EXHIBIT 10.42
LONG TERM GAS AGREEMENT
This Agreement is made this October 5, 2001, between Midland Cogeneration
Venture Limited Partnership ("MCV" or "Buyer") and El Paso Merchant Energy, L.P.
("Seller") for the purpose of entering into a long term gas supply arrangement
on the terms and conditions that 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:
1.1. "Agreement" shall mean this Agreement and all Exhibits hereto.
1.2. "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.
1.3. "Business Day" shall mean any Day other than a Day on which
banks in the U.S.A. are allowed by law to be closed.
1.4. "Contract Year" shall mean any calendar year during the term
of this Agreement.
1.5. "Cubic Foot of Gas" shall mean the volume of Gas contained in
one (1) cubic foot of space at a pressure of fourteen and
seventy-three hundredths (14.73) dry Psia, at a temperature of
sixty degrees (60(Degree)) Fahrenheit.
1.6. "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.
1.7. "Disputed Amount" shall have the meaning set forth in Section
5.1.2.
1.8. "Gas" shall mean any mixture of hydrocarbon and noncombustible
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 contact 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.
1.9. "Material Adverse Change" shall mean: (i) with respect to
Seller: Seller's guarantor or any successor guarantor thereto,
having consolidated net worth of less than $2.0 billion as
presented in its financial statements or having a long-term
debt rating of less than BBB- from Standard & Poor's Corp.,
and (ii) with respect to MCV: MCV having partner's equity of
less than $375,000,000 or having a Standard & Poor's rating of
less than BBB- on securities issued by Midland Funding Corp. I
or less than BB+ on securities issued by Midland Funding Corp.
II, or MCV having Average Cash Balances of less than
$225,000,000. Average Cash Balances shall be equal to the
average of the most recent four calendar quarters of the sum
of cash and cash equivalents plus restricted cash and cash
equivalents plus restricted investment securities held-to
maturity as reported in MCV's Forms 10K and 10Q.
1.10. "Mcf" shall mean one thousand (1,000) cubic feet of Gas.
1.11. "MMBtu" shall mean a quantity of Gas equal to one million
(1,000,000) Btu, which is equivalent to one (1) dekatherm.
1.12. "Month" or "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.
1.13. "NYMEX" shall mean the New York Mercantile Exchange ▇▇▇▇▇ Hub
natural gas futures contract traded on the New York Mercantile
Exchange. Should natural gas futures contracts for delivery at
▇▇▇▇▇ Hub cease to be traded on the NYMEX, Buyer and Seller
shall identify and agree on a replacement index. In the event
that Buyer and Seller cannot agree on a replacement index
within thirty (30) Days, the matter will be resolved in
accordance with Section 18 hereof.
1.14. "Point of Delivery" shall mean the point where Seller delivers
Gas to Buyer as set forth in this Agreement as referred to in
Exhibit A.
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1.15. "Prime Rate" shall mean the fluctuating per annum lending rate
of interest from time to time published by CITIBANK, N.A., or
its successor, for its best commercial customers.
1.16. "Psia" shall mean pounds per square inch absolute.
1.17. "Transporter" shall mean any pipeline transporting gas subject
to this Agreement.
1.18. "Undisputed Amount" shall have the meaning set forth in
Section 5.1.2.
2. Quantity. Seller agrees to deliver and sell and MCV agrees to receive and
purchase 21,000 MMBtu/Day, on a firm basis, in accordance with the terms
and conditions of this Agreement.
3. Price.
3.1. The price per MMBtu (dry) to be paid each month 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 the price equal to the NYMEX last day
settlement applicable for each month of gas flow for all Gas
delivered to the Point of Delivery minus $0.055 per MMBtu. For
clarification, the NYMEX last day settlement (▇▇▇▇▇ Hub) for a
month of gas flow will be determined on the last day that
contracts for delivery in the month of gas flow are traded on
the New York Mercantile Exchange.
3.2. 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, including but not limited to all
sales and use taxes.
4. Term. Deliveries of Gas shall commence March 1, 2007 and continue through
February 28, 2013.
5. Billing, Payments and Audit.
5.1. Billing and payment procedures are as follows:
5.1.1. 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 that is not a Business Day, then
payment shall be made on the next Business Day. If
Buyer bills Seller, the same procedure shall be
followed as set forth in this Section 5.1.1.
5.1.2. 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").
5.1.3. 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 principal.
5.2. 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, 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
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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.
6.1. 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.
