Exhibit 99.1
SECOND AMENDMENT TO
MASTER NETTING AGREEMENT
This Second Amendment ("SECOND AMENDMENT") to Master Cross-Product Netting,
Setoff, and Security Agreement is entered into effective as of October 18, 2001
by, between and among The New Power Company, a Delaware corporation
("NEWPOWER"), Enron North America Corp., a Delaware corporation ("ENA"), Enron
Energy Services, Inc., a Delaware corporation ("EES"), and Enron Power
Marketing, Inc., a Delaware corporation (together with ENA and EES collectively,
the "ENRON PARTIES").
RECITALS
WHEREAS, NewPower and the Enron Parties entered into that certain Master
Cross-Product Netting, Setoff, and Security Agreement effective as of March 14,
2001, as amended by that certain First Amendment to Master Cross-Product
Netting, Setoff, and Security Agreement effective as of May 4, 2001 (as amended,
the "MASTER NETTING AGREEMENT"), copies of which are attached hereto marked
Exhibit "A", and which, among other things, provide substitute security margin
under various commodity, forward and swap contracts (the "UNDERLYING MASTER
AGREEMENTS") between NewPower and the Enron Parties;
WHEREAS, since March 14, 2001, NewPower and the Enron Parties have continued to
enter into new transactions under the Underlying Master Agreements and to
provide security margin payments in accordance with the requirements in the
Master Netting Agreement, which amended the separate Collateral requirements
under each Underlying Master Agreement;
WHEREAS, in accordance with the terms of the Master Netting Agreement, NewPower
has, as of the date of this Second Amendment, posted $109,300,000 of Collateral
in the form of cash to the Enron Parties in order to satisfy NewPower's margin
payment requirements to the Enron Parties;
WHEREAS, pursuant to a letter dated September 26, 2001, and in accordance with
the terms of the Master Netting Agreement, the Enron Parties have requested
NewPower to provide an additional $15,000,000 in Collateral to the Enron
Parties;
WHEREAS, NewPower and the Enron Parties have discussed how to enable NewPower to
provide such Collateral to the Enron Parties and to otherwise meet its
obligations; and
WHEREAS, the Enron Parties have agreed to permit NewPower to provide Collateral
in a form other than cash under the Master Netting Agreement in order to permit
NewPower to provide additional Collateral to the Enron Parties and to provide
cash liquidity to NewPower, all on the terms and conditions provided herein;
NOW THEREFORE, for and in consideration of the mutual agreements
herein made and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
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1. DEFINITIONS. (a) Defined terms used or incorporated by reference in this
Second Amendment and not otherwise defined herein have the same meanings in this
Second Amendment as given to them by the Master Netting Agreement.
(b) The definition of "Enron Affiliates" is hereby amended to exclude
NewPower, TNPC Holdings, Inc. and NewPower Holdings, Inc. from the definition.
The definition of "NewPower Affiliates" is hereby amended to exclude the Enron
Parties, Enron Corp. and their respective subsidiaries and controlled affiliates
from the definition.
(c) The following terms used in this Second Amendment are defined as
follows:
"APPLICABLE PERCENTAGE" has the meaning set forth in Exhibit B and
shall be in the percentage amounts set forth in Exhibit B opposite each category
of Eligible Accounts set forth in Exhibit B.
"CERTIFICATE DELIVERY DATE" has the meaning set forth in Section
2(b).
"ELIGIBLE ACCOUNTS" shall mean bona fide accounts receivable owned
by NewPower (including receivables due from regulated utilities in return for
their purchase, billing and collection of NewPower's underlying customer
receivables as further described in Section 5(h) to the General Security
Agreement between the parties of even date herewith) in which the Enron Parties
hold perfected first priority security interests and are not subject to setoff
or any liens, claims or encumbrances (except in favor of the Enron Parties and
except for charges for routine billing and collection services), and which are
less than sixty-one (61) days after invoice date and are one of the following:
(i) Accounts receivable which have been earned by NewPower's
furnishing electricity, gas or services to its customers in the ordinary
course of its business but which have not yet been billed ("UNBILLED
ACCOUNTS");
(ii) Accounts receivable which have been earned by NewPower's
furnishing electricity, gas, or services to its customers in the ordinary
course of its business and which have been billed by NewPower ("NEWPOWER
BILLED ACCOUNTS"); or
(iii) Accounts receivable which have been earned by NewPower's
furnishing electricity, gas or services to its customers in the ordinary
course of its business and which have been billed by a regulated utility
on behalf of NewPower, including the receivables due from regulated
utilities in return for their purchase, billing and collection of
NewPower's underlying customer receivables ("UTILITY BILLED ACCOUNTS").
