
payroll, compensation, pensions and other benefits;
(e) training;
(f) purchasing and inventory control;
(g) a project safety and health program which will
include procedures and a manual;
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(h) an employee job site handbook for Operator's
employees who will be involved in operation and
maintenance with the Project and the Leased
Equipment, including as-built operating
procedures;
(i) a maintenance planning and scheduling system
including a detailed schedule of all preventative
maintenance to be performed on the Project and the
Leased Equipment; and
(j) a system for maintaining a computerized inventory
of consumables, spare parts, tools and supplies.
4.1.19 Office and Work Shop. Operator shall establish,
on behalf of and with the approval of Owner, an office
on the Project Site as well as a work shop for
performing minor maintenance.
4.1.20 Development of Mobilization Budgets. Operator
shall develop and deliver to Owner for approval,
budgets for the mobilization periods commencing on the
earlier of the Leased Equipment Mobilization Date and
the Project Mobilization Date, respectively, and ending
on the Project Operations Date.
4.2 Operations. On and after the Leased Equipment
Operations Date with respect to the Leased Equipment and the
Project Operations Date with respect to the Project, Operator
shall provide all operation and maintenance services (other than
major maintenance separately contracted by the Owner) necessary
to efficiently operate and maintain the Project and the Leased
Equipment, as the case may be, including, but not limited to,
performing the following services.
4.2.1 Compliance with Legal and Contractual
Requirements. Operator shall operate and maintain the
Project and the Leased Equipment in compliance with all
Legal and Contractual Requirements, Prudent Engineering
and Operating Practices, equipment supplier's
recommendations and the Annual Operating Plan and
Budget.
4.2.2 Approvals and Permits. Operator shall obtain and
maintain in effect all Approvals and Permits which may
be obtained and maintained in Operator's name, and
assist Owner in obtaining and renewing all Approvals
and Permits which must be maintained in Owner's name.
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4.2.3 Payment of Employees and Subcontractors. Operator
shall ensure that all of its employees, agents, and
subcontractors are paid in accordance with their agreed
terms and conditions, and comply with all filing and
payment requirements under applicable statutes in a
timely manner.
4.2.4 Subcontracts. Operator shall enter into such
subcontracts with Major Subcontractors as Operator may
elect following the approval of Owner and Millennium,
and retain such other subcontractors as may be
acceptable to Owner in the exercise of Owner's
reasonable discretion.
4.2.5 Employment and Training of Employees. Operator
shall employ, and ensure adequate training of,
Operator's employees and the employees of any of its
Affiliates (duly licensed where required by statute or
regulation) for the operation and maintenance of the
Project and the Leased Equipment consistent with the
equipment suppliers' recommendations and Prudent
Engineering and Operating Practices, and plan and
administer all matters pertaining to employee
relations, salaries, wages, working conditions, hours
of work, termination of employees, employee benefits,
employee staffing, safety and related matters
pertaining to such employees, and maintain records with
respect to all such matters.
4.2.6 Maintenance of Records. Operator shall monitor,
prepare and maintain records of the operations and
maintenance of the Project and the Leased Equipment in
such form and covering such matters as Owner may
reasonably request, consistent with Prudent Engineering
and Operating Practices, generally accepted accounting
principles, and applicable records retention
requirements, and make such records available for
inspection and/or audit by Owner, the Lenders and their
respective designees. Such records shall, at a minimum,
include all interconnections, including Steam and
electricity deliveries, fuel consumption, feed water,
boiler feed water, condensate return, wastewater
discharges, and such other information as may be
reasonably requested by Owner. Equipment operating and
maintenance records shall be maintained for the life of
the equipment. Other records shall be maintained for
such periods as Owner shall reasonably require.
4.2.7 Computerized Inventory of Spare Parts. Operator
shall implement a computerized inventory control system
to identify, catalog, and disburse spare parts for the
maintenance of the Project and the Leased Equipment,
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procuring, as agent for Owner, replacement spare parts
and refurbishing, where practical or economical, spare
parts to permit their re-use.
4.2.8 Operation and Maintenance of Project. Operate and
maintain the Project and the Leased Equipment in
accordance with the operation and maintenance programs
prepared by Operator, and, if necessary, update such
programs and create new programs as required for
operation and maintenance of the Project and the Leased
Equipment.
4.2.9 Maximization of Energy Production; Minimization of
Unscheduled Outages. Operator shall operate and
maintain the Project and the Leased Equipment to
maximize the continuous, reliable, safe and efficient
generation of electrical and thermal energy by the
Project and Millennium so as to conserve fuel and
financial resources and to minimize unscheduled
outages, and provide maintenance for the Project and
the Leased Equipment in a cost effective manner,
subject to any limitations imposed by Legal and
Contractual Requirements.
4.2.10 Cleanliness. Operator shall use all reasonable
care necessary to keep the Project, the Project Site
and the Leased Equipment in a clean and orderly
condition and free from debris, rubbish or waste.
4.2.11 Emergency. Operator shall take all necessary
precautions and appropriate corrective actions in the
event of an Emergency to prevent injury to personnel,
to prevent or mitigate noncompliance with Environmental
Laws and to safeguard the security of the Project and
the Leased Equipment.
4.2.12 Freedom from Liens and Encumbrances. Operator
shall keep the Project and the Leased Equipment free
and clear of any liens and encumbrances arising out of
the acts, omissions or debts of Operator or its
employees, agents or subcontractors claiming by,
through, or under Operator (this subsection shall not
apply to mechanics' liens and liens of any nature
arising by operation of law, provided such liens are
promptly removed by the payment of the debts they
secure when due; in the event of a dispute between
Operator or its subcontractors and a lien holder,
Operator's obligation to Owner pursuant to this
provision may be satisfied by the posting of an
appropriate bond to the extent acceptable to the
Agent).
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4.2.13 Preparation of Subsequent Annual Operating and
Budget Plans. In the event the Project Operations Date
occurs on any day other than the first day of a
calendar year, Operator shall prepare a modification to
the initial Annual Operating Plan and Budget to cover
the period from the first anniversary of the Project
Operations Date to the end of the calendar year in
which such first anniversary occurs, all as more fully
described in Section 6.2. Thereafter, Operator shall
prepare subsequent Annual Operating Plans and Budgets
which shall include all anticipated Expenses of the
Project to be paid by Owner for each succeeding
calendar year, all as more fully described in
Section 6.2. All such Annual Operating Plans and
Budgets shall be prepared only after consultations with
Owner and Millennium.
4.2.14 Scheduled Major Maintenance. Operator shall
coordinate with Owner (and, in the case of scheduled
major maintenance on the combustion turbines, Major
Maintenance Contractor) for the performance of all
scheduled major maintenance on the combustion turbines,
the heat recovery steam generators and the main
transformers and switch gear. To the extent possible,
all such scheduled major maintenance shall be performed
during periods when the Morris Plant will also be out
of operation in order to minimize the need for standby
electricity and auxiliary steam production and during
non-peak seasons in order to minimize the cost of any
required standby electricity.
4.2.15 Fuel Management Procedures. Operator shall
develop and implement fuel management procedures in
cooperation with Millennium. Operator acknowledges
that Millennium shall have primary responsibility for
fuel management, and Operator shall furnish Millennium
with information regarding the fuel requirements of the
Project and Boilers 5 and 6 based on the Annual
Operating Plan and Budget, Millennium's then current
projected demand for electricity and Steam, and Owner's
Excess Sales requirements. Operator shall also monitor
the quality of Methane Off Gas being provided by
Millennium to ensure that it meets the specifications
set out in Exhibit C-1 to the ESA. In addition,
Operator shall ensure that quantities of Methane Off
Gas delivered to the combustion turbines shall not
exceed 280 million Btu's per hour, unless agreed
otherwise between Owner and Millennium, and shall
coordinate with Millennium to optimize its delivery of
Methane Off Gas. To the extent that Millennium
provides Methane Off Gas which fails to meet the
specifications set out in Exhibit C-1 to the ESA, or to
the extent Operator determines that Methane Off Gas
meeting the specifications set out such Exhibit may
jeopardize operation of the Project,
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Operator shall promptly notify Owner thereof. Operator
shall follow any instructions given to it by Owner
regarding substitution of pipeline quality natural gas
for Methane Off Gas.
4.2.16 Monthly Reports of Delivered Fuel. Operator shall
provide to Owner monthly reports setting out the total
delivered amount of fuel to the Project, separately
setting forth the delivered amounts of pipeline natural
gas, Methane Off Gas and E/P Mix Gas. These reports
will be accompanied by appropriate supporting
documentation sufficient (other than with respect to
pricing information) to permit Owner to provide a fully
substantiated fuel cost report to Millennium.
4.2.17 Raw Water. Operator shall monitor the quantity
and quality of raw water delivered to the Project by
Millennium. Operator shall provide to Owner each month
a report of the quantity and quality of raw water
utilized by the Project.
4.2.18 Boiler Feedwater. Pursuant to Section 10.2 of the
ESA, Operator shall provide boiler feedwater to
Millennium up to a maximum of 1300 gallons per minute,
meeting the minimum requirements set out in Exhibit F-2
of the ESA. Operator shall monitor the quality and
quantity of boiler feed water delivered to both
Millennium and the Project. Meter results showing the
quality and quantity of boiler feed water delivered to
Millennium shall be furnished to Owner and Millennium
at the end of each month.
4.2.19 Condensate Return. Operator shall monitor the
quality and quantity of condensate returned to the
Project by Millennium, and ensure that such condensate
meets the minimum requirements set out in Exhibit F-3
of the ESA, and that such condensate is not
contaminated with oil, excess rust, or other foreign
substances that would render the condensate unsuitable
for boiler makeup water. Any condensate not meeting
these standards shall be rejected by Operator.
4.2.20 Waste Water Discharges. Operator shall ensure
that cooling tower blow down discharges, oily water
discharges, RO System discharges, boiler blow down
discharges, effluent from the demineralized water
system, storm water runoff, wash water from internal
combustion turbine or other equipment cleaning and
other waste discharges meet the criteria set out in
Exhibits F-4 through F-9 respectively of the ESA and
shall be in
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compliance with the Millennium NPDES permit. Operator
shall maintain the metering equipment on each waste
water discharge from the Project. The meter data shall
be furnished to Owner at the end of each month, or as
otherwise required by the Millennium NPDES permit.
4.2.21 Energy Services Billing Information. Operator
shall provide Owner with all information required to
bill Millennium for energy services each month.
Without limiting the generality of the foregoing, such
information shall include data covering steam and
electricity deliveries to Millennium, average
condensate return levels, steam required to return the
Millennium ethylene plant to service which is produced
by existing Boilers 5 and 6, third party electricity
sales, quantities of Methane Off Gas and E/P Mix Gas
provided by Millennium, all data needed to calculate
waste water discharge fees due Millennium, and the
quantities of demineralized and boiler feed water
furnished to the Morris Plant, as well as the quantity
of raw water taken by the Project from Millennium.
4.2.22 Consultations with Owner. Operator shall report
to, and consult with, Owner regarding the operation of
the Project on a regularly scheduled basis, as
reasonably requested by Owner.
4.2.23 Indemnities, Warranties and Guarantees. Operator
shall use reasonable commercial efforts to secure from
vendors, suppliers and subcontractors the best
indemnitees, warranties and guarantees as may be
commercially available regarding supplies, equipment,
and services purchased for the Project, all of which
shall be assigned to Owner (Operator shall render
reasonable assistance to Owner for the purpose of
enforcing such indemnitees, warranties or guarantees of
which Owner is a beneficiary regarding the Project
and/or the Leased Equipment).
4.2.24 Performance of Other Services. Operator shall
perform for Owner such other services as may from time-
to-time be reasonably requested or necessary or
appropriate in connection with the operation and
maintenance of the Project and the Leased Equipment.
4.2.25 Notification of Deficiency in Revenues; Excessive
Costs; Failure to Comply with Legal and Contractual
Requirements. Operator shall promptly notify Owner of
(i) any condition, event, or act which is likely to
result in a material deficiency in budgeted revenues,
or an excess in budgeted costs,
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(ii) any forced outages or significant malfunction of
the Project and/or the Leased Equipment immediately,
and (iii) any material failure to comply with any Legal
and Contractual Requirements or any event which is
reasonably expected to cause such material failure.
4.2.26 Information Requested by Owner. Operator shall
promptly provide Owner with such information relative
to the Project and the Leased Equipment as Owner may
reasonably request.
4.2.27 Warranty Inspections. In addition to routine
inspections during the warranty period, Operator shall
perform an "end of warranty period" inspection of all
major components of the Project, and prepare a report
to Owner of all breaches of the warranties provided by
the Construction Contractors (and any of its vendors)
under the EPC Contract and the RO Contract.
4.2.28 Repair or Replacement. Following damage or other
loss to the Project and/or the Leased Equipment,
Operator shall, on behalf of and with the approval of
Owner, repair or replace damaged components as required
as promptly as feasible.
4.2.29 Integrated Energy Management Plan. Operator shall
work with Owner and Millennium to develop and implement
an integrated energy management plan. This plan will
include the sharing between the Project and the Morris
Plant of distributed control system data for monitoring
purposes only, system operating capabilities, and
design criteria in order to optimize the Morris Plant's
and the Project's energy systems. Sources to be
monitored shall include the 600 pound, 150 pound, 50
pound and 25 pound steam systems, deaerators, fuel and
water systems. To the greatest extent possible, Owner
shall integrate the Project's distributed control
system data with that of Millennium.
4.2.30 PURPA Compliance. Operator shall monitor Project
compliance with the PURPA efficiency and operating
standards and notify Owner of any potential violation
of such standards in sufficient time to permit Owner
take appropriate corrective action. Operator shall
prepare a monthly report to Owner regarding PURPA
compliance and an end of year final report with
supporting documentation.
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4.2.31 Emissions Compliance. Operator shall monitor
emissions from the Project and the Leased Equipment and
compliance with emissions standards set forth in the
air permit (including tracking of the 365 day rolling
emission limits) and notify Owner of any potential
violation of such standards in sufficient time to
permit owner to take corrective action.
4.2.32 Cooperation with Lenders. Operator shall, as and to
the extent requested by Owner cooperate with the Lender's
independent engineer.
4.2.33 Restoration Plans. In the event of any
damage to or destruction of, or upon condemnation or
appropriation or any similar event with respect to, all
or a portion of the Project, Operator shall, at
Owner's request, prepare, or assist in the preparation
of a plan relating to the rebuilding, repairing or
restoring of the Project.
V. RESPONSIBLITIES OF OWNER
5.1 Responsibilities of Owner. Owner shall be responsible
for delivering the Project to Operator and providing Operator
with general strategic guidance, as well as specific operational
instructions, including, without limitation, the following:
5.1.1 Delivery of Care, Custody and Control of the
Project and the Leased Equipment to Operator. The
responsibility for the continuous operation of the
Project, as well as care, custody and control of the
Project, shall be delivered to Operator by Owner on the
Project Operations Date. The responsibility for the
continuous operation of the Leased Equipment, as well
as care, custody and control of the Leased Equipment,
shall be delivered to Operator by Owner on the Leased
Equipment Operations Date. The Owner's obligation
under this Section 5.1.1 is to deliver a complete plant
as contemplated in the EPC Contract, the ESA and the RO
Contract.
5.1.2 Provision of Spare Parts Inventory. Owner will
provide Operator with those spare parts for which
Construction Contractors are responsible under the EPC
Contract and RO Contract and a budget for acquiring the
additional spares approved by Owner pursuant to
Section 4.1.5.
5.1.3 Provision of Project Facilities. Owner shall
provide Operator with a Project Site office, work shop,
laboratories, locker rooms, storage and associated
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facilities. Furnishing and equipping of these
facilities shall be the responsibility of Operator, but
for Owner's account.
5.1.4 Project Site Services. Owner shall provide, or
cause Millennium to provide, the following Project Site
services as necessary for the operation and maintenance
of the Project and/or the Leased Equipment, at no cost
to Operator: ingress and egress to the Project Site;
fuel, raw make-up water, waste water disposal services,
standby power, and telephone services.
5.1.5 Owner's Representative. Owner shall provide an
Owner's representative who shall represent and have the
authority to bind Owner in all matters regarding this
Agreement, except as specifically limited in writing by
Owner.
5.1.6 Approvals and Permits. Owner shall be responsible
for obtaining and maintaining all Approvals and Permits
necessary for the Project to be legally authorized to
operate and required to be obtained in Owner's name.
Operator shall provide full and reasonable continuing
cooperation in obtaining and maintaining all such
Approvals and Permits, and shall review Owner's
applications for accuracy and completeness.
5.1.7 Provision of Operating and Maintenance Manuals.
Owner shall turn over to Operator those operation and
maintenance manuals (including as-built drawings of
process and instrument diagrams, electrical one-lines
and general arrangements) which it receives from
Construction Contractors or equipment manufacturers.
Owner shall also provide manuals furnished by
Millennium regarding the operation and maintenance of
the Leased Equipment. Operator shall be responsible for
the periodic updating of such manuals following
receipt.
5.1.8 Hazardous Substances Disposal. Owner shall be
responsible for arranging for the lawful and proper
disposal of Hazardous Substances generated by the
Project, and will also be responsible for making
appropriate arrangements with Millennium for the
removal of Hazardous Substances which are discovered by
Operator with respect to the Leased Equipment.
5.1.9 Copies of Project Agreements. Owner will give
Operator copies of all Project Agreements and Permits
and Approvals required for the
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performance of Operator's responsibilities hereunder.