6.2. 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 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 to the Point of Delivery and for delivering such Gas at a
pressure sufficient to effect such delivery. Notwithstanding anything to
the contrary herein, Seller shall have the right but not the obligation to
install compression to effect deliveries of Gas hereunder.
10. Quality of Gas. The Gas to be delivered by Seller hereunder at the Point
of Delivery shall comply with the quality requirements of the receiving
Transporter.
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 in
accordance with the established standard terms and conditions applicable
to the Transporter'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 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 (i) Seller providing, for the
term of this Agreement, a parental guaranty to Buyer in the
form attached hereto as Exhibit "B"; and (ii) Buyer providing,
not less than sixty (60) days prior to initial deliveries of
Gas, a Letter of Credit for at least ninety (90) days of gas
deliveries to Seller. Such Letter of Credit shall be
maintained in effect by MCV until all obligations of MCV
hereunder have indefeasibly been performed.
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 21) but not more than once in
any Day, if the Termination Payment (as such term is defined
in Section 13.5) should exceed $0 with respect to MCV and
$12,000,000 with respect to Seller (as calculated by Buyer)
(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
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$100,000). The Performance Assurance shall be delivered within
five Business Days of the date of the request. If such
additional Performance Assurance is not received by the
requesting Party within five Business Days, then the
requesting Party, in addition to any other remedy available,
may immediately suspend performance with respect to the
quantities associated with the amount in excess of the
Security Threshold, and cover such lost supply or market, as
the case may be. Incremental gas costs (as referenced 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 21.
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 thirty (30) 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 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 Costs (as those terms are defined
in Section 21.2.5 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 this Agreement.
14. Right to Terminate Agreement.
14.1. 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)
failure by Buyer to pay any Undisputed Amounts, fails, over a
period of at least sixty (60) consecutive 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
by restoring deliveries of 100% of the agreed quantity on a
daily basis thereafter, in which case Buyer's cancellation is
null and void, and this Agreement shall remain in full force
and effect.
14.2. 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 deliver, or (iii)
failure by Seller to pay any Undisputed Amounts, fails, over a
period of at least
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sixty (60) consecutive 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 by restoring purchases of 100% of the agreed
quantity on a daily basis thereafter, in which case Seller's
cancellation is null and void, and this Agreement shall remain
in full force and effect.
15. Assignment.
15.1. The terms, covenants and conditions hereof shall be binding on
the Parties hereto and on their successors and permitted
assignees.
15.2. 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 that
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 Energy Company (formerly Consumers Power Company),
The Dow Chemical Company ("Dow"), and 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 specifically agrees to accept
such assignments, if any, made by Buyer to Dow in accordance
with the aforementioned Gas Backup Agreement; provided,
however, that (a) such assignment shall not relieve Buyer of
its obligations under this Agreement absent Seller's written
consent and (b) Dow assumes all obligations of Buyer and meets
any credit requirements of Seller prior to the effective date
of such assignment.
15.3. 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.
15.4. 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, directed to the address of the Parties
as provided in Sections 16.1 and 16.2 below or at such other address as
either Party may from time to time specify in writing to the other Party.
Notices, requests, demands, or statements made by person, telephone,
Telecopy, 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), such notice shall not be effective until the next Business
Day.
16.1. TO SELLER:
Invoices: El Paso Merchant Energy, L.P.
Attn: Accounting Department
▇▇ ▇▇▇ ▇▇▇▇; ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Other Notices: El Paso Merchant Energy, L.P.
Attn: Contract Services
▇▇▇▇ ▇▇▇▇▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Wire Transfer: BANK: Mellon Bank, Pittsburgh PA
ACCT: 020-9517
ABA: ▇▇▇-▇▇▇-▇▇▇
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16.2. TO BUYER:
Invoices: Midland Cogeneration Venture Limited
Partnership
Attn: Gas Accounting
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Other Notices: Midland Cogeneration Venture Limited
Partnership
Attn: Contract Administration
100 Progress Place; ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Wire Transfer: BANK: U.S. Bank Trust, N.A., Minneapolis, MN
ACCT: 180121167365
ABA: ▇▇▇▇▇▇▇▇▇
DETAILS: MI Clearing 47300196 - FBO MCV
76608640
16.3. Gas nomination notices will be in accordance with the terms
and conditions applicable to Transporter.
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 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.