"ELIGIBLE NATURAL GAS" shall mean natural gas owned by NewPower free
and clear of any liens, claims or encumbrances (except those in favor of the
Enron Parties and except for statutory liens imposed without the consent of
NewPower) and in which the Enron Parties hold perfected first priority security
interests and which has not been delivered to customers. The value of the
Eligible Natural Gas shall be calculated by multiplying the sum of natural gas
volumes constituting Eligible Natural Gas in pipeline storage (including
pipeline storage domes not behind city gates) at the time of calculation times
the prompt month futures contract as quoted by NYMEX.
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"PERMITTED DEPOSITS" has the meaning set forth in Section 2(c).
"REPLACEMENT COLLATERAL" has the meaning set forth in Section 2 (a)
hereof.
"REPLACEMENT COLLATERAL PERIOD" shall mean the period from the date
of this Second Amendment through the earliest of (i) January 4, 2002, (ii) the
date any Default occurs by NewPower under the Master Netting Agreement after
giving effect to this Second Amendment, and (iii) the date NewPower delivers
written notice to the Enron Parties terminating the Replacement Collateral
Period.
"RETURNED CASH COLLATERAL" has the meaning set forth in Section 2
(b) hereof.
"SECURITY AGREEMENT" has the meaning set forth in Section 2 (e)
hereof.
"SUBSTITUTION AMOUNT" has the meaning set forth in Section 2 (a)
hereof.
2. REPLACEMENT COLLATERAL. (a) During the Replacement Collateral Period,
NewPower may substitute Eligible Accounts and Eligible Natural Gas
(collectively, "REPLACEMENT COLLATERAL") for cash Collateral currently held by
the Enron Parties in a total amount up to but not exceeding the lesser of (i)
$40,000,000 or (ii) the sum (the "Clause (ii) Amount") of the respective
Applicable Percentages of each category of Eligible Accounts and 50% of Eligible
Natural Gas; such lesser amount of (i) and (ii) above to be referred to
hereafter as the "Substitution Amount". The Applicable Percentage for any
Eligible Account shall be the percentage specified for that kind of Eligible
Account on Exhibit B hereto. During the month of October 2001, NewPower may
substitute no more than $25,000,000 in Replacement Collateral for Returned Cash
Collateral. The Parties expressly acknowledge and agree that the Substitution
Amount of Replacement Collateral, as determined from time to time pursuant to
the terms hereof, shall constitute acceptable Collateral for the obligations of
NewPower under the Master Netting Agreement during the Replacement Collateral
Period. At no time during the Replacement Collateral Period shall the Enron
Parties be obligated to release any cash Collateral to NewPower that would
result in NewPower's having posted cash Collateral to the Enron Parties of less
than $70,000,000 unless NewPower's Collateral requirement under the Master
Netting Agreement is less than such amount, in which case all of NewPower's
Collateral posted to the Enron Parties shall be provided in cash.
As examples, if during October 2001 of the Replacement Collateral
Period, NewPower has posted as Collateral with the Enron Parties $110,000,000 in
cash, has a Clause (ii) Amount calculated at $50,000,000, and has a requirement
for margin of $125,000,000 under the Master Netting Agreement, then NewPower
would be able during October to utilize $25,000,000 as the Substitution Amount
toward satisfying the Collateral requirement and would be obligated to post
$100,000,000 in cash Collateral for the balance of the Collateral requirement,
and the Enron Parties would be obligated to release $10,000,000 of cash
Collateral to NewPower. In November 2001 under the same assumptions, NewPower
would be able to utilize $40,000,000 as the Substitution Amount toward
satisfying the Collateral requirement and would be obligated to post $85,000,000
in cash Collateral for the balance of the Collateral requirement, and the Enron
Parties would be obligated to release an additional $15,000,000 of cash
Collateral to NewPower. If during November 2001, NewPower has a Clause (ii)
Amount of
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$50,000,000 and has a requirement for margin of $65,000,000 under the Master
Netting Agreement, then NewPower would not be able during November to utilize
any amount of the Substitution Amount toward satisfying the Collateral
requirement and would be obligated to post $65,000,000 in cash Collateral. If
the requirement for margin then increased to $70,000,000, NewPower would be
obligated to post an additional $5,000,000 in cash Collateral, for a total of
$70,000,000 in cash Collateral.