These shall be maintained in confidence by Operator.
5.1.10 Administration of Contracts and Financing. Owner
shall administer the Project Agreements including the
EPC Contract, the RO Contract and any financing for the
Project, including preparation of any required reports
to the Lenders.
5.1.11 Fuel Supply. Owner shall ensure that fuel is
supplied to the Project and the Leased Equipment,
including all natural gas necessary for Operator to
satisfy Excess Sales requirements. Owner shall monitor
and provide periodic reports to Operator regarding the
natural gas reserve inventory levels to be maintained
under the NIGAS Agreement.
5.1.12 Provision of Business Strategy and Guidance with
Respect to Excess Electricity Sales. Owner shall also
provide to Operator periodic written guidance with
respect to Excess Sales to ensure that such sales do
not conflict with Owner's responsibilities to
Millennium under the ESA. To the extent that Owner
arranges for the sale of interruptible or firm electric
capacity, Owner shall also provide copies of such
agreements to Operator and instructions regarding their
implementation. Owner shall be responsible for making
all such arrangements for Excess Sales.
VI. OPERATION OF THE PROJECT AND THE LEASED EQUIPMENT
6.1 Visits and Reviews by Owner. Owner, the Lenders and
their respective representatives shall have the right, during
both normal working hours and all other hours, to visit the
Project Site in order to monitor Operator's performance of its
obligations under this Agreement and to inspect the Project Site
and any part thereof. Owner and its representatives shall also
have the right to take visitors, after reasonable notice to
Operator, onto the Project Site, into the Project and to the
Leased Equipment to observe the various services which Operator
performs; provided, however, that such visits shall be conducted
in a manner so as to minimize interference with Operator's
obligations hereunder, and all such visitors (including without
limitation Owner, the Lenders and their respective
representatives) shall comply with the safety rules and
procedures established by Operator and Millennium.
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6.2 Development of Annual Operating Plan and Budget and
Major Maintenance Budget. Operator and Owner shall develop an
Annual Operating Plan and Budget for each Operating Year in
accordance with the following provisions:
6.2.1 Extension to Initial Annual Operating Plan and
Budget. In the event the Project Operations Date occurs on any
day other than the first day of a calendar year, Operator shall
prepare and deliver to Owner within four (4) months of the
Project Operations Date an extension to the initial Annual
Operating Plan and Budget to cover the period from the first
anniversary of the Project Operations Date to the end of the
calendar year in which such first anniversary occurs. Such Annual
Operating Plan and Budget shall include all expenses which
Operator expects to incur for the operation and maintenance of
the Project and the Leased Equipment during such extension
period.
6.2.2 Annual Operating Plan and Budget. In all
other instances, Operator shall prepare and deliver to
Owner by no later than October 1 of each Operating Year
a proposed Operating Plan and Budget for the subsequent
Operating Year. Each such Operating Plan and Budget
shall include all expenses which Operator expects to
incur for the operation and maintenance of the Project
and the Leased Equipment during such subsequent
Operating Year. Such Annual Operating Plan and Budget
shall also set forth the anticipated operation and
maintenance plan including projected electrical and
steam production levels for the Project broken out on a
monthly basis, and a complete schedule (to the extent
feasible) of routine maintenance to be accomplished
during such Operating Year.
6.2.3 Major Maintenance Budget. Operator shall
also prepare and deliver to Owner by October 1 of each
Operating Year a proposed Major Maintenance Budget that
shall include a plan and budget for major maintenance
tasks (including major Project and Leased Equipment
repairs) for the five-year period commencing with the
subsequent Operating Year.
6.2.4 Consent of Owner. Neither any Annual Operating
Plan and Budget, nor any Major Maintenance Budget shall be
effective without the consent and agreement of Owner. Owner and
Operator shall meet and exchange information as is necessary in
connection with Owners review and consent. If Owner and Operator
cannot agree on a Major Maintenance Budget by the start of the
first year of such Major Maintenance Budget, the Major
Maintenance Budget shall be as determined by Owner. If Owner and
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Operator cannot reach agreement on the Annual Operating
Plan and Budget by the start of any Operating Year (or by the end
of the fourth (4th) month after the Project Operations Date, in
the case of an extension contemplated in Section 6.1), either
Party may request that the relevant Annual Operating Plan and
Budget be submitted to dispute resolution in accordance with
Article XIII. Until such time as agreement is reached or the
dispute is resolved, the Annual Operating Plan and Budget (the
"Default Budget") for such Operating Year (or with respect to the
extension to the Annual Operating Plan and Budget contemplated in
Section 6.2.1, for such extension period) shall be as follows:
(a) For all labor costs, the budget shall be the budget for the
preceding Operating Year, adjusted by the change in the cost of
hourly labor at the Morris Plant from January 1 of such preceding
Operating Year to January 1 of the Operating Year for which such
Default Budget applies.
(b) For operating consumables, tools, parts, and other supplies
and materials, the budget shall be the actual cost of such items.
(c) For all other items the budget shall be the same as the
budget for the preceding Operating Year.
(d) The Default Budget shall be modified (i) to delete any non-
recurring expense from the Annual Operating Plan and Budget from
the preceding Operating Year, if such non-recurring expense is
not reasonably expected to occur during the Operating Year for
which the Default Budget is applicable, and (ii) to include
provision of any non-recurring expense which was not included in
the Annual Operating Plan and Budget for the preceding Operating
Year, if such non-recurring expense is reasonably expected to
occur during the Operating Year for which the Default Budget is
applicable.
Once Owner and Operator have reached agreement on the Annual
Operating Plan and Budget, Operator shall be bound by such
budget, and shall have no authority to incur expenses in excess
of such budget without the prior approval of Owner.
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6.3 Change Orders to Annual Operating Plan and Budget or
Major Maintenance Budget. The Parties acknowledge that Changes
may be required during the term of this Agreement to an Annual
Operating Plan and Budget or a Major Maintenance Budget. Either
Owner or Operator may, by written notice to the other Party,
propose a Change. The written notice shall describe the proposed
Change in reasonable detail and the reasons therefor. No Change
to an Annual Operating Plan and Budget or a Major Maintenance
Budget shall be undertaken by Operator prior to the execution by
Owner of a written Change Order approving such change; provided,
however, that Operator shall be entitled to implement a proposed
Change without the prior approval of Owner if such Change is
required due to an Emergency.
6.3.1 Emergencies. If Operator implements a Change without
the prior approval of Owner due to an Emergency, Operator shall
promptly notify Owner of the nature and extent of such Change.
6.3.2 Change in Law or Changes in Project Agreements. If a
Change in an Annual Operating Plan and Budget or a Major
Maintenance Budget is required as a direct consequence of either
a Change in Law or a Change in Project Agreements, Operator shall
promptly notify Owner in detail of the nature and extent of such
Change.
6.3.3 Certain Other Events. If a Change in an Annual
Operating Plan and Budget or a Major Maintenance Budget is
required as a direct consequence of (i) the replacement of
Millennium's existing Boilers 5 and 6, or (ii) a breaking of or
accident to equipment, Operator shall promptly notify Owner in
detail of the nature and extent of such Change.
6.3.4 Excess Sales. If a Change in an Annual Operating Plan
and Budget or a Major Maintenance Budget is required as a direct
consequence of Excess Sales, Operator shall promptly notify Owner
in detail of the nature and extent of such Change.
6.4 Modifications to Annual Operating Plan and Budget Due
to Changes in Requirements of Millennium. Owner and Operator
each acknowledges that the requirements of Millennium for steam
and electricity may change during the course of an Operating
Year, and that the projected levels of steam and electrical
production set out in the Annual Operating Plan and Budget are
estimates, based on information provided by Millennium. Operator
shall utilize its best efforts to meet the actual steam and
electrical requirements of Millennium, including any requirements
for Monomer Start-up Steam,
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regardless of whether such requirements are accurately reflected
in the Annual Operating Plan and Budget. Operator also
acknowledges that the quantities of Methane Off Gas which may be
available to the Project will vary over time, and that Operator
will be required to utilize fuel mixtures which involve varying
amounts of natural gas and Methane Off Gas, up to the limits set
out in the ESA. To the extent that Operator incurs additional
costs due to steam and electrical requirements of Millennium
which exceed those set out in the Annual Operating Plan and
Budget, Operator shall promptly notify Owner of the nature and
extent of such Change.
6.5 Standby Power Guaranty. During each Operating Year
commencing on the Acceptance Date, Operator shall guaranty that
Owner incurs no greater than five hundred thousand dollars
($500,000) (pro-rated for any Agreement Year which contains less
than 12 months) of Operator Standby Power Costs. Operator
acknowledges that included within such five hundred thousand
dollars ($500,000) are all Standby Power Costs incurred due to
routine or scheduled maintenance of the Project..
6.6 Plant Heat Rate Guarantee. Operator acknowledges that
maintenance of the projected plant heat rate is important to
Owner, and agrees to maintain the plant heat rate for the plant
within the Guaranteed Heat Rate. Operator acknowledges that the
Guaranteed Heat Rate curve is based on the use of up to 280
MMBtu per hour of Methane Off Gas as part of the fuel mix, fuel
heating, and inlet heating when at partial load, and also
incorporate adjustments for (a) gas turbine degradation between
major overhauls and (b) adjustments for load variations based on
the demand placed on each gas turbine generator set. Excessive
heat rate which is incurred due to Force Majeure events, the
failure of Owner and/or Millennium to furnish sufficient fuel,
makeup water, waste disposal services, and other services
required to be provided to Operator hereunder, latent defects, or
the failure to perform maintenance recommended by Operator in
accordance with Prudent Engineering and Operating Practices but
excluded from any Major Maintenance Budget or any Annual
Operating Plan and Budget by Owner, shall in each case be
excluded from the calculation of heat rate for the purposes of
this guaranty. For all purposes of this Agreement, the heat rate
of the Project shall be determined in a manner to be agreed
between Operator and Owner no later than the date which is twelve
months after the date hereof.
6.7 Leased Equipment.
6.7.1 Operator Responsibilities. Operator shall perform all
maintenance on the Leased Equipment, all Minor Leased Equipment
Repairs and all repairs or replacement of Boilers 5 and 6.
Subject to Section 6.8, Operator shall
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coordinate with Millennium and Owner the scheduling of
all other repairs on the Leased Equipment, which
repairs are the responsibility of Owner.
6.7.2 Owner Responsibilities. Operator shall not be
responsible for the following repairs and/or
replacements involving the Leased Equipment, which
repairs and/or replacements are acknowledged by Owner
to be its responsibility:
(a) reconstruction costs arising from a failure of a major
component of the boiler feedwater pumps, including their
respective drivers;
(b) the failure of a demineralizer vessel, including its
internals or its lined interconnecting piping;
(c) the failure of a boiler feedwater storage tank;
(d) the failure of the neutralization pit and accessories;
(e) the repair and maintenance of electrical switch gear,
breakers, starters, relays, controls, and wiring which is part of
the Leased Equipment, unless specifically damaged by Operator due
to improper operation; and
(f) one replacement of each of the four remaining resin trains
(out of the five original trains); provided, that Owner shall
also be responsible, at its cost, for any further replacements if
such replacements are caused by a lateral or other infrastructure
failure.
To the extent that Operator determines that any of the
foregoing repairs, maintenance or replacements are
required, it shall notify Owner. To the extent
possible, Operator shall identify any problems with
such systems in advance of equipment failure in order
to maximize availability and minimize Standby Power
Costs.
6.7.3 Steam and Electricity. All electricity and steam
required for operation of the Leased Equipment shall be
provided by Millennium through purchases made from
Owner.
6.8 Unscheduled Maintenance. Operator shall perform all
maintenance, repair and replacement requirements of the Project
notwithstanding that the same were not
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anticipated or included in the approved Annual Operating Plan and
Budget. Operator will not commence any work under this
Section without the approval of Owner, except that, in the event
that such work is required by an Emergency, Operator shall
undertake such work and notify Owner as soon as possible.
6.9 Gas Turbine Maintenance Agreement. Operator and Owner
shall work together to pursue an economic long-term gas turbine
maintenance agreement with a recognized provider of gas turbine
maintenance services acceptable to Owner and Lender. Such long-
term gas turbine maintenance agreement shall be entered into by
Owner and shall be administered by Operator.
6.10 Capital Improvement Budget. Operator shall, from time
to time, make recommendations for such capital improvements to
the Project as may improve the operating efficiency thereof and
shall, if requested by Owner, assist Owner in preparing a budget
for any such capital improvements Owner may elect to implement.
ARTICLE VII. FEES AND EXPENSES PAYABLE TO OPERATOR
7.1 Mobilization Fee. As compensation for the services
provided by Operator during the Mobilization Period, Operator
shall be entitled to a one time fee equal to two hundred fifty
thousand dollars ($250,000), payable within thirty (30) days
after the earlier of the Leased Equipment Mobilization Date or
the Project Mobilization Date.
7.2 Annual Operator's Fee. As compensation to Operator for
its performance of its obligations hereunder, Owner shall pay
Operator an annual fee (the "Annual Fee") commencing with the
first Operating Year after the Project Operations Date, and every
Operating Year thereafter. Operator's Fee for the first
Operating Year shall be five hundred thousand dollars ($500,000)
and shall be prorated for the number of months in the first
Operating Year. Thereafter, Operator's Fee shall be adjusted
annually by the percentage change in the Inflation Escalation
Index utilizing the value of the Inflation Escalation Index at
January 1, 1998, as the base year value. Operator's Fee shall be
payable in equal monthly installments in arrears, subject to
Owner's right to set off against such installments any liquidated
damages owed by Operator to Owner pursuant to Sections 8.1 and/or
8.2 hereof. Operator acknowledges that Owner may set off as much
as one hundred percent (100%) of the annual Operator's Fee to
cover any such liquidated damages, pursuant to the provisions
contained herein.
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7.3 Reimbursement for Operator's Costs for Operation.
Operator shall be reimbursed for the actual costs of Project and
Leased Equipment operation, including, without limitation:
7.3.1 Labor Costs. Operator shall be reimbursed for the
actual costs of recruitment and employment of permanent and
temporary staff and specialists from and after the Leased
Equipment Mobilization Date with respect to such costs incurred
in connection with the operation of the Leased Equipment and from
and after the Project Mobilization Date with respect to such
costs incurred in connection with the operation of the Project,
such costs to include employment related benefits applicable to
such staff and specialists.
7.3.2 Project Maintenance and Repair Costs.
Operator shall be reimbursed for the actual cost
of Project and Leased Equipment consumables, spare
parts, and repairs and/or replacement components
supplied by Operator in accordance with the
provisions of this Agreement.
7.3.3 Certain Other Expenses. Operator shall
also be reimbursed for all direct costs incurred
by Operator and not otherwise covered by
Sections 7.3.1 and 7.3.2 hereof, which are
directly related to the operation and maintenance
of the Project, such as any federal, state or
other sales, use, value added, gross receipts, or
similar tax, any insurance premiums paid by
Operator to obtain the insurance required of
Operator hereunder, and the costs of any permits
or licenses required of Operator. Operator shall
furnish Owner with reasonable documentation of
such costs.
7.4 Demobilization. Upon demobilization, Owner shall
reimburse Operator all reasonable costs and expenses associated
with such demobilization, including reasonable severance, out-
placement, relocation, continuation of benefits, unemployment
premiums and other similar costs; provided, that Operator shall
take all reasonable efforts to minimize such costs. In the event
that Millennium terminates this Agreement pursuant to the second
proviso of Article III, Operator shall be paid a demobilization
fee equal to twice the Annual Fee at the time of such
termination.
7.5 Invoices. Operator shall prepare and submit to Owner
on a monthly basis invoices covering the costs and fees to which
Operator is entitled under this Article VII. Such invoices shall
be accompanied by expense statements, vouchers, or other
supporting
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information as Owner may reasonably require. Owner shall pay, or
request its Lender to pay on Owner's behalf, all undisputed
amounts due Operator no later than thirty (30) days after receipt
of the invoice. All payments to Operator shall be made by wire
transfer in immediately available funds to the account set forth
in such invoice. Any payment not made within thirty (30) days
after receipt of Operator's invoice will bear interest from the
date on which payment was due at the rate of one percent (1%) per
month. To the extent that Owner disputes any charges included in
an invoice submitted by Operator, Owner shall be entitled to
withhold such amounts pending the resolution of the dispute,
pursuant to the provisions of Article XIII. Should the
arbitration panel established pursuant to Section 13.2
subsequently determine that some or all of the disputed amount
was due Operator, Owner shall pay such amount plus interest at
the rate of one and a half percent (1 1/2%) per month from the
date such payment was originally due until the date of payment.
ARTICLE VIII. LIQUIDATED DAMAGES AND INCENTIVES
8.1 Liquidated Damages for Excess Standby Power Costs. In
the event that Owner is required to pay five hundred thousand
dollars ($500,000) or more in Operator Standby Power Costs in any
Operating Year (prorated for any Operating Year which is less
than twelve months), then Operator shall pay to Owner, as
liquidated damages, and not as a penalty, an amount equal to
fifty percent (50%) of the difference between such Operator
Standby Power Costs incurred during such Operating Year and five
hundred thousand dollars ($500,000), subject to a ceiling equal
to the Maximum Liquidated Damages applicable to Operator Standby
Power Costs. Payment of liquidated damages under this Section
8.1 shall, subject to Section 12.4, constitute Owner's exclusive
remedy hereunder for reduced availability of electricity from the
Project.
