<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
June 26, 1998
KTI, INC.
(Exact name of Registrant as specified in Charter)
New Jersey 33-85234 22-2665282
- --------------------------------------------------------------------------------
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification
Number)
7000 Boulevard East, Guttenberg, New Jersey 07093
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number including area code- (201) 854-7777
------------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name and former address, as changed since last report)
<PAGE> 2
Item 5. Other Events.
On June 26, 1998 Penobscot Energy Recovery Company, Limited
Partnership ("PERC"), a subsidiary of KTI, Inc. (the "Company" or the
"Registrant") completed the refinancing of its tax exempt debt by issuing
$44,995,000 par amount Finance Authority of Maine ("FAME") Electric Rate
Stabilization Revenue Refunding Bonds, Series 1998 A and Series B (Penobscot
Energy Recovery Company, LP) (the "1998 Bonds"). The proceeds of the 1998 Bonds
were used to defease the Town of Orrington, Maine Floating Rate Demand Resource
Recovery Revenue Bonds (Penobscot Energy Recovery Company Project) Series 1986 A
and Series 1986 B Bonds (the "1986 Bonds") which have been called for redemption
on July 16, 1998. The 1998 Bonds are fixed rate bonds with yields ranging from
3.75% for 1-year term bonds to 5.20% for 20-year term bonds. The average yield
on the 1998 Bonds is approximately 5.06%. The 1998 Bonds are insured by
Financial Security Assurance, Inc. and are rated AAA and Aaa by Standard &
Poor's and Moody's, respectively, based on the bond insurance.
As part of the refinancing, the following documents were amended, created
or issued:
A. The Power Purchase Agreement between PERC and Bangor Hydro-Electric
Company ("Bangor Hydro") was amended to require Bangor Hydro to make
a one time payment of $6 million to PERC and to make 16 quarterly
payments of $250,000 each to PERC, commencing on October 1, 1998,
all of which payments are held by the trustee for the 1998 Bonds and
are pledged reserves therefor. (The payment of $6 million was paid
on June 26, 1998 to fund a capital reserve fund for the 1998 Bonds.
In addition, Bangor Hydro agreed to pay 50% of the transaction costs
associated with the issuance of the 1998 Bonds and the defeasance of
the 1986 Bonds.)
B. The Waste Disposal Agreements between certain of the Charter
Municipalities (the "Amending Charter Municipalities") and PERC were
amended to extend the term of such agreements to the year 2018, to
grant the Amending Charter Municipalities the immediate right to
purchase up to a 50% economic interest as limited partners in PERC
for $31 million and to purchase the remaining partnership interests
in 2018 from the then PERC partners at the then fair market value of
such partnership interests. (Any funds received from the Amending
Charter Municipalities to purchase limited partnership interests in
PERC prior to 2018 will be used to retire 1998 Bonds. Funds paid in
2018 will be paid to the then PERC partners.) The Waste Disposal
Agreements were further amended to provide that the Charter
Municipalities, Bangor Hydro and PERC would each receive a one-third
share of Distributable Cash. (Non-amending Charter Municipalities
are entitled to receive a one-half share of Distributable Cash
multiplied by a factor, the numerator of which is equal to the
tonnage delivered by non-amending Charter Municipalities and the
denominator of which is total tonnage delivered by both non-amending
Charter Municipalities and Amending Charter Municipalities. The
balance of the one-third share is distributable to the Amending
Charter Municipalities. As of the Closing Date, 53 Charter
Municipalities had considered and approved the Amended Waste
Disposal
<PAGE> 3
Agreements. No Charter Municipality, which has considered the
proposed amendments, has declined to approve the amendments.
C. As a part of the re-financing of the tax-exempt debt, PERC entered
into a Loan Agreement with FAME, containing the various agreements
and covenants relative to the 1998 Bonds. FAME assigned certain of
its interests in the Loan Agreement to the 1998 Bond Trustee, as
security for the 1998 Bonds. As a condition to FAME's issuance of
the 1998 Bonds, the Company was required to issue a $3 million
limited guaranty of PERC's payment obligation under the Loan
Agreement, in favor of FAME and the 1998 Bond Trustee. Bangor Hydro
issued its guaranty to FAME and the 1998 Bond Trustee in an amount
equal to the annual payments for principal and interest on the 1998
Bonds. Demands on such guaranties are to be pro-rata. If either
party shall default under such demand, the other guarantor is liable
for the entire demand, up to the limit on such guarantor's guaranty.
D. Bangor Hydro issued three warrants to purchase shares of Bangor
Hydro common stock at an exercise price of $7.00 per share, having
an expiration date of June 26, 2008. 25% of the shares covered by
such warrants may be purchased after March 26, 1999, 50% of the
shares covered by such warrants may be purchased after March 26,
2000, 75% of the shares covered by such warrants may be purchased
after March 26, 2001 and all of the shares covered by such warrants
may be purchased after March 26, 2002. The warrants permit a
cashless exercise. Bangor Hydro has the election, at the time of
exercise of a warrant, to pay cash in an amount equal to the
difference between the per share market value of its common stock
and the exercise price per share, multiplied by the number of shares
being purchased pursuant to the exercise in lieu of issuing common
stock. The warrants provide for certain registration rights and
other usual and customary terms, including anti-dilution protection.
The Amending Charter Municipalities received a warrant for one
million shares, PERC Management Company Limited Partnership, a
wholly owned subsidiary of the Company and the Managing General
Partner of PERC, received a warrant for 712,857 shares and Energy
National, Inc., a General Partner of PERC, received a warrant for
287,143 shares.
E. The Agreement of Limited Partnership of Penobscot Energy Recovery
Company, Limited Partnership was amended to permit Amending Charter
Municipalities to be admitted as limited partners.
F. PERC, Bangor Hydro and the Municipal Review Committee, Inc., a Maine
not for profit corporation (the "MRC") entered into a Surplus Cash
Agreement, allocating the cash flow of PERC after the satisfaction
of PERC's obligations under the Loan Agreement.
<PAGE> 4
Item 7. Financial Statements and Exhibits
(c) Exhibits.
Exhibit Number Description
- -------------- -----------
4.1 Amendment No. 2 to Power Purchase Agreement, entered into as
of the 26th day of June, 1998 by and between PENOBSCOT ENERGY
RECOVERY COMPANY, LIMITED PARTNERSHIP, a Maine limited
partnership, and BANGOR HYDRO-ELECTRIC COMPANY, a Maine
corporation.
4.2 Second Amended and Restated Waste Disposal Agreements
4.3 LOAN AGREEMENT by and between FINANCE AUTHORITY OF MAINE and
PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
4.4 KTI, Inc. Limited Guaranty
4.5 BANGOR HYDRO-ELECTRIC COMPANY Warrant to Purchase Common
Stock issued to PERC Management Company Limited Partnership
4.6 THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
4.7 SURPLUS CASH AGREEMENT dated as of June 26, 1998 is among
Penobscot Energy Recovery Company, Limited Partnership,
Bangor Hydro-Electric Company and Municipal Review Committee,
Inc.
4.8 News Release dated June 26, 1998
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KTI, Inc.
(the Registrant)
Dated: July 7, 1998 By: /s/ Martin J. Sergi
-----------------------------------------
Name: Martin J. Sergi
Title: President
<PAGE> 6
EXHIBIT INDEX
-------------
Exhibit Number Description
- -------------- -----------
4.1 Amendment No. 2 to Power Purchase Agreement, entered into as
of the 26th day of June, 1998 by and between PENOBSCOT ENERGY
RECOVERY COMPANY, LIMITED PARTNERSHIP, a Maine limited
partnership, and BANGOR HYDRO-ELECTRIC COMPANY, a Maine
corporation.
4.2 Second Amended and Restated Waste Disposal Agreements
4.3 LOAN AGREEMENT by and between FINANCE AUTHORITY OF MAINE and
PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
4.4 KTI, Inc. Limited Guaranty
4.5 BANGOR HYDRO-ELECTRIC COMPANY Warrant to Purchase Common
Stock issued to PERC Management Company Limited Partnership
4.6 THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
4.7 SURPLUS CASH AGREEMENT dated as of June 26, 1998 is among
Penobscot Energy Recovery Company, Limited Partnership,
Bangor Hydro-Electric Company and Municipal Review Committee,
Inc.
4.8 News Release dated June 26, 1998
<PAGE> 1
Exhibit 4.1
AMENDMENT NO. 2
TO POWER PURCHASE AGREEMENT
This Amendment No. 2 to Power Purchase Agreement ("Second Amendment") is
entered into as of the 26th day of June , 1998 by and between PENOBSCOT ENERGY
RECOVERY COMPANY, LIMITED PARTNERSHIP, a Maine limited partnership ("Seller"),
and BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller and Buyer are parties to a Power Purchase Agreement dated
June 21, 1984 and amended by Amendment No. 1 dated March 24, 1986 (as amended,
the "Agreement") for the sale by Seller and the purchase by Buyer of energy and
capacity from Seller's Orrington, Maine waste-to-energy facility (the
"Facility"); and
WHEREAS, Seller has entered into certain long-term waste disposal
agreements with numerous Maine municipalities, pursuant to a standard form First
Amended and Restated Waste Disposal Agreement dated as of April 1, 1991 or
shortly thereafter (the "First Waste Disposal Agreement") and intends to enter
into a standard form Second Amended, Restated and Extended Waste Disposal
Agreement (the "Second Waste Disposal Agreement") with many of the same
municipalities as of the Closing (as hereinafter defined); and
WHEREAS, those municipalities which are parties to the First Waste
Disposal Agreement are known as the "Charter Municipalities"; and
WHEREAS, those municipalities which become parties to the Second Waste
Disposal Agreement are known as "Amending Charter Municipalities;" and
WHEREAS, the Amending Charter Municipalities will be directly benefitted
by this Agreement, because it is expected that the continuing sale of energy by
Seller to Buyer will enable Seller to economically receive and process municipal
solid waste under the Second Waste Disposal Agreement, which is expected to
substantially assist the Amending Charter Municipalities in the discharge of
their obligation to provide for the disposition of municipal solid waste
discarded by their residents and businesses; and
1
<PAGE> 2
WHEREAS, in accordance with 35-A M.R.S.A. ss.3156, Buyer has conclusively
determined that (i) this Second Amendment provides near-term benefits to its
rate payers that will be reflected in rates paid by the Buyer's customers; and
(ii) as a result of this Second Amendment, potential future adverse rate impacts
are not likely to be disproportionate to near-term gains; and (iii) this Second
Amendment is consistent with 35-A M.R.S.A. ss.3191; and (iv) this Second
Amendment will not adversely impact the availability of a diverse and reliable
mix of electric energy resources and will not significantly reduce the long-term
electric energy or capacity resources available to Buyer and needed to meet
future electric demand; and
WHEREAS, consistent with 35-A M.R.S.A. ss.3208(4), Buyer has conclusively
determined that this Second Amendment will reduce the Buyer's potential stranded
costs; and
WHEREAS, at the request of Buyer, Seller is entering into a loan agreement
(the "Bond Financing Agreement") with the Finance Authority of Maine ("FAME") to
provide a loan to Seller pursuant to FAME's electric rate stabilization loan
program, as defined in 10 M.R.S.A. ss.963-A (7-A), by issuing bonds (the "New
Bonds") to refinance and replace the existing loan provided to Seller from
certain bonds issued by the Town of Orrington, Maine (the "Old Bonds"), which
Old Bonds financed a portion of the construction of the Facility; and
WHEREAS, this Amendment is being executed and delivered contingent upon
the closing of the refinancing referred to in the preceding paragraph (the
"Closing"); and
WHEREAS, delivery of the New Bonds shall be conclusive evidence that the
Closing has occurred; and
WHEREAS, Seller, Municipal Review Committee, Inc. (the "MRC") and Buyer
have approved the Bond Financing Agreement and the Trust Indenture (the "Trust
Indenture") to be entered into as of the Closing between FAME and The Chase
Manhattan Bank, as the trustee for the New Bonds (the "Bond Trustee"), pursuant
to which the Bond Trustee will receive specified payments from Seller and Buyer
at Closing to fund certain reserves held in trust by the Bond Trustee under the
Trust Indenture; and
WHEREAS, all Charter Municipalities are members of the MRC which is the
designated agent for the Charter Municipalities and the Amending Charter
Municipalities; and
2
<PAGE> 3
WHEREAS, Seller and Buyer understand that the Amending Charter
Municipalities will receive certain benefits as a result of this Second
Amendment and related transactions, and intend that the MRC shall be an express
third party beneficiary hereunder for the benefit of the Amending Charter
Municipalities to the extent provided herein; and
WHEREAS, Buyer intends to issue warrants to the MRC or its designees for
the benefit of Amending Charter Municipalities at the Closing; and
WHEREAS, the MRC and Buyer are separately entering into an agreement as of
the Closing regarding certain operating reports about the Facility to be
prepared periodically by the MRC for which Buyer shall pay Forty Thousand
Dollars ($40,000.00) annually (subject to annual adjustment in accordance with
changes in the "CPI-U," so-called, published by the United States Bureau of
Labor Statistics), payable Ten Thousand Dollars ($10,000.00) quarterly in
advance;
NOW THEREFORE, in consideration of the mutual covenants and promises set
forth herein, and the consent of the MRC and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Seller and Buyer agree as follows:
1. It is the express intent of Seller and Buyer that the MRC possess an
enforceable benefit for the Amending Charter Municipalities as a
third party beneficiary of the Agreement. As a third party
beneficiary, it is intended that the MRC shall have standing in any
suit, bankruptcy, reorganization, arbitration, mediation or dispute
resolution proceeding arising out of the Agreement to enforce any
rights granted to the Amending Charter Municipalities or the MRC
hereunder, or to seek damages from the breach of any obligations
owed to the Amending Charter Municipalities and the MRC hereunder.
2. The following provisions of the Agreement shall not be materially
amended, supplemented or modified without the express written
consent of the MRC, which consent shall not be unreasonably withheld
or delayed:
Article II: Term
Article III: Sale of Power
Article IV: Billing and Payment
Article IX: Deliveries
Article XI: Continuity of Service
Article XIII: Breach
Article XIV: Assignment
3
<PAGE> 4
Article XV: Indemnity
Article XVI: Liability, Dedication
Article XVII: Force Majeure
Article XIX: Representations and Warranties of the Parties
Article XXI: Waiver
Article XXIII: Choice of Law
The First and Second Amendments to the Agreement
3. At the Closing Buyer will (a) deposit with the Bond Trustee for the
benefit of Seller Six Million Dollars ($6,000,000.00) for credit to
the Capital Reserve Fund established under the Trust Indenture and
(b) a one-time payment of $151,393, which is an amount equal to
interest at the rate of eight percent (8%) per annum on One Million
Dollars ($1,000,000.00) over sixteen quarter-year periods,
discounted at the same interest rate (together, the "Closing
Payment"), for deposit under the terms of the Trust Indenture. Buyer
will pay to the Bond Trustee for the benefit of Seller and the MRC,
as agent for the Amending Charter Municipalities additional cash
payments in the aggregate amount of Four Million Dollars
($4,000,000), for deposit under the terms of the Trust Indenture, in
quarterly payments of Two Hundred Fifty Thousand Dollars
($250,000.00) due on the first day of each quarter for each quarter
or part thereof (January, April, July, October) which occurs after
the Closing, commencing October 1, 1998, until sixteen such
quarterly payments have been made (the "Installment Payments," and
together with the Closing Payment, the "Bangor Hydro Payments," and
each date of such payment, the "Payment Date"). All Bangor Hydro
Payments shall be made to the Bond Trustee but if a Bond Trustee is
not serving in such capacity on a particular Payment Date then the
Bangor Hydro Payment shall be made as Seller shall direct Buyer in
writing. The obligation of Buyer to make each of the Bangor Hydro
Payments shall be absolute and unconditional, and Buyer shall not be
entitled to any abatement, diminution, set off, abrogation, waiver
or modification thereof nor to any termination of the Agreement by
any reason whatsoever except as expressly provided herein,
regardless of any rights of set-off, recoupment or counterclaim that
Buyer might otherwise have against Seller or any other party or
parties and regardless of any contingency, act of God, event or
cause whatsoever.
4. Buyer and Seller each agree to pay by wire transfer of same day
funds on the Closing Date or as soon thereafter as practicable,
one-half (1/2) of the third party costs of restructuring the
financing described above including but not limited to costs related
to: (a) extension and termination of the letter of credit securing
the Old Bonds, (b) retirement of the Old Bonds, (c)
4
<PAGE> 5
issuance of the New Bonds and loans related thereto, (d) obtaining
FAME approval; and all of certain costs of other entities including,
but not limited to, reasonable expenses incurred by the MRC, the
Town of Orrington, bond counsel, FAME, the existing letter of credit
banks, and the Bond Trustee, and their respective counsel, with
credit for such portion thereof that may have been advanced by Buyer
or Seller, respectively, prior to the Closing.
5. Subject to the satisfaction of the requirements contained in
Paragraph 6 below, Seller shall pay to Buyer one-third (1/3) of any
Distributable Cash (as such term is defined in the Second Waste
Disposal Agreement), which is available for distribution in
accordance with the Trust Agreement, but only to the extent
permitted under the Bond Financing Agreement (each such payment a
"Bangor Hydro Distribution"), as more particularly described in the
Surplus Cash Agreement of even date herewith among Buyer, Seller,
and the MRC.
6. Seller's obligation to make a Bangor Hydro Distribution to Buyer is
contingent on Buyer making each Installment Payment as and when due
and performing each of its other obligations set forth in the
Agreement, as amended hereby. In the event of a payment default
hereunder by Buyer, Buyer shall immediately rebate to the Bond
Trustee (or if none, to Seller) all Bangor Hydro Distributions
previously received by Buyer in an amount equal to the sum of the
Bangor Hydro Payments (together with any other payments due
hereunder) which have not been paid when due, which rebate amount
(net of costs of collection) shall be distributed as directed in
writing by Seller.
7. In the event that Buyer's obligation to make payments under the
Agreement is avoided, or otherwise reduced in amount, or delayed, or
impaired in a bankruptcy, reorganization, or similar proceeding,
Seller's obligation to make any further Bangor Hydro Distributions
shall cease, and Seller and the MRC shall have valid and enforceable
claims against Buyer in the aggregate amount of all Bangor Hydro
Distributions previously paid to Buyer, net of any reserves funded
by Bangor Hydro Payments and held by the Bond Trustee under the
Trust Indenture, in addition to any other claims for damages or
other claims Seller and the MRC may possess.
5
<PAGE> 6
8. Article V of the Agreement is amended as follows:
To Seller: Penobscot Energy Recovery Company, Limited Partnership
P.O. Box 96
Industrial Way
Orrington, ME 04475
Attention: Plant Manager
With a copy (which shall not constitute notice) to:
Gordon F. Grimes, Esq.
Bernstein, Shur, Sawyer & Nelson
100 Middle Street
P.O. Box 9729
Portland, ME 04104-5029
To Buyer: President
Bangor Hydro-Electric Company
33 State Street
P.O. Box 932
Bangor, ME 04402-0932
To Municipal Review Committee, Inc.:
Municipal Review Committee, Inc.
Eastern Maine Development Corporation
One Cumberland Place
Bangor, ME 04401
With a copy (which shall not constitute notice) to:
Thomas M. Brown, Esq.
Eaton, Peabody, Bradford & Veague, P.A.
Fleet Center - Exchange Street
P.O. Box 1210
Bangor, ME 04402-1210
Monthly billing statements to Buyer shall be sent to:
Assistant Treasurer
Bangor Hydro-Electric Company
33 State Street
P.O. Box 932
Bangor, ME 04402-0932
9. Article IX of the Agreement is amended by adding the following at the end
of the last sentence of the first paragraph:
"...until such time as retail access is permitted pursuant to 35-A
M.R.S.A. ss.3202 or any successor statute. Thereafter Seller may
(without waiving any right to continue buying from Buyer from time
to time thereafter) purchase such power as permitted by statute,
which shall be delivered by Buyer if requested by Seller."
6
<PAGE> 7
10. Article XIII(A) of the Agreement is amended by adding the following at
the end of the first sentence:
"...and in addition Buyer shall pay all Bangor Hydro Payments set
forth in paragraphs 6 and 7 of the Second Amendment hereof."
11. Article XIV of the Agreement is amended by adding the following words
after the words "that the Trustee to which this Agreement is assigned" in the
second sentence thereof:
"..., upon taking possession of the Facility after foreclosure of
its liens on and security interests therein,...
12. Article XV of the Agreement is amended by inserting the following
immediately after the first sentence thereof:
"Notwithstanding the above, no limitation appearing in the preceding
sentence will be construed to limit payment of the amounts described
in paragraphs 6 and 7 of the Second Amendment hereof."
13. Article XVI is amended by adding the following to Section A:
"...except obligations to the MRC as provided for herein."
14. Article XXIV of the Agreement is amended by adding the following:
"...other than such terms and conditions referred to in documents
referred to in the Second Amendment."
Buyer acknowledges that any default under the Agreement referenced in the 15th
WHEREAS clause hereof shall not be a default under this Agreement or in any way
excuse performance by Buyer hereunder or give rise to any rights of offset with
respect thereto. In all other respects, the Agreement shall remain in full force
and effect in accordance with the terms thereof, and Seller and Buyer each
hereby reaffirms its respective obligations thereunder.
7
<PAGE> 8
IN WITNESS WHEREOF, Seller and Buyer have caused this Amendment No. 2 to be
executed as of the date first written above.
WITNESS: Penobscot Energy Recovery Company, Limited
Partnership
By: PERC Management Company Limited
Partnership, its General Partner
By: PERC, Inc. its General Partner
/s/ Robert E. Wetzel By: /s/ Martin J. Sergi
- ----------------------- -----------------------
Name: Robert E. Wetzel Martin J. Sergi
Its President
By: Energy National, Inc., its General
Partner
/s/ David Lloyd By: /s/ Michael J. Young
- ---------------------- ------------------------
Name: David Lloyd Michael J. Young
Its Secretary
Bangor Hydro-Electric Company
/s/ Andrew Landry By: /s/ Carroll R. Lee
- --------------------- ------------------------
Name: Andrew Landry Carroll R. Lee
Its Senior Vice President and Chief
Operating Officer
8
<PAGE> 1
Exhibit 4.2
SECOND AMENDED, RESTATED AND EXTENDED
WASTE DISPOSAL AGREEMENT
between
----------------------------------
(Municipality)
and
PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
DATED: _____________________
<PAGE> 2
TABLE OF CONTENTS
Article I Definitions .................................................. 3
Article II Representations, Warranties and Covenants..................... 10
Article III Operation of the Facility..................................... 13
Article IV Weighing ..................................................... 14
Article V Delivery of Waste to Company.................................. 16
Article VI Determination of Tipping Fee.................................. 20
Article VII Capital and Maintenance Reserve Account....................... 22
Article VIII Term of the Agreement, Termination............................ 27
Article IX Unacceptable and Hazardous Waste.............................. 30
Article X Suspension of Operations...................................... 31
Article XI Damage or Destruction......................................... 32
Article XII Municipal Review Committee.................................... 32
Article XIII Default; Liquidated Damages................................... 36
Article XIV Change in Law ................................................ 39
Article XV Force Majeure ................................................ 41
Article XVI Additional Remedies Upon Material, Adverse Changes............ 42
Article XVII Assignment.................................................... 46
Article XVIII Performance Credits........................................... 47
Article XIX Exercise of Option to Extend Term; Option To Purchase
Partnership Interests; Option To Purchase Limited
Partnership Interests ........................................ 51
Article XX Notices....................................................... 57
Article XXI Binding Effect ............................................... 58
Article XXII Other Documents............................................... 58
Article XXIII Headings...................................................... 58
Article XXIV Counterparts.................................................. 58
Article XXV Applicable Law ............................................... 59
Article XXVI Amendment of Agreement........................................ 59
Article XXVII Severability ................................................. 59
Article XXVIII Relationship of the Parties................................... 59
Article XXIX Representatives............................................... 59
Article XXX Integration; Conflicts........................................ 60
Article XXXI Consents...................................................... 60
Article XXXII Arbitration................................................... 60
-2-
<PAGE> 3
Article XXXIII Miscellaneous ................................................ 61
Schedules
Schedule A Notices; Guaranteed Annual Tonnage.......................i
Schedule B Charter Municipalities and Reference GATs................ii
Schedule C Tipping Fee Calculation..................................vi
Schedule D Procedure To Exercise Option To Purchase Facility under
Article XVI, Paragraph A ...............................xii
Schedule E Distributable Cash.....................................xiii
Schedule F Performance Standards..................................xvii
Schedule G Types of Vehicles........................................xx
Schedule H [Deleted]
Schedule H1 [Deleted]
Schedule I [Deleted]
Schedule J Litigation and Governmental Proceeding Disclosure......xxiv
Schedule K [Deleted]
Acknowledgment of Bangor Hydro-Electric Company
Acknowledgment and Agreement of Municipal Review Committee, Inc.
-3-
<PAGE> 4
SECOND AMENDED, RESTATED AND EXTENDED WASTE DISPOSAL AGREEMENT
This Second Amended, Restated and Extended Waste Disposal Agreement
(this "Agreement") is entered into in the State of Maine by and between
__________ ______________, Maine, a municipal corporation hereinafter called
"MUNICIPALITY"; and Penobscot Energy Recovery Company, Limited Partnership, a
Maine limited partnership hereinafter called "COMPANY," and amends, restates and
extends in its entirety that certain First Amended and Restated Waste Disposal
Agreement, between MUNICIPALITY and COMPANY, dated as of _________, 199_, as
heretofore amended and supplemented (as so amended and supplemented, the
"Outstanding Agreement").
WHEREAS, MUNICIPALITY is in need of a comprehensive, environmentally
sound, reliable, long-term management strategy for handling the present and
projected volumes of non-hazardous Solid Waste generated within MUNICIPALITY;
WHEREAS, it is the policy of the State of Maine to reduce the volume
of Solid Waste going into landfills, to recycle Solid Waste whenever possible
and to maximize resource recovery;
WHEREAS, improved waste management within the region of which
MUNICIPALITY is a part will serve the following goals:
1. Recovery of energy from waste;
2. Reduction in indiscriminate disposal of waste;
3. Coordination of Solid Waste management among political
subdivisions; and
4. Orderly and deliberate development of financially secure waste
facilities:
WHEREAS, State law requires each municipality to provide for
disposal facilities for domestic and commercial non-hazardous Solid Waste
generated within such municipality;
-4-
<PAGE> 5
WHEREAS, Solid Waste issues present communities with serious
long-term financial, management, governmental and technical problems in the
disposal of Solid Waste;
WHEREAS, effective management of Solid Waste is crucial to the
continued financial well-being of MUNICIPALITY and the region of which it is a
part;
WHEREAS, COMPANY owns and operates a facility that recovers certain
recyclable materials and otherwise converts Solid Waste into energy in the Town
of Orrington, Penobscot County, Maine (as hereinafter defined, the "Facility");
WHEREAS, MUNICIPALITY is willing to assure the steady supply of
specified quantities of Solid Waste to the Facility for a fixed period; and
WHEREAS, approximately 130 communities delivering Solid Waste to
COMPANY (as hereinafter defined, the "Charter Municipalities") have so-called
"charter municipality" waste disposal agreements with COMPANY; and
WHEREAS, COMPANY and Bangor Hydro-Electric Company (as hereinafter
defined, "Bangor Hydro") have entered into a Power Purchase Agreement, as
amended, pursuant to which Bangor Hydro has agreed to purchase the electric
generating capacity of, and electric power generated at, the Facility; and
WHEREAS, Bangor Hydro desires to reduce the price for energy and
capacity as now provided for in the Power Purchase Agreement and has requested
that COMPANY amend the Power Purchase Agreement to reduce the burden on its
ratepayers; and
WHEREAS, to effect such amendment it is necessary to refinance the
outstanding indebtedness that financed the Facility as well as to amend the
outstanding "charter municipality" waste disposal agreements between COMPANY and
such charter municipalities (as hereinafter defined, the "Charter
Municipalities"); and
WHEREAS, MUNICIPALITY and other Charter Municipalities are members
of the Municipal Review Committee, Inc., which has engaged in discussions and
negotiations with Bangor Hydro and COMPANY on behalf of MUNICIPALITY and the
other Charter Municipalities, resulting in a plan to restructure the Power
Purchase Agreement and the
-5-
<PAGE> 6
outstanding "charter municipality" waste disposal agreements and to refinance
the outstanding indebtedness that financed the Facility; and
WHEREAS, COMPANY seeks to amend, supplement and extend its existing
waste disposal agreement with MUNICIPALITY and substantially similar waste
disposal agreements with other Charter Municipalities it serves, and, for the
convenience of the parties, to restate such amended, supplemented and extended
agreements;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency thereof being hereby acknowledged, MUNICIPALITY and
COMPANY hereby agree to amend, supplement and extend the Outstanding Agreement
and to restate the Outstanding Agreement as so amended, supplemented and
extended, as follows: ARTICLE I. DEFINITIONS
A. "Acceptable Waste" means [this definition to be adapted for each
Charter Municipality based on applicable provisions of its existing waste
disposal agreement] Solid Waste, including all ordinary household, municipal,
institutional, commercial and industrial wastes which consist primarily of
combustible materials, except for the following (unless Specially Permitted
Waste):
1. demolition or construction debris from building and roadway
projects or locations;
2. liquid wastes or sludges;
3. abandoned or junk vehicles;
4. Hazardous Waste;
5. dead animals or portions thereof or other pathological wastes;
6. water treatment facility residues;
7. tree stumps;
8. tannery sludge;
-6-
<PAGE> 7
9. waste oil;
10. discarded "white goods" such as freezers, refrigerators,
washing machines, etc.;
11. waste which in the reasonable judgment of COMPANY'S weigh
station operator based solely upon a visual inspection has a
BTU content of less than 4000 BTU's per pound unless the waste
fails to meet the aforementioned BTU minimum requirement
solely because of the moisture content of such waste and such
moisture content is due to abnormally wet weather conditions;
Notwithstanding the above limitations, Acceptable Waste shall
include Specially Permitted Waste.
B. "Agreement" means this Second Amended, Restated and Extended
Waste Disposal Agreement (including Schedules attached hereto) between
MUNICIPALITY and COMPANY, as it may be amended or supplemented from time to time
in accordance with its terms.
C. "Amending Charter Municipality" means a Charter Municipality that
enters into a waste disposal agreement with COMPANY on terms substantially
similar to those contained in this Agreement on or before September 30, 1998.
Amending Charter Municipalities shall also include (i) those municipalities
which, with the prior approval of the Municipal Review Committee, enter into a
new waste disposal agreement with COMPANY and those municipalities which amend
and supplement their outstanding waste disposal agreements with COMPANY on terms
substantially similar to those contained in this Agreement after September 30,
1998 and before March 31, 2004, and (ii) those municipalities which after the
Closing Date enter into an agreement with COMPANY and are recognized by the
Municipal Review Committee and COMPANY as an Amending Charter Municipality
pursuant to Article VIII(C); provided, however, that Amending Charter
Municipalities described in clauses (i) and (ii) of this sentence shall not have
the rights of Amending Charter Municipalities to receive warrants for shares of
-7-
<PAGE> 8
common stock of Bangor Hydro, as contemplated by Article XII, paragraph E, or to
purchase limited partnership interests in COMPANY, as contemplated by Article
XIX.
D. "Bangor Hydro" means Bangor Hydro-Electric Company, a Maine
corporation, or any permitted successors as Buyer under the Power Purchase
Agreement, dated as of June 21, 1984, as amended through Amendment No. 2, with
the COMPANY.
E. "By-Pass Waste" means all Acceptable Waste which COMPANY is
required but is unable to accept at the Facility.
F. "Capital and Maintenance Reserve Account" means the reserve
account established by COMPANY and more specifically described in Article VII.
G. "Change in Law" means those events described in Article XIV
hereof.
H. "Charter Municipality" means the MUNICIPALITY and each
municipality that is a party to a waste disposal agreement with COMPANY on terms
substantially similar to those contained in the Outstanding Agreement or this
Agreement, and which are listed and designated as such on Schedule B hereto, as
such schedule may be amended by COMPANY upon the request of the Municipal Review
Committee from time to time in accordance with the provisions of Article V,
paragraph F.
I. "Closing Date" means the date on which refunding bonds are issued
by the Finance Authority of Maine, or other issuer, and funds are made available
to COMPANY to redeem all of the outstanding bonds issued by the Town of
Orrington, Maine, to finance the Facility, and Bangor Hydro and COMPANY shall
have executed and delivered Amendment No. 2 to the Power Purchase Agreement with
COMPANY, Bangor Hydro and the other parties thereto shall have executed and
delivered the warrant agreement referenced in Article XII, paragraph E, and the
parties to the Trust Agreement shall have executed and delivered the Trust
Agreement.
J. "COMPANY" means Penobscot Energy Recovery Company, Limited
Partnership, a Maine limited partnership, or any successor thereto or assign
thereof as permitted by this Agreement.
-8-
<PAGE> 9
K. "CPI-U" means the Consumer Price Index-All Urban Consumers (U.S.
cities average, all items) as published bi-monthly by the United States Bureau
of Labor Statistics in a report currently entitled "CPI Detailed Report." If
this index ceases to be published, a comparable index shall be designated by
agreement of COMPANY and the Municipal Review Committee.
L. "Delivery Hours" means a minimum of not less than eight (8) hours
per day Monday through Saturday, certain specified holidays excluded, during
which deliveries of Acceptable Waste, will be normally accepted at the Facility.
Such hours shall be determined by COMPANY with due consideration to be given to
the needs of MUNICIPALITY and the concerns of the Host Municipality. Delivery
Hours may be suspended by COMPANY due to a Suspension of Operations, hazardous
conditions or lawful orders to do so.
M. "District" means the Penobscot Valley Refuse Disposal District or
any other successor district which may be formed to exercise some or all of the
powers of said district or those powers which are conferred upon municipalities
pursuant to 38 M.R.S.A. Chapter 17.
N. "Equity Charter Municipality" means an Amending Charter
Municipality that timely exercises the option to participate in the purchase of
a limited partnership interest in COMPANY granted in Article XIX, paragraph C.
O. "Facility" means the waste to energy facility owned by COMPANY in
Orrington designed to convert Acceptable Waste into electrical and/or steam
energy.
P. "FEPR" means front end processing residue, including glass, grit,
ferrous metals and other non-processible material removed from the waste stream
prior to combustion.
Q. "Force Majeure Event" means an act of God, act of public enemy,
war, earthquake, storm, flood, and other causes not reasonably within the
control of any party invoking Article XV for its benefits.
-9-
<PAGE> 10
R. "Guaranteed Annual Tonnage" means the number of tons of
Acceptable Waste that originates within its boundaries which MUNICIPALITY
guarantees to deliver to the Facility during the Operating Year (as initially
set forth on Schedule A attached hereto), as such number of tons may be adjusted
pursuant to Article V hereof.
S. "Guaranteed Plant Capacity Share" means a number of tons of
Acceptable Waste equal to 125% of MUNICIPALITY's Guaranteed Annual Tonnage as in
effect with respect to MUNICIPALITY in any Operating Year, which COMPANY is
required to accept from MUNICIPALITY during such Operating Year.
T. "Hazardous Waste" means waste with inherent properties which make
such waste dangerous to manage by ordinary means, including, but not limited to,
chemicals, explosives, pathological wastes, radioactive wastes, toxic wastes and
other wastes defined as hazardous at any time during the term of this Agreement
by the State of Maine or the Resource Conservation and Recovery Act of 1976 as
amended, or other Federal, State or local laws, regulations, orders, or other
actions promulgated or taken with respect thereto.
U. "Host Municipality" means the municipality of Orrington,
Penobscot County, Maine which is not a Charter Municipality.
V. "MRC Administration Authorization" means the bylaws of the
Municipal Review Committee, as amended and restated and in effect on the Closing
Date, which govern the rights and obligations of the Municipal Review Committee
in its capacity as advisor or agent to the Amending Charter Municipalities in
respect of all or certain of its duties under this Agreement and other
agreements contemplated by this Agreement, including Articles XII and XIX of
this Agreement, as such bylaws may be amended or supplemented from time to time,
or any successor or supplemental agreement between the Municipal Review
Committee and the Amending Charter Municipalities.
W. "Municipal Review Committee" means the Municipal Review
Committee, Inc., a nonprofit corporation organized under the laws of the State
of Maine, or any
-10-
<PAGE> 11
successor entity operating as the Municipal Review Committee as described in
Article XII as the same may be constituted from time to time.
X. "Operating Year" means a twelve (12) month period of Facility
operation beginning January 1 and concluding December 31.
Y. "Outstanding Agreement" means the existing First Amended and
Restated Waste Disposal Agreement, dated _______________, 199_, between
MUNICIPALITY and COMPANY, as such had been heretofore amended and supplemented.
Z. "Pass-through Cost" has the meaning given in Paragraph B of
Schedule C to this Agreement.
AA. "Reference GAT" means, with respect to a Charter Municipality
and as of the date of determination, the Guaranteed Annual Tonnage set forth
opposite such Charter Municipality on Schedule B, which initially is the
Guaranteed Annual Tonnage of such Charter Municipality as of March 31, 1995, as
such may be amended from time to time in accordance with the provisions of
Article V, paragraph F.
BB. "Residue" means materials (including, but not limited to, bottom
ash, fly ash, and solids from emission control equipment) remaining after
processing of Acceptable Waste at the Facility.
CC. "Solid Waste" means non-hazardous solid materials with
insufficient liquid content to be free-flowing which are of no value to the
immediate source from which they emanate as evidenced by their disposal,
discard, or abandonment without consideration in return, including, but not
limited to, rubbish, sludge from a wastewater treatment plant, scrap materials,
junk, and refuse, but excluding septic tank sludge and agricultural waste. The
fact that value may be derived from such solid materials by recycling,
reprocessing, or other method of resource recovery shall have no bearing upon
their classification as "Solid Waste."
DD. "Specially Permitted Waste" means Unacceptable Waste which
COMPANY by written addendum to this Agreement agrees to accept at the Facility
to the extent that efficient operation of
-11-
<PAGE> 12
the Facility will permit, subject to such conditions and limitations as may be
imposed by COMPANY.
EE. "Spot Market Contract" means a written or oral agreement for not
more than one (1) year between COMPANY and an entity, municipal or
non-municipal, allowing deliveries of Acceptable Waste on an interruptible basis
at COMPANY's option in each case, pursuant to which said entity has the right to
deliver Acceptable Waste to the Facility, and COMPANY agrees to accept such
Acceptable Waste, subject to interruption, or termination at the COMPANY's sole
discretion.
FF. "Supplemental Fuel" means, oil, coal, natural gas, wood chips,
other biomass, tires, or any other fuel burned or consumed in the Facility's
combustion units as a supplement to Acceptable Waste, excluding oil burned
during a start up or shut down of the Facility.
GG. "Suspension of Operations" means the suspension of the
Facility's operation for a temporary period to allow for repairs, maintenance,
retrofitting, change in law modifications and regulatory compliance during which
COMPANY is unable to accept delivery of Acceptable Waste at the Facility.
HH. "Termination of Operations" means the termination of the
Facility's operation with no apparent intention or ability to resume operation.
II. "Tipping Fee" means the payments required to be made by
MUNICIPALITY to COMPANY for processing Acceptable Waste at the Facility,
diverting By-Pass Waste to another location at the COMPANY's cost or as
otherwise provided for in this Agreement.
JJ. "Trust Agreement" means the [Trust Agreement] to be entered into
between COMPANY and a trustee, pursuant to which a trust is established to
receive all revenues of the Facility and to distribute the same as therein
provided.
KK. "Unacceptable Waste" means all Solid Waste that is not
Acceptable Waste.
-12-
<PAGE> 13
ARTICLE II. REPRESENTATIONS, WARRANTIES AND COVENANTS
A. COMPANY warrants and represents to MUNICIPALITY the following:
1. COMPANY is a limited partnership duly organized and validly
existing under the laws of the State of Maine in good standing, and authorized
to do business under the laws of the State of Maine and that it has full power
and authority to execute and to enter into this Agreement and is qualified to
perform this Agreement in accordance with its terms.
2. The execution and delivery of this Agreement by COMPANY has
been duly authorized by all appropriate partnership actions and this Agreement
constitutes the legal, valid and binding obligation of COMPANY enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy or similar laws affecting creditor's rights and by application of
equitable principles if equitable remedies are sought).
3. Assuming the redemption of all Town of Orrington bonds and
cancellation of the letter of credit supporting such bonds, the execution,
delivery and performance of this Agreement by COMPANY will not violate any
provision of law, any order of any court or other agency of government, the
Agreement of Limited Partnership of COMPANY, as amended, supplemented and
restated, or any indenture, material agreement or other instrument to which
COMPANY is now a party or by which it or any of its properties or assets is
bound, or be in conflict with, result in a breach of or constitute a default
(with due notice of the passage of time or both) under any such indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the properties
or assets of COMPANY.
4. Except as set forth on Schedule J, to the best of its
knowledge, there is no pending or threatened litigation or governmental
proceeding which would adversely affect COMPANY's ability to operate the
Facility or would affect its ability to perform its obligations under this
Agreement.
-13-
<PAGE> 14
5. Each general partner of COMPANY is either a limited
partnership or corporation duly organized and validly existing under the laws of
the State of its organization in good standing and qualified to do business in
the State of Maine, and has the power to enter into, and had duly authorized by
proper action the execution and delivery of, this Agreement as general partner
on behalf of COMPANY. The execution and delivery of this Agreement by such
general partners of COMPANY and performance of this Agreement by such general
partners of COMPANY and performance of this Agreement by COMPANY will not (i)
violate any provision of law or any order of any court or other agency of
government applicable to such general partner, (ii) violate the organizational
documents of such general partner, or (iii) be in conflict with, result in a
breach of, or constitute a default (with due notice or the passage of time or
both) under any such material indenture, agreement or other instrument to which
such general partner is now a party or by which it or any of its properties or
assets is bound.
6. COMPANY shall provide to MUNICIPALITY an opinion of its
legal counsel to the effect of Paragraphs 1 through 5.
B. MUNICIPALITY warrants and represents to COMPANY each of the
following:
1. The execution and delivery of this Agreement has been duly
authorized by all appropriate actions of MUNICIPALITY'S governing body, and this
Agreement constitutes the legal, valid and binding obligations of MUNICIPALITY
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy or similar laws affecting creditors' rights,
and by application of equitable principles if equitable remedies are sought).
2. To the best of its knowledge, there is no pending or
threatened litigation or governmental proceedings which would affect its ability
to perform its obligations under this Agreement.
3. MUNICIPALITY shall provide to COMPANY (and if COMPANY
requests, to any financial institution providing financing for the Facility or
credit
-14-
<PAGE> 15
support for any refinancing of the Facility) an opinion of its legal counsel to
the effect of Paragraphs 1 through 2.
ARTICLE III. OPERATION OF THE FACILITY
A. COMPANY shall, except as otherwise expressly provided for herein:
1. Either operate and maintain the Facility so as to be
capable of receiving and combusting Acceptable Waste in quantities up to the
aggregate Guaranteed Plant Capacity Shares of all Charter Municipalities or
arrange for the disposal of such Acceptable Waste in the manner provided herein
for By-Pass Waste; provided, however, that COMPANY shall in no event be
obligated to accept or process Unacceptable Waste; and
2. Require any operator of the Facility (including COMPANY, if
applicable) to operate the Facility in accordance with standards that are not
lower than the General Duties (as that term is defined in the current Operations
and Maintenance Agreement between COMPANY and ESOCO Orrington, Inc.).
B. COMPANY shall use reasonable efforts to maintain the Facility in
a manner which will minimize any adverse impact upon residents of the
surrounding area, including the following:
1. all waste and waste by products shall be screened from
public view by natural buffers or man-made barriers;
2. vehicular access to the Facility shall be restricted during
non-Delivery Hours;
3. the premises of the Facility, except for storage areas,
shall be kept reasonably free of litter and other debris other than in its
designated location; and
4. roads on the premises of the Facility shall be kept in good
order and repair.
C. COMPANY shall accept Acceptable Waste at the Facility during
Delivery Hours only, except that if in the event of a natural disaster or other
emergency condition, MUNICIPALITY requests COMPANY to accept Acceptable Waste
outside of Delivery Hours,
-15-
<PAGE> 16
COMPANY shall make a reasonable effort to accommodate MUNICIPALITY's request
provided MUNICIPALITY agrees to pay any additional expenses that COMPANY may
incur in accommodating such request. If COMPANY determines that it is not able
to accommodate such request, its determination shall be final. In case of such a
determination, COMPANY will make a reasonable effort to locate an alternative
disposal or storage site for such Acceptable Waste.
D. The marketing of energy products and materials produced by the
Facility, including the pricing thereof, shall be sole and exclusive prerogative
of COMPANY and COMPANY, except as otherwise set forth herein shall be
exclusively entitled to any benefits derived from the sale of any materials it
may recover from Acceptable Waste.
E. COMPANY shall be responsible at its cost for disposing of all
Residue generated by the Facility and all By-Pass Waste except as otherwise
provided for in this Agreement but MUNICIPALITY shall bear all costs of
delivering waste to the Facility, including the costs of operating transfer
stations and all costs of removing any significant quantities of Unacceptable
Waste delivered to the Facility by MUNICIPALITY or its agents.
ARTICLE IV. WEIGHING
A. Except as otherwise provided herein, COMPANY shall operate and
maintain for use by MUNICIPALITY, a container and/or motor truck scale (or
scales) to weigh all vehicles of up to sixty (60) feet in length delivering
Acceptable Waste to the Facility for disposal. COMPANY shall provide for regular
inspections of the scale(s) by the appropriate public officials with
responsibility for certifying weights and measures to ensure their reasonable
accuracy, such inspection to be conducted not less than annually, and at such
other times as MUNICIPALITY at its expense deems necessary. COMPANY shall have
available a backup scale for use when installed scales are inoperative.
B. Deliveries by MUNICIPALITY shall be recorded separately. COMPANY
and MUNICIPALITY shall jointly establish reasonable procedures to ensure proper
vehicle identification and weighing of loads. Unless otherwise agreed, each
incoming and
-16-
<PAGE> 17
outgoing waste vehicle shall be weighed with gross weight, time, and truck
identification indicated on a weigh record. MUNICIPALITY, COMPANY and operator
of each weighed vehicle shall receive a copy of the weigh ticket. Each weigh
ticket shall include at least the following information:
* Date and Time
* Hauler Code
* Vehicle I.D. number
* Tons delivered (to nearest hundredth of a ton)
COMPANY shall retain all weigh tickets for a period of not less than one year.
The weigh records shall be used by COMPANY and MUNICIPALITY as a basis for the
calculations required herein and shall be verified at least annually.
MUNICIPALITY shall have the right to inspect COMPANY's weigh records upon 24
hours prior written notice. Such inspections shall be conducted during business
hours in such a manner as to not unreasonably interfere with Facility
operations.
C. If all weighing facilities are inoperative or are being tested,
COMPANY shall estimate the quantity of waste delivered on the basis of truck
volumes and estimated data obtained through historical information pertinent to
MUNICIPALITY. These estimates shall take the place of actual weighing records
during the scale outage.
D. In the event Acceptable Waste is directed to another facility
under the provisions of this Agreement, the weight records of the place of
disposal, absent manifest error, shall be used to determine the tonnage of
Acceptable Waste for purposes of this Agreement.
E. COMPANY agrees to notify MUNICIPALITY and the Municipal Review
Committee of the amount of recycled waste delivered to the Facility that can be
credited toward its recycling goals for the purpose of compliance and reporting
under the Maine Comprehensive Solid Waste Act and to provide the Municipal
Review Committee on an annual basis the aggregate amount of such credited
recycled waste, to the extent allowed by the State Planning Office or any
successor.
-17-
<PAGE> 18
ARTICLE V. DELIVERY OF WASTE TO COMPANY
A. MUNICIPALITY will use its best efforts to cause to be delivered
to the Facility in self discharging equipment of the general type specified in
Schedule G the Acceptable Waste collected by it and other Acceptable Waste under
its control up to its Guaranteed Plant Capacity Share and will adopt reasonable
measures to prevent the disposal of Unacceptable Waste at the Facility.
B. MUNICIPALITY shall use its best efforts to cause to be delivered
to the Facility the Acceptable Waste per operating month as shown on Schedule A.
C. COMPANY agrees that MUNICIPALITY may at its option, at any time
or from time to time during the term of this Agreement, if MUNICIPALITY is not
then in default hereunder, increase its Guaranteed Annual Tonnage (and, as a
consequence, its Guaranteed Plant Capacity Share) upon giving written notice
thereof to COMPANY; provided, however, that MUNICIPALITY may not, by the
exercise of the option granted in this paragraph C, increase its Guaranteed
Annual Tonnage to more than 125% of its Reference GAT. The increase in
Guaranteed Annual Tonnage shall take effect as of January 1 of the second
calendar year following the calendar year in which COMPANY receives written
notice from MUNICIPALITY of the increase.
D. COMPANY agrees that the Charter Municipalities may pool their
rights to increase their Guaranteed Annual Tonnage under paragraph C of this
Article V or similar provisions of other waste disposal agreements with COMPANY
(substantially similar to the Outstanding Agreement or this Agreement) so as to
permit any Charter Municipality, if it is not then in default under its waste
disposal agreement with COMPANY and subject to the prior written consent of the
Municipal Review Committee delivered to COMPANY, to increase its Guaranteed
Annual Tonnage to more than 125% of its Reference GAT then in effect; subject,
however, to the following conditions, which are hereby consented and agreed to
by MUNICIPALITY and the Municipal Review Committee:
-18-
<PAGE> 19
1. Following such increase, the aggregate Guaranteed Annual
Tonnages of all Charter Municipalities shall not exceed 225,000
tons;
2. In the event of any such pooling, the right of an
individual Charter Municipality to increase its Guaranteed Annual
Tonnage by 125% of its Reference GAT then in effect shall be limited
to the extent necessary to assure that the aggregate Guaranteed
Annual Tonnages of all Charter Municipalities does not exceed
225,000 tons, with any conflicts among Charter Municipalities as to
the allocation among them of any necessary limitations to be
resolved by the Municipal Review Committee;
3. Following any such increase and on or before January 1,
2003, the Guaranteed Annual Tonnage of all Amending Charter
Municipalities in the aggregate shall not be less than 51% of the
Guaranteed Annual Tonnage of all Charter Municipalities in the
aggregate; and
4. The right of the Charter Municipalities, including
MUNICIPALITY, to increase its Guaranteed Annual Tonnage under this
paragraph D and COMPANY's obligation to accept increased tons of
waste shall at all times be governed by and subject to the waste
processing capacity of the Facility from time to time.
