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COLLECTIONS ALLOCATION AND SEGREGATION AGREEMENT
among
LONG ISLAND POWER AUTHORITY,
LIPA ACQUISITION CORP.,
and
MARKETSPAN TRADING SERVICES, LLC,
as Manager
Dated as of
May 28, 1998
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COLLECTIONS ALLOCATION AND SEGREGATION AGREEMENT
This COLLECTIONS ALLOCATION AND SEGREGATION AGREEMENT, dated
as of May 28, 1998 (this "Agreement"), by and among LONG ISLAND POWER
AUTHORITY, a corporate municipal instrumentality and political subdivision of
the State of New York (the "Authority"), party of the first part, LIPA
ACQUISITION CORP., a corporation organized and existing under the laws of the
State of New York (the "Subsidiary"), party of the second part, MARKETSPAN
CORPORATION, a corporation organized and existing under the laws of the State
of New York ("MarketSpan"), party of the third part, and MARKETSPAN ENERGY
MANAGEMENT, LLC, a limited liability company organized and existing under the
laws of the State of New York, as the successor Manager under the Management
Services Agreement mentioned hereinbelow (the "Manager"), party of the fourth
part (capitalized terms used herein and not otherwise explicitly defined have
the meanings ascribed to them in the Management Services Agreement);
WITNESSETH:
WHEREAS, the Authority and Long Island Lighting Company
("LILCO") entered into a certain Management Services Agreement, dated as of
June 26, 1997, (as amended and supplemented the "Management Services
Agreement"), under which LILCO, as Manager, agreed (i) to operate and maintain
the T&D System, and (ii) in connection with the aforementioned duties and
responsibilities, to collect certain amounts due and owing to the Authority;
and
WHEREAS, on May 13, 1998 the Authority adopted its Electric
System General Revenue Bond Resolution (as amended and supplemented from time
to time, the "Bond Resolution"), pursuant to which, among other things, the
Authority may issue its bonds, notes or other evidences of indebtedness from
time to time, including $3,449,527,638.05 aggregate initial principal amount of
Electric System General Revenue Bonds, Series 1998A (the "Series 1998A Bonds");
and
WHEREAS, on May 20, 1998 the Authority adopted its Electric
System General Subordinated Revenue Bond Resolution, pursuant to which, among
other things, the Authority may issue its bonds, notes or other evidences of
indebtedness from time to time, including $1,500,000,000 aggregate principal
amount of Electric System Subordinated Revenue Bonds, Series 1, 2, 3, 4, 5 and
6 (the "Initial Subordinated Indebtedness" and, together with the Series 1998A
Bonds, the "1998 Bonds"); and
WHEREAS, in conjunction with the issuance of the 1998 Bonds,
the Subsidiary will succeed to the rights and interests of the Authority under
the Management Services Agreement and MarketSpan Energy Management, LLC will
succeed LILCO as Manager under the Management Services Agreement; and
WHEREAS, under the Management Services Agreement, (a) the
Manager is required to use its best efforts to collect on a timely basis (i)
all amounts due Subsidiary for service provided to customers, and for other
services, in accordance with the Schedule of Rates for the periods in which
services were provided, and (ii) other monies owed to the Subsidiary pursuant
to the operation of the T&D System; and (b) it is expected that gas customers
of MarketSpan (or another Affiliate of the Manager) and the T&D System electric
customers will be billed in a single statement and, in the event any electric
customer who is also a gas customer shall pay less than all of the amount due
at any time under a single statement, the amounts collected shall be applied
pro rata between amounts owed by such customer with respect to electric service
and gas service; and
WHEREAS, the parties hereto desire to clarify and implement
provisions of the Management Services Agreement relating to the allocation and
segregation of (i) amounts due the Subsidiary and collected by the Manager or
any Subcontractor pursuant to the Management Services Agreement, and (ii)
amounts due MarketSpan (or other Affiliates of the Manager) and collected by
the Manager or any Subcontractor in respect of gas service;
NOW, THEREFORE, the Authority, the Subsidiary, MarketSpan and
the Manager agree as follows:
Section 1. Daily Customer Remittances. Subject to Section 3
of this Agreement, all amounts remitted to the Manager or any Subcontractor by
T&D System electric customers (including combination electric and gas
customers) shall be (a) segregated from all other funds within the custody,
control or possession of the Manager or such Subcontractor, and (b) on the
Business Day of such collection, deposited (for overnight clearing, if in the
form of checks) into a separate bank account, established by and for the sole
benefit of the Subsidiary (except to the extent of MarketSpan's interest in the
Gas Payment or Gas Overpayment, as defined below), into which only such
remittances are deposited from time to time (such account hereinafter referred
to as the "Customer Remittance Account").
Section 2. Disbursements from Customer Remittance Account.
Not later than 10:00 A.M., New York time, on each Business Day, the Manager
shall (i) calculate the proportion of remittances (i.e., cash and the amount
drawn as checks) in respect of electric service to total remittances received
by the Manager during the preceding five (5) Business Days (on each such date
of calculation, the "Five-Day Electric Percentage"), (ii) transfer from the
Customer Remittance Account to the Revenue Fund established and maintained
pursuant to the Bond Resolution (the "Revenue Fund") an amount equal to the
product of (x) the amount deposited on the preceding Business Day into the
Customer Remittance Account ("Yesterday's Receipts") times (y) the Five-Day
Electric Percentage (the "Revenue Fund Payment"), and (iii) transfer from the
Customer Remittance Account, to or upon the order of MarketSpan, the excess (if
any) of Yesterday's Receipts over the Revenue Fund Payment (the "Gas Payment").