8.2 Liquidated Damages for Operator's Failure to Maintain
Guaranteed Heat Rate. In the event that Operator fails to
maintain in any Operating Year, the Guaranteed Heat Rate,
Operator shall pay as liquidated damages, and not as a penalty,
an amount equal to fifty thousand dollars ($50,000) for each one
percent (1%) (or part thereof) by which the average heat rate for
the Project for the Operating Year exceeded the Guaranteed Heat
Rate, subject to a ceiling equal to the Maximum Liquidated
Damages and prorated for any Operating Year which is less than
twelve months. Payment of such liquidated damages shall, subject
to Section 12.4, be Owner's sole and exclusive remedy for the
failure of Operator to achieve the Guaranteed Heat Rate.
8.3 Billing and Collection of Liquidated Damages. Not
later than twenty (20) days after the end of each Operating Year,
Operator shall render a statement to Owner, with all necessary
and appropriate supporting documentation, calculating the amount
of
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liquidated damages (if any) due Owner in accordance with
Sections 8.1 and 8.2 for the period from the beginning of the
Operating Year through the end of such Operating Year. Any
amounts due to Owner on account of such liquidated damages,
together with all amounts, if any, being paid by Operator to cure
defaults under Section 12.4(d), (provided that Operator may set
off from such amount any past due amounts owed to Operator by
Owner) shall be paid by Operator within thirty (30) days of the
delivery of a statement therefor, but Owner's acceptance of such
amounts shall not preclude Owner from disputing under
Article XIII the accuracy of the amount of liquidated damages
owed as set forth on the statement. Should Operator fail to
provide such statement, or fail to pay the applicable liquidated
damages, Owner shall have the right to calculate such damages
independently, and to set off such damages from amounts otherwise
due Operator for the Operations Fee. In no event shall the
liquidated damages payable under Sections 8.1 and 8.2 exceed one
hundred percent (100%) of Operator's Fee in the applicable
Operating Year.
8.4 Bonuses for Improved Availability and/or Superior Heat
Rate. To the extent that Operator is able to keep Operator's
Standby Power Costs below the five hundred thousand dollars
($500,000) guaranteed by Operator in accordance with Section 6.5
with respect to any Operating Year (prorated for any Operating
Year which is less than twelve months) Operator shall be entitled
to a bonus in an amount equal to fifty percent (50%) of the
difference between five hundred thousand dollars ($500,000) and
the Operator Standby Power Costs incurred during such Operating
Year, up to a maximum of eighty percent (80%) of the Annual
Operator's Fee set out in Section 6.2. If Operator is able to
achieve a Project heat rate superior to that of the Guaranteed
Heat Rate and guaranteed in accordance with Section 6.6 for the
applicable Operating Year, Operator shall be entitled to a bonus
equal to fifty thousand dollars ($50,000) for each one percent
(1%) (or part thereof) by which the Project heat rate is better
than the applicable guaranteed value, subject to a ceiling equal
to twenty percent (20%) of the Annual Operator's Fee set out in
Section 6.2 and prorated for any Operating Year which is less
than twelve months. Operator shall render a statement to Owner
at the end of each Agreement Year setting out any bonuses which
it has earned pursuant to this section, along with reasonable
documentation thereof. Any bonus payments due Operator shall be
made by Owner within thirty (30) days of receipt and acceptance
of such statement. In the event of any dispute, either Owner or
Operator may refer the dispute to arbitration pursuant to the
provisions of Article XIII.
8.5 Adjustment of Performance Standards. In the event that
Acceptance (as defined in the EPC Contract) is achieved by
payment of liquidated damages pursuant to Article 12 of the EPC
Contract, Operator and Owner shall negotiate in good faith to
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adjust the performance standards set forth in this Article VIII
to reflect the reduced performance capabilities of the Project.
In the event that Operator and Owner are not able to reach
agreement on such adjusted performance standards within sixty
(60) days of the Acceptance Date, Owner and Operator shall
commence dispute resolution proceedings pursuant to Article XIII
to resolve such dispute.
ARTICLE IX. INDEMNIFICATION RESPONSIBILITIES OF THE PARTIES
9.1 Indemnification Responsibilities of Operator. Operator
shall indemnify and hold harmless Owner, Owner's Affiliates, and
Lender(s), and their respective directors, officers, employees,
agents and representatives (hereinafter the "Owner Indemnified
Parties") from and against any and all claims (including, without
limitation, all environmental claims) arising out of, incident
to, or related to Operator's willful misconduct or gross
negligence in connection with its performance of this Agreement,
made by any Person (other than the Owner Indemnified Parties),
whether based on contract (including any breach of any agreement
respecting any subcontractor but specifically excluding any
breach of the Project Agreements), strict liability or otherwise
(except to the extent any such claims arise out of, are incident
to or related to the negligence of, or the breach of this
Agreement by, any Owner Indemnified Parties, in which event the
claims shall be borne by the Parties in proportion to the
respective fault of each Party). The indemnification obligations
under this Section 9.1 shall not be limited by any limitation on
the amount or type of damages, compensation or other employee
benefit payable under any worker's compensation or other employee
benefit acts or insurance policies. The indemnity provisions
contained in this Section 9.1 shall in no manner amend or
otherwise modify or limit any other of Operator's obligations
expressed elsewhere in this Agreement except as expressly
provided with respect to liquidated damages.
9.2 Owner Indemnification Obligations. Owner shall
indemnify and hold harmless Operator and its directors, officers,
employees, agents and representatives (hereinafter the "Operator
Indemnified Parties") from and against any and all claims arising
out of, incident to, or related to Owner's willful misconduct or
gross negligence in connection with its performance of this
Agreement, made by any Person (other than Operator and the
Operator Indemnified Parties), whether based on contract
(including negligence by commission or omission), strict
liability or otherwise (except to the extent any such claims
arise out of, are incident to or related to the negligence of, or
the breach of this Agreement by any Operator Indemnified Parties,
in which event the claims shall be borne by the Parties in
proportion to the respective fault of each Party). The
indemnification obligations under this Article 9.2 shall not be
limited by any limitation on
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the amount or type of damages, compensation or other employee
benefit payable under any worker's compensation or other employee
benefit acts or insurance policies. The indemnity provisions
contained in this Article 9.2 shall in no manner amend or
otherwise modify or limit any other of Owner's obligations
expressed elsewhere in this Agreement.
9.3 Survival. The duty to indemnify under this Article
will continue in full force and effect notwithstanding the
expiration or termination of this Agreement with respect to any
claim or action based on facts or conditions which occur prior to
such termination or expiration.
9.4 Cooperation Regarding Claims. If any Indemnified Party
intends to seek indemnification under this Article from an
Indemnifying Party with respect to any action or claim, the
Indemnified Party shall give the Indemnifying Party notice of
such claim or action within thirty (30) days of the commencement
of, or actual knowledge by the Indemnified Party of, such claim
or action. Failure to provide such notice shall not relieve the
Indemnifying Party of its obligations hereunder so long as the
Indemnifying Party is not materially harmed by the Indemnified
Party's failure to give timely notice of the claim or action.
The Indemnifying Party shall, at its sole cost and expense,
defend any such claim or action; provided, however, that the
Indemnified Party shall, at its own cost and expense, have the
right to participate in the defense or settlement of any such
claim or action. The Indemnified Party shall not compromise or
settle any such claim or action without the prior written consent
of the Indemnifying Party, which consent shall not be
unreasonably withheld.
ARTICLE X. INSURANCE REQUIREMENTS
10.1 Insurance Requirements of Operator. Unless Owner shall
advise Operator that Owner has satisfied the following
requirements in whole or in part by naming Operator as a named
insured on Owner's insurance policies, Operator shall procure and
maintain in full force and effect at all times that the Project
is being operated (and, in any event, no later than the date on
which Operator has employees at the Project), insurance policies
with limits and coverage provisions in no event less than the
limits and coverage provisions set forth below.
10.1.1 General Liability Insurance: Liability
insurance on an occurrence basis against claims for
personal injury (including bodily injury and death) and
property damage. Such insurance shall provide coverage
for products-completed operations, blanket contractual,
explosion, collapse and underground coverage, broad
form property damage, personal injury
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insurance, independent contractors and the hostile
fire exception to the pollution liability exclusion
with a $1,000,000 minimum limit per occurrence for
combined bodily injury and property damage provided
that policy aggregates, if any, shall apply separately
to the Project. A maximum deductible or self-insured
retention of $25,000 per occurrence shall be allowed.
10.1.2 Automobile Liability Insurance: Automobile
liability insurance against claims for personal injury
(including bodily injury and death) or property damage
arising out of the use of all owned, leased, non-owned
and hired motor vehicles including loading and
unloading with a $1,000,000 minimum limit per
occurrence for combined bodily injury and property
damage and containing appropriate no-fault insurance
provisions where applicable. A maximum deductible or
self-insurance retention of $25,000 per occurrence
shall be allowed.
10.1.3 Workers' Compensation Insurance: Workers'
compensation insurance as required by applicable Legal
and Contractual Requirements. A maximum deductible or
self-insured retention of $25,000 per occurrence shall
be allowed.
10.1.4 Employer's Liability Insurance: Employer's
liability insurance for all employees of the Operator
with a $1,000,000 minimum limit per accident. A
maximum deductible or self-insured retention of $25,000
shall be allowed.
10.1.5 Excess Insurance: Excess liability insurance
on an occurrence basis covering claims in excess of the
underlying insurance described in the foregoing
subsections (1), (2) and (4) with a $10,000,000 minimum
limit per occurrence; provided, that aggregate limits
of liability, if any, shall apply separately to the
Project.
10.1.6 Aircraft Insurance: If the performance of
Operators obligations under this Agreement requires the
use of any aircraft that is owned, leased or chartered
by the Operator, aircraft liability insurance with a
$25,000,000 minimum limit per occurrence for property
damage and bodily injury, including passengers and
crew.
All policies of liability insurance to be maintained by Operator
shall be endorsed (a) to
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provide a severability of interest or cross liability clause; (b)
to name Owner, the Agent and their respective directors,
officers, employees and agents as additional insureds; and (c)
that the insurance shall be primary and not excess to or
contributing with any insurance or self-insurance maintained by
Owner or the Banks.
10.2 Insurance Requirements of Owner. Owner shall maintain
insurance required to be maintained by it pursuant to the terms
of the ESA. In the event that the ESA is terminated, Owner
shall, for the remaining term of this Agreement, maintain
insurance of the types and in the amounts required to be
maintained by it pursuant to the ESA as of the date hereof.
10.3 Primary and Excess Insurance. The amounts of insurance
required in the Sections 10.1.1, 10.1.2, 10.1.3, 10.1.4 and
10.1.5 may be satisfied by the Operator purchasing coverage in
the amounts specified or by any combination of primary and excess
insurance, so long as the total amount of insurance meets the
requirements specified above.
10.4 Evidence of Insurance. On or prior to the earlier of
the Project Mobilization Date or the Leased Equipment
Mobilization Date, each Party shall provide to the other pursuant
to the notice provisions of Article XVI, properly executed
certificates of insurance, signed by an authorized representative
of the insurance carrier. Such insurance certificates shall
provide the following information: (i) name of insurance company,
policy number and expiration date, (ii) coverage required and the
limits on each, including the amount of deductibles and self-
insured retentions, (iii) a statement indicating that sixty (60)
days notice of cancellation, nonrenewal, or material change in
coverage with respect to any of the policies shall be given to
each named insured and any additional insured, and (iv) named and
additional insureds. Each Party shall have the right to inspect
and photocopy the policies of insurance at the other Party's
place of business during regular business hours, upon reasonable
prior written notice.
10.5 Additional Insurance Requirements. As respects all
insurance required hereunder, the policies will provide for
mutual waivers of subrogation in favor of each Party to this
Agreement and the Agent and their respective directors, officers,
employees and agents. Each Party shall be responsible for the
deductible portion of any claim filed under the insurance
required hereunder. As respects all insurance required
hereunder, such insurance shall be maintained with insurance
companies authorized to do business in the State of Illinois and
rated "A-" or better with a minimum size rating of "VIII" as
rated by Best Insurance Guide and Key Ratings (or an equivalent
rating by another widely
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recognized insurance rating agency of similar standing) or other
insurance companies of recognized financial responsibility
satisfactory to both Owner and Operator.
10.6 Changes in Insurance Requirements. In the event the
Agent, pursuant to the Financing Agreements, amends the
requirements or approved insurance companies applicable to this
Section 10, this Section 10 shall be likewise amended. In the
event any insurance (including the limits or deductibles thereof)
hereby required to be maintained shall not be reasonably
available and commercially feasible in the commercial insurance
market, Operator shall notify Owner of such fact and shall
provide Owner evidence thereof
ARTICLE XI. REPRESENTATIONS AND WARRANTIES OF THE PARTIES
11.1 Owner Representations and Warranties. Owner represents
and warrants to Operator as follows:
11.1.1 Owner is a limited liability company duly formed,
validly existing, and in good standing under the laws of
Delaware, and is properly qualified to do business in Illinois;
11.1.2 The execution of this Agreement has been duly
authorized and approved by Owner, and no other authorizations,
approvals or consents are required in order for this Agreement to
constitute a binding and enforceable legal obligation of the
Owner;
11.1.3 The execution of this Agreement by Owner, and the
performance of Owner's obligations under this Agreement will not
conflict with, or result in a breach or default under, any
agreement, contract, or covenant to which Owner is a party; and
11.1.4 This Agreement, as executed, constitutes a binding
legal obligation of Owner that is enforceable in accordance with
its terms and conditions.
11.2 Operator Representations and Warranties. Operator
represents and warrants to Owner as follows:
11.2.1 Operator is a corporation duly incorporated,
validly existing, and in good standing under the laws of
Delaware, and is properly qualified to do business in Illinois;
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11.2.2 The execution of this Agreement by Operator has
been duly authorized and approved by Operator, and no other
authorizations, approvals or consents are required in order for
this Agreement to constitute a binding and enforceable legal
obligation of Operator;
11.2.3 The execution of this Agreement by Operator, and
the performance of its obligations under this Agreement will not
conflict with, or result in a breach or default under, any
agreement, contract, or covenant to which Operator is a party;
and
11.2.4 This Agreement, as executed, constitutes a binding
legal obligation of Operator that is enforceable in accordance
with its terms and conditions.
ARTICLE XII. EVENTS OF DEFAULTS; REMEDIES
12.1 Owner Default. Each of the following events shall
constitute a default by Owner hereunder except, if and to the
extent excused by, a Force Majeure event, or the fault, action or
inaction of Operator:
12.1.1 The failure by Owner to fulfill any of its
material obligations hereunder following receipt of written
notice thereof from Operator, unless Owner shall have cured the
same within thirty (30) days from the date of receipt of such
notice or within such longer period as may be reasonably required
to cure such failure given the nature thereof, provided that
Owner proceeds and continues with diligence to correct such
failure.
12.1.2 Owner (i) commences any insolvency proceedings
with respect to itself, or (ii) makes any general assignment for
the benefit of its creditors, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become
due or takes any action to effectuate or authorize any of the
foregoing actions.
12.1.3 Any involuntary insolvency proceedings are
commenced or filed against Owner or any writ, judgment, warrant,
or attachment, execution or similar process is issued or levied
against all or a substantial part of Owner's properties, and any
such involuntary insolvency proceedings shall not be dismissed,
or such writ, judgment, warrant of attachment, execution or
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similar process shall not have been released, vacated
or fully bonded within sixty (60) days after commencement, filing
or levy, or (i) any court of competent jurisdiction shall issue a
decree for relief in any such case; (ii) Owner admits the
material allegations of the petition against it in any insolvency
proceeding or an order for relief is ordered in such insolvency
proceedings; or (iii) Owner acquiesces to the appointment of a
receiver, trustee, custodian, conservator, liquidator, mortgagee
in possession (or agent thereof) or other similar person for
itself or a substantial portion of its properties or business.
12.1.4 The failure of Owner to make any undisputed
payment due Operator herein within thirty (30) days of the due
date. Failure to make any such payment shall not be excused by
Force Majeure events.
12.2 Operator Default. Each of the following events shall
constitute default by Operator hereunder except, if and to the
extent excused by, a Force Majeure event, or the fault, action,
or inaction of Owner:
12.2.1 The failure to make any undisputed payment due
Owner hereunder within thirty (30) days of the date such payment
is due. Failure to make any such payment shall not be excused by
a Force Majeure event.
12.2.2 The failure by Operator to fulfill its material
responsibilities hereunder after receipt of written notice
thereof from Owner, unless Operator shall have cured the same
within thirty (30) days after the date of receipt of such notice,
or within such longer period as may be reasonably required to
cure such failure given the nature thereof, provided that
Operator proceeds and continues with diligence to correct such
failure.
12.2.3 The payment by Operator of the Maximum Liquidated
Damages (or the obligation to pay) pursuant to Section 8.1 and
8.2 in any two consecutive Operating Years during the term
hereof, or the payment of such damages in any four (4) Operating
Years by Operator; provided, that no default shall arise under
this Section 12.2.3 if the payment of such Maximum Liquidated
Damages arises from a single event.
12.2.4 Operator (i) commences any insolvency proceedings
with respect to itself, or (ii) makes any general assignment for
the benefit of its creditors, or generally fails to pay, or
admits in writing its inability to pay, its debts as
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they become due or takes any action to effectuate or
authorize any of the foregoing actions.
