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EXHIBIT 10.37
GAS SALES AGREEMENT
This Agreement is made this 15th of November, 1998, between Midland Cogeneration
Venture Limited Partnership ("MCV" or "Buyer") and Engage Energy U.S., L.P.
("Seller") for the purpose of entering into a long-term gas supply arrangement
on the terms and conditions which follow. In this Agreement, Seller and Buyer
may also be referred to individually as "Party" or collectively as "Parties."
1. Definitions. The following terms when used in this Agreement, shall have
the following meanings:
a) The term "Agreement" means this Agreement and all Exhibits hereto.
b) The term "business day" shall mean: any day other than a day on which
banks in Michigan are allowed by law to be closed.
c) The term "Btu" shall mean one (1) British Thermal Unit, the amount of
heat required to raise the temperature of one (1) pound of water one
(1) degree Fahrenheit at sixty (60) degrees Fahrenheit. BTU is
measured on a dry basis.
d) The term "Contract Year" shall mean any calendar year during the term
of this Agreement.
e) The term "cubic foot of gas" shall mean the volume of gas contained in
one (1) cubic foot of space at a pressure of fourteen
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and seventy-three hundredths (14.73) dry psia, at a temperature of
sixty degrees (60 degrees) Fahrenheit.
f) The term "day" shall mean a period of twenty-four (24) consecutive
hours (23 hours when changing from Standard to Daylight time and 25
hours when changing back to Standard time), beginning and ending at
9:00 a.m. Central clock time.
g) The term "Disputed Amount" shall have the meaning set forth in Section
5A(ii).
h) The term "gas" shall mean any mixture of hydrocarbon and
non-combustible gases in a gaseous form, consisting primarily of
methane, and includes natural gas produced from gas ▇▇▇▇▇ (gas well
gas), gas which immediately prior to being produced from a reservoir
is in solution with crude oil, or dispersed in an intimate association
with crude oil, or in contract with crude oil across a gas-oil contact
(casinghead gas), or residue gas resulting from the processing of
either or both casinghead gas and gas well gas.
i) The term "Mcf" shall mean one thousand (1,000) cubic feet of gas.
j) The term "MMBtu" shall mean a quantity of gas equal to one million
(1,000,000) Btu which is equivalent to one (1) dekatherm.
k) The term "month" shall mean the period beginning at 9 a.m. Central
clock time on the first day of any calendar month and ending at 9 a.m.
Central clock time on the first day of the next succeeding calendar
month.
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l) The term "Point of Delivery" shall mean the point where Seller
delivers gas to Buyer as set forth in this Agreement.
m) The term "Prime Rate" shall mean the fluctuating per annum lending
rate of interest from time to time published by CITIBANK, NA, or its
successor, for its best commercial customers.
n) The term "psia" shall mean pounds per square inch absolute.
o) The term "psig" shall mean pounds per square inch gauge.
p) The term "Transporter" shall mean any pipeline transporting gas
subject to this Agreement.
q) The term "Great Lakes Pipeline" shall mean the pipeline owned by Great
Lakes Gas Transmission Limited Partnership which connects to the 26"
pipeline owned by the Midland Cogeneration Venture Limited
Partnership.
r) The term "Undisputed Amount" shall have the meaning set forth in
Section 5A (ii).
2. Quantity. Seller agrees to deliver and sell and MCV agrees to receive and
purchase 10,000 MMBtu/day, on a firm basis in accordance with the terms and
conditions of this Agreement.
3. Price.
(A) The price to be paid by Buyer to Seller for all quantities of gas
delivered hereunder inclusive of all taxes and other adjustments or
costs not provided for herein shall be $2.79 per MMBtu for all gas
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delivered to the interconnection of the Midland Cogeneration Venture
Limited Partnership's 26" pipeline with Great Lakes Pipeline's Midland
interconnect located in ▇▇▇▇▇▇▇▇ County, Michigan.
(B) Seller shall be responsible for all taxes prior to the Point of
Delivery. MCV shall be responsible for all taxes at and after the
Point of Delivery.
4. Term. Deliveries of gas shall commence on November 1, 2004 and continue
through October 31, 2007.
5. Billing and Payments.
(A) Billing and payment procedures are as follows:
(i) After the delivery of gas has commenced hereunder, Seller
shall, on or about the tenth day of each month, render to
Buyer a statement showing the estimated (or actual if
available) quantity of gas delivered at each Point of
Delivery during the prior month, and the amounts due Seller
hereunder. Seller shall also render to Buyer, if necessary,
a separate statement showing the adjustment, if any,
required to conform the prior month's estimated and actual
deliveries and prices. Payment of the amount due based on
such statements shall be made by Buyer to Seller by wire
transfer with immediately available funds the later of (a)
ten (10) days following receipt of such statement or (b) the
twentieth (20th) day of the month. If the due date falls on
a day which is not a business day, then payment shall be
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made on the next business day. If the Buyer bills Seller the
same procedure shall be followed as set forth in this
subparagraph.
(ii) In the event that either Party shall in good faith dispute
any portion of the amount shown in the other Party's
statement (hereinafter called the "Disputed Amount"), the
disputing Party shall (a) notify the other Party in writing
as to the Disputed Amount, and (b) pay the remaining
undisputed portion of the other Party's statement when due
(hereinafter, the "Undisputed Amount").
(iii) If it is determined that the failure to pay any Undisputed
Amount of any statement was not justifiable, interest on
such Undisputed Amount shall accrue at a rate per annum
equal to the Prime Rate, plus one percent (1.0%), from the
time payment would have been due until the time payment is
made, but in no event shall the interest on such unpaid
portion exceed the applicable lawful nonusurious rate of
interest. Payment of any previously unpaid Undisputed Amount
shall be credited first to all interest accrued and then to
principle.
(B) Each Party hereto shall have the right, upon reasonable written
notice, during normal business hours and at its own expense to examine
the books and records of the other Party to the extent necessary to
verify the accuracy of any statement, charge,
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computation or demand made under or pursuant to this Agreement. Such
examination shall be conducted no more than once in a twelve-month
period. Any error or discrepancy in statements furnished pursuant to
this Agreement shall be promptly reported to Seller or Buyer, as
applicable, and proper adjustment thereof shall be made within thirty
(30) days after final determination of the correct volumes or amounts
involved; provided, however, that, if no such errors or discrepancies
are reported to Seller or Buyer, as applicable, within two (2) years
from the end of the calendar year in which such errors or
discrepancies occurred, the same shall be conclusively deemed to be
correct.