The increase in Guaranteed Annual Tonnage shall take effect as of January 1 of
the second calendar year following the calendar year in which COMPANY receives
written notice from the Municipal Review Committee of the increase.
E. MUNICIPALITY may at any time and from time to time, if it is not
then in default hereunder, and with the approval of the Municipal Review
Committee, decrease its Guaranteed Annual Tonnage (and its Reference GAT) for
purposes of this Agreement if one or more other Amending Charter Municipalities
increase their Guaranteed Annual Tonnages (and their Reference GATs) by the same
aggregate amount under their waste disposal agreements with COMPANY.
Correspondingly, MUNICIPALITY may increase its Guaranteed Annual Tonnage
-19-
<PAGE> 20
hereunder (and its Reference GAT) by agreeing to increase its Guaranteed Annual
Tonnage in response in whole or in part to a corresponding decrease in the
Guaranteed Annual Tonnage (and Reference GAT) of one or more other Amending
Charter Municipalities under their waste disposal agreements with COMPANY. Any
such decreases and increases in Guaranteed Annual Tonnage (and Reference GAT)
shall be effected by delivery to COMPANY of written notice from the Municipal
Review Committee of the amount of such decreases and increases and the Amending
Charter Municipalities affected thereby. Such decreases and increases shall take
effect as of the January 1 of the calendar year next succeeding the calendar
year in which such notice is received by COMPANY if the notice is received
before September 1, or, if such notice is received by COMPANY on or after
September 1, as of January 1 of the second succeeding calendar year.
F. Following the effective date of increases or decreases in the
Guaranteed Annual Tonnage of MUNICIPALITY or any other Amending Charter
Municipality, as permitted by paragraph E, COMPANY shall promptly amend Schedule
B to this Agreement to reflect such increases and decreases in the Reference
GATs of the Amending Charter Municipalities and provide to the Municipal Review
Committee a copy thereof, and thereupon such Schedule B shall be amended for all
purposes of this Agreement. Furthermore, upon the addition of an Amending
Charter Municipality, COMPANY shall promptly amend Schedule B to this Agreement,
as requested by the Municipal Review Committee, to reflect such addition and
provide to the Municipal Review Committee a copy thereof, and thereupon such
Schedule B shall be amended for all purposes of this Agreement.
G. All Acceptable Waste delivered to the Facility by MUNICIPALITY or
directed to another facility during a Suspension of Operations shall be credited
toward MUNICIPALITY'S Guaranteed Annual Tonnage and all Acceptable Waste shall
become the property of COMPANY after it is delivered to the Facility.
H. For the duration of this Agreement, MUNICIPALITY shall be
obligated to deliver Acceptable Waste to COMPANY equal to its Guaranteed Annual
Tonnage or pay any amounts due under paragraph I of this Article. Only
Acceptable Waste which originates
-20-
<PAGE> 21
from within MUNICIPALITY or, with the written consent of COMPANY, which
MUNICIPALITY otherwise causes to be so delivered, shall be delivered to the
Facility by or on behalf of MUNICIPALITY and credited towards its Guaranteed
Annual Tonnage. For purpose of determining whether MUNICIPALITY has met its
Guaranteed Annual Tonnage, no credit shall be given to MUNICIPALITY for
Acceptable Waste delivered to the Facility during the last month of the
Operating Year in excess of 150% of the normal monthly tonnage specified in
Schedule A unless such excess Acceptable Waste is actually processed by the
Facility.
I. On an Operating Year basis, if the aggregate amount of Acceptable
Waste credited during the Operating Year to all of the Charter Municipalities is
less than the aggregate Guaranteed Annual Tonnage of all Charter Municipalities
(for reasons other than Force Majeure or Termination of Operations), those
municipalities which did not meet their Guaranteed Annual Tonnage requirement
shall make a payment, as described below, based on their pro-rata share of the
shortfall in tonnage. The payment shall be calculated as follows: municipality's
pro-rata share of an additional fee for the shortfall computed by (i)
multiplying the aggregate shortfall in tonnage by the Tipping Fees (as
determined by taking the average Tipping Fee in effect during the Operating
Year) which the Charter Municipalities would have paid to COMPANY had the
Guaranteed Annual Tonnage of all Charter Municipalities been credited during the
Operating Year in question, and adding (ii) COMPANY's cost of purchasing
Supplemental Fuel equal in BTU value to the shortfall using the actual measured
BTU value per pound of Acceptable Waste over such Operating Year. This payment
shall be made not later than the March 1 or thirty (30) days after
reconciliation pursuant to Paragraph F of Schedule C next following the
Operating Year in which such shortfall in aggregate Charter Municipality
Guaranteed Annual tonnage was not delivered.
ARTICLE VI. DETERMINATION OF TIPPING FEE
A. Tipping Fees. From and after April 1, 1991, MUNICIPALITY shall
pay COMPANY a Tipping Fee calculated and adjusted as provided on Schedule C
attached hereto. The Tipping Fee payable to COMPANY shall be calculated by
multiplying the Tipping
-21-
<PAGE> 22
Fee in effect during the period of deliveries of Acceptable Waste, by the number
of tons of Acceptable Waste that MUNICIPALITY caused to be delivered to Facility
or caused to be delivered to another waste facility at the direction of COMPANY,
which tonnage is based on weight records referred to in Article IV hereof, as
tallied and formulated into invoices on a monthly basis and submitted to
MUNICIPALITY by COMPANY.
B. Invoices; Payment. Payment of the Tipping Fees (and any other
amounts listed on the invoices) shall be made by MUNICIPALITY within thirty (30)
days of its receipt of said invoices. Any late payments shall bear interest at
lesser of 1.5% per month or the rate of interest announced by Bank of Boston or
its successor as its prime or base rate of interest, adjusted daily, plus 2% per
annum.
C. Components of Tipping Fee. The two components of the Tipping Fee
shall be first the Base Rate as defined on Schedule C, and second, the Variable
Rate as defined on Schedule C attached hereto. The Base Rate shall be adjusted
(up or down) on the first day of each January commencing with January 1, 1992 by
a percentage equal to the annual percentage change in the CPI-U as of the
immediately preceding September from that of the September of the prior year and
the Variable Rate shall be adjusted (up or down) quarterly commencing July 1,
1991 as set forth on Schedule C. The Tipping Fee to be paid by MUNICIPALITY
shall be adjusted in accordance with the terms of Schedule C attached hereto.
D. The provisions of this Agreement relating to payment of Tipping
Fees, Guaranteed Annual Tonnage and other requirements which are based upon an
Operating Year basis shall be modified to reflect the percentage of the year
during which the Facility operates or the percentage of the year after which
MUNICIPALITY begins delivery or the percentage of the year prior to a
termination. For this purpose, all Operating Year requirements to be adjusted
shall be multiplied by a fraction, the numerator of which is the number of
months during which the Facility has operated and fractions thereof and the
denominator of which is twelve (12).
-22-
<PAGE> 23
E. COMPANY may add a surcharge on the Tipping Fee imposed by COMPANY
for delivery and acceptance of Specially Permitted Waste by MUNICIPALITY
provided that such surcharge shall not exceed an amount necessary to offset
COMPANY's incremental costs of handling and disposing of such Specially
Permitted Waste, and, if applicable, the lower BTU value of such Specially
Permitted Waste.
ARTICLE VII. CAPITAL AND MAINTENANCE RESERVE ACCOUNT
A. COMPANY has established and shall fund an account entitled the
Capital and Maintenance Reserve Account ("CMRA"). All amounts funded at any time
by COMPANY in the CMRA shall be held by Fleet Bank or its successor pursuant to
a Custodial Agreement, dated on or about June 13, 1991, and shall be used solely
for Capital or Maintenance Expenditures as defined in paragraph G of this
Article. MUNICIPALITY and the other Charter Municipalities shall be entitled to
a first possessory priority lien on amounts in the CMRA to secure the
performance by COMPANY of its obligations to MUNICIPALITY and the other Amending
Charter Municipalities pursuant to this Agreement and similar agreements and the
other Charter Municipalities pursuant to their respective Charter Municipality
agreements; provided, however, that no entity (including, without limitation,
MUNICIPALITY) other than the Municipal Review Committee shall be entitled to
enforce such lien on behalf of Charter Municipalities or to effect any set-off
against amounts held in such Account.
B. There shall be paid into the CMRA during each Operating Year from
payment of the Tipping Fees paid by MUNICIPALITY and other Charter
Municipalities an amount equal to the Monthly Reserve Fund Amount, which is
defined and computed pursuant to paragraph C of this Article.
C. The Monthly Reserve Fund Amount shall be calculated as follows:
(i) for each Operating Year commencing April 1, 1991, a
deposit of $116,667 per month (or a fraction thereof as described below),
adjusted up or down as of the first day of each Operating Year commencing on or
after January 1, 1992 by a percentage equal to the
-23-
<PAGE> 24
percentage change in the CPI-U for September 30 of the immediately preceding
Operating Year as compared to the CPI-U for April 1991. (Until the aggregate
Guaranteed Annual Tonnage of MUNICIPALITY and all other Charter Municipalities
("Charter Tonnage") reaches 216,480 tons per year, the deposit of $116,667 per
month, as adjusted, shall be reduced to an amount that is determined by
multiplying $116,667 by a fraction, the numerator of which is the Charter
Tonnage and the denominator of which is 216,480 tons); and
(ii) in the event that in the judgment of COMPANY, consistent
with paragraph H, the amount in the CMRA at the end of any Operating Year will
exceed $5 million, COMPANY will, as of the beginning of such Operating Year,
reduce the Base Rate portion of the Tipping Fee for that Operating Year by an
aggregate amount equal to the amount of such excess. Such Base Rate reduction
will be calculated on a per ton of Acceptable Waste basis based on the aggregate
Guaranteed Annual Tonnage of all Charter Municipalities applicable to such
Operating Year. COMPANY shall also reduce the Monthly Reserve Fund Amount for
such Operating Year by an amount equal to the amount of such excess, divided by
twelve (12).
D. The failure of COMPANY to deposit in any year or month in the
CMRA any amounts required to be deposited therein by it by reason of the failure
of MUNICIPALITY or any Charter Municipality to pay any amounts due COMPANY shall
not constitute a default by COMPANY of any of its obligations under this Article
VII.
E. All monies in the CMRA shall be invested and reinvested in such
obligations issued or guaranteed by the United States of America as the
Custodian shall determine. The Custodian shall not be liable or responsible for
any depreciation of the value of any investment made by it. Interest earned or
accrued on any monies or investments in the CMRA shall be held in and credited
to the CMRA for the purposes thereof.
F. COMPANY shall be entitled to withdraw from the CMRA those amounts
determined by it at the time of such withdrawal, to pay, or to reimburse itself
for, any Capital or Maintenance Expenditures paid or incurred by it in the
Operating Year in which such Capital or Maintenance Expenditure is made. When
COMPANY withdraws funds from the
-24-
<PAGE> 25
CMRA, it shall furnish a statement to the Municipal Review Committee certifying
that the funds withdrawn are for Capital or Maintenance Expenditures, including
a description of the expenditure and substantiation of the costs. If COMPANY
withdraws funds from the CMRA due to an event covered by an insurance policy or
subject to a warranty or third party claim, COMPANY will use good faith efforts
to recover any amounts owed, and deposit into the CMRA any insurance proceeds it
recovers or damages it collects, minus reasonable expenses incurred (including
any attorneys fees) by COMPANY.
G. "Capital or Maintenance Expenditures" shall consist only of those
costs, fees, expenses and liabilities paid by or incurred by COMPANY in the
construction, acquisition, operation or maintenance of the Facility for Capital
or Maintenance Expenditures. Capital or Maintenance Expenditures shall not
include such costs, fees, expenses and liabilities paid or incurred as a result
of a Change-in-Law which are included in the full amount thereof as a
Change-in-Law cost for purposes of computing the Variable Rate. "Capital
Expenditures" means only those amounts recorded in accordance with Generally
Accepted Accounting Principles ("GAAP") in respect of any period by COMPANY for
the purchase or acquisition for value of fixed or capital assets for the
Facility. "Maintenance Expenditures" means all expenditures for repairs or
modifications to existing equipment whether or not due to normal wear and tear
to the Facility or maintenance work performed spontaneously during the operation
of the Facility, in excess of $20,000 individually for any one item or in the
aggregate for any series of related items. Maintenance Expenditures shall not
include items included as "Scheduled Maintenance" on COMPANY's annual budget
which includes quarterly boiler grate cleaning and annual minor turbine
inspections.
H. As part of the annual budget to be prepared by COMPANY and
submitted to the Municipal Review Committee, COMPANY will show projected uses,
to the extent then known, of the CMRA for the next Operating Year.
I. If as of May 10, August 10, November 10 or February 10, the
cumulative amounts of money deposited in the CMRA in the first quarter, second
quarter, third
-25-
<PAGE> 26
quarter or fourth quarter, respectively, of any Operating Year are less than the
cumulative amounts of money that should have been deposited in the CMRA in said
quarter ("Cumulative CMRA Shortfall"), and if COMPANY within twenty (20) days
next following either May 10, August 10, November 10 or February 10, as the case
may be, does not fund the Cumulative CMRA Shortfall, then Charter Municipalities
may withhold from their future monthly Tipping Fee payments an amount up to the
Cumulative CMRA Shortfall. The Municipal Review Committee shall determine the
amount to be withheld by each Charter Municipality, including MUNICIPALITY,
which amount along with that portion of the then current Tipping Fee
attributable to MUNICIPALITY's contribution to the CMRA (the "CMRA Account
Payment") as determined by the Municipal Review Committee shall be paid to the
Municipal Review Committee to be held in escrow. The CMRA Account Payments may
be withheld in escrow only to the extent and only as long as any portion of the
Cumulative CMRA shortfall remains. Once the Cumulative CMRA Shortfall has been
paid into the CMRA account, the Municipal Review Committee shall within two (2)
days release the CMRA Account Payments in escrow to COMPANY for deposit in the
CMRA; provided, however, if COMPANY cures any shortfalls to the extent that the
release of any money from escrow would bring the amount current, said money
shall be released.
J. If pursuant to Article VIII(C), this Agreement is terminated
prior to March 31, 2018, the balance (if any) in the CMRA as of the date of
termination shall be distributed to COMPANY and MUNICIPALITY (and other Charter
Municipalities whose agreements will similarly be terminated) as follows: a pro
rata share, based on the proportion of COMPANY's contributions to CMRA to the
Charter Municipalities' contributions to the CMRA, with COMPANY's proportionate
share to be paid to COMPANY and the Charter Municipalities' share to be divided
among the Charter Municipalities as determined by the Municipal Review
Committee.
K. Notwithstanding any provision of this Agreement to the contrary,
a pro rata share, based on the proportion of the Reference GAT of MUNICIPALITY
to the
-26-
<PAGE> 27
aggregate Reference GATs for all Charter Municipalities, of the balance (if any)
remaining in the CMRA shall be paid to MUNICIPALITY if this Agreement is in full
force and effect on March 31, 2018 and MUNICIPALITY is not then in default
hereunder. COMPANY shall be entitled to all amounts that otherwise would have
been allocable to Charter Municipalities which terminated their respective
agreements effective prior to March 31, 2018.
ARTICLE VIII. TERM OF AGREEMENT; TERMINATION
A. The term of this Agreement, as it extends the term of the
Outstanding Agreement (which began on April 1, 1991), shall be from the Closing
Date through March 31, 2018, unless earlier terminated as herein provided.
B. [Intentionally Reserved]
C. If as a result of a termination notice or notices received by
COMPANY from Charter Municipalities that are not Amending Charter
Municipalities, the aggregate Guaranteed Annual Tonnage of nonterminating
Charter Municipalities (based upon Guaranteed Annual Tonnage in effect at the
time of giving of such notice(s)), together with the tonnage of all other
municipalities delivering waste under long-term waste disposal agreements with
COMPANY, will fall below 155,000 tons after the effective date of such
termination, COMPANY may elect to terminate all of the Charter Municipality
agreements, including this Agreement. If COMPANY makes this election, all then
effective Charter Municipality agreements shall terminate on either March 31,
2000, March 31, 2002, or March 31, 2004, as the case may be, unless before
either March 31, 2000, March 31, 2002, or March 31, 2004, as the case may be,
the non-terminating Charter Municipalities exercise any one of the following
options.
COMPANY shall promptly provide to the Municipal Review Committee
copies of termination notices from Charter Municipalities that are not Amending
Charter Municipalities and a statement as to the amount of the Charter
Municipality aggregate Guaranteed Annual Tonnage capacity (if any) made
available as a result of the notices and the amount of the shortfall below
155,000 tons created as a result of each such notice. The Municipal Review
-27-
<PAGE> 28
Committee will have one hundred and twenty (120) days to exercise either an
option (1) to arrange for a reallocation of the Guaranteed Annual Tonnage
capacity created as a result of the notices or (2) to arrange for Guaranteed
Annual Tonnage under a substitute waste disposal agreement containing the same
terms as this Agreement. If the Municipal Review Committee exercises all or a
portion of the first option, it shall notify COMPANY and Charter Municipalities
as to which Charter Municipalities the capacity shall be allocated, to be
effective on the effective date of the applicable termination and said notice(s)
shall constitute an increase to that Municipality's Guaranteed Annual Tonnage;
provided, however, no such reallocation on or before January 1, 2003 shall cause
the aggregate Guaranteed Annual Tonnage of all Amending Charter Municipalities
to be less than 51% of the aggregate Guaranteed Annual Tonnage of all Charter
Municipalities. If the Municipal Review Committee exercises all or a portion of
the second option, then the municipality entering into the substitute waste
disposal agreement shall be an Amending Charter Municipality and the effective
date of its agreement shall be the same as the effective date of the applicable
termination; provided, however, that such Amending Charter Municipality shall
not have rights of Amending Charter Municipalities to receive warrants for
shares of common stock of Bangor Hydro, as contemplated by Article XII,
paragraph E, or to purchase limited partnership interests in COMPANY, as
contemplated by Article XIX. COMPANY will cooperate with the Municipal Review
Committee in its efforts to obtain replacement tonnage. The Municipal Review
Committee can only obtain replacement tonnage in order to meet the 155,000 ton
minimum or such greater amount of Guaranteed Annual Tonnage as COMPANY may
approve in writing. If as a result of the exercise of this option, the aggregate
Guaranteed Annual Tonnage of the remaining Charter Municipalities, together with
the tonnage of all other municipalities delivering waste under long-term waste
disposal agreements with COMPANY, meets or exceeds 155,000 tons as of the
effective date of the termination notices, COMPANY shall not have the right to
terminate the remaining Charter Municipality agreements under this paragraph C.
-28-
<PAGE> 29
Notwithstanding the immediately preceding paragraph, COMPANY shall
not have the right to terminate the remaining Charter Municipality agreements,
including this Agreement, under this paragraph C if (i) the Municipal Review
Committee causes to be paid to COMPANY the full amount of Tipping Fees that
would otherwise have been payable under the Charter Municipality agreements and
in the same manner as the put-pay obligations are paid in this Agreement, as if
the aggregate Guaranteed Annual Tonnage under such Charter Municipality
agreements were 155,000 tons, and (ii) the aggregate Guaranteed Annual Tonnage
under all Charter Municipality agreements then in effect is not less than
140,000 tons.
In consideration of the option granted to the Municipal Review
Committee in this paragraph C, the Municipal Review Committee agrees that it
shall continue to consent to COMPANY entering into long-term waste disposal
agreements on terms substantially similar to those contained in this Agreement
with any municipality other than the City of Ellsworth and the Towns of Newport,
Pittsfield, Detroit, Monroe, Prospect, Winterport and Frankfort, Maine, to which
the Municipal Review Committee has otherwise consented until a total of 180,000
tons of Guaranteed Annual Tonnage has been achieved and, thereafter, in order to
maintain at least 180,000 tons of Guaranteed Annual Tonnage. The option granted
to the Municipal Review Committee in this paragraph C is further conditioned on
and shall remain effective only so long as no Charter Municipality has filed a
civil action or initiated an arbitration proceeding against COMPANY alleging or
based upon an infirmity in the Municipal Review Committee's consent or a
violation or breach of Article XXXIII of this Agreement or the other Charter
Municipality agreements; provided that COMPANY may waive this limitation on the
effectiveness of such amendments.
D. [Intentionally reserved]
E. No termination of this Agreement shall relieve MUNICIPALITY of
its obligation to make any Tipping Fee payments (including any remaining
balances of Change-in-Law costs as set forth in Schedule C) or either party of
any indemnity or payment obligations with respect to waste delivered or matters
occurring on or before the effective date of termination
-29-
<PAGE> 30
hereunder, and upon termination, MUNICIPALITY and COMPANY shall execute a mutual
release of the other with only such exceptions specified in this paragraph E.
ARTICLE IX. UNACCEPTABLE AND HAZARDOUS WASTE
Unacceptable Waste shall be handled in the following manner:
A. COMPANY's weigh station operator shall have authority to reject
all loads of waste delivered to the Facility on behalf of MUNICIPALITY which
have significant amounts of Unacceptable Waste. The determination of the weigh
station operator or other agent of COMPANY, if made in good faith, shall be
binding on MUNICIPALITY. COMPANY shall immediately notify the MUNICIPALITY of
any rejected loads and shall provide to it particulars about the hauler, the
reason for rejection and the information on the weight ticket provided for by
Article IV hereof, for that rejected load. MUNICIPALITY shall notify all haulers
delivering waste on its behalf of what constitutes Unacceptable Waste.
B. Subject to the provisions of paragraph A, COMPANY shall not
knowingly permit any delivery by any person at the Facility of Hazardous Waste
or Unacceptable Waste. COMPANY shall exercise reasonable care in the
identification and extraction from the waste stream of Hazardous Waste and
Unacceptable Waste received at the Facility. If the probable source of the
Hazardous Waste or Unacceptable Waste can be identified as MUNICIPALITY,
MUNICIPALITY shall either immediately remove such waste from the Facility or
reimburse COMPANY for all costs incurred by the COMPANY in the required clean-up
of such waste.
ARTICLE X. SUSPENSION OF OPERATIONS
A. If a Suspension of Operations occurs, COMPANY shall promptly
advise MUNICIPALITY of such occurrence, its effect on the ability of COMPANY to
accept Acceptable Waste from MUNICIPALITY at the Facility and its probable
duration. During a Suspension of Operations COMPANY shall, in consideration of
the Tipping Fee, provide for and pay for the disposal of MUNICIPALITY's
Acceptable Waste and other Charter Municipalities' Acceptable Waste up to the
aggregate Guaranteed Plant Capacity Share of the Charter
-30-
<PAGE> 31
Municipalities. COMPANY shall use its best efforts to resume normal operations
at the Facility at the earliest practicable time. So long as COMPANY meets its
obligations hereunder it shall not be deemed in default of this Agreement.
B. During a Suspension of Operations, COMPANY may require
MUNICIPALITY to deliver its Acceptable Waste to an alternative waste disposal
facility. COMPANY shall use its best efforts to arrange for said alternative
waste facility in close proximity to the Facility with due regard for costs of
each of the parties. COMPANY shall pay any incremental transportation costs
incurred by MUNICIPALITY or its members as a result of delivering By-Pass Waste
to such alternative waste disposal facility, but only if such alternative waste
disposal facility is located a distance greater than 10 miles radius from the
intersection of Union and Main Streets in Bangor. MUNICIPALITY'S incremental
transportation costs shall include a reasonable mileage allowance for vehicular
use, added labor costs, and, if applicable, any additional storage capacity
required by MUNICIPALITY as the result of a decrease in the number of waste
deliveries that can be made in a given day due to an increase in distance.
C. COMPANY may periodically suspend operations for maintenance and
repair purposes and shall use its best efforts to schedule such maintenance and
repairs at periods when delivery of a low quantity of Acceptable Waste is
anticipated and at periods of any energy purchaser's off-peak demand. COMPANY
shall use its best efforts to give thirty (30) day prior written notice to
MUNICIPALITY of a scheduled Suspension of Operations, indicating the expected
time, duration and nature of such Suspension of Operations.
ARTICLE XI. DAMAGE OR DESTRUCTION
If the Facility or any substantial portion thereof is so damaged or
destroyed by fire, the elements or other casualty that it is not feasible to
restore, repair or reconstruct the Facility, a Termination of Operations shall
be deemed to have occurred and this Agreement shall be automatically terminated
as of the date of such occurrence without any further liability on the part of
any party except for accrued and unpaid Tipping Fees including remaining
balances of Change-in-Law costs as set forth in Schedule C, payments to
reimburse COMPANY for expenses
-31-
<PAGE> 32
incurred or paid by it to dispose of Unacceptable Waste and Performance Credit
amounts accrued or earned but unpaid.
ARTICLE XII. MUNICIPAL REVIEW COMMITTEE
A. In order to facilitate review of Facility operations and of the
performance and the interfacing of the numerous Charter Municipalities with
COMPANY and Bangor Hydro during the life of this Agreement, the Charter
Municipalities have formed the Municipal Review Committee to serve as
representative for the Charter Municipalities. The Municipal Review Committee
has established bylaws to govern its activities.
B. The functions of the Municipal Review Committee, in general,
shall encompass review of COMPANY's financial operating information and
monitoring of COMPANY expenses, Tipping Fee adjustments and of Change-in-Law
costs. COMPANY shall provide monthly and annually to the Municipal Review
Committee operation and performance reports of the Facility.
C. COMPANY will notify the Municipal Review Committee of any
material adverse change or potential change in the financial condition of
COMPANY which in its opinion could result in a cessation of operations. Any
notice of material adverse changes under this paragraph shall be signed by each
of COMPANY'S general partners and shall include, but not be limited to, the
following circumstances:
a. receipt by COMPANY from its lenders of a written notice that
an event of default has occurred and is continuing and that
such lenders intend to foreclose on the Facility or to take
possession thereof;
b. the occurrence of any material adverse change, claim or action
with respect to COMPANY which in its opinion would likely
result in the Facility no longer remaining in the business of
being a municipal solid waste disposal facility; or
c. a decision by COMPANY to cause the Facility no longer to
remain in the business of being a municipal solid waste
disposal facility.
-32-
<PAGE> 33
COMPANY acknowledges its obligation of good faith in the giving of such notices
to the Municipal Review Committee.
The Municipal Review Committee will have up to ninety (90) days from
COMPANY's notice in which to evaluate the circumstances and to propose whatever
remedial action it deems necessary. COMPANY will have up to thirty (30) days
thereafter to provide a response to the Municipal Review Committee's proposal,
after which each party agrees to consider the proposals of the other in good
faith for a period of up to sixty (60) days before taking action(s). Upon
delivery of any such notice by COMPANY, the Municipal Review Committee may also
exercise the rights granted in Article XVI hereof.
D. In conjunction with the execution and delivery of this Agreement
and pursuant to a Warrant to Purchase Common Stock, dated as of ____________,
1998 (the "Warrant Agreement"), Bangor Hydro has issued to the Municipal Review
Committee on behalf of the Amending Charter Municipalities, including
MUNICIPALITY, in care and custody of Bangor Savings Bank or another institution
designated by the Municipal Review Committee, as custodian, warrants entitling
the holders to acquire one million shares of common stock of Bangor Hydro. The
warrants are exercisable as provided in the Warrant Agreement. The warrants will
be held in the custody of Bangor Savings Bank pursuant to a custodial agreement,
of even date herewith. MUNICIPALITY hereby irrevocably delegates, for the
current year and, to the extent permitted by law, for each future year during
the term of the Warrant Agreement, to the Municipal Review Committee, as its
agent, sole discretion to exercise or direct the sale of the warrants as further
provided in the MRC Administration Authorization and the custodial agreement
with Bangor Savings Bank. The Municipal Review Committee has agreed to advise
the Amending Charter Municipalities regarding the exercise of the warrants and
to distribute proceeds thereof to the Amending Charter Municipalities, based on
their respective ownership interests in the warrants. MUNICIPALITY acknowledges
and agrees that COMPANY has no responsibility or duty whatsoever to MUNICIPALITY
or the Municipal Review Committee in respect of the warrants or the exercise
thereof.
-33-
<PAGE> 34
E. Under Article XIX hereof, Amending Charter Municipalities,
including MUNICIPALITY, are granted the option to participate in the purchase of
limited partnership interests in COMPANY and to designate all or a portion of
the Performance Credits to be used to pay the purchase price of such interests.
The Municipal Review Committee shall administer and advise the Amending Charter
Municipalities regarding the exercise of the option to participate therein and
whether to purchase such interests as provided in the MRC Administration
Authorization. If MUNICIPALITY exercises the option to participate as provided
in Article XIX and thus becomes an Equity Charter Municipality, MUNICIPALITY
hereby confirms its irrevocable authorization and direction to the Municipal
Review Committee, granted in the MRC Administration Authorization, this
Agreement and the other agreements contemplated by this Agreement, for the
current year and, to the extent permitted by law, for each future year during
the term of this Agreement, to receive the Performance Credits to be paid to
MUNICIPALITY under Article XVIII and apply them as provided in the MRC
Administration Authorization or in such other manner acceptable to MUNICIPALITY.
MUNICIPALITY acknowledges and agrees that COMPANY has no responsibility or duty
whatsoever to MUNICIPALITY to advise it as to the exercise of such option to
participate in the purchase of such limited partnership interests or in the
purchase thereof.
If MUNICIPALITY becomes an Equity Charter Municipality, MUNICIPALITY
hereby confirms its authorization and direction to the Municipal Review
Committee to administer and receive partnership distributions from COMPANY in
the name and on behalf of MUNICIPALITY, as further provided in the MRC
Administration Authorization to be executed by MUNICIPALITY and the Municipal
Review Committee as a condition to exercising the option to participate, as
provided in Article XIX, paragraph C.
ARTICLE XIII. DEFAULT; LIQUIDATED DAMAGES
A. Each of the following events shall constitute an "Event of
Default" hereunder:
-34-
<PAGE> 35
1. A failure to pay when due and payable any amounts owed one
party to the other and the continuance of such failure for thirty (30) days
after receipt of written notice of nonpayment; or
2. Failure of either party to observe and perform any
covenant, condition or agreement on its part required to be observed or
performed by this Agreement for a continuous period of sixty (60) days after
receipt of written notice from the non-defaulting party, specifying such failure
and demanding such failure be corrected; provided, however, if the failure
stated in the notice cannot be corrected within such period, the non-defaulting
party will not unreasonably withhold its consent to an extension of such period
if corrective action is instituted within such period and diligently pursued
until the default is corrected.
B. Whenever any Event of Default shall have occurred and be
continuing, which Event of Default is substantial and concerns a material
provision of this Agreement, the non-defaulting party may terminate this
Agreement upon giving thirty (30) days' written notice to the defaulting party.
This provision, however, is subject to the condition that if, after sending a
notice of termination and prior to the date on which such termination otherwise
becomes effective, the defaulting party pays in full any amounts owing under
this Agreement or otherwise cures the Event of Default, the notice of
termination shall be canceled and the parties shall be restored to their prior
position under this Agreement, but no such cancellation shall affect any
subsequent default or impair or exhaust any rights or powers arising therefrom.
C. Whenever an Event of Default shall have occurred and be
continuing, the non-defaulting party may take whatever action may be necessary
or desirable to collect the payments and other amounts then due and thereafter
to become due as provided in this Agreement, and/or to enforce performance and
observance of any obligation, agreement or covenant under this Agreement.
D. [this provision to be adapted for each Charter Municipality based
on applicable provisions of its existing waste disposal agreement] If at any
time, a Termination of Operations occurs which is not caused by a termination
under Article VIII, Article XI or a Force
-35-
<PAGE> 36
Majeure Event, COMPANY shall pay to MUNICIPALITY, as liquidated damages in lieu
of all other damages, including special, consequential, or indirect damages, two
hundred and fifty percent (250%) of (1) the total Tipping Fees paid to COMPANY
by the MUNICIPALITY for Acceptable Waste delivered to the Facility or to
alternate disposal facilities in accordance with this Agreement by it during the
twelve (12) months immediately preceding the date on which the Termination of
Operations occurred, or (2) if twelve (12) months have not elapsed from the
commencement of the delivery by MUNICIPALITY of Acceptable Waste to the date on
which the Termination of Operation occurs, the total Tipping Fees that would
have been paid by MUNICIPALITY to COMPANY had it delivered to the Facility an
amount of Acceptable Waste equal to its Guaranteed Annual Tonnage for such
Operating Year.
As provided in the Outstanding Agreement and other similar
agreements with the Charter Municipalities, there is a ceiling in the aggregate
for total liquidated damages that may be paid to the Charter Municipalities,
except as otherwise provided in the next succeeding paragraph. This ceiling is
$5 million, adjusted annually at January 1 (commencing with January 1, 1992) for
changes in the CPI-U as of the immediately preceding September 30 from that of
the September of the prior year. A Charter Municipalities' pro rata share of the
ceiling amount is the same ratio as the ratio of its Guaranteed Annual Tonnage
to the aggregate of the Guaranteed Annual Tonnage of all Charter Municipalities
delivering waste to the Facility as of the date Termination of Operations
occurs. This limitation on liability for monetary damages in the event of a
Termination of Operations shall be calculated for all Charter Municipalities and
the pro rata share of the ceiling amount allocable to those Charter
Municipalities not constituting Amending Charter Municipalities shall be applied
as a limitation on the amounts payable to such Charter Municipalities.
In consideration of the execution and delivery of this Agreement by
MUNICIPALITY and similar agreements by other Amending Charter Municipalities,
COMPANY hereby agrees that the ceiling amount described in the foregoing
paragraph and allocable to the
-36-
<PAGE> 37
Amending Charter Municipalities shall not apply to the liquidated damages
payable to the Amending Charter Municipalities, including MUNICIPALITY.
It is acknowledged and agreed that the liability of Energy National,
Inc., a Utah corporation ("ENI"), as a general partner of COMPANY, for the
payment of liquidated damages by COMPANY under this paragraph D shall be limited
to $5 million, adjusted annually at January 1 (commencing with January 1, 1992)
for changes in the CPI-U as of the immediately preceding September 30 from that
of the September of the prior year. A Charter Municipalities' pro rata share of
the ceiling amount applicable to ENI is the same ratio as the ratio of its
Guaranteed Annual Tonnage to the aggregate of the Guaranteed Annual Tonnage of
all Charter Municipalities delivering waste to the Facility as of the date
Termination of Operations occurs.
E. If at any time prior to Termination of Operations, COMPANY fails
to accept and/or provide for the disposal of Acceptable Waste delivered to it by
MUNICIPALITY up to its Guaranteed Plant Capacity Share and such failure is not
caused by a Force Majeure Event, COMPANY shall pay to MUNICIPALITY all
reasonable costs incurred by MUNICIPALITY in disposing of such Acceptable Waste,
provided that nothing herein contained shall be construed to bar MUNICIPALITY
from obtaining specific performance of any obligation of COMPANY if such remedy
is otherwise available. COMPANY shall not be liable for its refusal or failure
to process any amounts annually in excess of MUNICIPALITY'S Guaranteed Plant
Capacity Share, if at the time such excess is proposed to be delivered to
COMPANY, COMPANY will not have the capacity to process such excess based upon
the amount of waste it is receiving from others; provided, however, that to the
extent the capacity is not available because of spot market tonnage being
brought in at a Tipping Fee higher than MUNICIPALITY's Tipping Fee, MUNICIPALITY
shall have the option of agreeing to pay such higher Tipping Fee for such excess
in which case COMPANY shall be obligated to accept such waste. COMPANY shall pay
such costs within forty-five (45) days of receipt of an itemized bill from
MUNICIPALITY.
-37-
<PAGE> 38
F. In the event any agreement or covenant contained in this
Agreement should be breached by one party and thereafter waived by the other
party, such waiver shall be limited to the particular breach so waived and shall
not be deemed to waive any other breach hereunder.
ARTICLE XIV. CHANGE IN LAW
A. "Change in Law" includes the following: The promulgation,
adoption, enactment or change in any law, code, ordinance or regulation and/or
the rendering of any judgment, order, decree or other governmental action of any
Federal, State or local court, administrative agency, government office, body or
branch, occurring subsequent to January 1, 1991 affecting the operation or
maintenance of the Facility or the disposal of Residue, including by way of
example but not by way of limitation a refusal by such a governmental body to
grant, issue or renew any required permit or license or approval for the
operation of the Facility unless changes in the Facility are made or a
regulatory requirement imposed after January 1, 1991 by such a governmental body
implementing a previously enacted statute. Changes in Federal and State income
tax laws shall not be considered a Change in Law.
B. "Change in Law costs" means any increase in the cost of
financing, construction, modifying, operating or maintaining the Facility or the
Site, or the disposal of Residue, FEPR or By-Pass Waste related solely to a
Change in Law, which on a cumulative basis exceeds $100,000, provided that if
any such increase in cost results solely from a change in the design, fuel mix,
or operating criteria of the Facility which is not mandated by law and which is
initiated by the COMPANY subsequent to the execution of this Agreement, such
Change in Law cost shall be disregarded for purposes of this Article. See
Schedule C pertaining to Tipping Fee calculation as to how Change-in-Law costs
will be paid.
C. The following procedures shall govern this Article:
1. COMPANY shall notify the MUNICIPALITY and Municipal Review
Committee and the Municipal Review Committee shall notify the COMPANY in
writing, as soon as either party has knowledge of any administrative, court or
other governmental action
-38-
<PAGE> 39
or the enactment of any law or regulation which could lead to a claim of an
occurrence of a Change in Law. COMPANY shall keep the Municipal Review Committee
informed of the progress of such actions.
2. Upon determining the impact of any Change in Law or
determining any Change-in-Law costs, COMPANY shall give the Municipal Review
Committee a detailed explanation thereof, including, appropriate designs or
plans for new construction or modifying items, bid cost and construction
schedule, and information regarding operations and maintenance costs. COMPANY
shall not expend any monies in response to a Change in Law until the Municipal
Review Committee has had forty-five (45) days to review such data, unless
COMPANY has been directed to or is required to take prior corrective action. The
Municipal Review Committee must authorize or disapprove expenditure of any
Change in Law costs proposed by COMPANY within forty-five (45) days of receipt
of the data, or propose an alternative reasonably satisfactory to COMPANY, or
said expenditure shall be conclusively deemed to be authorized by MUNICIPALITY.
During any Suspension of Operations because of any Change in Law pending review
by Municipal Review Committee under this paragraph, COMPANY shall be relieved of
any penalties and shall not be deemed to be in default.
E. Nothing in this Article shall relieve COMPANY from compliance
with any law or regulation or other lawful order.
ARTICLE XV. FORCE MAJEURE
A. Except as herein provided, if any party is rendered unable,
wholly or in part, by a Force Majeure Event to carry out its obligations other
than any payment obligation under the Agreement, that party shall give to the
other party prompt written notice of the Force Majeure Event with reasonably
full particulars concerning it. Thereupon the obligations of the Party giving
the notice, so far as they are affected by the Force Majeure Event, shall be
suspended during, but no longer than the continuance of the Force Majeure Event,
and for a reasonable time thereafter if required to remedy the physical damages
and/or place the Facility back in operation.
-39-
<PAGE> 40
In the event that the Facility is subjected to a Force Majeure Event, COMPANY
shall not be obligated to accept Acceptable Waste or arrange for or pay for
disposal of By-Pass Waste.
B. The party whose performance is excused due to the occurrence of a
Force Majeure Event shall, during such period, keep the other party and the
Municipal Review Committee duly notified of all such actions required in order
for it to be able to commence or resume performance of its obligations under
this Agreement.
C. Financial inability of either party hereto or the technological
inability of the Facility to accomplish the purposes contemplated by this
Agreement shall not be deemed to be a Force Majeure Event.
ARTICLE XVI. ADDITIONAL REMEDIES UPON MATERIAL ADVERSE CHANGES
A. In the event that COMPANY is required to provide the Municipal
Review Committee with notice of a material adverse change as set forth in
Article XII, paragraph C, and such notice states as therein contemplated either
COMPANY's lenders intend to foreclose on the Facility, COMPANY'S opinion that
such change would likely result in the Facility no longer remaining in the
business of being a municipal solid waste disposal facility, or COMPANY's
decision to cause the Facility no longer to remain in the business of being a
municipal solid waste disposal facility, then the Municipal Review Committee may
take the following actions in addition to those described in said Article XII,
paragraph C:
So long as all the Charter Municipality agreements shall then
expressly provide for the same (i.e. expressly agree to the options herein
described), no later than 180 days from the date of such written notice, the
Charter Municipalities may irrevocably elect in writing addressed to COMPANY to
purchase the Facility, including any reserves of COMPANY not used to satisfy
obligations under or pursuant to any obligations of COMPANY to any provider of
credit enhancement or support for the bonds as set forth below (which purchase
shall be concluded no later than the end of such 180 day period) in accordance
with the provisions set forth in Schedule D to this Agreement, at a purchase
price equal to $1.00, and title to the Facility
-40-
<PAGE> 41
and such reserves shall be conveyed as provided in Schedule D. Concurrently with
such purchase and as a condition precedent thereto, (i) the purchaser shall
assume all of COMPANY'S then existing obligations in respect to the
construction, ownership and operation of the Facility (other than those
obligations which are obligations that the partners, affiliates or associates of
COMPANY have undertaken in their individual capacities and not as partners or
affiliates of COMPANY), (ii) all parties to whom such partners, affiliates or
associates shall have undertaken any obligations with respect to the Facility in
their individual capacities and not as partners, including without limitation,
any obligations in connection with COMPANY'S power purchase and sale agreement
with Bangor Hydro and under or relating to capital contribution agreements of
the partners, but specifically excluding any obligations to or for the benefit
of Orrington Waste Ltd. Limited Partnership and any guaranties of such
obligations, shall have unconditionally released such partners, affiliates and
associates therefrom pursuant to instruments in form and substance reasonably
satisfactory to each of them; (iii) all of the obligations of COMPANY under and
pursuant to any agreement or instrument with any provider of credit enhancement
or support for the bonds shall have been indefeasibly satisfied in full in cash
by purchaser, and (iv) all parties whose consent is required to any such
purchase or assumption shall have unconditionally consented thereto in writing
pursuant to instruments in form and substance satisfactory to COMPANY. Nothing
in this Article XVI shall limit or otherwise restrict any right or remedy
provided to any provider of credit enhancement or support for the bonds or the
holders of the bonds, including, without limitation, the right to sell or
otherwise dispose of the Facility free and clear of any rights granted by this
Article XVI, upon any exercise of the rights or remedies provided therein or in
any way change or alter any of the obligations of COMPANY set forth in any
agreements relating to or securing the bonds or any agreement between COMPANY
and any provider of credit enhancement or support for the bonds.
MUNICIPALITY and the Municipal Review Committee acknowledge that
some circumstances which would give rise to a notice by COMPANY under Article
XII, paragraph C could make it difficult or beyond its reasonable control for
COMPANY to prevent
-41-
<PAGE> 42
cessation of operations during the 180 day period contemplated by this Article
XVI without a cure of a default or other interim remedy until the Municipal
Review Committee has concluded its consideration of appropriate actions. Both
COMPANY, MUNICIPALITY and the Municipal Review Committee agree, however, that
there shall be no obligation of either party to provide an interim cure or
remedy, other than the obligation of the parties to diligently meet and consider
measures to enable the Municipal Review Committee to exercise its rights
hereunder.
B. Notwithstanding the rights set forth in paragraph A above,
COMPANY may at any time cure, remedy or cause the cessation of the default,
claim or adverse circumstance which gave rise to the notice and possible
cessation of operations or loss of possession; in which case COMPANY shall
provide the Municipal Review Committee notice that said default, claim or
adverse circumstance has in fact been remedied or cured, or has ceased whereupon
the Municipal Review Committee's rights under paragraph A above shall terminate
nunc pro tunc; provided, however, that in the event of such cure, if COMPANY
fails to provide the Municipal Review Committee with notice of COMPANY'S
intention to cure, remedy or cause the cessation of the default, claim or
adverse circumstance within 90 days of COMPANY having provided notice under
Article XII, paragraph C, COMPANY shall reimburse the Municipal Review Committee
for justifiable and reasonable costs and expenses the Municipal Review Committee
incurs with respect to the intended purchase of Facility pursuant to paragraph A
so long as COMPANY'S need to cure or remedy the default (of which it gives
notice of its intention) is not caused by the Charter Municipalities' inability
to purchase the Facility.
C. The provisions set forth in this Article XVI shall not restrict
the rights of COMPANY to secure additional or alternative financing for the
Facility prior to providing notice under Article XII, paragraph C. However,
COMPANY acknowledges its obligation under the Charter Municipality agreements to
fully inform the Municipal Review Committee of COMPANY'S financial
circumstances. COMPANY agrees to provide upon request by the Municipal Review
Committee copies of its credit agreements and other financing agreements to
which it is a party. COMPANY also acknowledges that since changes in the debt
obligations of
-42-
<PAGE> 43
COMPANY with respect to the Facility are of interest to the Municipal Review
Committee as a potential purchaser of the Facility, COMPANY will advise the
Municipal Review Committee of any new financing activities. In turn, the
Municipal Review Committee acknowledges that any active pursuit of alternative
financing by the Municipal Review Committee without COMPANY'S knowledge could
have an adverse impact on COMPANY'S operating ability and agrees to advise
COMPANY first of any desire to refinance the Facility and to utilize the
consultation provisions of the Charter Municipality agreements to consider
mutually with COMPANY any such proposals.
D. After the Municipal Review Committee undertakes remedial
measures, if the Facility continues to be available to Charter Municipalities
for processing their waste, notwithstanding a decision by some or all Charter
Municipalities to terminate their delivery of waste to the Facility, it is
intended by this Article XVI that an Event of Default and Termination of
Operations shall not be deemed to have occurred and COMPANY'S obligations under
Article XIII, if any, relating to the payment of liquidated damages to Charter
Municipalities in the event of a Termination of Operations shall not apply.
E. The provisions set forth in paragraph A granting the Charter
Municipalities the right to acquire COMPANY'S right, title and interest in the
Facility and all of COMPANY'S obligations are conditioned upon receipt of a duly
authorized waiver, from all of the Charter Municipalities, of damages and
acknowledgment of the absence of an Event of Default under Article XIII,
paragraph D of the Charter Municipality agreements. Such waiver of damages by
the Charter Municipalities shall not apply to any subsequent Termination of
Operations if the Municipal Review Committee's remedial efforts result in
continued availability of Facility under COMPANY'S ownership or possession and
there is a subsequent cessation of operations in a separate occurrence that is
not remedied.
F. The waivers and obligations of COMPANY set forth in this Article
XVI shall remain effective only so long as no Charter Municipality has filed a
civil action or initiated an arbitration proceeding against COMPANY alleging or
based upon an infirmity in the
-43-
<PAGE> 44
Municipal Review Committee's consent or a violation or breach of Article XXXIII
of the Charter Municipality agreements; provided that COMPANY may waive this
limitation on the effectiveness of its waivers and obligations created by this
Article XVI.
ARTICLE XVII. ASSIGNMENT
A. Except as provided in paragraph D below, this Agreement shall not
be assigned by COMPANY to any third party without Municipal Review Committee
approval, which shall not be unreasonably withheld.
B. This Agreement shall not be assigned by MUNICIPALITY to any third
party without COMPANY approval, which shall not be unreasonably withheld.
C. Notwithstanding paragraphs A and B of this Article, MUNICIPALITY
may assign its interest in this Agreement to the District, provided such
District includes the MUNICIPALITY.
D. MUNICIPALITY acknowledges that this Agreement has been assigned
as security to the banks which provided financing for the Facility and the
assignment remains effective in all respects with respect to this Agreement.
MUNICIPALITY further acknowledges that this Agreement has been or will be
assigned as security to the Finance Authority of Maine, as the issuer of bonds
to provide refinancing for the Facility, to the trustee for holders of such
bonds and to any other entity or entities which provide credit support for such
bonds, and the assignment remains effective in all respects with respect to this
Agreement. MUNICIPALITY agrees to provide, upon written request of COMPANY, to
COMPANY or any party described in the previous sentence in writing a
confirmation of its acknowledgment of and consent to any such assignment and as
to the effectiveness of this Agreement.
ARTICLE XVIII. PERFORMANCE CREDITS
A. Under Article XVIII of the Outstanding Agreement, MUNICIPALITY is
entitled to certain Performance Credits on the terms and conditions therein
specified. Since this Agreement amends the manner of calculation of Performance
Credits, MUNICIPALITY and COMPANY hereby agree that for purposes of the
calculation of Performance Credits and Net
-44-
<PAGE> 45
Compensation under the Outstanding Agreement, the close of business of the day
before the Closing Date shall be treated as the end of a calendar year and any
Performance Credits and Net Compensation earned under the Outstanding Agreement
shall be calculated and determined as of such date, giving effect to the
release, if any, of funds from reserve accounts effected on the Closing Date
which are to be taken into account as Distributable Cash (as defined in and in
accordance with the Outstanding Agreement). It is acknowledged and agreed that
the Finance Authority of Maine has indicated that it will require the funding of
certain reserve funds or accounts on the Closing Date: $6,000,000 in a debt
service reserve account, such deposit to be made by funds advanced by Bangor
Hydro under the amended Power Purchase Agreement; $3,000,000 in an operating
reserve fund, such deposit to be made by funds provided by COMPANY from existing
reserves released as a result of the refinancing; and $1,000,000 in a capital
improvement fund, such deposit to be made by funds provided by COMPANY from
existing reserves released as a result of the refinancing. MUNICIPALITY
acknowledges and agrees that such closing requirements are preliminary and
consents to additional deposits in these or other reserve accounts as may be
required of COMPANY or Bangor Hydro by the Finance Authority of Maine, the
trustee for the bonds or any provider of credit enhancement or support for such
bonds, as approved by the Municipal Review Committee. It is acknowledged and
agreed that to the extent that any cash reserves of COMPANY existing prior to
the Closing Date are used to fund operating or debt service reserves or other
financial requirements in respect of, or are required in connection with, the
bonds to be issued on the Closing Date to refinance the Facility, such
pre-existing cash reserves shall not be treated as Distributable Cash under the
Outstanding Agreement. It is further acknowledged and agreed that COMPANY on the
Closing Date, after providing for payment or reserves for payment of
Distributable Cash (as defined in the Outstanding Agreement) to the Charter
Municipalities and COMPANY (including Net Compensation (as defined in the
Outstanding Agreement)), funding reserves and capital improvement funds as
contemplated above and retaining sufficient operating funds, consistent with
prior practices and prudent financial management, to permit operations of the
Facility, shall
-45-
<PAGE> 46
distribute the remainder of its then existing cash balances one-half (50%) to
the Charter Municipalities and one-half (50%) to partners in COMPANY.
The Performance Credits earned under the Outstanding Agreement shall
be calculated as of the Closing Date and a preliminary payment thereof made by
COMPANY as soon as reasonably practicable thereafter, initially calculated on
the assumption that all Charter Municipalities will become Amending Charter
Municipalities, subject to a final payment and adjustment to reflect the actual
Amending Charter Municipalities to be made on or before September 1, 1998.