(b) NewPower may on any Business Day, and covenants that it shall on the
first Business Day of each week during the Replacement Collateral Period (the
date of delivery of a Replacement Collateral Certificate being the "CERTIFICATE
DELIVERY DATE") deliver to the Enron Parties, by delivery to each of Xxxxxxx
Xxxxxxxx (facsimile number 713-646-8525) and Xxxxxxx Xxxxxxxx (facsimile number
713-646-8525) or such other person(s) as reasonably directed by the Enron
Parties in writing, a certificate of a responsible officer of NewPower (a
"REPLACEMENT COLLATERAL CERTIFICATE") (i) certifying, as of the immediately
preceding Business Day, the Substitution Amount, the amount of cash Collateral
and Replacement Collateral posted to the Enron Parties hereunder, the absence of
Default under the Master Netting Agreement, the aggregate amount of all
Permitted Deposits, including cash, collateral, or margin payments deposited or
posted with any third party for the purposes of providing collateral or margin,
and a listing and aging of Utility Billed Accounts and NewPower Billed Accounts
reconciled to the aggregate Replacement Collateral shown in the Replacement
Collateral Certificate to which it is attached ("AGING REPORT"), and (ii)
containing a daily cash forecast for the current month and the subsequent month.
The Replacement Collateral Certificate shall be substantially in the form
attached hereto as Exhibit "B". On the second Business Day after each
Certificate Delivery Date (or, if the Replacement Collateral Certificate is
delivered before noon New York time on the Certificate Delivery Date, then on
the next Business Day) and provided that no Default under the Master Netting
Agreement then exists, the Enron Parties shall release excess cash Collateral to
NewPower under the terms and conditions provided herein ("RETURNED CASH
COLLATERAL"); provided, however, if the most recent Replacement Collateral
Certificate from NewPower would require the Enron Parties to return a lesser
amount of cash Collateral, then the Enron Parties shall be obligated to return
only such lesser amount. Any determination of the Substitution Amount shall be
made as of the date specified and shall be without prejudice to any Party
thereafter to seek additional Collateral or the return of Collateral in
accordance with the terms of the Master Netting Agreement as amended by this
Second Amendment.
(c) NewPower covenants and agrees during the Replacement Collateral Period
to use its available cash, including the Returned Cash Collateral, to pay its
obligations in the ordinary course of its business and for no other purpose.
Specifically, during the Replacement Collateral Period, NewPower shall not use
cash, including the Returned Cash Collateral, to fund costs or expenses incurred
outside the ordinary course of NewPower's normal business operations, including,
without limitation, payment of dividends, payment of obligations (other than to
Enron Parties) before they come due, making loans or advances to employees other
than ordinary travel advances or the like, or funding executive deferred
compensation, "parachute" agreements or other similar agreements; provided,
however, that during the Replacement Collateral Period, NewPower may (x) make
severance payments under employment or other agreements that do not require the
payment of lump sum severance amounts and (y) make lump sum payments under
employment or severance agreements in writing in existence as of the date of
this Second Amendment, up to an aggregate amount of $500,000. NewPower, however,
shall have the right
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to use available cash, including the Returned Cash Collateral, to make (i)
expenditures in connection with any acquisition if and only if such actions are
approved in advance by the Board of Directors of NewPower Holdings Inc. in
accordance with the by-laws of NewPower Holdings Inc., and (ii) additional
margin payments or deposits to third parties including deposits on accounts and
to sureties ("Permitted Deposits"); provided, however, in no event shall
NewPower use in excess of $5,000,000 of the Returned Cash Collateral to make
such additional Permitted Deposits to third parties over and above the total
amount of $94,270,000, which is the aggregate amount of such margin payments and
deposits posted by NewPower as of the date of this Second Amendment.