12.2.5 Any involuntary insolvency proceedings are
commenced or filed against Operator or any writ, judgment,
warrant, or attachment, execution or similar process is issued or
levied against all or a substantial part of Operator's
properties, and any such involuntary insolvency proceedings shall
not be dismissed, or such writ, judgment, warrant of attachment,
execution or similar process shall not have been released,
vacated or fully bonded within sixty (60) days after
commencement, filing or levy, or (i) any court of competent
jurisdiction shall issue a decree for relief in any such case;
(ii) Owner admits the material allegations of the petition
against it in any insolvency proceeding or an order for relief is
ordered in such insolvency proceedings; or (iii) Operator
acquiesces to the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent
thereof) or other similar person for itself or a substantial
portion of its properties or business.
12.2.6 The occurrence of an event of default under the
NRG Guaranty.
12.2.7 The failure of Operator on two separate occasions
during the term hereof to deliver Steam to Millennium meeting the
requirements of the ESA; provided, that no such event shall be
considered as such an occasion if (a) such event arises from
defective design or equipment, (b) the failure to discover such
defect was not the result of Operator negligence, (c) Operator
identifies and repairs such defect and (d) no subsequent failure
to deliver Steam to Millennium shall have arisen from the same
defect.
12.2.8 Operator's performance shall cause Owner to incur
operation and maintenance expenses in any Operating Year that
exceed the amounts provided therefor in the Annual Operating Plan
and Budget, as amended by any Change Order, by more than five
percent (5%).
12.3 Remedies. In the case of a default by a Party, the non-
defaulting Party shall have the right to seek any and all
available remedies from the arbitration panel established
pursuant to Article XIII for any default hereunder. All rights
and remedies of the Parties shall be cumulative, and may, to the
extent permitted by law, be exercised concurrently or separately,
and the exercise of one right or remedy shall not be deemed to be
an election of such right or remedy or to preclude or waive the
exercise of any other right or remedy.
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12.4 Certain Remedies of Owner and Millennium for Selected
Operator Defaults. In addition to the remedies set out in
Section 12.3, Owner shall have the right to terminate this
Agreement, without resort to the arbitration procedures set out
in Article XIII, if (a) Operator is in default under
Section 12.2.3 or Section 12.2.7 hereof, (b) Operator is in
default a second time under Section 12.2.8 hereof, (c) the heat
rate of the Project for any Operating Year is greater than three
percent (3%) above the Guaranteed Heat Rate for such Operating
Year, or (d) the Owner is required to pay more than one million
five hundred thousand dollars ($1,500,000) in Operator Standby
Power Costs in any Operating Year; provided, that Operator may
cure a default under this Section 12.4(d) by paying to Owner an
amount equal to the entire amount of the excess of such Operator
Standby Power Costs over one million five hundred thousand
dollars ($1,500,000); provided further, that Operator may not
cure any such default if the amount of such Operator Standby
Power Costs exceeds one million nine hundred thousand dollars
($1,900,000). Upon such termination, Operator shall turn over to
Owner care, custody and control of the Project and the Leased
Equipment, and shall assign such subcontracts for services
provided hereunder as Owner may request. Operator shall also
turn over all spare parts and other consumables in the inventory.
Operator shall cooperate with Owner and any replacement operator
in a transition of operation and maintenance responsibilities.
In addition, in the event that Operator fails to deliver Steam to
Millennium pursuant to the requirements of the ESA, Millennium
shall have the right to immediately re-assume operating control
of the Leased Equipment without affording Operator a cure period,
pending the outcome of any arbitration proceedings under
Article 27 of the ESA. Operator will cooperate with Millennium
during any such period, and shall only be entitled to re-assume
operating control of the Leased Equipment once Owner and
Millennium are satisfied that Operator can meet its
responsibilities under this Agreement. During any period in
which Millennium has assumed operating control of the Leased
Equipment, the Annual Fee to be paid to Operator shall be reduced
by twenty-five percent (25%) and Operator shall not be entitled
to any bonus under Section 8.4.
12.5 Consequential Damages. Except for any liquidated
damages payable by Operator under Sections 8.1 and 8.2 hereof,
neither Party shall be liable to the other for incidental,
indirect, punitive, exemplary, special or consequential losses or
damages, including, but not limited to, loss of profits or loss
of revenue by reason of, or arising out of, such Party's
performance or non-performance of its obligations hereunder.
12.6 Operator's Right to Suspend and Terminate.
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12.6.1 Suspension Events. Each of the following events shall
constitute "Suspension Events":
(a) Any Emergency shall, in the reasonable judgement of
Operator, pose a threat to the health or safety of Operator's
employees or others, expose Operator or its officers, directors
or employees to criminal liability or to civil liability for
which Operator will not be compensated pursuant to this
Agreement, or pose a threat to the safety and security of the
Project, the Leased Equipment or the Morris Plant, and such
Emergency cannot, in the reasonable judgement of Operator, be
resolved without suspending operations.
(b) Thirty (30) days shall have elapsed without payment of
undisputed portions of an Operator invoice, after Operator shall
have given written notice to Owner that such invoice is thirty
(30) days past due.
12.6.2 Suspension of Operations. Upon the occurrence and
during the continuation of a Suspension Event, Operator shall
have the right to suspend performance of services pursuant to
this Agreement; provided, that if such Suspension Event shall
have arisen under (a) Section 12.6.1(a), such suspension shall be
of no greater scope nor of any longer duration than is necessary
in order to mitigate or avoid the threat to health or safety or
of civil or criminal liability, and (b) Section 12.6.1(b), such
suspension shall terminate immediately upon payment of the
undisputed portion of such invoice.
12.6.3 Termination of Agreement. In the event that
(a) Operator shall have exercised its right to
suspend operations pursuant to Section 12.6.2, and
(b) sixty (60) or more days have elapsed since
such suspension without the re-commencement of
operations, Operator shall have the right to
terminate this Agreement upon written notice to
Owner.
12.7 Owner's Right to Terminate for Convenience. Owner
shall have the right to terminate at any time for its own
convenience upon (a) delivery of one hundred twenty (120) days
prior written notice to Operator, and (b) payment to Owner of a
demobilization fee in an amount equal to three (3) times the
Annual Operator's Fee as of
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the date of such notice of termination. Owner shall also pay all
demobilization expenses as contemplated in Section 7.4.
ARTICLE XIII. DISPUTE RESOLUTION
13.1 Initial Dispute Resolution Procedure. In the
event a dispute arises between the Operator and the Owner
regarding the application or interpretation of any provision of
this Agreement, the aggrieved Party shall promptly, and in any
event within ten (10) Business Days, after such dispute arises,
notify the other Party to this Agreement of the dispute in
writing. If the Parties have failed to resolve the dispute
within ten (10) Business Days after delivery of such notice, each
Party shall, within five (5) Business Days thereafter, nominate a
senior officer of its management to meet at the Millennium
Project Site, or at any other mutually agreeable location, to
resolve the dispute.
13.2 Binding Arbitration. Should the Parties be unable
to resolve the dispute to their mutual satisfaction within thirty
(30) Business Days after such nomination of its senior officers,
either Party may refer the dispute to binding arbitration
pursuant to the arbitration rules of the American Arbitration
Association. All arbitration proceedings shall be held in
Chicago, Illinois, unless the Parties agree otherwise. The
expenses of the arbitration panel shall be borne equally by the
Parties. The decision of the arbitration panel shall be in
writing, shall set forth the reasons for the decision, and shall
be binding on the Parties as to any matter or matters submitted
to arbitration, and, to the extent permitted by applicable law,
there shall be no appeal from any award made thereunder. Each
Party shall continue to perform its respective obligations under
this Agreement pending the decision of the arbitration panel.
13.3 Enforcement. In the event either Party refuses or
otherwise fails to abide by the decision rendered by the
arbitration panel, judgment may be entered against such Party
pursuant to such decision in accordance with applicable law in
any court having jurisdiction thereof.
ARTICLE XIV. FORCE MAJEURE
14.1 Effect on Performance of Obligations. Except for the
obligation of either Party to make any required payments
hereunder, the Parties shall be excused from performing their
respective obligations under this Agreement and shall not be
liable in damages or otherwise if and to the extent that they are
unable to so perform or are prevented from performing by a Force
Majeure, provided that:
47
<PAGE>
(a) The non-performing Party, as promptly as practicable
after the occurrence of the Force Majeure, but in no
event later than fourteen (14) days thereafter, gives
the other Party written notice describing the
particulars of the occurrence;
(b) The suspension of performance is of no greater scope
and of no longer duration than is reasonably required
by the Force Majeure;
(c) The non-performing Party uses its best efforts to
remedy the inability to perform; and
(d) As soon as the non-performing Party is able to resume
performance of its obligations excused as a result of the
occurrence, it shall give prompt written notification thereof to
the other Party.
ARTICLE XV. PROVISION OF GUARANTEE OF NRG ENERGY, INC.
Concurrently with the execution of this Agreement, Operator
shall deliver to Owner the NRG Guaranty.
ARTICLE XVI. NOTICES
16.1 General Requirements. All notices and other
communications required or permitted by this Agreement shall
become effective when delivered (including by messenger or
courier) or when received by facsimile, telex, telegram or such
other method of telecommunication as is capable of creating a
writing.
16.2 Addresses of the Parties. All notices and other
communications shall be forwarded to the Parties at the following
addresses, or facsimile numbers, or at such substitute addresses
or substitute facsimile numbers as a Party may designate by
written notice to the other Party in the manner specified herein:
If to Owner: NRG (Morris) Cogen, LLC
1221 Nicollet Mall
Minneapolis, Minnesota
Facsimile: 612-373-5430
Attention: President
48
<PAGE>
With a copy to:
NRG Energy, Inc.
1221 Nicollet Mall
Minneapolis, Minnesota
Facsimile: 612-373-5392
Attention: General Counsel
If to Operator:NRG Morris Operations Inc.
1221 Nicollet Mall
Minneapolis, MN
Facsimile: ______________________
Attention: ______________________
With a copy to:
NRG Energy, Inc.
1221 Nicollet Mall
Minneapolis, Minnesota
Facsimile: 612-373-5392
Attention: General Counsel
ARTICLE XVII. LENDER CURE RIGHTS
Operator acknowledges that Owner intends to finance the
Project through non-recourse, project financing. As a
consequence, Operator agrees that it will provide Agent with an
opportunity to cure any alleged default of Owner hereunder, prior
to exercising its remedies hereunder. In such circumstances,
Agent shall be provided a minimum thirty (30) additional days in
which to cure any default of Owner. Operator will also agree to
such other reasonable provisions as Agent may request as part of
the consent to assignment of this Agreement to the Lenders. In
addition, Operator acknowledges that any consent or approval by
Owner hereunder may require the consent or approval of
Millennium, the Agent or the Lenders.
49
<PAGE>
ARTICLE XVIII. APPLICABLE LAW
This Agreement shall be governed by, and construed and
interpreted in accordance with the laws of Illinois, exclusive of
conflicts of laws provisions.
ARTICLE XIX. SEVERABILITY
In the event that any provision of this Agreement is held to
be unenforceable or invalid by any arbitrator appointed pursuant
to Article XIII, or by any court of competent jurisdiction,
Operator and the Owner shall negotiate an equitable adjustment in
the provisions of this Agreement with a view toward effecting the
purposes of this Agreement, and the validity and enforceability
of the remaining provisions shall not be affected thereby.
ARTICLE XX. AMENDMENTS AND WAIVERS
This Agreement may not be amended or otherwise changed
orally, and any waiver, amendment, modification or supplement
hereof must be in writing and executed by both Parties.
ARTICLE XXI. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the
Parties with respect to the subject matter hereof, and supersedes
the terms and conditions of any previous agreements or
understandings.
ARTICLE XXII. EFFECTIVE WAIVERS
Either Party's waiver of any breach or failure to enforce
any of the terms, covenants, conditions or other provisions of
this Agreement at any time shall not, in any way, affect, limit,
modify or waive that Party's right thereafter to enforce or
compel strict compliance with every term, covenant, condition or
other provisions, notwithstanding any course of dealing, course
of performance, or custom of trade.
ARTICLE XXIII. ASSIGNMENT; SUCCESSORS AND PERMITTED ASSIGNS
23.1 This Agreement may not be assigned by Operator without
the written consent of Owner and written agreement of assignee
whereby it expressly assumes and agrees to perform each and every
obligation of the Operator hereunder. Any assignment
50
<PAGE>
by Operator in violation hereof shall be null and void. Owner
may, without the consent of Operator, assign this Agreement as
collateral to Agent.
23.2 This Agreement shall be binding upon, and inure to the
benefit of, the Parties hereto and their respective successors
and permitted assigns.
ARTICE XXIV. EXECUTION IN COUNTERPARTS; ACCEPTABILITY
OF COPIES TRANSMITTED BY FACSIMILE
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same Agreement.
51
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement effective as of the date and year first set forth
above.
NRG (MORRIS) COGEN, LLC NRG MORRIS
OPERATIONS INC.
By: /s/ Craig Mataczynski By: /s/ Ronald J. Will
Its: President Its: President
<PAGE>
EXHIBIT A-1
Initial Annual Operating Plan and Budget
<PAGE>
EXHIBIT A-2
Initial Major Maintenance Budget
<PAGE>
EXHIBIT B
Form of Limited Guaranty
<PAGE>
EXHIBIT C
Mobilization Schedule of Deliverables
<PAGE>
Exhibit 10.27.15
FIRST AMENDMENT
to
OPERATION AND MAINTENANCE AGREEMENT
This FIRST AMENDMENT to OPERATION AND MAINTENANCE AGREEMENT
is entered into as of December 10, 1997 by and between NRG
(Morris) Cogen, LLC, a Delaware limited liability company (the
"Owner") and NRG Morris Operations Inc. (the "Operator").
WHEREAS, Owner and Operator are parties to that certain
Operation and Maintenance Agreement dated as of September 19,
1997 (the "O&M Agreement");
WHEREAS, Owner and Operator wish to amend the O&M Agreement
as herein provided;
NOW, THEREFORE, Owner and Operator hereby agree as
follows:
1. The definition of the term "Agent" in Article I of the
O&M Agreement shall be deleted in its entirety and the following
shall be substituted therefor:
"Agent" means any agent appointed by the Lender(s) under the
Financing Agreements.
2. Section 4.1.16 of the O&M Agreement shall be amended by
adding the following sentences to the end thereof:
Owner shall have the right upon 30 days' written notice
documenting the basis for such action, to require Operator to
remove for cause the person selected as the Plant Manager,
subject to an Operator's 30-day cure period (but absent such a
cure, Operator will remove such person from such position
following such a request by Owner). As soon as practicable after
any such removal, Operator shall appoint a new Plant Manager
after first obtaining Owner's consent to such new appointment.
Owner will not exercise its right to require such removal in any
manner that causes Operator to violate applicable labor laws,
based on a written opinion of outside counsel of the Operator.
3. Section 4.2.9 of the O&M Agreement shall be amended by
adding the following to the end thereof:
Operator and Owner shall cooperate to maximize excess energy
sales and manage plant operating margins. Owner and Operator
shall work to agree to a detailed plan to accomplish such
objectives prior to Commercial Operation.
4. Section 10.1 of the O&M Agreement shall be deleted in
its entirety and the following shall be substituted therefor:
10.1 Insurance Requirements of Operator. Unless
Owner shall advise Operator that Owner has satisfied the
following requirements in whole or in part by naming
Operator as a named insured on Owner's insurance policies,
Operator shall procure and maintain in full force and effect
at all times that the Project is being operated (and, in
any event, no later than the date on which Operator has
employees at the Project), insurance policies with limits
and coverage provisions in no event less than the limits and
coverage provisions set forth below.
<PAGE>
10.1.1 General Liability Insurance: Liability
insurance on an occurrence basis against claims for
personal injury (including bodily injury and death) and
property damage. Such insurance shall provide coverage
for products-completed operations, blanket contractual,
explosion, collapse and underground coverage, broad
form property damage, personal injury insurance,
independent contractors and the hostile fire exception
to the pollution liability exclusion with a $1,000,000
minimum limit per occurrence for combined bodily injury
and property damage; provided that the policy general
aggregate, if any, shall apply separately to the
Project. A maximum deductible or self-insured
retention of $500,000 per occurrence shall be allowed.
10.1.2 Automobile Liability Insurance: Automobile
liability insurance against claims for personal injury
(including bodily injury and death) or property damage
arising out of the use of all owned, leased, non-owned
and hired motor vehicles including loading and
unloading with a $1,000,000 minimum limit per
occurrence for combined bodily injury and property
damage and containing appropriate no-fault insurance
provisions where applicable. A maximum deductible or
self-insured retention of $500,000 per occurrence shall
be allowed.
10.1.3 Workers' Compensation Insurance: Workers'
compensation insurance as required by applicable Legal
and Contractual Requirements. A maximum deductible or
self-insured retention of $500,000 per occurrence shall
be allowed.
10.1.4 Employer's Liability Insurance: Employer's
liability insurance for all employees of the Operator
with a $1,000,000 minimum limit per accident. A
maximum deductible or self-insured retention of
$500,000 shall be allowed.
10.1.5 Excess Insurance: Excess liability insurance
on an occurrence basis (or modified AEGIS claims made
form) covering claims in excess of the underlying
insurance described in Sections 10.1.1, 10.1.2 and
10.1.4 hereof with a $10,000,000 minimum limit per
occurrence; provided, that the general aggregate limit
of liability, if any, shall apply separately to the
Project.