B. Performance Credits under this Agreement shall be determined and
paid in accordance with this paragraph B. The Amending Charter Municipalities
shall have the right to receive, in cash, one-third (33-1/3%) of the cumulative,
Distributable Cash, as defined in Schedule E annexed hereto, from and after the
Closing Date (the "Performance Credits"), which shall be payable to Bangor
Savings Bank or other institution designated by the Municipal Review Committee;
provided, however, that the rights of the Amending Charter Municipalities to
receive Performance Credits shall be subject to and limited by the prior right
of the Municipal Review Committee to allocate and apply Performance Credits to
the purchase of limited partnership interests in COMPANY pursuant to Paragraph
(C)(3)(III) of Article XIX of this Agreement. Notwithstanding the foregoing
provisions of this Article XVIII, (i) any cash deposited in the "Principal
Reserve and Redemption Account" (or similar account) or in the "Bangor Hydro
Reserve Account" (or similar account) required by the Finance Authority of Maine
into which Bangor Hydro's installment payments under the amended Power Purchase
Agreement are payable, and (ii) any payments made to reserve accounts required
by the Finance Authority of Maine, the trustee for the bonds or any provider of
credit enhancement or support for such bonds by COMPANY or MUNICIPALITY from
installment payments made by Bangor Hydro under the amended Power Purchase
Agreement or from amounts that would otherwise constitute distributions to
COMPANY or MUNICIPALITY under the Trust Agreement, to the extent not otherwise
applied in accordance with the Trust Agreement or other document governing such
-46-
<PAGE> 47
reserve account (collectively, the "Equity Reserves"), shall not constitute
Distributable Cash under this Agreement, and the Amending Charter Municipalities
and the partners in COMPANY as of the Closing Date shall each have the right to
receive one-half (50%) of the Equity Reserves and any investment income
therefrom, from and after the Closing Date, but only if and to the extent and at
the time that such Equity Reserves and investment income (or funds held in other
accounts in lieu thereof) are released to COMPANY, as further provided in the
Trust Agreement; provided, however, that the rights of the Amending Charter
Municipalities to receive Equity Reserves and investment income thereon shall be
subject to and limited by the prior right of the Municipal Review Committee to
allocate and apply such Equity Reserves and investment income to the purchase of
limited partnership interests in COMPANY pursuant to Paragraph (C)(3)(III) of
Article XIX of this Agreement. The amount of Equity Reserves to be distributed
to the Amending Charter Municipalities shall be allocated to MUNICIPALITY in the
same proportion that Performance Credits are then allocated to MUNICIPALITY
under the next succeeding paragraph. The portion of the Equity Reserves and
investment income to be paid to MUNICIPALITY shall be paid to Bangor Savings
Bank or other institution designated by the Municipal Review Committee. From the
Performance Credits payable to the Amending Charter Municipalities there shall
be deducted "Performance Credits" (as defined therein) payable to Charter
Municipalities that are not Amending Charter Municipalities under waste disposal
agreements with COMPANY.
The amount of Performance Credits to be distributed to the Amending
Charter Municipalities shall be allocated to MUNICIPALITY in proportion to the
average of (a) the proportion of Acceptable Waste credited to MUNICIPALITY under
this Agreement to the aggregate amount of Acceptable Waste credited to all of
the Amending Charter Municipalities under this Agreement and similar waste
disposal agreements in the calendar quarter for which the Performance Credits
are being calculated; and (b) the proportion of the Guaranteed Annual Tonnage of
MUNICIPALITY to the Guaranteed Annual Tonnage for all Amending Charter
Municipalities, as of the last day of the calendar quarter for which the
Performance Credits are
-47-
<PAGE> 48
being calculated. Notwithstanding the immediately preceding sentence, the
Municipal Review Committee, upon a vote of its Board, following an opportunity
to be heard by any affected Amending Charter Municipality, and upon written
notice to COMPANY and MUNICIPALITY given not less than 45 days before the
effective date of such change, may change the allocation of Performance Credits
among the Amending Charter Municipalities, including MUNICIPALITY. The
Performance Credits shall be calculated quarterly based upon the operations of
the Facility during the preceding quarter. The Performance Credits shall be
recognized upon determination, but MUNICIPALITY shall not be entitled to any
credit or payment of Performance Credits until the end of the following quarter
or as soon thereafter as funds are released therefor under the Trust Agreement,
but only to the extent that funds are released under the Trust Agreement and are
available therefor. Upon delivery of the annual audit of COMPANY, the
Performance Credits for the year covered by the audit shall be adjusted to
accord with the audit, and any credits or debits thereto shall be applied to the
next distribution of Performance Credits hereunder.
ARTICLE XIX. EXERCISE OF OPTION TO EXTEND TERM; OPTION TO PURCHASE
PARTNERSHIP INTERESTS; OPTION TO PURCHASE LIMITED PARTNERSHIP INTERESTS
A. By the execution and delivery of this Agreement, MUNICIPALITY has
irrevocably elected to exercise the option under Article XIX of the Outstanding
Agreement, alternative (D)(3), to extend the term of the Outstanding Agreement
for 15 years. MUNICIPALITY acknowledges and consents to the reduction in the
extension of the term of the Outstanding Agreement from 15 years to 14 years, as
evidenced by this Agreement, in order to coincide with the stated expiration
date of the original and amended Power Purchase Agreement between Bangor Hydro
and COMPANY, and MUNICIPALITY acknowledges and agrees that such reduction in
term is in the best interests of MUNICIPALITY and its residents. MUNICIPALITY
further acknowledges and agrees that such exercise is effective notwithstanding
any variation of terms of this Agreement from the Outstanding Agreement.
-48-
<PAGE> 49
By the execution and delivery of this Agreement and of similar waste
disposal agreements by other Amending Charter Municipalities and the acceptance
hereof and thereof by COMPANY, it is acknowledged and agreed that MUNICIPALITY,
with such other Amending Charter Municipalities, have effectively exercised the
option granted to the Charter Municipalities under Article XIX of the
Outstanding Agreement and other similar agreements (alternative (D)(3)) to
extend the term of the Outstanding Agreement and the outstanding Charter
Municipality agreements between COMPANY and the other Amending Charter
Municipalities, notwithstanding that the extension is in substance for 14 years
instead of 15 years (since that date coincides with the stated expiration date
of the original and amended Power Purchase Agreement between Bangor Hydro and
COMPANY), notwithstanding any variation of terms of this Agreement from the
Outstanding Agreement, and notwithstanding that the effectiveness of such
exercise is to be based on the selection of an alternative by the Charter
Municipalities with a majority of Guaranteed Annual Tonnage as of January 1,
2003 (since the Amending Charter Municipalities will constitute at the Closing
Date a majority of Guaranteed Annual Tonnage and no pooling of Guaranteed Annual
Tonnage on or before January 1, 2003, may cause the Guaranteed Annual Tonnage of
the Amending Charter Municipalities to be less than 51% of the Guaranteed Annual
Tonnage of all Charter Municipalities, as provided in Article V of this
Agreement and the other Charter Municipality agreements with the Amending
Charter Municipalities). Consequently, no other option remains to be exercised
by MUNICIPALITY under Article XIX of the Outstanding Agreement (including,
without limitation, the option to purchase the Facility on March 31, 2004).
B. The Amending Charter Municipalities, including MUNICIPALITY, if
they remain parties to Charter Municipality agreements with COMPANY through
March 31, 2018, have the right to purchase as of March 31, 2018 all partnership
interests in COMPANY not owned by Equity Charter Municipalities, in whole but
not in part, at their then fair market value, as further provided in the
partnership agreement of COMPANY as in effect on the Closing Date,
-49-
<PAGE> 50
whether or not such Amending Charter Municipalities are Equity Charter
Municipalities, and which option may be exercised by one, more or all of such
Amending Charter Municipalities.
C. MUNICIPALITY shall have the right, in conjunction with the other
Amending Charter Municipalities (except those municipalities that become
Amending Charter Municipalities after September 30, 1998), to exercise an
irrevocable option to participate in the purchase of limited partnership
interests in COMPANY (the "Equity Participation Option") up to 50% of the total
interest in capital and profits of COMPANY, which is hereby granted to all such
Amending Charter Municipalities and described below, subject to the following
terms and conditions:
1. Term of Equity Participation Option. Notice of exercise of the
Equity Participation Option must be given by 5:00 o'clock p.m. on September 30,
1998. If notice of the exercise of the Equity Participation Option is not
received by COMPANY as provided in subparagraph (2) hereof, the Equity
Participation Option in favor of MUNICIPALITY shall expire. The exercise of the
Equity Participation Option is irrevocable by MUNICIPALITY.
2. Means of Exercise. The Equity Participation Option shall be
exercised by written notice delivered to COMPANY at its offices at the Facility
in Orrington, Maine, either by personal delivery to the Facility on-site plant
Manager, or by certified mail, received prior to the expiration of the term of
the Equity Participation Option.
3. Participation by MUNICIPALITY. To be an effective exercise of the
Equity Participation Option, the notice of exercise of the Equity Participation
Option shall contain a certification by MUNICIPALITY and an acknowledgment by
the Municipal Review Committee that MUNICIPALITY and the Municipal Review
Committee have entered into the MRC Administration Authorization pursuant to
which MUNICIPALITY has irrevocably appointed the Municipal Review Committee to
act as its agent in the administration of the purchase of limited partnership
interests in COMPANY pursuant to the Equity Participation Option and the
application of partnership distributions, including authorization for the
Municipal Review Committee to designate in the name and on behalf of
MUNICIPALITY the amount of
-50-
<PAGE> 51
Performance Credits to be applied on the account of MUNICIPALITY to purchase
limited partnership interests in COMPANY, as contemplated by paragraph III
below.
If an Amending Charter Municipality, including MUNICIPALITY,
effectively exercises its Equity Purchase Option, it then shall have the right
to purchase limited partnership interests in COMPANY on the following terms and
conditions, as further provided in the partnership agreement of COMPANY, as in
effect on the Closing Date:
I. Additional Partnership Interests. Such limited partnership
interests shall be additional limited partnership interests authorized by the
partnership agreement of COMPANY, and shall not constitute a sale or assignment
by any current partner in COMPANY of its partnership interest as in effect
before the Closing Date.
II. Purchase Price. The purchase price of five-ninths (5/9ths) of
the total limited partnership interests in COMPANY (which equals 50% of the
total interest in capital and profits of COMPANY) shall be equal to
$31,000,000.00 (the "Purchase Price"); provided, however, that if less than a
five-ninths (5/9ths) limited partnership interest is purchased, the purchase
price shall be equal to a proportionate share of the Purchase Price based on the
limited partnership interests acquired.
The total limited partnership interests for all Equity Charter
Municipalities acquired at any one time, as provided in paragraph III below,
shall be equal to the product of: (i) five-ninths (5/9ths) of the total limited
partnership interests in COMPANY, times (ii) the aggregate amount then paid by
the Equity Charter Municipalities pursuant to paragraph III, divided by (iii)
the Purchase Price; provided, however, that at no time through the exercise of
the Equity Participation Option may the Equity Charter Municipalities acquire in
the aggregate more than 50% of the total interest in capital and profits of
COMPANY.
III. Payment of Purchase Price. If MUNICIPALITY has effectively
exercised the Equity Purchase Option, the Municipal Review Committee, on behalf
of MUNICIPALITY, may, at any time and from time to time (but not more frequently
than once each calendar quarter) after the later of: (i) September 30, 1998, or
(ii) the date six months after
-51-
<PAGE> 52
the Closing Date, purchase limited partnership interests in COMPANY by the
designation of all or a portion of the Performance Credits payable to
MUNICIPALITY or previously paid to MUNICIPALITY under Article XVIII or Equity
Reserves payable or previously paid to MUNICIPALITY under Article XVIII for use
by COMPANY in the prepayment and redemption of bonds or other borrowing that has
refinanced the Facility and COMPANY hereby agrees to apply such amounts to such
purpose as soon as is reasonably practicable under the documents evidencing or
securing such bonds or other borrowing. The effective date of the purchase of
the limited partnership interests shall be the date on which COMPANY's
obligations in respect of the bonds or such other borrowing is prepaid. The
amount of Performance Credits or Equity Reserves to be applied by the Municipal
Review Committee on behalf of MUNICIPALITY and all other Equity Charter
Municipalities at any single time to purchase limited partnership interests
shall be equal in principal amount to an authorized principal amount of bonds or
such other borrowing that may then be prepaid in accordance with their terms.
Pursuant to the MRC Administration Authorization, the Municipal
Review Committee on behalf of MUNICIPALITY shall designate quarterly the amount,
if any, of the Performance Credits and Equity Reserves allocated to MUNICIPALITY
to be applied to such purchase. To the extent that such Performance Credits and
Equity Reserves are so applied, MUNICIPALITY shall have acquired limited
partnership interests in COMPANY to the extent of the purchase price thereof, as
further provided in the partnership agreement of COMPANY. COMPANY agrees to
evidence such partnership interests in its books and records and to provide such
further documentation thereof as MUNICIPALITY or the Municipal Review Committee
shall reasonably request.
MUNICIPALITY acknowledges that its ownership share of limited
partnership interests in COMPANY will be based on its respective share of
cumulative prior contributions of Performance Credits and Equity Reserves toward
the purchase of such limited partnership interests. MUNICIPALITY hereby ratifies
and confirms its delegation to the Municipal Review Committee pursuant to the
MRC Administration Authorization, to the extent
-52-
<PAGE> 53
permitted by law, of authority to vote and otherwise act in its name and on its
behalf as to its limited partnership interests in COMPANY. Partnership
distributions to be made to MUNICIPALITY as a result of its limited partnership
interest in COMPANY shall be made to Bangor Savings Bank, as custodian, to be
administered by the Municipal Review Committee on behalf of MUNICIPALITY.
MUNICIPALITY acknowledges and agrees that COMPANY has no
responsibility or duty whatsoever to MUNICIPALITY or the Municipal Review
Committee to advise either of them as to the use and application of Performance
Credits or Equity Reserves, exercise of the Option or the use and application of
partnership distributions, if any.
ARTICLE XX. NOTICES
All notices herein required or permitted to be given or furnished
under this Agreement by either party to the other shall be in writing, and shall
be deemed sufficiently given and served upon the other party if sent by
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to COMPANY: Penobscot Energy Recovery Company,
Limited Partnership
P.O. Box 160
Route 15
River Road
Orrington, Maine 04475
Attention: Plant Manager
With copies to: Charles J. Micoleau, Esq.
Curtis Thaxter Stevens
Broder & Micoleau
One Canal Plaza
P.O. Box 7320 DTS
Portland, Maine 04112
and
Municipal Review Committee, Inc.
Eastern Maine Development Corporation
One Cumberland Place
Bangor, Maine 04401
-53-
<PAGE> 54
If to MUNICIPALITY: See Schedule A
With a copy to: Municipal Review Committee, Inc.
Eastern Maine Development Corporation
One Cumberland Place
Bangor, Maine 04401
Each party shall have the right, from time to time to designate a different
person and/or address by notice given in conformity with this section.
ARTICLE XXI. BINDING EFFECT
The Agreement shall bind upon and inure to the benefit of the
parties hereto and their respective successors or assignees.
ARTICLE XXII. OTHER DOCUMENTS
Each party promises and agrees to execute and deliver any
instruments and to perform any acts which may be necessary or reasonably
required in order to give full effect hereto.
ARTICLE XXIII. HEADINGS
Captions and headings herein are for ease of reference and do not
constitute a part of this Agreement.
ARTICLE XXIV. COUNTERPARTS
This Agreement may be executed in more than one counterpart, each of
which shall be deemed an original and all of which together shall constitute the
same agreement.
ARTICLE XXV. APPLICABLE LAW
The law of the State of Maine shall govern the validity,
interpretation, construction and performance hereof.
ARTICLE XXVI. AMENDMENT OF AGREEMENT
No amendments to this Agreement may be made except in writing signed
by both parties. This Agreement has been or will be assigned to a trustee under
bond financing
-54-
<PAGE> 55
arrangements or to the issuer or the providers of credit enhancement for such
bonds and the written consent of all such assignees shall also be required
before any amendment becomes effective.
ARTICLE XXVII. SEVERABILITY
In the event any covenant, condition or provision of this Agreement
is held to be invalid or unenforceable by a final judgment of a court of
competent jurisdiction, the invalidity or unenforceability thereof shall in no
way affect any of the other covenants, conditions or provisions hereof, provided
that such remaining covenants, conditions or provisions can thereafter be
applicable and effective without materially changing the obligations of either
party.
ARTICLE XXVIII. RELATIONSHIP OF THE PARTIES
Nothing herein shall be deemed to constitute either party a partner,
agent or local representative of the other party or to create any fiduciary
relationship between the parties. MUNICIPALITY may, however, acquire an interest
in COMPANY as provided in Article XIX hereof.
ARTICLE XXIX. REPRESENTATIVES
The authorized representative of each of the parties for the
purposes hereof shall be such persons as the parties may from time to time
designate in writing.
ARTICLE XXX. INTEGRATION; CONFLICTS
This instrument (including all Schedules attached hereto, which are
hereby incorporated herein and made a part hereof) embodies the whole of this
Agreement. There are no promises, terms, conditions, or obligations between the
parties other than those contained herein or in the written agreements
specifically referenced herein (such as the Trust Agreement, the amended Power
Purchase Agreement between Bangor Hydro and COMPANY and the Warrant Agreement).
This Agreement amends, supplements, restates, extends and supersedes the
Outstanding Agreement and all supplements thereto and all other previous
communications, representations, or agreements, either oral or written, between
the parties hereto in respect of the subject matters covered hereby.
-55-
<PAGE> 56
In the event that the requirements of any Article of this Agreement
shall be found to be inconsistent with those of any Schedule, the Article shall
control.
ARTICLE XXXI. CONSENTS
To the extent that the consent of either party to this Agreement is
required to any action of the other party pursuant to any provision of this
Agreement, such consent will not be unreasonably withheld.
ARTICLE XXXII. ARBITRATION
A. MUNICIPALITY and COMPANY shall confer from time to time to review
Facility operations and the relationship in general.
B. MUNICIPALITY and COMPANY agree that, if any dispute arises under
Articles V(D), (E) and (I), VI, VII, X, XII, XIII, XIV, XVI, XVII, XVIII, and
XIX(F), resolution of that dispute shall be conducted by COMPANY and the
Municipal Review Committee pursuant to this Article XXXII and the results
thereof shall be binding on MUNICIPALITY, COMPANY and the Municipal Review
Committee.
C. The parties shall submit such dispute to an arbitrator to obtain
a binding resolution thereof. The dispute shall be submitted to the arbitrator
as soon as the dispute arises. The arbitrator shall be a person mutually agreed
upon by the parties or, if the parties are unable to reach such agreement, there
shall be three (3) arbitrators, one selected by each of the parties within five
(5) days after the dispute arises and a third chosen by the two appointed within
five (5) days after their selection. The parties then shall provide whatever
information and material the arbitrators deem necessary to resolve the dispute.
The arbitrators shall decide the dispute within twenty (20) days after the
arbitrators have been selected. If there is only one arbitrator, his decision
shall be binding on COMPANY, MUNICIPALITY and the Municipal Review Committee,
and if there are three, the decision of any two shall be binding. The parties
intend that this arbitration process will expeditiously resolve disputes
relative to financial or
-56-
<PAGE> 57
technical matters relating to the Facility. The costs of such arbitration shall
be shared equally by the parties.
ARTICLE XXXIII. MISCELLANEOUS
To the extent permitted by law, no municipality, Charter
Municipality, or commercial entity will be offered a long term,
non-interruptible waste disposal agreement by COMPANY on any terms more
favorable than described herein unless either the Municipal Review Committee
consents or all more favorable terms, including tipping fee, are made available
to MUNICIPALITY. No municipality will be offered any Spot Market Contract
without Municipal Review Committee consent.
COMPANY agrees that the tipping fee rate under any future waste
disposal contracts with the City of Ellsworth and the Towns of Newport,
Pittsfield, Detroit, Monroe, Prospect, Winterport and Frankfort, Maine, will
equal at least the greater of (i) the market rate in effect at the time for
waste disposal agreements with substantially similar terms, or (ii) the then
current Charter Municipality rate (the average of the Tipping Fee under this
Agreement and, if there are Charter Municipalities that are not Amending Charter
Municipalities, the Tipping Fee in effect under the waste disposal agreements of
such Charter Municipalities with COMPANY), plus the "Equivalent Escalating
Spread," as reasonably determined by the Municipal Review Committee in
consultation with COMPANY.
COMPANY may engage in refinancing of indebtedness or other
borrowings at any time without the consent of the Municipal Review Committee
only if such refinancings or other borrowing do not materially adversely affect
Distributable Cash or the Performance Credits; provided, however, that COMPANY
may incur indebtedness, without the consent of the Municipal Review Committee,
to the extent COMPANY reasonably deems necessary to provide for maintenance and
repair of the Facility or to enable the Facility or its operation to comply with
applicable law or permit requirements.
-57-
<PAGE> 58
This Agreement shall not take effect unless and until the Closing
Date occurs. If the Closing Date does not occur on or before December 31, 1998,
this Agreement shall be without force and effect, and the Outstanding Agreement,
as such as been heretofore otherwise amended or supplemented, shall continue to
govern.
IN WITNESS WHEREOF, the parties hereto have executed this amended,
supplemented, restated and extended agreement on this ____ day of _______, 199_.
WITNESS: [MUNICIPALITY]
____________________________ By:_______________________________________
Its
PENOBSCOT ENERGY RECOVERY COMPANY,
LIMITED PARTNERSHIP
By: PERC Management Company,
Its General Partner
By: PERC, Inc.
Its General Partner
By:
Its President
-58-
<PAGE> 59
By: Energy National, Inc.,
Its General Partner
By:
Title:
-59-
<PAGE> 60
SCHEDULE A
Name and address of MUNICIPALITY:
Send copy of notices to MUNICIPALITY to:
1. Guaranteed Annual Tonnage per Operating Year to be delivered by MUNICIPALITY
pursuant to Article V
2. Monthly Estimate (non-binding) of tons of Acceptable Waste
Jan. ______ July ______
Feb. ______ Aug. ______
March ______ Sept. ______
April ______ Oct. ______
May ______ Nov. ______
June ______ Dec. ______
-60-
<PAGE> 61
SCHEDULE B
Charter Municipalities and Reference GATs
Charter Municipality Reference GAT
-------------------- -------------
Albion 600
Alton 260
Atkinson 144
Baileyville 1,200
Bangor 27,000
Bar Harbor 4,600
Blue Hill 2,000
Boothbay Reg. 4,500
Bradley 425
Brewer 9,000
Brooks 258
Brownville 640
Bucksport 2,750
Burnham 500
Camden, Rockport, Lincolnville, Hope 5,400
Carmel 700
Central Penobscot 1,100
China 1,000
Clifton 300
Clinton 2,000
Corinna 1,729
Cushing 444
Dedham 400
Dexter 3,600
Dover-Foxcroft 1,700
Eddington 960
Enfield 700
Exeter 250
Fairfield 3,000
Friendship 492
Glenburn 1,300
Gouldsboro 800
Greenbush 375
Guilford 1,400
Hampden 3,200
Hancock 1,014
Hermon 1,965
Holden 1,050
Jackson 130
Charter Municipality Reference GAT
-------------------- -------------
-61-
<PAGE> 62
Lamoine 350
Lee 352
Levant 679
Lincoln 3,000
Lucerne 175
Mariaville 106
Marion 5,400
Mars Hill 500
Mattawamkeag 400
Milford 1,100
Millinocket 3,000
Milo 1,320
Monson 160
Mt. Desert 1,800
Newburgh 500
Old Town 5,000
Orland 750
Orono 5,100
Otis 210
Owls Head 780
Palmyra 500
Parkham 168
Penobscot County 700
Pleasant River SWD 1,400
Plymouth 360
Reed Plantation 100
Rockland 5,100
St. Albans 474
Sangerville 400
Searsport 1,500
South Thomaston 600
Southwest Harbor 2,000
Stetson 220
Steuben 380
Stonington 604
Surry 1,000
Thomaston 1,560
Thorndike 200
Tremont 1,000
Trenton 600
Troy 250
Union 300
Unity 702
Charter Municipality Reference GAT
-------------------- -------------
Vassalboro 1,250
Veazie 800
-62-
<PAGE> 63
Verona 275
Waldoboro 2,100
Waterville 21,000
West Gardner 1,005
Winslow 3,850
Winthrop 3,200
-63-
<PAGE> 64
MUNICIPALITIES WITH LONG-TERM WASTE DISPOSAL CONTRACTS WITH COMPANY
BUT WHICH ARE NOT CHARTER MUNICIPALITIES AS OF THE CLOSING DATE
Municipality Guaranteed Annual Tonnage
------------ -------------------------
Abbott 190
Aroostook Valley 790
Bowerbank 25
Bridgewater 75
Burlington/Lowell 200
Castine 260
Cherryfield 300
Chester 220
Dixmont 150
Edinburg 38
Etna 350
Freedom 194
Harrington 300
Howland 425
Hudson 150
Kenduskeag 170
Knox 150
LaGrange 180
Maxfield 24
Medford 50
Milbridge 625
Monticello 240
Montville 260
NARIF 8,000
Northern Katahdin 1,500
Oakfield 260
Passadumkeag 160
Piscataquis 200
Reed Plantation Group 224
St. Francis, St. John Plantation 275
Searmont 270
Sebec 180
Sherman 480
Springfield 160
Swans Island 200
TriCounty 1,180
Wiscasset 3,400
-64-
<PAGE> 65
SCHEDULE C
Tipping Fee Calculation
A. The two components of the total Tipping Fee to be paid are the
Base Rate and the Variable Rate. The Base Rate, for the period from April 1,
1991 through and including December 31, 1991, is $35.16 per ton which Base Rate
shall be available to only Charter Municipalities. The Base Rate will be
adjusted in subsequent Operating Years as provided for in Article VI, Paragraph
C of the Agreement.
The Variable Rate shall be added to the Base Rate and paid by
Municipality in accordance with the terms of the Agreement. For the period from
April 1, 1991 through June 30, 1991, the Variable Rate shall be $7.45 per ton.
The Variable Rate in respect of any calendar quarter commencing on or after July
1, 1991 shall be an amount per ton of Acceptable Waste equal to:
1. the initial Variable Rate of $7.45 per ton; plus
2. the Pass-through Costs as estimated by COMPANY for such
quarter, divided by the total tons of Acceptable Waste that
COMPANY estimates will be delivered in such quarter (except in
calculating the Change-in-Law costs and Change in Rate of
Interest Cost, the denominator shall not include tonnage under
Spot Market Contracts originating from outside the State of
Maine); plus
3. a reconciliation calculated as the difference between (i) the
amount in dollars corresponding to the Variable Rate component
of the total Tipping Fee that COMPANY was entitled to receive
from the Charter Municipalities in the previous quarter; and
(ii) the amount in dollars corresponding to the Variable Rate
component of the total Tipping Fee that is actually payable or
was paid to COMPANY from the Charter Municipalities in the
previous quarter, all divided by the tons of Acceptable Waste
that COMPANY estimates will be delivered by the Charter
Municipalities in the current quarter; minus
4. any adjustments for failure of the Facility to operate or to
meet the Performance Standards other than by reason of
Suspension of Operations, Force Majeure, or MUNICIPALITY
default; all
-65-
<PAGE> 66
divided by the tons of Acceptable Waste that COMPANY estimates
will be delivered in such quarter; plus
5. any adjustments for Change-in-Law costs and Change in Rate of
Interest Cost, as converted to dollars per ton in accordance
with Section E below;
and where the amounts in items (2), (3) and (5) can be positive or negative.
B. For purposes of calculating Section A(2) above, Pass-through
Costs shall be defined as the sum of the following:
(1) Changes in the cost of Residue disposal. The difference
between (i) the sum of all fees, costs, expenses and liabilities that COMPANY
estimates it will incur or pay in respect of Residue disposal for the calendar
quarter (including but not limited to transportation costs), and (ii) the base
amount for Residue disposal which is $368,188.
(2) Changes in the cost of FEPR disposal. The difference
between (i) the sum of all fees, costs, and expenses and liabilities that
COMPANY estimates it will incur or pay in respect of FEPR disposal for the
calendar quarter (including but not limited to transportation costs), and (ii)
the base amount for FEPR disposal which is $526, 274.
C. For purposes of calculating Section A(4) above, the adjustments
for failure to meet the Performance Standards (for reasons other than Suspension
of Operations, Force Majeure or MUNICIPALITY default) shall be calculated in the
first quarter of each Operating Year on the basis of performance in the
preceding Operating Year. Such adjustments shall be defined as follows:
1. for failure to comply with the Residue Moisture Standard,
the actual costs of transportation and disposal associated with the excess tons.
2. for failure to comply with the Residue Combustible Content
Standard and/or the Ferrous Quality Standard, the actual costs of transportation
and disposal for the excess tons associated with excess combustible material.
-66-
<PAGE> 67
3. for failure to comply with the Residue Truck Loading
Standard and/or the FEPR Truck Loading Standard, the cost of transportation
associated with the excess shipments.
4. for failure to comply with both the Glass and Grit Quantity
and Quality Standards, the actual costs of transportation and disposal, for the
excess tons provided that no adjustment shall be made unless the Facility has
failed to comply with both standards.
E. For purposes of the adjustments in Section A(5) above,
Changes-in-Law costs and Changes in Rate of Interest Costs shall be defined as
the sum of the following:
(1) Change-in-Law costs. The Change-in-Law costs for any
calendar quarter are the fees, costs, expenses and liabilities paid or incurred
by COMPANY during such calendar quarter, by reason of a Change-in-Law event
(including an allocated portion of capital expenditures and direct quantifiable
additions to operating or maintenance costs) but only as and to the extent such
fees, costs, expenses and liabilities in respect of any Change-in-Law event
exceeds $100,000 (whether or not paid in any calendar quarter). The
Change-in-Law costs to be included in any adjustments of the Variable Rate for
any calendar quarter may not exceed 25% of the Tipping Fee payable by
MUNICIPALITY for such calendar quarter (before giving effect to the inclusion of
the full amount thereof without reference to such limitation). Any Change-in-Law
costs which exceed the 25% cap in a particular calendar quarter shall be accrued
and be included as and to the extent permitted by the immediately preceding
sentence in the next succeeding calendar quarter(s) in which such inclusion will
not be prohibited by such limitation.
The amount of the Change-in-Law costs which is not received in a
calendar quarter by reason of such 25% limitation shall, together with interest
on the unpaid and unrecorded amount thereof at a rate per annum equal to the
rate of interest announced by Bank of Boston or its successor as its base or
prime rate of interest plus 2% per annum on the unrecovered amount thereof, be
thereafter treated as a Change-in-Law costs and included in any calculation
thereof until received in full. All calculations of Change-in-Law costs shall be
prepared on the basis that unpaid amounts of Change-in-Law costs from prior
calendar quarters
-67-
<PAGE> 68
are the first ones to be included and recovered and Change-in-Law costs paid in
the calendar quarter in question are the last to be included and recovered.
Notwithstanding the foregoing, such 25% limitation shall not be applicable as
and to the extent that any Change-in-Law costs paid or incurred in the calendar
quarter would not be recovered by amortizing the amount thereof on an even
calendar quarter basis (based on the number of remaining calendar quarters) over
the period ending March 31, 2018.
In the event of a termination of this Agreement whether by COMPANY,
pursuant to Article VIII or Article XIII or by MUNICIPALITY, pursuant to Article
XIII, or pursuant to Article XI, MUNICIPALITY shall be required to pay COMPANY
an amount equal to its pro-rata share (based on the then Guaranteed Tonnage and
the Guaranteed Annual Tonnage of all Charter Municipalities) of any remaining
balances of Change-in-Law costs at the effective date of any such termination
which have not been recovered prior to such date; provided, however, that
MUNICIPALITY may at the effective date of such termination by written notice to
COMPANY elect to pay any such amount owing by it based on an even monthly
amortization of the amount thereof over a period of up to forty-eight (48)
months as MUNICIPALITY shall elect. Any amount to be amortized shall bear
interest at a rate per annual equal to the rate of interest announced by Bank of
Boston or its successor as its base or prime rate of interest plus 2% and shall
be payable at the time each such monthly payment is made.
(2) Changes in Rate of Interest cost. Changes in Rate of Interest
cost to be paid by COMPANY to the trustee of its presently outstanding bonds
shall be an amount equal to the aggregate difference between (i) the interest
expense of COMPANY to be paid or accrued in respect of the bonds as estimated by
COMPANY in respect of such calendar quarter, and (ii) the interest expense that
would have been paid or accrued in respect of the bonds during such calendar
quarter at a 6.40% constant rate; provided, however, that the interest rate used
in making the calculation in clause (i) shall in no event exceed the rate of
8.00% per annum. COMPANY will use its best efforts to fix the rate on the bonds
at a time and on a basis which is mutually agreeable between COMPANY and the
Municipal Review Committee the cost of which
-68-
<PAGE> 69
fixing of interest rate shall be paid by Charter Municipalities, including
MUNICIPALITY, as a Pass-through Cost, in a manner which is agreeable to
Municipal Review Committee and COMPANY.
F. COMPANY will certify to the Municipal Review Committee the
validity of quarterly Pass-through Costs and deliver to the Municipal Review
Committee the certificate and the quarterly reconciliation statement with
accompanying invoices and other agreed-upon documentation within twenty (20)
days after the end of the calendar quarter so that the Municipal Review
Committee can review the reconciliation. The Municipal Review Committee will
have twenty (20) days from receipt of the statement to accept or dispute the
reconciliation. Unless the Municipal Review Committee files a written objection
to the statement with COMPANY within twenty (20) days of receiving the same,
setting forth the basis for such dispute, such statement shall be final and
binding on all parties, including MUNICIPALITY. If the Municipal Review
Committee files such written objection, the amount of the disputed items shall
not be included in Tipping Fee invoices, but the disputed items shall be
referred to binding arbitration for resolution as provided for in Article XXXII.
Adjustments to Pass-through Costs determined by resolution of the disputed items
shall be reflected in future invoices as referred to in paragraph A above.
G. Annual Projections of Tipping Fees. On or before September 15 of
each Operating Year, commencing with the Operating Year beginning January 1,
1992, or on such other date as shall be mutually acceptable to COMPANY and
MUNICIPALITY, COMPANY shall use its best efforts to notify MUNICIPALITY and the
Municipal Review Committee of COMPANY's then estimate of the Base Rate per ton
and the Variable Rate per ton, so that MUNICIPALITY may include in its budget
adequate contingency amounts to cover potential increases in its projected
Tipping Fees. Any such estimates shall not be binding on any of the parties.
-69-
<PAGE> 70
SCHEDULE D
Procedure To Exercise Option To Purchase Facility under Article XVI,
Paragraph A
If the Municipal Review Committee, on behalf of the Charter
Municipalities, elects to purchase the Facility as permitted and provided in
Article XVI, Paragraph A of this Agreement, the notice of exercise of the Option
shall specify the date of the closing of the transfer of title from COMPANY to
Charter Municipalities or their designee, which closing shall occur within 180
days of the date of the written notice given by the Municipal Review Committee
under Article XVI, Paragraph A. At closing, COMPANY shall convey the Facility by
quitclaim deed with covenant and bills of sale with warranty covenants, free and
clear of all liens and encumbrances. Any liens and encumbrances including the
balances of any unpaid amounts secured by the mortgage to the trustee or any
provider of credit enhancement or support of bonds providing financing or
refinancing of the Facility or any portion thereof, together with all interest,
fees and costs due to the trustee and such providers secured thereby, shall be
paid in cash at closing.
The condition contained in the preceding sentence is for the benefit
of both parties and may not be waived by any party to this Agreement. The
parties shall make appropriate provisions for the orderly assumption of
executory contracts and reconcile real estate taxes and other such items on a
pro rata basis. Unless otherwise agreed prior to closing, the Charter
Municipalities will not be acquiring accounts receivable or assuming accounts
payable of COMPANY.
-70-
<PAGE> 71
SCHEDULE E
Distributable Cash
For the purpose of calculating Performance Credits referred to in
Article XVIII of the Agreement for any period, amounts used to calculate
Distributable Cash shall be determined consistent with Generally Accepted
Accounting Principles and shall be derived from the following types of income
and expenses:
(1) all amounts received by COMPANY from Bangor Hydro in respect to
the sale of electricity to it during such period; provided, however, that to the
extent such funds constitute Equity Reserves (as defined in Article XVIII,
paragraph B), such funds and any investment income therefrom shall be
distributed one-half (50%) to the Amending Charter Municipalities and one-half
(50%) to the partners in the COMPANY as of the Closing Date, if and when
released to COMPANY;
(2) all sums received by COMPANY during such period in respect to
all Acceptable Waste delivered to COMPANY during such period;
(3) all amounts received by COMPANY in respect of the sale by it of
recoverable materials, steam or byproducts during such period; and
(4) all investment income of COMPANY earned (other than earnings on
monies in accounts maintained pursuant to this Agreement, the trust indenture
between the Finance Authority of Maine, or other issuer, and the bond trustees,
existing credit or other agreements between COMPANY and any provider of credit
enhancement or support for the bonds) during such period.
From the sum of the amounts and income set forth above, shall be
deducted the sum of all fees, costs, expenses and liabilities paid or incurred
by COMPANY in respect to such period including debt service, amounts deposited
into or credited to any account maintained pursuant to the trust indenture, the
credit agreements between COMPANY and any provider of credit enhancement or
support for the bonds, or this Agreement, any plant management fee allocable to
COMPANY or bonus payments paid or incurred by COMPANY
-71-
<PAGE> 72
pursuant to the operating agreement between COMPANY and ESOCO Orrington, Inc. or
any subsequent operating agreement.
In the calculation of Distributable Cash, distributions to partners
of COMPANY in respect to any ownership interests in the partnership shall not be
considered to be a fee, a cost, an expense, or a liability. Further,
Distributable Cash shall not include:
(1) any 1990 through March 31, 1991 interim tipping fee payments or
any payments for this purpose made over time after March 31, 1991;
(2) amounts received from borrowing or drawing-down of letters of
credit;
(3) insurance or condemnation proceeds or awards;
(4) amounts received in satisfaction of claims;
(5) capital contributions and indemnity payments;
(6) debt service savings (including any reductions in letter of
credit or other credit enhancement fees or commissions or any remarketing fees)
resulting from the prepayment of bonds or other borrowings effected with
payments made by Equity Charter Municipalities under Article XIX, paragraph
(B)(5) of this Agreement; and
(7) any other amount not representing revenues received in the
ordinary course of business (including, without limitation, withdrawals from
accounts maintained under the trust indenture, credit or other agreements
between COMPANY and its lenders, or this Agreement); provided, however, that
funds, if any, remaining in the debt service reserve fund, capital improvement
reserve fund and operating reserve fund securing the bonds when released to
COMPANY shall be Distributable Cash; provided, further, however, to the extent
such reserve funds constitute Equity Reserves (as defined in Article XVIII,
paragraph B), such funds and any investment income therefrom shall be
distributed one-half (50%) to the Amending Charter Municipalities and one-half
(50%) to the partners in COMPANY as of the Closing Date, if and when released by
the Finance Authority of Maine or the trustee.
-72-
<PAGE> 73
Distributable Cash shall be calculated in a manner consistent with
the description below. All capitalized terms not defined elsewhere in this
Agreement refer to specific line items in COMPANY's profit and loss operations
statements ("Operating P&L") as prepared monthly by COMPANY's controller in the
regular course of COMPANY's financial affairs and audited annually by an
independent accounting firm.
1. Start with Total Revenues.
2. Subtract the following summary line items:
a. Total Fixed Expenses;
b. Total Variable Expenses; and
c. Total Non-Operating Income Expenses.
3. Add back the following individual line items:
a. Depreciation; and
b. Amortization.
4. Subtract the following:
a. The principal paid on the outstanding bonds; and
b. The amount of debt service savings resulting from the
prepayment of bonds or other borrowings effected with
payments made by Equity Charter Municipalities under
Article XIX, paragraph (B)(5) of this Agreement.
5. Adjust for other cash and non-cash items and cash flow lags as
calculated and substantiated by COMPANY and otherwise not
incorporated into the Operating P&L.
In the event that COMPANY changes the definitions of line items on
its Operating P&L, it shall inform the Municipal Review Committee of such
changes, and appropriate adjustments to the calculation described above shall be
made by mutual agreement.
COMPANY shall submit its calculation of Distributable Cash and
Performance Credits to the Municipal Review Committee within sixty (60) days of
the close of each calendar quarter and within thirty (30) days of the completion
of the annual independent audit. Quarterly calculations of the amount of
Distributable Cash and Performance Credits for a year shall be subject to
adjustment and reconciled with the annual audit. Such submittal shall be
accompanied by the following:
-73-
<PAGE> 74
1. A certificate signed by COMPANY's controller stating that he has
reviewed the submittal and the calculations, that the submittal is a correct
representation of the matters set forth and was prepared from data prepared in
accordance with Generally Accepted Accounting Principles consistent with
COMPANY's historical operating practices and in accordance with the terms of
this Agreement;
2. A certificate signed by an authorized officer of COMPANY that
COMPANY has complied with its obligations under this Agreement as they affect
the calculation of Performance Credits;
3. Company Operating P&L for the period;
4. A written statement setting forth the detailed calculation of the
Performance Credits;
5. A written statement setting forth the tons of Acceptable Waste
accepted from each Charter Municipality in the period.
-74-
<PAGE> 75
SCHEDULE F
Performance Standards
1. THE RESIDUE MOISTURE STANDARD
The moisture in the Residue as shipped shall not exceed forty
percent (40%) by weight on an annual basis. The annual average shall
be the simple average of the results of analysis of compound
samples. The size of the samples, the frequency of sampling and
sample compounding and the procedures for storing and compounding
samples in waterproof containers shall be established by mutual
agreement of COMPANY and the Municipal Review Committee. Protocols
for analysis of the samples shall be in accordance with standard
American Society for Testing and Materials (ASTM) methods or
otherwise by mutual agreement of COMPANY and the Municipal Review
Committee.
2. THE RESIDUE COMBUSTIBLE CONTENT STANDARD
The percent weight of the unburned combustibles in the Residue as
measured by the percent LOI shall not exceed the Residue Combustible
Content Standard on an annual average basis. The Residue Combustible
Content Standard shall be set for 1991 at nine percent (9%) by
weight (dry), and shall be adjusted for Operating Years after 1991
by mutual agreement of COMPANY and the Municipal Review Committee
using the results of analysis of compound samples taken during 1991.
The size of the samples, the frequency of sampling and sample
compounding and the procedures for storing and compounding samples
in waterproof containers shall be established by mutual agreement of
COMPANY and the Municipal Review Committee. Protocols for analysis
of the samples shall be in accordance with standard ASTM methods or
otherwise by mutual agreement of COMPANY and the Municipal Review
Committee.
-75-
<PAGE> 76
3. THE RESIDUE TRUCK LOADING STANDARD
The annual average net weight of shipments of Residue shall not be
less than twenty (20) tons per truck. Net weights and the number of
shipments shall be determined on the basis of monthly disposal
invoices as verified for accuracy.
4. THE FEPR TRUCK LOADING STANDARD
The annual average net weight of shipments of FEPR (including glass
and grit, non-processible waste, and to the extent that its disposal
costs are based on explicit payments for transportation on a per
truck basis, recovered ferrous materials) shall not be less than
twenty (20) tons per truck. Net weights and the number of shipments
shall be determined on the basis of monthly disposal invoices as
verified for accuracy.
5. THE FERROUS QUALITY STANDARD
The higher heating value (HHV) of the recovered ferrous materials as
measured by the ratio of the BTUs of the free combustibles to the
total weight of the recovered ferrous materials shall not exceed the
Ferrous Quality Standard on an annual average basis. The Ferrous
Quality Standard shall be set for 1991 at 940 BTU/lb on the basis of
ten percent (10%) free combustible content by weight at an assumed
HHV of 9400 BTU/lb, and shall be adjusted for Operating Years after
1991 by mutual agreement of COMPANY and the Municipal Review
Committee using the results of analysis of compound samples taken
during 1991. The size of the samples, the frequency of sampling and
sample compounding and the procedures for storing and compounding
samples in waterproof containers shall be established by mutual
agreement of COMPANY and the Municipal Review Committee. Protocols
for analysis of the samples shall be in
-76-
<PAGE> 77
accordance with standard ASTM methods or otherwise by mutual
agreement of COMPANY and the Municipal Review Committee.
6. THE GLASS AND GRIT QUANTITY STANDARD
The weight of the glass and grit shall not exceed twenty-six percent
(26%) of the weight of all Acceptable Waste accepted at the Facility
(including nonprocessible waste) on an annual basis. The weights of
the glass and grit and the Acceptable Waste shall be determined on
the basis of monthly disposal invoices as verified for accuracy by
COMPANY.
7. THE GLASS AND GRIT QUALITY STANDARD
The Glass and Grit Quality Standard shall not be applicable unless
the Facility has not complied with the Glass and Grit Quantity
Standard. The HHV of the glass and grit shall not exceed the Glass
and Grit Quality Standard on an annual average basis. The Glass and
Grit-Quality Standard shall be set initially at 2088 BTU/lb and
shall be adjusted by mutual agreement of the COMPANY and the
Municipal Review Committee using the results of analysis of compound
samples taken during 1991. The size of the samples, the frequency of
sampling and sample compounding and the procedures for storing and
compounding samples in waterproof containers shall be established by
mutual agreement of COMPANY and the Municipal Review Committee.
Protocols for analysis of the samples shall be in accordance with
standard ASTM methods or otherwise by mutual agreement of COMPANY
and the Municipal Review Committee.
-77-
<PAGE> 78
SCHEDULE G
Type of Vehicles
All vehicles depositing waste on the Facility tipping floor shall be
capable of discharging their loads mechanically. Included within the category of
vehicles permitted to tip are: standard solid waste packer trucks, transfer
trailers and hydraulic dump trucks. In addition, all solid waste vehicles
entering the Facility shall have their loads enclosed within a container or
covered securely by means of a tarp. No pick-up trucks, so-called, or other
vehicles which would require manual unloading, either by design or by reason of
malfunction, shall be permitted to discharge Acceptable Waste on the tipping
floor.
-78-
<PAGE> 79
SCHEDULE H
[Deleted]
-79-
<PAGE> 80
SCHEDULE H(1)
[Deleted]
-80-
<PAGE> 81
SCHEDULE I
[Deleted]
-81-
<PAGE> 82
SCHEDULE J
Pending or Threatened Litigation or Governmental Proceeding
1. [to come]
_. COMPANY during the conduct of its business is involved in
numerous governmental proceedings and investigations with respect to permits,
approvals and administrative matters relative to the ownership, operation and
maintenance of the Facility which, if adversely determined, could result
adversely and affect COMPANY's ability to operate the Facility.
TO BE UPDATED, IF NECESSARY, PRIOR TO CLOSING
-82-
<PAGE> 83
SCHEDULE K
[Deleted]
-83-
<PAGE> 84
ACKNOWLEDGMENT OF BANGOR HYDRO-ELECTRIC COMPANY
Bangor Hydro-Electric Company ("Bangor Hydro") hereby acknowledges
that it has received a copy of the foregoing Second Amended, Restated and
Extended Waste Disposal Agreement, dated as of ___________, 199_, between
[Municipality] and Penobscot Energy Recovery Company, Limited Partnership, and
that the references to the Common Stock Warrant and Registration Agreement
contained in Article XII, paragraph E of the Agreement are correct in all
material respects.
IN WITNESS WHEREOF, Bangor Hydro has caused its duly authorized
officer to execute this Acknowledgment as of the ____ day of ____________, 199_.
BANGOR HYDRO-ELECTRIC COMPANY
By /s/ Andrew Landry
--------------------------------------
Its General Counsel, Secretary & Clerk
-84-
<PAGE> 85
ACKNOWLEDGMENT AND AGREEMENT OF MUNICIPAL REVIEW COMMITTEE, INC.
Municipal Review Committee, Inc. (the "Municipal Review Committee")
hereby acknowledges receipt of a copy of the foregoing Second Amended, Restated
and Extended Waste Disposal Agreement, dated as of ___________, 199_, between
[Municipality] and Penobscot Energy Recovery Company, Limited Partnership, and
hereby agrees to undertake and perform all duties and responsibilities imposed
upon it by the provisions thereof.
IN WITNESS WHEREOF, the Municipal Review Committee has caused its
duly authorized officer to execute this Acknowledgment and Agreement as of the
____ day of ____________, 199_.
MUNICIPAL REVIEW COMMITTEE, INC.