18.1. If the Parties are unable to resolve a disagreement arising
under this Agreement (including the selection of a replacement
index for the NYMEX), such disagreement shall be settled by
binding arbitration. Either Party may then commence
arbitration by serving written notice thereof on the other
Party designating the issue to be arbitrated.
18.2. 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 (a) qualified by education,
knowledge, and experience to resolve the dispute or
controversy and (b) neutral and disinterested parties. 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 to agree on
a third arbitrator within ten (10) Days after the appointment
of the second, 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.
18.3. 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 guidelines and the
procedures set forth in this Agreement, the terms of this
Agreement shall control. In no event shall the arbitrators be
authorized to award punitive, consequential or incidental
damages.
18.4. 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
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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.
18.5. Enforcement of the award may be entered in any court having
jurisdiction over the Parties.
18.6. 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 the
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,
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,
failure or curtailment of firm transportation service by a Transporter;
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 that by the exercise of due diligence such Party
is unable to prevent or overcome. Notwithstanding anything to the contrary
contained herein, Buyer's loss of QF Status shall not constitute an event
of Force Majeure. In the event that Buyer cannot perform its obligations
to take gas under this contract due to a loss of QF status, the cover
damages set forth in Section 17 above shall apply. If Buyer's loss of QF
status continues for three month(s), Seller may terminate this Agreement
without liability. Buyer or Seller, as the case may be, shall as soon as
practicable give the other Party notice, including reasonably full
particulars, of suspension of performance hereunder. While its obligations
are suspended hereunder, Buyer or Seller, as the case may be, shall be
relieved of liability and shall suffer no prejudice for failure to
perform.
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 nonfailing Party for such charges or penalties.
21. Defaults and Remedies.
21.1. 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"):
21.1.1. 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 5.1.2;
21.1.2. 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;
21.1.3. 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 21.1 as
a separate Event of Default and (ii) the events that
are covered in Sections 14, 17, and 19) 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
notice thereof to the Defaulting Party unless such
failure is excused by Force Majeure;
21.1.4. A Party becomes subject to a bankruptcy proceeding,
generally fails to pay its debts when due or makes an
assignment for the benefit of creditors; or
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21.1.5. 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 five (5) Business Days of the
Defaulting Party's receipt, in accordance with the
notice provisions of Section 16, of a demand therefor
by the Non-Defaulting Party.
21.2. Remedies Upon an Event of Default.
21.2.1. 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 (ii) withhold any
payments due, or (iii) suspend deliveries or receipts,
as the case may be, of Gas in the period prior to such
Early Termination Date; provided however, upon the
occurrence of any Event of Default listed in Section
21.1.4, 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.
21.2.2. If an Early Termination Date has been designated (or
triggered), 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-party offer or that 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.)
21.2.3. 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 Amount to the Non-Defaulting
Party, which amount shall bear interest at the
interest rate as set forth in Section 5.1.3 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 5.1.3 above,
from the Early Termination Date until paid.
Page 8
21.2.4. 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 Defaulting
Party's explanation, the Parties shall seek to resolve
the issues and absent mutual agreement within sixty
(60) days of the Non-Defaulting Party's receipt of the
Defaulting Party's explanation, the issue(s) shall be
resolved in accordance with Article 18 above.
21.2.5. As used herein in this Section 21.2, 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 5.1.3 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 5.1.3 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 (a) any punitive or
consequential damages or (b) any costs or expenses
incurred by a Party in terminating or reestablishing
any arrangement pursuant to which it has hedged its
obligations under this Agreement.
22. Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUCTED ACCORDING TO THE
LAWS OF THE STATE OF MICHIGAN.
23. Miscellaneous.
23.1. 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.
23.2. 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.
23.3. 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.
23.4. 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 Energy
Company (formerly Consumers Power Company) dated January 27,
1987.
23.5. 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.
23.6. Neither Buyer nor Seller shall disclose to any third Party
other than its partners, parents, affiliates, directors,
officers, employees, consultants, advisors, representatives,
agents, or those third parties providing financing to it any
information received from the other Party that is explicitly
marked "Confidential" (such information hereinafter referred
to as "Confidential Information"); provided however, that
nothing shall be deemed Confidential Information that:
23.6.1. is part of the public domain;
23.6.2. becomes publicly known otherwise than through an
action or inaction of the receiving Party;
Page 9
23.6.3. is independently developed by the receiving Party; or
23.6.4. 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;
provided that the Party requesting protection shall
pay the costs of these efforts.
23.7. 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 promises, covenants, or undertakings
other than those expressly set forth in said documents.