6. Deliveries.
(A) Exhibit A hereto sets forth the Point of Delivery under this
Agreement. Seller shall not use any other point to deliver gas without
Buyer's written consent which Buyer may grant or withhold in its sole
discretion.
(B) To the extent that the procedures for the delivery of gas set forth
herein conflict with the rules and tariffs of any Transporter, the
Transporter's rules and tariffs will control and the Parties shall
cooperate fully with each other in complying with such rules and
tariffs.
7. Third Party Gas. Buyer understands and agrees the gas delivered
hereunder may be supplied either from Seller's gas or from gas
purchased by Seller from third parties, provided however, if such gas
is
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purchased from third parties, Seller shall be solely responsible for
the payment of the purchase price of gas to such third parties.
8. Title. Title and risk of loss to gas delivered hereunder shall pass
from Seller to Buyer at the Point of Delivery.
9. Delivery Pressure. Seller shall be required to deliver or cause
delivery of the gas at the Point of Delivery hereunder against the
varying pressures in the facilities of Buyer's Transporter(s) (MCV's
26" pipeline); provided however, Seller shall have the right but not
the obligation to install compression.
10. Quality of Gas. The gas to be delivered hereunder shall comply with
the quality requirements of the Seller's Transporter (Great Lakes
Pipeline) delivering the gas at the Point of Delivery.
11. Measurement and Tests of Gas. The quantity and quality of gas
delivered to the Buyer's account at the Point of Delivery shall be
determined by the Seller's Transporter (Great Lakes Pipeline) in
accordance with the then current standard terms and conditions
applicable to Great Lakes Pipeline's gas transportation contracts.
12. Warranty of Title. Seller hereby warrants (i) title to all gas sold
hereunder or the right to sell such gas, (ii) that it has the right to
sell same to Buyer and (iii) that all such gas shall be free from any
and all liens and adverse claims of any nature whatsoever. Seller
agrees to indemnify and hold Buyer harmless, including but not limited
to, all costs, damages and expenses (including Buyer's reasonable
attorney fees) incurred by Buyer
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in defending against any liens or adverse claims of any nature
whatsoever, including but not limited to, third parties from whom
Seller purchased gas as permitted in Section 7, in addition to any
other remedies Buyer may have hereunder or at law.
13. Credit Worthiness.
13.1 This Agreement is subject to Seller providing Buyer a
guaranty from The Coastal Corporation in the form attached
hereto as Exhibit "B."
13.2 At any time, and from time to time during the term of this
Agreement (and notwithstanding whether an Event of Default
has occurred, as defined in Section 23) but not more than
once in any seven (7) day period, if the Termination Payment
(as such term is defined in Section 13.5) should exceed
$4,000,000 until November 1, 2004 and $5,000,000 thereafter
as to MCV, and $8,000,000 as to Seller, (the "Security
Threshold"), then either Party may request the other Party
to provide additional Performance Assurance in an amount
equal to: the amount by which the Termination Payment
exceeds the Security Threshold (rounding upwards for any
fractional amount to the next $100,000). The Performance
Assurance shall be delivered within thirty (30) calendar
days of the date of the request. If such additional
Performance Assurance is not received by the requesting
Party within thirty (30) calendar days, then the requesting
Party in addition to any other remedy
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available, may immediately suspend performance with respect to the
quantities associated with the amount in excess of the Security
Threshold plus any Performance Assurance already in place and cover
such lost supply or market, as the case may be. Incremental gas costs
(as defined in Section 17 with respect to either Buyer or Seller, as
applicable) incurred by the covering Party shall be recoverable from
the other Party. Such suspension will be implemented on a pro rata
basis to a level at which assurances have been provided. In addition,
a failure to provide Performance Assurance as requested shall
constitute an Event of Default under Section 23.
13.3 Either Party, at its sole expense, may request the other Party to
reduce its Performance Assurance then in place, if the Termination
Payment (with respect to all Transactions then outstanding) reverts
back to an amount less than or equal to the sum of the Performance
Assurance and the Security Threshold then in place (rounding upwards
for any fractional amount to the next $100,000). Such request for
reduction shall be no more frequently than weekly with respect to
Letters of Credit and guaranties, and daily with respect to cash. The
consent to such request(s) shall not be unreasonably withheld.
13.4 Either Party may at any time make a calculation of the Termination
Payment and submit same to the other Party for review. If within
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thirty days of the submission of the value of the Termination Payment
from one Party to the other, agreement has not been reached by the
Parties as to the amount of the Termination Payment, the determination
of the amount of the Termination Payment shall be submitted to
arbitration as provided for in Section 18 of this Agreement.
Notwithstanding the submission of the determination of the amount of
the Termination Payment to arbitration, all requirements in Section 13
of this Agreement shall remain in effect.
13.5 With respect to this Section 13: (a) "Performance Assurance" means
collateral in the form of either cash or Letters of Credit. The
requesting Party may also accept a parental guaranty or other
collateral deemed sufficient by the requesting Party. If the
collateral is in the form of cash, then such cash shall be placed in a
segregated, interest-bearing escrow account on deposit with a major
U.S. commercial bank having a credit rating of at least "A-" from
Standard and Poor's or "A3" from ▇▇▇▇▇'▇ (interest to accrue to the
Party posting the collateral); (b) "Letter of Credit" means one or
more irrevocable, transferable standby letters of credit from a major
U.S. commercial bank or foreign bank with a U.S. office having a
credit rating of at least "A-" from Standard & Poor's or "A3" from
▇▇▇▇▇'▇; (c) "Termination Payment" means the amount by which the
requesting Party shall aggregate Gains, Losses, and
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Costs (as those terms are defined in Section 23.2 (e)) with
respect to this Agreement into a single net amount. The
Termination Payment shall include all amounts owed but not yet
paid by one Party to the other Party, whether or not such amounts
are then due, for performance already performed pursuant to any
Transaction.