By
By Gerald Kempen
--------------------------------------
Its President
-85-
<PAGE> 1
Exhibit 4.3
LOAN AGREEMENT
by and between
FINANCE AUTHORITY OF MAINE
and
PENOBSCOT ENERGY RECOVERY COMPANY,
LIMITED PARTNERSHIP
relating to the
$29,930,000
Finance Authority of Maine
Electric Rate Stabilization Revenue Refunding Bonds
Series 1998A (Penobscot Energy Recovery Company, LP)
and
$15,065,000
Finance Authority of Maine
Electric Rate Stabilization Revenue Refunding Bonds
Series 1998B (Penobscot Energy Recovery Company, LP)
Dated as of June 1, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Definitions.................................................... 2
Section 1.2 Rules of Construction.......................................... 6
ARTICLE II
REPRESENTATIONS AND UNDERTAKINGS
Section 2.1 Representations by the Issuer.................................. 7
Section 2.2 Representations by the Borrower................................ 8
ARTICLE III
ELECTRIC RATE STABILIZATION PROJECT; ISSUANCE OF BONDS;
AUTHORIZED REPRESENTATIVES
Section 3.1 Agreement to Complete Electric Rate Stabilization Project...... 9
Section 3.2 Agreement to Issue Bonds; Application of Bond Proceeds......... 9
Section 3.3 Borrower Required to Fund Insufficiency........................ 10
Section 3.4 Authorized Representatives of the Borrower..................... 10
ARTICLE IV
EFFECTIVE DATE AND DURATION OF THIS AGREEMENT; REPAYMENT
PROVISIONS; AND UNCONDITIONAL OBLIGATION OF THE BORROWER
Section 4.1 Effective Date and Duration of this Agreement.................. 10
Section 4.2 Loan Clauses; Loan Note........................................ 10
Section 4.3 Additional Amounts Payable..................................... 12
Section 4.4 Optional Prepayments........................................... 12
(1)
<PAGE> 3
Page
----
Section 4.5 Prepayment; Extraordinary and Special Optional Redemption...... 13
Section 4.6 Notice of Prepayment........................................... 13
ARTICLE V
SECURITY FOR PAYMENT
Section 5.1 Obligations of the Borrower Hereunder Unconditional............ 14
Section 5.2 Assignment of Rights Under Facility Agreements................. 14
Section 5.3 Collateral Assignment.......................................... 15
Section 5.4 Payment of Assigned Sums....................................... 15
Section 5.5 Exercise of Rights by Borrower................................. 15
Section 5.6 No Release or Assumption....................................... 16
Section 5.7 Security Clauses............................................... 16
Section 5.8 Pledge of Trust Estate......................................... 16
Section 5.9 Receipt by Trustee of Payments Under Facility Agreements and
Other Contracts; Enforcement and Amendment of Facility
Agreements................................................... 17
ARTICLE VI
SPECIAL COVENANTS
Section 6.1 No Warranty of Condition or Suitability by the Issuer.......... 17
Section 6.2 Operation and Maintenance of the Facility...................... 17
Section 6.3 Damage; Repair of Damage; Condemnation......................... 17
Section 6.4 [Reserved]..................................................... 18
Section 6.5 Issuer's Right of Inspection and Access........................ 18
Section 6.6 Conduct of Business............................................ 18
Section 6.7 Indemnification Covenants...................................... 18
Section 6.8 Assignment, Leasing and Selling................................ 20
Section 6.9 Environmental Covenants........................................ 20
Section 6.10 Default and Litigation Notification............................ 21
Section 6.11 Insurance...................................................... 21
Section 6.12 Additional Covenants and Agreements............................ 21
Section 6.13 No Liability of the Issuer..................................... 21
Section 6.14 Incorporation of Tax Regulatory Agreement; Determination of
Taxability..................................................... 22
Section 6.15 Maintenance of Facility Agreements............................. 22
(2)
<PAGE> 4
Page
----
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default Defined ..................................... 23
Section 7.2 Remedies on Default............................................ 25
Section 7.3 No Remedy Exclusive; Trustee and Noteholders Deemed Third
Party Beneficiaries.......................................... 26
Section 7.4 No Additional Waiver Implied By One Waiver..................... 26
ARTICLE VIII
SPECIAL PROVISIONS RELATING TO BOND INSURANCE
Section 8.1. Purpose of Article............................................. 26
Section 8.2. Special Provisions............................................. 26
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices........................................................ 27
Section 9.2 Filing......................................................... 29
Section 9.3 Binding Effect................................................. 29
Section 9.4 Severability................................................... 29
Section 9.5 Amendments, Changes and Modifications.......................... 29
Section 9.6 Execution of Counterparts...................................... 29
Section 9.7 Law Governing Construction of Agreement........................ 29
Section 9.8 Payments Due on Non-Business Days.............................. 30
Section 9.9 Limitation of Liability........................................ 30
EXHIBIT A ADDITIONAL COVENANTS OF BORROWER................................A-1
EXHIBIT B LOAN PRINCIPAL..................................................B-1
Form of Loan Note .............................................................1
(3)
<PAGE> 5
LOAN AGREEMENT
This Loan Agreement, dated as of June 1, 1998, is entered into by and
between the FINANCE AUTHORITY OF MAINE, a public body politic and corporate and
a duly created and validly existing agency of the State of Maine, and PENOBSCOT
ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP, a limited partnership organized
and existing under the laws of the State of Maine.
WHEREAS, the Act authorizes the Issuer to issue revenue obligation
securities to assist in financing eligible projects within the State and to
provide credit enhancement by establishing capital reserve funds to secure the
payment of principal and interest on such securities; and
WHEREAS, the Borrower proposes to refinance an eligible project
originally consisting of the acquisition and construction of the Facility (as
defined herein); and
WHEREAS, the Issuer has issued its revenue obligation securities
referred to as Electric Rate Stabilization Revenue Refunding Bonds Series 1998A
(Penobscot Energy Recovery Company, LP) and Electric Rate Stabilization Revenue
Refunding Bonds Series 1998B (Penobscot Energy Recovery Company, LP), which
Bonds are not a debt or liability of the Issuer, the State or any municipality
therein or any political subdivision thereof, or a pledge of the faith and
credit of the State or any political subdivision thereof, but are limited
obligations of the Issuer payable solely out of the Trust Estate; and
WHEREAS, the Issuer has issued a conditional financing commitment to
the Borrower, pursuant to which the Issuer agreed to use the Bond proceeds to
fund the Loan to the Borrower in the original principal amount of $44,995,000 to
refund in whole the $44,800,000 outstanding principal amount of Floating Rate
Demand Resource Recovery Revenue Bonds (Penobscot Energy Recovery Company
Project - Series 1986A) issued by the Town of Orrington, Maine and Floating Rate
Demand Resource Recovery Revenue Bonds (Penobscot Energy Recovery Company
Project - Series 1986B) issued by the Town of Orrington, Maine (the
"Refunding"), which has been approved by the Issuer; and
WHEREAS, the Issuer has issued the Bonds in the amount of $44,995,000
for the purpose of funding the Loan; and
WHEREAS, the Borrower has agreed to accept the Loan of a portion of the
proceeds of the Bonds and to make Additional Payments, as evidenced by the Loan
Note, under the terms and conditions set forth herein; and
WHEREAS, the Borrower acknowledges that the Issuer is providing
financing for the Refunding from the proceeds of the sale of the Bonds in
accordance with the purposes of the Act, that the accomplishment of these
purposes is dependent upon compliance of the Borrower with its covenants
contained in this Agreement, and that the Refunding is in furtherance of a
public purpose.
<PAGE> 6
W I T N E S S E T H:
IN CONSIDERATION of the respective representations and agreements
hereinafter contained, the parties hereto agree as follows (provided that in the
performance of the agreements of the Issuer herein contained, any obligation it
may hereby incur for the payment of money shall not create a pecuniary liability
or a charge against the general credit of the Issuer or the general credit or
taxing powers of the State or any municipality therein or political subdivision
thereof, but shall be payable solely out of the Trust Estate).
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section I.1 Definitions. All words and terms defined in the Indenture
shall have the same meanings in this Loan Agreement, unless otherwise
specifically defined herein. In addition, the following words and terms as used
in this Agreement, including the preambles hereto, shall have the following
meanings unless some other meaning is plainly intended:
"Act" means the Finance Authority of Maine Act: Title 10, Chapter 110,
Maine Revised Statutes, as amended.
"Additional Covenants" shall mean those covenants, warranties,
representations and agreements set forth in Exhibit A hereto.
"Additional Payments" means the amounts required to be paid by the
Borrower, other than Loan Payments, pursuant to the provisions of the Loan Note
and Sections 4.2 and 4.3 hereof.
"Administrative Expenses" shall have the meaning assigned to such term
in the Indenture.
"Agreement" or "Loan Agreement" means this Loan Agreement between the
Issuer and the Borrower, as the same may be amended or supplemented from time to
time.
"Authorized Representative" shall have the meaning assigned to such
term in the Indenture.
"Borrower" means Penobscot Energy Recovery Company, Limited
Partnership, a limited partnership organized and existing under the laws of the
State of Maine, its permitted successors and assigns, and any surviving,
resulting or transferee entity permitted under this Agreement.
2
<PAGE> 7
"Borrower Documents" means, collectively, all documents and agreements
executed and delivered by the Borrower as security for or in connection with the
issuance of the Bonds, including the Loan Note, this Agreement and the Support
Agreements.
"Capital Reserve Premium" means the fee, calculated annually and
payable quarterly by the Borrower to the Issuer, initially in an amount equal to
fifty basis points (.50%) of the outstanding Loan balance as of the date of
calculation as described below, which fee rate may be changed from time to time
by written agreement between the Issuer and the Borrower. The Capital Reserve
Premium shall be calculated as of July 1 of each year for the next four
quarterly payments, based on the Loan balance on such July 1 after giving effect
to any payment of principal made on such July 1, payable in advance in equal
quarterly installments on the immediately succeeding July 15, October 15,
January 15 and April 15; provided, however, that the first calculation period
for such fee shall commence on the Loan funding date and end on June 30, 1999,
calculated on the basis of the Loan then funded, and the first payment
installment of such fee shall be made on the Loan funding date for the period
commencing thereon and ending on October 14, 1998.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all real and personal property, both tangible and
intangible, of the Borrower on which the Authority and the Trustee hold a
mortgage, security interest or pledge pursuant to the Mortgage. The Collateral
does not constitute collateral for the Loan, and the Authority's interest in the
Collateral constitutes a part of Unassigned Issuer's Rights.
"Electric Rate Stabilization Project" means the electric rate
stabilization project constituting the refunding of the outstanding Prior Bonds
which financed part of the cost of acquisition and construction of the Facility.
"Environmental Cleanup Site" shall mean any location which is listed or
proposed for listing on the National Priorities List, on CERCLIS or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding or investigation
related to or arising from any alleged violation of any Environmental Law.
"Event of Default" means any of the events described as an Event of
Default in Section 7.1 hereof.
"Facility" means the 25.3 megawatt (gross) nameplate capacity
waste-to-energy electric generation facility located in Orrington, Maine, owned
and operated by the Borrower, including the site thereof, as more particularly
described in the Mortgage.
3
<PAGE> 8
"Facility Agreements" shall have the meaning assigned to such term by
the Indenture.
"Financing Documents" means the Loan Note and this Loan Agreement.
"Indebtedness" means, as to the Borrower, at a particular time, (a) all
indebtedness for borrowed money of, or guaranteed by, the Borrower, (b) all
indebtedness for borrowed money secured by any lien on any property owned by the
Borrower, even though the Borrower has not assumed or become liable for the
payment thereof, (c) obligations of the Borrower under leases which the Borrower
has or should have, in accordance with generally accepted accounting principles,
capitalized, (d) all obligations owed by the Borrower for all or any portion of
the deferred purchase price of property or services which the Borrower has or
should have, in accordance with generally accepted accounting principles,
capitalized, and (e) all obligations of the Borrower incurred in connection with
any letter of credit or bond insurance policy with respect to which the issuer
thereof has made any payment or disbursement.
"Indenture" means the Trust Indenture of even date herewith between the
Issuer and the Trustee pursuant to which the Bonds will be issued and all of the
Issuer's interest in this Agreement (except Unassigned Issuer's Rights and
except that with respect to Shared Rights, rights of enforcement may be
exercised by the Trustee either jointly or severally with the Issuer and rights
to consent to the modification thereof or to waive compliance therewith may be
exercised by the Trustee jointly with the Issuer but not severally) will be
assigned and pledged as security for the payment of principal of and interest on
the Bonds.
"Issuer" or "Authority" means the Finance Authority of Maine, a body
corporate and politic and a public instrumentality of the State, duly organized
and existing under the laws of the State, and any body, board, authority, agency
or other political subdivision or instrumentality of the State which shall
hereafter succeed to the powers, duties and functions thereof.
"Issuer Documents" means, collectively, those Financing Documents
executed by the Issuer.
"Loan" means the loan by the Issuer to the Borrower of the proceeds of
sale of the Bonds.
"Loan Note" means the promissory note of the Borrower to the Authority
dated the Closing Date, and any amendments, supplements, renewals or allonges
thereto or replacements thereof made in conformity with this Agreement and the
Indenture.
"Loan Payments" means the amounts required to be paid by the Borrower
in repayment of the Loan pursuant to the provisions of the Loan Note and Section
4.2 hereof.
4
<PAGE> 9
"Material Adverse Effect" shall mean a material adverse effect on the
business, operations, condition (financial or otherwise) or prospect of the
Borrower.
"Mortgage" means the Mortgage, Security Agreement and Financing
Statement, of even or contemporaneous date herewith, executed by the Borrower in
favor of the Issuer and the Trustee, and any substitute or replacement therefor
or any mortgage hereafter given to secure the Borrower's obligations to the
Issuer hereunder and to the Trustee.
"Permitted Encumbrances" means, as of any particular time: (i) the
Indenture; (ii) the Mortgage; (iii) this Agreement; and (iv) any other liens
permitted by this Agreement or the Mortgage.
"Person" means and includes any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, or government or any agency or political subdivision thereof.
"Prior Bonds" means the Town of Orrington, Maine, Floating Rate Demand
Resource Recovery Revenue Bonds (Penobscot Energy Recovery Company Project
Series 1986A) and the Town of Orrington, Maine, Floating Rate Demand Resource
Recovery Revenue Bonds (Penobscot Energy Recovery Company Project - Series
1986B).
"Repayment Installment" means any amount that the Borrower is required
to pay directly to the Trustee pursuant to Section 4.2 of this Agreement as a
repayment of the Loan.
"Revenue Fund" means the special fund by that name created and
established by and pursuant to the Indenture.
"Revenues" shall have the meaning assigned to such term in the
Indenture.
"Shared Rights" means all of the rights of the Issuer to enforce and
consent to the modification of or waiver of compliance with the Loan Note, this
Agreement and the Mortgage.
"Support Agreements" shall have the meaning assigned to such term in
the Indenture.
"Trust Estate" shall have the meaning assigned to such term in the
Indenture.
"Unassigned Issuer's Rights" means all of the rights of the Issuer (a)
in, to and under the Mortgage and, pursuant thereto, the Collateral, including
the Facility, and the right to enforce, and consent to the modification of or
waiver of compliance with, the foregoing; (b) to enforce and
5
<PAGE> 10
consent to the modification of or waiver of compliance with, the conditions and
covenants of the Borrower referred to in Sections 6.7 and 6.12 hereof; (c) to
receive Additional Payments due and owing to the Issuer under the Loan Note and
Section 4.3 hereof; (e) under Sections 6.5 and 6.8 hereof; (f) to give or
withhold consent under Section 6.3 hereof; (g) to give or withhold consent to
amendments, changes, modifications, alterations and termination of this
Agreement under Section 9.5 hereof and in the definition of Capital Reserve
Premium contained in Section 1.1 hereof; and (f) to receive notices hereunder,
and in each such case any corresponding rights under the Loan Note. Unassigned
Issuer's Rights does not include any rights of the Trustee under the foregoing
Sections and provisions, including but not limited to its right to receive
Additional Payments under the Loan Note and Section 4.3(b) hereof, and under the
Mortgage.
Section I.2 Rules of Construction.
(a) Words of the masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders. Unless the context
shall otherwise indicate, the words "Bond," "Bondholder," "owner" and "person"
shall include the plural as well as the singular number.
(b) The Table of Contents, captions, and headings in this Agreement are
for convenience only and in no way limit the scope or intent of any provision or
section of this Agreement.
(c) All references herein to particular articles or sections are
references to articles or sections of this Loan Agreement unless some other
reference is indicated.
(d) All references herein to the Act or any particular provision or
section thereof shall be deemed to refer to any successor, or successor
provision or section, thereof, as the case may be.
(e) Nothing contained in this Agreement or any of the Financing
Documents or otherwise shall be construed to cause the Borrower to become the
agent for the Issuer or the Trustee for any purpose whatsoever, nor shall the
Issuer or the Trustee be regarded as an agent for the Borrower unless
specifically so provided, or be responsible for any shortage, discrepancy,
damage, loss or destruction of any part of the Facility wherever located or for
whatever cause.
(f) All approvals, consents and acceptances required to be given or
made by any person or party hereunder shall be at the sole discretion of the
party whose approval, consent or acceptance is required, except as otherwise
provided herein.
(g) This Agreement shall be governed by and construed in accordance
with the applicable laws of the State.
6
<PAGE> 11
(h) If any portion of any provision of this Agreement shall be ruled
invalid by any court of competent jurisdiction, the invalidity or such portion
shall not affect the remainder of such provision or any of the remaining
provisions hereof.
(i) Any reference to any Person shall be deemed to include the heirs,
personal representatives, successors and assigns (of the Borrower, only to the
extent permitted hereunder, or otherwise permitted in writing by the Issuer) of
such Person, unless the context clearly indicates otherwise.
(j) Any reference to a period of days shall be deemed to mean a period
of calendar days, unless Business Days are specified.
(k) Any references herein or in the Financing Documents to any of the
Financing Documents, the Indenture or the Bonds shall be deemed to include any
amendments, modifications, supplements, replacements, substitutions, allonges,
appendices, attachments, exhibits and schedules thereto or therefor, now
existing or hereafter created.
ARTICLE II
REPRESENTATIONS AND UNDERTAKINGS
Section II.1 Representations by the Issuer. The Issuer makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Issuer is a public body politic and corporate and a duly
created and validly existing agency of the State and is authorized and empowered
by the provisions of the Act to enter into the transactions contemplated by the
Issuer Documents and the Bonds. The Electric Rate Stabilization Project
constitutes and will constitute an "eligible project" within the meaning of the
Act. By proper action by the Issuer, the Issuer has been duly authorized to
execute and deliver this Agreement and the Indenture, to issue and deliver the
Bonds and to use the proceeds thereof to provide funds for the Electric Rate
Stabilization Project.
(b) The Issuer has taken all action and has complied with all
provisions of law, including without limitation the Act, with respect to the
execution, delivery and performance of the Issuer Documents and the Bonds and
the due authorization of the consummation of the transactions contemplated
hereby and thereby, and the taking of any and all actions as may be required on
the part of the Issuer to carry out, give effect to and consummate such
transaction; and the Issuer Documents and the Bonds have been duly executed and
delivered by, and constitute the legal, valid,
7
<PAGE> 12
and binding agreements or obligations of, the Issuer, enforceable in accordance
with their respective terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights or the enforcement thereof and by general principles of equity.
(c) The execution and delivery of the Issuer Documents and the Bonds,
the consummation of the transactions contemplated hereby and thereby, and the
fulfillment of or compliance with the terms hereof and thereof do not and will
not conflict with or constitute on the part of the Issuer a violation of, breach
of, or default under any constitutional provision or statute or any agreement or
instrument to which the Issuer is a party or by which the Issuer is bound, or
any order, rule, regulation or ordinance of any court or governmental agency or
body having jurisdiction over the Issuer or any of its activities or property;
and all consents, approvals, authorizations and orders of governmental or
regulatory authorities, if any, which are required for the consummation of the
transactions contemplated in the Financing Documents and the Bonds have been
obtained.
(d) There is no action, suit, proceeding or investigation at law or in
equity before or by any court, public board or body pending or threatened
against or affecting the Issuer, or to the best knowledge of the Issuer, any
basis therefor, wherein an unfavorable decision, ruling or finding would
adversely affect the transactions contemplated hereby or by the Indenture, or
which, in any way, would adversely affect the validity of the Series 1998 Bonds,
the Indenture or the Financing Documents, or any agreement, or instrument to
which the Issuer is a party and which is used or contemplated for use in
consummation of the transactions contemplated hereby and by the Indenture.
Section II.2 Representatons by the Borrrower. The Borrower makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Borrower is a limited partnership duly organized and validly
existing under the laws of the State, is in good standing under the laws of the
State and has the power to enter into and perform the transactions contemplated
by the Borrower Documents.
(b) By proper partnership action, the Borrower has duly authorized the
execution and delivery of the Borrower Documents and the consummation of the
transactions contemplated hereby and thereby, and the taking of any and all
actions as may be required on the part of the Borrower to carry out, give effect
to and consummate such transactions; and the Borrower Documents have been duly
executed and delivered by, and constitute legal, valid, and binding agreements
of, the Borrower, enforceable in accordance with their respective terms, except
as enforcement may be limited by applicable bankruptcy, insolvency, moratorium
or other similar laws affecting creditors' rights or the enforcement thereof and
by general principles of equity.
8
<PAGE> 13
(c) The Borrower has, and hereafter will have, good and marketable fee
simple title to the Facility, subject only to Permitted Encumbrances.
(d) The execution and delivery of the Borrower Documents, the
consummation of the transactions contemplated hereby and thereby, and the
fulfillment of or compliance with the terms and conditions of the Borrower
Documents do not (i) conflict with or result in a breach of any of the terms,
conditions, or provisions of its partnership agreement or any agreement or
instrument to which the Borrower is now a party or by which it is bound, (ii)
constitute a default under any of the foregoing, (iii) except as contemplated
hereby or thereby, result in the creation or imposition of any lien, charge, or
encumbrance of any nature whatsoever upon any of the property or assets of the
Borrower under the terms of any instrument or agreement to which the Borrower is
now a party or by which it is bound, or (iv) violate any provision of law or any
regulation applicable to the Borrower or any applicable writ or decree of any
court or governmental authority having jurisdiction over the Borrower or any of
its activities or property.
(e) There is no action or proceeding pending or, to the knowledge of
the Borrower, threatened against the Borrower before any court, administrative
agency or arbitration board that may adversely affect the ability of the
Borrower to perform its obligations under the Financing Documents or the
Facility Agreements and all authorizations, consents and approvals of
governmental bodies or agencies required in connection with the execution and
delivery of the Financing Documents and the Facility Agreements and in
connection with the performance of the Borrower's obligations hereunder or
thereunder have been obtained.
(f) The Borrower consents to the references to it in the Preliminary
Official Statement dated June 9, 1998 and the Official Statement dated June 16,
1998 relating to the Bonds. With respect to the Borrower and the Facility, the
Preliminary Official Statement did not as of its date, and the Official
Statement did not as of its date and will not as of the date of delivery of the
Bonds to the initial purchasers thereof, contain (or incorporate by reference)
an untrue statement of a material fact or omit to state (or incorporate by
reference) a material fact necessary to make the statements therein (or
incorporated by reference), in light of the circumstances under which they were
made, not misleading.
(g) The Borrower is in compliance with all applicable Environmental
Laws except for matters which, individually or in the aggregate, could not have
a Material Adverse Effect.
(h) The Borrower has all Environmental Approvals necessary or desirable
for the ownership and operation of its properties, facilities, and businesses as
presently owned and operated except for matters which, individually or in the
aggregate, could not have a Material Adverse Effect.
(i) There is no Environmental Claim pending or, to the knowledge of the
Borrower after due inquiry, threatened, and there are no past or present acts,
omissions, events or
9
<PAGE> 14
circumstances that could form the basis of any Environmental Claim against the
Borrower except for matters which, individually or in the aggregate, could not
have a Material Adverse Effect.
(j) No facility or property now or previously owned, operated or leased
by the Borrower is an Environmental Cleanup Site.
ARTICLE III
ELECTRIC RATE STABILIZATION PROJECT; ISSUANCE OF BONDS;
AUTHORIZED REPRESENTATIVES
Section III.1 Agreement to Complete Electric Rate Stabilization
Project. The Borrower agrees that it will exercise due diligence to complete, or
cause to be completed, the Electric Rate Stabilization Project as promptly as
practicable after receipt by the Trustee of proceeds from the sale of the Bonds.
Section III.2 Agreement to Issue Bonds; Application of Bond Proceeds.
In order to provide the Borrower moneys necessary to effect the Electric Rate
Stabilization Project, the Issuer agrees that it will sell and cause the Bonds
to be delivered to the purchasers thereof in the aggregate principal amount of
$44,995,000 and will thereupon (i) deposit in the Debt Service Fund the premium,
if any, received on the sale of the Bonds, together with accrued interest on the
Bonds from June 15, 1998 to the date of delivery of the Bonds, and (ii) transfer
the balance of the proceeds received from said sale to the Prior Trustee (as
defined in the Indenture).
Section III.3 Borrower Required to Fund Insufficiency.. In the event
the Bond proceeds available for the costs of refunding the outstanding Prior
Bonds shall not be sufficient to pay such costs in full, the Borrower agrees to
pay, or cause to be paid, all that portion of the costs of refunding the
outstanding Prior Bonds as may be in excess of such Bond proceeds available
therefor. The Issuer does not make any warranty, either express or implied, that
such Bond proceeds will be sufficient to pay all the costs which have been or
will be incurred in connection with the refunding of the outstanding Prior
Bonds. The obligation of the Borrower to refund the outstanding Prior Bonds
shall survive any termination of this Agreement.
Section III.4 Authorized Representatives of the Borrower. The Borrower
shall designate, in the manner prescribed in Section 1.1 hereof, Authorized
Representatives. In the event that any person so designated and his alternate or
alternates, if any, should become unavailable or unable to take any action or
make any certificate provided for or required in this Agreement, successors
shall be appointed in the same manner.
10
<PAGE> 15
ARTICLE IV
EFFECTIVE DATE AND DURATION OF THIS AGREEMENT; REPAYMENT
PROVISIONS; AND UNCONDITIONAL OBLIGATION OF THE BORROWER
Section IV.1 Effective Date and Duration of this Agreement. This
Agreement and the covenants of the Borrower hereunder shall become effective
upon its delivery, and shall continue in full force and effect until the
principal of and interest on the Bonds, together with all Administrative
Expenses and all other sums to which the Issuer or the Trustee are entitled
hereunder or under the Indenture, shall have been fully paid (or provision for
such payment has been made in accordance with the provisions of the Indenture);
provided, however, that the Borrower's obligations under Section 4.3 (but only
to the extent such obligations have vested prior to termination), Section 6.7
and Section 6.14 hereof shall survive termination of this Agreement.
Section IV.2 Loan Clauses; Loan Note
(a) Subject to the conditions and in accordance with the terms and
provisions of this Agreement, the Issuer agrees to lend to the Borrower the
proceeds received from the sale of the Bonds (excluding any accrued interest
paid upon the original delivery thereof) in accordance with the Indenture and
with this Agreement.
(b) To evidence, secure and provide for the repayment of the Loan, and
to evidence, secure and provide for the payment of Additional Payments, the
Borrower hereby and concurrently herewith delivers to the Issuer its Loan Note
of like aggregate principal amount, maturity dates and interest rates as the
Bonds and providing for Loan Payments and Additional Payments thereunder. The
Borrower agrees to repay the Loan and pay the Additional Payments in accordance
with the terms of the Loan Note, this Agreement and all other Financing
Documents. The originally scheduled Loan principal payments are shown on Exhibit
B hereto.
(c) The Borrower acknowledges receipt of a copy of the Indenture. The
Borrower agrees to pay, or cause to be paid, as a Repayment Installment on the
Loan, an amount which, when added to other moneys available therefor in the Debt
Service Fund, will be sufficient to pay the principal of, premium, if any, and
interest on the Bonds due and payable on each Interest Payment Date and
Principal Payment Date, whether at maturity, upon mandatory sinking fund
redemption, upon optional or mandatory redemption prior to maturity, upon
declaration accelerating the maturity in accordance with the Indenture, or
otherwise. With respect to all payments due under this Agreement and the Loan
Note, time is of the essence. All payments on the Loan Note must be paid in
immediately available funds as and when due, to the Trustee for the account of
the Issuer, at the
11
<PAGE> 16
designated corporate trust office of the Trustee or at such other place in the
United States as the Trustee may direct in writing, by wire transfer, in the
amounts and at the times required by the Indenture with respect to the Bonds.
(d) Upon the occurrence of any Event of Default under the Indenture
because of which the principal of and accrued interest on the Bonds have been
accelerated under Section 7.02 thereof, written notice of which acceleration has
been given by the Trustee to the Issuer, the Issuer, or the Trustee on the
Issuer's behalf, may declare the principal amounts payable under this Section
for the remainder of the term of the Loan Agreement, and under the Loan Note,
and the interest accrued and unpaid thereon, to be immediately due and payable,
whereupon the same shall become immediately due and payable. In such event, the
Issuer and the Trustee shall have access to and may inspect, examine and make
copies of the Borrower's books and records and any and all of the Borrower's
accounts, data, and income and other tax returns, and may take whatever action
at law or in equity may appear necessary or desirable to collect such amounts
then due and thereafter to become due, or to enforce performance and observance
of any obligation, agreement or covenant of the Borrower under this Agreement
and the Loan Note.
(e) Upon payment in full of the Bonds (or provision for payment thereof
sufficient to cause all of the Outstanding Bonds to be deemed to have been paid
within the meaning of Section 9.02 of the Indenture) and all Administrative
Expenses and other fees, reimbursement payments and charges of the Trustee and
the Issuer provided herein, this Agreement shall terminate, provided, however,
that the Borrower's obligations under Sections 4.3 (but only to the extent such
obligations have vested prior to termination), 6.7 and 6.14 hereof shall survive
termination of this Agreement.
Section IV.3 Additional Amounts Payable
(a) The Borrower hereby further expressly agrees to pay to the Issuer
or the Trustee, as applicable, as and when the same shall become due, (i) the
fees, including without limitation the Capital Reserve Premium, and reasonable
expenses of the Issuer as provided in the Financing Documents, (ii) the
reasonable fees, charges and expenses of the Issuer and the Trustee in
connection with or arising out of or relating to the issuance and servicing of
the Bonds, the making, servicing, administration or collection of the Loan or
exercise of any rights or responsibilities under the Financing Documents, the
Indenture or the Bonds, including reasonable charges of counsel, (iii) the
reasonable fees and charges of the Trustee, any Co-Trustee, any Authenticating
Agent, any Paying Agent and the Registrar for services, including reasonable
charges of counsel, rendered by it directly or indirectly in connection with the
Loan or the Bonds, (iv) any amounts that may be required to be paid by the
Issuer or the Borrower pursuant to Article XIII of the Indenture, (v) any
amounts that may be required to be paid by the Borrower pursuant to Section 6.14
of this Agreement, and (vi) the fees and charges of the Rating Services.
12
<PAGE> 17
(b) The Borrower also agrees to pay all amounts payable by it under the
Financing Documents and the Mortgage, including without limitation Section 6.7
hereof, at the time, in the manner and to the party therein provided, without
delay, reduction or offset of any kind or for any reason.
(c) In the event the Borrower shall fail to make, or cause to be made,
any of the payments required hereby, the unpaid item or installment shall
continue as an obligation of the Borrower until such amount shall have been
fully paid, and the Borrower agrees to pay, or cause to be paid, the same with
interest thereon from the date of failure or, in the case of payments required
by Sections 4.3(a)(ii), (iii) and (iv) hereof, the date 30 days after the date
on which the Borrower is notified thereof, at the interest rate borne by the
Bonds until fully paid, except as may otherwise be provided by Article XIII of
the Indenture.
(d) The Additional Payments provided for herein and in the Loan Note
shall be made in immediately available funds as and when due directly to or for
the account of the entitled party. In the event a party entitled to payment
directs in writing that such payment be made to another party in the United
States, the Borrower shall make payments to such designee.
Section IV.4 Optional Prepayments. (a) At any time on or after July 1,
2008, the Borrower shall have, and is granted, the option to prepay all or any
portion of the amount payable under Section 4.2 hereof with respect to the
Bonds, by taking or causing the Issuer to take the actions required to redeem in
whole or in part the principal amount of the Bonds to be redeemed and to pay the
interest accrued thereon to the date of redemption pursuant to Section 2.04(a),
(b) or (c) of the Indenture.
(b) There is expressly reserved to the Borrower the right, and the
Borrower is authorized and permitted as provided in the Indenture, to prepay by
direct payment of Bonds or delivery of Bonds for cancellation all or any part of
the amounts payable under Section 4.2 hereof with respect to the Bonds, and the
Issuer agrees that the Trustee may accept such prepayments when the same are
tendered by the Borrower. All amounts so prepaid or Bonds delivered for
cancellation shall be credited to sinking fund installments, or the Borrower may
direct the Trustee to apply such payments to the redemption of Bonds, in
accordance with Section 2.04(a), (b) or (c) of the Indenture.
Section IV.5 Prepayment; Extraordinary and Special Optional Redemption.
There is expressly reserved to the Borrower the right to prepay all or a portion
of the amounts payable under Section 4.2 hereof with respect to Bonds to effect
a redemption of Bonds pursuant to Section 2.04(d) or (e)(1) or (2) of the
Indenture, which right shall be exercised by the Borrower (except with respect
to clause (v) of Section 2.04(e)(1), which shall be exercised by the Issuer) or
in the event any of the requirements specified in Section 6.3 hereof shall not
have been satisfied.
13
<PAGE> 18
Seciton IV.6 Notice of Prepayment. To exercise any prepayment option of
the Borrower pursuant to Section 4.4 or 4.5 of this Agreement, an Authorized
Representative of the Borrower shall give the Issuer and the Trustee a notice
designating the principal amount of the Bonds to be redeemed, and specifying the
date of redemption, which shall not be less than forty-five (45) days (unless
the Trustee accepts a shorter period of not less than 30 days) following the
date such notice is given.
The Borrower shall furnish any moneys (or amounts shall be available
for redemption under the Indenture) required by the Indenture to be deposited
with the Trustee or otherwise paid by the Issuer or Borrower in connection with
any prepayment pursuant to Section 4.4 or 4.5 hereof.
14
<PAGE> 19
ARTICLE V
SECURITY FOR PAYMENT
Section V.1 Obligations of the Borrower Hereunder Unconditional.
The obligations of the Borrower to make, or cause to be made, the
payments required herein and under the Loan Note and to perform and observe the
other agreements on its part contained herein and in the Financing Documents
shall be absolute and unconditional, irrespective of any defense or any rights
of set-off, recoupment, or counterclaim it might have against the Issuer or the
Trustee. The Borrower shall pay, or cause to be paid, all payments required
hereunder and under the Loan Note, free of any deductions and without
postponement, abatement, set-off or diminution; and until such time as the
principal of and interest on the Bonds and all other amounts due hereunder shall
have been fully paid, or provision for the payment thereof shall have been made
in accordance with the Indenture, the Borrower:
(i) shall not suspend or discontinue, or cause to be suspended
or discontinued, any such payments required hereby or under
the Financing Documents;
(ii) shall perform and observe all of its other agreements
contained in this Agreement and the Mortgage; and
(iii) shall not terminate this Agreement (other than as
provided herein)
for any cause, including, without limiting the generality of the foregoing, the
occurrence of any acts or circumstances that may constitute failure of
consideration; commercial frustration of purpose; any change in the tax or other
laws of the United States of America or of the State or any political
subdivision of either thereof; any failure of the Issuer to perform and observe
any agreement, whether express or implied, or any duty, liability, or obligation
arising out of or connected with this Agreement, the Financing Documents or
Indenture; or failure of the Facility to comply with any statute, rule, or
regulation now or hereafter made applicable thereto. Except to the extent
provided in this Section 5.1, nothing contained in this Section 5.1 shall be
construed to prevent or restrict the Borrower from asserting any rights it may
have against the Issuer, the Trustee or any other Person under the Financing
Documents or the Indenture or under any provisions of law.
Sction V.2 Assignment of Rights Under Facility Agreements. The Borrower
hereby assigns, transfers, conveys, grants a security interest in and sets over
unto the Issuer and the Trustee to secure the Borrower's obligations under this
Agreement, all of Borrower's estate, right, title and interest in, to and under
each Facility Agreement including, without limitation, the following:
15
<PAGE> 20
(i) all amounts payable to the Borrower under the Facility
Agreements;
(ii) all claims, rights, privileges and remedies on the part
of Borrower, whether arising under the Facility Agreements or by
statute or at law or in equity or otherwise, arising out of or in
connection with any failure by any party to any Facility Agreement
to make any payment under the Facility Agreements assigned
hereunder;
(iii) all amounts payable to the Borrower by any party to any
Facility Agreement as a result of the exercise of any such claim,
right, privilege or remedy; and
(iv) all rights of the Borrower to exercise (subject to the
provisions of Section 5.5 hereof relating to the giving of notice to
the Borrower) any election or option or to give or receive any
notice, consent, waiver or approval under or in respect of the
Facility Agreements, and the right (but not the obligation) to do
any and all other things the Borrower is entitled to do thereunder;
together with full power of authority, in the name of the Borrower or otherwise,
to enforce, collect, receive and receipt for any and all of the foregoing;
provided, however, that until the occurrence of an Event of Default hereunder,
the Borrower may exercise all its rights under the Facility Agreements except
(a) the right to receive any moneys due or to become due thereunder and (b) any
right thereunder that is inconsistent with the rights of the Trustee under any
provision of this Agreement or in violation of any of the Borrower's
representations, warranties, agreements or covenants set forth in this
Agreement.
Section V.3 Collateral Assignment. The assignment evidenced by Section
5.2 of this Agreement is intended to be a collateral assignment of all the
Borrower's interest in and to the Facility Agreements. So long as no Event of
Default shall have occurred and be continuing, the Issuer and the Trustee shall
not exercise any rights under Section 5.2 hereof other than as provided in said
Section 5.2.
Section V.4 Payment of Assigned Sums. The Borrower hereby presently,
unconditionally and irrevocably directs each other party to a Facility Agreement
to pay all moneys assigned pursuant to Section 5.2 to the Trustee for collection
and deposit into the Revenue Fund (as defined in the Indenture) unless otherwise
directed by the Issuer or the Trustee in writing in accordance with the
provisions of this Agreement.
Section V.5 Exercise of Rights by Borrower. Except as provided in the
proviso to Section 5.2 or in Section 5.6 hereof, the Issuer or the Trustee may
exercise any election or option or give any notice, consent, waiver or approval
under, or deliver any requisition for payment under, or
16
<PAGE> 21
take any other action in respect of, any of the Facility Agreements without any
approval of or action by the Borrower, but the Borrower shall nevertheless
execute and deliver any instrument requested by the Issuer or the Trustee to be
executed and delivered by the Borrower in connection with the exercise by the
Issuer or the Trustee of any such election or option or the giving by the Issuer
of any such notice, consent, waiver or approval or the taking by the Issuer or
Trustee of any such other action. So long as no Event of Default shall have
occurred and be continuing, the Issuer and the Trustee shall not exercise any
rights under this Section.
Section V.6 No Release or Assumption. Notwithstanding any contrary
provision herein or in any Facility Agreement, (i) the Borrower shall at all
times remain fully liable under the Facility Agreements to perform all the
Borrower's duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) neither this Agreement nor any action or
inaction on the part of the Borrower, the Issuer or the Trustee shall release
the Borrower from any of its obligations under the Facility Agreements or
constitute an assumption of any such obligations by the Issuer or the Trustee,
(iii) neither the Issuer nor the Trustee shall have any obligation or liability
under the Facility Agreements or otherwise arising out of this Agreement, nor
shall the Issuer or the Trustee be obligated in any manner to perform any
obligation of the Borrower under or pursuant to the Facility Agreements and (iv)
no default or breach by or action or failure to act by the Borrower with respect
to the Facility Agreements shall adversely affect or limit the rights and
interests of the Issuer under this Agreement or, through this Agreement, under
the Facility Agreements.
Section V.7 Security Clauses
(a) The Issuer hereby notifies the Borrower and the Borrower
acknowledges that, among other things, Borrower's Loan Payments evidenced hereby
and by the Loan Note and all of the Issuer's right, title and interest under
this Agreement and the Loan Note (except Shared Rights, which with respect to
rights of enforcement may be exercised by the Issuer and the Trustee jointly or
severally, and with respect to rights of consent to the modification of or
waiver of compliance may be exercised by the Issuer and the Trustee jointly but
not severally, and Unassigned Issuer's Rights) are being concurrently with the
execution and delivery hereof assigned without recourse to the Trustee as
security for the Bonds as provided in the Indenture.
(b) The Borrower acknowledges that each of the Trustee and the Issuer
may (except with respect to Shared Rights, except that with respect thereto
rights of enforcement may be exercised by the Trustee either jointly or
severally with the Issuer, and rights to consent to the modification thereof or
to waive compliance therewith may be exercised by the Trustee jointly with the
Issuer but not severally, and Unassigned Issuer's Rights), exercise any and all
of their respective rights against the Borrower pursuant to or in connection
with this Agreement and the Loan Note, and the Borrower shall not question the
authority of any such party to exercise such rights.
17
<PAGE> 22
Section V.8 Pledge of Trust Estate. It is understood and agreed that
the Trust Estate shall be pledged and assigned to the Trustee for the benefit of
the Bondholders. The Borrower assents to such pledge and assignment and agrees
to execute and deliver to the Trustee any necessary financing statements under
the Uniform Commercial Code as in effect in the State of Maine.
Section V.9 Receipt by Trustee of Payments Under Facility Agreements
and Other Contracts; Enforcement and Amendment of Facility Agreements. The
Borrower shall direct each party to the Facility Agreements to transfer directly
to the Trustee and the Trustee shall receive and forthwith deposit in the
Revenue Fund all amounts payable to the Borrower pursuant to the Facility
Agreements. The Borrower shall immediately deliver any amounts delivered to it
by any party to any Facility Agreement to the Trustee. The Borrower shall
enforce or cause to be enforced the provisions of the Facility Agreements and
duly perform its covenants and agreements thereunder. A copy of each of the
Facility Agreements certified by an Authorized Representative of the Borrower
shall be filed with the Issuer and the Trustee, and a copy of any such
amendment, consent, waiver or other instrument certified by an Authorized
Representative of the Borrower shall be filed with the Issuer and the Trustee.
ARTICLE VI
SPECIAL COVENANTS
Section VI.1 No Warranty of Condition or Suitability by the Issuer. The
Issuer makes no warranty, either express or implied, as to the Electric Rate
Stabilization Project, or that the Electric Rate Stabilization Project is or
will be suitable for the Borrower's purposes or needs.
Section VI.2 No Warranty of Condition or Suitability by the Issuer. The
Borrower agrees that it will not operate or cause to be operated the Facility
contrary to, and will maintain or cause to be maintained the Facility at all
times hereafter, in all material respects, in accordance with, all applicable
provisions of the Facility Agreements, will maintain or cause to be maintained
all necessary licenses and permits for the operation of the Facility, and at its
own expense and shall defray all costs in connection therewith (including from
time to time all necessary repairs, renewals and replacements) so that the
Facility and all other facilities necessary or incidental thereto shall be kept
in good repair and in good operating condition.
Section VI.3 Damage; Repair of Damage; Condemnation. (a) In the event
of the occurrence of any damage or loss to the Facility, there shall be no
abatement or reduction in the payments required by Section 4.2 or 4.3 hereof to
be made by the Borrower. Any Insurance
18
<PAGE> 23
Proceeds payable by reason of such damage or loss shall be paid as set forth in
the Indenture and applied in the manner set forth herein and in the Mortgage.
(b) In the event that title to or the temporary use of the Facility, or
any part thereof, shall be taken in condemnation or by the exercise of the power
of eminent domain by any governmental body or by any person, firm or corporation
acting under governmental authority, there shall be no abatement or reduction in
the payments required under Section 4.2 or 4.3 hereof to be made by the
Borrower. Any condemnation proceeds payable by reason of such loss shall be paid
as set forth in the Indenture and applied in the manner set forth in the
Mortgage.
(c) If, pursuant to the provisions of the Mortgage, there shall be an
election to restore the Facility, the Borrower shall forthwith proceed with such
restoring and upon the completion thereof shall notify the Issuer and the
Trustee of such completion. Notwithstanding the foregoing, the Borrower shall
have no obligation to undertake any such restoration if it delivers to the
Trustee a certificate signed by an Authorized Representative to the effect that
the taking will not affect the ability of the Facility to generate Revenues
sufficient to pay principal of and premium, if any, and interest on the
Outstanding Bonds when due and all other indebtedness for money borrowed by the
Borrower and other Administrative Expenses and to pay costs of operating and
maintaining the Facility as and when due.
Section VI.4 [Reserved]
Section VI.5 Issuer's Right of Inspection and Access. The Issuer and
the Trustee and their duly authorized agents shall be permitted, at all
reasonable times and upon reasonable notice, to examine the books and records of
the Borrower with respect to the Facility or the Electric Rate Stabilization
Project, the Loan Note, the Borrower's business generally, and any records
maintained by the Issuer pertaining to the Borrower, the Facility or the
Electric Rate Stabilization Project, and the Borrower shall furnish the Issuer
and the Trustee with such information, statements and certificates as may
reasonably be required from time to time.
Section VI.6 Conduct of Business. The Borrower covenants and agrees
that so long as any Bonds are Outstanding it will remain qualified to do
business in all jurisdictions necessary in the operation of its business and
will not otherwise dispose of all or substantially all of its assets.
The Borrower further covenants that it will remain subject to service
of process in the State of Maine so long as any Bonds are Outstanding.
Section VI.7 Indemnification Covenants.
19
<PAGE> 24
(a) The Borrower agrees to protect, defend and hold harmless the
Trustee and the Issuer and their respective directors, agents, officers, members
and employees (each an "Indemnified Party") from and against any claim, demand,
suit, action, liability, loss, damage, fine, penalty or expense (including
out-of-pocket and incidental expenses and legal fees) or other proceeding
whatsoever by any Person, including any violation or breach of any Environmental
Law by the Borrower, or any Environmental Claim arising out of the management,
use, control, ownership or operation of the Facility (collectively, "Losses")
imposed on, incurred by or asserted against the Borrower, arising or purportedly
arising from or in connection with the Financing Documents, the Indenture, the
Bonds, or the transactions contemplated by or actions taken under any thereof,
or, with respect to the Trustee, for following any instructions or other
directions upon which the Trustee is authorized to rely pursuant to the terms of
the Indenture, the Bonds or the financing Documents, except for any bad faith,
willful misconduct, material misrepresentation or gross negligence on the part
of the Indemnified Party. The Borrower agrees to indemnify and hold the Trustee
and its directors, officers, agents and employees (collectively, the
"Indemnitees") harmless from and against any and all claims, liabilities,
losses, damages, fines, penalties, and expenses, including out-of-pocket and
incidental expenses and legal fees ("Losses") that may be imposed on, incurred
by, or asserted against, the Indemnitees or any of them for following any
instructions or other directions upon which the Trustee is authorized to rely
pursuant to the terms of the Indenture, the Bonds or the Financing Documents.
(b) The Borrower releases each Indemnified Party from, agrees that each
Indemnified Party shall not be liable for, and agrees to hold each Indemnified
Party harmless against any damages or reasonable expenses, including (subject to
subparagraph (d) of this Section) reasonable charges of counsel, incurred
because of any investigation, review or lawsuit commenced by any Person other
than the Borrower with respect to the Financing Documents, the Indenture, the
Bonds or the Facility, except for any bad faith, willful misconduct, material
misrepresentation or gross negligence on the part of the Indemnified Party.
(c) All covenants, stipulations, promises, agreements and obligations
of the Issuer contained herein shall be deemed to be the covenants,
stipulations, promises, agreements and obligations of the Issuer and not of any
member, officer or employee of the Issuer in his or her individual capacity, and
no recourse shall be had for the payment of the Loan or the Bonds or for any
claim based thereon or hereunder against any member, officer or employee of the
Issuer or the Trustee or any natural person executing the Bonds.
(d) In case any action shall be brought against one or more of the
Indemnified Parties based upon any of the above and in respect of which
indemnity may be sought against the Borrower, such Indemnified Party shall
notify the Borrower in writing, enclosing a copy of all papers served, but the
omission so to notify the Borrower of any such action shall not relieve it of
any liability which it may have to any Indemnified Party other than under this
Section 5.5. In case
20
<PAGE> 25
any such action shall be brought against any Indemnified Party and it shall
notify the Borrower of the commencement thereof, the Borrower shall be entitled
to participate in and, to the extent that it shall wish, to assume the defense
thereof with counsel reasonably satisfactory to such Indemnified Party, and
after notice from the Borrower to such Indemnified Party of the Borrower's
election so to assume the defense thereof the Borrower shall not be liable to
such Indemnified Party for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such Indemnified Party in
connection with the defense thereof. The Indemnified Party shall have the right
to employ its own counsel in any such action, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (i) the
employment of counsel by such Indemnified Party has been authorized by the
Borrower, (ii) the Indemnified Party shall have reasonably concluded that there
is a conflict of interest between the Borrower and the Indemnified Party in the
defense of such action (in which case the Borrower shall not have the right to
direct the defense of such action on behalf of the Indemnified Party), or (iii)
the Borrower shall not in fact have employed counsel reasonably satisfactory to
the Indemnified Party to assume the defense of such action.
(e) In the event the Borrower fails to pay any amount or perform any
act under the Financing Documents, the Trustee or the Issuer may, but shall have
no obligation to, pay the amount or perform the act, in which event the
reasonable costs, disbursements, expenses and charges of counsel thereof,
together with interest thereon from the date the expense is paid or incurred at
the highest prime rate from time to time as published in The Wall Street
Journal, plus two per centum (2%), shall be an additional obligation hereunder
payable on demand.
(f) The obligations of the Borrower under this section shall survive
the termination of this Agreement. This section is not for the benefit of any
person not an Indemnified Party, and no waiver of the Maine Tort Claims Act or
other applicable law is intended.
Section VI.8 Assignment, Leasing and Selling.
(a) Unless the Capital Reserve Fund has been drawn upon, and the time
has expired for the restoration thereof, and the Capital Reserve Fund has not
been fully restored pursuant to Section 5.09 of the Indenture, without the prior
written consent of the Issuer, the Borrower may not assign its rights, interests
or obligations hereunder or under the Loan Note or sell the whole or any part of
the Facility or lease the whole or any part of the Facility necessary for the
operation of the Facility at its designed capacity.
(b) Without the prior written consent of the Issuer, the Borrower may
not assign or transfer this Agreement or any of its right, title or interest in
any of the Facility Agreements or any Financing Agreements.
21
<PAGE> 26
Section VI.9 Environmental Covenants. (a) The Borrower covenants that
(1) except in compliance with applicable environmental laws, it has not
discharged, dumped, installed, stored, used, treated, transported, disposed or
maintained, and shall neither discharge, dump, install, store, use, treat,
transport, dispose or maintain toxic, hazardous, or radioactive substances,
materials or wastes, including, without limitation, all of the following: (a)
asbestos in any form; (b) urea formaldehyde foam insulation; (c) transformers or
other equipment which contain dielectric fluid containing any level of
polychlorinated biphenyls or (d) any other chemical, material or substance which
is prohibited, limited, or regulated by any federal, state, county, regional,
local, or other governmental authority or which, if not so regulated, to the
knowledge of the Borrower poses a substantial hazard to health and safety (all
of which are referred to collectively herein as "Hazardous Substances"), and (2)
the Borrower is not the subject of any existing, pending or threatened
investigation or inquiry by, or of any remedial order or obligation issued by or
at the behest of, any governmental authority under any law, rule or regulation
pertaining to health or the environment except as described in the engineering
report required by paragraph 13 of the Loan Commitment from the Issuer to the
Borrower with respect to the Loan.
(b) The Borrower will comply with all applicable Environmental Laws.
(c) Promptly upon becoming aware of any Environmental Claim pending or
threatened against the Borrower, or any past or present acts, omissions, events
or circumstances that could form the basis of such Environmental Claim, which if
adversely resolved, individually or in the aggregate, could have a Material
Adverse Effect, the Borrower shall give the Trustee notice thereof, together
with a written statement of an Authorized Representative of the Borrower setting
forth the details thereof and any action with respect thereto taken or proposed
to be taken by the Borrower.
Section VI.10 Default and Litigation Notification. The Borrower shall
deliver to the Issuer and the Trustee, within one hundred five (105) days after
the close of each fiscal year of Borrower, a certificate signed by an Authorized
Representative to the effect that the Borrower is in compliance with the
provisions of the Financing Documents or specifying the nature of the
noncompliance and the steps the Borrower is taking to correct any noncompliance.
