EXHIBIT 10.2
AGREEMENT
THIS AGREEMENT (this "Agreement") dated as of July 31, 2002 is entered into
by and among Chevron U.S.A. Inc. (both in its individual capacity and as
Collateral Agent under and in respect of the Security Documents referenced
herein; hereinafter "CUSA"), Dynegy Marketing and Trade ("DMT"), Dynegy Holdings
Inc. ("DHI"), Dynegy Inc. ("Dynegy") and certain of their respective affiliates
who are parties to this Agreement.
Reference is made to (i) the Natural Gas Purchase and Sale Agreement
effective March 1, 2002, as such agreement may be amended from time to time (the
"NGPSA"), (ii) the Security Agreement (as defined in the NGPSA) (as amended, the
"Security Agreement"), (iii) the other Security Documents (as defined in the
Security Agreement), (iv) the Net Payment Agreement dated as of July 1, 2002
(the "DMT Net Payment Agreement") with DMT relating to, among other agreements,
the NGPSA and (v) the other Contracts (as defined in the DMT Net Payment
Agreement). The DMT Net Payment Agreement is a "Netting Agreement" within the
meaning and for the purposes of the Security Agreement.
The parties hereto hereby amend the NGPSA, the Security Agreement, the DMT
Net Payment Agreement and the other Contracts as set forth herein and otherwise
hereby agree as follows:
1. (a) DMT, DHI and Dynegy each acknowledge that CUSA and the other
Producers (as defined in the NGPSA) believe that they are insecure in their
expectation of receiving due performance by DMT under, and in respect of, the
NGPSA. Accordingly, CUSA and the other Producers have requested, and Dynegy has
agreed to provide, additional assurance of due performance by DMT under, and in
respect of, the NGPSA as follows: concurrently with Dynegy's receipt of funds in
respect of the sale of the Series A Preferred Stock of NNG owned by Dynegy
(pursuant to the Purchase and Sale Agreement dated as of July 28, 2002 between
Dynegy, NNGC Holding Company, Inc. and MidAmerican Energy Holdings Company: as
such agreement may be amended from time to time, the "NNG Purchase Agreement")
(the date on which such funds are received being called the "NNG Sale Date"),
Dynegy will cause a capital contribution to be made to DMT to enable DMT to
remit, and DMT will remit, in same day funds, $187,500,000 to CUSA (for the
benefit of CUSA and other Producers as their interests may appear) as a payment
in respect of gas delivered or to be delivered by CUSA and the other Producers
during the Month (as defined in the NGPSA) in which the NNG Sale Date falls (the
"NNG Sale Date Month") (irrespective of whether or not payment for such gas is
then due under Section 7.2 of the NGPSA).
(b) As further adequate assurance of its future performance, DMT shall, on
the last Business Day of the Month next following the NNG Sale Date Month and on
the last Business Day of each Month thereafter (each, a "Specified Month"), pay
to CUSA (for the benefit of CUSA and the other Producers as their respective
interests may appear) an amount for gas delivered or to be delivered during the
Specified Month in question equal to 75% of the amount payable pursuant to the
NGPSA for gas deliveries during the Month next preceding such Specified Month
(determined after giving effect to the DMT Net Payment Agreement, but taking
into account the exercise by CUSA of its rights under paragraph 9 below). In
addition to the amount payable on the last Business Day of each Specified Month
pursuant to the preceding sentence, DMT shall also pay on such date the balance
of the amount due for gas delivered in the prior Month under the NGPSA
(determined after giving effect to the DMT Net Payment Agreement, but taking
into account the exercise by CUSA of its rights under paragraph 9 below) net of
any amount previously paid in respect of such gas pursuant to paragraph 1(a) or
the first sentence of this paragraph 1(b). Any failure of DMT to make payments
in accordance with this paragraph 1(b) shall be deemed a failure to pay under
the NGPSA.
(c) Payments pursuant to the preceding paragraphs 1(a) and 1(b) shall be
final and irrevocable as and when made (subject only to refunds for overpayments
and other adjustments provided for in Article VII of the NGPSA) and shall be
credited against the corresponding "Payment Obligations" under the Security
Agreement immediately upon receipt thereof by CUSA.
(d) In the event that the primary obligor in respect of the Contracts
(presently DMT or a successor to DMT's gas and NGL marketing and trading
business) carries at least two of the following three credit ratings: (i) at
least BBB+ by Standard & Poor's, (ii) at least Baa1 by Xxxxx'x Investor Services
and (iii) at least BBB+ by Fitch Ratings (in the event that the obligor shall
not be then rated, the rating shall be the rating of the direct or indirect
parent of such obligor that shall have guaranteed, in form and substance
satisfactory to CUSA (if the guarantor is other than DHI), performance by such
obligor of the Contracts), but only for so long as such obligor shall be so
rated, the provisions of paragraph 1(b) shall be suspended and the payment
provisions of the NGPSA and the DMT Net Payment Agreement in effect prior to
this Agreement shall be reinstated.
