EXHIBIT 10(a)
SURPLUS CASH AGREEMENT
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This Agreement dated as of June 26, 1998 is among Penobscot Energy
Recovery Company, Limited Partnership, a Maine limited partnership (the
"Partnership"), Bangor Hydro-Electric Company, a Maine corporation ("Bangor
Hydro") and Municipal Review Committee, Inc., a Maine not-for-profit
corporation (the "MRC").
WHEREAS, the Partnership and the Finance Authority of Maine ("FAME")
have entered into a Loan Agreement pursuant to which FAME has agreed to issue
its Electric Rate Stabilization Revenue Refunding Bonds, Series 1998A
(Penobscot Energy Recovery Company, LP) in the aggregate principal amount of
$29,930,000 (the "Series A Bonds" and its Electric Rate Stabilization Revenue
Refunding Bonds, Series 1998B (Penobscot Energy Recovery Company, LP) in the
aggregate principal amount of $15,065,000 (the "Series B Bonds" and, together
with the Series A Bonds, the "Bonds") pursuant to the Trust Indenture dated
as of June 1, 1998 (the "Indenture") between FAME and The Chase Manhattan
Bank, as Trustee (the "Trustee"); and
WHEREAS, the Partnership and Bangor Hydro entered into a Power Purchase
Agreement dated June 21, 1984, as amended by Amendment No. 1 dated March 24,
1986 and as further amended by Amendment No. 2 (the "Power Purchase Agreement
Amendment No. 2") dated as of the date hereof (collectively, the "Power
Purchase Agreement"); and
WHEREAS, the MRC is the designated agent for certain municipalities in
the State of Maine which have entered into with the Partnership the First
Amended and Restated Waste Disposal Agreements on effective as of April 1,
1991 (the "Charter Municipalities") and Second Amended, Restated and Extended
Waste Disposal Agreements (the "Extended Waste Disposal Agreements") in 1998
in connection with the issuance of the Bonds (the "Amending Charter
Municipalities); and
WHEREAS, under Article XIX of the Extended Waste Disposal Agreements,
the Amending Charter Municipalities, acting through the MRC pursuant to
paragraph E of Article XII, have the option to participate in the purchase of
limited partnership interests in the Partnership, with the purchase price
payable from a designation of Performance Credits (as defined in the Extended
Waste Disposal Agreements), and under paragraph B of Article XVIII and
paragraph C.3.III of Article XIX, funds credited to the MRC Prepayment
Account in the Bond Prepayment and Reserve Fund from Revenues (as defined in
and pursuant to Article V of the Indenture) or deposited therein by the MRC
from designated Performance Credits and either (i) transferred to the
Special Redemption Account of the Debt Service Fund to redeem "Series 1998B
Special Term Bonds" (as defined in the Indenture) prior to their stated
maturity date, or (ii) used to purchase and cancel, or to defease or
otherwise optionally redeem, Bonds prior to their stated maturity date; and
WHEREAS, the distribution to the MRC constitutes the Performance Credits
contemplated in Article XVIII of the Extended Waste Disposal Agreement and
the calculation of such Performance Credits needs to be adjusted as a result
of additional reserve accounts required by FAME in connection with the
issuance of the Bonds, as contemplated in paragraph A of Article XVIII of the
Extended Waste Disposal Agreement and approved by the MRC; and
WHEREAS, under the Power Purchase Agreement, Bangor Hydro is obligated
to pay $250,000 on the first day of each January, April, July and October,
commencing October 1, 1998, until the amount paid equals $4,000,000, by wire
transfer to the Trustee for credit to the Bangor Hydro Funded Account of the
Bond Prepayment and Reserve Fund (the "Bangor Hydro Payment"); and
WHEREAS, under Section 5.01 of the Indenture, the Trustee has
established certain Trust Funds, including the Special Redemption Account of
the Debt Service Fund and the Bond Prepayment and Reserve Fund consisting of
(1) the Bangor Hydro-Funded Account (consisting of the MRC Retention
Subaccount and the Borrower Retention Subaccount), (2) the MRC Prepayment
Account, and (3) the Borrower Reserve Account; and
WHEREAS, Section 5.03 of the Indenture provides for the application of
Revenues on the fifteenth day of each calendar month (each an "Indenture
Distribution Date"), and any balance remaining after application pursuant to
clauses (1) through (9) and the funding of certain Accounts pursuant to
clause (10) of said Section 5.03 is paid to or at the direction of the
Partnership for distribution among the Partnership, Bangor Hydro and the MRC;
and
WHEREAS, the parties hereto desire to set forth herein their agreement
of the distribution of (i) the Allocable Funds after accounting for Reserve
Deposits, (ii) interest on various reserve funds held under the Indenture,
and (iii) Indenture Residual paid by the Trustee to or at the direction of
the Partnership under the Indenture.