14. Right to Terminate Agreement.
(A) In addition to any other remedy of Buyer under law or
provided under this Agreement, Buyer shall have the right at
its election to terminate this Agreement upon twenty (20)
days written notice to Seller if Seller, for any reason,
other than (i) force majeure, (ii) Buyer's failure to take,
or (iii) a failure by Buyer to pay any Undisputed Amounts,
fails, over a period of at least sixty (60) days, to deliver
an average of ninety percent (90%) of the agreed quantity
and provided further that such failure occurred not more
than one hundred forty (140) days immediately preceding the
giving of such notice of termination. Seller shall have
twenty (20) days after receipt of such cancellation notice
to cure any failure in which case Buyer's cancellation is
null and void and this Agreement shall remain in full force
and effect.
(B) In addition to the other remedies of Seller under law or
provided under this Agreement, Seller shall have the right
at its election to terminate this Agreement upon twenty (20)
days written notice to Buyer if Buyer, for any reason, other
than (i) force majeure, (ii) Seller's failure to
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deliver, or (iii) a failure by Seller to pay any Undisputed
Amounts, fails, over a period of at least sixty (60) days, to
take a volume of gas not less than an average of ninety percent
(90%) of the agreed quantity, and provided further that such
failure occurred not more than one hundred forty (140) days
immediately preceding the giving of such notice of termination.
Buyer shall have twenty (20) days after receipt of such
cancellation notice to cure any failure in which case Seller's
cancellation is null and void and this Agreement shall remain in
full force and effect.
15. Assignment.
(A) The terms, covenants and conditions hereof shall be binding
on the Parties hereto and on their successors and permitted
assignees.
(B) Either Party may assign its interest under this Agreement,
with the consent of the other Party, which consent shall not
be unreasonably withheld, to an affiliate or any company
which shall succeed, by merger or consolidation, to
substantially all of its assets. In the event of any such
assignment, such successor shall be entitled to the rights
and shall be subject to the obligations of its predecessor.
Seller acknowledges that pursuant to a certain Gas Backup
Agreement among Consumers Power Company, The Dow Chemical
Company (Dow) and the Midland Cogeneration Venture Limited
Partnership dated January 27, 1987, Buyer may be required to
make an assignment to Dow of certain rights under this
Agreement. Seller
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specifically agrees to accept such assignments, if any, made
by Buyer to Dow in accordance with the aforementioned Gas
Backup Agreement; provided, however, that such assignment
shall not relieve Buyer of its obligations under this
Agreement absent Seller's written consent.
(C) Except as provided above, neither Party shall assign this
Agreement without the prior consent of the other Party,
which consent shall not be unreasonably withheld. Nothing
herein contained shall prevent or restrict either Party from
pledging, granting a security interest in, or assigning as
collateral all or any portion of such Party's interest to
secure any debt or obligation of such Party under any
mortgage, deed of trust, security agreement or similar
instrument.
(D) Either Party desiring to make an assignment for which it has
the right pursuant to the foregoing may upon request obtain
a written consent within sixty (60) days to such assignment
from the other Party evidencing its consent.
16. Notices. Except as otherwise herein provided, any notice, request,
demand or statement given in writing or required to be given in
writing by the terms of this Agreement shall be deemed given when
deposited in the government mail, postage prepaid, as certified mail,
directed to the post office address of the Parties as follows:
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TO SELLER:
For Invoices and Payments: Engage Energy US, L.P.
Five Greenway Plaza, Ste. 1200
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn.: Client Services
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Wire Transfer No. Citibank, NA, NY,
NY,
Acct. # 4071-9415, ABA # 0210-00089
For all other notices: Engage Energy US, L.P.
Five Greenway Plaza, Ste. 1200
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn.: Contract Administration
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
TO BUYER:
For Invoices and Payments: Midland Cogeneration Venture
Limited Partnership
Attn.: Treasury
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Wire Transfer: U.S. Bank Trust, N.A.
Minneapolis, MN
ABA# ▇▇▇▇▇▇▇▇▇
A/C# 180121167365
MI Clearing #47300196 - FBO MCV
76608640
For all other notices: Midland Cogeneration Venture
Limited Partnership
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: Gas Supply Department
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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or at such other address as either Party may from time to time specify
as its address for such purposes by registered for certified letter
addressed to the other Party. Notices, requests, demands or statements
made in person, by telephone, Telecopier, Telex or wire shall be
deemed given when received provided, however, that if such notices are
received after 5:00 p.m. (recipient's local time), they shall not be
effective until the next business day.
Gas nomination notices will be in accordance with the terms and
conditions applicable to Great Lakes Pipeline.
17. Remedies. In the event Seller fails to deliver the daily quantities
for reasons not otherwise excused by force majeure, Seller shall be
responsible for any incremental gas costs incurred by MCV in replacing
such gas. MCV agrees to use commercially reasonable efforts to
purchase replacement gas at the lowest available price. Seller's
obligation to pay MCV for incremental replacement gas costs (and any
transportation penalties or transportation demand charges resulting
from unused transportation) shall be MCV's sole and exclusive remedy
for Seller's failure to deliver except as provided in Section 14. In
the event that MCV fails to take gas for reasons not otherwise excused
by force majeure, MCV shall pay Seller for any incremental decrease in
the resale price of such gas. Seller agrees to use commercially
reasonable efforts to resell such deficiency gas at the highest
achievable price. MCV's
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obligation to pay Seller for such decrease (and any transportation
penalties or transportation demand charges resulting from unused
transportation) shall be Seller's sole and exclusive remedy for MCV's
failure to take gas except as provided in Section 14.
18. Arbitration.
(A) If the Parties are unable to resolve a disagreement arising
under this Agreement such disagreement shall be settled by
arbitration. Either Party may then commence arbitration by
serving written notice thereof on the other Party
designating the issue to be arbitrated.
(B) The Parties shall each appoint one (1) arbitrator and the
two (2) arbitrators so appointed will select a third
arbitrator, all of such arbitrators to be qualified by
education, knowledge, and experience to resolve the dispute
or controversy. If either Party fails to appoint an
arbitrator within ten (10) days after a request for such
appointment is made by the other Party in writing, or if the
two (2) appointed fail, within ten (10) days after the
appointment of the second, to agree on a third arbitrator,
the arbitrator or arbitrators necessary to complete a board
of three (3) arbitrators will be appointed upon application
by either Party therefor to the American Arbitration
Association.
(C) The jurisdiction of the arbitrators will be limited to the
single issue referred to arbitration and the arbitration
shall be conducted pursuant to the guidelines set forth by
the American Arbitration Association; provided, however,
that should there be any conflict between such
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guidelines and the procedures set forth in this Agreement, the terms
of this Agreement shall control.