23.8. 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.
23.9. 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 hereto, except to
the extent such partners are legally required to be named in
any action to be brought against MCV.
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.
25. Nominations and Recording.
25.1 Each Party consents to the recording of its employees'
telephone conversations without any further notice.
25.2 Either Party shall notify the other Party of its
nomination(s), from time to time, with prior notice of at
least twenty-four (24) hours and/or within the transporter's
pipeline's deadline date for making changes in nominations.
Buyer shall be responsible for compliance with the effective
nominations given within the transporter's pipeline's deadline
date for changes.
IN WITNESS WHEREOF, this Agreement is executed in multiple originals effective
as of the day and year first herein above written.
Midland Cogeneration Venture Limited Partnership El Paso Merchant Energy, L.P.
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. Boum
-------------- ---------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. Boum
Title: Vice President Energy Supply and Marketing Title: Senior Vice President
Page 10
EXHIBIT A
POINT OF DELIVERY
Delivery point on the pipeline of Trunkline Gas Company commonly known as East
Louisiana (E. LA)
Page 11
EXHIBIT B
GUARANTY
Guaranty dated effective as of October 5, 2001, by El Paso Corporation, a
Delaware corporation (hereinafter referred to as the "Guarantor"), in favor of
Midland Cogeneration Venture Limited Partnership, a Michigan limited partnership
(hereinafter referred to as "Creditor").
WHEREAS, Creditor and El Paso Merchant Energy, L.P. (hereinafter referred
to as "Debtor") have entered into a certain Long Term Gas Agreement dated
October 5, 2001 (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 (such
obligations being hereinafter referred to as the "Obligations") up to an
aggregate limit of $12 million U.S. dollars; 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 notice to Guarantor at the address provided below,
Guarantor shall make such payment or otherwise cause same to be paid.
2) Termination. This Guaranty is continuing and irrevocable and shall remain
in full force and effect until the earlier of (a) the termination of the
Contract, (b) February 28, 2013, (c) the date on which all obligations
under the Contract have been fulfilled, or (d) the date on which Guarantor
successfully transfers its obligations hereunder to a permitted transferee
according to Section 4 below. Termination of this Guaranty shall not
eliminate Guarantor's liability for any transactions entered into under
the Contract prior to such termination; however, termination of this
Guaranty shall relieve Guarantor of any obligation or liability occurring
after such termination.
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, which shall not be unreasonably withheld. 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. Creditor shall give notice to Guarantor if it elects to extend
primary term of the Contract. 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 certified, postage prepaid, or one (1) day
after
Page 12
delivery to a nationally recognized overnight courier service, fee
prepaid, return receipt requested, if in writing and addressed as follows:
El Paso Corporation
Attn: Treasury
▇▇▇▇ ▇▇▇▇▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
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
Michigan.
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.
El Paso Corporation
-----------------------------------
Name:
Title:
Page 13
EXHIBIT C
CONSENT AND AGREEMENT
CONSENT AND AGREEMENT, dated as of October 5, 2001, made by EL PASO
MERCHANT ENERGY, 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 Long Term Gas Agreement dated October 5, 2001, 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 and obligations 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, provided MCV is not in default under the Contract.
(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 5 business days (or such longer period, not to exceed 30 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. It is understood that, except for the right to
terminate the Contract, the undersigned may exercise
Page 14
any right or remedy available under the Contract during this cure period,
including but not limited to suspension of deliveries and recourse to financial
security or offset.
(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 and obligations of MCV under
such Contract, and the undersigned will comply in all respects with such
exercise by such Person, provided that the Condition Precedent in Section 2(a)
above is met.
(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
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
Page 16
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, material 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.
El Paso Merchant Energy, L.P.
By: ▇▇▇▇▇▇▇ ▇. Boum
Title: Senior Vice President
Seen and Agreed to this
5th Day of October, 2001.
MIDLAND COGENERATION VENTURE
LIMITED PARTNERSHIP, as
Lessee
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President Energy Supply and Marketing
Page 16
SCHEDULE A
MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP,
as Lessee,
FIRST MIDLAND LIMITED PARTNERSHIP,
DCC PROJECT FINANCE ONE, INC.,
EDISON CAPITAL (formerly, Mission Funding Epsilon),
VERIZON CAPITAL CORPORATION (formerly, NYNEX Credit Company, and ▇▇▇▇ Atlantic
Credit Corporation),
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.
Page 17
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 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.
Page 18
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.
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.
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