Upon becoming aware of any condition or event which constitutes, or with the
giving of notice or the passage of time would constitute, an Event of Default
under this Agreement, or an Event of Default (as defined in the Indenture) under
the Indenture, the Borrower promptly shall deliver to the Issuer and the Trustee
a notice stating the existence and nature thereof and specifying the corrective
steps the Borrower is taking with respect thereto. The Borrower shall promptly
notify the Issuer and Trustee of the commencement of any litigation,
administrative, enforcement or other proceeding by or against it, or the threat
thereof, in which an unfavorable outcome could materially adversely affect the
operation of the Borrower's business or compliance with the Financing Documents.
22
<PAGE> 27
Section VI.11 Insurance. The Borrower shall maintain an insurance
policy against liability appropriate for Borrower's business (including
environmental insurance to the extent available on reasonable terms) and
adequate workers' compensation coverage, in each case with customary deductible
and self insurance provisions selected by the Borrower.
Section VI.12 Additional covenants and Agreements. The Borrower hereby
agrees to those Additional Covenants and other matters set forth in Exhibit A
hereto.
Section VI.13 No Liability of the Issuer. Any obligation of the Issuer
created by or arising out of this Agreement, including the Bonds and the
Financing Documents, is not a general obligation of the Issuer or payable in any
manner from revenues raised by taxation or from the general funds and accounts
of the Authority, but shall be payable solely out of Revenues and the other
moneys pledged under the Indenture. In making the agreements, provisions, and
covenants set forth in the Indenture and this Agreement, the Issuer has not
obligated itself except with respect to the Electric Rate Stabilization Project
or the Facility and the application of the Revenues and the other moneys pledged
under the Indenture. All covenants, stipulations, promises, agreements, and
obligations of the Issuer contained herein shall be deemed to be covenants,
stipulations, promises, agreements, and obligations of the Issuer and not of any
member, officer, agent, or employee thereof in his or her individual capacity.
No recourse shall be had for the payment of the principal of or of the interest
on the Bonds, for the performance of any obligation hereunder, or for any claim
based thereon or hereunder against any such member, officer, agent or employee
or against any natural person executing the Bonds. No such member, officer,
agent, employee, or natural person is or shall become personally liable for any
such payment, performance, or other claim, and in no event shall any monetary or
deficiency judgment be sought or secured against any such member, officer,
agent, employee, or other natural person for any such payment, performance or
other claim.
Section VI.14 Incorporation of Tax Regulatory Agreement; Determination
of Taxability. (a) The representations, warranties, covenants and statements of
expectation of the Borrower set forth in the Tax Regulatory Agreement are by
this reference incorporated in this Agreement as though fully set forth herein.
(b) If there shall occur a Determination of Taxability, and the Issuer
exercises its option to require the redemption in whole of the Bonds, the Issuer
shall provide to the Borrower written notice of its exercise of the option to
redeem the Bonds, which notice shall specify a Redemption Date not later than
ninety (90) days from the date of such notice, and the Borrower shall pay not
later than thirty (30) days prior to the Redemption Date to the Trustee an
amount sufficient, together with all other amounts held by the Trustee and
available under the Indenture for such purpose, to redeem all Bonds then
Outstanding, in accordance with Section 2.04(e) of the Indenture.
23
<PAGE> 28
(c) The obligation of the Borrower to make the payments provided for in
this Section shall be absolute and unconditional, and the failure of the Issuer
or the Trustee to execute or deliver or cause to be delivered any documents or
to take any action required under this Agreement or otherwise shall not relieve
the Borrower of its obligations under this Section. Notwithstanding any other
provision of this Agreement or the Indenture, the Borrower's obligations under
this Section shall survive the termination of this Agreement and the Indenture.
(d) Notwithstanding the provisions of paragraph (b) above if, in the
opinion of Bond Counsel (as defined in the Indenture), redemption of less than
all of the Bonds will preserve the tax-exempt status of interest on the
remaining Bonds, then only such amount need be redeemed, the particular Bonds to
be redeemed to be selected by lot by the Trustee or otherwise as required by the
Indenture or as specified in such final Determination of Taxability or opinion.
Section VI.15 Maintenance of Facility Agreements. The Borrower shall
maintain such Facility Agreements in effect as shall be sufficient, together
with other Revenues, to permit (i) the operation of the Facility to be carried
out as contemplated hereby and by the Indenture and (ii) the payment of the
amounts required to be paid by the Borrower hereunder and under the Facility
Agreements, the Financing Documents and the Indenture.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section VII.1 Events of Default Defined.
(a) The following shall be "Events of Default" hereunder, and the terms
"Events of Default" or "Default" shall mean, whenever they are used in this
Agreement, any one or more of the following events:
(i) failure by the Borrower to pay, or cause to be paid, any
Loan Payments under Section 4.2 hereof, at the times specified
herein;
(ii) failure by the Borrower to observe and perform any
covenant, condition or agreement on its part to be observed or
performed (other than as referred to in Section 7.1(a)(i)
hereof) for a period of thirty (30) days after written notice,
specifying such failure, requesting that it be remedied, and
stating that it is a notice of default, has been given to the
Borrower by the Trustee (except in the case of Unassigned
Issuer's Rights) or by the Issuer, unless the Trustee (except
in the case of Unassigned Issuer's Rights) shall agree in
writing to an extension of such time prior
24
<PAGE> 29
to its expiration (or, in the case of Unassigned Issuer's
Rights, the Issuer shall agree in writing to an extension of
such time prior to its expiration, or to a modification or
waiver of any covenant, condition or agreement in or referred
to in this Agreement constituting a part of Unassigned
Issuer's Rights); provided, however, if said failure be such
that it cannot be corrected within the applicable period, it
shall not constitute an Event of Default if corrective action
is instituted by the Borrower within the applicable period and
diligently pursued until the failure is corrected, but only,
with respect to covenants, conditions and agreements not
included in Unassigned Issuer's Rights, if such failure is
corrected within ninety (90) days after the written notice of
default related thereto unless the Trustee shall agree in
writing to an extension of such time prior to its expiration;
and/or
(iii) the Borrower makes an assignment for the benefit of
creditors, files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal
for any receiver of or any trustee for itself or any
substantial part of its property under any bankruptcy,
insolvency, reorganization, arrangement, or readjustment of
debt law or statute or similar law or statute of any
jurisdiction, whether now or hereafter in effect; or commences
any proceeding relating to the Borrower, under any bankruptcy,
insolvency, reorganization, arrangement, or readjustment of
debt law or statute or similar law or statute of any
jurisdiction, whether now or hereafter in effect; or there is
commenced against the Borrower any such proceeding which
remains undismissed for a period of sixty (60) days; or the
Borrower indicates its consent to, approval of, or
acquiescence in any such proceeding or the appointment of any
such receiver of or trustee for the Borrower or any
substantial part of its property; or the Borrower suffers any
such receivership or trusteeship to continue undischarged or
unstayed for a period of sixty (60) days; and/or
(iv) there shall occur an "Event of Default" specified in
Section 7.01(a) or (b) of the Indenture; and/or
(v) any representation or warranty made by the Borrower in
this Agreement, or any material representation or warranty
made by the Borrower in any instrument, other agreement,
statement or certificate furnished by or on behalf of the
Borrower to the Issuer or the Trustee in connection with this
Agreement or the purchase of the Bonds including, without
limitation, the Tax Regulatory Agreement, proves untrue in any
material respect as of the date of the issuance or making
thereof; provided, however, if any of the facts upon which the
representations and warranties of the Borrower are based are
capable of correction or cure to conform to any such
representation or warranty, there shall be no Event of Default
until passage of a period of thirty (30) days after written
notice, specifying such failure and requesting
25
<PAGE> 30
that it be remedied, given to the Borrower by the Trustee or
the Holders of twenty-five percent (25%) in aggregate
principal amount of the Bonds then Outstanding; and/or
(vi) the Borrower has failed to provide funds in the amount
and by the time specified by the Issuer in a notice electing
to exercise the option to redeem the Bonds provided by the
Issuer to the Borrower pursuant to Section 6.14(b) hereof.
The declaration of an Event of Default under clause (iii) of subsection
(a) above, and the exercise of remedies upon any such declaration, shall be
subject to any applicable limitations of federal bankruptcy law affecting or
precluding that declaration or exercise during the pendency of or immediately
following any bankruptcy, liquidation or reorganization proceedings.
(b) Paragraph (ii) of the foregoing Section 7.1(a) is subject to the
following limitations: if by reason of force majeure the Borrower is unable in
whole or in part to carry out the agreements on its part herein contained, other
than the obligations on the part of the Borrower contained in Sections 4.2, 4.3
and 6.7 hereof, the Borrower shall not be deemed in default during the
continuance of such inability. The term "force majeure" as used herein shall
mean, without limitation, the following: Acts of God; strikes, lockouts, or
other industrial disturbances; acts of public enemies; orders of any kind of
governmental authority or any of their departments, agencies or officials, or
any civil or military authority; insurrections; riots; landslides; earthquakes;
fires; storms; droughts; floods; explosions; breakage; malfunction or accident
to facilities, machinery, transmission pipes, or canals; or any other cause or
event not reasonably within the control of the Borrower. The Borrower agrees,
however, to remedy with all reasonable dispatch the cause or causes preventing
the Borrower from carrying out this Agreement to the extent that such remedy is
reasonably within the ability of the Borrower; provided that the settlement of
strikes, lockouts, and other industrial disturbances shall be left entirely
within the discretion of the Borrower, and the Borrower shall not be required to
make settlement of strikes, lockouts and other industrial disturbances by
acceding to the demands of the opposing party or parties.
Section VII.2 Remedies on Default.
(a) Whenever any Event of Default referred to in Section 7.1 hereof
shall have happened and be continuing, the Issuer or the Trustee may take any
one or more of the following remedial steps (except that the Trustee shall have
no right to enforce Unassigned Issuer's Rights):
(i) The Issuer or the Trustee may declare an amount equal to
the unpaid principal amount of the Loan and the interest
accrued thereon to the date of such declaration to be
immediately due and payable, whereupon the same shall become
26
<PAGE> 31
immediately due and payable, and which amount the Borrower
hereby agrees to pay or cause to be paid; and/or
(ii) The Issuer or the Trustee may take whatever action at law
or in equity may appear necessary or desirable to collect the
payments and other amounts then due and thereafter to become
due or to enforce performance and observance of any
obligation, agreement, or covenant of the Borrower under this
Agreement or the Facility Agreements.
Notwithstanding the foregoing, if any such Event of Default relates solely to an
Event of Default caused by a default under Section 6.14 hereof, the Issuer or
the Trustee may take only the remedial steps set forth in clause (ii) above and
not those in clause (i) above.
(b) Any amounts collected pursuant to action taken under this Section
shall be paid into the Debt Service Fund or the Capital Reserve Fund, as
required by the Indenture, and applied in accordance with the provisions of the
Indenture or, if all of the Bonds and other amounts due hereunder have been
fully paid (or provision for payment thereof has been made in accordance with
the provisions of the Indenture), to the Borrower (except, to the extent of any
payments by the State into the Capital Reserve Fund pursuant to the Act and
Section 5.09 of the Indenture not otherwise reimbursed, to the Issuer).
(c) Except to the extent of any such collection, no action taken
pursuant to this Section shall relieve the Borrower from such of the Borrower's
obligations pursuant to Sections 4.2, 4.3 and 6.7 hereof which shall survive any
such action, and the Issuer or the Trustee may take whatever action at law or in
equity as may appear necessary and desirable to collect all amounts then due and
thereafter to become due and/or to enforce the performance and observance of any
obligation, agreement or covenant of the Borrower hereunder (except that the
Trustee shall have no right to enforce Unassigned Issuer's Rights).
Section VII.3 No Remedy Exclusive; Trustee and Noteholders Deemed Third
Party Beneficiaries. No remedy herein conferred upon or reserved to the Issuer
is intended to be exclusive of any other available remedy or remedies, but each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given under this Agreement or now or hereafter existing at law or
in equity or by statute. No delay or omission to exercise any right or power
accruing upon any default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be expedient. In order to entitle the
Issuer or the Trustee to exercise any remedy reserved to it in this Article, it
shall not be necessary to give any notice, other than such notice as may be
herein expressly required. Subject to any applicable restriction on enforcement
contained in the Indenture, such rights and remedies as are given the Issuer
hereunder shall also extend to the Trustee, and the
27
<PAGE> 32
Trustee and the Bondholders shall be deemed third party beneficiaries of all
covenants and agreements herein contained, whether described as rights of the
Trustee or Holders or as rights of the Issuer, except in the case of the
Bondholders as to the rights of the Trustee for its own account, and except in
each and every such case Unassigned Issuer's Rights.
Section VII.4 No Additional Waiver Implied By One Waiver. In the event
any agreement contained in this Agreement should be breached by either party and
thereafter waived by the other party or the Trustee, such waiver shall be
limited to the particular breach so waived and shall not be deemed to waive any
other breach hereunder.
ARTICLE VIII
SPECIAL PROVISIONS RELATING TO BOND INSURANCE
Section VIII.1. Purpose of Article. The Bond Insurer (as defined in the
Indenture) has made a commitment to issue a Bond Insurance Policy (as defined in
the Indenture) that guarantees the scheduled payment of principal of and
interest on the Bonds when due. In order to comply with the conditions precedent
to the issuance of the Bond Insurance Policy, the following provisions of this
Article are adopted and shall be binding upon the Authority and the Borrower.
The provisions of this Article shall govern notwithstanding anything to the
contrary set forth elsewhere in this Agreement.
Section VIII.2. Special Provisions.
1. The Bond Insurer shall be deemed to be a third party
beneficiary hereof, except of Unassigned Issuer's Rights and rights of the
Trustee or any Co-Trustee, Authenticating Agent or Paying Agent for its own
account.
2. The Borrower shall pay as Additional Payments all amounts
required to be paid by the Authority to the Bond Insurer under the Indenture.
3. The Bond Insurer shall be provided by the Borrower with the
following information:
(i) annual audited financial statements of the Borrower within
105 days after the end of its fiscal year and the annual budget within
30 days after the approval thereof;
(ii) upon delivery of the annual audited financial statements
of the Borrower, a certificate of Authorized Representatives of the
Borrower stating that, to the best of such
28
<PAGE> 33
individual's knowledge following reasonable inquiry, no Event of
Default has occurred, or if an Event of Default has occurred,
specifying the nature thereof and, if the Borrower has a right to cure
pursuant to this Agreement, stating in reasonable detail the steps, if
any, being taken by the Borrower to cure such Event of Default;
(iii) notice of any failure of the Borrower to make any
payment when due under this Agreement within one Business Day of such
failure;
(iv) a full original or certified transcript of all
proceedings relating to the execution of any amendment of or supplement
to the Financing Documents;
(v) copies of all reports, certificates and notices required
to be delivered by the Borrower pursuant to this Agreement; and
(vi) such additional information as the Bond Insurer from time
to time may reasonably request.
4. The Borrower shall give any direction necessary to permit
compliance with Section 13.02(p) of the Indenture.
ARTICLE IX
MISCELLANEOUS
Section IX.1 Notices.
(a) All notices, certificates, or other communications hereunder shall
be sufficiently given and shall be deemed given when (i) mailed by first class
mail or by overnight courier, (ii) faxed and immediately confirmed by first
class mail, or (iii) delivered, postage prepaid, or by overnight courier
addressed as follows:
29
<PAGE> 34
(i) If to the Issuer:
If by mail, to:
Finance Authority of Maine
Post Office Box 949
Augusta, ME 04332-0949
(Attention: General Counsel)
Telephone Number: (207) 623-3263
Fax Number: (207) 623-0095
or
If by overnight courier, to:
Finance Authority of Maine
83 Western Avenue
Augusta, ME 04330-7226
(Attention: General Counsel)
Telephone Number: (207) 623-3263
Fax Number: (207) 623-0095
(ii) If to the Borrower, to:
Penobscot Energy Recovery Company,
Limited Partnership
Industrial Way
P.O. Box 160
Orrington, ME 04474
(iii) If to the Trustee, to:
The Chase Manhattan Bank
c/o Chase National Corporate
Services, Inc.
Corporate Trust Group
73 Tremont Street
Boston, MA 02108-3913
30
<PAGE> 35
(b) Duplicate copies of each notice, certificate, or other
communication given hereunder by the Issuer, the Trustee or the Borrower to any
of the others, shall also be given to all of the others, except that in the case
of notices relating solely to Unassigned Issuer's Rights, no notice need be sent
to the Trustee.
(c) The Issuer, the Borrower and the Trustee may, by notice given to
all parties hereto, designate any further or different addresses to which
subsequent notices, certificates, or other communications shall be sent.
Section IX.2 Filing.
(a) The Borrower will execute such financing statements with respect to
the pledge of the Trust Estate effected by the Indenture to be filed by the
Trustee.
(b) The parties agree that all necessary continuation statements shall
be filed by the Trustee, at the expense of the Borrower, within the time
prescribed by the Uniform Commercial Code - Secured Transactions of the State,
except that the Issuer shall file all necessary continuation statements, at the
expense of the Borrower, with respect to this Agreement, within such time.
Section IX.3 Binding Effect. This Agreement shall inure to the benefit
of and shall be binding upon the Issuer, its successors and assigns, the
Borrower, and the permitted successors and assigns of the Borrower.
Section IX.4 Severability. In the event any provision of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof.
Section IX.5 Amendments, Changes and Modifications.
(a) This Agreement may not be amended, changed, modified, altered, or
terminated without in each instance the prior written consent of both parties
hereto and (except in the case of Unassigned Issuer's Rights) the Trustee.
(b) No obligation is imposed on the Issuer by this Section to enter
into any amendment, and no amendment is permitted hereunder which would result
in the breach of the Issuer's agreements in the Indenture.
Section IX.6 Execution of Counterparts. This agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
31
<PAGE> 36
Section IX.7 Law Governing Construction of Agreement. This Agreement
shall be deemed to be a contract made under the laws of the State and for all
purposes shall be governed by and construed in accordance with the laws of the
State applicable to contracts made and to be performed entirely within the
State.
Section IX.8 Payments Due on Non-Business Days. If any payment of
moneys hereunder is due on a date other than a Business Day (the "due date"),
that payment need not be made on the due date, but may be made on the next
succeeding Business Day with the same force and effect as if that payment were
made on the due date, and in such case no interest shall accrue for the period
from such due date.
Section IX.9 Limitation of Liability. Notwithstanding any other
provision of this Agreement, there shall be no recourse against any general or
limited partner of the Borrower, or any of their respective affiliates,
stockholders, partners, officers, directors, employees or agents, for any
liability to the Issuer or the holders of the Loan Note or the obligations
arising in connection with any breach or default under this Agreement except to
the extent the same is enforced against and limited to the Borrower or the
Collateral, and the Issuer and its assignees, including the Trustee, shall look
solely to the Borrower and the Collateral in enforcing rights and obligations
under and in connection with this Agreement, the Mortgage, the Loan Note, the
Indenture, or any other Borrower Documents or pledge of the Collateral. The
limitations on recourse set forth in this Section shall survive the termination
of this Agreement and the full payment and performance of the obligations of
Borrower hereunder and under the Mortgage, the Loan Note, the Indenture and the
other Borrower Documents.
32
<PAGE> 37
IN WITNESS WHEREOF, the FINANCE AUTHORITY OF MAINE has executed this
Agreement by causing these presents to be signed in its name and behalf by its
Chief Executive Officer and Penobscot Energy Recovery Company, Limited
Partnership has executed this Agreement by causing these presents to be signed
in its name and behalf by its duly authorized general partners, all being done
as of the day and year first hereinabove written.
FINANCE AUTHORITY OF MAINE
[SEAL] By /s/ Timothy P. Agnew
-----------------------------------------
Timothy P. Agnew
Chief Executive Officer
PENOBSCOT ENERGY RECOVERY COMPANY,
LIMITED PARTNERSHIP
By PERC Management Company Limited Partnership,
a general partner
By PERC, Inc., its general partner
By: /s/ Robert E. Wetzel
------------------------------
Its Senior Vice President
By Energy National, Inc.
its general partner
By: /s/ Michael J. Young
-----------------------------
Its Secretary
33
<PAGE> 38
EXHIBIT A
ADDITIONAL COVENANTS OF BORROWER
1. The existing general partners of the Borrower may not sell, assign,
transfer or otherwise encumber their general partnership interest in the
Borrower without the prior written consent of the Authority, which consent
shall not be unreasonably withheld or delayed; provided, however, that no
consent of the Authority shall be required with respect to (a) a transfer
from one general partner to its affiliate, or to another general partner
or its affiliate, or to an entity controlled by any or all of such general
partners and affiliates, or (b) a transfer to the MRC or the
municipalities for which the MRC acts as agent, in accordance with the
Waste Disposal Agreements, or (c) the grant of a security interest in or
lien on the partnership interests in the Borrower by the holder of such
partnership interest to secure loan facilities extended to it or an
affiliate.
2. The Borrower shall promptly notify the Authority of the occurrence of any
litigation (including litigation concerning affiliates or subsidiaries)
which may materially impact the Borrower. "Material" includes, but is not
limited to, any claim or action with a demand of $1,000,000 or greater.
Such notice shall be in writing and shall describe the matter and the
steps taken and then expected to be taken by the Borrower (or its
affiliates or subsidiaries) affected with respect thereto. A prompt copy
of any filing with the Securities and Exchange Commission shall constitute
adequate notification for purposes of this paragraph.
3. The Borrower shall furnish the Issuer with copies of its annual budget for
operations and maintenance (the "Operating Budget") for each Fiscal Year,
as adopted, by November 15 of each year, and shall furnish the Issuer with
copies of any amendment thereto promptly after the adoption thereof. In
the event the Borrower requests any requisition from the Operating Account
under the Indenture which will make the aggregate amount requested in any
Fiscal Year in excess of 110% of the amount of the originally adopted
Operating Budget, the Issuer may, at the expense of the Borrower, retain
the services of a consultant to provide a report on the Borrower and its
operations, management and such other matters as the Chief Executive
Officer of the Issuer deems pertinent.
4. The Borrower shall provide the Issuer with quarterly unaudited financial
statements, without footnotes or year end adjustments but otherwise in
accordance with generally accepted accounting principles, within
forty-five days after the end of each quarter.
5. The Borrower shall provide the Issuer with a copy of its annual audited
financial statements within 105 days after the close of its Fiscal Year.
6. The Borrower shall observe and comply in all material respects with all
applicable laws, regulations, ordinances, rules, and orders (including
without limitation those relating to
A-1
<PAGE> 39
zoning, land use, environmental protection, air, water and land pollution,
wetlands, health, equal opportunity, minimum wages, worker's compensation
and employment practices) of any federal, state, municipal or other
governmental authority except during any period during which the Borrower
at its expense and in its name shall be in good faith contesting its
obligations to comply therewith.
7. The Borrower shall not create, incur, assume or permit to exist any
mortgage, lien, charge, security interest or other encumbrance on any
property or asset of the Borrower, except Permitted Encumbrances (as
defined in the Mortgage).
8. The Borrower shall apply the Loan proceeds only as described in Section
3.2 of this Agreement.
9. The Borrower shall promptly notify the Issuer of any material adverse
change in the Borrower's business operations or financial condition.
10. The Borrower shall pay all costs and expenses incurred by the Issuer in
connection with the issuance of the Bonds and servicing of the Loan and
the Bonds, to the extent not paid from other sources. Such costs and
expenses shall include but shall not be limited to costs and expenses of
employees of the Issuer including in-house counsel in processing servicing
requests during the term of the Loan.
11. The Borrower shall not incur additional Indebtedness in excess of
$15,000,000 unless (a) such Indebtedness is refunding Indebtedness which
does not increase the Borrower's aggregate level of Indebtedness, or (b)
the issuance of such Indebtedness does not reduce the Debt Service
Coverage (as defined below) below the lesser of (i) the Debt Service
Coverage prior to the issuance of new debt or (ii) 1.3x, or (c) such
additional Indebtedness is required by a change in law occurring after the
Loan closing or is required to comply with an order or decision of any
governmental agency or authority with authority to issue or make and
enforce the same, or (d) the Chief Executive Officer of the Issuer
consents in writing thereto.
For the purpose of this covenant, Debt Service Coverage means: earnings
before income taxes + interest for the previous 12 months + depreciation
for the previous 12 months + amortization for the previous 12 months (less
or plus extraordinary1 income or losses) divided by: interest for the
previous 12 months + principal payments for the previous 12 months + the
projected 12 months of principal and interest for all Indebtedness.
12. The Borrower shall immediately assign to the Trustee all payments and
revenues the Borrower is entitled to receive under any agreement for the
sale of power, energy, steam, waste disposal services or other output
capacity for services of the Facility or the receipt of waste by the
Facility.
A-2
<PAGE> 40
EXHIBIT B
LOAN PRINCIPAL
Note
Principal
Payment Date Repayments
------------ ----------
07/01/99 $1,325,000
07/01/00 1,475,000
07/01/01 1,535,000
07/01/02 1,600,000
07/01/03 1,670,000
07/01/04 1,735,000
07/01/05 1,820,000
07/01/06 1,910,000
07/01/07 2,005,000
07/01/08 2,110,000
07/01/09 2,205,000
07/01/10 2,315,000
07/01/11 2,430,000
07/01/12 2,555,000
07/01/13 2,680,000
07/01/14 2,825,000
07/01/15 2,965,000
07/01/16 3,120,000
07/01/17 3,275,000
07/01/18 3,440,000
Total $44,995,000
B-1
<PAGE> 41
PROMISSORY NOTE
No. 1 $44,995,000
Penobscot Energy Recovery Company, Limited Partnership, a limited
partnership duly organized and existing under the laws of the State of Maine
(the "Borrower"), for value received, promises to pay to the order of Finance
Authority of Maine (the "Authority") the principal sum of $44,995,000 and to pay
(i) interest on the unpaid principal balance thereof from the date hereof until
fully and finally paid at the interest rates borne by the Bonds (as defined
below) from time to time and as further described in the Agreement (as defined
below), and (ii) those additional payments referred to in Section 4.3(b) of the
Agreement.
This promissory note has been executed and delivered by the Borrower
pursuant to a certain Loan Agreement (the "Agreement"), dated as of June 1,
1998, between the Authority and the Borrower. Terms used but not defined herein
shall have the meanings ascribed to such terms in the Agreement.
This promissory note is issued to evidence the obligation of the
Borrower under the Agreement to repay the Loan made by the Authority from the
proceeds of the sale of its Electric Rate Stabilization Revenue Refunding Bonds,
Series 1998A (Penobscot Energy Recovery Company, LP) and its Electric Rate
Stabilization Revenue Refunding Bonds, Series 1998B (Penobscot Energy Recovery
Company, LP) (together, the "Bonds"), together with interest thereon and all
other amounts, fees, penalties, adjustments, expenses, counsel fees and other
payments of any kind required to be paid by the Borrower under the Agreement.
The Agreement further provides for the payment of interest on this promissory
note at other rates in certain circumstances.
The Financing Documents (as defined in the Indenture), including the
Agreement and this promissory note, have been assigned to The Chase Manhattan
Bank (the "Trustee") acting pursuant to a Trust Indenture dated as of June 1,
1998 (the "Indenture") between the Authority and the Trustee, except with
respect to the Unassigned Issuer's Rights, which are not so assigned. Such
assignment is made as security for the payment of the Bonds.
As provided in the Agreement and subject to the provisions thereof,
payments hereon are to be made at the principal office of the Trustee, or at
such other place in the United States as the Trustee may direct in writing, by
wire transfer, in the amounts and at the times required by the Indenture with
respect to the Bonds. Loan payments hereon shall be paid, or caused to be paid,
by the Borrower in an amount which, when added to the other moneys available
therefor in the Debt Service Fund, will be sufficient to pay the principal of
and interest on the Bonds due and payable on each Interest Payment Date and
Principal Payment Date, whether at maturity or upon
1
<PAGE> 42
declaration accelerating the maturity, upon mandatory sinking fund redemption in
accordance with the Indenture, or otherwise.
With respect to payments due hereunder, time is of the essence. All
payments must be in immediately available funds as and when due.
The Borrower shall make payments on this promissory note on the dates
and in the amounts specified herein and in the Agreement and in addition shall
make such other payments as are required to be made by the Borrower pursuant to
the Agreement and the Indenture. This promissory note is subject to prepayment
to the extent the Loan is prepaid pursuant to the Agreement.
In the event the Borrower shall fail to make, or cause to be made, any
of the payments required hereby or by the Agreement, the unpaid item or
installment shall continue as an obligation of the Borrower until such amount
shall have been fully paid, and the Borrower agrees to pay, or cause to be paid,
the same with interest thereon from the date of failure or, in the case of
payments required by Sections 4.3(a)(ii), (iii) and (v) of the Agreement, the
date 30 days after the date on which the Borrower is notified thereof, at the
interest rate borne by the Bonds until fully paid, except as otherwise may be
provided by Article XIII of the Indenture.(1)
All payments hereunder shall be payable in lawful money of the United
States of America and shall be made to the Authority, the Trustee, or the Note
Insurer, as provided in the Agreement. Loan payments shall be deposited in the
Revenue Fund created by the Indenture. Except as otherwise provided in the
Indenture, such Loan payments shall be used by the Trustee to pay the principal
of and interest on the Bonds when due.
The obligation of the Borrower to make the payments required hereunder
and to perform and observe the other agreements on its part contained herein
shall be absolute and unconditional, irrespective of any defense or any rights
of set-off, recoupment or counterclaim which the Borrower may have against the
Authority or the Trustee. The Borrower shall pay, or cause to be paid,
absolutely net all payments required hereunder and under the Agreement, free of
any deductions and without postponement, abatement or diminution, but subject to
applicable provisions of the Indenture. Except to the extent provided in this
paragraph, nothing contained in this paragraph shall be construed to prevent or
restrict the Borrower from asserting any rights it may have against the
Authority, the Trustee or any other Person under the Financing Documents or the
Indenture or under any provisions of law.
Whenever an Event of Default under Section 7.01(a), (d), (e) or (f) of
the Indenture shall have occurred and, as a result thereof, the principal of the
Bonds then outstanding, and interest accrued thereon, shall have been declared
to be immediately due and payable pursuant to Section 7.03 of the Indenture, the
unpaid principal amount of and accrued interest on this promissory note
- ----------
(1) Re: Bond Insurance.
2
<PAGE> 43
shall also be due and payable on the date on which the principal of and interest
on the Bonds shall have been declared due and payable; provided that the
annulment of a declaration of acceleration with respect to the Bonds shall also
constitute an annulment of any corresponding declaration with respect to this
promissory note.
The Borrower further waives diligence, demand, presentment for payment,
notice of nonpayment, protest and notice of protest, and notice of any renewals
or extension of this promissory note. Any delay on the part of the Authority or
the Trustee in exercising any right hereunder shall not operate as a waiver of
any such right, and any waiver granted with respect to one default shall not
operate as a waiver in the event of any subsequent default.
Notwithstanding any other provisions of this promissory note, there
shall be no recourse against any general or limited partner of the Borrower, or
any of their respective affiliates, stockholders, partners, officers, directors,
employees or agents, for any liability to the Authority or the holders of this
promissory note or the obligations arising in connection with any breach or
default under this promissory note except to the extent the same is enforced
against and limited to the Borrower or the Collateral, and the Authority shall
look solely to the Borrower and the Collateral in enforcing rights and
obligations under and in connection with this promissory note and the Loan
Agreement, the Mortgage, the Indenture, or any other Borrower Documents, or
pledge of the Collateral. The limitations on recourse set forth in this
paragraph shall survive the termination of this promissory note and the full
payment and performance of the obligations of the Borrower hereunder and under
the Loan Agreement, the Indenture, the Mortgage and the other Borrower
Documents.
3
<PAGE> 44
IN WITNESS WHEREOF, Penobscot Energy Recovery Company, Limited
Partnership has caused this promissory note to be executed in its corporate name
and intends for it to have the same effect as if sealed with Penobscot Energy
Recovery Company, Limited Partnership's corporate seal by its duly authorized
officer this June 15, 1998.
PENOBSCOT ENERGY RECOVERY COMPANY,
LIMITED PARTNERSHIP
By PERC Management Company Limited Partnership,
a general partner
By PERC, Inc., its general partner
By________________________________
Its
By Energy National, Inc.
its general partner
By_________________________________
Its
4
<PAGE> 45
AUTHORITY ENDORSEMENT
Pay to the order of The Chase Manhattan Bank, as Trustee, except with
respect to the Unassigned Issuer's Rights, without recourse.
FINANCE AUTHORITY OF MAINE
By: /s/ Timothy P. Agnew
-----------------------------
Timothy P. Agnew
Chief Executive Officer
- --------
(1) Extraordinary is defined as a nonrecurring occurrence that must be explained
by note on the financial statements or in a filing. Earnings are adjusted by
adding or subtracting the extraordinary occurrence.
5
<PAGE> 1
Exhibit 4.4
ELECTRIC RATE STABILIZATION BOND PROGRAM
LIMITED GUARANTY AGREEMENT
This Guaranty Agreement dated as of June 1, 1998, (the "Guaranty") is
given by KTI, INC., a corporation organized and existing under the laws of the
State of New Jersey (the "Guarantor") to THE CHASE MANHATTAN BANK, as Trustee
(the "Trustee").
WHEREAS, the Finance Authority of Maine ("the Authority") has agreed
with Penobscot Energy Recovery Company, Limited Partnership (the "Borrower") to
issue its Series 1998 Electric Rate Stabilization Revenue Refunding Bonds,
Series 1998A and Series 1998B (Penobscot Energy Recovery Company, LP) in the
aggregate principal amount of $44,995,000 (the "1998 Bonds"), which will
contemporaneously herewith be issued to finance a loan (the "Loan") from the
Authority to Penobscot Energy Recovery Company, Limited Partnership (the
"Borrower") pursuant to a Loan Agreement dated as of June 1, 1998 (the
"Agreement"); and
WHEREAS, the Agreement will be assigned by the Authority to the Trustee
(except for certain Unassigned Issuers Rights and Shared Rights as defined
therein), contemporaneously with the execution thereof; and
WHEREAS, the obligation of the Borrower to the Authority pursuant to
the Agreement is evidenced by a promissory note of the Borrower to the Authority
(the "Loan Note"); and
WHEREAS, the Trustee has entered into a Trust Indenture with the
Authority dated as of June 1, 1998 (the "Indenture"); and
WHEREAS, the Guarantor is the sole shareholder of PERC, Inc.; PERC,
Inc. is the general partner of PERC Management Company Limited Partnership, a
general partner of the Borrower; and
WHEREAS, in order to induce the Authority to make the Loan to the
Borrower, the Guarantor is prepared to guarantee the payment and performance
when due of the obligations of the Borrower to the Authority under the Loan
Agreement, subject to the limitations hereinafter set forth; and
WHEREAS, the Guarantor acknowledges that it will be benefited by the
Authority making the Loan to the Borrower; and
WHEREAS, for the purpose of providing security for the payment of the
Loan Note and other sums provided for in the Agreement, the Guarantor hereby
agrees to guaranty the prompt and punctual payment of the Loan and other sums,
as more fully set forth herein and in the Indenture and subject to the
limitations herein; and
NOW, THEREFORE, in consideration of the premises and in order to induce
the Authority to issue the 1998 Bonds and make the Loan, the Guarantor hereby
covenants and agrees with the Trustee as follows:
Page 1
<PAGE> 2
ARTICLE I
REPRESENTATIONS AND WARRANTIES
Section 1.1. Representations and Warranties. The Guarantor hereby
represents and warrants as follows:
(1) The Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey, has the
corporate powers and authority to own its property and assets, to carry on its
business as now being conducted by it and to execute, deliver and perform this
Guaranty. The Guarantor is duly qualified to do business in every jurisdiction
in which such qualification is necessary.
(2) The execution, delivery and performance of this Guaranty
and the consummation of the transactions herein contemplated have been duly
authorized by all requisite corporate action on the part of the Guarantor and
will not violate any provision of law, any order of any court or other agency of
government or the certificate of incorporation or bylaws of the Guarantor, or
any material provision of any indenture, agreement or other instrument to which
the Guarantor is a party or by which it or any of its property is bound, or be
in conflict with or result in a breach of or constitute (with due notice and/or
lapse of time) a default under any such indenture, agreement or other instrument
for which a waiver has not been obtained.
(3) The acceptance by the Guarantor of its obligations
hereunder will result in a material financial benefit to the Guarantor.
(4) This Guaranty constitutes a valid and legally binding
obligation of the Guarantor, enforceable in accordance with its terms.
(5) There is no action or proceeding pending or to the
knowledge of the Guarantor, threatened against the Guarantor before any court or
administrative agency which, if determined adversely to the Guarantor would
materially adversely affect the ability of the Guarantor to perform its
obligations hereunder, except as may be disclosed in its filings with the
Securities and Exchange Commission.
(6) No authorizations, approvals or other actions are required
by any governmental authority or regulatory body for due execution, delivery and
performance by the Guarantor of this Guaranty.
(7) The Guarantor has fulfilled its obligations under the
minimum funding standards of ERISA with respect to any employee pension benefit
plan which is covered by Title 4 of ERISA, which is the subject of the minimum
funding standard under Section 412 of the Internal Revenue Code, and as to which
the Guarantor may have liability (or with respect to a multi-employer Plan has
made all required contributions) and is in compliance in all material respects
with applicable provisions of ERISA.
Page 2
<PAGE> 3
ARTICLE II
COVENANTS AND AGREEMENTS
Section 2.1. The Guaranty.
(A) The Guarantor hereby unconditionally guaranties to and for the
account of the Trustee for the benefit of the holders of the 1998 Bonds and to
and for the benefit of the Authority as holder of the Loan Note to the extent of
this Guaranty as limited by Section 2.1(C) hereof, (i) the full and prompt
payment of the principal on the Loan when and as the same shall become due,
whether by demand or at the stated maturity thereof, by acceleration or
otherwise; (ii) the full and prompt payment of the interest on the Loan when and
as the same shall become due and payable; (iii) the full and prompt payment of
all principal, interest and other sums due and payable on the Loan Note and any
other sums when and as the same shall become due and payable under the Financing
Documents (as that term is defined in the Agreement), required to be paid by the
Borrower under the terms of the Agreement, whether by acceleration or otherwise
(the "Obligations")
(B) The Guarantor hereby expressly acknowledges and agrees to the terms
of Article V of the Indenture, a copy of which Article V is attached hereto as
Exhibit A and incorporated herein to the extent such terms affect or create the
obligation of the Guarantor to make payment of the Obligations and create rights
of the Trustee to enforce this Guaranty.
(C) The Guarantor further agrees that each of its undertakings in
subsection 2.1(A) and 2.1(B) above constitutes an absolute, unconditional,
present and continuing guaranty provided, however, that the obligation of the
Guarantor to pay such Obligation shall be limited to $3,000,000, provided,
however, if any amounts are paid by the Guarantor to the Trustee pursuant to
this Guaranty, and the Trustee thereafter reimburses the Guarantor pursuant to
Section 5.03(9) and Section 5.11 of the Indenture, this Guaranty will be
reinstated by the amount of such reimbursement. The Guarantor waives any right
to require that any resort be had by the Trustee to (i) any particular security
held by the Authority or the Trustee (except as otherwise provided in the
Indenture) or (ii) the performance of any obligation of the Authority or the
Trustee under the Indenture.
(D) If the Borrower shall default in payment of the Obligations the
Guarantor, upon demand by the Trustee without notice other than such demand and
without the necessity of further action on their respective parts, or
Guarantor's successors or assigns, as the case may be, will promptly and fully
comply with the efforts of the Trustee to enforce this Guaranty. The Guarantor
will pay all reasonable costs and expenses, including reasonable attorneys'
fees, paid or incurred by the Trustee in connection with the enforcement of the
obligations of the Guarantor under this Guaranty. All payments by the Guarantor
shall be made in any coin or currency of the United States of America which on
the respective dates of payment thereof is legal tender for the payment of
public and private debts within two (2) Business Days of demand from the
Trustee.
Section 2.2. Absolute and Unconditional Limited Guaranty. Except as
expressly limited by the terms hereof, the obligations of the Guarantor under
this Guaranty are absolute and unconditional and shall remain in full force and
effect until every payment, obligation or liability guaranteed hereunder shall
have been fully and finally paid, and, to the extent permitted by law, such
obligations shall not be
Page 3
<PAGE> 4
affected, modified, released, or impaired by any state of facts or the happening
from time to time of any event including, without limitation, any of the
following, whether or not with notice to, or the consent of, the Guarantor:
(1) the termination, cancellation, invalidity, irregularity,
illegality or unenforceability of, or any defect in, the Indenture, any of the
1998 Bonds, this Guaranty, the Agreement, the Loan Note or any other Financing
Documents;
(2) the compromise, settlement, release, extension,
indulgence, change, modification or termination of any or all of the
obligations, covenants or agreements of the Agreement, the Loan Note, the
Indenture, the 1998 Bonds, or any other guaranties, or any other Financing
Documents;
(3) the failure to give notice to the Guarantor of the
occurrence of any Event of Default under the terms and provisions of this
Guaranty, the Indenture, the Agreement, the Loan Note or any other Financing
Documents;
(4) the waiver of the payment, performance or observance by
the Authority or the Trustee of any of the obligations, conditions, covenants or
agreements of any or all of them contained in this Guaranty, the Indenture, the
1998 Bonds the Agreement, the Loan Note or any other Financing Documents by the
Authority or the Trustee, as the case may be;
(5) the extension of the time for payment of the principal of,
premium if any, or interest on the 1998 Bonds or the principal of, or interest
on the 1998 Bonds or any other amounts that are due or may become due under the
Financing Documents or of the time for performance of any other obligations,
covenants or agreements under or arising out of the Financing Documents;
(6) the modification or amendment (whether material or
otherwise) of any duty, obligation, covenant or agreement set forth in the
Indenture, the 1998 Bonds, or any of the Financing Documents;
(7) any failure, omission, delay or lack thereof on the part
of the Authority or the Trustee to assert or exercise any right, power or remedy
conferred on either of them in the Indenture, the 1998 Bonds, this Guaranty, the
Agreement, or any other Financing Documents;
(8) the voluntary or involuntary liquidation, dissolution,
merger, consolidation, sale or other disposition of all or substantially all the
assets, marshalling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors, or other similar proceedings affecting
the Guarantor, any other guarantors, or the Borrower, the Authority or the
Trustee, or any or all of the assets of any of them, or any allegation or
contest of the validity of the Indenture, the 1998 Bonds, or any of the
Financing Documents including this Guaranty in any such proceeding; it is
specifically understood, consented and agreed to that this Guaranty shall remain
and continue in full force and effect and shall be enforceable against the
Guarantor to the same extent and with the same force and effect as if such
proceedings had not been instituted; and it is the intent and purpose of this
Guaranty that the Guarantor shall and does hereby waive all rights and benefits
which might accrue to the Guarantor by reason of any such
Page 4
<PAGE> 5
proceedings, and without limiting the generality of the foregoing, it is further
the intent and purpose of this Guaranty that the liability of the Guarantor
shall not be in any way limited by the filing of any bankruptcy involving the
Borrower, but rather shall in all respects continue and extend to include, by
way of example and not limitation, post-filing interests and costs, including
reasonable attorney's fees;
(9) to the extent permitted by law, the release or discharge
of the Guarantor from the performance or observance of any obligation, covenant
or agreement contained in this Guaranty by operation of law or the addition or
release of any other guarantor;
(10) the default or failure of any other guarantor fully to
perform any of its obligations set forth in any other guaranty;
(11) any release, substitution, replacement, destruction, loss
or impairment of the security pledged under the Financing Documents;
(12) any failure of the Authority or the Trustee to mitigate
damages resulting from any default by the Borrower under the Financing
Documents;
(13) any other circumstances which might otherwise constitute
a legal or equitable discharge or defense of a surety or a guarantor; or
(14) any other act of commission or omission or any other
occurrence whatsoever, whether similar or dissimilar to the foregoing.
Section 2.3. Qualified Letter of Credit; Release of Guaranty. With the
written consent of the Authority, the Guarantor may provide as a substitute for
this Guaranty a letter of credit satisfactory to the Authority for this
Guaranty.
Section 2.4. Changes in Ownership; Continuing Existence. (a) The
Guarantor will maintain its corporate existence in good standing under the laws
of the jurisdiction of incorporation and its qualification to transact business
in each jurisdiction where failure so to qualify would permanently preclude the
Guarantor from enforcing its rights with respect to any material asset or would
expose the Guarantor to any material liability; provided, however, that nothing
herein shall prohibit the merger or consolidation described in clause (b) of
this Section 2.4.
(b) The Guarantor will not merge or consolidate or enter into any
analogous reorganization or transaction with any Person or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), unless the surviving
corporation (i) assumes in writing the obligations of the Guarantor, (ii) has a
net worth determined in accordance with GAAP) at least equal to the consolidated
net worth (determined in accordance with GAAP) of the Guarantor as shown on the
most recent audited financial statements of the Guarantor prior to the merger or
consolidation and (iii) the shareholders of the Guarantor will have a majority
interest in the surviving Person.
Section 2.5. Good Standing. The Guarantor warrants that it is and will
be during the term of this Agreement incorporated and in good standing in all
jurisdictions in which it does business.
Page 5
<PAGE> 6
Section 2.6. Indemnification Covenants.
(A) The Guarantor agrees to protect, defend and hold harmless the
Authority and its officers, members, directors, agents, servants and employees
(each an "Indemnified Party") from any claim, demand, suit or action or other
proceeding whatsoever by any person or entity whatsoever, arising or purportedly
arising from or in connection with the Guaranty or the transactions contemplated
thereby or actions taken thereunder, except for any bad faith, willful
misconduct material misrepresentation or gross negligence on the part of the
Indemnified Party.
(B) All covenants, stipulations, promises, agreements and obligations
of the Authority contained herein shall be deemed to be the covenants,
stipulations, promises, agreements and obligations of the Authority and not of
any member, officer, director, agent or employee of the Authority in his or her
individual capacity, and no recourse shall be had for the payment of any claim
based thereon or hereunder against any member, officer or employee of the
Authority or any natural person executing the 1998 Bonds.
(C) In case any action shall be brought against one or more of the
Indemnified Party's based upon any of the above and in respect of which
indemnity may be sought against the Guarantor, such Indemnified Party shall
notify the Guarantor in writing, enclosing a copy of all papers served, but the
omission so to notify the Guarantor of any such action shall not relieve it of
any liability which it may have to any Indemnified Party other than under this
Section 2.6. In case any such action shall be brought against any Indemnified
Party and it shall notify the Guarantor and the Borrower of the commencement
thereof, the Guarantor shall be entitled to participate in and, to the extent
that it shall wish, to assume the defense thereof with counsel satisfactory to
such Indemnified Party, and after notice from the Guarantor to such Indemnified
Party of the Guarantor's election so to assume the defense thereof the Guarantor
shall not be liable to such Indemnified Party for any legal or other expenses,
other than reasonable costs of investigation subsequently incurred by such
Indemnified Party in connection with the defense thereof. The Indemnified Party
shall have the right to employ its own counsel in any such action, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the employment of counsel by such Indemnified Party has been
authorized by the Guarantor, (ii) the Indemnified Party shall have reasonably
concluded that there may be a conflict of interest between the Borrower and/or
Guarantor and the Indemnified Party in the conduct or the defense of such action
(in which case the Guarantor shall not have the right to direct the defense of
such action on behalf of the Indemnified Party), or (iii) the Guarantor shall
not in fact have employed counsel satisfactory to the Indemnified Party to
assume the defense of such action.
(D) The Guarantor also agrees to pay all reasonable and necessary
out-of-pocket expenses of the Authority (including reasonable charges of
counsel) in connection with the Guaranty and the enforcement of any rights
hereunder, including, without limitation, any fees, charges and expenses
(including reasonable charges of counsel).
(E) The obligations of the Guarantor under this section shall survive
the termination of this Guaranty. This section is not for the benefit of any
person not an Indemnified Party, and no waiver of the Maine Tort Claims Act or
other applicable law is intended.
Section 2.7. Submission of Financial Statements. The Guarantor shall
provide the
Page 6
<PAGE> 7
Authority with a copy of its annual audited financial statements within 105 days
after the close of its Fiscal Year, provided however, that if the Guarantor's
annual audited financial statements are incorporated into a 10-K submitted to
the Authority pursuant to Section 2.9 hereof, the Guarantor will not be
separately obligated to submit its financial statements.
Section 2.8. Default and Litigation Notification. Upon becoming aware
of any condition or event which constitutes, or with the giving of notice or the
passage of time would constitute, an Event of Default, the Guarantor immediately
shall deliver to the Authority a notice stating the existence and nature thereof
and specifying the corrective steps the Guarantor is taking with respect
thereto. The Guarantor shall promptly notify the Authority of the commencement
of any litigation, administrative, enforcement or other proceeding by or against
it with a claim or demand of $5,000,000 or greater, or the threat thereof, in
which an unfavorable outcome could materially adversely affect the financial
condition of the Guarantor.
Section 2.9. Notification of SEC Filings. The Guarantor must provide
the Authority with copies of each filing and report made by the Guarantor with
or to the Securities and Exchange Commission including, without limitation, all
10-Q, 10-K and 8-K Reports (other than registration statements that have not
become effective under the Securities Act of 1933, filings and reports with
respect to dividend reinvestment, employee benefits, or other similar plans, and
filings pertaining to sales of or other transactions in securities of the
Guarantor by persons other than the Guarantor), and of each communication from
the Guarantor to public shareholders generally, promptly upon the filing or
making thereof. The Guarantor must meet periodically with the Authority at the
Authority's reasonable request to provide information on financial conditions
(whether or not included in such filings) and any other issue raised by the
Authority. The Authority agrees that any information obtained by it and not
available to the public will be kept confidential to the extent permitted
pursuant to 10 MRSA ss. 975-A and 1 MRSA ss. 401, et seq.
Section 2.10. Compliance with Law. The Guarantor will observe and
comply in all material respects with all material laws, regulations, ordinances,
rules, and orders (including without limitation those relating to zoning, land
use, environmental protection, air, water and land pollution, wetlands, health,
equal opportunity, minimum wages, worker's compensation and employment
practices) of any federal, state, municipal or other governmental authority the
noncompliance of which would have a material adverse effect on the financial
condition of the Guarantor.