(D) Within fifteen (15) days following selection of the third arbitrator,
each Party shall furnish the arbitrators in writing its position
regarding the issue being arbitrated. The arbitrators may, if they
deem necessary, convene a hearing regarding the issue being
arbitrated. Within thirty (30) days following the later of the
appointment of the third arbitrator or of the hearing, if one is held,
the arbitrators shall notify the Parties in writing as to which of the
two (2) positions submitted is most consistent with the meaning of
this Agreement with respect to the issue being arbitrated. No other
position may be selected. Such decision shall be binding on the
Parties hereto and shall remain in effect until and unless changed in
accordance with the provisions of this Agreement.
(E) Enforcement of the award may be entered in any court having
jurisdiction over the Parties.
(F) Each Party will pay the expenses of the arbitrator selected by or for
it, and its counsel, witnesses and employees. All other costs of
arbitration will be equally divided between Parties.
19. Force Majeure. The term "force majeure" as employed herein for all purposes
relating hereto, shall mean acts of God, strikes, lockouts or other
industrial disturbances, acts of public enemy, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes,
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hurricanes, explosions, fires, arrests and restraints of governments and
people, civil disturbance, freeze-up of Seller's ▇▇▇▇▇ or ▇▇▇▇▇ from which
Seller is furnishing gas hereunder, or other temporary inability of
Seller's ▇▇▇▇▇ or ▇▇▇▇▇ from which Seller is furnishing gas hereunder to
produce, mechanical breakdowns or repairs of MCV's plant or pipeline
facilities or those of any Transporter used to transport gas hereunder,
inability of any Party hereto to obtain necessary materials, supplies or
permits due to existing or future rules, regulations, orders, laws or
proclamations of governmental authorities (federal, state or local),
including both civil and military, and any other causes whether of the kind
herein enumerated or otherwise, not within the control of the Party
claiming suspension and which by the exercise of due diligence such Party
is unable to prevent or overcome.
20. Transportation. Both Parties shall cooperate in an effort to eliminate
imbalances on either Party's transporting pipeline(s). The Parties further
agree that if any imbalance penalties or charges (including cash out
charges) are imposed on a Party as a result of the other Party's failure to
deliver or accept the required quantities, then the failing Party shall
reimburse the non-failing Party for such charges or penalties.
21. Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUCTED ACCORDING TO THE
LAWS OF THE STATE OF MICHIGAN.
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22. Miscellaneous.
(A) No waiver by either Seller or Buyer of any default by the other under
this Agreement shall operate as a waiver of any future default,
whether of like or different character or nature.
(B) The descriptive headings of particular provisions of this Agreement
are for the purpose of facilitating administration and shall not be
construed as having any substantive effect on the terms of this
Agreement.
(C) The Parties agree to proceed with due diligence and make good faith
effort to obtain such governmental authorizations as may be necessary
to enable performance of this Agreement.
(D) This Agreement is subject to the January 27, 1987 Gas Supply Option
between Buyer and Dow and to Dow's rights under a certain Gas Backup
Agreement with Buyer and Consumers Power Company dated January 27,
1987.
(E) If any provision of this Agreement is determined to be invalid, void
or unenforceable by any court having jurisdiction, such determination
shall not invalidate, void or make unenforceable any other provision
of this Agreement.
(F) Neither Buyer nor Seller shall disclose to any third Party other than
its partners, parents, affiliates, directors, officers, employees,
consultants, representatives, agents or those third parties providing
financing to it, any information received from the other Party that is
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explicitly marked "Confidential" (such information hereinafter
referred to as ("Confidential Information"); provided however, that
nothing shall be deemed Confidential Information which:
(i) is part of the public domain;
(ii) becomes publicly known otherwise than through an action or
inaction of the receiving Party;
(iii) is independently developed by the receiving Party; or
(iv) is required to be disclosed pursuant to any law, rule, or
regulation, or pursuant to any order of a governmental
instrumentality, provided that the Party receiving the
order shall, if feasible, notify the other Party of any
such requirement at least ten (10) days before compliance
is required, and if so requested by the other Party, shall
use reasonable efforts to oppose the required disclosure,
as appropriate under the circumstances, or to otherwise
make such disclosure pursuant to a protective order or
other similar arrangement for confidentiality.
(G) This Agreement may be amended only by a written instrument executed by
the Parties hereto. This Agreement, the Guaranty (Exhibit B attached
hereto), and the Consent and Agreement (Exhibit C attached hereto)
contain the entire understanding of the Parties with respect to the
matter contained in said documents. There are no
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promises, covenants or undertakings other than those expressly set
forth in said documents.
(H) Buyer represents and warrants that it has full and complete authority
to enter into and to perform this Agreement. Seller represents and
warrants that it has full and complete authority to enter into and to
perform this Agreement. Each person who executes this Agreement on
behalf of Buyer represents and warrants that he or she has full and
complete authority to do so and that Buyer will be bound thereby. Each
person who executes this Agreement on behalf of Seller represents and
warrants that he or she has full and complete authority to do so and
that Seller will be bound thereby.
(I) Notwithstanding anything to the contrary contained in this Agreement,
the liabilities and obligations of MCV arising out of, or in
connection with, this Agreement or any other agreements entered into
pursuant hereto shall not be enforced by any action or proceeding
wherein damages or any money judgment or specific performance of any
covenant in any such document and whether based upon contract,
warranty, negligence, indemnity, strict liability or otherwise, shall
be sought against the assets of the partners of MCV. By entering into
this Agreement, Seller waives any and all right to ▇▇▇ for, seek or
demand any judgment against such partners and their affiliates, other
than MCV by reason of the performance by MCV of its obligations under
this Agreement or any other agreements entered into pursuant
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hereto, except to the extent such partners are legally required to be
named in any action to be brought against MCV.