10.1.6 Aircraft Insurance: If the performance of
Operator's obligations under this Agreement requires
the use of any aircraft that is owned, leased or
chartered by Operator, aircraft liability insurance
with a $25,000,000 minimum limit per occurrence for
property damage and bodily injury, including passengers
and crew.
All policies of liability insurance to be maintained by Operator
shall be endorsed (a) to provide a severability of interests or
cross liability clause; (b) to name Owner, the Agent and their
respective directors, officers, employees and agents as
additional insureds; and (c) to provide that the insurance shall
be primary and not excess to or contributing with any insurance
or self-insurance maintained by Owner or the Lenders.
<PAGE>
5. Section 12.4 of the O&M Agreement shall be deleted in
its entirety and the following shall be substituted therefor:
12.4 Certain Remedies of Owner and Millennium for
Selected Operator Defaults. In addition to the remedies set
out in Section12.3, Owner shall have the right to terminate
this Agreement, without resort to the arbitration procedures
set out in Article XIII, if (a) Operator is in default under
Section12.2.3 or Section 12.2.7 hereof, (b) Operator is in
default a second time under Section 12.2.8 hereof, (c) the
heat rate of the Project for any Operating Year is greater
than three percent (3%) above the Guaranteed Heat Rate for
such Operating Year, (d) the Owner is required to pay more
than one million five hundred thousand dollars ($1,500,000)
in Operator Standby Power Costs in any Operating Year;
provided, that Operator may cure a default under Section
12.4(d) by paying to Owner an amount equal to the entire
amount of the excess of such Operator Standby Power Costs
over one million five hundred thousand dollars ($1,500,000);
provided further, that Operator may not cure any such
default if the amount of such Operator Standby Power Costs
exceeds one million nine hundred thousand dollars
($1,900,000) , or (e) NRG Energy, Inc. ("NRG Energy")
directly or indirectly owns less than ten percent (10%) of
the outstanding common stock (the "Stock") of NRG Generating
(U.S.), Inc. ("NRGG") as a result of a sale of Stock by NRG;
provided, that, if it has not been previously exercised,
Owner's right to exercise its termination rights under this
Section 12.4(e) shall be suspended for no more than 180 days
during any period in which NRG Energy is, directly or
indirectly, reaquiring an aggregate amount of Stock equal to
or in excess of ten percent (10%) of the Stock. Upon any
such termination, Operator shall turn over to Owner care,
custody and control of the Project and the Leased Equipment,
and shall assign such subcontracts for services provided
hereunder as Owner may request. Operator shall also turn
over all spare parts and other consumables in the inventory.
Operator shall cooperate with Owner and any replacement
operator in a transition of operation and maintenance
responsibilities. In addition, in the event that Operator
fails to deliver Steam to Millennium pursuant to the
requirements of the ESA, Millennium shall have the right to
immediately re-assume operating control of the Leased
Equipment without affording Operator a cure period, pending
the outcome of any arbitration proceedings under Article27
of the ESA. Operator will cooperate with Millennium during
any such period, and shall only be entitled to re-assume
operating control of the Leased Equipment once Owner and
Millennium are satisfied that Operator can meet its
responsibilities under this Agreement. During any period in
which Millennium has assumed operating control of the Leased
Equipment, the Annual Fee to be paid to Operator shall be
reduced by twenty-five percent (25%) and Operator shall not
be entitled to any bonus under Section 8.4.
6. To the extent Operator had in effect insurances meeting
the requirements set forth above in Section 4 of this Amendment,
Owner hereby waives any failure by Operator to meet the
requirements of Section 10.1 of the O&M Agreement prior to the
date hereof.
<PAGE>
7. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other
provision of the O&M Agreement or any other agreement referred to
therein, or prejudice any right or rights which Owner or Operator
may now have or may have in the future under or in connection
with the O&M Agreement. Except as expressly modified hereby, the
terms and provisions of the O&M Agreement shall continue in full
force and effect. All references to the O&M Agreement shall
hereafter be deemed to refer to the O&M Agreement as modified
hereby.
8. This Amendment may be executed in separate counterparts
by Owner and Operator, each of which when so executed and
delivered shall be an original, but all of which shall constitute
one and the same instrument. A complete set of counterparts
shall be delivered to each of Owner and Operator.
9. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF ILLINOIS, BUT WITHOUT GIVING
EFFECT TO.CONFLICTS OF LAW PROVISIONS.
10. This Amendment shall become effective on the date when
the Agent has consented in writing to the execution hereof by
Owner pursuant to the terms of the Financing Agreements.
IN WITNESS WHEREOF, Owner and Operator have caused their
duly authorized representatives to execute and deliver this
Amendment as of the date first above written.
NRG (MORRIS) COGEN, LLC
By /s/ Craig Mataczynski
Name: Craig Mataczynski
Title: President
NRG MORRIS OPERATIONS INC.
By Ronald J. Will
Name: Ronald J. Will
Title: President
Consent, dated as of December 30, 1997 among NRG
Energy, NRGG Funding, the Company and Equistar
Chemicals, LP a successor in interest to Millennium
Petrochemicals, Inc.
<PAGE>
Exhibit 10.27.16
ASSIGNMENT, ASSUMPTION AND CONSENT
This Assignment, Assumption and Consent is made on this
30th day of December, 1997, by and between NRG Energy, Inc.,
a Delaware corporation (the Assignor), NRG Generating (U.S.)
Inc., a Delaware corporation ("NRGG"), NRGG Funding Inc., a
Delaware corporation and wholly-owned subsidiary of NRGG
(the "Assignee") and Equistar Chemicals LP, a Delaware
limited partnership, as successor in interest to Millennium
Petrochemicals Inc. ("Millennium Petrochemicals").
RECITALS
A. That certain Energy Services Agreement dated as of
June 3, 1997, as amended by letter agreements dated August 28,
1997 and September 19,1997 (as so amended, the "ESA") by and
between NRG (Morris) Cogen, LLC, a Delaware limited liability
company (the "Company") and Millennium Petrochemicals Inc., sets
forth certain obligations of Assignor to Equistar pursuant to
Sections 19.1, 19.3 and 19.5 thereof. Assignor acknowledged such
obligations with respect to Section 19.3 of the ESA in a letter
dated June 6, 1997. Assignor has also subsequently orally
acknowledged its obligations to Equistar under Sections 19.1 and
19.5 of the ESA.
B. Pursuant to that certain Membership Interest Purchase
Agreement dated December 10, 1997 (the "PSA"), Assignor, is
transferring all of its membership interests in the Company to
Assignee.
C. Assignor and Assignee desire to assign to Assignee all
of Assignor's obligations under Sections 19.1, 19.3 and 19.5 of
the ESA.
NOW, THEREFORE, in consideration of these recitals which are
hereby incorporated herein and of the mutual covenants herein set
forth and other good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed:
1. Assignment By Assignor. Assignor hereby assigns and
transfers to Assignee any and all of Assignor's obligations
under Sections 19.1, 19.3 and 19.5 of the ESA (all such
obligations, the "Obligations").
2. Acceptance, Assumption and Indemnification by Assignee.
Assignee hereby accepts the foregoing assignment and
promises and agrees to assume all of the Obligations and to
comply with the Obligations. Assignee shall indemnify and
hold Assignor harmless from any and all claims, demands,
actions, causes of action, suits, proceedings, damages,
liabilities, costs and expenses of every nature whatsoever,
including reasonable attorneys' fees, relating to the
Obligations arising from or after the date hereof.
3. Consent. Equistar hereby consents to the assignment herein
of the Obligations from Assignor to Assignee.
<PAGE>
4. NRGG Commitment. NRGG agrees and covenants with Equistar to
cause Assignee to comply with the assumed Obligations and
further agrees not to sell, assign or otherwise dispose of
any of the stock of Assignee, without the prior written
consent of Equistar under Section 19.3 of the ESA, unless
NRGG, after giving effect to such sale, assignment or other
disposition, directly or indirectly owns 100% of the
membership interests of the Company, and if any subsidiary
of NRGG other than Assignee owns any portion of the
membership interests of the Company, NRGG will cause such
subsidiary to undertake the obligations in Sections 19.1,
19.3 and 19.5 of the ESA assumed by Assignee herein and will
agree and covenant to cause such subsidiary to comply with
such obligations.
5. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
6. Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, excluding
conflicts of law provisions.
7. Agreement Binding. This Agreement shall be binding upon the
successors and assigns of the parties hereto. The parties
shall execute and deliver such further and additional
instruments, agreements and other documents as may be
necessary to evidence or carry out the provisions of this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their
duly authorized representative to execute this Amendment as
of the day and year first above written.
"Assignor" NRG ENERGY, INC.
By:/s/ Craig Mataczynski
Name: Craig Mataczynski
Title: Vice President U.S. Business Development
"Assignee" NRGG FUNDING INC.
By:/s/ Robert T. Sherman
Name: Robert T. Sherman
Title: President & CEO
"NRGG" NRG GENERATING (U.S.) INC.
By:/s/ Robert T. Sherman
Name: Robert T. Sherman
Title: President
"Equistar" EQUISTAR CHEMICALS LP
By:/s/ Eugene R. Allspach
Name: Eugene R. Allspach
Title: President
19, 1997 by NRG Energy for the benefit of Cogen, LLC.
<PAGE>
Exhibit 10.27.17
Limited Guaranty
This Limited Guaranty (this "Guaranty") is made on this 19th
day of September, 1997, by NRG Energy, Inc., a Delaware
corporation, with its principal offices located at 1221 Nicollet
Mall, Minneapolis, Minnesota (the "Guarantor") for the benefit of
NRG (Morris) Cogen, LLC, a Delaware limited liability company
with its principal offices located at 1221 Nicollet Mall,
Minneapolis, Minnesota (the "Principal"). Guarantor and Principal
are sometimes collectively referred to as the "Parties" and
individually as a "Party."
R E C I T A L S
WHEREAS, Principal is in the process of developing a nominal
117 megawatt gas-fired cogeneration project (the "Project") at
the Morris, Illinois, chemical production facility owned by
Millennium Petrochemicals Inc.; and
WHEREAS, Principal intends to contract with NRG Morris
Operations Inc. (the "Operator"), an affiliate of Guarantor,
pursuant to that certain Operation and Maintenance Agreement
dated as of September 19, 1997 (the "O&M Agreement") for the
operation and maintenance of the Project; and
WHEREAS, in order to induce Principal to enter into the
Operation and Maintenance Agreement with Operator, Guarantor is
prepared to provide a limited guaranty of certain of Operator's
obligations thereunder; and
WHEREAS, Principal acknowledges that this is a limited
guaranty of Operator's obligations based on the terms set out
herein; and
WHEREAS, unless otherwise defined, capitalized terms used
herein shall have the meanings ascribed to such terms in the O&M
Agreement;
NOW, THEREFORE, in consideration of the O&M Agreement
between Principal and Operator and the covenants of the Parties
contained herein, Guarantor hereby covenants with Principal as
follows:
1. Scope and Effective Date of Guaranty. Guarantor hereby
guaranties to Principal the payment by Operator when
due of up to a maximum of one million two hundred
thousand dollars ($1,200,000) in liquidated damages
potentially owed by Operator to Principal under
Sections 8.1 and/or 8.2 of the O&M Agreement (the
"Guarantied Obligations"). No more than four hundred
thousand dollars ($400,000) of such damages shall be
guarantied by Guarantor in any Operating Year. No
other obligations of Operator under the O&M Agreement
are covered by this Guaranty. This Guaranty shall
become effective and enforceable upon the Effective
Date under the O&M Agreement.
<PAGE>
2. Failure of Operator to pay Liquidated Damages. If
Operator (unless relieved from its obligation to pay
liquidated damages under Sections 8.1 and/or 8.2 of the
O&M Agreement by statute or by the decision of an
arbitration panel or tribunal of competent
jurisdiction) shall in any respect fail to pay
liquidated damages owed to Principal under Sections 8.1
and/or 8.2 of the O&M Agreement, then Guarantor will,
upon receipt of notice that such damages are due and of
Operator's failure to pay same, pay such amounts, up to
a maximum of four hundred thousand dollars ($400,000)
in any Operating Year, and up to a maximum of one
million two hundred thousand dollars ($1,200,000)
during the term of the O&M Agreement. Payment shall be
by wire transfer in immediately available funds to an
account designated by Principal, or Principal's Lender.
Payment will be made within ten (10) Business Days of
receipt of notice by Guarantor or in the event that
Operator disputes such damages, within ten (10)
Business Days of a final decision of the arbitration
panel established pursuant to Article XIII of the O&M
Agreement. In the event Operator disputes such
damages, and pursues dispute resolution proceedings
pursuant to such Article XIII with due diligence,
Guarantor shall have no obligation to Principal until
the final decision of the arbitration panel is issued.
3. Modifications to the O&M Agreement. The Guarantor
shall not be discharged or released from, and its
liability shall not be affected under this Guaranty, by
any arrangement which may be made between Operator and
the Principal or by any forbearance by the Principal
whether as to payment, time of performance or by
anything else which might otherwise have any such
effect at law or in equity. Operator is expressly
authorized to amend, supplement, or otherwise modify
the O&M Agreement, waive compliance by the Principal
with the terms thereof, and settle or compromise any of
the Guarantied Obligations without notice to the
Guarantor, and without in any manner affecting the
absolute liabilities of the Guarantor hereunder.
4. Nature of Guaranty. This Guaranty is an absolute,
unconditional, irrevocable and continuing guaranty of
payment of the Guarantied Obligations, and the
obligations of the Guarantor hereunder shall not be
released, in whole or in part, by any action or thing
which might, but for this provision of this Guaranty,
be deemed a legal or equitable discharge of a surety or
guarantor, other than irrevocable payment in full of
the Guarantied Obligations. No notice of the
Guarantied Obligations to which this Guaranty may
apply, or any renewal or extension thereof, need be
given to the Guarantor, and none of the foregoing acts
shall release the Guarantor from liability hereunder.
The Guarantor hereby expressly waives (a) demand of
payment, presentment, protest, or notice of dishonor
for non-payment of the Guarantied Obligations; (b)
notice of acceptance of this Guaranty and notice of any
liability to which it may apply; and (c) all other
notices and demands of any kind and description
relating to the Guarantied Obligations now or hereafter
provided for by any agreement, statute, law, rule, or
regulation. The Guarantor shall not be exonerated with
respect to the Guarantor's liabilities under this
Guaranty by any act or thing except irrevocable payment
of the Guarantied
<PAGE>
Obligations, it being the purpose and intent of this
Guaranty that covenants, agreements, and all
obligations of the Guarantor hereunder be absolute,
unconditional, and irrevocable. No invalidity,
irregularity, or unenforceability of all or any part of
the Guarantied Obligations shall affect, impair, or be
a defense of this Guaranty. The liabilities of the
Guarantor herein shall not be affected or impaired by
any failure, delay, neglect or omission on the part of
Principal to realize upon any of the Guarantied
Obligations of Operator to the Principal nor by the
taking by Principal of (or the failure to take) any
other guaranty or guaranties to secure the Guarantied
Obligations, nor by the taking by the Principal (or the
failure to take or the failure to perfect any security
interest in or other lien on) of collateral or security
of any kind. No act or omission of the Principal,
whether or not such action or failure to act varies or
increases the risk, or affects the rights or remedies,
of the Guarantor, shall affect or impair the
obligations of the Guarantor hereunder. The Guarantor
acknowledges that this Guaranty is in effect and
binding as of the Effective Date without reference to
whether this Guaranty is signed by any other person,
that possession of this Guaranty by Principal shall be
conclusive evidence of due delivery hereof by the
Guarantor and that this Guaranty shall continue in full
force and effect notwithstanding the release of or
extension of time provided to any other guarantor of
the Guarantied Obligations or any part thereof.
5. Waiver of Subrogation and Contribution Rights. Prior
to the irrevocable payment in full of the Guarantied
Obligations hereunder, the Guarantor waives all rights
of subrogation to any of the rights of Principal
against Operator, and the Guarantor waives all rights
to seek any recourse against, or contribution or
reimbursement from, Operator in respect of payments
made by the Guarantor hereunder.
6. Set Aside of Payments made by Operator to Principal.
If any payment received by the Principal and applied to
the Guarantied Obligations is subsequently set aside,
recovered, rescinded, or required to be returned for
any reason (including without limitation, the
bankruptcy, insolvency or reorganization of Operator),
the Guarantied Obligations to which such payment was
applied shall for the purposes of this Guaranty be
deemed to have continued in existence, notwithstanding
such application, and this Guaranty shall be
enforceable as to such Guarantied Obligations as fully
as if such application had never been made. References
in this Guaranty to amounts "irrevocably paid" or to
"irrevocable payment" refer to payments that cannot be
set aside, recovered, rescinded, or required to be
returned for any reason.
7. Effect of Bankruptcy Proceedings involving Operator.
The Guarantor expressly agrees that the liabilities and
Guarantied Obligations of the Guarantor under this
Guaranty shall not in any way be impaired or otherwise
affected by the institution by or against Operator of
any bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceedings, or any other
similar proceedings for relief under any bankruptcy law
or similar law for the relief of debtors and that any
<PAGE>
discharge of any of the Guarantied Obligations pursuant
to any such bankruptcy or similar law or other law
shall not diminish, discharge, or otherwise affect in
any way the obligations of the Guarantor under this
Guaranty, and that upon the institution of any of the
above actions, such obligations shall be enforceable
against the Guarantor.
