NONOPERATING INTEREST ACQUISITION AGREEMENT
THIS AGREEMENT is entered into by and among NRG Energy, Inc. ("NRG"),
and NEO Corporation (the "Operator") as of September 12, 1997.
Background of this Agreement
Operator extracts, produces, and utilizes gas elements ("Landfill Gas"
or "LFG") from one or more landfills (the "Landfills"), and owns the rights
necessary to enter upon the Landfills, and construct and operate LFG gathering,
production and combustion equipment (the "Project"). Such Operator rights are
herein referred to as the "Lease." As used in this Agreement, the term "Lease
Area" means all of the lands, LFG leasehold interests and LFG interests
intended to be developed and operated for LFG production under the Lease.
Definitions not otherwise provided in this Agreement shall be as defined in the
Construction, Acquisition and Term Loan Agreement dated September 12, 1997
among NEO Landfill Gas Inc. (the "Borrower"), Lyon Credit Corporation and
Credit Lyonnais New York Branch (the "Agents") and the other parties thereto
Operator desires to convey, transfer and assign a nonoperating
interest in the LFG in exchange for payments from NRG and NRG desires to
acquire such a nonoperating interest including tax credits.
Terms of this Agreement
NOW, THEREFORE, in consideration of their mutual covenants set forth
below and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Conveyance of Nonoperating Interest in LFG.
Subject to the terms and conditions of this Agreement, Operator hereby
transfers, assigns and grants to NRG the right to receive all gross proceeds to
be realized at any time by Operator resulting from sales of LFG produced from
the Lease Area. Operator shall at all times be the operator of the Lease Area
and shall conduct and direct and have full control of all operations on the
Lease Area. Operator shall conduct all such operations in a good and
workmanlike manner, but shall have no liability as Operator to NRG for losses
sustained or liabilities incurred, except such as may result from gross
negligence or willful misconduct. Nothing contained in this Agreement shall be
deemed or construed for any purpose to establish, between Operator and NRG, a
partnership or joint venture, or a principal-agent relationship.
2. Allocation of Section 29 Tax Credits to NRG.
The parties hereto acknowledge and intend that the conveyance of the
nonoperating interest in Section 1 shall result in the allocation to NRG of all
tax credits under Section 29 of the Internal Revenue Code ("Section 29")
arising from the sale of LFG produced from the Lease Area (the "Section 29 Tax
Credits").
3. Payments for Nonoperating Interest.
a. In exchange for the nonoperating interest, NRG shall pay to
Operator the Quarterly Payment Amount solely with respect to
periods ending on or before December 31, 2007. Payments with
respect to such periods shall be the sole consideration for
the nonoperating interest acquired hereunder, and no other
payments with respect to any period ending after December 31,
2007 shall be due. The "Quarterly Payment Amount" for any
calendar quarter shall mean an amount equal to the product of
(a) mmBtu of LFG produced from the Lease Area during such
calendar quarter, multiplied by (b) the Applicable Section 29
Credit Rate. The MMBTU shall be measured on a monthly basis
at the interconnection point. For any calendar quarter, the
"Applicable Section 29 Credit Rate" shall equal (x) the
product of $3 times the "inflation adjustment factor" divided
by (y) 5.8. "Inflation adjustment factor" has the same
meaning as in Section 29(d)(2)(B) of the Internal Revenue
Code as in effect on the date of this Agreement. If the
Internal Revenue Service has not yet published the inflation
adjustment factor with respect to a calendar quarter, then
the Quarterly Payment Amount shall be computed using the most
recently announced inflation adjustment factor. Upon
publication of such information, there shall be a reconciling
adjustment, upwards or downwards as the case may be, to
reflect the actual credit amount determined to be in effect
for such calendar quarters.
b. If no LFG is produced, then no Section 29 Tax Credit will
accrue for the month so measured and the Quarterly Payment
Amount will be adjusted accordingly.