(d) The right of NewPower to provide Replacement Collateral shall
terminate at the expiration of the Replacement Collateral Period. Prior to the
scheduled expiration of the Replacement Collateral Period on January 4, 2002,
NewPower shall have the right to provide cash or other Collateral meeting the
requirements under the Master Netting Agreement (without giving effect to this
Second Amendment) in replacement for the Replacement Collateral and to elect in
writing to terminate the Replacement Collateral Period, and the Enron Parties
shall then be obligated to release the Replacement Collateral. Upon expiration
of the Replacement Collateral Period, NewPower shall immediately provide the
full amount of cash or other Collateral meeting the requirements of the Master
Netting Agreement (without giving effect to this Second Amendment). The Enron
Parties shall not be obligated to release any Replacement Collateral unless and
until NewPower shall have provided all Collateral to the Enron Parties in
accordance with the terms of the Master Netting Agreement (without giving effect
to this Second Amendment).
(e) Contemporaneously with the execution of this Second Amendment, NewPower is
executing that certain General Security Agreement dated of even date herewith
(the "SECURITY AGREEMENT") in favor of the Enron Parties granting a security
interest in and lien upon all Accounts and Inventory of NewPower and certain
General Intangibles of New Power as defined under the Uniform Commercial Code as
enacted by the State of New York, in consideration of the Enron Parties'
agreement herein to accept Replacement Collateral.
3. AMENDMENT TO DEFINITION OF DEFAULT. Section 2(a) (iii) of the Master Netting
Agreement is hereby amended by deleting the word "hereunder" and adding the
clause "under this Master Netting Agreement, as amended by the First Amendment
and the Second Amendment, or an Event of Default has occurred and is continuing
under the Security Agreement."
4. AMENDMENT TO EXPOSURE THRESHOLD. Section 6(g) of the Master Netting Agreement
is hereby amended by deleting the amount "$15,000,000" in the tenth line thereof
and inserting in its place the phrase "$0 for the Replacement Collateral Period
and $15,000,000 thereafter." For clarification, the proviso after the words
"$15,000,000 thereafter" shall remain in full force and effect notwithstanding
this Second Amendment.
5. AMENDMENT TO COMPLIANCE CERTIFICATE COVENANT. Section 7(c) of the Master
Netting Agreement is hereby amended by deleting the phrase "certifying that a
Material Adverse Change with respect to NewPower does not then exist" in the
fourth line thereof and inserting in it place
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the phrase "certifying whether a Material Adverse Change with respect to
NewPower has occurred and is then in existence."
6. AMENDMENT TO ARBITRATION PROVISIONS. Section 16 of the Master Netting
Agreement is hereby amended by adding the clause, "provided, however,
arbitration shall not apply to any invocation of or effort by the Enron Parties
to enforce any remedial provisions of this Second Amendment, any collateral
instruments or security documents, including, without limitation, the Security
Agreement, executed by NewPower in favor of the Enron Parties, whether such
invocation or enforcement is by nonjudicial or judicial foreclosure, notice to
account debtors or holders of property as to rights of the Enron Parties or
otherwise" after the word "arbitration" in the fifth line thereof.
7. REPRESENTATIONS AND WARRANTIES. Each Party represents and warrants to the
other that (i) it is duly authorized to execute and deliver this Second
Amendment and to perform its obligations hereunder and has taken all necessary
actions to authorize such execution, delivery, and performance, including, with
respect to NewPower, approval by NewPower's Board of Directors and its Business
Review Committee, in form and substance satisfactory to the Enron Parties, (ii)
the person signing this Second Amendment on its behalf is duly authorized to do
so on its behalf, and (iii) this Second Amendment constitutes its legal, valid,
and binding obligation, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency, conservatorship,
receivership, moratorium, or other similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law). Each Party represents and warrants to the other that it has
not assigned, transferred, created, or permitted to exist any lien or other
encumbrance on, or otherwise disposed of, or purported to assign, transfer,
create, or permit to exist any lien or other encumbrance on, or otherwise
dispose of, any of its rights to any amounts that may be owed to it under the
Master Netting Agreement or any of the Underlying Master Agreements to any third
party.
8. GOVERNING LAW. The law governing this Second Amendment shall be the law
applicable to the Master Netting Agreement. This Second Amendment is a financial
accommodation contract under the Code.
9. SURVIVAL. The provisions this Second Amendment to the extent applicable after
the termination of the Replacement Collateral Period shall survive the
termination of the Replacement Collateral Period and shall remain binding on all
Parties.