Section 3. Weekly Reconciliation and True-Up. (a) On each
Business Day, the Manager shall determine, in accordance with the
Management Services Agreement, (i) the
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amount deposited in the Customer Remittance Account on the preceding Business
Day constituting actual collections in respect of electric service, and (ii)
the amount deposited in the Customer Remittance Account on the preceding
Business Day constituting actual collections in respect of gas service.
(b) On Monday of each week (or, if such Monday is not a
Business Day, on the immediately succeeding Business Day), before any cash
collected by the Manager or any Subcontractors from customers on such day
("Monday Cash") is deposited in the Customer Remittance Account, the Manager
shall: (i) deposit in the Revenue Fund, for each Business Day of the preceding
week (each a "Business Day of the Preceding Week"), an amount of Monday Cash
equal to the excess (if any) of (A) the amount transferred from the Customer
Remittance Account pursuant to clause (iii) of Section 2 of this Agreement on
such Business Day of the Preceding Week, over (B) the amount determined
pursuant to clause (ii) of Section 3(a) of this Agreement for each such
Business Day of the Preceding Week (each a "Gas Overpayment"), together with
interest on each Gas Overpayment calculated at the Base Interest Rate (such
interest to be calculated on the basis of a 360-day year consisting of twelve
30-day months); and (ii) pay to or upon the order of MarketSpan, for each
Business Day of the Preceding Week, an amount of Monday Cash equal to the
excess (if any) of (A) the amount transferred from the Customer Remittance
Account pursuant to clause (ii) of Section 2 of this Agreement on each such
Business Day of the Preceding Week, over (B) the amount determined pursuant to
clause (i) of Section 3(a) of this Agreement for such Business Day of the
Preceding Week (each an "Electric Overpayment"), together with interest on each
Electric Overpayment calculated at the Base Interest Rate (such interest to be
calculated on the basis of a 360-day year consisting of twelve 30-day months).
To the extent (if any) that Monday Cash is insufficient at any time to make the
deposit and/or payment then required pursuant to the preceding sentence, then
such Monday Cash shall be so applied pro rata according to the amounts of such
requirements and (x) MarketSpan shall pay (or cause to be paid) to the
Subsidiary, from funds other than those within the custody or possession of the
Manager pursuant to the Management Services Agreement or this Agreement, the
resulting deposit deficiency (provided, however, that such payment by
MarketSpan shall not be deposited in the Revenue Fund), and (y) the Subsidiary
shall pay to or upon the order of MarketSpan, from funds of the Subsidiary
other than those in the Revenue Fund or within the custody or possession of the
Manager, the resulting payment deficiency.
Section 4. Manager Restrictions and Limitations; Books,
Records and Accounts. (a) In connection with the collections, deposits and
payments contemplated by Sections 1 and 3 of this Agreement, the Manager and
any Subcontractor (x) shall act solely as an agent for the Subsidiary, (y)
shall have no right or claim to either the Customer Remittance Account or the
Revenue Fund or the amounts and monies deposited therein or, pursuant to the
Management Services Agreement and this Agreement, required to be deposited
therein, and (z) shall have no right to assert a claim of set-off, recoupment,
abatement, counterclaim of deduction for any amounts which may be owed to the
Manager or with respect to any other matter in dispute.
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(b) Proper, accurate and complete books, records and accounts
regarding the aforementioned collections, deposits and payments (and the
determinations required by Section 3 of this Agreement) shall be prepared and
maintained by the Manager in accordance with Sections 4.9(C) and 4.15(F) of the
Management Services Agreement.
Section 5. No Recourse to Revenue Fund. No provision of the
Management Services Agreement or of this Agreement shall confer, or be deemed
to confer, upon the Manager, the Subsidiary or MarketSpan any title, recourse
or right to or interest in the Revenue Fund or the amounts on deposit therein,
and the Manager, the Subsidiary and MarketSpan do hereby irrevocably disavow,
waive and forfeit any such title, recourse, right or interest (whether pursuant
to contract or arising by operation of law).
Section 6. Term of Ageement. This Agreement shall become
effective upon execution hereof by all the parties hereto and shall remain in
effect, until the expiration or earlier termination of the Management Services
Agreement.
Section 7. Affirmation of Bond Resolution and Management
Services Agreement. Except as expressly stated herein, no provisions of this
Agreement shall, or be deemed to intend to, amend, nullify, supersede, repeal
or waive any agreement, term or provision whatsoever contained or set forth in
the Bond Resolution or in the Management Services Agreement.
Section 8. Counterparts. This Agreement may be executed in
any number of original counterparts, all of which shall constitute but one and
the same instrument.
Section 9. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to contracts executed, and to be entirely performed, within the
State of New York, without regard to or application of rules or principles of
conflicts of laws.
Section 10. Captions. Titles or captions of the sections of
this Agreement are inserted only as a matter of convenience and for reference,
and in no way define, limit, extend, describe or otherwise affect the scope or
meaning of this Agreement or the intent of any provision hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers or representatives,
all as of the date first above written.
LONG ISLAND POWER AUTHORITY
By: /s/ Xxxxx X. Xxxxxx
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Name:
Title:
LIPA ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxx
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Name:
Title:
MARKETSPAN CORPORATION
By:
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Name:
Title:
MarketSpan ENERGY MANAGEMENT, LLC,
as Manager
By: [**MarketSpan SUB**],
its managing member
By:
---------------------------------
Name:
Title:
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers or representatives,
all as of the date first above written.
LONG ISLAND POWER AUTHORITY
By:
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Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer
LIPA ACQUISITION CORP.
By:
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Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer
MARKETSPAN CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Vice President
MARKETSPAN ENERGY MANAGEMENT, LLC,
as Manager
By: MARKETSPAN CORPORATION,
its managing member
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Vice President
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