2. CUSA will receive from DMT (in electronic format where practicable),
commencing August 9, 2002 and continuing thereafter at the end of each business
week (until CUSA, in its sole discretion shall have determined to forego receipt
of particular items), the following information to the extent otherwise prepared
for internal use by DMT, other subsidiaries of Dynegy or any successor to all or
any substantial portion of the trading functions previously conducted by DMT
(subject in each case to applicable confidentiality provisions and as not
prohibited by applicable law): (i) daily cash report of receipts/payments by
counterparty; (ii) daily report of cash balances; (iii) daily report of all
letters of credit and/or cash and/or other security then posted by Dynegy or any
of its Affiliates; (iv) daily report of all netting, setoff and similar trading
and account receivables/ payables positions (shown by counterparty); (v) daily
report of all sales and purchase contracts executed for natural gas, including
customer names and quantities, but excluding pricing information; and (vi) most
current cash and liquidity forecast for the current and following months. The
information so provided to CUSA shall be deemed to have been provided subject to
the confidentiality provisions of Section 15.4 of the NGPSA.
3. (a) The provisions of Article VI of the Security Agreement with respect
to the Required Ratio are suspended until the close of business on the earlier
of (a) Friday, August 30, 2002 and (b) the NNG Sale Date. If the NNG Sale Date
has not occurred by 2:00 p.m. Central Clock Time on August 30, 2002, DMT shall
deliver to CUSA a special Gas Receivables Report effective as of August 30, 2002
no later than 2:00 p.m. Central Clock Time on Wednesday,
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September 4, 2002, which special Gas Receivables Report shall be prepared in
accordance with the Security Agreement.
(b) If the closing under the NNG Purchase Agreement shall not have occurred
at or prior to 2:00 p.m. Central Clock Time on Friday, August 30, 2002, CUSA
shall be entitled to instruct and give notice to Bank One, N.A. (the "Control
Activation Notice") that (i) CUSA has taken control of the Designated Gas
Account (Demand Deposit Account xxxxxx) and (ii) all funds then on deposit in
the Designated Gas Account and all funds thereafter deposited shall be
transferred directly to deposit account number xxxxxxx at Bank One, N.A., in
each case pending further written instruction from CUSA. Upon the earlier to
occur of (x) the NNG Sale Date if prior to 2:00 p.m. Central Clock Time on
Wednesday, September 4, 2002 and receipt by CUSA of the payment contemplated by
paragraph 1(a) and (y) delivery of the special Gas Report on Wednesday,
September 4, 2002 (but only if such report shows compliance with the applicable
Required Ratio), and if at that time no Cash Collateral Event or Triggering
Event has occurred and is continuing (or any event or circumstance which, with
the passage of time, the giving of notice or both, would become a Triggering
Event), then, at or prior to the opening of business on Thursday, September 5,
2002, CUSA shall (A) instruct Bank One, N.A. to return all funds in the Cash
Collateral Account to the Designated Gas Account and (B) countermand and cancel
the Control Activation Notice. If the NNG Sale Date occurs on or prior to 2:00
p.m. Central Clock Time on Wednesday, September 4, 2002, DMT shall no longer be
required to deliver the special Gas Receivables Report required by paragraph
3(a) above.
4. Upon the payment contemplated by paragraph 1(a) above and for so long as
the payments referenced in paragraph 1(b) shall continue and have been made in
the required amount as and when specified, CUSA shall no longer have the right
to require a special Gas Receivables Report pursuant to Section 4.10(b) of the
Security Agreement. All Gas Receivables Reports to be delivered under Section
4.10(a) of the Security Agreement will continue to be delivered as specified by
such Section 4.10(a).
5. The Gas Receivables Report requested by CUSA to be delivered on Friday,
August 2, 2002, was delivered as required by the Security Agreement. CUSA agrees
that, with respect to such report, the Required Ratio provisions of the Security
Agreement did not have to be satisfied.
6. Section 11.8 of the NGPSA and the correlative dispute resolution
provisions of each other Contract shall not be applicable to the exercise by a
non-breaching party of a right to terminate the NGPSA or any such Contract, as
applicable, for material breach (whether pursuant to a contractually provided
termination right or a termination pursuant to the exercise of legal or
equitable remedies) where, at the time that the non-breaching party commences
the exercise of a termination remedy, the breaching party shall not carry at
least two of the following three credit ratings (i) at least BBB+ by Standard &
Poors, (ii) at least Baa1 by Xxxxx'x Investor Services and (iii) at least BBB+
by Fitch Ratings. In the event that the breaching party shall not be then rated,
the rating shall be the rating of the direct or indirect parent of such
breaching party that shall have guaranteed, in form and in substance
satisfactory to the non-breaching party (if the guarantor is other than DHI),
performance by the breaching party of the Contracts. This paragraph 6 shall take
precedence over any inconsistent provision in any Contract, shall be effective
immediately and shall inure to the benefit of each Person who is party to, or an
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intended beneficiary under, any Contract or any other contract entered into in
furtherance of any Contract. The parties hereto shall cause each of their
affiliates who is a party to a Contract but who is not a signatory to this
Agreement to agree to this paragraph 6 by a writing in substantially the form of
Annex A hereto.