c. Except as stated in Section (b) above, the Quarterly Payment
Amount shall be due in all cases, regardless of whether:
(i) NRG or any of its affiliates can utilize any of the
Section 29 Tax Credits to offset Federal income tax
liability;
(ii) The Project fails to qualify for Section 29 Tax
Credits due to problems with binding contracts,
failure to be placed in service on time, failure to
find a buyer for the LFG, failure to make LFG sales
to related persons or problems with the deal
structure;
(iii) The Project qualifies for Section 29 Tax Credits but
only through 2002, for any reason including because
the facilities that collect LFG
were considered to have been originally placed in
service before 1993;
(iv) There is a reduction in Section 29 Tax Credits
allocated to NRG pursuant to Section 29(d)(3) of the
Internal Revenue Code because other persons besides
NRG are considered to have an "interest" in a
Project;
(v) There is a reduction in Section 29 Tax Credits under
Section 29(b)(3) of the Internal Revenue Code
because the Project benefited from grants,
tax-exempt financing or subsidized energy financing;
(vi) There is a phase-out of the Section 29 Tax Credits
under Section (b)(1) of the Internal Revenue Code
due to escalating oil prices; or
(vii) The Section 29 Tax Credit or the federal income tax
is repealed before 2008.
d. In the event that the Section 29 Tax Credits become
unavailable to NRG because Congress repeals Section 29 as it
applies to landfill gas facilities such as the Project, NRG
shall nonetheless continue to be obligated to make the
Quarterly Payment Amounts throughout the term of this
Agreement. With respect to any calendar year for which such a
repeal has become effective, the "Applicable Section 29
Credit Rate" shall be equal to the Applicable Section 29
Credit Rate in effect for the last year prior to the year of
such repeal without any further adjustments for inflation.
4. Quarterly Payments to Operator.
NRG shall pay the Quarterly Payment Amount to Operator in cash within
30 days after the last day of each calendar quarter.
5. No Offset.
Payments required to be made by NRG pursuant to this Agreement will be
made without offset for amounts that Operator may owe NRG.
6. Representations and Warranties of NRG.
NRG represents and warrants that as of the date hereof:
a. It is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has
the corporate power,
authority and legal right to execute, deliver and carry out
the terms and provisions of this Agreement;
b. The execution, delivery and performance of this Agreement
have been duly authorized by all necessary corporate action;
c. The execution, delivery and performance of this Agreement
will not (i) require any consent or approval of any
shareholder of NRG or Government Instrumentality that has not
been obtained, (ii) violate any provision of any of law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having
applicability to NRG, or (iii) result in a breach of or
constitute a default under any material agreement binding
upon NRG, and
d. This Agreement constitutes a valid and legally binding
agreement of NRG, enforceable in accordance with its terms
except as the enforceability of this Agreement may be limited
by the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditor's rights generally and by general principles of
equity.
7. Representations and Warranties of Operator.
Operator represents and warrants that as of the date hereof:
a. It is a limited liability company or corporation duly
organized, validly existing and in good standing under the
laws of the State within which it is organized, and has the
power, authority and legal right to execute, deliver and
carry out the terms and provisions of this Agreement;
b. The execution, delivery and performance of this Agreement
have been duly authorized by all necessary corporate action;
c. The execution, delivery and performance of this Agreement
will not (i) require any consent or approval of any member or
shareholder of Operator or Government Instrumentality that
has not been obtained, (ii) violate any provision of any
law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having
applicability to Operator, or (iii) result in a breach of or
constitute a default under any material agreement binding
upon Operator; and
d. This Agreement constitutes a valid and legally binding
agreement of Operator, enforceable in accordance with its
terms except as the enforceability of this Agreement may be
limited by the effect of any
applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditor's rights
generally and by general principles of equity.
8. Other Business Activities; Disclosure; Waiver.
Each of the parties may engage in or possess any interest in any other
business venture of any nature or description independently or with others, and
the other party shall not have any right by virtue of this Agreement in and to
such business venture or the income or profits derived therefrom or to prevent
the other party from engaging in such business venture.
9. Scope of Authority; Indemnification.
Operator shall not take any action on behalf of or in the name of NRG,
or enter into any commitment or obligation purporting to be binding upon NRG,
except for actions expressly provided for in this Agreement. Operator shall
indemnify and hold harmless NRG, its partners, affiliates, shareholders,
directors and officers from and against any and all claims, demands, losses,
damages, liabilities, lawsuits and other proceedings, judgments, and awards,
and costs and expenses (including, but not limited to, reasonable attorneys'
fees) which any of them may incur or which may be claimed against any of them
by any person or entity in connection with, resulting from, or arising directly
or indirectly, in whole or in part, out of the acts or omission of Operator
with respect to the Project or the Lease or out of any breach of this Agreement
by the Operator. Notwithstanding the foregoing, any indemnification obligation
of the Operator to NRG under this Agreement shall be subordinate to the payment
in full of Operator's Obligations to the Agents and Lenders pursuant to the
terms of the Loan Agreement.