ARTICLE III
EVENTS OF DEFAULT AND REMEDIES
Section 3.1. Events of Default. An "Event of Default" hereunder shall
exist if any of the following occurs and is continuing:
(1) the Guarantor defaults on the Obligations referred to in
Section 2.1 hereof and such default continues for more than, two (2) Business
Days after demand is made by the Trustee;
(2) the Guarantor fails to observe and perform any covenant,
condition or agreement, other than that referred to in Sections 3.1(1) of this
Guaranty, or of any instrument,
Page 7
<PAGE> 8
document or agreement now or hereafter securing this Guaranty and such failure
continues for more than thirty (30) days after written notice (which shall be
deemed given upon facsimile transmission or three (3) Business Days after
mailing of notice by first class mail, postage prepaid or certified mail) of
such failure has been given to the Guarantor by the Trustee or if by reason of
such default the same cannot be remedied within said thirty (30) days;
(3) any warranty, representation or other statement by or on
behalf of the Guarantor contained in this Guaranty or in any certificate, letter
or other writing or instrument furnished or delivered to the Authority pursuant
hereto or in connection herewith and in connection with the Financing Documents
shall at any time prove to have been incorrect in any material respect when
made, effective, or reaffirmed, as the case may be;
(4) the entry of a decree or order for relief by a court
having jurisdiction of the Guarantor in an involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee (or similar official) of the
Guarantor or for any substantial part of any of its property, or ordering the
winding-up or liquidation of any of its affairs and the continuance of any such
decree or order unstayed and in effect for a period of sixty (60) consecutive
days, or the commencement by the Guarantor of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy insolvency or other similar law, or the
consent by the Guarantor to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian (or other similar official)
or the making by it of any assignment for the benefit of creditors, or the
taking of corporate or other action by the Guarantor to authorize or effect any
of the foregoing;
(5) A final and unappealable judgment or order for the payment
for money in excess of $1,000,000 or more shall be rendered against the
Guarantor, such judgment or order shall continue unsatisfied and unpaid for a
period of thirty (30) days.
Section 3.2. Remedies Upon Default. Upon an Event of Default under
Section 3.1 of this Guaranty, the Trustee shall have the right to proceed
directly against the Guarantor without proceeding against or exhausting any
other remedies which it may have and without resorting to any security held
including, without limitation the Capital Reserve Fund.
Section 3.3. [Reserved]
Section 3.4. Waiver of Notice of Non-Payment and Costs of Enforcement.
The Guarantor hereby expressly waives presentment, demand, protest and notice of
nonpayment and further waives notice from the Authority of its acceptance and
reliance on this Guaranty. The Guarantor agrees to pay all costs, disbursements
and expenses (including all reasonable attorneys' fees) which may be incurred by
the Authority in enforcing or attempting to enforce this Guaranty and any
security therefor following any default on the part of the Guarantor hereunder,
whether the same shall be enforced by suit or otherwise.
Section 3.5. The Authority Not Coguarantor. The Guarantor hereby
acknowledges that (a) the Authority has established a Capital Reserve Fund under
the Indenture in order to provide credit
Page 8
<PAGE> 9
enhancement for the 1998 Bonds; (b) the Authority is not a coguarantor with the
Guarantor, who shall have no right of contribution, indemnity or subrogation
against the Authority; (c) all liability of the Guarantor under this Guaranty
shall continue in full force and effect notwithstanding any payment by the
Authority in the form of draws by the Trustee from the Capital Reserve Fund
under the Indenture or payments by Financial Security Assurance Inc. under the
Bond Insurance Policy provided to insure the 1998 Bonds or otherwise; and (d)
all liability of the Guarantor under this Guaranty shall continue in full force
and effect notwithstanding the fact that the Authority may have acquired rights
against the Guarantor by assignment, subrogation or otherwise.
ARTICLE IV
MISCELLANEOUS
Section 5.1. Amendment. This Guaranty may not be amended, changed,
modified, altered or terminated without the concurring written consent of the
Guarantor and the Authority.
Section 5.2. Effective Date. The obligations of the Guarantor hereunder
shall arise absolutely and unconditionally when the Loan Note shall have been
executed by the Borrower.
Section 5.3. Remedies Not Exclusive. No remedy herein conferred upon or
reserved to the Trustee is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Guaranty or now or
hereafter existing at law or in equity. No delay or omission to exercise any
right or power accruing upon any Event of Default shall impair any such right or
power or shall be construed to be a waiver in the event any provision contained
in this Guaranty should be breached by any party and thereafter duly waived by
any other party so empowered to act. Such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. No waiver, amendment, release or modification of this Guaranty shall
be established by conduct, custom or course of dealing, but solely by an
instrument in writing duly executed by the parties thereunto duly authorized by
this Guaranty.
Section 5.4. Notice. Except as otherwise provided herein, all notices
or other communications hereunder shall be sufficiently given and shall be
deemed given when delivered by hand delivery or on the third day following the
day on which the same has been mailed, postage prepaid, by certified mail
addressed as follows:
if to Guarantor:
KTI, Inc.
7000 Boulevard East
Guttenberg, NJ 07093
Attention: Martin J. Sergi, President
Fax: (201) 854-1771
Page 9
<PAGE> 10
if to the Trustee:
The Chase Manhattan Bank
73 Tremont Street
Boston, MA 02108-3913
Fax:
Any party, by notice given hereunder, may designate a different address
for future notices.
Section 5.5. Counterparts. This Guaranty constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and may
be executed simultaneously in several counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
instrument.
Section 5.6. Severability. The invalidity or unenforceability of any
one or more phrases, sentences, clauses, or Sections in this Guaranty contained,
shall not affect the validity or enforceability of the remaining portions of
this Guaranty, or any part thereof.
Section 5.7. Governing Law. This Guaranty shall be governed by and
construed in accordance with the laws of the State of Maine. The Guarantor and
the Trustee and their successors or assigns agree that any action hereunder may
be brought in the Federal Courts in the State of New York.
Section 5.8. Successors and Assigns. This Guaranty shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns.
Section 5.9. Reinstatement of Obligation. The obligations of the
Guarantor under this Guaranty shall be reinstated to the extent of any payment
made by the Borrower which must be returned by reason of the bankruptcy or
insolvency of the Borrower or for any other reason, subject to the limitations
contained in this Guaranty.
Section 5.10. Rules of Construction.
(A) Words of the neuter gender shall be deemed and construed to include
correlative words of the feminine and masculine genders.
(B) Unless the context shall otherwise indicate, the term Guarantor
shall include the plural as well as the singular number.
(C) Terms used and not defined herein shall have the meanings set forth
in the Agreement or in the Indenture to the extent such meaning is not
incompatible with the context used herein.
IN WITNESS WHEREOF, the Guarantor and the Trustee have caused this
Guaranty to be executed, all as of the date first above written.
Page 10
<PAGE> 11
WITNESS: KTI, INC.
/s/ Suzanne VanDyk /s/ Martin J. Sergi
- ---------------------- ------------------------------------
By: Martin J. Sergi
Its: President
THE CHASE MANHATTAN BANK,
as trustee,
/s/ Mary Lou Bessey /s/ Don Iaccheri
- ---------------------- ------------------------------------
By: Don Iaccheri
Its: Authorized Signed
Page 11
<PAGE> 1
Exhibit 4.5
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
AS SPECIFIED IN SECTION 15 HEREOF. NEITHER THE RIGHTS REPRESENTED BY THIS
WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE BEEN
REGISTERED FOR OFFER OR SALE UNDER THE SECURITIES ACT OF 1933. SUCH RIGHTS
AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN WHOLE OR IN PART EXCEPT
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 15 HEREOF.
BANGOR HYDRO-ELECTRIC COMPANY
Warrant to Purchase Common Stock
BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation (the "Company"), hereby
certifies that, for value received, PERC Management Company Limited Partnership,
a Maine limited partnership, is entitled, subject to the terms set forth below,
to purchase from the Company upon surrender of this Warrant, at any time or
times on or after June 26, 1998 but not after 4:00 P.M., Eastern Prevailing
Time, on the Expiration Date, June 26, 2008, seven hundred twelve thousand eight
hundred and fifty-seven (712,857) fully paid nonassessable shares (the "Warrant
Shares") of Common Stock, $5.00 par value, of the Company (as adjusted from time
to time as provided in this Warrant) at an initial purchase price of $7.00 per
share in lawful money of the United States.
DEFINITIONS
SECTION 1. (a) Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
"Affiliate" shall mean, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.
"Business Day" shall mean, except as otherwise provided in the definition
of "Market Price", a day other than a Saturday, a Sunday or a day on which
banking institutions in Maine are authorized or obligated by law or required by
executive order to be closed.
"Change of Control" shall mean (i) any merger, consolidation, arrangement
or reorganization of the Company with any Person whereby, after such
transaction, holders of Shares of Common Stock prior to the transaction, do not
continue to own, directly or indirectly, at least a majority, determined on a
fully-diluted basis, of the shares of the Voting Stock of the Company or the
surviving or resulting corporation, or (ii) any sale, lease or exchange of 50%
or more of the assets of the Company and its Subsidiaries, taken as a whole, to
any Person.
<PAGE> 2
"Commission" shall mean the United States Securities and Exchange
Commission or the principal United States agency administering the United States
securities laws.
"Common Stock" shall mean with reference to the Common Stock for which
Warrants are exercisable, only Common Stock of the class existing on the date
hereof and any stock into which such Common Stock may thereafter have been
changed, and, when otherwise used herein, shall include also stock of the
Company of any other class, whether now or hereafter authorized, which ranks, or
is entitled to a participation, as to assets or dividends, substantially on a
parity with such existing Common Stock or other class of stock into which such
Common Stock have been changed.
"Convertible Securities" shall mean any securities issued by the Company
that are convertible into or exchangeable for, directly or indirectly, shares of
Common Stock.
"Expiration Date" shall mean June 26, 2008.
"Holder" shall mean the Person in whose name the Warrant set forth herein
is registered on the books of the Company maintained for such purpose.
"Majority Holders" shall mean the holders of Warrants exercisable for 50%
or more of the aggregate number of shares of Common Stock then purchasable upon
exercise of all Warrants.
"Market Price" shall mean (a) the higher of (i) the highest closing sale
price of the Common Stock on any domestic exchange on which the Common Stock may
be listed for the Business Day immediately preceding, or the last Business Day
that the Common Stock traded on such exchange prior to, the date as to which
"Market Price" is being determined and (ii) the average of the closing prices of
the Common Stock sales on all domestic exchanges on which the Common Stock may
at the time be listed or, if there shall have been no sales on any such exchange
on any day, the average of the reported bid prices on all such exchanges at the
end of such day or, if on any day the Common Stock shall not be so listed, the
average of the representative bid prices quoted in the NASDAQ as of 3:30 P.M.,
New York prevailing time, or if on any day the Common Stock shall not be quoted
in the NASDAQ, the average of the high and low bid prices on such day in the
domestic over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of 10 consecutive Business Days (or other such period as shall be
specified herein) prior to the date as of which "Market Price" is being
determined; provided, however, that if the Common Stock is listed on any
domestic exchange or the NASDAQ the term "Business Day" as used in this
definition shall mean any day on which such exchange or the NASDAQ is open for
trading or (b) in the event the Common Stock is not Publicly Traded, the fair
market value of the Common Stock as determined in good faith by the Board of
Directors of the Company; provided, however, that such determination may be
challenged by any Holders and any dispute arising therefrom shall be resolved by
an investment bank of recognized standing selected by the Company and reasonably
satisfactory to such Holders whose
-2-
<PAGE> 3
determination of the fair market value of the Common Stock shall be final and
binding on the parties; and the fees and expenses incurred by such investment
bank in connection with its determination shall, in the case it determines that
the fair market value of the Common Stock is (i) 90% or more of such
determination of the Board of Directors, be borne by such Holders, and (ii) less
than 90% of such determination of the Board of Directors, be borne by the
Company.
"Person" shall mean an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"Public Offering" shall mean a firm underwritten offering of Common Stock
registered under the Securities Act of 1933 on Form S-1, S-2 or S-3 (or any
successor form) and offered generally to the public.
"Publicly Traded" shall mean, with respect to any securities, listed on a
nationally recognized U.S. securities exchange or admitted for trading on the
NASDAQ.
"Rule 144" shall mean the rule of such number promulgated by the
Commission under the Securities Act and any successor rule thereto.
"Voting Stock" shall mean, as applied to the stock (or the equivalent
thereof) of any Person, stock (or such equivalent) of any class or classes,
however designated, having ordinary voting power for the election of at least a
majority of the board of directors (or other governing body) of such Person,
other than stock (or such equivalent) having such power only by reason of the
happening of a contingency.
"Warrant Exercise Price" shall mean initially $7.00 per share and shall be
adjusted and readjusted from time to time as provided in this Warrant.
"Warrants" shall mean collectively the rights granted by this Warrant and
the rights granted by Warrants issued on June 26, 1998 to Municipal Review
Committee, Inc. and Energy National Inc.
(b) Other Definitional Provisions. (i) Except as otherwise specified
herein, all references herein (A) to any Person other than the Company shall be
deemed to include such Person's successors and assigns, (B) to the Company shall
be deemed to include the Company's successors and (C) to any applicable law
defined or referred to herein shall be deemed references to such applicable law
as the same may have been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, the words "herein", "hereof" and
"hereunder", and words of similar import, shall refer to this Warrant as a whole
and not to any provision of this Warrant, and the words "Section", "Schedule"
and "Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this
Warrant unless otherwise specified.
-3-
<PAGE> 4
(iii) Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
SECTION 2. Exercise of Warrant. Subject to the terms and conditions
hereof, this Warrant may be exercised, in whole or in part, at any time during
normal business hours on or after the opening of business on June 26, 1998 and
prior to 4:00 P.M., Eastern Prevailing Time, on the Expiration Date. The rights
represented by this Warrant may be exercised by the Holder, in whole or in part
(except that this Warrant shall not be exercisable as to a fractional share), by
(i) delivery of a written notice, in the form of the Subscription Notice
attached as Exhibit A, of the Holder's election to exercise this Warrant, which
notice shall specify the number of Warrant Shares to be purchased, (ii) payment
to the Company of an amount equal to the Warrant Exercise Price multiplied by
the number of Warrant Shares as to which the Warrant is being exercised in cash
or by certified or official bank check, for the number of Warrant Shares as to
which this Warrant shall have been exercised, (iii) the surrender of this
Warrant, properly endorsed, at the principal office of the Company at 33 State
Street, Bangor, Maine (or at such other agency or office of the Company as the
Company may designate by notice to the Holder) and (iv) if the Warrant Shares
issuable upon the exercise of the rights represented by this Warrant have not
been registered under the Securities Act, delivery to the Company by the Holder
of a letter in the form of Exhibit B hereto [unless in the opinion of counsel to
the Holder reasonably acceptable to the Company (delivered to the Company)
delivery of such letter is not required]. If such Warrant Shares are to be
issued in any name other than that of the Holder or its nominee, such issuance
shall be deemed a transfer and the provisions of Section 15 shall be applicable.
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the Warrant Shares so purchased, registered in
the name of, or as directed by, the Holder, shall be delivered to, or as
directed by, Holder within a reasonable time, not exceeding five days, after
such rights shall have been so exercised. Unless the rights represented by this
Warrant shall have expired or have been fully exercised, the Company shall issue
a new Warrant identical in all respects to the Warrant exercised except (A) it
shall represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under the Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant was exercised and (B) the
Warrant Exercise Price thereof shall be the Warrant Exercise Price of the
Warrant exercised. The Person in whose name any certificate for Warrant Shares
is issued upon exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such Warrant Shares immediately prior to the
close of business on the date on which the Warrant was surrendered and payment
of the amount due in respect of such exercise was made, irrespective of the date
of delivery of such share certificate, except that, if the date of such
surrender and payment is a date when the stock transfer books of the Company are
properly closed, such Person shall be deemed to have become the holder of such
Warrant Shares at the opening of business on the next succeeding date on which
the stock transfer books are open.
SECTION 3. Covenants as to Common Stock. The Company covenants and agrees
that all Warrant Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable. The Company further
-4-
<PAGE> 5
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized
and reserved a sufficient number of shares of Common Stock to provide for the
exercise of the rights then represented by this Warrant and that the par value
of said shares will at all times be less than the applicable Warrant Exercise
Price.
SECTION 4. Adjustment of Warrant Exercise Price and Adjustment of Number
of Shares. The number of shares and Warrant Exercise Price of Common Stock
issuable upon exercise of this Warrant shall be subject to adjustment on a
weighted average basis to prevent dilution, (a) in the event that the Company
issues additional Common Stock at less than the Market Price as of the date of
issue (other than pursuant to this Warrant), or rights, warrants, or options to
acquire Common Stock at less than the Market Price as of the date of issue
(other than shares reserved for issuance to employees or directors); (b) in the
event that the Company issues securities convertible into or exchangeable for
Common Stock at less than the equivalent Market Price of the Common Stock as of
the date of issue; (c) in the event that the Company declares any cash
distributions other than from current earnings; or (d) upon stock splits, stock
dividends, divisions, combinations, reorganizations, reclassifications, or any
other event which is similar in effect to any of the events described in
subsections (a) through (d) hereof.
SECTION 5. Reorganizations. (a) Reorganization or Reclassification. In
case of any capital reorganization or of any reclassification of the Capital
Stock of the Company (other than a change in par value or from par value to no
par value or from no par value to par value), this Warrant shall, upon such
capital reorganization or reclassification, entitle the Holder to purchase the
kind and number of shares of stock or other securities or cash, assets or other
property of the Company to which the Holder would have been entitled if the
holder had held the Common Stock issuable upon the exercise hereof immediately
prior to such capital reorganization or reclassification.
(b) Change of Control. In case of any Change of Control, this Warrant
shall entitle the holder, immediately and at all times thereafter until the
Expiration Date, to exercise this Warrant and to receive the kind and number of
shares of stock or other securities or cash, assets or other property of the
Person resulting from or surviving such Change of Control to which the holder
would have been entitled if the holder had held the Common Stock issuable upon
the exercise hereof immediately prior to such Change of Control. The Company
shall not effect any such Change of Control unless, prior to or simultaneously
with the consummation thereof, the successor Person (if other than the Company)
resulting from such Change of Control or the corporation purchasing such assets
shall assume by written instrument executed and mailed or delivered to the
holder the obligation to deliver to the holder such shares of stock, securities,
cash, assets or other property as, in accordance with the foregoing provisions,
such Holder may be entitled to receive upon the exercise of this Warrant.
(c) Applicable Provisions. In case of either paragraph (a) or (b) of this
Section 5, appropriate provision shall be made with respect to the rights and
interests of the holder to the end that the provisions hereof (including without
limitation provisions for adjustment of the
-5-
<PAGE> 6
Warrant Exercise Price and of the number of shares purchasable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise of the rights represented hereby.
SECTION 6. Notice of Warrant Exercise Price. The Company shall annually
give a notice to the Holder, which notice shall state the Warrant Exercise Price
in effect and the increase or decrease, if any, in the number of shares
purchasable at the Warrant Exercise Price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
SECTION 7. Computation of Adjustments. Upon each computation of an
adjustment to the Warrant Exercise Price and the number of shares that may be
subscribed for and purchased upon exercise of this Warrant, the Warrant Exercise
Price shall be computed to the nearest cent (i.e., fractions of 0.5 of a cent or
greater, shall be rounded to the next highest cent) and the number of shares
that may be subscribed for and purchased upon exercise of this Warrant shall be
calculated to the nearest whole share (i.e., fractions of less than one half of
a share shall be disregarded and fractions of one half of a share or greater
shall be treated as being a whole share). No such adjustment shall be made,
however, if the change in the Warrant Exercise Price would be less than $0.01
per share, but any such lesser adjustment shall be made (i) at the time and
together with the next subsequent adjustment which, together with any
adjustments carried forward, shall amount to $0.01 per share or more, or (ii) if
earlier, upon the third anniversary of the event for which such adjustment is
required.
SECTION 8. Notice of Certain Events. In case at any time:
(a) the Company shall make any distribution in respect of its Common Stock
(other than the payment of a cash dividend from current earnings);
(b) the Company shall propose to register any of its Common Stock under
the Securities Act in connection with a public offering of such Common Stock
(other than with respect to a registration statement filed on Form S-8 or other
such similar form then in effect under the Securities Act);
(c) the Company shall offer for subscription pro rata to the holders of
its Common Stock any additional shares of stock of any class or other rights;
(d) there shall be any capital reorganization, or reclassification of the
capital stock, of the Company, or Change of Control; or
(e) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of said cases, the Company shall give notice to the
Holder of the date on which (i) the books of the Company shall close or a record
shall be taken for such distribution or
-6-
<PAGE> 7
subscription rights or (ii) such reorganization, reclassification, Change of
Control, dissolution, liquidation or winding up shall take place, as the case
may be. Such notice shall be given not less than twenty-one (21) days prior to
the record date or the date on which the transfer books of the Company are to be
closed in respect thereto in the case of an action specified in clause (i) and
at least forty-five (45) days prior to the action in question in the case of an
action specified in clause (ii).
SECTION 9. No Change in Warrant Terms on Adjustment. Irrespective of any
adjustment in the Warrant Exercise Price or the number of shares of Common Stock
issuable upon exercise hereof, this Warrant, whether theretofore or thereafter
issued or reissued, may continue to express the same price and number of shares
as are stated herein and the Warrant Exercise Price and such number of shares
specified herein shall be deemed to have been so adjusted.
SECTION 10. Limitation on Right to Exercise Warrants. Notwithstanding the
rights to exercise the Warrant granted herein, other than as provided in Section
5, the Holder may exercise this Warrant only to the following extent: (a) 25% of
the Warrants initially granted hereunder may be exercised on or after March 26,
1999; (b) 50% of the Warrants initially granted hereunder may be exercised on or
after March 26, 2000; (c) 75% of the Warrants initially granted hereunder may be
exercised on or after March 26, 2001; (d) 100% of the Warrants initially granted
hereunder may be exercised on or after March 26, 2002.
SECTION 11. Registration Rights. (a) Required Registration. Upon written
request by Majority Holders, the Company shall use its best efforts to register
and to maintain in effect for a period of one year, pursuant to the Securities
Act of 1933, the Common Stock for which Warrants are exercisable or have been
exercised. The Company's Board of Directors may, upon determining that there is
a valid business reason for doing so, delay filing a Registration Statement for
up to 120 days after receipt of the written request. Upon receipt of such
written request, the Company shall notify all holders of Warrants that such a
request has been made and shall provide all holders reasonable opportunity to
include Common Stock in the registration. If on the date of such written request
the Company has filed or notifies the Majority Holders it intends to file a
Registration Statement pursuant to the Securities Act of 1933 within 120 days,
the requirements of this subsection will be met by the inclusion of Common Stock
within the Registration Statement filed or to be filed. Upon filing a
Registration Statement pursuant to this subsection, the Company shall have no
obligation to file additional Registration Statements at the request of Majority
Holders for a period of one year.
(b) Incidental Registration. If the Company proposes to register any of
its common stock pursuant to the Securities Act of 1933 in connection with a
public distribution of that stock, other than pursuant to a merger or
acquisition for stock or pursuant to an employee benefits, option or
compensation plan (unless such plans in the aggregate provide for the issuance
of more than 10% of the Company's then outstanding common stock), it shall give
notice to all holders of Warrants and give them reasonable opportunity to
participate in the registration.
-7-
<PAGE> 8
(c) Tag-Along Rights. If the Company shall propose to issue and if any
single entity shall propose to acquire securities of the Company having voting
power equal to or more than the voting power of the then outstanding shares of
the Company, the Company may not accept the offer of such entity unless such
entity shall simultaneously make an offer to purchase this warrant, or all of
the shares underlying this warrant and all other warrants of this class of
warrant, or all of the shares underlying such warrants, which is accepted by at
least one of the holders of this class of warrants. Such purchase must be
simultaneous with the purchase of the securities to be issued by the Company to
such entity.
(d) Costs of Registration. All costs of registration shall be paid by the
Company.
SECTION 12. Options at the Time of Exercise. (a) Company's Option to Pay
Cash in Lieu of Issuing Common Stock. Upon the exercise of this Warrant, the
Company may elect, at its option, to give the Holder immediate notice and to pay
the Holder within ten (10) business days a sum of cash in lieu of Issuing Common
Stock as provided in Section 2. The amount of cash payable pursuant to this
subsection shall be calculated by subtracting the Warrant Exercise Price from
the Market Price on the date of exercise and multiplying the result by the
number of shares of Common Stock as to which exercise is being made. At the time
of making any payment pursuant to this Section, the Company shall repay to the
Holder any amounts paid in connection with the exercise of the Warrant pursuant
to Section 2. The Company may exercise this option only if in doing so it does
not violate any material covenants contained in any of its financing agreements
that have not been waived.
(b) Cashless Exercise. At the time of exercise of this Warrant, the Holder
may elect to exercise the option provided in this subsection in lieu of making
the cash payment required by Section 2. Upon written notice of its desire to
exercise this option given at the same time and in the same manner as the notice
specified in Section 2, the Holder shall be entitled to the issuance of Warrant
Shares (in lieu of the Warrant Shares otherwise issuable pursuant to Section 2),
the number of which shall be calculated as follows: the product of (x) the
number of shares as to which the Warrant is being exercised and (y) a fraction,
the numerator of which is the Market Price of the Common Stock minus the Warrant
Exercise Price and the denominator of which is the Market Price of the Common
Stock.
SECTION 13. Warrant Holder Not Deemed a Shareholder. Except as provided in
Section 8, no Holder, as such, shall be entitled to vote or receive dividends or
be deemed the holder of shares of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder, as
such, any of the rights of a shareholder of the Company or any right to vote,
give or withhold consent to any corporate action (whether any reorganization,
issue or reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance of record to the Holder of the
Warrant Shares which it is then entitled to receive upon the due exercise of
this Warrant.
SECTION 14. No Limitation on Corporate Action; No Avoidance of Terms.
-8-
<PAGE> 9
(a) No provisions of this Warrant and no right or option granted or
conferred hereunder shall in any way limit, affect or abridge the exercise by
the Company of any of its corporate rights or powers to recapitalize, amend its
charter, reorganize, consolidate or merge with or into another corporation, or
to transfer all or any part of its property or assets, or the exercise of any
other of its corporate rights and powers.
(b) The Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger or arrangement, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of the
Holder against impairment. Without limiting the generality of the foregoing, the
Company will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant.
SECTION 15. Transfer; Opinions of Counsel; Restrictive Legends.
(a) Prior to any sale, transfer or other disposition of this Warrant or
the Warrant Shares, the Holder thereof will give seven (7) days' notice to the
Company of its intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer and shall be
accompanied by an opinion of counsel for the Holder reasonably satisfactory to
the Company, addressed to the Company and reasonably satisfactory in form and
substance to it stating that, in the opinion of such counsel, such transfer is a
transaction exempt from registration under the Securities Act.
(b) If such sale, transfer or other disposition may, in the opinion of
such counsel, be effected without registration under the Securities Act, the
holder shall thereupon be entitled to transfer this Warrant and the Warrant
Shares in accordance with the terms of the notice delivered by the Holder to the
Company. If, in the opinion of such counsel, such transfer may not be effected
without registration under the Securities Act, the Holder shall not be entitled
to so transfer this Warrant or the Warrant Shares unless (i) the Company elects
to file a registration statement relating to such proposed transfer and such
registration statement has become effective under the Securities Act or (ii) the
provisions of Section 11 apply.
(c) Notwithstanding the provisions of this Section 15, the Holder may at
any time transfer this Warrant or the Warrant Shares to an Affiliate or an
Associate (as such term is defined in Section 12b-2 of the Securities Exchange
Act of 1934, as amended) of the Holder.
(d)(i) Except as otherwise provided in this Section 15, each certificate
for Warrant Shares initially issued upon the exercise of this Warrant, and each
certificate for Warrant Shares issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend stating that
the shares represented by such certificate have not been
-9-
<PAGE> 10
registered under the Securities Act of 1933 and may not be transferred except in
accordance with the provisions of the Securities Act of 1933 and Section 15 of
this Warrant.
(ii) Except as otherwise provided in this Section 15, each Warrant shall
be stamped or otherwise imprinted with a legend stating that neither the rights
represented by the Warrant nor the shares issuable upon the exercise thereof
have been registered under the Securities Act of 1933 and that such rights and
shares may not be transferred except in accordance with the provisions of the
Securities Act of 1933 and Section 15 of this Warrant.
(e) Termination of Restrictions. The restrictions imposed by Section 15(a)
and the legend requirements of Section 15(d) shall terminate as to any
particular Warrant or Warrant Share (i) when and so long as such security shall
have been effectively registered under the Securities Act of 1933 and disposed
of in a public sale or distribution pursuant thereto, (ii) when such security
shall have been disposed of in accordance with Rule 144 or (iii) when the
Company shall have received opinions of counsel reasonably satisfactory to it,
which opinions shall be satisfactory in substance and form to the Company, to
the effect that such restrictions on transfer pursuant to the Securities Act of
1933 no longer apply. Whenever said restrictions and legend requirements shall
terminate as to this Warrant, as hereinabove provided, the Holder shall be
entitled to receive from the Company, at the expense of the Company, a new
Warrant bearing a legend in place of the restrictive legend described in Section
15(d) stating that the restrictions on transferability of the Warrant have been
terminated. Whenever the restrictions imposed by this Section 15 shall terminate
as to any Warrant Share, as hereinabove provided, the holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive legend
described in Section 15(d).
SECTION 16. Exchange of Warrant. This Warrant is exchangeable upon the
surrender hereof by the Holder at the office or agency of the Company, for new
Warrants of like tenor representing in the aggregate the right to subscribe for
and purchase the number of shares which may be subscribed for and purchased
hereunder from time to time after giving effect to all the provisions hereof,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares as shall be designated by the Holder hereof at the time of
such surrender.
SECTION 17. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall, upon receipt by it
of indemnity satisfactory to it, issue a new Warrant of like denomination and
tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new
Warrant shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall
be at any time enforceable by anyone.
SECTION 18. Division and Combination. Subject to Section 15, this Warrant
may be divided or combined with other Warrants upon presentation hereof at the
office or agency of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance
-10-
<PAGE> 11
with Section 15, as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. The Company shall prepare, issue and deliver at its own
expense the new Warrant or Warrants under each of Section 15 and this Section
18.
SECTION 19. Maintenance of Books. The Company agrees to maintain, at its
office or agency, books for the registration and the registration of transfer of
the Warrants.
SECTION 20. [Intentionally Omitted.]
SECTION 21. Notice. All notices and other communications under this
Warrant shall (a) be in writing, (b) be (i) sent by registered or certified
mail, postage prepaid, return receipt requested or (ii) delivered by hand, (c)
be given at the following respective addresses and to the attention of the
following Persons:
(i) if to the Company, to it at:
Bangor Hydro-Electric Company
33 State Street
P.O. Box 932
Bangor, Maine 04402-0932
Attention: President
(ii) if to the initial Holder, to it at:
PERC Management Company Limited Partnership
c/o KTI, Inc.
7000 Boulevard East
Guttenberg, NJ 07093
Attention: President
or to such other address or to the attention of such other person as the party
to whom such information pertains may hereafter specify for the purpose in a
notice to the other specifically captioned "Notice of Change of Address" and (d)
be effective or deeded delivered or furnished (i) if given by mail, on the fifth
Business Day after such communication is deposited in the mail, addressed as
above provided and (ii) if given by hand delivery, when left with an employee of
the addressee at the address of the addressee addressed as above provided,
except that notices of a change of address shall not be deemed furnished until
received.
SECTION 22. Miscellaneous. This Warrant and any term hereof may not be
changed, waived, discharged, or terminated except by an instrument in writing
signed by the party or
-11-
<PAGE> 12
holder hereof against which enforcement of such change, waiver, discharge or
termination is sought. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
SECTION 23. Date. The date of this Warrant is June 26, 1998. This Warrant,
in all events, shall be wholly void and of no effect after the close of business
on the Expiration Date, except that notwithstanding any other provisions hereof,
the provisions of Sections 11 and 15 shall continue in full force and effect
after such date as to any Warrant Shares or other securities issued upon the
exercise of this Warrant.
SECTION 24. Governing Law. This Warrant shall be construed in accordance
with and governed by the laws of the State of Maine, excluding those applicable
to choice of law.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officers as of this June 26, 1998.
BANGOR HYDRO-ELECTRIC COMPANY
By: /s/ Frederick S. Samp
----------------------------------------
Its: Vice President - Finance & Law
-12-
<PAGE> 13
Exhibit A
to Warrant
SUBSCRIPTION NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
HOLDER DESIRES TO EXERCISE THIS WARRANT
BANGOR HYDRO-ELECTRIC COMPANY
The undersigned hereby exercises the right to purchase Warrant Shares
covered by this Warrant according to the conditions thereof and herewith makes
payment of $____________, the aggregate Warrant Exercise Price of such Warrant
Shares, in full.
[NAME OF HOLDER]
By:
Title:
Number of
Warrant Shares Being
Purchased
Dated:__________________________, 19[20]
<PAGE> 14
Exhibit B
to Warrant
Attention:
Re: Exercise of Warrant, dated
Dear Sirs:
In connection with the undersigned's purchase of Common Stock of Bangor
Hydro-Electric Company upon exercise of a warrant therefor, the undersigned
confirms and agrees as follows:
1. As the purchaser of the shares of Common Stock in a private
placement not registered under the Securities Act of 1933, as amended (the
"Act"), the undersigned is purchasing such shares for its own account for
investment and (subject to the disposition of its property being at all
times within its control) not with a view to any resale, distribution or
other disposition thereof, and the undersigned is proceeding on the
assumption that it must bear the economic risk of the investment for an
indefinite period, since the shares of Common Stock may not be sold except
as provided in paragraph 2 below.
2. The undersigned agrees that, if in the future the undersigned
should decide to dispose of the shares of Common Stock (such disposition
not being presently foreseen or contemplated), the undersigned will not
offer, sell, transfer or exchange such shares of Common Stock, except
under conditions that would not violated the Act or any applicable
securities laws.
3. The undersigned is purchasing the shares of Common Stock pursuant
to an exemption from the registration requirements of the Act and from
registration or qualification requirements under applicable state
securities laws.
If administrative or legal proceedings are commenced or threatened in
connection with which this notice is or would be relevant, the undersigned
irrevocably authorizes Bangor Hydro-Electric Company to produce this notice or a
copy thereof to any interested party in such proceedings.
Date:
[NAME OF HOLDER]
By:
Title:
<PAGE> 1
Exhibit 4.6
THIRD AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP
OF
PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP
This THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of
June 26, 1998, relative to the Maine limited partnership known as PENOBSCOT
ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP (the "Partnership") is entered into
by and among:
PERC MANAGEMENT COMPANY LIMITED PARTNERSHIP a Maine limited
partnership ("PMC");
ENERGY NATIONAL, INC., a Utah corporation ("ENI"); and
Upon their admission as Limited Partners in the Partnership, the
EQUITY CHARTER MUNICIPALITIES which exercise their Equity Participation Options
to become Limited Partners in the Partnership.
PRELIMINARY STATEMENT
The Partnership was originally formed in 1983 for the purpose of constructing,
owning and operating a waste to energy facility in the Town of Orrington, Maine.
The Partnership currently exists pursuant to a Second Amended and Restated
Agreement and Certificate of Limited Partnership dated May 15, 1986 which has
been amended by the First and Second Amendments thereto dated June 14, 1991 and
September 29, 1997, respectively (the "Existing Partnership Agreement"). The
Existing Partnership Agreement has been supplemented by a Restated Certificate
of Limited Partnership filed with the Maine Secretary of State on October 14,
1997.
The purpose of this Third Amended and Restated Agreement of Limited Partnership
Agreement (the "Partnership Agreement") is to (i) confirm the complete
withdrawal of The Prudential Insurance Company of America ("PRU") from the
Partnership effective November 12, 1997; (ii) provide for the admission of
Equity Charter Municipalities as new Limited Partners of the Partnership
consistent with their respective Equity Participation Options; (iii) allow for
the possible redemption of the interests of all of the Partners (other than
Equity Charter Municipalities) and the admission of Purchasing Municipalities in
accordance with purchase options exercisable in the year 2018; (iv) amend and
restate in its entirety the Existing Partnership Agreement and (v) confirm the
Partners' election to continue the Partnership's business in accordance with the
Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and of other good and valuable consideration, the receipt and sufficiency
of which are hereby
<PAGE> 2
acknowledged, the parties agree as follows:
ARTICLE 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
1.1 Affiliate. "Affiliate" means an "affiliate," as defined in Rule
405 under the Securities Act.
1.2 Aggregate Prepayment Amount. "Aggregate Prepayment Amount" means
the aggregate amount, computed from time to time, of the principal amount of the
FAME Bonds, or other Partnership borrowings, that have been prepaid, purchased,
cancelled or defeased by the application of Performance Credits in accordance
with the rights of the Equity Charter Municipalities under their Waste Disposal
Agreements.
1.3 Amending Charter Municipality. "Amending Charter Municipality"
means any Charter Municipality that has entered into a Waste Disposal Agreement
on or before September 30, 1998, or otherwise qualifies as an Amending Charter
Municipality under a Waste Disposal Agreement.
1.4 Associate. "Associate" means an "associate," as defined in Rule
405 under the Securities Act.
1.5 Bankruptcy. "Bankruptcy," with respect to the Partnership or a
Partner thereof, means (a) an adjudication that such Partner or Partnership is
bankrupt or insolvent, or the entry of an order for relief under the Federal
Bankruptcy Code, (b) the making by it of an assignment for the benefit of
creditors, (c) the filing by it of a petition in bankruptcy or a petition for
relief under any section of the Federal Bankruptcy Code or any other applicable
bankruptcy or insolvency statute or an answer admitting or failing to deny the
allegations of any such petition, (d) the filing against it of any such petition
(unless such petition is dismissed within 60 days from the date of filing
thereof), or (e) the appointment of a trustee, conservator or receiver for all
or a substantial part of its assets (unless such appointment is vacated or
stayed within 60 days from its effective date).
1.6 Bond Indenture. "Bond Indenture" means the trust agreement
entered into between the Finance Authority of Maine and The Chase Manhattan
Bank, as Trustee, in connection with the FAME Bonds.
1.7 Bond Prepayment Date. "Bond Prepayment Date" has the meaning,
given such term in Section 3.2.
1.8 Capital Transaction. "Capital Transaction" means any Partnership
transaction the proceeds of which are Net Sale or Refinancing Proceeds.
1.9 Charter Municipality. "Charter Municipality" means each of the
municipalities,
2
<PAGE> 3
counties, refuse disposal districts, public waste disposal corporations or other
quasi municipal corporations which remains a party to a First Amended and
Restated Waste Disposal Agreement with the Partnership as of the date of this
Partnership Agreement.
1.10 Capitalized Management Fee. "Capitalized Management Fee" means
the unpaid management fees due the General Partners accrued on the books of the
Partnership through the date hereof.
1.11 Code. "Code" means the United States Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder.
1.12 Consent. "Consent" means the written consent of a Person,
except that in the case of Equity Charter Municipalities it means the written
consent of MRC which shall be binding on all Equity Charter Municipalities.
1.13 CPI-U. "CPI-U" means the Consumer Price Index All Urban
Consumers (U.S. Cities average, all items) as published bi-monthly by the United
States Bureau of Labor Statistics in a report currently entitled "CPI Detailed
Report," or if this index ceases to be published, a comparable index designated
by the General Partners.
1.14 Custodian. "Custodian" means Bangor Savings Bank or other
financial institution designated by MRC as its agent to receive and disburse
Performance Credits for the benefit of Equity Charter Municipalities and to act
as Custodian for the limited partnership interests in the Partnership acquired
by the Equity Charter Municipalities.
1.15. Disposition. "Disposition" means any sale or exchange (either
in one transaction or a series of transactions) to one or more buyers pursuant
to a plan of disposition formulated by the General Partners or other disposition
including, but not limited to, an involuntary disposition giving rise to
insurance or other proceeds (except to the extent such proceeds are included in
Net Cash Flow) of a material amount of the Partnership's property outside of the
ordinary course of business.
1.16 Dissolution Event. "Dissolution Event" means any of the events
set forth in Section 12.1.
1.17 Distributable Cash. "Distributable Cash" means the amount
calculated in accordance with Schedule E to the Waste Disposal Agreements.
1.18 ENI. "ENI" means Energy National, Inc. a Utah corporation, its
successors and assigns.
1.19 Equity Charter Municipality. "Equity Charter Municipality"
means any Amending Charter Municipality that has timely exercised its option to
participate in the purchase of limited partnership interests in the Partnership
in accordance with Article XIX Paragraph C of a Waste
3
<PAGE> 4
Disposal Agreement. Upon any such timely exercise, the name and address of each
qualifying Equity Charter Municipality shall be listed on Schedule A attached to
this Agreement.
1.20 Equity Participation Options. "Equity Participation Options"
means the right given to Amending Charter Municipalities under their respective
Waste Disposal Agreements to become Limited Partners in the Partnership.
1.21 Equity Reserves. "Equity Reserves" means the following reserves
to be established by the Partnership under the Bond Indenture: The Bangor Hydro
Funded Account (comprised of the MRC Retention Subaccount and the Borrower
Retention Subaccount); the MRC Prepayment Account and the Borrower Reserve
Account, all constituting part of the Bond Prepayment and Reserve Account.
1.22 ESOCO. "ESOCO" means ESOCO Orrington, Inc., a Utah corporation
and an indirect, wholly-owned subsidiary of ENI.
1.23 Existing Debt. "Existing Debt" means the tax exempt bonds
issued by the Town to finance the initial construction of the Facility, which
bonds remain unpaid as of the date of this Agreement, and obligations associated
with equipment leases shown in Schedule B, as the same may be amended or
supplemented in the future.
1.24 Facility. "Facility" means the 25.3 megawatt refuse derived
fuel waste-to-energy facility owned and operated by the Partnership in the Town.
1.25 FAME Bonds. "FAME Bonds" means the $44,995,000 Electric Rate
Stabilization Revenue Refunding Bonds Series 1998A and Series 1998B (Penobscot
Energy Recovery Company, L.P.) to be issued by FAME. or any authorized
replacement financing entered into by the Partnership.
1.26 Fiscal Year. "Fiscal Year" means the tax year of the
Partnership, which shall be the calendar year.
1.27 GAAP. "GAAP" means generally accepted accounting principles in
the United States in effect from time to time.
1.28 General Partner. "General Partner" means PERC Management
Company Limited Partnership, a Maine limited partnership ("PMC") and Energy
National, Inc., a Utah corporation ("ENI"), or their respective successors or
lawful assigns.
1.29 GP Sharing Ratios. "GP Sharing Ratios" means the following
percentages: PMC's GP Sharing Ratio shall be seventy percent (70%) and ENI's GP
Sharing Ratio shall be thirty percent (30%).
1.30 Independent Accountant. "Independent Accountant" means such
nationally
4
<PAGE> 5
recognized firm of certified public accountants as the General Partners may
select from time to time.
1.31 Limited Partner. "Limited Partner" means PERC Management
Company Limited Partnership, a Maine limited partnership ("PMC"); Energy
National, Inc., a Utah corporation ("ENI"), and the Equity Charter
Municipalities, when and if admitted as Limited Partners, or their permitted
successors or lawful assigns.
1.32 Liquidator. "Liquidator" means the Person who shall be
responsible for taking all action necessary or appropriate upon the liquidation
of the Partnership to wind up its affairs and distribute its assets pursuant to
Article 12 of this Agreement.
1.33 L.P. Sharing Ratios. "LP Sharing Ratios" means with respect to
each Limited Partner, the following percentages (which represents a 90% share of
the Partnership; the remaining 10% being the General Partner share):
ENI: 28.5714% less (28.5714% times the
Municipal Share)
PMC: 71.4286% less (71.4286% times the
Municipal Share)
Equity Charter Municipalities: The Municipal Share (to be allocated by
the Partnership (in the aggregate): among
the Equity Charter Municipalities
consistent with the most recent MRC
Allocation Certification).
1.34 Management Fee. "Management Fee" means a fee equal to $518,994
per year (adjusted annually on each January 1, commencing January 1, 1992, by
the percentage change from the immediately preceding January 1 in the CPI-U)
that the Partnership shall pay to the General Partners pursuant to Section 6.4.
1.35 Managing General Partner. "Managing General Partner" means PMC,
its successors and assigns.
1.36 Minimum Gain. "Minimum Gain" means the excess of the
outstanding balance of all nonrecourse indebtedness which is secured by the
property of the Partnership over the adjusted basis of such property for Federal
income tax purposes.
1.37 Moody's. "Moody's" means Moody's Investor Services, Inc.
1.38 MRC. "MRC" means the non profit corporation known as the
Municipal Review Committee, Inc. formed by the Charter Municipalities to assist
them in their dealings with the Partnership and which serves as agent for all
Equity Charter Municipalities.
1.39 MRC Allocation Certification. "MRC Allocation Certification"
means the certification received by the Partnership from the MRC on the first
Bond Prepayment Date and continuing on each subsequent Bond Prepayment Date,
stating the proportionate interests in the Partnership held by each of the
Equity Charter Municipalities as of the date of the Certification, which
5
<PAGE> 6
Certification the Partnership may rely upon for all purposes.
1.40 Municipal Share. "Municipal Share" means the product (expressed
as a percentage) obtained by multiplying 5/9 times the Aggregate Prepayment
Amount divided by the Purchase Price, which product shall be re-computed as of
each Bond Prepayment Date. (e.g., If Performance Credits totaling $930,000 are
used to prepay bonds, the Municipal Share is approximately 1.666%: 5/9 x
(930,000 / 31,000,000) x 100).
1.41 "Net Cash Flow" means, for any period, the amount, computed on
a cash basis, in accordance with generally accepted accounting principles, of:
(i) the sum of (A) cash gross receipts, all cash investment income
of the Partnership, and all cash received from any refinancing, sale or other
event, and (B) any amounts released from reserves maintained by the Partnership,
including those maintained pursuant to the FAME Bonds, reduced by:
(ii) the sum of (A) cash disbursements of the Partnership for
operating expenses (including payment of all Partnership administration,
accounting, professional and similar expenses as determined by the General
Partners, and the Management Fee), for principal payments on debt permitted
hereby, interest, other expenses, including any debt repayments required or
elected to be made in connection with any refinancing, sale or other event,
capital expenditures, payments required under any agreement to which the
Partnership is a party, including, without limitation, payments to Charter
Municipalities or Amending Charter Municipalities pursuant to an applicable long
term waste disposal agreement or Waste Disposal Agreement, and payments to
Bangor Hydro Electric Company, MRC and others pursuant to the Surplus Cash
Agreement dated as of June 26, 1998, and (B) any increase in reserves required
by any lender and any increase in working capital reserves as determined in the
discretion of the General Partners; provided that any cash received, expenses
incurred and disbursements made with respect to liquidation of the Partnership
or Net Sale or Refinancing Proceeds shall not be taken into account in computing
Net Cash Flow and further provided that the Indenture Residual (as defined in
the Surplus Cash Agreement) shall not be taken into account in computing Net
Cash Flow; the Indenture Residual to be distributed exclusively in accordance
with the Surplus Cash Agreement.
1.42 Net Sale or Refinancing Proceeds. "Net Sale or Refinancing
Proceeds" means the net proceeds remaining from any sale or Disposition or
taking of all or substantially all of the Partnership's property (including,
without limitation, eminent domain or condemnation proceeds or proceeds from a
Transfer under a threat of condemnation or eminent domain proceedings, title
insurance proceeds and casualty insurance proceeds) or any refinancing of the
FAME Bonds, in either case, after the payment of all costs and expenses related
thereto, the payment for any capital expenditures or expenses for which such
proceeds are to be used, and the setting aside of any reserves as reasonably
determined by the General Partners.
1.43 Net Tax Losses. "Net Tax Losses" means the net losses and other
allowable deductions of the Partnership, as determined for Federal income tax
purposes.
6
<PAGE> 7
1.44 Notice. "Notice" means written notice delivered in accordance
with Section 14.3.
1.45 Operation and Maintenance Agreement. "Operation and Maintenance
Agreement" means the Operation and Maintenance Agreement dated as of June 30,
1989, and amended as of January 1, 1992 between the Partnership and ESOCO, as
the same may be further amended, modified or supplemented in accordance with its
terms.
1.46 Partners. "Partners" means the General Partners and the Limited
Partners, collectively; "Partner" refers to any one of the Partners, or its
successors or assigns.
1.47 Partnership. "Partnership" means Penobscot Energy Recovery
Company, Limited Partnership, a Maine limited partnership, which is the subject
of this Partnership Agreement, as such Partnership may from time to time be
constituted.
1.48 Partnership Act. "Partnership Act" is the Maine Uniform Limited
Partnership Act, as it may be amended from time to time.
1.49 Partnership Capital Contribution Account. "Partnership Capital
Contribution Account" means the account maintained by the Partnership pursuant
to Section 3.10.
1.50 Performance Credits. "Performance Credits" means, for purposes
of this Agreement, that portion of Distributable Cash payable to the Amending
Charter Municipalities under the Waste Disposal Agreements (constituting 1/3 of
all Distributable Cash after deducting from the Amending Charter Municipalities'
share the amount of Performance Credits payable to Charter Municipalities who
are not Amending Charter Municipalities), including without limitation, that
portion of the MRC Prepayment Account and the MRC Retention Subaccount released
for the benefit of Equity Charter Municipalities as provided in the Bond
Indenture.
1.51 Person. "'Person" means any individual, firm, corporation,
trust, partnership or other entity.
1.52 PMC. "PMC" means PERC Management Company Limited Partnership, a
Maine limited partnership, its successors and assigns.
1.53 Power Purchase Agreement. "Power Purchase Agreement" means the
Power Purchase Agreement dated as of June 21, 1984, between Bangor
Hydro-Electric Company and the Partnership, as amended by Amendments No. 1 and
No. 2 and as such agreement may be further amended from time to time.
1.54 Purchase Price. "Purchase Price" means $31 million
($31,000,000).
1.55 Purchasing Municipality. "Purchasing Municipality" means any
Amending
7
<PAGE> 8
Charter Municipality which exercises its option under Section 9.3 of the
Partnership Agreement to acquire, together with other Purchasing Municipalities,
all of the Partnership interests in the Partnership, other than those held by
the Equity Charter Municipalities.