23. Defaults and Remedies.
23.1 Event of Default. A Party shall be deemed in default under this
Agreement upon the occurrence of any one or more of the following
events ("Events of Default"):
(a) The unexcused failure by a Party (the "Defaulting Party") to
make, when due, any payment required pursuant to this Agreement
if such failure is not remedied within three (3) business days
after written notice of such failure is given to the Defaulting
Party by the other Party (the "Non-Defaulting Party") and
provided the payment is not a Disputed Amount as described in
Section 5(A)(ii);
(b) Any representation or warranty made by a Party herein shall at
any time during the term of this Agreement prove to be false or
misleading in any material respect;
(c) The failure by a Party to perform, in any material respect, any
material covenant or provision set forth in this Agreement (other
than (i) the events that are otherwise specifically covered in
this Section 23.1 as a separate Event of Default and (ii) the
events that are covered in Sections 14 and 17) and such failure
is not cured within five (5) business days (or such longer period
of time if reasonably necessary to cure the failure and the
Defaulting Party is making continuous and diligent efforts to
cure) after written
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notice thereof to the Defaulting Party unless such failure is
excused by force majeure;
(d) A Party becomes subject to a Bankruptcy Proceeding; or
(e) The failure of a Party, upon the occurrence of a Material Adverse
Change, to provide, for so long as the Material Adverse Change is
occurring, adequate assurance (in the form of cash or a Letter of
Credit to be provided at the election of the Defaulting Party or
a guaranty deemed acceptable by the Non-Defaulting Party which
such acceptance of such guaranty may not be unreasonably
withheld) of its ability to perform all of its outstanding
obligations to the Non-Defaulting Party under this Agreement,
within a period not to exceed three (3) business days of the
Defaulting Party's receipt, in accordance with the notice
provisions of Section 16, of a demand therefore by the
Non-Defaulting Party.
The term "Material Adverse Change" shall mean: (i) with respect to
The Coastal Corporation, having consolidated net worth of less
than $2.0 billion as presented in its financial statements, and
(ii) with respect to MCV having less than $60 million of its Cash
Reserves as reported in the Liquidity Section of Midland
Cogeneration Venture's annual 10K report and quarterly 10Q
report. Cash Reserves equal the total cash reserves as reported
less the funds restricted for rental payments (presently
24
$137,000,000) and funds restricted for management non-qualified
plans (presently $0).
25
23.2 Remedies Upon an Event of Default.
(a) If an Event of Default occurs with respect to a Defaulting Party
at any time during the term of this Agreement, the Non-Defaulting
Party shall have the right, for so long as the Event of Default is
continuing, to (i) establish a date (which date shall be between 5
and 10 business days after the Non-Defaulting Party delivers
written notice to the Defaulting Party of its intent to exercise
the remedy described herein) ("Early Termination Date") on which
this Agreement shall terminate and (ii) withhold any payments due;
provided, however, upon the occurrence of any Event of Default
listed in item (d) of Section 23.1 as it may apply to any Party,
this Agreement in respect thereof shall automatically terminate,
without notice, and without any other action by either Party as if
an Early Termination Date had been declared immediately prior to
such event.
(b) If an Early Termination Date has been designated, the
Non-Defaulting Party shall in good faith calculate its Gains,
Losses and Costs resulting from the termination of this Agreement.
The Gains, Losses and Costs shall be determined by comparing the
value of the remaining term, Contract Quantities and Contract
Prices under this Agreement had it not been terminated, to the
equivalent quantities and relevant market prices for the remaining
term either quoted by a bona fide third-
26
party offer or which are reasonably expected to be available in
the market under a replacement contract for the balance of this
Agreement. To ascertain the market prices of a replacement
contract, the Non-Defaulting Party may consider, among other
valuations, settlement prices of NYMEX natural gas futures
contracts, quotations from leading dealers in natural gas swap
contracts and other bona fide third party offers, all adjusted for
the length of the remaining term and differences in
transportation. It is expressly agreed that a Party shall not be
required to enter into replacement transactions in order to
determine the Termination Amount (as hereinafter defined.)
(c) The Non-Defaulting Party shall aggregate such Gains, Losses and
Costs with respect to the balance of this Agreement into a single
net amount ("Termination Amount"). The Non-Defaulting Party shall
provide the Defaulting Party with a notice and statement
containing a clear identification and calculation of the
Termination Amount owed by or due to the Defaulting Party and
shall be accompanied by sufficient information to enable the
Defaulting Party to determine the basis upon which the calculation
was made and the accuracy thereof. If the Non-Defaulting Party's
aggregate Losses and Costs exceed its aggregate Gains, the
Defaulting Party shall, within five (5) business days of receipt
of such statement, pay the Termination
27
Amount to the Non-Defaulting Party, which amount shall bear
interest at the interest rate as set forth in Section 5(A)(iii)
above, from the Early Termination Date until paid. If the
Non-Defaulting Party's aggregate Gains exceed its aggregate Losses
and Costs, if any, resulting from the termination of this
Agreement, the Non-Defaulting Party shall pay such excess to the
Defaulting Party on or before the latter of: (i) twenty (20) days
after the end of the month ending on or after the Early
Termination Date, and (ii) five (5) business days after receipt by
the Defaulting Party of the Non-Defaulting Party's notice of the
Termination Amount, which amount shall bear interest at the
interest rate as set forth in Section 5(A)(iii) above, from the
Early Termination Date until paid.
(d) If the Defaulting Party disputes the Non-Defaulting Party's right
to terminate this Agreement or disagrees with its calculation of
the Termination Amount, in whole or in part, the Defaulting Party
shall, within three (3) business days of receipt of the
Non-Defaulting Party's calculation of the Termination Amount,
provide to the Non-Defaulting Party a detailed written explanation
of the basis for such dispute or disagreement and, if the
Termination Amount is due from the Defaulting Party, shall
promptly pay to the Non-Defaulting Party such portion thereof as
is conceded to be correct. Upon receipt of the
28
Defaulting Party's explanation, the Parties shall seek to resolve
the issues in accordance with mutually agreeable dispute
resolution procedures.
(e) As used herein in this Section 23.2, with respect to each Party:
(i) "Costs" shall mean reasonable brokerage fees, commissions and
other similar transaction costs and expenses reasonably incurred
by a Party either in terminating or entering into new arrangements
which replace this Agreement, and reasonable attorney's fees, if
any reasonably incurred in connection with enforcing its rights
under this Agreement; (ii) "Gains" shall mean an amount equal to
the present value (calculated using the interest rate as set forth
in Section 5(A)(iii) above as the prevailing discount rate) of the
economic benefit (exclusive of Costs), if any, to a Party
resulting from the termination of its obligations with respect to
this Agreement, determined in a commercially reasonable manner;
and (iii) "Losses" shall mean an amount equal to the present value
(calculated using the interest rate as set forth in Section
5(A)(iii) above as the prevailing discount rate) of the economic
loss (exclusive of Costs), if any, to a Party from the termination
of its obligations with respect to this Agreement, determined in a
commercially reasonable manner. In no event, however, shall a
Party's Costs, Gains or Losses include any costs or expenses
incurred
29
by a Party in terminating or re-establishing any arrangement
pursuant to which it has hedged its obligations under this
Agreement.