8. Reimbursement of Certain Expenses of Principal. The
Guarantor will pay or reimburse the Principal on demand
for all out-of-pocket expenses (including in each case
all reasonable fees and expenses of counsel) incurred
by the Principal arising out of or in connection with
the enforcement of this Guaranty against the Guarantor
or arising out of or in connection with any failure of
the Guarantor to fully and timely perform the
obligations of the Guarantor hereunder.
9. Representations and Warranties of Guarantor. Guarantor
represents and warrants to Principal as follows: (a)
Guarantor is a corporation duly formed, validly
existing, and in good standing under the laws of
Delaware; (b) Guarantor has the requisite power and
authority to execute, deliver and perform the terms and
provisions of this Guaranty, (c) the execution,
delivery, and performance of this Guaranty have been
duly authorized and approved by Guarantor, and no other
authorizations, approvals, or consents are required in
order for this Guaranty to constitute a binding and
enforceable legal obligation of the Guarantor; (d) the
execution of this Guaranty by Guarantor and the
performance of Guarantor's obligations under this
Guaranty will not conflict with, or result in a breach
of or default under any agreement, contract, or
covenant to which Guarantor is a party or by which
Guarantor is bound; and (e) this Guaranty, as executed,
constitutes the binding legal obligation of Guarantor
that is enforceable in accordance with its terms and
conditions, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of rights of creditors
generally and except to the extent that enforcement of
rights and remedies set forth therein may be limited by
equitable principles (regardless of whether enforcement
is considered in a court of law or a proceeding in
equity).
10. Assignment. This Guaranty may not be assigned by
Guarantor without the express prior written approval of
Principal. This Guaranty may not be assigned by
Principal without the express prior written consent of
Guarantor; provided, however, that Principal may assign
this Guaranty, without the consent of Guarantor, as
collateral for financing for the cogeneration Project
which is the subject of the O&M Agreement. Guarantor
agrees to execute any consent to assignment which may
be reasonably requested by Principal's Lenders.
11. Successors and Permitted Assigns. This Guaranty shall
be binding upon, and inure to the benefit of, the
successors and permitted assigns of the Parties.
12. Waivers and Amendments. This Guaranty may be waived,
modified or amended only by a writing signed by the
Principal and Guarantor. A waiver so signed shall
<PAGE>
be effective only in the specific instance and for the
specific purpose given.
13. Expiration of Guarantee. This Guaranty shall expire
upon the earliest of (a) the payment by the Guarantor
of the maximum amount of Guarantied Obligations set
forth in Section 1 above; (b) expiration of the term of
the O&M Agreement if no claim has been made by
Principal against Guarantor prior to such expiration;
or (c) delivery by Operator to Principal of a letter of
credit or substitute guaranty, in each case in form and
substance satisfactory to Principal, in an amount equal
to the remaining obligation of Guarantor hereunder. No
extension of this Guaranty shall be effective unless
evidenced by written amendment signed by Guarantor.
14. Governing Law. This Guaranty shall in all respects be
governed by the laws in force in the state of Minnesota
except with regard to such state's choice of law
provisions, and the Guarantor hereby submits to the
personal jurisdiction of the state and federal courts
of the state of Minnesota, and waives any defense based
on improper venue or forum non-conveniens. Guarantor
agrees to accept service of process by certified mail
in any enforcement proceedings.
15. Notices. All notices and other communications required
or permitted by this Guaranty shall become effective
when delivered (including by messenger or courier) or
when received by facsimile or such other method of
telecommunication as is capable of creating a writing.
All notices and other communication shall be forwarded
to the Parties at the following addresses, or facsimile
numbers, or at such substitute addresses, or substitute
facsimile numbers as the Party may designate by written
notice to the other Party in the manner specified
herein:
If to Principal: NRG (Morris) Cogen, LLC
1221 Nicollet Mall
Minneapolis, Minnesota
Facsimile: 612-373-5430
Attention: President
If to Guarantor: NRG Energy, Inc.
1221 Nicollet Mall
Minneapolis, Minnesota
Facsimile: 612-373-5392
Attention: General Counsel
16. Severability. In the event that any provision of this
Guaranty is held to be unenforceable or invalid by any
court of competent jurisdiction, the validity and
enforcibility of the remaining provisions shall not be
affected thereby.
<PAGE>
IN WITNESS WHEREOF, the Guarantor has duly signed this
Limited Guaranty as of the date and year first above written.
NRG Energy, Inc.
By:/s/ Craig Mataczynski
Name: Craig Mataczynski
Title: Vice President
Guaranty, dated as of the 10th day of December, 1997
that amends the Limited Guaranty made by NRG Energy for
the benefit of Cogen, LLC dated September 19, 1997.
<PAGE>
Exhibit 10.27.18
FIRST AMENDMENT TO LIMITED GUARANTY
THIS FIRST AMENDMENT to the Limited Guaranty (the
"Amendment") is made as of the 10th day of December, 1997 and
amends the Limited Guaranty made by NRG Energy, Inc., a Delaware
corporation (the "Guarantor") for the benefit of NRG (Morris)
Cogen, LLC, a Delaware limited liability company (the
"Principal") dated September 19, 1997 (the "Limited Guaranty").
Terms not defined herein shall have the meaning ascribed to them
in the Limited Guaranty.
W I T N E S S E T H:
WHEREAS, the Guarantor has made the Limited Guaranty for the
benefit of the Principal;
WHEREAS, the Guarantor and Principal have agreed to amend
the Limited Guaranty as set forth below;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1.
Amendment to Section 13
1. Section 13 of the Limited Guaranty is hereby amended to read
as follows:
"13. Expiration of Guaranty. This Guaranty shall expire
upon the earliest of
(a) the payment by the Guarantor of the maximum amount
of Guaranteed Obligations set forth in Section 1 above;
(b) expiration of the term of the O&M Agreement if no
claim has been made by Principal against Guarantor
prior to such expiration; provided, however, that
Principal may make claims against Guarantor under this
Guaranty that arose prior to the expiration of the O&M
Agreement for a period of one hundred twenty (120) days
after the expiration of the O&M Agreement; or (c)
delivery by Operator to Principal of a letter of credit
or substitute guaranty, in each case in form and
substance satisfactory to Principal, in an amount equal
to the remaining obligation of Guarantor hereunder. No
extension of the Guaranty shall be effective unless
evidenced by written amendment signed by the
Guarantor."
Section 2.
Miscellaneous
2. This Amendment may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This
Amendment shall be governed by and construed in accordance with
the laws of Minnesota, without giving effect to its provisions
regarding conflict of laws. Except as
<PAGE>
specifically amended hereby the provisions of the Limited
Guaranty shall continue in full force and effect. This Amendment
contains the entire agreement between the parties hereto as to
amendment of the Limited Guaranty, and any representations,
endorsements, promises or arrangements, including those contained
in any prior drafts of this Amendment, if not embodied herein,
shall not be of any force or effect.
3. This Amendment is effective upon the later of (i) the date
on which written consent to this Amendment is given by The Chase
Manhattan Bank, as agent for Principal's Lenders, and (ii) the
date of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused their
duly authorized representative to execute this Amendment as of
the day and year first written above.
NRG Energy, Inc.
By:/s/ Craig Mataczynski
Name: Craig A. Mataczynski
Title: Vice President
<PAGE>
Exhibit 10.31.2
NRG GENERATING (U.S.) INC.
1997 STOCK OPTION PLAN
GRANT OF INCENTIVE STOCK OPTION
Date of Grant: ______________________
THIS GRANT, dated as of the date of grant first stated above
(the "Date of Grant"), is delivered by NRG Generating (U.S.) Inc.
(the "Company") to _____________________ ("Grantee"), who is an
Employee of the Company or a Subsidiary.
WHEREAS, the Board of Directors of the Company (the "Board")
on March 27, 1997 adopted the NRG Generating (U.S.) Inc. 1997
Stock Option Plan (the "Plan") to be effective as of May 1, 1997,
and the shareholders of the Company approved the Plan on
, 1997;
WHEREAS, the Plan provides for the granting of Incentive
Stock Options by the Committee to directors, officers and key
employees of the Company (excluding officers and directors who
are not employees) to purchase shares of the Common Stock of the
Company (the "Stock"), in accordance with the terms and
provisions thereof; and
WHEREAS, the Committee considers Grantee to be a person who
is eligible for a grant of Incentive Stock Options under the
Plan, and has determined that it would be in the best interest of
the Company to grant the Incentive Stock Options documented
herein.
NOW THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the
Company, with the approval and at the direction of the Committee,
hereby grants to Grantee, as of the Date of Grant, an option to
purchase up to __________ shares of Stock at a price of
$___________ per share, its Fair Market Value as of the Date of
Grant. The shares of stock purchasable upon exercise of the
Option are hereinafter sometimes referred to as the "Option
Shares." The Option is intended by the parties hereto to be, and
shall be treated as, an Incentive Stock Option under Code Section
422.
2. Installment Exercise.
Subject to such further limitations as are provided herein, the
Option shall become exercisable in three (3) installments,
Grantee having the right hereunder to purchase from the Company
the following number of Option Shares upon exercise of the
Option, on and after the following dates, in cumulative fashion:
(i) on and after the first anniversary of the Date of Grant up
to one-third (ignoring fractional shares) of the total number of
Option Shares;
(ii) on and after the second anniversary of the Date of Grant,
up to an additional one-third (ignoring fractional shares) of the
total number of Option Shares; and
(iii) on and after the third anniversary of the Date of Grant,
the remaining Option Shares.
<PAGE>
3. Termination of Option.
(a) The Option and all rights hereunder with respect thereto,
to the extent such rights shall not have been exercised, shall
terminate and become null and void after the expiration of ten
(10) years from the Date of Grant (the "Option Term").
(b) Upon the occurrence of Grantee's ceasing for any reason to
be employed by the Company, the Option, to the extent not
previously exercised, shall terminate and become null and void
immediately upon the Separation Date, except in a case where the
termination of Grantee's employment is by reason of retirement,
Disability or death or otherwise as follows. Upon a termination
of Grantee's employment by reason of Disability or death, all
unexercised portions of the Option shall become immediately
exercisable and the Option may be exercised during the period
beginning upon such termination and ending one year after such
date. In the event of any other termination, the Option may be
exercised within the three-month period following the date of
retirement, but only to the extent that the Option was
outstanding and exercisable upon the date of such retirement. In
no event, however, shall any such period extend beyond the Option
Term.
(c) In the event of Grantee's death, the Option may be
exercised by Grantee's legal representative(s) as and to the
extent that the Option would otherwise have been exercisable by
Grantee, subject to the provisions of Section 3(b) hereof.
(d) A transfer of Grantee's employment between the Company and
its Parents or Subsidiaries shall not be deemed to be a
termination of Grantee's employment.
(e) Notwithstanding any other provisions set forth herein or in
the Plan, if Grantee shall: (i) commit any act of malfeasance or
wrongdoing affecting the Company, its Parents or Subsidiaries,
(ii) breach any covenant not to compete, or employment contract,
with the Company, its Parents or Subsidiaries), or (iii) engage
in conduct that would warrant Grantee's discharge for cause
(excluding general dissatisfaction with the performance of
Grantee's duties, but including any act of disloyalty or any
conduct clearly tending to bring discredit upon the Company, its
Parents or Subsidiaries), any unexercised portion of the Option
shall immediately terminate and be void.
4. Exercise of Options.
(a) Grantee may exercise the Option with respect to all or any
part of the number of Option Shares that are exercisable
hereunder by giving the Secretary of the Company written notice
of intent to exercise. The notice of exercise shall specify the
number of Option Shares as to which the Option is to be exercised
and date of exercise thereof, which date shall be at least five
(5) days after the signing of such notice unless an earlier time
shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by Grantee of the Option
Price for Option Shares purchased shall be made on or before the
exercise date specified in the notice of exercise in cash, or as
the Company may otherwise permit as further set forth in the
Plan. On the exercise date specified in Grantee's notice or as
soon thereafter as is practicable, the Company shall cause to be
delivered to Grantee, a certificate or certificates for the
Option Shares then being purchased (out of theretofore unissued
Stock or reacquired Stock, as the Company may elect) upon full
payment for such Option Shares. The obligation of the Company to
deliver Stock shall, however, be subject to the condition that if
at any time the Committee shall determine in its discretion that
the listing, registration or qualification of the Option or the
Option Shares upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or
in connection with, the Option or the issuance or purchase of
Stock thereunder, the Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
2
<PAGE>
(c) If Grantee fails to pay for any of the Option Shares
specified in such notice or fails to accept delivery thereof,
Grantee's right to purchase such Option Shares may be terminated
by the Company or the exercise of the Option may be ignored, as
the Committee in its sole discretion may determine. The date
specified in Grantee's notice as the date of exercise shall be
deemed the date of exercise of the Option, provided that payment
in full for the Option Shares to be purchased upon such exercise
shall have been received by such date.
5. Adjustment of and Changes in Stock.
In the event of a reorganization, recapitalization, change of
shares, stock split, spin-off, stock dividend, reclassification,
subdivision, or combination of shares, merger, consolidation,
rights offering, or any other change in the corporate structure
of shares of capital stock of the Company, the Committee shall
make such adjustment as it deems appropriate in the number and
kind of shares of Stock subject to the Option or in such option
price; provided, however, that no such adjustment shall give
Grantee any additional benefits under the Option.
[Optional Change of Control Provisions
In the event of any Corporate Transaction or an event giving rise
to a Change in Control, the Option shall be fully vested,
nonforfeitable and become exercisable as of the date of the
Change in Control or Corporate Transaction or as otherwise
determined in accordance with Section 5.5(c) of the Plan.
However, in the case of a Corporate Transaction, the Committee
may determine that the Option will not be so accelerated if and
to the extent (i) such Option is either to be assumed by the
successor or parent thereof or to be replaced with a comparable
Option to purchase shares of the capital stock of the successor
corporation or parent thereof, or (ii) such Option is to be
replaced with a cash incentive program of the successor
corporation that preserves the option spread existing at the time
of the Corporate Transaction and provides for subsequent payment
in accordance with the same vesting schedule applicable to such
Option.
In the event of a Corporate Transaction described in clauses (i)
or (ii) of Section 5.5(b) of the Plan, the Committee may, upon no
less than 60 days notice to the optionee (an "Acceleration
Notice") determine that such optionee's Options will terminate as
of the effective date of such Corporate Transaction, in which
event such Options shall be fully vested, nonforfeitable and
become exercisable immediately as of the date of such
Acceleration Notice. In the event of a Change in Control or
Corporate Transaction described in clauses (a)(i), (a)(ii) and
(b)(iii) of Section 5.5 of the Plan or in the event the
Acceleration Notice is not timely given, the Option shall remain
exercisable for the remaining term of the Option notwithstanding
the provisions of Article V of the Plan, subject to any
limitations thereto which may be applicable to Incentive Stock
Options. In the event of a Corporate Transaction described in
clauses (a)(iii), (b)(i) or (b)(ii) of Section 5.5 of the Plan,
which is preceded by a timely Acceleration Notice, the Option
shall terminate as of the effective date of the Corporate
Transaction described therein. In no event shall the Option be
exercised after the expiration of the Option Term.]
6. Fair Market Value.
As used herein, the term "Fair Market Value" shall mean:
(a) If the Common Stock is listed on any established stock
exchange or a national market system, including, without
limitation, the Nasdaq National Market, its fair market value
shall be the average, over the twenty (20) trading days preceding
the date of the grant of an option, of the closing selling price
for such stock on the principal securities exchange or national
market system on
3
<PAGE>
which the Common Stock is at the time listed for trading. If
there are no sales of Common Stock on that date, then the closing
selling price for the Common Stock on the next preceding day for
which such closing selling price is quoted shall be determinative
of fair market value; or,
(b) If the Common Stock is not traded on an exchange or a
national market system, its fair market value shall be determined
in good faith by the Committee, and such determination shall be
conclusive and binding on all persons.
In no event shall the Fair Market Value equal less than the par
value of the Common Stock.
7. No Rights as Shareholders.
Grantee shall have no rights as a shareholder with respect
thereto unless and until certificates for shares of Common Stock
are issued to him or her.
8. Non-Transferability of Option.
During Grantee's lifetime, this Option shall be exercisable
only by Grantee or his or her guardian or legal representative.
9. Employment Not Affected.
The grant of the Option hereunder shall not be construed as
conferring on Grantee any right to continued employment, and
Grantee's employment may be terminated without regard to the
effect which such action might have upon him as a holder of this
Option.
10. Amendment of Option.
The Option may be amended by the Committee at any time (i) if
the Committee determines, in its sole discretion, that amendment
is necessary or advisable in light of any addition to or change
in the Code or in the regulations issued thereunder, or any
federal or state securities law or other law of regulation, which
change occurs after the Date of Grant and by its terms applies to
the Option; or (ii) other than in the circumstances described in
clause (i), with the consent of Grantee.
11. Notice.
Any notice to the Company provided for in this instrument shall
be addressed to it in care of its Secretary at its executive
offices and any notice to Grantee shall be addressed to Grantee
at the current address shown on the payroll records of the
Employer. Any notice shall be deemed to be duly given if and
when properly addressed and posted by registered or certified
mail, postage prepaid.