10. REAFFIRMATION OF MASTER NETTING AGREEMENT AND UNDERLYING MASTER AGREEMENTS;
SEVERABILITY. Each of the Parties hereby reaffirms its obligations under the
Master Netting Agreement, as amended by the First Amendment and this Second
Amendment, and confirms that the Master Netting Agreement, as amended by the
First Amendment and this Second Amendment, and the Underlying Master Agreements
are and shall remain in full force and effect. NewPower and the Enron Parties
convenant that all transactions between them shall be subject to and conducted
in compliance with the terms, conditions, and requirements contained in the
Master Netting Agreement, as amended, and the Underlying Master Agreements,
including but not limited to written confirmation of each trade under such
agreements and the prompt execution of all such confirmations by the
counterparty. In the event any one or more of
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the provisions contained in this Second Amendment should be held invalid,
illegal, or unenforceable in any respect under the law of any jurisdiction, the
validity, legality, and enforceability of the remaining provisions under the law
of such jurisdiction, and the validity, legality, and enforceability of such
provisions and any other provisions under the law of any other jurisdiction,
shall not in any way be affected or impaired thereby.
11. REPRESENTATION BY COUNSEL. Each Party represents that before executing this
Second Amendment, it has been fully informed of its terms, contents, conditions,
and effect. Each party further represents that, in entering into this Second
Amendment, it has had the benefit and advice of counsel and experts of its own
choosing and that no promises or representations of any kind have been made by
any party or anyone acting for a party except as expressly stated in this Second
Amendment and that it has entered into this Second Amendment freely and without
duress of any kind.
IN WITNESS WHEREOF, the Parties hereto have caused this Second Amendment to be
executed by facsimile or original signature and in multiple counterparts, each
of which is deemed an original and effective as one document, as of the date
first written above.
ENRON NORTH AMERICA CORP.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Print Name: Xxxxxxx X. Xxxxx
----------------------------
Title: Managing Director
---------------------------------
ENRON ENERGY SERVICES, INC.
By: /s/ Xxxxx X. Delainey
------------------------------------
Print Name: Xxxxx X. Delainey
----------------------------
Title: Chairman and Chief Executive
Officer
---------------------------------
ENRON POWER MARKETING INC.
By: /s/ Xxx X. Xxxxxx, Xx.
------------------------------------
Print Name: Xxx X. Xxxxxx, Xx.
----------------------------
Title: Managing Director, Finance and
Treasurer
---------------------------------
THE NEW POWER COMPANY
By: /s/ Xxxxxxx X Xxxxxx
------------------------------------
Print Name: Xxxxxxx X Xxxxxx
----------------------------
Title: Managing Director and Chief
Financial Officer
---------------------------------
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EXHIBIT B
FORM OF REPLACEMENT COLLATERAL CERTIFICATE
I Substitution Amount calculation
Eligible Accounts Applicable Percentages Value Calculation
A) (1) Eligible Accounts -
Unbilled Accounts $_____ x B(1) 0.20 (Applicable = C(1) $_______
Percentage for
Unbilled Accounts)
(2) Eligible Accounts (Applicable = C(2) $_______
NewPower Billed Percentage for
Accounts $_____ x B(2) 0.80 NewPower Billed
Accounts)
(3) Eligible Accounts (Applicable = C(3) $_______
Utility Billed Percentage for
Accounts $_____ x B(3) 0.30 Utility Billed
Accounts)
C)(4) Add (C1), (C2), (C3) SUBTOTAL____________
D) (1) Eligible Natural Gas (mmbtu) ________________
(2) Deduct Imbalance Amounts
due from third parties ________________
(3) Total Eligible Natural Gas ________________
E) Prompt month NYMEX futures contract
price per mmbtu ________________
F) D(3) times E times 50%
G) Result SUBTOTAL ____________
H) C(4) plus G TOTAL ____________
Substitution Amount equal to the lesser of
(i) $40,000,000 and (ii) the amount shown in H above ____________
Amount of cash Collateral posted to
the Enron Parties ____________
II Daily cash forecast for the current month and the subsequent month.
III Schedule of Permitted Deposits.
Total (not to exceed $_______________) ________________
IV Aging Report (attached)
I _______________________, the ____________________ of The New Power Company
certify as of this __ day of __________, 2001 that the Substitution Amount, the
amount of cash Collateral and Replacement Collateral posted to the Enron Parties
hereunder, the daily cash forecast for the current month and the subsequent
month, the Schedule of Permitted Deposits, and the Aging Report are true and
correct and there is no Default under the Master Netting Agreement or the
Security Agreement.
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