24. Limitations: NEITHER PARTY HERETO SHALL BE LIABLE TO THE OTHER PARTY FOR
ANY CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES ARISING OUT OF, OR
RELATED TO, A BREACH OF THIS AGREEMENT.
IN WITNESS WHEREOF, this Agreement is executed in multiple originals
effective as of the day and year first herein above written.
BUYER MIDLAND COGENERATION VENTURE
LIMITED PARTNERSHIP
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: V.P. Gas Supply
SELLER ENGAGE ENERGY U.S., L.P.
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and CEO
30
EXHIBIT A
POINT OF DELIVERY
Great Lakes Gas Transmission - Midland Interconnect
31
EXHIBIT B
GUARANTY
Guaranty dated effective as of the 1st day of January, 1999, by The
Coastal Corporation, a Delaware corporation (hereinafter referred to as the
"Guarantor"), in favor of Midland Cogeneration Venture Limited Partnership, a
Michigan partnership (hereinafter referred to as "Creditor").
WHEREAS, Creditor and Engage Energy U.S., L.P. (hereinafter referred to
as "Debtor") have entered into a certain Gas Sales Agreement dated November 15,
1998 (hereinafter referred to as the "Contract"); and
WHEREAS, as a condition precedent to Creditor's entering into the
Contract, Guarantor has agreed to provide this Guaranty as provided herein;
NOW, THEREFORE, for and in consideration of the premises, Guarantor
hereby agrees as follows:
1. Guaranty. Guarantor unconditionally guarantees to Creditor the payment of
amounts due and payable by Debtor pursuant to the Contract up to a maximum
amount in the aggregate of $8,000,000 (such obligations being hereinafter
referred to as the "Obligations"); provided, however, that as to
Obligations which Guarantor is called upon to honor, Guarantor is and shall
be entitled to assert any and all claims, counterclaims, defenses, offsets
and other rights which Debtor could assert against Creditor with respect to
the Obligations, except as provided in paragraph 7 below. In the event
Debtor defaults in the payment of any of the Obligations, after thirty days
written
32
notice to Guarantor at the address provided below, Guarantor shall make
such payment or otherwise cause same to be paid. Guarantor's Obligations
are subject to its receiving from Creditor copies of any and all notices of
defaults and events of default given by Creditor to Debtor pursuant to the
Contract in the same manner and at the same time as such notices are given
by Creditor to Debtor, except to Guarantor's address for notice set forth
in this Guaranty.
2. Termination. This Guaranty is continuing and irrevocable and shall remain
in full force and effect until such time as all of the Obligations have
been fully satisfied, performed and discharged.
3. Waivers. Except as is otherwise provided in this Guaranty, Guarantor waives
notice of acceptance of the guaranty contained herein, presentment, demand,
notice of dishonor, protest and notice of protest, and prosecution of
litigation in connection with the Obligations.
4. Assignment. Neither Guarantor nor Creditor may assign its respective rights
or obligations under this Guaranty without the other's written consent.
Subject to the foregoing, this Guaranty shall be binding upon and inure to
the benefit of the parties hereto and their respective successors,
permitted assigns, and legal representatives.
5. Notices. Any notice or other communication required or permitted to be
given to Guarantor under this Guaranty shall be deemed to have been given
when delivered personally or otherwise actually received or on the tenth
(10th) day after being deposited in the United States mail if registered or
33
certified, postage prepaid, or one (1) day after delivery to a nationally
recognized overnight courier service, fee prepaid, return receipt
requested, if in writing and addressed as follows: The Coastal Corporation,
Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: Secretary.
6. Applicable Law. This Guaranty shall in all respects be governed by,
enforced under and construed in accordance with the laws of the State of
Texas.
7. Effect of Certain Events. Guarantor agrees that Guarantor's liability
hereunder will not be released, reduced, impaired or affected by the
occurrence of any one or more of the following events:
a. The insolvency, bankruptcy, reorganization, or disability of Debtor;
b. The renewal, consolidation, extension, modification, or amendment from
time to time of the Contract;
c. The failure, delay, waiver, or refusal by Creditor to exercise any right
or remedy held by Creditor with respect to the Contract;
d. The sale, encumbrance, transfer or other modification of the ownership
of Debtor or the change in the financial condition or management of
Debtor.
IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty effective
as of the date first written above.
THE COASTAL CORPORATION
BY: ▇. ▇. ▇▇▇▇▇
Vice President and Controller
34
EXHIBIT C
CONSENT AND AGREEMENT
CONSENT AND AGREEMENT, dated as of November 15, 1998, made by Engage
Energy US L.P., a Delaware limited partnership, (the "undersigned") to the
parties whose names appear on Schedule A attached hereto (the "Transaction
Parties"), provides as follows:
1. Midland Cogeneration Venture Limited Partnership ("MCV"), and the
undersigned entered into the Gas Sales Agreement, dated November 15, 1998, as
the same may be amended, modified or supplemented from time to time in
accordance with the provisions thereof and of this Consent and Agreement (the
"Contract"). MCV was the owner of an approximately 1370 MW gas-fired
cogeneration facility in Midland, Michigan (the "Facility"). Pursuant to several
separate Participation Agreements, each dated as of June 1, 1990, MCV sold and
leased-back several separate Undivided Interests in the Facility under several
separate Leases each having a basic term of 25 years. The general structure of
the sale and lease-back transactions is described in more detail in Schedule B
attached hereto.