12. Incorporation of Plan by Reference.
The Option is granted pursuant to the Plan, the terms and
definitions of which are incorporated herein by reference, and
the Option shall in all respects by interpreted in accordance
with the Plan.
13. Governing Law.
To the extent that federal law shall not be held to have
preempted local law, this Option shall be governed by the laws of
the State of Delaware. If any provision of the Option shall be
held invalid or unenforceable, the remaining provisions hereof
shall continue in full force and effect.
4
<PAGE>
IN WITNESS WHEREOF, the Company has caused its duly
authorized officer to execute this Grant of Incentive Stock
Option, and Grantee has placed his or her signature hereon,
effective as of the Date of Grant.
NRG Generating (U.S.) Inc.
By:________________________________
Member of the Committee
By:________________________________
Member of the Committee
By:________________________________
Timothy P. Hunstad
Vice President and Chief
Financial
Officer
GRANTEE
Signature__________________________
Name:______________________________
(Print)
Address:
_____________________________
_____________________________
<PAGE>
Exhibit 10.31.3
NRG GENERATING (U.S.) INC.
1997 STOCK OPTION PLAN
GRANT OF EMPLOYEE NONQUALIFIED STOCK OPTION
Date of Grant: ______________________
THIS GRANT, dated as of the date of grant first stated above
(the "Date of Grant"), is delivered by NRG Generating (U.S.) Inc.
(the "Company") to _____________________ (the "Grantee"), who is
an Employee of the Company or a Subsidiary.
WHEREAS, the Board of Directors of the Company (the "Board")
on March 27, 1997, adopted the NRG Generating (U.S.) Inc. 1997
Stock Option Plan (the "Plan") effective as of May 1, 1997;
WHEREAS, the Plan provides for the granting of Nonqualified
Stock Options by the Committee to directors of the Company and to
officers and key employees of the Company and its Subsidiaries to
purchase shares of the Common Stock of the Company (the "Stock"),
in accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers Grantee to be a person who
is eligible for a grant of Nonqualified Stock Options under the
Plan, and has determined that it would be in the best interest of
the Company to grant the Nonqualified Stock Options documented
herein.
NOW THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the
Company, with the approval and at the direction of the Committee,
hereby grants to Grantee, as of the Date of Grant, an option to
purchase up to __________ shares of Stock at a price of
$___________ per share. The shares of stock purchasable upon
exercise of the Option are hereinafter sometimes referred to as
the "Option Shares." The Option is intended by the parties
hereto to be, and shall be treated as, a Nonqualified Stock
Option which is not subject to the provisions of Code Section
422.
2. Installment Exercise.
Subject to such further limitations as are provided herein, the
Option shall become exercisable in three (3) installments,
Grantee having the right hereunder to purchase from the Company
the following number of Option Shares upon exercise of the
Option, on and after the following dates, in cumulative fashion:
(i) on and after the first anniversary of the Date of Grant up
to one-third (ignoring fractional shares) of the total number of
Option Shares;
(ii) on and after the second anniversary of the Date of Grant,
up to an additional one-third (ignoring fractional shares) of the
total number of Option Shares; and
(iii) on and after the third anniversary of the Date of Grant,
the remaining Option Shares.
3. Termination of Option.
(a) The Option and all rights hereunder with respect thereto,
to the extent such rights shall not have been exercised, shall
terminate and become
<PAGE>
null and void after the expiration of ten (10) years from the
Date of Grant (the "Option Term").
(b) Upon the occurrence of Grantee's ceasing for any reason to
be employed by the Company, the Option, to the extent not
previously exercised, shall terminate and become null and void
immediately upon the Separation Date, except in a case where the
termination of Grantee's employment is by reason of retirement,
Disability or death or otherwise as follows. Upon a termination
of Grantee's employment by reason of Disability or death, all
unexercised portions of the Option shall become immediately
exercisable and the Option may be exercised during the period
beginning upon such termination and ending one year after such
date. Upon termination of Grantee's employment, the Option may
be exercised during the three-month period following the date of
retirement, but only to the extent that the Option was
outstanding and exercisable on the date of such retirement. In no
event, however, shall any such period extend beyond the Option
Term.
(c) In the event of Grantee's death, the Option may be
exercised by Grantee's legal representative(s) as and to the
extent that the Option would otherwise have been exercisable by
Grantee, subject to the provisions of Section 3(b) hereof.
(d) A transfer of Grantee's employment between the Company, its
parents, subsidiaries or affiliates, shall not be deemed to be a
termination of Grantee's employment.
(e) Notwithstanding any other provisions set forth herein or in
the Plan, if Grantee shall: (i) commit any act of malfeasance or
wrongdoing affecting the Company, its Parents or Subsidiaries,
(ii) breach any covenant not to compete, or employment contract,
with the Company, its Parents or Subsidiaries, or (iii) engage in
conduct that would warrant Grantee's discharge for cause
(excluding general dissatisfaction with the performance of
Grantee's duties, but including any act of disloyalty or any
conduct clearly tending to bring discredit upon the Company, its
Parents or Subsidiaries), any unexercised portion of the Option
shall immediately terminate and be void.
4. Exercise of Options.
(a) Grantee may exercise the Option with respect to all or any
part of the number of Option Shares that are exercisable
hereunder by giving the Secretary of the Company written notice
of intent to exercise. The notice of exercise shall specify the
number of Option Shares as to which the Option is to be exercised
and date of exercise thereof, which date shall be at least five
(5) days after the signing of such notice unless an earlier time
shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by Grantee of the Option
Price for Option Shares purchased shall be made on or before the
exercise date specified in the notice of exercise in cash or as
the Company may otherwise permit as further set forth in the
Plan. On the exercise date specified in Grantee's notice or as
soon thereafter as is practicable, the Company shall cause to be
delivered to Grantee, a certificate or certificates for the
Option Shares then being purchased (out of theretofore unissued
Stock or reacquired Stock, as the Company may elect) upon full
payment for such Option Shares. The obligation of the Company to
deliver Stock shall, however, be subject to the condition that if
at any time the Committee shall determine in its discretion that
the listing, registration or qualification of the Option or the
Option Shares upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or
in connection with, the Option or the issuance or purchase of
Stock thereunder, the Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
(c) If Grantee fails to pay for any of the Option Shares
specified in such notice or fails to accept delivery thereof,
Grantee's right to purchase such Option Shares may be terminated
by the Company
2
<PAGE>
or the exercise of the Option may be ignored, as the Committee in
its sole discretion may determine. The date specified in
Grantee's notice as the date of exercise shall be deemed the date
of exercise of the Option, provided that payment in full for the
Option Shares to be purchased upon such exercise shall have been
received by such date.
5. Adjustment of and Changes in Stock.
In the event of a reorganization, recapitalization, change of
shares, stock split, spin-off, stock dividend, reclassification,
subdivision, or combination of shares, merger, consolidation,
rights offering, or any other change in the corporate structure
of shares of capital stock of the Company, the Committee shall
make such adjustment as it deems appropriate in the number and
kind of shares of Stock subject to the Option or in such option
price; provided, however, that no such adjustment shall give
Grantee any additional benefits under the Option.
[Optional Change of Control Provision
In the event of any Corporate Transaction or an event giving rise
to a Change in Control, the Option shall be fully vested,
nonforfeitable and become exercisable as of the date of the
Change in Control or Corporate Transaction or as otherwise
determined in accordance with Section 5.5(c) of the Plan.
However, in the case of a Corporate Transaction, the Committee
may determine that the Option will not be so accelerated if and
to the extent (i) such Option is either to be assumed by the
successor or parent thereof or to be replaced with a comparable
Option to purchase shares of the capital stock of the successor
corporation or parent thereof, or (ii) such Option is to be
replaced with a cash incentive program of the successor
corporation that preserves the option spread existing at the time
of the Corporate Transaction and provides for subsequent payment
in accordance with the same vesting schedule applicable to such
Option.
In the event of a Corporate Transaction described in clauses (i)
or (ii) of Section 5.5(b) of the Plan, the Committee may, upon no
less than 60 days notice to the optionee (an "Acceleration
Notice") determine that such optionee's Options will terminate as
of the effective date of such Corporate Transaction, in which
event such Options shall be fully vested, nonforfeitable and
become exercisable immediately as of the date of such
Acceleration Notice. In the event of a Change in Control or
Corporate Transaction described in clauses (a)(i), (a)(ii) and
(b)(iii) of Section 5.5 of the Plan or in the event the
Acceleration Notice is not timely given, the Option shall remain
exercisable for the remaining term of the Option notwithstanding
the provisions of Article V of the Plan, subject to any
limitations thereto which may be applicable to Incentive Stock
Options. In the event of a Corporate Transaction described in
clauses (a)(iii), (b)(i) or (b)(ii) of Section 5.5 of the Plan,
which is preceded by a timely Acceleration Notice, the Option
shall terminate as of the effective date of the Corporate
Transaction described therein. In no event shall the Option be
exercised after the expiration of the Option Term.]
6. No Rights as Shareholders.
Grantee shall have no rights as a shareholder with respect
thereto unless and until certificates for shares of Common Stock
are issued to him or her.
7. Non-Transferability of Option.
During Grantee's lifetime, this Option shall be exercisable
only by Grantee or his or her guardian or legal representative.
8. Employment Not Affected.
The grant of the Option hereunder shall not be construed as
conferring on Grantee any right to continued employment, and
Grantee's employment may be terminated without regard to the
effect which such action might have upon him as a holder of this
Option.
9. Amendment of Option.
The Option may be amended by the Committee at any time (i) if
the Committee determines, in its sole discretion, that amendment
is necessary or advisable in light of any addition to or change
in the Code or in the regulations issued thereunder, or any
federal or state securities law or other law of regulation, which
change occurs after the Date of Grant and by its terms applies to
the Option; or (ii) other than in
3
<PAGE>
the circumstances described in clause (i), with the consent of
Grantee.
10. Notice.
Any notice to the Company provided for in this instrument shall
be addressed to it in care of its Secretary at its executive
offices and any notice to Grantee shall be addressed to Grantee
at the current address shown on the payroll records of the
Employer. Any notice shall be deemed to be duly given if and
when properly addressed and posted by registered or certified
mail, postage prepaid.
11. Incorporation of Plan by Reference.
The Option is granted pursuant to the Plan, the terms and
definitions of which are incorporated herein by reference, and
the Option shall in all respects by interpreted in accordance
with the Plan.
12. Governing Law.
To the extent that federal law shall not be held to have
preempted local law, this Option shall be governed by the laws of
the State of Delaware. If any provision of the Option shall be
held invalid or unenforceable, the remaining provisions hereof
shall continue in full force and effect.
4
<PAGE>
IN WITNESS WHEREOF, the Company has caused its duly
authorized officer to execute this Grant of Nonqualified Stock
Option, and Grantee has placed his or her signature hereon,
effective as of the Date of Grant.
NRG Generating (U.S.) Inc.
By:
Member of the Committee
By:
Member of the Committee
By:
Timothy P. Hunstad
Vice President and Chief
Financial Officer
GRANTEE
Signature___________________________
Name:
(Print)
Address:
_____________________________
_____________________________
5
<PAGE>
Exhibit 10.31.4
NRG GENERATING (U.S.) INC.
1997 STOCK OPTION PLAN
GRANT OF NONEMPLOYEE DIRECTOR
NONQUALIFIED STOCK OPTION
Date of Grant: ______________________
THIS GRANT, dated as of the date of grant first stated above
(the "Date of Grant"), is delivered by NRG Generating (U.S.) Inc.
(the "Company") to _____________________ (the "Grantee"), who is
a director of the Company who is not an Employee of the Company
or a Subsidiary.
WHEREAS, the Board of Directors of the Company (the "Board")
on March 27, 1997 adopted the NRG Generating (U.S.) Inc. 1997
Stock Option Plan (the "Plan") effective as of May 1, 1997;
WHEREAS, the Plan provides for the granting of Nonqualified
Stock Options by the Committee to directors of the Company to
purchase shares of the Common Stock of the Company (the "Stock"),
in accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers Grantee to be a person who
is eligible for a grant of Nonqualified Stock Options under the
Plan, and has determined that it would be in the best interest of
the Company to grant the Nonqualified Stock Options documented
herein.
NOW THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the
Company, with the approval and at the direction of the Committee,
hereby grants to Grantee, as of the Date of Grant, an option to
purchase up to __________ shares of Stock at a price of
$___________ per share. The shares of stock purchasable upon
exercise of the Option are hereinafter sometimes referred to as
the "Option Shares." The Option is intended by the parties
hereto to be, and shall be treated as, a Nonqualified Stock
Option which is not subject to the provisions of Code Section
422.
2. Installment Exercise.
Subject to such further limitations as are provided herein, the
Option shall become exercisable in three (3) installments,
Grantee having the right hereunder to purchase from the Company
the following number of Option Shares upon exercise of the
Option, on and after the following dates, in cumulative fashion:
(i) on and after the first anniversary of the Date of Grant up
to one-third (ignoring fractional shares) of the total number of
Option Shares;
(ii) on and after the second anniversary of the Date of Grant,
up to an additional one-third (ignoring fractional shares) of the
total number of Option Shares; and
<PAGE>
(iii) on and after the third anniversary of the Date of Grant,
the remaining Option Shares.
3. Termination of Option.
(a) The Option and all rights hereunder with respect thereto,
to the extent such rights shall not have been exercised, shall
terminate and become null and void after the expiration of ten
(10) years from the Date of Grant (the "Option Term").
(b) When the Grantee ceases to be a director of the Company,
the Option, to the extent not previously exercised, shall
terminate and become null and void immediately upon the
Separation Date, except in a case where the Grantee's service as
a director of the Company ceases by reason of Disability or death
or otherwise as follows. If the Grantee ceases to be a director
of the Company by reason of Disability or death, all unexercised
portions of the Option shall become immediately exercisable and
the Option may be exercised during the period beginning upon such
termination and ending one year after such date. In no event,
however, shall any such period extend beyond the Option Term. If
the Participant's service as a director of the Company terminates
for any other reason prior to the exercise of all portions of the
Option, the Participant shall have the right within three (3)
months of his Separation Date, but not beyond the expiration date
of the Option, to exercise such unexercised portions of the
Option.
(c) In the event of Grantee's death, the Option may be
exercised by Grantee's legal representative(s) as and to the
extent that the Option would otherwise have been exercisable by
Grantee, subject to the provisions of Section 3(b) hereof.
(d) Notwithstanding any other provisions set forth herein or in
the Plan, if Grantee shall: (i) commit any act of malfeasance or
wrongdoing affecting the Company, its Parents or Subsidiaries, or
(ii) engage in conduct that would warrant Grantee's removal for
cause (excluding general dissatisfaction with the performance of
Grantee's duties, but including any act of disloyalty or any
conduct clearly tending to bring discredit upon the Company, its
Parents or Subsidiaries), any unexercised portion of the Option
shall immediately terminate and be void.
4. Exercise of Options.
(a) Grantee may exercise the Option with respect to all or any
part of the number of Option Shares that are exercisable
hereunder by giving the Secretary of the Company written notice
of intent to exercise. The notice of exercise shall specify the
number of Option Shares as to which the Option is to be exercised
and date of exercise thereof, which date shall be at least five
(5) days after the signing of such notice unless an earlier time
shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by Grantee of the Option
Price for Option Shares purchased shall be made on or before the
exercise date specified in the notice of exercise in cash or as
the Company may otherwise permit as further set forth in the
Plan. On the exercise date specified in Grantee's notice or as
soon thereafter as is practicable, the Company shall cause to be
delivered to Grantee, a certificate or certificates for the
Option Shares then being purchased (out of theretofore unissued
Stock or reacquired Stock, as the Company may elect) upon full
payment for such Option Shares. The obligation of the Company to
deliver Stock shall, however, be subject to the condition that if
at any time the Committee shall determine in its discretion that
the listing, registration or qualification of the Option or the
Option Shares upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or
in connection with, the Option or the issuance or purchase of
Stock thereunder, the Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
(c) If Grantee fails to pay for any of the Option Shares
specified in such notice or fails to accept delivery thereof,
Grantee's right to purchase such
2
<PAGE>
Option Shares may be terminated by the Company or the exercise of
the Option may be ignored, as the Committee in its sole
discretion may determine. The date specified in Grantee's notice
as the date of exercise shall be deemed the date of exercise of
the Option, provided that payment in full for the Option Shares
to be purchased upon such exercise shall have been received by
such date.
5. Adjustment of and Changes in Stock.
In the event of a reorganization, recapitalization, change of
shares, stock split, spin-off, stock dividend, reclassification,
subdivision, or combination of shares, merger, consolidation,
rights offering, or any other change in the corporate structure
of shares of capital stock of the Company, the Committee shall
make such adjustment as it deems appropriate in the number and
kind of shares of Stock subject to the Option or in such option
price; provided, however, that no such adjustment shall give
Grantee any additional benefits under the Option.
[Optional Changes of Control Provision
In the event of any Corporate Transaction or an event giving rise
to a Change in Control, the Option shall be fully vested,
nonforfeitable and become exercisable as of the date of the
Change in Control or Corporate Transaction or as otherwise
determined in accordance with Section 5.5(c) of the Plan.
However, in the case of a Corporate Transaction, the Committee
may determine that the Option will not be so accelerated if and
to the extent (i) such Option is either to be assumed by the
successor or parent thereof or to be replaced with a comparable
Option to purchase shares of the capital stock of the successor
corporation or parent thereof, or (ii) such Option is to be
replaced with a cash incentive program of the successor
corporation that preserves the option spread existing at the time
of the Corporate Transaction and provides for subsequent payment
in accordance with the same vesting schedule applicable to such
Option.