1.56 Qualified Investments. "Qualified Investments" means:
(a) any evidence of indebtedness, maturing not more than two years
after the date of` purchase, issued by the United States of America, or any
instrumentality or agency thereof and guaranteed fully as to principal, interest
and premium, if any, by the United States of America;
(b) any certificate of deposit issued by a commercial banking
institution which is a member of the Federal Reserve System and which has a
combined capital and surplus and undivided profits of not less than
$500,000,000;
(c) commercial paper issued by a corporation (other than the General
Partners or any of their respective Affiliates) organized and existing under the
laws of any state within the United States of America with a rating, at the time
as of which any determination thereof is to be made, of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P;
(d) any repurchase agreement which by its terms matures not later
than five days from its date of execution with any bank or trust company
organized under the laws of any state of the United States of America or any
national banking association (provided such bank, trust company or national
banking association has a combined capital, surplus and undivided earnings of
not less than $500,000,000) any government bond dealer reporting to, trading
with, and recognized as a primary dealer by the Federal Reserve Bank of New
York, which agreement is secured by any one or more of the securities described
in clause (a) above, so long as such securities shall at all times have a market
value (exclusive of accrued interest) not less than one hundred three percent
(103 percent) of the full amount of the repurchase agreement, dates of maturity
not in excess of seven years and shall be delivered to another state of the
United States of America or any national banking association, as custodian;
(e) direct and general obligations of any state of the United States
of America, or any political subdivision thereof the payment of the principal of
and interest on which the full faith and credit of such state or political
subdivision is pledged, provided that at the times of their purchase such
obligations are rated, without giving effect to the addition of a "plus" to any
rating, in either of the two highest rating categories by S&P or Moody's and
mature not more than five years after the date of purchase;
(f) variable rate obligations required to be redeemed or purchased
by the obligor or its agent or designee upon demand of the holder thereof
secured as to such redemption or purchase requirement by a liquidity agreement
with a corporation and as to the payment of interest and principal either upon
maturity or redemption (other than upon demand by the holder thereof) thereof by
an unconditional credit facility of a corporation, provided that the variable
rate obligations themselves are rated, without giving effect to the addition of
a "plus" to any rating, in the highest rating categories in
8
<PAGE> 9
respect to its long term rating, if any, and in either of the two highest
categories in respect to its short term rating by either S&P or Moody's and that
the corporations providing the liquidity agreement and credit facility have, at
the date of acquisition of the variable rate obligation by the company, an
outstanding issued of unsecured, uninsured and unguaranteed debt obligations
rated, without giving effect to the addition of a "plus" to any rating, in
either of the two highest rating categories by either S&P or Moody's; and
(g) any Eurodollar certificate of deposit which by its terms matures
not later than 30 days from its date of issuance and which is issued by any bank
or trust company organized under the laws of any state of the United States of
America or any national banking association (provided such bank, trust company,
or national banking association has capital and unimpaired surplus of not less
than $500,000,000), and
(h) shall exclude any of the foregoing which may be issued by any of
the Charter Municipalities.
1.57 Qualifying Facility. "Qualifying Facility" means a small power
production or cogeneration facility that is a qualifying facility under the
Public Utility Regulatory Policies Act of 1978 and regulations promulgated
thereunder and is a "small power producer" as such term is used in the Maine
Small Power Production Facilities Act.
1.58 Securities Act. "Securities Act" means the Securities Act of
1933, as amended, and the regulations promulgated thereunder.
1.59 Service. "Service" means the United States Internal Revenue
Service.
1.60 S&P. "S&P" means Standard and Poor's Rating Services a division
of McGraw Hill.
1.61 Substitute Limited Partner. "Substitute Limited Partner" means
a Person who has become a Substitute Limited Partner pursuant to Section 10.4 of
this Agreement.
1.62 Surplus Cash Agreement. "Surplus Cash Agreement" means the
agreement among the Partnership, Bangor Hydro-Electric Company and the MRC dated
June 26, 1998, as the same may be amended from time to time, which agreement
describes the understandings of the parties relative to the application of cash
to be released from the Bond Indenture by the Trustee.
1.63 Tax Return. "Tax Return" means the annual Federal income tax
return of the Partnership, whether on Form 1065 or such other form as may
hereafter be prescribed by the Service.
1.64 Town. "Town" means the Town of Orrington, Maine.
1.65 Transfer. "Transfer" means a sale, transfer, assignment,
hypothecation, or other disposition of an interest in the Partnership.
9
<PAGE> 10
1.66 Transferee. "Transferee" means a purchaser, transferee,
assignee or pledgee of, or Person who takes an interest by means of
hypothecation in, a Partnership interest.
1.67 Transferor. "Transferor" means a seller, assignor or
hypothecator of a Partnership interest.
1.68 Waste Disposal Agreement. "Waste Disposal Agreement" means each
Second Amended, Restated and Extended Waste Disposal Agreement between the
Partnership and an Amending Charter Municipality as the same may be entered into
and amended from time to time.
ARTICLE 2. THE PARTNERSHIP AND ITS BUSINESS.
2.1 Continuation. The Partners hereby agree to continue the
Partnership under the laws of the State of Maine. The Equity Charter
Municipalities may be, and hereby are, admitted to the Partnership as Limited
Partners. A General Partner shall take or cause to be taken all such further
actions as are appropriate for the Partnership's continuance under the
Partnership Act, including any required filings with the Office of the Secretary
of State of the State of Maine.
2.2 Name of Partnership. The name of the Partnership shall continue
to be "Penobscot Energy Recovery Company, Limited Partnership." The Partnership
may use the assumed name "Penobscot Energy Recovery Company, L.P."
2.3 Address of Partnership. The address of the Partnership shall be
110 Main Street, Suite 1308, Saco, Maine, 04072, or such other location as
determined by the General Partners.
2.4 Purpose. The sole purpose of the Partnership shall be to own,
maintain, enhance and operate the Facility, and to undertake any and all other
acts and things necessary, proper, convenient, or advisable to effectuate and
carry out such purpose.
2.5 Term. The term of the Partnership shall continue until December
31, 2018, unless the Partnership is sooner dissolved as herein provided or by
operation of law.
2.6 Place of Business. The principal office and place of business of
the Partnership shall be at 29 Industrial Way, Orrington, Maine. The Partnership
may also maintain such other offices at such other places as the General
Partners may deem advisable.
2.7 Addresses of the Partners.
PERC Management Company Limited Partnership
110 Main Street
Suite 1308
Saco, Maine 04072
10
<PAGE> 11
Energy National, Inc.
1221 Nicollet Mall
Suite 700
Minneapolis, MN 55403-2445
Equity Charter Municipalities
c/o Municipal Review Committee, Inc.
Eastern Maine Development Corporation
One Cumberland Place
Bangor, ME 04401
ARTICLE 3. INVESTMENT OBLIGATIONS.
3.1 Additional Capital Contributions of PMC and ENI. Neither PMC nor
ENI is required to make any additional Capital Contributions to the Partnership.
3.2 (a) Equity Charter Municipalities. Pursuant to their purchase
rights set forth in their Waste Disposal Agreements, the Equity Charter
Municipalities have the right, exercisable in the sole discretion of the MRC, to
make Capital Contributions to the Partnership by application of their
Performance Credits, in an aggregate amount not to exceed $31 million, in
exchange for which they shall be allocated limited partnership interests
sufficient to provide them (on a fully subscribed basis) with a 5/9th interest
as Limited Partners in the Partnership constituting an aggregate 50% interest in
the total capital and profits of the Partnership. The Partnership is obligated
to use the proceeds of all such Performance Credits as directed by the MRC and
in accordance with the Surplus Cash Agreement to prepay, purchase and cancel or
defease, or otherwise retire the FAME Bonds or other Partnership borrowings.
(b) Manner of Exercise. Equity Charter Municipalities, acting
through the MRC, may exercise their purchase rights no more frequently than once
per Calendar Quarter (as defined in the Bond Indenture) by delivering notice of
exercise to the Managing General Partner. The amount to be applied toward such
purchases, and the timing of such purchases, shall be determined as follows:
(i) with respect to transfers to the Special Redemption
Account under Section 7(a) of the Surplus Cash
Agreement, the purchase amount shall equal the amount so
transferred to the Special Redemption Account, effective
as of the date of transfer;
(ii) with respect to the purchase and cancellation of Bonds
under Section 7(b)(I) of the Surplus Cash Agreement, the
defeasance of Bonds under Section 7(b)(ii) of the
Surplus Cash Agreement or the optional redemption of
Bonds under Section 7(b)(iii) of the Surplus Cash
Agreement, the purchase amount shall equal the principal
amount of the Bonds so purchased and canceled, defeased
and discharged or redeemed, effective as of the date of
cancellation, discharge or
11
<PAGE> 12
redemption, as applicable.
Each such effective date is a "Bond Prepayment Date" hereunder. If a
cancellation after purchase, and redemption and/or defeasance occurs on
different dates in the same calendar quarter, for purposes of the effective date
of the allocation of limited partnership interests acquired, the Bond Prepayment
Date shall be the later of such dates. On or before such Bond Prepayment Date
MRC shall deliver to the Partnership the MRC Allocation Certification specifying
the respective ownership interest of the Equity Charter Municipalities as of
that Date.
3.3 Additional Capital Contributions. Except as provided in this
Article 3 and Section 12.3, Partners shall not be required to make any
additional Capital Contributions or loans to the Partnership.
3.4 No Interest on Capital. No interest shall be paid to any Partner
on all or a portion of a Capital Contribution or on a balance in its Capital
Account.
3.5 Capital Withdrawals and Returns. Partners shall not have the
right to withdraw or reduce their contributions to the capital of the
Partnership except in accordance with this Agreement. Except as otherwise
provided herein, Partners shall not have the right to demand or receive
property, other than cash, in return for their Capital Contribution or have
priority over another Partner, either as to the return of contribution of
capital or as to profits, losses, or distributions, or as to compensation by way
of income.
3.6 Waiver of Partition Right. The Partners hereby waive and forfeit
all rights arising out of statute or operation of law to seek, bring or maintain
in any court an action for partition pertaining to any asset of the Partnership.
3.7 Capital Accounts. A Capital Account shall be maintained with
respect to each Partner in accordance with Federal income tax accounting
principles and Treasury Regulation Section 1.704-1(b). Each Capital Account
shall be credited with the amount of the cash contribution to the capital of the
Partnership by such Partner, the fair market value of property contributed to
the Partnership by such Partner (net of liabilities assumed with respect to such
interest and liabilities to which such contributed property is subject), the
distributive share of partnership income and gain (or items thereof) as
allocated to such Partner pursuant to Section 4.1, and the distributive share of
income exempt from tax. Each Capital Account shall be charged for the amount of
any loss or deduction (or items thereof) allocated to such Partner pursuant to
Section 4.1, the amount of all distributions in cash to such Partner pursuant to
this Agreement, the fair market value of property distributed to such Partner
(net of liabilities assumed with respect to such interest and liabilities to
which such distributed property is subject), and the distributive share of
expenditures of the Partnership described in Section 705(a)(2)(B) of the Code
(which share shall be determined in accordance with the allocable interests in
the Partnership). The following rules shall apply in maintaining Capital
Accounts with respect to interests in the Partnership:
12
<PAGE> 13
(a) A Partner who has more than one interest in the Partnership
shall have a single Capital Account that reflects all such interests, regardless
of the class of interests owned by such Partner (e.g., general or limited) and
regardless of the time or manner in which such interests were acquired.
(b) For purposes of this Section, amounts described in Section 709
of the Code (other than amounts with respect to which an election is in effect
under Section 709(b) of the Code) shall be treated as described in Section
705(a)(2)(B) of the Code.
(c) If property is distributed by the Partnership, Capital Accounts
shall be adjusted as though such property had been sold on the date of such
distribution for its then fair market value, and any gain or loss on such sale
had been allocated in accordance with Section 4.1.
(d) If property is contributed to the Partnership, Capital Accounts
shall be adjusted in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(d)(3).
(e) Capital Accounts shall be adjusted, in accordance with Treasury
Regulation Section 1.704-1(b)(2)(iv)(j), to reflect any adjustments to the basis
of Partnership property under Section 48(q) of the Code.
(f) if, in any taxable year, the Partnership has in effect an
election under Section 754 of the Code, Capital Accounts shall be adjusted in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
3.8 Capital Contribution Account. A Capital Contribution Account
shall be maintained with respect to each Partner. The Capital Contribution
Account shall be credited with the amount of the Capital Contributions each made
by each Partner .
3.9 Partnership Capital Contribution Account. A Partnership Capital
Contribution Account shall be maintained with respect to the Partnership as a
whole. The Partnership Capital Contribution Account shall be credited with the
amount of all Capital Contributions made by all Partners. The balance in the
Partnership Capital Contribution Account at any time shall reflect the sum of
the balances reflected in the separate Capital Contribution Accounts of the
Partners.
3.10 Optional Loans from General Partners and Affiliates. The
Partnership may borrow funds from the General Partners or their Affiliates,
provided that no General Partner or Affiliate shall be obligated to make such
loans. Any such loans ("General Partner Loans") shall be on terms no less
favorable to the Partnership than would be reasonably available to the
Partnership from non affiliated commercial lenders. To the extent General
Partner Loans have not been repaid prior to the determination of Distributable
Cash, General Partner Loans shall be repaid as a priority in accordance with
Section 5.1.
13
<PAGE> 14
ARTICLE 4. PROFITS AND LOSSES.
4.1 Allocation of Profits and Losses.
(a) General Rule. (i) All Partnership items of income, gain, loss,
deduction or credit (including without limitation investment tax credits and
accelerated cost recovery deductions), other than those profits and losses
arising from Capital Transactions, as determined for Federal income tax
purposes, shall be allocated in the same proportion as the Partners share in Net
Cash Flow for the period under Section 5.1(c).
(ii) Notwithstanding the foregoing, in no event shall a loss for any
year be allocated to a Limited Partner to the extent it would cause the
aggregate negative Capital Accounts of the Limited Partners having negative
Capital Accounts (such aggregate to be stated as a positive number) to exceed
the sum of Minimum Gain on the last day of such year. For purposes of this
subparagraph (ii), the Capital Accounts of ENI and PMC shall be deemed to
include only those adjustments made with respect to ENI or PMC in its capacity
as a Limited Partners.
(iii) Notwithstanding the foregoing, except as provided in
subparagraph (ii) above, in the event any Equity Charter Municipality, as a
Limited Partner, unexpectedly receives any adjustments, allocations or
distributions described in Treasury Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6), then items of Partnership income and gain
shall be specially allocated to such Limited Partner in an amount and manner
sufficient to eliminate as quickly as possible the Adjusted Deficit Capital
Account Balance in such Limited Partner's Capital Account created by such
adjustments, allocations, or distributions. Any special allocations of items of
income or gain pursuant to this subsection shall be taken into account in
computing subsequent allocations of other net profits, net losses and all other
items allocated to the Limited Partner pursuant to Article 4.1 shall, to the
extent possible, be equal to the net amount that would have been allocated to
the Limited Partner pursuant to the provisions of this Article 4.1 had such
unexpected adjustments, allocations or distributions not occurred. "Adjusted
Deficit Capital Account Balance" shall mean the deficit Capital Account balance
of a Limited Partner, if any, as of the end of the relevant fiscal year of the
Partnership, after giving effect to the following: (A) credit to such Capital
Account any amounts the Limited Partner is obligated to restore pursuant to the
penultimate sentence of Treasury Regulations Section 1.704-1(b)(4)(iv)(f), and
(B) debit to such Capital Account the items described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
(iv) Except as provided in subparagraph (ii) above, in the event an
Equity Charter Municipality, as a Limited Partner, has an Adjusted Deficit
Balance Capital Account at the end of any Partnership fiscal year which is in
excess of the sum of (A) the amount such Limited Partner is obligated to restore
pursuant to any provision of this Agreement and (B) the amount such Limited
Partner is deemed to be obligated to restore pursuant to the penultimate
sentence of Treasury Regulations Section 1.704-1(b)(4)(iv)(f), such Limited
Partner shall be specially allocated items of Partnership income and gain in the
amount of such excess as quickly as possible.
14
<PAGE> 15
(b) Capital Transactions. (i) Any net gain realized by the
Partnership arising from a Capital Transaction shall be allocated among the
Partners and credited to their Capital Accounts (after crediting or charging
thereto the appropriate portion of all net profits or net losses of the
Partnership for the current year in accordance with Section 4.1(a) and after
distributing all amounts to be distributed to the Partners pursuant to Article 5
hereof (including the Net Proceeds of Sale or Refinancing arising out of the
Capital Transaction giving rise to the allocation hereunder) in the following
order of priority (in each case, reflecting in the balance of the Capital
Accounts any profit or loss credited or charged, as the case may be, pursuant to
the preceding paragraph):
First, if the Capital Account of any Limited Partner has a negative
balance, gain shall first be credited to the Capital Accounts of the Limited
Partners which have such negative balances, in proportion to such negative
balances, until such time as the Capital Accounts of all such Limited Partners
equal zero;
Second, if the Capital Account of any General Partner has a negative
balance, gain shall next be credited to the Capital Accounts of the General
Partners which have such negative balances, in proportion to such negative
balances, until such time as the Capital Accounts of all such General Partners
equal zero; and
Third, any remaining gain shall be allocated to the Partners in the
proportion in which they share distributions of Net Cash Flow for the applicable
period under Section 5.1(c).
(ii) Net losses incurred by the Partnership arising from Capital
Transactions shall be charged to the Capital Accounts of the Partners (after
crediting or charging thereto the appropriate portion of all net profits or net
losses of the Partnership for the current year in accordance with Section 4.1(a)
and after distributing all amounts to be distributed for such year pursuant to
Article 5) in the following order of priority:
First, loss shall be charged to the Capital Accounts of the Partners
in proportion to and to the extent of the positive Capital Accounts of the
Partners; and
Second, the balance of any loss shall be charged in the proportion
in which profits and losses are allocated for the applicable period under
subparagraph (i) paragraph (a) above without regard to subparagraph (ii)
thereof.
4.2 Restoration of Negative Capital Accounts. Except as may be
required by Section 12.3, or in respect of any negative balance resulting from a
distribution in contravention of this Agreement, at no time during the term of
the Partnership shall a Partner with a negative balance in its Capital Account
have any obligation to the Partnership or to another Partner to restore such
negative balance.
4.3 Partnership Adjustments. In the event of the Transfer of all or
any part of the Partnership interest of a Partner or upon the death of a Partner
(if such Partner is a natural person), the Partnership may elect to adjust the
basis of Partnership property. Any increase or decrease in the
15
<PAGE> 16
amount of any item of income, gain, loss, deduction or credit attributable to an
adjustment to the basis of Partnership assets made pursuant to a valid election
under Sections 734, 743 and 754 of the Code, and pursuant to corresponding
provisions of applicable state and local income tax laws, shall be charged or
credited, as the case may be, to those Partners entitled thereto under such
laws.
4.4 Allocations to Transferred Partnership Interests. Profits,
losses, gains, deductions and credits allocated to a Partnership interest
assigned or reissued during a Fiscal Year shall be allocated to each Person who
was the holder of the Partnership interest during such Fiscal Year, in
proportion to the number of days that each such holder was recognized as the
owner of such Partnership interest during such Fiscal Year or during an interim
period in respect of which the books of the Partnership shall be closed, as the
case may be, or in any other manner required or permitted by the Code and
selected by the General Partners in accordance with this Agreement, without
regard to the results of Partnership operations or the date, amount or recipient
of any distributions which may have been made with respect to such Partnership
interest. The effective date of the assignment shall be (a), in the case of a
voluntary assignment, the actual date the assignment as recorded on the books of
the Partnership, or (b) in the case of involuntary assignment, the date of the
operative event.
ARTICLE 5. DISTRIBUTIONS.
5.1 Net Cash Flow. Subject to compliance with each applicable Waste
Disposal Agreement and the Surplus Cash Agreement, the Partnership shall
distribute its Net Cash Flow quarterly as follows:
(a) First, to repay General Partner Loans in accordance with their
terms;
(b) Second, until the Capitalized Management Fee has been paid in
full, ten percent (10%) to the General Partners to pay the Capitalized
Management Fee; and
(c) Third, the balance ten percent (10%) to the General Partners in
accordance with the GP Sharing Ratios and ninety percent (90%) to the Limited
Partners in accordance with the LP Sharing Ratios.
Upon delivery of the Partnership's annual audit, the allocation of
Net Cash Flow for the year covered by the audit shall be adjusted to accord with
the audit, and consistent with the audit, allocations among Partners shall be
prorated for such year on a daily basis. Any credits or debits due to or from
any Partner with respect to such annual period shall be applied or credited to
the next distribution of Net Cash Flow, until an equalization for the audited
year has been fully implemented. Allocations to the Equity Charter
Municipalities shall be in accordance with the MRC Allocation Certification in
effect as of each Bond Prepayment Date.
5.2 Net Sale or Refinancing Proceeds. The Partnership shall
distribute Net Sale or Refinancing Proceeds within 120 days of the event giving
rise to such proceeds in the following manner:
16
<PAGE> 17
First, to those Partners having positive Capital Accounts in
proportion to such accounts until such accounts have been reduced to zero; and
Second, to all Partners in the same manner as it distributes Net
Cash Flow of the applicable period under Section 5.1.
5.3 Distributions in Kind. Partners shall not be entitled to receive
as distributions from the Partnership any Partnership asset other than money.
The General Partners shall not be permitted to distribute assets to the Limited
Partners in kind.
5.4 Distribution Restrictions. The Partners acknowledge and consent
to the provisions of the FAME Bonds and other Partnership borrowings which
restrict distributions to Partners and agree to abide by such restrictions.
Article 6. POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNERS.
6.1 Management Authority.
(a) Establishment of Management Committees. As soon as practicable
following the date hereof, the General Partners shall establish the Management
Committee, which shall have the full authority and discretion with respect to
the management of the Partnership's business, except as provided in paragraph
(d), (e) and (h) below or as delegated to the Managing General Partner pursuant
to written policies and directives adopted by the Management Committee. Until
the establishment of the Management Committee, the General Partners shall have
full authority and discretion with respect to management of the Partnership's
business and thereafter shall have the authority set forth herein.
(b) Composition of Management Committee. The Management Committee
shall consist of two members, one member appointed by each of the General
Partners, who shall not be entitled to receive any fee, wage or salary from the
Partnership for such services, except that the Partnership may reimburse members
of the Management Committee for reasonable expenses incurred in connection with
performing Management Committee duties. The Management Committee shall meet from
time to time upon five days notice from either member to the other. A prior
agenda shall be submitted for each meeting, if convenient, and minutes of each
meeting shall be kept and such minutes shall be signed by each member of the
Management Committee. A quorum at any meeting of the Management Committee shall
consist of all of the members, and a quorum shall be required for any meeting of
the Management Committee to be held. If the meeting is held by telephone,
minutes will be prepared and circulated for signature. Each member of the
Management Committee shall be deemed to hold 50 percent of the voting power of
the Management Committee. Subject to Section 6.1(e), any decision of the
Management Committee shall be binding upon the Partners. In the event that 50
percent of the Management Committee's voting power shall have been voted for
opposite positions with respect to a proposal or matter considered by the
Management Committee, such deadlock shall constitute a defeat of the proposal or
matter under consideration.
(c) Powers of Management Committee. Without limiting the general
powers of
17
<PAGE> 18
the Management Committee under paragraph (a) above, the Management Committee is
hereby specifically directed to:
(i) develop a program and scope of work for each phase of the
Facility's maintenance and operation;
(ii) approve the Partnership's capital requirements for each phase
of the Facility's maintenance and operation, including any capital and operating
budgets prepared by the Managing General Partner, as well as approve and execute
instruments of debt, contracts and leases and maintain bank accounts;
(iii) adopt rules and amendments or supplements to such rules
concerning the conduct of the affairs of the Management Committee and the
business of the Partnership and such other matters as the Management Committee
shall deem appropriate and which are not inconsistent with the provisions of
this Agreement;
(iv) obtain adequate insurance governing the interests of the
parties and the Partnership and protecting and indemnifying all members of the
Management Committee and officials and employees of the Partnership for
liability incurred in performing their duties;
(v) approve any tax policy matters regarding the Partnership;
(vi) form an audit committee and appoint auditors;
(vii) approve general accounting methods; and
(viii) execute and deliver such documents and instruments as may be
necessary to effectuate the terms of this Agreement, including, but not limited
to, all documents and instruments relating to the financing for and operation of
the Facility.
(d) Actions Reserved to General Partners. Any action taken in
compliance with the directives of the Management Committee shall be binding on
the Partners. Nevertheless, the following items of Partnership business shall be
presented to the General Partners for approval or rejection:
(i) refinancing or replacement of any mortgage or other security
interest related in any way to the Partnership's property, and the repayment in
whole or in part, refinancing, recasting, modification, consolidation or
extension of the terms of any indebtedness owed by the Partnership or affecting
all or a portion of any Partnership property;
(ii) the reduction of, or proposed addition to, Partnership capital;
(iii) the acquisition or disposition of significant assets of the
Partnership other than in the ordinary course of business;
18
<PAGE> 19
(iv) the expansion or contraction of the Partnership or its
business;
(v) the addition of new Partners (except as provided herein, Charter
Municipalities) or the Transfer of Partnership interests;
(vi) contracting with or terminating any organization providing
day-to-day management services or other services to the Partnership on a
contract or other regular basis;
(vii) the creation, renegotiation or renewal of major leases
relating to significant property utilized in connection with the operations of
the Partnership;
(viii) the approval of terms and conditions of any agreement for
management of the Facility;
(ix) the approval of all budgets; and
(x) approval of the terms and conditions of any contract or
agreement pursuant to which the Partnership would expend or receive $100,000 or
more in any Fiscal Year.
(e) Right to Reverse Action. The General Partners shall have the
right to review and reverse any decision made or action authorized by the
Management Committee in the manner provided in this paragraph (e). The
representative of either General Partner on the Management Committee may
exercise the right to review an action or authorization of the Management
Committee by giving verbal notice at the meeting of the Management Committee at
which the action or authorization was approved that a period of time for review
of the action or authorization is desired. Within five days thereafter, the vote
of the General Partners shall be taken, and the action or decision of the
Management Committee shall be reversed if reversal is voted for by both General
Partners.
(f) General Partner Voting. In the event that the General Partners
shall have voted for opposite positions with respect to a matter considered by
the General Partners, such deadlock shall constitute a defeat of the proposal or
matter under consideration. Any General Partner aggrieved by the defeat of the
proposal or matter may bring it to arbitration pursuant to Section 14.14 to
break the deadlock. PMC shall have one vote and ENI shall have one vote on all
matters submitted to the General Partners for vote.
(g) Removal and Replacement of Management Committee Members. A
General Partner, in its sole discretion, may remove a member of the Management
Committee previously appointed by such General Partner, at any time and from
time to time. Each party shall have the right to fill vacancies occurring in the
positions occupied by appointees of such party.
(h) Powers of General Partners. In furtherance of the purpose of the
Partnership as set forth in Section 2.4 of this Agreement, each of the General
Partners is hereby granted the right, power and authority to do on behalf of the
Partnership at any time before or after establishment of the
19
<PAGE> 20
Management Committee, all things which, in the judgment of the General Partners,
are necessary, proper or desirable to carry out their duties and
responsibilities hereunder, including, but not limited to the following: from
time to time to incur all reasonable expenditures; to employ and dismiss from
employment any and all employees, agents, contractors, brokers, attorneys and
accountants; to create, by grant or otherwise, easements and servitudes; to
borrow money on an unsecured basis; to borrow money in any amount from any
Person including the General Partners and their Affiliates, on a recourse or
nonrecourse basis, and as security therefor to mortgage all or any part of the
Partnership's property; to renovate, alter, improve, Partnership's property
repair, raze, replace or rebuild any building or other improvement on all or any
portion of any Partnership property which is real estate; to purchase or acquire
interests in real or personal property; to obtain refinancings or replacements
of any mortgages or other security instruments related in any way to any
Partnership property, and to prepay in whole or in part, refinance, recast,
modify, consolidate or extend any of the terms of any indebtedness owed by the
Partnership or affecting all or any portion of any Partnership property; to do
any and all of the foregoing at such price or amount for cash, securities or
other property and upon such terms as the General Partners deems proper; and to
execute, acknowledge and deliver any and all contracts, agreements or other
instruments to effectuate any and all of the foregoing. A unanimous written
consent authorizing any of the foregoing actions and signed by both of the
General Partners shall be conclusive evidence of the exercise of the authority
set forth in this paragraph (h).
(i) Indemnification. The Partnership shall indemnify and save
harmless the members of the Management Committee against all actions, claims,
demands, costs and liabilities arising out of the acts, or failure to act, of
any such members within the scope of the Partnership's business; provided,
however, that the same were the result of action or inaction of such person
which he, in good faith, determined was in the best interests of the Partnership
and which course of conduct did not constitute willful misconduct on the part of
such Management Committee member.
(j) Devotion of Time; Affiliates. Each of the General Partners shall
devote such time to the Partnership business as the General Partners mutually
determine is necessary to supervise the Partnership's business and affairs in an
efficient manner; but nothing contained in this Agreement shall preclude the
employment, at the expense of the Partnership, of any agent or other third party
to operate and manage all or any portion of the property, business or operations
of the Partnership, subject to the control of the General Partners. Subject to
Section 6.3 of this Agreement, Affiliates of either of the General Partners may
be employed by the Partnership to perform any other services for the Partnership
as the General Partners mutually determine is necessary.
(k) Other Activities. Neither of the General Partners shall. be
required to manage the Partnership as its sole and exclusive function, and it
may have other business interests and may engage in other activities in addition
to those relating to the Partnership. Neither the Partnership nor any Partner
shall have any right by virtue of this Agreement or the Partnership relationship
created hereby in or to such other ventures or activities or to the income or
proceeds derived therefrom, and the pursuit of such ventures shall not be deemed
wrongful or improper. Partners and their Affiliates shall not be obligated to
present any particular investment opportunity to the Partnership even if such
opportunity is of a character which, if presented to the Partnership, could be
taken by the Partnership, and each of them shall have the right to take for its
own account (individually or otherwise) or to
20
<PAGE> 21
recommend to others any such particular investment opportunity.
(l) Compliance with FAME Bonds. Notwithstanding anything in this
Agreement to the contrary, the General Partners shall not be obligated to take
any action that is inconsistent with the terms and conditions of the FAME Bonds.
(m) Except as required by law or pursuant to a dissolution and
winding up in accordance with this Agreement, in no event shall the General
Partners have any power to sell, exchange, lease or otherwise transfer all or
substantially all of the assets of the Partnership; provided, however, that this
paragraph (m) shall not limit the ability of the General Partners or the
Partnership to enter into or perform all agreements entered into in connection
with the FAME Bonds, or any authorized replacement financing for the FAME Bonds.
6.2 Fiduciary Duties. The General Partners shall have the fiduciary
duty to conduct the affairs of the Partnership for the exclusive benefit of the
Partner ship and in accordance with the provisions of applicable law and to use
all Partnership funds and assets in the best interests of the Partnership.
Except as otherwise required by the FAME Bonds or other Partnership borrowings,
all funds of the Partnership shall be invested only in Qualified Investments or
deposited in the name of the Partnership in separate interest-bearing accounts
in a federally insured bank or savings and loan association. The Managing
General Partner shall have full authority on behalf of the Partnership to adopt
such resolutions as may be required by any such bank or savings and loan
association for the operation of such account, to make deposits and withdrawals
from such account, to make and execute the checks, drafts, notes and other
instruments representing funds of the Partnership in such account, and to take
any and all such other action as may be necessary or appropriate in connection
with the operation of such account.
6.3 Business with Affiliates, Associates. The General Partners shall
not cause the Partnership to transact any business with the General Partners,
collectively or individually, or an Affiliate or Associate thereof, for goods or
services in connection with the conduct of the Partnership's business, except
that such transaction may be effected if the transaction is on terms no less
favorable to the Partnership than would be available in a bona fide arm's length
transaction with an unaffiliated Person.
6.4 Compensation. In consideration of the Management services to be
performed by the General Partners, the Partnership shall pay to the General
Partners the Management Fee (including any accrued and unpaid portion of the
Fee) as follows: seventy percent (70%) to PMC and thirty percent (30%) to ENI.
Payments of the Management Fee shall be made quarterly during the remaining term
of the Partnership. The Partners acknowledge that the Management Fee is a
guaranteed payment within the meaning of Section 707(c) of the Code and
furthermore is not to be treated as a distribution under Article 5 for any
purpose.
6.5 Reimbursement. The Partnership shall reimburse the General
Partners for the cost of goods, materials and services used for or by the
Partnership. The General Partners shall not be reimbursed by the Partnership for
any indirect expenses incurred in performing services for the
21
<PAGE> 22
Partnership, such as officers' salaries, rent, utilities and other overhead
items. The Partnership shall, however, reimburse the General Partners for (a)
out of pocket expenses and overhead in connection with operating the Facility
and (b) services which could be performed directly for the Partnership by
independent parties, such as legal, accounting, duplicating and other similar
services. Such amounts charged to the Partnership shall not exceed the lesser of
(a) the actual cost of such services to the party providing them or (b) the
amount which the Partnership would be required to pay to independent parties for
comparable services. Each such payment and reimbursement of expenses pursuant to
this Section 6.5 shall be made prior to any distributions under Article 5.
6.6 Establishment of Reserves.
(a) The Managing General Partner shall establish such reserve funds
as may be required by FAME, or upon any authorized refinancing of the FAME
Bonds, and shall cause to be deposited therein such amounts as may be so
required.
(b) Pursuant to the terms of this Agreement, the Managing General
Partner may from time to time establish such reserves for the Partnership as it
deems reasonable and necessary.
ARTICLE 7. REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE PARTNERS.
7.1 Representations, Warranties and Covenants of PMC. PMC hereby
represents and warrants to and covenants with the Partnership and the Partners
as follows:
(a) Organization. PMC is a duly formed and validly existing
limited partnership under the laws of the State of Maine and it is or will be
duly qualified to operate as a foreign limited partnership and to own its assets
and properties and to carry on its business in the other jurisdictions where it
owns or leases or will own or lease such assets or properties or carries on or
will carry on such business, except where the failure to so qualify would not
have a material adverse effect on the results of operations or financial
condition of the Partnership.
(b) Authorization; No Conflicts. Except for the possible
retained rights of Charter Municipalities who do not become Amending Charter
Municipalities, the execution, delivery and performance by PMC of this Agreement
(i) has been duly authorized by all necessary partnership action, (ii) does not
contravene any material provision of any indenture, agreement or other
instrument to which PMC is a party, or by which PMC or any of its properties are
bound and (iii) does not and will not conflict with, result in a breach of or
constitute (with notice or lapse of time or both) a default under any such
indenture, agreement or other instrument.
(c) Validity. This Agreement has been duly authorized,
executed and delivered by PMC and constitutes the legal, valid and binding
obligation of PMC, enforceable against PMC in accordance with its terms, except
insofar as enforcement may be limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and by
moratorium laws from time to time in effect and general equitable principles.
22
<PAGE> 23
(d) No Violation of Law. The execution, delivery and
performance by PMC of this Agreement does not violate any provision of any law,
rule, regulation, order, writ, judgment, decree, determination or award
presently in effect having applicability to the Partnership or PMC, except those
the violation of which would not have a material adverse effect on the
Partnership or PMC.
(e) Pending or Threatened Litigation. There are no actions,
suits or proceedings pending or, to its knowledge, threatened against PMC in any
court or by or before any governmental department, agency or instrumentality or
any arbitrator, in which there is a reason able possibility of an adverse
decision which could materially and adversely affect the business, operations,
properties, assets or condition (financial or otherwise) of PMC, or the ability
of PMC to perform its obligations under this Agreement.
(f) Utility. PMC is not a utility or a public utility or
subject to regulation as such, and the Facility constitutes a "qualifying small
power production facility" under the Public Utility Regulatory Policies Act of
1978, as amended, and the regulations in effect thereunder.
(g) Taxes. All United States Federal income tax returns and
all other tax returns or reports (Federal, state, local or foreign) which are
required to be filed with respect to or by PMC have been filed as required, or
the time for filing appropriately extended, and all taxes shown to be due on
such returns or reports or pursuant to any assessment received by PMC in respect
thereof have been paid, other than assessments, the applicability, validity or
amount of which is being diligently contested in good faith by appropriate
proceedings and as to which adequate reserves have been set aside on the books
of PMC in accordance with GAAP with respect to such assessment. The charges,
accruals and reserves on the books of PMC in respect of taxes or other
governmental charges are adequate and have been made in accordance with GAAP.
(h) Disclosure. To the best knowledge of PMC, after due
inquiry, all factual information (taken as a whole) heretofore or
contemporaneously furnished by or on behalf of the Partnership or PMC in writing
to the Equity Charter Municipalities for purposes of or in connection with the
Facility was true and accurate in all material respects on the date as of which
such information was dated or certified and was not incomplete by omitting to
state any material fact necessary to make such information not misleading at
such time.
(i) QF Not Impaired. PMC's execution and delivery of this
Agreement, and its performance according to the terms hereof, shall not prevent
the Facility from being owned and operated as a Qualifying Facility.
(j) Net Worth. PMC's sole general partner, PERC, Inc., a
Delaware corporation, has, as of the date hereof, a net worth of not less than
$1,000,000.
(k) Notice of Default. PMC shall forward to the Partners a
copy of any notice received by PMC of any default under any agreement or
instrument to which the Partnership is a
23
<PAGE> 24
party or by which it is bound not later than the next business day following the
receipt thereof.
(l) Partnership Status. PMC will not knowingly take any action
that would cause the Partnership to be treated for Federal income tax purposes
other than as a partnership taxable under Subchapter K of the Code as in effect
on the date hereof.
7.2 Representations, Warranties and Covenants of ENI. ENI hereby
represents and warrants to and covenants with the Partnership and the Partners
as follows:
(a) Organization. ENI is a corporation duly formed, validly
existing and in good standing under the laws of the State of Utah and it is or
will be duly qualified to operate as a Foreign corporation and to own its assets
and properties and to carry on its business in the other jurisdictions where it
owns or leases or will own or lease such assets or properties or carries on or
will carry on such business, except where the failure to so qualify would not
have a material adverse effect on the results of operations or financial
condition of Partnership.
(b) Authorization; No Conflicts. The execution, delivery and
performance by ENI of this Agreement (i) has been duly authorized by all
necessary corporate action, (ii) does not contravene any material provision of
any indenture, agreement or other instrument to which ENI is a party, or by
which ENI or any of its properties are bound and (iii) does not and will not
conflict with, result in a breach of or constitute (with notice or lapse of time
or both) a default under any such indenture, agreement or other instrument.
(c) Validity. This Agreement has been duly authorized,
executed and delivered by ENI and constitutes the legal, valid and binding
obligation of ENI, enforceable against ENI in accordance with its terms, except
insofar as enforcement may be limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and by
moratorium laws from time to time in effect and general equitable principles.
(d) No Violation of Law. The execution, delivery and
performance by ENI of this Agreement does not violate any provision of any law,
rule, regulation, order, writ, judgment, decree, determination or award
presently in effect having applicability to the Partnership or ENI, except those
the violation of which would not have a material adverse effect on the
Partnership or ENI.
(e) Pending or Threatened Litigation. There are no actions,
suits or proceedings pending or, to its knowledge, threatened against ENI in any
court or by or before any governmental department, agency or instrumentality or
any arbitrator, in which there is a reasonable possibility of an adverse
decision which could materially and adversely affect the business, operations,
properties, assets or condition (financial or otherwise) of ENI, or the ability
of ENI to perform its obligations under this Agreement.
(f) Utility. ENI is a wholly owned subsidiary of a public
utility and is subject to regulation as such. However, ENI's interest in the
Partnership is less than 50% and as a
24
<PAGE> 25
result, the Facility constitutes a "qualifying small power production facility"
under the Public Utility Regulatory Policies Act of 1978, as amended, and the
regulations in effect thereunder.
(g) Taxes. All United States Federal income tax returns and
all other tax returns or reports (Federal, state, local or foreign) which are
required to be filed with respect to or by ENI have been filed as required, or
the time for filing appropriately extended, and all taxes shown to be due on
such returns or reports or pursuant to any assessment received by ENI in respect
thereof have been paid, other than assessments, the applicability, validity or
amount of which is being diligently contested in good faith by appropriate
proceedings and as to which adequate reserves have been set aside on the books
of ENI in accordance with GAAP with respect to such assessment. The charges,
accruals and reserves on the books of ENI in respect of taxes or other
governmental charges are adequate and have been made in accordance with GAAP.
(h) Disclosure. To the best knowledge of ENI, after due
inquiry, all factual information (taken as a whole) heretofore or
contemporaneously furnished by or on behalf of the Partnership or ENI in writing
to the Equity Charter Municipalities for purposes of or in connection with the
Facility was true and accurate in all material respects on the date as of which
such information was dated or certified and was not incomplete by omitting to
state any material fact necessary to make such information not misleading at
such time.
(i) QF Not Impaired. ENI's execution and delivery of this
Agreement, and its performance according to the terms hereof, shall not prevent
the Facility from being owned and operated as a Qualifying Facility.
(j) Net Worth. ENI has as of the date hereof a net worth of
not less than $1,750,000.
(k) Notice of Default. ENI shall forward to the Partners a
copy of any notice received by ENI of any default under any agreement or
instrument to which the Partnership is a party or by which it is bound.
(l) Partnership Status. ENI will not knowingly take any action
that would cause the Partnership to be treated for Federal income tax purposes
other than as a partnership taxable under Subchapter K of the Code as in effect
on the date hereof.
7.3 Representations, Warranties and Covenants of Equity Charter
Municipalities. Upon Equity Charter Municipalities becoming Limited Partners,
the MRC on behalf of the Equity Charter Municipalities will represent, warrant
and covenant with the Partnership and the Partners as follows:
(a) Authorization. The execution, delivery and performance by
MRC on behalf of the Equity Charter Municipalities of this Agreement (i) has
been duly authorized by all necessary public or private action of such Equity
Charter Municipality (ii) does not contravene any material provision of any
agreement or other instrument to which such Equity Charter Municipality is a
25
<PAGE> 26
party or by which such Equity Charter Municipality or any of its properties are
bound and (iii) does not and will not conflict with, result in a breach of, or
constitute (with lapse or notice of time or both) a default under any agreement
or other instrument binding on such Equity Charter Municipality.
(b) Validity. This Agreement has been duly authorized by each
Equity Charter Municipality and duly executed and delivered by MRC on behalf of
each of the Equity Charter Municipalities and constitutes the legal, valid and
binding obligation of each Equity Charter Municipality, enforceable against each
Equity Charter Municipality in accordance with its terms, except insofar as
enforcement may be limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally and by moratorium laws
from time to time in effect and general equity principles.
(c) No Violation of Law. The execution, delivery and
performance by MRC on behalf of each of the Equity Charter Municipalities of
this Agreement does not violate any provision of any law, rule, regulation,
order, writ, judgment, decree, determination or award presently in effect having
applicability to the Partnership or Equity Charter Municipality, except those
the violation of which would not have a material adverse effect on the
Partnership or such Equity Charter Municipality.
ARTICLE 8. INDEMNIFICATION.
8.1 Indemnity for Acts and Omissions.
(a) Each of the General Partners shall be indemnified and held
harmless by the Partnership from and against any and all reasonable attorneys
fees, claims, demands, liabilities, costs, damages and causes of action arising
out of or incidental to its management or administration of the affairs of the
Partnership; provided, however, that the same were the result of action or
inaction of such General Partner which it, in good faith, determined was in the
best interests of the Partnership and which course of conduct did not constitute
gross negligence or willful misconduct on the part of such General Partner or
breach of any representation, warranty or covenant of such General Partner under
Article 7; provided further, however, that all claims for indemnification made
by the General Partners under this paragraph (a) shall be made only against and
shall be limited to the assets of the Partnership and a General Partner shall
have no recourse against the other Partners with respect to such claims.
(b) Each of the Limited Partners shall be indemnified and held
harmless by the Partnership from and against any and all reasonable attorneys'
fees, claims, demands, liabilities and costs, damages and causes of action
arising out of or incidental to the affairs of the Partnership, provided,
however, that the same were the result of action or inaction of such Limited
Partner which it, in good faith, determined was in the best interests of the
Partnership and which course of conduct did not constitute gross negligence or
willful misconduct on the part of such Limited Partner a breach of any of its
representations, warranties or covenants or those made on its behalf under
Article 7; provided further, however, that all claims for indemnification made
by the Limited Partners under this paragraph (b) shall be made only against and
shall be limited to the assets of the Partnership and the Limited Partners shall
have no recourse against the General Partners with respect to such claims.
26
<PAGE> 27
(c) Indemnifications authorized under this Section 8.1 shall
include payment of reasonable attorneys' fees or other expenses incurred in
connection with settlement or in any legal proceeding, claims or demands and the
removal of any liens affecting any property of the indemnitee. Such
indemnification rights shall be cumulative of, and in addition to, any and all
rights, remedies and recourses to which a Partner or the Partnership shall be
entitled, whether or not pursuant to the provisions of this Agreement, at law or
in equity. Payment obligations of the Partnership under this Section 8.1 shall
be junior in right of payment to the prior payment in full of all obligations
under the FAME Bonds.
ARTICLE 9. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS AND 2018
PURCHASE OPTION.
9.1 No Control by the Limited Partners. The Limited Partners, in
their capacity as Limited Partners, shall not take part in the control of and
shall not take part in the management of the Partnership's business and shall
have no right or authority to act for or to bind the Partnership.
9.2 Limitation on Liability. Except as required by Article 3 or by
Section 12.3, a Limited Partner shall not have any liability to contribute money
to the Partnership, shall not be personally liable for any obligations of the
Partnership, and shall not be obligated to make loans to the Partnership.
Nothing else set forth in this Agreement, in any other document and nothing
arising from any transaction contemplated by any of the foregoing agreements,
shall in any way remove, diminish or affect this limitation of liability.
9.3 2018 Purchase Option. Commencing on March 31, 2018 and
terminating on December 31, 2018, the Amending Charter Municipalities, or any
one or more of Amending Charter Municipalities (provided they continue as
parties to Waste Disposal Agreements with the Partnership as of that date) have
the right to elect to purchase all of the interests in the Partnership other
than those already owed by the Equity Charter Municipalities for a purchase
price equal to the then fair market value of such interests. Upon exercise of
this option, (which shall be by written notice to the Partnership) the
Purchasing Municipalities shall, within 60 days after such notice, deliver to
the Partnership the full amount of the purchase price and the Partnership shall,
in turn, use the entire purchase price to redeem all of the Partnership
interests (both general and limited partnership interests) of the then existing
Partners, excluding Equity Charter Municipalities. Upon the effective date of
such redemption, (i) notwithstanding any restrictions under Article 11 of the
Partnership Agreement, the existing General Partners shall withdraw from the
Partnership, (ii) MRC, or another person designated by MRC, shall be admitted to
the Partnership as the Partnership's new sole General Partner on such terms and
conditions as the MRC deems appropriate in its sole discretion, (iii) the Equity
Charter Municipalities shall remain Limited Partners of the Partnership, and
(iv) the Purchasing Municipalities shall be admitted as Limited Partners of the
Partnership, with such proportionate interests as the MRC shall determine is
fair and equitable.
For purposes of the foregoing, fair market value shall be determined
of as follows: On or before February 1, 2018, the Amending Charter
Municipalities (as a group) and the General Partners
27
<PAGE> 28
(as a group) shall each select an investment bank or otherwise qualified
appraiser to appraise the Partnership interests held by all Partners other than
the Equity Charter Municipalities. Each appraiser selected shall submit its
written appraisal within thirty days of its selection. If the two appraisals are
within ten percent of each other, the fair market value for the interest shall
be the average of the two values. If the two values differ by more than ten
percent, the two appraisers selected shall jointly appoint a third appraiser,
such appointment to be made no later than March 15, 2018. The third appraiser
shall determine which of the first appraisals more accurately reflects the fair
market value of the interests to be redeemed and that appraisal shall be the
fair market value of the interests and shall be binding on the General Partners
and the Amending Charter Municipalities for all purposes under this section.
If the purchase option is not exercised by the Amending Charter
Municipalities within the period specified, the option shall terminate and be of
no further force and effect. Each of the Partners agrees to execute and deliver
any and all documents reasonably deemed necessary or appropriate to give effect
to any exercise of this purchase option. The distribution by the Partnership to
the then existing Partners in redemption of their Partnership interests shall be
made to the terminating Partners in accordance with Section 5.2 of the
Partnership Agreement as if the distributions were proceeds from a sale or
refinancing.
ARTICLE 10. TRANSFER OF LIMITED PARTNERSHIP INTERESTS.
10.1 Prohibited Transfers. The Limited Partners may not Transfer or
otherwise encumber their interest in the Partnership or any part thereof in any
way whatsoever except as permitted in this Article 10, and any such Transfer or
encumbrance in violation of this Article 10 shall be null and void as against
the Partnership, except as otherwise provided by law.
10.2 Permitted Transfers by Limited Partners. Subject to compliance
with the FAME Bonds, ENI and PMC may transfer their interests as Limited
Partners at any time. An Equity Charter Municipality may transfer all or any
part of its interest in the Partnership (but only if the Transferor shall not
then be in material default under this Agreement), provided that:
(a) Any Transferee shall take such interest subject to the terms,
provisions and conditions of this Agreement and shall acknowledge its acceptance
of this Agreement by executing and delivering to the remaining Partners an
instrument in form satisfactory to said Partners whereby such Transferee assumes
and agrees to be bound by all the terms, provisions and conditions hereof and to
become, in the place of the transferring Equity Charter Municipality, a Partner
for all purposes herein (although in connection with such transferee's
assumption of obligations hereunder, such Transferee shall be entitled to the
benefit of any limitation upon the liability of the Transferor hereunder).
(b) Such Transfer must be for cash consideration, and all costs to
the Partnership of such Transfer shall be paid by the Transferee or Transferor.
(c) Each of the General Partners shall have Consented to the
Transfer which Consent any such Partner may grant or withhold in its sole
discretion. The Partners acknowledge that it
28
<PAGE> 29
is the General Partners' intent that they will not consent to the transfer of
any Limited Partnership interest held by an Equity Charter Municipality unless
the transfer is to another Equity Charter Municipality.
10.3 Right of First Refusal. Before consummating a Transfer of its
interest in the Partnership in a transaction otherwise permitted under this
Section 10.3, an Equity Charter Municipality desiring to consummate such
Transfer (the "Assigning Limited Partner") shall give written notice to the
Non-assigning Limited Partners of the proposed transaction and shall deliver to
the Nonassigning Limited Partners with such notice a copy of the bona fide
written offer from a prospective Transferee (such notice from the Assigning
Limited Partner, together with such copy of the bona fide written offer, being
hereinafter collectively called ("Partnership Offer Notice") setting forth the
name of the prospective Transferee and all of the material terms and conditions
on which the Assigning Limited Partner intends to Transfer such interest in the
Partnership, and each of the Nonassigning Limited Partners shall then have 90
days after the giving of the Partnership Offer Notice, to elect (by giving a
notice of the same to the Assigning Limited Partner) to purchase such interest
of the Assigning Limited Partner for the purchase price and on the same terms
and conditions as set forth in such Partnership Offer Notice, and in the event
any of the Nonassigning Limited Partners makes such election, the transaction
shall be closed within a period of 30 days after the making of such election,
with the time, place and date (within such period) as specified by the
Nonassigning Limited Partner in the notice of its election. If any of the
Nonassigning Limited Partners shall fail to give notice of this election, or
having given notice of this election, fails to complete the purchase, then the
Assigning Limited Partner may Transfer such Partnership interest, provided such
Transfer is otherwise permitted under this Article 10, at any time or times
within 180 days after the giving of such Partnership Offer Notice, for a
purchase price and on terms and conditions no more favorable to the Transferee
than those contained in the Partnership Offer Notice and only to the person
identified in the Partnership Offer Notice, and if such Transfer is not
consummated within said 180-day period, then the Nonassigning Limited Partners'
rights to notice and to purchase as aforesaid shall reapply to any pending
Transfer and continue with respect to any other proposed Transfer of the
Partnership interest of the Assigning Limited Partner.