2. The undersigned hereby acknowledges notice of the sale and
lease-back transactions described in Schedule B and receipt of a photocopy of
each Participation Agreement (including Appendix A thereto but excluding other
Appendices, Exhibits and Schedules referenced therein unless specifically
requested). Photocopies of the related Transaction Documents will be made
available by MCV to the undersigned at its request for inspection. The
undersigned further acknowledges and consents to the assignments of and Liens on
the Contract pursuant to the Transaction Documents related to each sale and
lease-back transaction, and hereby agrees with each of the Transaction Parties
(provided, however, that each of the Indenture Trustees will have the rights set
forth herein only until the undersigned receives written notice from such
Indenture Trustee that the related Undivided Interest in the Facility is no
longer subject to the Lien of the Indenture to which such Indenture Trustee is a
party and the Secured Notes issued pursuant to such Indenture have been paid in
full) that:
(a) Each Owner Trustee and each related Indenture Trustee
shall be entitled, after a Lease Event of Default or an Indenture Event of
Default under the Lease or the Indenture, as the case may be, to which such
Person is a party, to exercise any and all rights of MCV under the Contract in
accordance with the terms of the related Lease, the related Lessee Security
Agreement, the related Indentures and this Consent and Agreement, and the
undersigned will comply in all respects with such exercise by any of such
Persons.
35
(b) The undersigned will give each owner Trustee and Indenture
Trustee prompt written notice of any default of which it has knowledge under the
Contract which, if not cured, would give the undersigned the right to suspend
its performance under, or to terminate, the Contract. Each Owner Trustee and
Indenture Trustee (and their respective designee(s)) shall have the right,
within 30 days (or such longer period, not to exceed 90 days, as may reasonably
be required to cure defaults other than defaults in respect to the nonpayment of
money by MCV) of receipt by each such Person of such written notice, to cure
such default.
(c) In the event any Owner Trustee or Indenture Trustee
succeeds to MCV's rights or interests under the Contract after a Lease Event of
Default or an Indenture Event of Default under the Lease or the Indenture, as
the case may be, to which such Person is a party, whether by foreclosure or
otherwise, such Person shall have the right to exercise all rights of MCV under
such Contract, and the undersigned will comply in all respects with such
exercise by such Person.
(d) The exercise of remedies under any Lease or foreclosure of
any Indenture, whether by judicial proceedings or under power of sale contained
in such Indenture or otherwise or any conveyance from MCV or any Owner Trustee
to either related Indenture Trustee in lieu thereof, following a Lease Event of
Default or Indenture Event of Default under the Lease or the Indenture, as the
case may be, to which such Person is a party, shall not require the further
consent of the undersigned.
3. It is understood and agreed that the Contract and this Consent and
Agreement are subject to all tariffs and all Applicable Laws relating to such
services. Except as required, in the undersigned's reasonable opinion or by any
Applicable Law, the undersigned will not, without the prior written consent of
each Owner Trustee and Indenture Trustee (unless MCV delivers to the undersigned
a certificate stating that such consent is not required by the terms of the
related Transaction Documents), cancel, amend, modify or terminate or accept any
cancellation, amendment, modification or termination thereof, except if such
cancellation or termination is in accordance with the express terms of the
Contract, but subject to the rights of each Owner Trustee and Indenture Trustee
to cure any defaults and to keep the Contract in full force and effect as
provided in Section 2(b) above.
4. In the event that any Owner Trustee or Indenture Trustee (or their
respective designee(s)) assumes the Contract or otherwise elects to perform the
duties of MCV under the Contract, such Person shall not have any personal
liability to the undersigned for the performance of MCV's obligations under the
Contract, it being understood that the sole recourse of the undersigned seeking
36
enforcement of such obligations shall be to such Person's interest in the
Facility and the related rights and Revenues therefrom.
5. If the Contract is rejected by a trustee or debtor-in-possession in
any bankruptcy, insolvency or similar proceeding involving any Persons other
than the undersigned, or is terminated for any other reason (except as a result
of a default which was not appropriately cured as provided herein and in the
Contract), and if, (i) within 30 days thereafter, MCV (in the case of a
bankruptcy, insolvency or similar proceeding involving any Owner Trustee or
Owner Participant), any Owner Trustee, Indenture Trustee or their respective
successors or assigns so request and (ii) all payment defaults under the
Contract have been cured, the undersigned will execute and deliver to the Person
or Persons making such request in proportion to their respective interests in
the Contract a new Contract for the services remaining to be performed under the
original Contract and containing the same terms and conditions as the original
Contract (except for any requirements which have been fulfilled prior to such
termination). Such new Contract also shall be subject to the terms of this
Consent and Agreement.
6. The undersigned acknowledges that after the end of the respective
Lease Terms and during the respective Residual Terms, each Owner Trustee, as the
assignee of an Undivided Interest in the Contract pursuant to the related
Facility Agreements Assignment, shall have all of the rights and shall be liable
for all of the obligations (to the extent of its respective Undivided Interest
Percentage) on a non-recourse basis of MCV under the Contract. The undersigned
further acknowledges that MCV shall be the initial Operator of the Facility
under the Operating Agreement and further agree that the Owner Trustees may
appoint any Person to serve as a successor Operator thereunder so long as such
Person satisfies the requirements set forth in the Operating Agreement.
7. No termination, amendment or waiver of any provision of this Consent
and Agreement or consent to any departure by the undersigned from any provision
of this Consent and Agreement shall be effective unless the same shall be in
writing and signed by the Owner Trustees, the Indenture Trustees and MCV and
then such waiver or consent shall be effective only in a specified instance for
the specific purpose for which it was given.
8. This Consent and Agreement shall be governed by, and construed in
accordance with, the laws of the State of Michigan, and shall be binding on the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned by its officers thereunto duly
authorized, have duly executed this Agreement as of the day and year first above
written.
37
---------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President & CEO
Seen and Agreed to this 20 day of January , 1999.
MIDLAND COGENERATION VENTURE
LIMITED PARTNERSHIP, as
Lessee
By: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President Energy Supply and Marketing
38
SCHEDULE A
MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP,
as Lessee,
FIRST MIDLAND LIMITED PARTNERSHIP,
DCC PROJECT FINANCE ONE, INC.,
EDISON CAPITAL (formerly, Mission Funding Epsilon),
▇▇▇▇ ATLANTIC CREDIT CORPORATION (formerly, NYNEX Credit Company),
RESOURCES CAPITAL MANAGEMENT CORPORATION,
as the several Owner Participants,
STATE STREET BANK AND TRUST COMPANY
(formerly, Fleet National Bank, Shawmut Bank Connecticut, National
Association, and The Connecticut National Bank),
not in its individual capacity but solely as Owner Trustee
under several separate Trust Agreements,
UNITED STATES TRUST COMPANY OF NEW YORK,
not in its individual capacity but solely as Senior Indenture Trustee
under several separate Senior Trust Indenture, Leasehold Mortgage
and Security Agreements for the benefit of the Senior Secured Notes,
FIRST UNION NATIONAL BANK
(formerly, Meridian Trust Company),
not in its individual capacity but solely as Subordinated Indenture Trustee
under several separate Subordinated Trust Indenture,
Leasehold Mortgage and Security Agreements
for the benefit of the Subordinated Secured Notes, and
MIDLAND FUNDING CORPORATION I AND
MIDLAND FUNDING CORPORATION II,
as purchasers of the Secured Notes.