7. (a) Neither DMT nor CUSA will exercise, and DHI and CUSA will not permit
any of their Affiliates to exercise, any contractual right to terminate the DMT
Net Payment Agreement unless otherwise mutually agreed.
(b) Not later than the close of business, Central Clock Time, on August 30,
2002, DMT and CUSA will cause each of their affiliates that is a party to either
(i) the Net Payment Agreement made as of July 1, 2002 among Dynegy Liquids
Marketing and Trade, CUSA, Texaco Natural Gas Inc. and Four Star Oil and Gas
Company or (ii) the Net Payment Agreement made as of July 1, 2002 among Dynegy
Midstream Services, Limited Partnership, CUSA, Texaco Natural Gas Inc. and Four
Star Oil and Gas Company to deliver a binding instrument as to each such net
payment agreement to the same effect as paragraph 7(a) with respect to such net
payment agreement.
8. A breach by DMT of any Security Document or any of its undertakings
hereunder, and any exercise of remedies by the non-breaching party in
consequence thereof (whether under the NGPSA, any Security Document, this
Agreement or otherwise) shall not be subject to the dispute resolution
procedures specified in Section 11.8 of the NGPSA.
9. With respect to the DMT Net Payment Agreement, DMT agrees that CUSA
(acting for itself and the other C-T Parties under the DMT Net Payment
Agreement) may, in its sole and absolute discretion, select the amounts (and the
order of priority in application of amounts) due from DMT under one or more
Contracts (similarly to be selected by CUSA) as to which the Net Payment
Determination provisions of the DMT Net Payment Agreement shall be applicable.
For avoidance of doubt, CUSA may, for example, elect to effect a Net Payment
Determination such that all or any portion of the amounts due from the C-T
Parties (or any of them) under one or more Contracts are netted against amounts
due from DMT under one or more Contracts other than the NGPSA. CUSA and DMT
shall effect net payments, as provided in the DMT Net Payment Agreement, in the
aggregate, for all amounts then due from and to the C-T Parties.
10. In specific consideration of the provisions of paragraphs 7, 8 and 9
above, the Security Agreement is hereby amended to make permanent the changes to
the definition of Required Ratio contained in the Temporary Amendment to
Security Agreement dated July 16, 2002: to wit, "Required Ratio" shall mean (i)
1.60 to 1.00 with respect to any Grantor Report Date, and (ii) 1.20 to 1.00 with
respect to any Special Report Date."
11. The provisions of Section 7.1 (Notices), 7.2 (Survival of Agreement),
7.3 (Binding Effect; Several Agreements), 7.4 (Successors and Assigns), 7.6
(GOVERNING LAW), subsection (a) of 7.7 (Waivers; Amendments), 7.10 (WAIVER OF
JURY TRIAL), 7.11 (Severability), 7.12 (Counterparts) and 7.14 (Jurisdiction;
Consent to Service of Process) of the Security Agreement are applicable, mutatis
mutandis, also to this Agreement.
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12. DHI hereby absolutely and unconditionally guarantees the obligations of
DMT under this Agreement. This paragraph 12 is intended as a guaranty of
performance and not of collection.
13. This Agreement supersedes the Term Sheet dated August 2, 2002. This
Agreement is limited in scope, effect and duration as expressly set forth herein
and will not operate as a waiver or amendment of any of the rights or remedies
of any party to, or any other provisions of, the NGPSA, the Security Agreement,
the DMT Net Payment Agreement or the other Contracts other than as specifically
set forth herein. This Agreement may not be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the parties
hereto.
14. This Agreement shall become effective upon the execution of a signature
page hereto by each of the parties below and may be executed in multiple
counterparts, each of which, when taken together, shall be treated as an
original.
[Signatures on following page.]
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IN WITNESS WHEREOF, the parties have duly entered into this Agreement as of
the day and year first above written.
CHEVRON U.S.A. INC., on behalf of itself
and as the Collateral Agent,
By: /s/ R.I. Xxxxxx
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Name: R.I. Xxxxxx
Title: President
DYNEGY MARKETING AND TRADE
By: /s/ Gene. X. Xxxxxx
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Name: Xxxx X. Xxxxxx
Title: Vice President, Taxation
TEXACO NATURAL GAS INC.
By: /s/ X.X. Xxxx
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Name: X.X. Xxxx
Title: Executive Vice President
DYNEGY INC.
By: /s/ Xxxxx Xxxx
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Name: Xxxxx Xxxx
Title: Vice President, Finance
DYNEGY HOLDINGS INC.
By: /s/ Xxxx Xxxxxx
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Name: Xxxx Xxxxxx
Title: Senior Vice President
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