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EXHIBIT 10.39
LONG TERM GAS AGREEMENT EXHIBIT 10.39
This Agreement is made this first day of September 2000, between Midland
Cogeneration Venture Limited Partnership ("MCV" or "Buyer") and Coastal Merchant
Energy, L.P., formerly named Engage Energy US, 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
Federal banks in the United States 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 degrees) 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 xxxxx (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'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 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 $250,000,000. 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" 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. "Point of Delivery" shall mean the point where Seller tenders
Gas to Buyer as set forth in this Agreement.
1.14. "Prime Rate" shall mean the fluctuating per annum lending rate
of interest from time to time published by Wall Street Journal,
under the "Money Rates" table.
1.15. "Psia" shall mean pounds per square inch absolute.
1.16. "Transporter" shall mean Trunkline Gas Company.
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1.17. "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 5,000 MMBtu/Day, on a firm basis, in accordance with the
terms and conditions of this Agreement.
3. Price.
3.1. 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 $3.34
per MMBtu for all Gas delivered to the Point of Delivery.
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.
4. Term. Deliveries of Gas shall commence on November 1, 2001, and
continue through October 31, 2004.
5. Billing and Payments.
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 on or before the applicable due
date of the Disputed Amount and the basis of such
dispute in as much detail as possible, 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 principle.
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 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.
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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
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 Seller providing Buyer a guaranty
from The Coastal Corporation in the form attached hereto as
Exhibit "B". If the Seller's guarantor is merged, acquired or
otherwise controlled by another entity and no longer has a
long-term credit rating of at least BBB-, Seller will cause a
substitute guaranty in the same form without change to any
material obligation and in the same amount to be issued by an
affiliated entity with a minimum credit rating of BBB-.
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 seven (7) Day period, if the Termination Payment (as such
term is defined in Section 13.5) should exceed $0 as
calculated by Seller with respect to MCV, and $4,000,000 as
calculated by MCV with respect 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. 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's consent to reduce its Performance Assurance then in
place if the Termination Payment reverts back to an amount
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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 rights including
without limitation those in Section 13.2 and other
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 Xxxxx'x (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 Xxxxx'x; (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,
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 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, 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
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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 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 such assignment
shall not relieve Buyer of its obligations under this
Agreement absent Seller's written consent.
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.
15.5. Notwithstanding sections 15.1 through 15.4, Seller shall have
the right subject to section 13 to assign this agreement to an
affiliate or any company that shall succeed by merger,
acquisition or consolidation, to all or substantially all of
its assets.
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 five (5)
days after being deposited in the government mail, postage prepaid, as
certified mail 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: Coastal Merchant Energy, L.P.
Attn: Client Services
Five Xxxxxxxx Xxxxx Xxxxx 0000; Xxxxxxx XX 00000
Telephone: 000-000-0000 Facsimile: 000-000-0000
Other Notices: Coastal Merchant Energy, L.P.
Attn: Contract Administration
Five Greenway Plaza Suite 1200; Xxxxxxx XX 00000
Telephone: 000-000-0000 Facsimile: 000-000-0000
Wire Transfer: BANK: Citibank, N.A., New York, NY
ACCT: 4071-9415
ABA: 0000-0000-0
16.2. TO BUYER:
Invoices: Midland Cogeneration Venture Limited Partnership
Attn: Gas Accounting
000 Xxxxxxxx Xxxxx; Xxxxxxx XX 00000
Telephone: 000-000-0000 Facsimile: 000-000-0000
Other Notices: Midland Cogeneration Venture Limited Partnership
Attn: Contract Administration
100 Progress Place; Xxxxxxx XX 00000
Telephone: 000-000-0000 Facsimile: 000-000-0000
Wire Transfer: BANK: U.S. Bank Trust, N.A., Minneapolis, MN
ACCT: 180121167365
ABA: 000000000
DETAILS: MI Clearing 47300196 - FBO MCV 76608640
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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, 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.