39
SCHEDULE B
A. As described below, the Owner Participants named in
Schedule A acquired separate Undivided Interests in the Facility and leased such
Undivided Interests back to MCV through separate Owner Trustees acting on behalf
of separate Owner Trusts. The beneficial interest in each Owner Trust is held by
Owner Participant.
B. For purposes of this Schedule B and the Consent and
Agreement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in Appendix A to the several separate
Amended and Restated Participation Agreements (the "Participation Agreements"),
each dated as of June 1, 1990, to which MCV, an Owner Participant, the related
Owner Trustee, the related Indenture Trustees, the Funding Corporations, MDC and
the Institutional Senior Bond Purchasers named therein are parties. The rules of
usage set forth in such Appendices also shall apply hereto; provided, that when
the terms defined in Appendix A to a particular Participation Agreement as
relating only to the transaction contemplated therein are used in the plural
herein, such terms are intended to apply to the terms applicable to the
transactions contemplated by all Participation Agreements collectively. In
addition, the word "related", when used with respect to any Person, interest,
instrument, agreement or document, shall denote a Person which is a party to, or
an interest, instrument, agreement or document which is a part of, the
transaction contemplated in a particular Participation Agreement and the
Transaction Documents referred to in such Participation Agreement.
C. Pursuant to a related Participation Agreement, MCV sold and
transferred to each Owner Trustee, and each Owner Trustee acquired, subject to
Dow's Prior Rights and Consumers' Prior Rights, an Undivided Interest in the
Facility equal to the respective Undivided Interest Percentage of such Owner
Trustee (with the Undivided Interests in the Initial Assets having been sold and
transferred on the First Closing Date and the Undivided Interests in the Second
Closing Assets being sold and transferred on the Second Closing Date). Each
Owner Trustee leased its Undivided Interest in the Facility back to the Lessee
pursuant to a related Lease, under which MCV has the use, possession and control
of the Undivided Interest in the Facility for the related Lease Term (with the
Undivided Interests in the Initial Assets having been leased on the First
Closing Date and the Undivided Interests in the Second Closing Assets being so
leased on the Second Closing Date).
D. On the Second Closing Date, (i) MCV assigned to each Owner
Trustee a separate Undivided Interest in the Facility Agreements and the
Cogeneration Agreements pursuant to a related Facility Agreements Assignment
40
and a related Cogeneration Agreements Assignment, respectively, (ii) each Owner
Trustee assumed the obligations of MCV under the PPA and the SEPA, to the extent
of its respective Undivided Interest Percentage, pursuant to a related
Cogeneration Agreements Assignment, (iii) pursuant to the related Lease, each
Owner Trustee subassigned its Undivided Interests in the Cogeneration Agreements
and Facility Agreements back to MCV for the respective Lease Term, subject to
the Lien of the related Indentures, and MCV, as lessee, accepted such
subassignment, and (iv) MCV granted to each Owner Trustee a Lien on, without
limitation, MCV's right, title and interest in the related Undivided Interests
in the Cogeneration Agreements and the Facility Agreements (and the Revenues
therefrom) as collateral security for the related Secured Obligations pursuant
to a related Lessee Security Agreement.
E. Each Owner Trustee, as provided in the related
Participation Agreement, financed a portion of the Purchase Price for its
Undivided Interest in the Facility with the proceeds of Senior Secured Notes
issued by it to Midland Funding Corporation I pursuant to a related Senior Trust
Indenture and related Subordinated Secured Notes issued by it to Midland Funding
Corporation II pursuant to a related Subordinated Trust Indenture, and Midland
Funding Corporation I and Midland Funding Corporation II purchased such Secured
Notes.
F. Each Owner Trustee granted to the related Indenture
Trustees Liens on, among other things, the Owner Trustee's Undivided Interests
in the Facility, the Cogeneration Agreements and the Facility Agreements, the
Site Interest and its interest in certain of the related Transaction Documents
as collateral security for the Owner Trustee's obligations under the related
Secured Notes.
G. On the Second Closing Date, the Funding Corporations issued
Bonds pursuant to a Senior Collateral Trust Indenture and a Subordinated
Collateral Trust Indenture, respectively, for the purpose of participating in
the payment of the Purchase Price for each Undivided Interest in the Facility
and acquiring the funds necessary to purchase the Senior Secured Notes and the
Subordinated Secured Notes pursuant to a related Participation Agreement. The
Funding Corporations secured their obligations under the Bonds by a pledge to
the related Collateral Trust Trustees of the related Secured Notes (and the
collateral security therefor) held by the Funding Corporations.
H. MCV, each Owner Trustee and Indenture Trustee and the
Working Capital Lender, on the Second Closing Date, entered into an
Intercreditor Agreement with the Collateral Agent providing for the deposit with
and disbursement of all Revenues from the Undivided Interests in the Project by
the Collateral Agent.
41
I. MCV and each Owner Trustee also entered into an Operating
Agreement appointing MCV as the initial operator of the Project during the
respective Residual Terms, commencing on the Operation Commencement Date (as
such term is defined in the Operating Agreement).
J. On the Second Closing Date, in order to obtain necessary
working capital for the operation of the Facility, MCV obtained the Working
Capital Line from the Working Capital Lender and granted to the Working Capital
Lender first priority Liens on MCV's right, title and interest (as subassignee
of the separate Undivided Interests in the Cogeneration Agreements and the
Facility Agreements during the respective Lease Terms) in and to (i) all Earned
Receivables, (ii) its Natural Gas Inventory and (iii) the Gas Brokering
Contract.
K. Each Owner Trustee has agreed to reassign its Undivided
Interest in the Project (including the Undivided Interest in the Facility
Agreements) and the Site Interest back to MCV at the expiration of the related
Support Term.