10.4 Substitute Limited Partner. If a Transferee of a Limited
Partnership interest does not become a Substitute Limited Partner pursuant to
this Section 10.4, the Partnership shall not recognize the Transfer and the
Transferee shall not have any rights to require any information on account of
the Partnership's business, inspect the Partnership's books, receive
distributions, or vote on Partnership matters. A Transferee of the whole or any
part of a Limited Partnership interest shall have the right to become a
Substitute Limited Partner in place of its Transferor only if all of the
following conditions are satisfied:
(a) a fully executed and acknowledged written instrument of
assignment has been filed with the Partnership setting forth a statement of the
intention of the Transferor that the Transferee become a Substitute Limited
Partner in its place;
(b) the Transferee executes, adopts and acknowledges this
Agreement and agrees to assume all the obligations of its Transferor; and
29
<PAGE> 30
(c) any reasonable costs to the Partnership of the Transfer
shall have been paid to the Partnership.
10.5 Involuntary Withdrawal by the Limited Partner.
(a) Upon the Bankruptcy, dissolution or other cessation of
existence of a Limited Partner which is not a natural person, the authorized
representative of such entity shall have all the rights of a Partner for the
purpose of effecting the orderly winding up and disposition of the business of
such entity and such power as such entity possessed to designate a successor as
a Transferee of its Partnership interest and to join with such Transferee in
making application to substitute such Transferee as a Substitute Limited
Partner.
(b) The death, Bankruptcy, disability or legal incapacity of a
Limited Partner shall not dissolve or terminate the Partnership.
ARTICLE 11. WITHDRAWAL OF A GENERAL PARTNER.
11.1 Assignment or Withdrawal by a General Partner. A General
Partner may not Transfer its interest as a General Partner, in whole or in part,
or withdraw from the Partnership, except as permitted by this Article 11.
11.2 Voluntary Assignment or Withdrawal of a General Partner.
Subject to compliance with the Bond Indenture, a General Partner may at any time
sell, assign or transfer any of all of its interest as a General Partner to any
entity under common control with the selling, assigning or transferring General
Partner or to another General Partner. In addition, upon giving 120 days' Notice
to the other General Partner (the "Remaining General Partner") and to the MRC, a
General Partner may voluntarily withdraw from the Partnership or sell, transfer
or assign its interest to a non controlled third Person if:
(a) the Person has agreed to serve as successor General
Partner and any Remaining General Partner shall have consented to such Person as
a successor General Partner, which consent shall not be unreasonably withheld;
(b) the Person has satisfied the terms and conditions set
forth in Section 11.4; and
(c) the substitution of such Person will not cause the
Partnership to lose its status as a limited partnership for Federal income tax
purposes.
30
<PAGE> 31
11.3 Removal of a General Partner.
(a) In the event that a General Partner is alleged to have
materially breached this Agreement, it will have the right to cure such breach
within 30 days of receiving a written notice of the alleged breach. If such
breach cannot reasonably be cured in such period, it shall have such time to
commence efforts to cure and diligently pursue such cure. If it fails to do so,
with the Consent of any Remaining General Partner and the MRC on behalf of the
Equity Charter Municipalities, a General Partner may be removed as a General
Partner and another Person named as General Partner in accordance with Section
11.4 . Any dispute that may arise regarding such breach or cure shall be
submitted to arbitration pursuant to Section 14.14 hereof. In the event of such
dispute, a General Partner shall be removed only upon the issuance of an
arbitration decision that is final and nonappealable;provided, however, that if
the dispute is not subject to arbitration pursuant to Section 14.14, a General
Partner shall be removed only upon entry of a final, nonappealable order of a
court of competent jurisdiction.
(b) If a General Partner is removed as a General Partner, its
Partnership interest shall be converted to that of a Limited Partner, it shall
receive allocations under Article 4 and distributions under Article 5 as if it
had remained a General Partner, and it shall continue to have all the benefits
of a Limited Partner, except that it shall not participate in the management of
the Partnership or approve its successor General Partner pursuant to Section
11.4(a). In the event a General Partner is removed pursuant to this Section
11.3, the Remaining General Partner may select another Person as a successor
General Partner and the Consent of the General Partner which was removed shall
not be required.
11.4 Successor General Partner. A Person shall be admitted a
successor General Partner only if the following terms and conditions are
satisfied:
(a) the admission of such Person shall have been Consented to
by any Remaining General Partner which consent shall not be unreasonably be
withheld,
(b) the Person shall have accepted and agreed to be bound by
all the terms and provisions of this Agreement by executing a counterpart
thereof and such other documents or instruments as may be required or
appropriate in order to effect the admission of such Person as a General
Partner;
(c) a certificate evidencing the admission of such Person as a
General Partner shall have been filed for recordation in accordance with the
Partnership Act;
(d) if the successor General Partner is a corporation, it
shall have provided counsel for the Partnership with a certified copy of a
resolution of its Board of Directors authorizing it to become a General Partner;
and
(e) none of the actions taken in connection with such transfer
or admission
31
<PAGE> 32
will have a material adverse tax effect upon the Partnership.
11.5 Pledge of Interest. Nothing contained in this Agreement shall
prohibit any Partner from assigning or pledging as collateral its economic
interest as a Limited or General Partner in the Partnership. Any assignee or
pledgee of such interest shall be bound by the terms of this Agreement and its
rights in the interest shall be subject to compliance with this Agreement.
ARTICLE 12. DISSOLUTION AND WINDING UP AFFAIRS.
12.1 Dissolution. No Partner shall cause a voluntary dissolution of
the Partnership. No act, thing, occurrence, event or circumstance shall cause or
result in the dissolution of the Partnership, except that the Partnership shall
dissolve and terminate upon the happening of any one of the following
Dissolution Events, unless within 30 days of any such Dissolution Event, PMC,
ENI and MRC on behalf of the Equity Charter Municipalities shall decide by
written agreement to continue the business of the Partnership:
(a) The Bankruptcy of all of the General Partners, or the
General Partners' cessation to exist as legal entities;
(b) The determination by PMC, ENI and MRC (or their
successors) that the Partnership should be dissolved, in accordance with state
law;
(c) The sale of all of the Partnership's property; or
(d) The expiration of the term of the Partnership pursuant to
Section 2 of this Agreement.
12.2 Winding Up. In the event of the dissolution of the Partnership
for any reason the Liquidator, shall be the Remaining General Partner. However,
if the Dissolution Event shall be the Bankruptcy of all of the General Partners
or the cessation of all of the General Partners to exist as legal entities, with
its consent, the MRC shall serve as the Liquidator. The Liquidator however
selected, shall commence to wind up the affairs of the Partnership and to
liquidate its investments. The proceeds of such liquidation shall be applied and
distributed as set forth in Section 12.3. The Partners shall continue to share
profits and losses, gain or loss on sale or disposition of Partnership property,
Net Cash Flow, and Net Sale or Refinancing Proceeds during the period of winding
up in the same manner and proportion as before the dissolution. The Partner or
Partners obligated to wind up the affairs of the Partnership shall have full
right and unlimited discretion to manage the business of the Partnership during
the winding up period and to determine in good faith the time, manner and terms
of any sale or sales of Partnership property pursuant to such liquidation.
12.3 Distributions Upon Dissolution and Termination. After all
liabilities and obligations of the Partnership, including all expenses of
liquidation, shall have been paid or provided for (whether by such reserve as
the Liquidator shall deem appropriate or otherwise), and all items of gain,
loss, deduction and credit shall have been allocated in accordance with Article
4, and after any
32
<PAGE> 33
distributions of Net Cash Flow and Net Sale or Refinancing Proceeds pursuant to
Sections 5.1 and 5.2, any proceeds from the liquidation of the Partnership shall
be distributed to the Partners with positive Capital Account balances in
proportion to such Capital Account balances within the period as may be required
pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(1)(1). Any Partner,
other than an Equity Charter Municipality, with a deficit in its Capital Account
following the complete distribution of the liquidation proceeds will be required
to restore the amount of such deficit to the Partnership within the period as
may be required pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(1)(1),
which amount will be paid first to creditors and the remaining balance, if any,
will be distributed to the Partners in proportion to the Partners' Capital
Account balances.
ARTICLE 13. ACCOUNTING AND REPORTS.
13.1 Books and Records. The General Partners shall maintain or cause
to be maintained at the office of the Partnership this Agreement and all
amendments thereto and full and accurate books of the Partnership showing all
receipts and expenditures, assets and liabilities, profits and losses, and all
other books, records and information required by the Partnership Act as
necessary for recording the Partnership's business and affairs. The
Partnership's books and records shall be maintained on an accrual basis in
accordance with GAAP. Such documents, books and records shall be maintained at
such office until five years after the termination and liquidation of the
Partnership. All Partners and their duly authorized representatives shall have
the right to inspect and copy at their expense during reasonable business hours
at the Facility all of the Partnership's books and records, including books and
records necessary to enable a Partner to defend any tax audit or related
proceeding.
13.2 Reports to Partners.
(a) Within 45 days after the end of each fiscal quarter, the
General Partners shall send to the Limited Partners an unaudited closing balance
sheet as of the end of such fiscal quarter and a statement of operations for
such fiscal quarter.
(b) Within 45 days after the end of the second and fourth
fiscal quarter of each year, the General Partners shall send to the Limited
Partners a written discussion of recent operations of the Partnership and any
recent developments in the business of the Partnership or other matters of
management interest.
(c) By each March 1, the General Partners shall provide to the
Limited Partners audited financial statements examined by the Independent
Accountant, including the balance sheet of the Partnership as of the end of the
preceding Fiscal Year and related statements of income, Partners' capital and
changes in financial position for the Fiscal Year (prepared on a basis
disclosing cash flow), accompanied by a report of the Independent Accountant
stating that such financial statements have been prepared in accordance with
GAAP applied on a consistent basis.
(d) As soon as practicable after the end of each Fiscal Year,
the General Partners shall furnish to the Partners reports containing at least
the following information:
33
<PAGE> 34
(i) by each March 1, Service Form K-1, or any similar
form as may be required by the Code or the Service; and
(ii) a reconciliation between the aforementioned audited
financial reports prepared by the General Partners and the basis the Partnership
uses for preparation of its Federal income tax returns.
13.3 Annual Tax Returns.
(a) PMC is hereby designated the "Tax Matters Partner" for
Federal income tax purposes pursuant to section 6231 of the Code with respect to
all taxable years of the Partnership and is authorized to do whatever is
necessary to qualify as such. PMC shall prepare or cause to be prepared all tax
and information returns required of the Partnership (including, but not limited
to Federal, state and local income tax and information returns), which returns
shall be reviewed in advance of filing by the independent Accountant. Each
Partner shall file its individual or corporate return in a manner consistent
with the Partnership tax and information returns.
(b) PMC shall do all acts, make all elections, and take
whatever reasonable steps are required to maximize, in the aggregate, the
Federal, state and local income tax advantages available to the Partnership and
shall defend all tax audits and litigation with respect thereto. PMC shall
maintain the books, records and tax returns of the Partnership in a manner
consistent with the acts, elections and steps taken by the Partnership.
13.4 Action in Event of Audit. If an IRS audit of any of the
Partnership's tax returns shall occur, the General Partners shall, at the
expense of the Partnership, participate in the audit and may contest, settle or
otherwise compromise assertions of the auditing agent which may be adverse to
the Partnership. The General Partners may, if they determine that the retention
of accountants and/or other professionals would be in the best interests of the
Partnership, retain such accountants and/or other professionals, to assist in
such audits (if any). The Partnership shall indemnify and reimburse the General
Partners for all expenses, including legal and accounting fees, claims,
liabilities, losses and damages to the extent borne by the General Partners,
incurred in connection with any administrative or judicial proceeding with
respect to any audit of the Partnership's tax returns. The payment of all such
expenses to which this indemnification applies shall be made before any
distributions pursuant to Section 5.1 or 5.2 of this Agreement. Neither the
General Partners or their Affiliates, nor any other Person shall have any
obligation to provide funds for such purpose. The taking of any action and the
incurrence of any expense by the General Partners in connection with any such
proceeding, except to the extent required by law, is a matter in the sole
discretion of the General Partners; provided, however, that the decision to take
any action or not to take any action shall be made in accordance with the
General Partners' fiduciary duty as set forth in Section 6.2 of this Agreement.
The indemnification set forth in Section 8 of this Agreement shall be fully
applicable to PMC in its capacity as Tax Matters Partner.
34
<PAGE> 35
ARTICLE 14. GENERAL PROVISIONS.
14.1 Amendments. This Agreement may be amended only upon the written
consent of PMC, ENI and MRC on behalf of the Equity Charter Municipalities.
14.2 Title to Partnership Property. All property owned by the
Partnership, whether real or personal, tangible or intangible, shall be deemed
to be owned by the Partnership as an entity, and no Partner, individually, shall
have any ownership of such property. The Partnership may hold any of its assets
in its own name or in the name of its nominee for the benefit of the
Partnership, which nominee may be one or more individuals, corporations,
partnerships, trusts or other entities.
14.3 Notices. (a) All notices and other communications required or
permitted by this Agreement or by law to be served upon or given to a party
hereto by any other party hereto shall be in writing and shall be deemed duly
served and given when received after being delivered by hand or sent by
registered or certified mail, return receipt requested, postage prepaid
addressed as follows:
If to PMC: With a Copy to:
PERC Management Company Limited Partnership Bernstein, Shur, Sawyer & Nelson
110 Main Street 100 Middle Street
Suite 1308 P.O. Box 9729
Saco, Maine 04072 Portland, Maine 04112-5029
Telecopier: 201-854-1771 ATTN: Gordon F. Grimes
Telecopier: 201-774 -1127
With such copy not to constitute notice.
If to ENI: With a Copy to:
Energy National, Inc. NRG Energy, Inc.
1221 Nicollet Mall 1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445 Minneapolis, MN 55403-2445
ATTN: Stan Marks ATTN: Michael J. Young,
Telecopier: 612-373-5312 Senior Counsel
Telecopier: 612-373-5312
35
<PAGE> 36
With such copy not to constitute notice.
If to the Equity Charter Municipalities
With a Copy to:
(a single notice for the benefit of all
Equity Charter Municipalities):
Equity Charter Municipalities Eaton, Peabody, Brown & Veague
c/o Municipal Review Committee Fleet Center - Exchange Street
Eastern Maine Development Corporation P.O. Box 1210
One Cumberland Place Bangor, ME 04402-1210
Bangor, ME 04401 ATTN: Thomas M. Brown, Esq.
ATTN: Greg Lounder Telecopier: 207-942-3040
Telecopier: 207-942-3548
With such copy not to constitute notice.
Each Partner may change its address for the purpose of this Section 14.3 by
giving written notice of such change to the other Partners in the manner
provided in this Section 14.3.
(b) Notices and Reports to Equity Charter Municipalities. For
all purposes under this Agreement the GP's should deliver a single copy of all
reports due to Equity Charter Municipalities to the MRC for further distribution
by the MRC to the Equity Charter Municipalities.
14.4 Governing Law. This Agreement shall be governed by the laws of
the State of Maine, without reference to the conflicts of laws or principles
thereof.
14.5 Headings. The headings of the articles and sections of this
Agreement are inserted for convenience only and are not to be deemed to
constitute a part of this Agreement.
14.6 Further and Additional Documents and Reports. Each of the
parties hereto agrees to execute, acknowledge and verify, if required to do so,
all further or additional documents as may be reasonably necessary to effectuate
fully the terms of this Agreement.
14.7 Counterparts. This Agreement may be executed in counterparts,
each one of which shall be considered an original, and all of which, when taken
together, shall constitute one and the same instrument.
14.8 Binding on Successors and Assigns. Except as otherwise
specifically provided herein, this Agreement shall be binding upon and inure to
the benefit of the executors, administrators, successors, and assigns of the
respective Partners.
36
<PAGE> 37
14.9 Waiver. The terms, conditions, covenants, representations, and
warranties hereof may be waived only by a written instrument executed by the
Partner waiving compliance. The failure of a Partner at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. The waiver of any breach of any term,
covenant, or condition of this Agreement by any of the parties hereto shall not
constitute a continuing waiver or waiver of any subsequent breach, either of the
same or of any other additional or different term, covenant, or condition of
this Agreement.
14.10 Severability. Whenever possible, each provision of this
Agreement and all related documents shall be interpreted in such a manner as to
be valid under applicable law, but if any such provision is invalid or
prohibited under said applicable law, such provision shall be ineffective to the
extent of such invalidity or prohibition without invalidating the remainder of
such provision or the remaining provisions of the affected documents.
14.11 Attorneys' Fees. The parties hereto agree that in the event
any party to this Agreement shall be required to initiate legal or arbitration
proceedings to enforce performance of any term or condition of this Agreement
including, but not limited to, the payment of monies or the enjoining of any
action prohibited hereunder, the prevailing party shall be entitled to recover
from the Partnership such sums, in addition to any other damages or compensation
received, as will reimburse such prevailing party for attorneys' fees and court
and/or arbitration costs incurred on account thereof, regardless of whether such
action proceeds to final judgment or determination.
14.12 Creditors. None of the provisions of this Agreement be for the
benefit of or enforceable by a creditor of the Partnership or of a Partner.
14.13 Remedies. Except as may be provided explicitly in this
Agreement, the rights and remedies of any of the parties hereunder shall not be
mutually exclusive, and the exercise of one or more of the provisions hereof
shall not preclude the exercise of any other provision hereof. Each of the
Partners confirms that monetary damages may be an inadequate remedy for breach
or threat of breach of any provision hereof. The respective rights and
obligations hereunder shall be enforceable by specific performance, injunction,
or other equitable remedy, but nothing herein contained is intended to limit or
affect any rights at law or by statute or otherwise of any party aggrieved as
against the other for a breach or threat of breach of any provision hereof, it
being the intention by this Section 14.13 to make clear the agreement of the
parties hereunder that this Agreement shall be enforceable in equity as well as
at law or otherwise.
14.14 Arbitration. Any party hereto may require the arbitration of
any matter or matters arising under or in connection with this Agreement.
Arbitration is initiated and required by giving notice specifying the matter to
be arbitrated. If legal action is already pending on any matter concerning which
the notice is given, the notice is ineffective unless given before the
expiration of 20 days after service of process on the person giving the notice.
The arbitration shall be held in Portland, Maine, and shall be in conformity
with and subject to the then applicable rules and procedures of the American
Arbitration Association (or any successor thereto). If the American Arbitration
Association is not then in existence and there is no successor, or if for any
reason the American Arbitration
37
<PAGE> 38
Association fails or refuses to act, the arbitration shall be in conformity with
and subject to the provisions of applicable statutes (if any) relating to
arbitration at the time of the notice. The arbitrators shall be bound by this
Agreement and all related agreements. Pleadings in any action pending on the
same matter shall, if arbitration is required, be deemed amended to limit the
issues to those contemplated by the rules prescribed above. The costs of
arbitration, including arbitrator's fees, shall be paid by the nonprevailing
party. The number and selection of arbitrators shall be in accordance with the
rules prescribed above, except that each arbitrator selected shall be familiar
with the subject matter of the issues to be arbitrated, such as, by way of
example, partnership accounting, or management of waste-to-energy facilities, or
such other subject matter as may be at issue.
14.15 Schedules and Exhibits. Each of the Schedules and Exhibits are
attached hereto is hereby incorporated herein and made a part hereof for all
purposes, and references thereto contained herein shall be deemed to include
this reference and incorporation.
14.16 Number and Gender. Unless the context clearly indicates
otherwise, where appropriate in this Agreement, the singular shall include the
plural and the masculine shall include the feminine and the neuter, and vice
versa.
14.17 Power of Attorney; Authority. Each Equity Charter Municipality
hereby grants to the MRC its irrevocable Power of Attorney to take all action,
execute, swear to and deliver any and all documents required or appropriate in
connection with its acquisition of an interest in the Partnership, and the
Partnership's affairs, including amendments to the Partnership Agreement. Each
Equity Charter Municipality hereby authorizes and consents to the General
Partners executing and delivering on behalf of the Partnership any and all
documents reasonable deemed appropriate in connection with, and consistent with
the terms of, the FAME Bonds, the Power Purchase Agreement or the Waste Disposal
Agreements.
14.18 Terms Not Defined. The terms used herein, unless otherwise
specifically defined in this Partnership Agreement, shall have the meanings
provided in the Waste Disposal Agreement.
38
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have signed and sworn to this
Third Amended and Restated Agreement of Limited Partnership the day and year
stated above.
THE GENERAL PARTNERS:
PERC MANAGEMENT COMPANY LIMITED
PARTNERSHIP
BY: PERC, INC.
General Partner
By: /s/ Martin J. Sergi
-----------------------------------------
Martin J. Sergi, President
ENERGY NATIONAL, INC.
By: /s/ Michael J. Young
-----------------------------------------
Michael J. Young, Secretary
THE LIMITED PARTNERS:
PERC MANAGEMENT COMPANY LIMITED
PARTNERSHIP
BY: PERC, INC.
General Partner
By: /s/ Martin J. Sergi
-----------------------------------------
Martin J. Sergi, President
ENERGY NATIONAL, INC.
By: /s/ Michael J. Young
-----------------------------------------
Michael J. Young, Secretary
39
<PAGE> 40
NEWLY ADMITTED LIMITED PARTNERS
(Equity Charter Municipalities)
BY COUNTER PART SIGNATURE PAGE.
Schedule A Names and Address of the Equity Charter Municipalities
Schedule B Equipment Leases
40
<PAGE> 1
Exhibit 4.7
SURPLUS CASH AGREEMENT
This Agreement dated as of June 26, 1998 is among Penobscot Energy
Recovery Company, Limited Partnership, a Maine limited partnership (the
"Partnership"), Bangor Hydro-Electric Company, a Maine corporation ("Bangor
Hydro") and Municipal Review Committee, Inc., a Maine not-for-profit corporation
(the "MRC").
WHEREAS, the Partnership and the Finance Authority of Maine ("FAME") have
entered into a Loan Agreement pursuant to which FAME has agreed to issue its
Electric Rate Stabilization Revenue Refunding Bonds, Series 1998A (Penobscot
Energy Recovery Company, LP) in the aggregate principal amount of $29,930,000
(the "Series A Bonds" and its Electric Rate Stabilization Revenue Refunding
Bonds, Series 1998B (Penobscot Energy Recovery Company, LP) in the aggregate
principal amount of $15,065,000 (the "Series B Bonds" and, together with the
Series A Bonds, the "Bonds") pursuant to the Trust Indenture dated as of June 1,
1998 (the "Indenture") between FAME and The Chase Manhattan Bank, as Trustee
(the "Trustee"); and
WHEREAS, the Partnership and Bangor Hydro entered into a Power Purchase
Agreement dated June 21, 1984, as amended by Amendment No. 1 dated March 24,
1986 and as further amended by Amendment No. 2 (the "Power Purchase Agreement
Amendment No. 2") dated as of the date hereof (collectively, the "Power Purchase
Agreement"); and
WHEREAS, the MRC is the designated agent for certain municipalities in the
State of Maine which have entered into with the Partnership the First Amended
and Restated Waste Disposal Agreements on effective as of April 1, 1991 (the
"Charter Municipalities") and Second Amended, Restated and Extended Waste
Disposal Agreements (the "Extended Waste Disposal Agreements") in 1998 in
connection with the issuance of the Bonds (the "Amending Charter
Municipalities); and
WHEREAS, under Article XIX of the Extended Waste Disposal Agreements, the
Amending Charter Municipalities, acting through the MRC pursuant to paragraph E
of Article XII, have the option to participate in the purchase of limited
partnership interests in the Partnership, with the purchase price payable from a
designation of Performance Credits (as defined in the Extended Waste Disposal
Agreements), and under paragraph B of Article XVIII and paragraph C.3.III of
Article XIX, funds credited to the MRC Prepayment Account in the Bond Prepayment
and Reserve Fund from Revenues (as defined in and pursuant to Article V of the
Indenture) or deposited therein by the MRC from designated Performance Credits
and either (i) transferred to the Special Redemption Account of the Debt Service
Fund to redeem "Series 1998B Special Term Bonds" (as defined in the Indenture)
prior to their stated maturity date, or (ii) used to purchase and cancel, or to
defease or otherwise optionally redeem, Bonds prior to their stated maturity
date; and
WHEREAS, the distribution to the MRC constitutes the Performance Credits
-1-
<PAGE> 2
contemplated in Article XVIII of the Extended Waste Disposal Agreement and the
calculation of such Performance Credits needs to be adjusted as a result of
additional reserve accounts required by FAME in connection with the issuance of
the Bonds, as contemplated in paragraph A of Article XVIII of the Extended Waste
Disposal Agreement and approved by the MRC; and
WHEREAS, under the Power Purchase Agreement, Bangor Hydro is obligated to
pay $250,000 on the first day of each January, April, July and October,
commencing October 1, 1998, until the amount paid equals $4,000,000, by wire
transfer to the Trustee for credit to the Bangor Hydro-Funded Account of the
Bond Prepayment and Reserve Fund (the "Bangor Hydro Payment"); and
WHEREAS, under Section 5.01 of the Indenture, the Trustee has established
certain Trust Funds, including the Special Redemption Account of the Debt
Service Fund and the Bond Prepayment and Reserve Fund consisting of (1) the
Bangor Hydro-Funded Account (consisting of the MRC Retention Subaccount and the
Borrower Retention Subaccount), (2) the MRC Prepayment Account, and (3) the
Borrower Reserve Account; and
WHEREAS, Section 5.03 of the Indenture provides for the application of
Revenues on the fifteenth day of each calendar month (each an "Indenture
Distribution Date"), and any balance remaining after application pursuant to
clauses (1) through (9) and the funding of certain Accounts pursuant to clause
(10) of said Section 5.03 is paid to or at the direction of the Partnership for
distribution among the Partnership, Bangor Hydro and the MRC; and
WHEREAS, the parties hereto desire to set forth herein their agreement of
the distribution of (i) the Allocable Funds after accounting for Reserve
Deposits, (ii) interest on various reserve funds held under the Indenture, and
(iii) Indenture Residual paid by the Trustee to or at the direction of the
Partnership under the Indenture.
NOW, THEREFORE, for good and valuable consideration, the parties hereto
hereby agree as follows:
Section 1. Definitions. Capitalized terms used herein and not otherwise
defined have the meanings given such terms in the Indenture. In addition, the
following terms, as used herein, have the following meanings:
"Allocable Funds" means, as of any Indenture Distribution Date, the
Revenue Fund Balance, less reimbursements of the Partnership and the MRC
under Section 4(a) of this Agreement for withdrawals by the Trustee from
the Borrower Reserve Account, the Borrower Retention Subaccount and the
MRC Reserve Accounts, and less the Prepayment Benefit (if any) for the
Monthly Period ended on such Indenture Disbursement Date.
"Bangor Hydro Payment" has the meaning given such term in the sixth
WHEREAS clause above.
-2-
<PAGE> 3
"Bond Documents" means the Indenture and the Financing Documents.
"ENI" means Energy National, Inc., a Utah corporation, and its
successors or assigns as a general or limited partner in the Partnership.
"Funding Date Partners" means the partners of the Partnership (as
their respective interests are then reflected on the books and records of
the Partnership) on each Indenture Distribution Date from July 15, 1998 to
the date on which the aggregate amount of all deposits made into the
Borrower Reserve Account under Section 5.03(b)(10)(iv) is $2,500,000.
"Indenture Residual" has the meaning given such term in Section 6
hereof.
"Issue Date Partners" means PMC and ENI.
"MRC Reserve Accounts" means collectively, the MRC Retention
Subaccount in the Bangor Hydro-Funded Account, and the MRC Prepayment
Account, of the Bond Prepayment and Reserve Fund.
"Monthly Period" means a period beginning on an Indenture
Distribution Date and ending on the next succeeding Indenture Distribution
Date.
"PMC" means PERC Management Company Limited Partnership, a Maine
limited partnership, and its successors or assigns as a general or limited
partner in the Partnership.
"Prepayment Benefit" means, for any period of determination, an
amount equal to (i) the interest and the Capital Reserve Premium payable
to the Authority that would have been payable on the Bonds during such
period if no Bonds had been optionally redeemed, purchased or defeased as
contemplated by Section 7 of this Agreement, less (ii) the interest and
the Capital Reserve Premium payable to the Authority paid on outstanding
Bonds during such period.
"Reserve Deposits" means, as of any Indenture Distribution Date, the
aggregate amount of the Revenue Fund Balance credited by the Trustee (i)
to the MRC Retention Subaccount pursuant to Section 5.03(10)(i) of the
Indenture; (ii) to the Borrower Retention Subaccount pursuant to Section
5.03(10)(ii) of the Indenture; (iii) to the MRC Prepayment Account
pursuant to Section 5.03(10)(iii) of the Indenture; and (iv) to the
Borrower Reserve Account pursuant to Section 5.03(10)(iv) of the
Indenture.
"Revenue Fund Balance" has the meaning given such term in Section
5.03(10) of the Indenture; namely, it is the balance of the Revenues in
the Revenue Fund on each Indenture Distribution Date after application of
Revenues by the Trustee pursuant to clauses (1) through (9) of said
Section 5.03 of the Indenture.
-3-
<PAGE> 4
Section 2. Bangor Hydro Payments. Bangor Hydro shall pay, by wire transfer
or in other immediately available funds, to the Trustee for credit to the Bangor
Hydro-Funded Account of the Bond Prepayment and Reserve Fund, the Bangor Hydro
Payment, one-half of which is to be designated by Bangor Hydro for credit to the
MRC Retention Subaccount and one-half of which is to be designated by Bangor
Hydro for credit to the Borrower Retention Subaccount.
Section 3. Investment of MRC Accounts; Interest Earnings.
(a) Under Section 5.12 of the Indenture, the Partnership has the
right to direct the investment, from time to time, of the various Trust
Funds, including the MRC Reserve Accounts, in Eligible Investments, and as
of the date hereof the Partnership has provided the Trustee with written
investment instructions and intends to do so from time to time, in its
discretion, except that upon the Partnership's receipt of written
instructions of the MRC, the Partnership agrees to direct the Trustee to
invest funds in the MRC Reserve Accounts, or either of them, in accordance
with such instructions, provided that such investment instructions comply
with the provisions of Section 5.12 of the Indenture and the Tax
Regulatory Agreement. The MRC hereby agrees and acknowledges that such
investments may be made with or through the Trustee or its affiliates, and
neither the Trustee nor the Partnership shall be responsible or liable for
any losses incurred or realized by the investment of such Account or
Subaccount so long as such investments qualify as "Eligible Investments"
as required under the Indenture.
(b) Under Section 5.12(b)(iii) of the Indenture, interest earnings
on funds credited to the Special Redemption Account and the Bond
Prepayment and Reserve Fund are to be distributed from time to time at the
direction of the Partnership. The parties hereto agree that the
Partnership shall direct the Trustee to distribute such interest earnings
as follows: (i) on the Special Redemption Account, as and when earned, to
the Partnership; (ii) on the Borrower Retention Subaccount, as and when
earned, to the Issue Date Partners; (iii) on the Borrower Reserve Account,
as and when earned, to the Funding Date Partners; and (iv) on the MRC
Reserve Accounts, as and when earned, to the MRC unless the MRC has
provided the Partnership with written instructions to direct the Trustee
to retain such amounts therein, or to transfer such amounts (in minimum
increments as specified in Section 7 of this Agreement) to the Special
Redemption Account.
Section 4. Distribution of Revenue Fund Balance. After applications of the
Revenue Fund Balance pursuant to Section 5.03(10) of the Indenture (that is
after any Reserve Deposits), the Trustee pays the balance to or at the direction
of the Partnership on each Indenture Distribution Date. The parties hereto agree
that the Partnership shall direct the Trustee to disburse the balance payable to
the Partnership on an Indenture Disbursement Date, as follows:
(a) First, pro rata to the Issue Date Partners, an amount equal to
any amounts
-4-
<PAGE> 5
theretofore withdrawn by the Trustee from the Borrower Reserve Account
under Section 5.10(a)(2) of the Indenture and to the Funding Date
Partners, an amount equal to any amounts theretofore withdrawn by the
Trustee from the Borrower Retention Subaccount under Section 5.10(a)(2) of
the Indenture to pay deficiencies in the Debt Service Fund, until such
partners have been fully reimbursed for all such amounts withdrawn by the
Trustee, and to the MRC, an amount equal to any amounts theretofore
withdrawn by the Trustee from the MRC Reserve Accounts under Section
5.10(a)(2) of the Indenture to pay deficiencies in the Debt Service Fund
(but not including any transfers to the Special Redemption Account or
otherwise to optionally redeem Bonds under Section 2.04(c) or (d) of the
Indenture or to purchase and cancel or defease Bonds), until the MRC has
been fully reimbursed for all amounts so withdrawn by the Trustee;
provided that if the balance of funds available for such purpose is
insufficient to make such payments in full to the Issue Date Partners, the
Funding Date Partners and the MRC, then it shall be paid to the Issue Date
Partners and the Funding Date Partners (on one hand) and the MRC (on the
other hand) on a pro rata basis.
(b) Second, to the Partnership, the Prepayment Benefit (if any) for
the Monthly Period ended on such Indenture Disbursement Date.
(c) Third, the remaining balance distributed as follows:
(i) To Bangor Hydro: (A) one-third (1/3) of the Allocable
Funds less (B) any amount deposited in the MRC Retention Subaccount
by the Trustee under Section 5.03(10)(i) of the Indenture, and less
(C) any amount deposited in the Borrower Retention Subaccount by the
Trustee under Section 5.03(10)(ii) of the Indenture.
(ii) To or at the direction of the MRC: (A) one-third (1/3) of
the Allocable Funds less (B) any amount deposited to the MRC
Prepayment Account by the Trustee under Section 5.03(10)(iii) of the
Indenture; provided, however, that if the Partnership receives
written direction from the MRC not less than five (5) Business Days
prior to the Indenture Distribution Date that all or any designated
portion of such payment should be transferred by the Trustee to the
MRC Prepayment Account or the Special Redemption Account, the
Partnership shall direct the Trustee to effect such retention or
transfer;
(iii) To the Partnership: (A) one-third (1/3) of the Allocable
Funds less (B) any amounts deposited to the Borrower Reserve Account
by the Trustee under Section 5.03(10)(iv) of the Indenture.
Examples of the Partnership's directions to the Trustee regarding the
distribution of the Revenue Fund Balance remaining after Reserve Deposits
among the parties hereto is attached as Exhibit A.
-5-
<PAGE> 6
Section 5. Closing Date Adjustments. The parties hereto agree that
following the date hereof, they will calculate an amount that would have been
distributed to the parties hereto, assuming that the issuance and delivery of
the Bonds (and the defeasance of the Prior Bonds), had occurred at the end of
business on April 30, 1998, and the Partnership will distribute among the
Partnership, the MRC and Bangor Hydro such amount within 45 days after June 30,
1998 or as soon thereafter as sufficient funds are available.
Section 6. Distribution of Indenture Residual. Under Section 5.15 of the
Indenture, upon the payment and discharge in full of all of the Bonds, and after
application and other payments as described in clauses (i) through (iv) of
Section 5.15 of the Indenture, the Trustee shall pay the balance remaining under
the Indenture (the "Indenture Residual") to or at the direction of the
Partnership. The parties hereto agree that the Partnership shall direct the
Trustee to disburse the Indenture Residual as follows:
(i) Revenue Fund, one-third paid to the Partnership, one-third paid
to Bangor Hydro and one-third paid to the MRC.
(ii) Debt Service Fund (excluding the Special Redemption Account),
one-third paid to the Partnership, one-third paid to Bangor Hydro and
one-third paid to the MRC.
(iii) Special Redemption Account, paid to the Partnership.
(iv) Operating Account in the Operating Fund (after retention by the
Partnership of an amount necessary for working capital purposes),
one-third paid to the Partnership, one-third paid to Bangor Hydro and
one-third paid to the MRC.
(v) Operating Reserve Account in the Operating Fund, one-third paid
to Bangor Hydro, one-third paid to the MRC and one-third paid to the Issue
Date Partners.
(vi) Capital Improvement Fund, one-third paid to Bangor Hydro,
one-third paid to the MRC and one-third paid to the Issue Date Partners.
(vii) Capital Reserve Fund, one-third paid to Bangor Hydro,
one-third paid to the MRC and one-third paid to the Issue Date Partners.
(viii) MRC Reserve Accounts, to the MRC.
(ix) Borrower Retention Subaccount, to the Issue Date Partners.
(x) Borrower Reserve Account, to the Funding Date Partners.
Amounts paid to the Issue Date Partners under clauses (v), (vi), (vii) and (ix)
above shall be paid 71.28574% to PMC and 28.71426% to ENI. Amounts paid to the
Funding Date Partners under
-6-
<PAGE> 7
clause (x) above, shall be paid to each Funding Date Partner in proportion to
the fraction the numerator of which is the cumulative sum of (a) the amount
credited to the Borrower Reserve Account on each Indenture Distribution Date
multiplied by (b) that Funding Date Partner's aggregate GP Sharing Ratio with
respect to the general partners' aggregate interest (currently 10%) and LP
Sharing Ratio with respect to the limited partners' aggregate interest
(currently 90%) as of such date and the denominator of which is the aggregate
principal amount credited to the Borrower Reserve Account over the life of the
Bonds.
Section 7. Optional Redemption, Purchase or Defeasance of Bonds. At any
time and from time to time (but not more frequently than once in each Calendar
Quarter):
(a) upon notice from the MRC, the Partnership shall direct the
Trustee to transfer all or any designated portion of money on deposit in
the MRC Retention Subaccount or the MRC Prepayment Account (in a minimum
increment of $5,000 or any multiple thereof) to the Special Redemption
Account of the Debt Service Fund to be used to optionally redeem Series
1998B Special Term Bonds (in authorized denominations) on the earliest
date practicable under Sections 2.04(d) and 5.07(iv) of the Indenture;
(b) the MRC may (i) purchase Bonds in the open market, and direct
the Partnership to tender such Bonds to the Trustee for cancellation, or
(ii) direct the Partnership to defease a designated portion of the Bonds
in authorized denominations, or (iii) from and after July 1, 2008,
instruct the Partnership to optionally redeem Bonds (in authorized
denominations) on the earliest practicable date under Section 2.04(c) of
the Indenture. If Bonds are to be defeased, all costs of defeasance shall
be paid by funds in the MRC Prepayment Account from such amount and shall
include all costs and expenses related to such defeasance, including the
purchase price of Government Obligations, the costs and expenses of the
Trustee, Bond Counsel, counsel to the Partnership, and any accounting or
Rating Agency expenses. If Bonds are to be optionally redeemed pursuant to
Section 2.04(c) of the Indenture, the redemption price, including any
redemption premium, shall be paid from funds in the MRC Retention
Subaccount or the MRC Prepayment Account.
(c) Under Section 5.03(c)(10)(v) of the Indenture, at any time
additional money may be paid to the Trustee for credit to the MRC
Prepayment Account or for transfer to the Special Redemption Account. Upon
receipt of any such additional money, accompanied by a written direction
from the MRC to do so, the Partnership shall transfer such funds to the
Trustee for credit to the Account so specified in the MRC's written
direction; provided that amounts to be deposited in or transferred to the
Special Redemption Account shall be in integral amounts of $5,000.
(d) If the Partnership receives a written direction from the MRC to
direct the Trustee to transfer amounts in either of the MRC Reserve
Accounts to the Special Redemption Account or to pay all or a part of such
amounts to the MRC in accordance with Section 5.06(c) of the Indenture,
the Partnership will so direct the Trustee; provided
-7-
<PAGE> 8
that the amounts to be so transferred to the Special Redemption Account
shall be in integral amounts of $5,000.
Section 8. Prepayment Benefit for Debt Service Savings Due to Early
Retirement of Bonds from MRC Prepayment Account. If any Series 1998B Special
Term Bonds are optionally redeemed from funds deposited in or transferred to the
Special Redemption Account, or if any Bonds are purchased by the MRC and
tendered to the Trustee for cancellation, or defeased, in connection with an MRC
direction given to the Partnership pursuant to Section 7 of this Agreement, the
Partnership shall calculate the Prepayment Benefit for each Monthly Period, and
shall provide such calculations to the MRC and Bangor Hydro. Absent manifest
error, such calculations shall be deemed conclusive.
Section 9. Notices. Except when telephonic notice is expressly authorized
by this Agreement, any notice or other communication to any party in connection
with this Agreement shall be in writing and shall be sent by manual delivery,
overnight courier or United States mail (postage prepaid) or facsimile
transmission (followed by a written confirmation sent by manual delivery,
overnight courier or United States mail), addressed to such party at the address
specified on the signature page hereof, or at such other address as such party
shall have specified to the other parties hereto in writing. All periods of
notice shall be measured from the date of delivery thereof if manually
delivered, from the date of sending thereof if sent by facsimile transmission,
from the first Business Day after the date of sending if sent by overnight
courier, or from four days after the date of mailing if mailed; provided,
however, that any notice to the Partnership from the MRC under Section 4(b)
hereof shall be deemed to have been given only when received by the Partnership.
Section 10. Limitation of Liability. Notwithstanding any other provision
of this Agreement, and without waiving or foregoing any rights against the
Partnership, there shall be no recourse against any general or limited partner
of the Partnership or any of their respective affiliates, stockholders,
partners, officers, directors, employees or agents, for any liability or
obligations of the Partnership arising under this Agreement. The limitations on
recourse set forth in this Section 10 shall survive termination of this
Agreement and the full performance of the obligations of the Partnership
hereunder.
Section 11. MRC Approval. The MRC acknowledges that the distributions to
it pursuant to Section 4 hereof constitute the Performance Credits, that the
calculation of such distributions might be interpreted as varying method defined
in Article XVIII of the Extended Waste Disposal Agreements, and that such
variation is contemplated in paragraph A of Article XVIII of the Extended Waste
Disposal Agreements. The MRC hereby approves of the variation in calculating
such Performance Credits.
Section 12. Miscellaneous Provisions.
(a) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns.
-8-
<PAGE> 9
(b) Governing Law and Construction; Severability. The validity,
construction and enforceability of this Agreement shall be governed by the
internal laws of the State of Maine, without giving effect to the conflict
of laws principles thereof. Whenever possible, each provision of this
Agreement and any other statement, instrument or transaction contemplated
hereby or thereby or relating hereto or thereto shall be interpreted in
such manner as to be effective and valid under such applicable law, but,
if any provision of this Agreement, the Indenture or any other statement,
instrument or transaction contemplated hereby or thereby or relating
hereto or thereto shall be held to be prohibited or invalid under such
applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement or any other
statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto.
(c) Captions. The captions or headings herein are for convenience
only and in no way define, limit or describe the scope or intent of any
provision of this Agreement.
(d) Entire Agreement. This Agreement and the Power Purchase
Agreement, the Waste Disposal Agreements, the Warrants, the Bond
Documents, the partnership agreement of the Partnership and the monitoring
agreement between the MRC and Bangor Hydro embody the entire agreement and
understanding between the parties hereto with respect to the subject
matter hereof and thereof. This Agreement supersedes all prior agreements
and understandings relating to the subject matter hereof. Nothing
contained in this Agreement or in any other document, expressed or
implied, is intended to confer upon any Persons other than the parties
hereto any rights, remedies, obligations or liabilities hereunder or
thereunder.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Agreement
by signing any such counterpart.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
Notice Address for Partnership:
One copy to: PENOBSCOT ENERGY RECOVERY
COMPANY, LIMITED PARTNERSHIP
c/o KTI, Inc.
7000 Boulevard East By PERC Management Company Limited
Guttenberg, NJ 07093 Partnership, a General Partner
Attn: President By PERC, Inc., its general partner
Fax No.: (201) 854-1771
Telephone No.: (201) 854-777
By: Martin J. Sergi
----------------------------
and
Its: President
---------------------------
One copy to:
By ENERGY NATIONAL, INC.,
Energy National, Inc. a General Partner
c/o NRG Energy, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, MN By: Michael Young
Attn: Stan Marks -----------------------------
Fax No.: (612) 373-5312
Its: Secretary
----------------------------
Telephone No.: (612) 373-5455
and
One copy to:
Penobscot Energy Recovery Company,
Limited Partnership
Industrial Way
Orrington, Maine
Attn: Gary A. Stacey
Fax No. (207) 825-4115
Telephone No.: (207) 825-4566
-10-
<PAGE> 11
Notice Address for MRC: MUNICIPAL REVIEW COMMITTEE, INC.
Municipal Review Committee, Inc.
P.O. Box 2579 By: Gerald Kempen
Bangor, Maine 04402 ---------------------------
Attn: Clerk Its: President
Fax No.: (207) 942-3548 ---------------------------
Telephone No.: (207) 942-6389
Notice Address for Bangor Hydro: BANGOR HYDRO-ELECTRIC COMPANY
Bangor Hydro-Electric Company
33 State Street
P.O. Box 932 By: Frederick S. Samp
Bangor, Maine 04402-0932 -----------------------------
Attn: President Its: Vice President-Finance & Law
Fax No.: (207) 945-5621 -----------------------------
Telephone No.: (207) 941-6653
(Signature Page to Surplus Cash Agreement)
<PAGE> 1
Exhibit 4.8
NEWS RELEASE
FOR IMMEDIATE RELEASE
KTI, Inc. Announces Completion of PERC's
Utility Contract Restructuring
Guttenberg, N. J. (June 26, 1998) -- - KTI, Inc. (Nasdaq: KTIE) announced
today the successful completion of a major overhaul of the various contracts and
obligations of its waste-to-energy subsidiary, Penobscot Energy Recovery
Company, Limited Partnership (PERC). This major restructuring involves the waste
supply agreements with the constituent municipalities, the power sales agreement
with Bangor Hydro (PERC's sole utility customer), as well as a refinancing of
the tax exempt bonds for PERC. KTI is a 71.3% owner and general partner of PERC.
The refinancing was made possible through the sale of approximately
$45,000,000 in Electric Rate Stabilization Revenue Refunding bonds issued by the
Finance Authority of Maine (FAME). The yield on the bonds ranges from 3.75% for
1-year term bonds to 5.20% for 20-year term bonds. Proceeds were used to retire
PERC's existing outstanding bonds, thereby reducing its debt service costs and
extending the term of its current 5-year bonds.
The refinancing was part of a complex transaction involving KTI, PERC,
FAME, the Maine Legislature, Bangor Hydro-Electric Company, the Public Utilities
Commission of Maine, and the Municipal Review Committee (MRC) which represents
over 130 Maine municipalities.
The refinancing was facilitated under the auspices of the Maine
Legislature through an amendment to the Electric Rate Stabilization Program that
allowed PERC to qualify for such financing. Under the agreement, the State of
Maine's "moral obligation" supports the new non-recourse debt.
The PERC refinancing agreement and the associated restructuring of the
power sales agreement is also intended to enhance the financial objectives of
Bangor Hydro-Electric including a rate reduction of its contractual obligation
to purchase PERC's power output through the year 2018. The agreement addresses
Bangor Hydro's desire to reduce the burden on its ratepayers caused by the
existing power purchase agreement with PERC. The restructuring also stabilized
tipping fees for the municipalities which PERC serves in exchange for the
extension of their commitment to provide up to 180,000 tons of solid waste each
year to PERC through the year 2018.
As part of the closing of the transaction, Bangor Hydro made a one-time
payment of $6 million to PERC and will make additional quarterly payments of
$250,000 for four years totaling $4 million.
-more-
<PAGE> 2
Page 2
KTI, Inc.
In addition, Bangor Hydro issued one million warrants to PERC and one
million warrants to MRC. Each warrant entitles the warrant holder to acquire one
share of Bangor Hydro common stock at a price of $7 per share. The warrants vest
over four years and expire in 10 years.
KTI President, Martin J. Sergi said, "This is an extremely important and
valuable transaction for all parties involved. As for KTI, the transaction has
some near term impact on earnings, which are perfectly manageable as expected.
We will both increase and strengthen our cash flow which is locked in for the
years ahead. In addition, KTI will have an equity stake in Bangor Hydro. As a
further benefit, the communities have extended their contracts with PERC by 15
years to supply the required stream of solid waste into the facility, and the
Public Utilities Commission in Maine has approved the rate that PERC charges
Bangor Hydro for electricity for the next 20 years. This is another illustration
of the strong public/private partnership developed by KTI's subsidiaries in
Maine."
PERC processes approximately 250,000 tons of municipal solid waste a year
from 230 Maine communities and generates over 160,000 megawatt hours of
electricity per annum, which is sold to Bangor Hydro Electric Company. In 1997,
PERC generated $31.6 million in revenue and net income of $7.3 million.
Energy National, Inc. (ENI), a subsidiary of NRG Energy, which is also a
general partner of PERC, owns 28.7% of PERC.
***
KTI is a fully integrated waste management company whose core reputation
was established in the waste-to-energy sector. KTI owns and operates two
waste-to-energy facilities in Maine, two waste-to-energy facilities in Virginia;
a biomass-to-energy plant in Florida, and wood processing operations in Maine
and Georgia. Collectively, these businesses handle in excess of 1,000,000 tons
of material annually.
KTI also owns and operates major recycling facilities in Boston, Newark
and Chicago, a full-service environmental company based in Newington, New
Hampshire, a Maryland company specializing in marketing post-industrial
recycling plastics, a paper and metals recycling company in Biddeford, Maine and
a world wide secondary fiber marketing company based in Portland, Oregon. It
also holds a majority interest in America's only commercially operational
municipal waste ash recycling facility in Nashville, Tennessee
For further information, contact Marty Sergi at KTI, Inc. (201) 854-7777
or Frank N. Hawkins, Jr. or Julie Marshall at Hawk Associates, Inc. (305)
852-2383. Copies of KTI press releases, SEC filings, current price quotes, stock
charts, analysts' comments and other valuable information for investors may be
found on the website http://www.hawkassociates.com.
This release contains various forward looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 which represent the company's expectations or
beliefs concerning future events of the company's financial performance. These
forward-looking statements are qualified by important factors that could cause
actual results to differ materially from those in the forward-looking
statements. Results actually achieved may differ materially from expected
results included in these statements.