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 qualified by education,
knowledge, and experience to resolve the dispute or
controversy. Such arbitrators shall not be employees, agents,
attorneys or representatives or former employees agents,
attorneys or representatives of the party appointing such
arbitrator. 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
therefore 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.
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 being arbitrated. No
other position may be selected. Such decision shall be binding
on the Parties hereto subject to any appeals for errors of law
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, storms, explosions, fires, arrests and restraints of
governments and people, civil disturbance, freeze-up of Seller's xxxxx
or xxxxx from which Seller is furnishing Gas hereunder, or other
temporary inability of Seller's xxxxx or xxxxx from which Seller is
furnishing Gas hereunder to produce, mechanical
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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 in so far as they are affected by such Force Majeure event
and that by the exercise of commercially reasonable efforts, such Party
is unable to prevent or overcome. Neither party may rely upon changes
in market conditions, curtailment of interruptible transportation, or
denial by a regulatory authority of the pass through of the cost of gas
purchased under this Agreement as events of Force Majeure. In the event
of Force Majeure that causes Seller to curtail its deliveries of gas
hereunder, Seller shall treat Buyer on a pro rata basis with Seller's
other similarly situated firm customers and Seller shall cease
deliveries of gas to all of its interruptible markets affected by such
event of Force Majeure before curtailing deliveries of gas to any of
Seller's firm markets. In the event of a Force Majeure that causes
Buyer to curtail its receipts of gas hereunder, Buyer shall treat
Seller on a pro rata basis with Buyer's other firm gas suppliers and
Buyer shall cease receipts of gas from all its interruptible suppliers
before curtailing receipts of gas from any of Buyer's firm gas
suppliers.
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 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
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; or
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 fifteen (15) 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.
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
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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 Section 21.1 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.
21.2.2. 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-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.
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 in accordance with mutually agreeable
dispute resolution procedures or absent mutual
agreement then pursuant to arbitration as provided in
section 18.
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,
Page 8
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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 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, 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;
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.
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.
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10
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 xxx 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.
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 Coastal Merchant Energy, L.P.
XxXxx X. Xxxxx Xxxxx X. Xxxx XX
-------------- ----------------
Name: XxXxx X. Xxxxx Name: Xxxxx X. Xxxx XX
Title: Vice President Energy Supply and Marketing Title: President & CEO
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EXHIBIT A
POINT OF DELIVERY
The Trunkline Gas Company-South Texas Pool Delivery Point(s)
Page 11
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EXHIBIT B
GUARANTY
Guaranty dated effective as of the first day of September 2000, by The Coastal
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 Engage Energy US, L.P. (hereinafter referred to
as "Debtor") have entered into a certain Long Term Gas Agreement dated September
1, 2000 (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 $4,000,000 (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 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 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:
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The Coastal Corporation
Attn: Secretary
Nine Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
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
Xxxxx X. Xxxx XX
----------------
Name: Xxxxx X. Xxxx XX
Title: President & CEO
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EXHIBIT C
CONSENT AND AGREEMENT
CONSENT AND AGREEMENT, dated as of September 1, 2000, 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 Long Term Gas Agreement dated September 1,
2000, 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.
(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,
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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 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.
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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.
Coastal Merchant Energy, L.P.
By: Xxxxx X. Xxxx XX
-------------------
Title: President & CEO
----------------
Seen and Agreed to this
1 Day of September, 2000.
MIDLAND COGENERATION VENTURE
LIMITED PARTNERSHIP, as
Lessee
By: XxXxx X. Xxxxx
--------------
Title: Vice President Energy Supply and Marketing
-------------------------------------------
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SCHEDULE A
MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP,
as Lessee,
FIRST MIDLAND LIMITED PARTNERSHIP,
DCC PROJECT FINANCE ONE, INC.,
EDISON CAPITAL (formerly, Mission Funding Epsilon),
XXXX 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.
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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.
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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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