In the event of a Corporate Transaction described in clauses (i)
or (ii) of Section 5.5(b) of the Plan, the Committee may, upon no
less than 60 days notice to the optionee (an "Acceleration
Notice") determine that such optionee's Options will terminate as
of the effective date of such Corporate Transaction, in which
event such Options shall be fully vested, nonforfeitable and
become exercisable immediately as of the date of such
Acceleration Notice. In the event of a Change in Control or
Corporate Transaction described in clauses (a)(i), (a)(ii) and
(b)(iii) of Section 5.5 of the Plan or in the event the
Acceleration Notice is not timely given, the Option shall remain
exercisable for the remaining term of the Option notwithstanding
the provisions of Article V of the Plan, subject to any
limitations thereto which may be applicable to Incentive Stock
Options. In the event of a Corporate Transaction described in
clauses (a)(i)(iii), b(i) or (b)(ii) of Section 5.5 of the Plan,
which is preceded by a timely Acceleration Notice, the Option
shall terminate as of the effective date of the Corporate
Transaction described therein. In no event shall the Option be
exercised after the expiration of the Option Term.]
6. No Rights as Shareholders.
Grantee shall have no rights as a shareholder with respect
thereto unless and until certificates for shares of Common Stock
are issued to him or her.
7. Non-Transferability of Option.
During Grantee's lifetime, this Option shall be exercisable
only by Grantee or his or her guardian or legal representative.
8. Amendment of Option.
The Option may be amended by the Committee at any time (i) if
the Committee determines, in its sole discretion, that amendment
is necessary or advisable in light of any addition to or change
in the Code or in the regulations issued thereunder, or any
federal or state securities law or other law of regulation, which
change occurs after the Date of Grant and by its terms applies to
the Option; or (ii) other than in the circumstances described in
clause (i), with the consent of Grantee.
9. Notice.
Any notice to the Company provided for in this instrument shall
be addressed to it in care of its Secretary at its executive
offices and any notice to
3
<PAGE>
Grantee shall be addressed to Grantee at the address below. Any
notice shall be deemed to be duly given if and when properly
addressed and posted by registered or certified mail, postage
prepaid.
10. Incorporation of Plan by Reference.
The Option is granted pursuant to the Plan, the terms and
definitions of which are incorporated herein by reference, and
the Option shall in all respects by interpreted in accordance
with the Plan.
11. Governing Law.
To the extent that federal law shall not be held to have
preempted local law, this Option shall be governed by the laws of
the State of Delaware. If any provision of the Option shall be
held invalid or unenforceable, the remaining provisions hereof
shall continue in full force and effect.
4
<PAGE>
IN WITNESS WHEREOF, the Company has caused its duly
authorized officer to execute this Grant of Nonqualified Stock
Option, and Grantee has placed his or her signature hereon,
effective as of the Date of Grant.
NRG Generating (U.S.) Inc.
By:
Member of the Committee
By:
Member of the Committee
By:
Timothy P. Hunstad
Vice President and Chief
Financial
Officer
GRANTEE
Signature___________________________
Name:
(Print)
Address:
_____________________________
_____________________________
5
<PAGE>
Exhibit 10.33
August 5, 1997
Mr. Richard C. Stone
4 Ashbrook Road
Exeter, NH 03833
Dear Dick:
I am pleased to extend to you the following offer of employment:
Position: Vice President
NRG Generating (U.S.) Inc. ("NRGG")
You will report to the President and
CEO of NRGG
Duties: Head of Business Development and
Marketing, with duties as assigned by
the President and CEO
Base Salary: $12,917/month
Hire Date: As soon as possible, but not later than
1 September 1997
Hiring Bonus: $15,000 payable within seven (7)
days of Hire Date
Annual Bonus: Up to 50% of Base Salary, according to
an annual plan recommended by the
President and CEO and approved by
NRGG's Board of Directors determined
under such annual plan. For calendar
year 1997, the annual
1
<PAGE>
bonus will be prorated based on actual
days worked in 1997.
Stock Options: Subject to approval of the NRGG Board
of Directors, you will receive the
following stock options:
(1) An option to purchase up to 50,000 shares of NRGG common
stock pursuant to the 1996 or 1997 NRGG Stock Option Plan ("the
Plan"); strike price to be the weighted average of the common
stock price within the 20 day period prior to the Hire Date, as
determined in good faith by NRGG's Chief Financial Officer.
(2) An option to purchase up to an additional 25,000 shares of
options on NRGG common stock, pursuant to the Plan; strike price
to be the weighted average of the common stock price within the
20 day period prior to the Hire Date, as determined in good faith
by NRGG's Chief Financial Officer. The incentive shares will
begin vesting on the day following the twenty-day period during
which the common stock shall have traded at a price of $25/share.
(3) An additional 25,000 options on NRGG common stock, pursuant
to the Plan; strike price will be the weighted average of the
common stock price within the 20 day period prior to the Hire
Date, as determined in good faith by NRGG's Chief Financial
Officer. The incentive shares will begin vesting on the day
following the twenty-day period during
2
<PAGE>
which the common stock shall have
traded at a price of $35/share.
Benefits: You will receive health, dental, life
insurance and the employee benefits
available to officers of NRGG, as such
benefits are available from time to
time. You acknowledge receipt of a
copy of NRGG's current employee
benefit program.
Relocation: Moving and relocation expenses will be
paid or reimbursed pursuant to NRGG's
Relocation Policy, copy attached.
Parking: NRGG will pay expenses of covered
parking at the Company's headquarters.
Vacation: Four (4) weeks per year
This offer is subject to the following:
Completion of reference checks (please
provide three professional references);
Completion of a security evaluation by
NRGG.
When the conditions have been satisfied, the provisions of this
letter will function as the terms and conditions of a binding
agreement between you and NRGG.
Dick, I want to welcome you to NRGG. Please acknowledge
acceptance of these terms by signing in the space below. You may
retain one original of this letter for your file.
Best regards
/s/ Robert T. Sherman, Jr.
3
<PAGE>
Terms accepted this 28th day of August, 1997.
By:/s/ Richard Stone
Richard C. Stone
Enclosures:
NRGG Employee Benefit Program as of August 1, 1997
NRGG Relocation Policy
4
<PAGE>
Exhibit 10.35
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement, entered into as of October 3,
1997, is executed by NRG Generating (U.S.) Inc. ("NRGG"), a
corporation organized under the laws of the State of Delaware,
the address of which is set forth at the end of this Agreement,
and NRG Energy, Inc. ("Energy"), a corporation organized under
the laws of the State of Delaware, the address of which is set
forth at the end of this Agreement. NRGG and Energy are referred
to individually as a "Party" and collectively as the "Parties."
RECITALS
A. The Parties are both party to that certain Co-Investment
Agreement, dated as of April 30, 1996 (the "Co-Investment
Agreement"), pursuant to which they will be potentially
investing together in projects.
B. The Parties, for their mutual benefit and in furtherance of
these projects, may exchange Confidential Information (as
defined below) in the course of their relationship.
C. The Parties which to define their respective rights and
obligations with respect to such Confidential Information.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Parties agree as follows:
19. As used herein, the term "Confidential Information" means
information which is of a non-public, proprietary or
confidential nature to the disclosing Party, including all
reports and analyses, technical and economic data, studies,
forecasts, trade secrets, research or business strategies,
financial or contractual proposals or information or other
written or oral information. Confidential Information may
be in any form whatsoever, including writings, computer
programs, logic diagrams, component specifications, drawings
or other media. All information disclosed by either Party
to the other, whether orally (provided, however, that
information disclosed orally must be reduced to written form
and marked confidential within five business days), in
writing, by inspection or otherwise, shall be deemed to be
Confidential Information unless otherwise expressly agreed
in writing by the Party disclosing such information, or
unless excluded pursuant to paragraph 2 below.
20. Notwithstanding the provisions of paragraph 1, the term
"Confidential Information" shall not include, and neither
Party shall be under any obligation to maintain in
confidence or not use, any information (or any portion
thereof) disclosed to it by the other Party to the extent
that such information:
<PAGE>
(i) is in the public domain at the time of disclosure; or
(ii) following disclosure, becomes generally known or available
through no fault or omission on the part of the receiving
Party; or
(iii) is known, or becomes known, to the receiving Party from
persons not known by the receiving Party to be under an
obligation of secrecy (whether legal or contractual) to the
disclosing Party; or
(iv) is independently developed by the receiving Party without
violating any of its obligations under this Agreement; or
(v) is legally required to be disclosed by judicial or other
governmental action; provided, however, that prompt notice
of such judicial or other governmental action shall have
been given to the disclosing Party and that the disclosing
Party shall be afforded the opportunity (consistent with the
legal obligations of the receiving Party) to exhaust all
reasonable legal remedies to maintain the Confidential
Information in confidence; or
(vi) which the disclosing Party approved for release by written
authorization to the receiving Party; or
(vii) which is already in the receiving Party's possession at
the time of disclosure and which was not acquired by the
receiving Party directly or indirectly from the disclosing
Party on a confidential basis.
Specific information shall not be deemed to be within the
exceptions of subparts (i) or (iv) above merely because it is
included in a document which contains information within such
exceptions.
21. The Confidential Information (i) may be used by the
receiving Party solely in connection with business between
the Parties, as a result of which the Parties have caused
this Agreement to be executed, and (ii) will be kept
confidential and not disclosed by the receiving Party to any
other person, except that Confidential Information may be
disclosed to any of the receiving Party's affiliates,
directors, officers, employees, attorneys, accountants,
consultants, potential lenders or underwriters, advisors and
agents (collectively, its "Representatives") who require
access to such information in connection with the evaluation
of potential business transactions between the Parties.
Each of the Parties agrees that any of its Representatives
to whom Confidential Information is disclosed will be
informed of the confidential or proprietary nature thereof
and of the receiving Party's obligations under this
Agreement, and that each Party shall be responsible for any
use or disclosure of Confidential Information by any of its
Representatives.
22. NRGG shall not: (i) directly or indirectly solicit business
from the principal host project energy customer, or any
affiliate thereof, of any project that has been presented to
the NRGG Board or NRGG Management as an opportunity in which
NRGG may acquire an
2
<PAGE>
ownership interest or been offered to NRGG in writing (any
such project "an offered project"); (ii) solicit business
from any project energy customer of an offered project which
business is in competition and inconsistent with an offered
project; (iii) during the period in which NRGG is evaluating
whether it intends to purchase an interest in an offered
project, contact any project participant without the prior
notification, consent and coordination of the contact with
the designated representatives of Energy; or (iv) after the
period in which NRGG is evaluating whether it intends to
purchase an interest in an offered project, contact any
project participant concerning such project without the
prior notification, consent and coordination of the contact
with the designated representatives of Energy, unless NRGG
has acquired an ownership interest in such project. During
the period in which NRGG is evaluating purchasing an
interest in an offered project, Energy shall promptly and
completely disclose information reasonably required by NRGG
related to such project, and Energy shall use reasonable
efforts to facilitate such meetings with project
participants as are reasonably necessary to obtain such
information once a good faith indication of interest has
been made by NRGG. Energy shall have no obligation to
facilitate meetings with project participants prior to the
time that Energy has made an Offer of a project as defined
in section 2.2(a) of the Co-investment Agreement. For the
purposes of this Agreement-
"principal host project energy customer" shall not
include (x) an electric utility company, (y) a power
marketer, or (z) an existing purchaser of energy from a
project in which any NRGG subsidiary has an ownership
interest as of the date of this Agreement.
"affiliate" of a principal host project energy customer
shall mean any partnership, joint venture, or
corporation (any of which, including the principal
project host energy customer, being a "person")
controlling, controlled by, or under common control
with, such customer, provided that control shall mean
the ownership of fifty percent (50%) or more of the
outstanding voting or ownership shares or ownership
interests of the person in question.
23. The Parties agree that: (i) all rights to Confidential
Information disclosed pursuant to this Agreement are
reserved to the disclosing Party, (ii) nothing in this
Agreement shall diminish or restrict in any way the rights
that each Party has to conduct its business or to disclose
its own Confidential Information to third parties; and (iii)
no license or conveyance of any rights relating to the
Confidential Information is granted or implied by either
Party to the other.
24. This Agreement shall continue in effect until the earlier of
(i) one year from the date hereof, or (ii) termination of
the Parties' business relationship. The obligations of
confidentiality contained herein and the obligations set
forth in Section 4 herein shall survive and continue for a
period of two years after expiration or termination the Co-
Investment Agreement.
25. Nothing in this Agreement shall obligate either Party to
disclose any Confidential Information about itself to the
other Party, and any disclosure of Confidential Information
3
<PAGE>
shall be at the disclosing Party's sole discretion. This
Agreement does not constitute a commitment or promise by
either Party to proceed with any transaction. All
agreements, representations, warranties, covenants and
conditions with respect thereto will be set forth in a
separate written agreement to be negotiated, and if
agreement can be reached, executed by the Parties.
26. Upon a disclosing Party's request, the receiving Party shall
return to the disclosing Party as promptly as practicable,
but in any event within thirty (30) days, all Confidential
Information received from the disclosing Party in the
possession of the receiving Party or its Representatives,
but may retain one copy of such Confidential Information,
all notes and documents compiled using the Confidential
Information and such records as are necessary for securities
disclosure and tax positions.
27. This Agreement embodies all of the understandings between
the Parties hereto concerning the subject matter hereof, and
merges all prior discussions and writings between them as to
confidentiality of information other than as expressly
provided in this Agreement, or as duly set forth subsequent
to the date hereof in writing and signed by both Parties.
This Agreement may not be assigned by either Party without
the prior written consent of the other Party except in
connection with the sale of all or substantially all of the
business or assets of the assigning Party.
28. Without prejudice to the rights and remedies otherwise
available to the disclosing Party, the disclosing Party will
be entitled to equitable relief by way of injunction if
there is a breach or threat of a breach of any of the
provisions of this Agreement by the receiving Party. The
Parties agree and acknowledge that damages would not be an
adequate remedy in the event of a breach of this Agreement.
29. In no event shall either Party have liability for any
consequential, indirect, punitive or other extraordinary
damages.
30. This Agreement shall not be governed by the laws of the
State of Minnesota, excluding its conflict of law rules.
31. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original and all of
which shall constitute one and the same document.
32. The provisions of this Agreement are severable, and if any
one or more of such provisions is determined to be
judicially unenforceable, the remaining provisions shall
nevertheless be binding and enforceable.
33. No third party shall become a Party or beneficiary to this
Agreement, except with the prior written consent of all then-
existing Parties to this Agreement.
34. The prevailing party in any dispute or litigation arising in
connection with this Agreement shall be entitled to recover
its reasonable attorneys' fees and costs.
4
<PAGE>
IN WITNESS WHEREOF the Parties have signed this Agreement as of
the date first set forth above.
Addresses:
NRG Generating (U.S.) Inc. NRG GENERATING (U.S.) INC.
1221 Nicollet Mall
Suite 610 By: /s/ Robert T. Sherman, Jr.
Minneapolis, MN 55403-2445 Title: President
NRG Energy, Inc. NRG ENERGY, INC.
1221 Nicollet Mall
Suite 700 By: /s/ David H. Peterson
Minneapolis, MN 55403-2445 Title: Chairman, President &
CEO
5
<PAGE>
Exhibit 21
Exhibit 21
List of Subsidiaries of Registrant
(Majority or Wholly Owned Unless Otherwise Indicated)
Name of Subsidiary State of Incorporation
NRG Generating (Newark) Cogeneration, Inc. Delaware
NRG Generating (Parlin) Cogeneration, Inc. Delaware
O'Brien (Philadelphia) Cogeneration, Inc. Delaware
NRG Generating Ltd. United Kingdom
PoweRent* United Kingdom
Puma Manufacturing Ltd. United Kingdom
Puma Export Finance Ltd. United Kingdom
Puma Freight Forwarding Ltd. United Kingdom
Puma Far East Ltd. United Kingdom
Enercol Energy Systems, Ltd. United Kingdom
O'Brien Energy Europe United Kingdom
Philadelphia Biogas Supply, Inc. Delaware
NRGG Parlin Supply Corporation Delaware
NRGG Newark Supply Corporation Delaware
Grays Ferry Cogeneration Partnership* Pennsylvania
NRGG (Schuylkill) Cogeneration Inc. Delaware
Grays Ferry Services Partnership Pennsylvania
NRGG Funding, Inc. Delaware
NRG Morris, Inc. Delaware
NRG (Morris) Cogen, LLC Delaware
O'Brien Energy Services Company Delaware
O'Brien Power Equipment, Inc. Texas
O'Brien Mobile Power Rental Company Delaware
NRGG (Asia), Inc. Delaware
Power Service Company Delaware
O'Brien Fuels, Inc. Delaware
SDN Power, Inc. Delaware
* The Company owns 50% or less of the equity interest in these
subsidiaries.
52
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 333-38603) of NRG
Generating (U.S.) Inc. of our report dated March 30, 1998
appearing in this Form 10-K.
Price Waterhouse LLP
Minneapolis, Minnesota
March 30, 1998
53
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from the registrant's financial statements
for its year ended December 31, 1997 and is qualified
in its entirety by reference to such financial statements.
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Dec-31-1997
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0
0
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</TABLE>