10. Term of this Agreement.
This Agreement shall commence with respect to Operator on the Term
Loan Conversion Date for the Project associated with such Operator. This
Agreement shall terminate on December 31, 2007 or the date of the indefeasible
payment in full of all Obligations under the Loan Agreement.
11. Notices and Communications.
All notices and other communications required or permitted to be given
or made hereunder shall be in writing and, shall be delivered to such address
as any party may from time to time designate in writing. Notices or
communications given as set forth herein shall be conclusively deemed to have
been received by the party to whom addressed when delivered.
12. Binding Provisions.
The covenants and agreements contained in this Agreement shall be
binding upon the heirs, personal representatives, successors and permitted
assigns of the respective parties to this Agreement.
13. Severability.
If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under the present or future laws effective during the terms of
this Agreement, such provision shall be fully severable, and this Agreement
will be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part of this Agreement, and the remaining
provisions of this Agreement will remain in full force and effect, and will not
be affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid,
or unenforceable provision, there will be added automatically as a part of this
Agreement a provision as similar in terms and effect to such illegal, invalid
or unenforceable provision as would be legal, valid and enforceable.
14. Entire Agreement.
This Agreement constitutes the entire understanding and agreement
among the parties with respect to the subject matter of this Agreement, and
supersedes all prior and contemporaneous agreements and understandings,
inducements, or conditions, express or implied, oral or written, except as
contained in this Agreement.
15. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota.
16. Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which when taken together, shall constitute one
and the same instrument, binding on the parties hereto. The signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
17. Third-Party Beneficiaries.
Except as otherwise provided in this Section 17, this Agreement is
made solely and specifically among and for the benefit of the parties hereto,
and their respective successors and assigns, and no other person will have any
rights, interest, or claim hereunder or be entitled to any benefits under or on
account of this Agreement whether as a third party beneficiary or otherwise.
NRG acknowledges that Operator has collaterally
assigned its right, title and interest in, to and under this Agreement to Lyon
Credit Corporation, as agent (the "Agent") for the Lenders under the Loan
Agreement. NRG intends that the Agent will be a third-party beneficiary to
this Agreement to the extent of such collateral assignment with the right to
enforce this Agreement against NRG directly. The Agent may bring an action to
enforce this Agreement against NRG directly without any requirement for notice
to the Operator and without waiting for the Operator to enforce its rights
under this Agreement. Any successors or assigns of the Agent will possess the
same rights as the Agent as a third-party beneficiary under this Agreement. In
addition, NRG has executed a Consent and Agreement dated of even date herewith,
consenting to the assignment by the Operator of all of its right, title and
interest in, to and under this Agreement to the Agent.
18. Amendment of Agreement.
This Agreement may be amended only by a writing duly executed by all
of the parties hereto; provided, however, that no amendment to this Agreement
shall be effective without the prior written consent of the Agent.
IN WITNESS WHEREOF, the parties hereto acknowledge that this Agreement
is their free act and that they have executed this Agreement as of the day and
year first above written.
NRG ENERGY, INC.
By: /s/ XXXXX X. XXXXXX
Title: VP & GC
NEO CORPORATION
By: /s/ XXXXX X. XXXXX
Title: Manager
NEO Albany LLC
NEO Edgeboro LLC
NEO Fitchburgh LLC
NEO Xxxxxx LLC
Miramar Landfill Gas LLC
NEO Spokane LLC
NEO Taunton LLC
NEO Tulare LLC
NEO Tomoka Farms LLC
NEO Yolo LLC
NEO Cuyahoga LLC
NEO Hartford LLC
NEO Prima Deshecha LLC
NEO Prince Xxxxxxx LLC
NEO Tacoma LLC
NEO West Covina LLC
NEO Hackensack LLC
NEO Xxxxx Canyon LLC
NEO Corporation