NOW, THEREFORE, for good and valuable consideration, the parties hereto
hereby agree as follows:
Section 1. DEFINITIONS. Capitalized terms used herein and not
otherwise defined have the meanings given such terms in the Indenture. In
addition, the following terms, as used herein, have the following meanings:
"ALLOCABLE FUNDS" means, as of any Indenture Distribution Date, the
Revenue Fund Balance, LESS reimbursements of the Partnership and the MRC
under Section 4(a) of this Agreement for withdrawals by the Trustee from the
Borrower Reserve Account, the Borrower Retention Subaccount and the MRC
Reserve Accounts, and LESS the Prepayment Benefit (if any) for the Monthly
Period ended on such Indenture Disbursement Date.
"BANGOR HYDRO PAYMENT" has the meaning given such term in the sixth
WHEREAS clause above.
"BOND DOCUMENTS" means the Indenture and the Financing Documents.
"ENI" means Energy National, Inc., a Utah corporation, and its
successors or assigns as a general or limited partner in the Partnership.
"FUNDING DATE PARTNERS" means the partners of the Partnership (as their
respective interests are then reflected on the books and records of the
Partnership) on each Indenture Distribution Date from July 15, 1998 to the
date on which the aggregate amount of all deposits made into the Borrower
Reserve Account under Section 5.03(b)(10)(iv) is $2,500,000.
"INDENTURE RESIDUAL" has the meaning given such term in Section 6
hereof.
"ISSUE DATE PARTNERS" means PMC and ENI.
"MRC RESERVE ACCOUNTS" means collectively, the MRC Retention Subaccount
in the Bangor Hydro-Funded Account, and the MRC Prepayment Account, of the
Bond Prepayment and Reserve Fund.
"MONTHLY PERIOD" means a period beginning on an Indenture Distribution
Date and ending on the next succeeding Indenture Distribution Date.
"PMC" means PERC Management Company Limited Partnership, a Maine limited
partnership, and its successors or assigns as a general or limited partner in
the Partnership.
"PREPAYMENT BENEFIT" means, for any period of determination, an amount
equal to (i) the interest and the Capital Reserve Premium payable to the
Authority that would have been payable on the Bonds during such period if no
Bonds had been optionally redeemed, purchased or defeased as contemplated by
Section 7 of this Agreement, less (ii) the interest and the Capital Reserve
Premium payable to the Authority paid on outstanding Bonds during such
period.
"RESERVE DEPOSITS" means, as of any Indenture Distribution Date, the
aggregate amount of the Revenue Fund Balance credited by the Trustee (i) to
the MRC Retention Subaccount pursuant to Section 5.03(10)(i) of the
Indenture; (ii) to the Borrower Retention Subaccount pursuant to
Section 5.03(10)(ii) of the Indenture; (iii) to the MRC Prepayment Account
pursuant to Section 5.03(10)(iii) of the Indenture; and (iv) to the Borrower
Reserve Account pursuant to Section 5.03(10)(iv) of the Indenture.
"REVENUE FUND BALANCE" has the meaning given such term in
Section 5.03(10) of the Indenture; namely, it is the balance of the Revenues
in the Revenue Fund on each Indenture Distribution Date after application of
Revenues by the Trustee pursuant to clauses (1) through (9) of said
Section 5.03 of the Indenture.
Section 2. BANGOR HYDRO PAYMENTS. Bangor Hydro shall pay, by wire
transfer or in other immediately available funds, to the Trustee for credit
to the Bangor Hydro-Funded Account of the Bond Prepayment and Reserve Fund,
the Bangor Hydro Payment, one-half of which is to be designated by Bangor
Hydro for credit to the MRC Retention Subaccount and one-half of which is to
be designated by Bangor Hydro for credit to the Borrower Retention
Subaccount.
Section 3. INVESTMENT OF MRC ACCOUNTS; INTEREST EARNINGS.
(a) Under Section 5.12 of the Indenture, the Partnership has the right
to direct the investment, from time to time, of the various Trust Funds,
including the MRC Reserve Accounts, in Eligible Investments, and as of the
date hereof the Partnership has provided the Trustee with written investment
instructions and intends to do so from time to time, in its discretion,
except that upon the Partnership s receipt of written instructions of the
MRC, the Partnership agrees to direct the Trustee to invest funds in the MRC
Reserve Accounts, or either of them, in accordance with such instructions,
provided that such investment instructions comply with the provisions of
Section 5.12 of the Indenture and the Tax Regulatory Agreement. The MRC
hereby agrees and acknowledges that such investments may be made with or
through the Trustee or its affiliates, and neither the Trustee nor the
Partnership shall be responsible or liable for any losses incurred or
realized by the investment of such Account or Subaccount so long as such
investments qualify as "Eligible Investments" as required under the
Indenture.
(b) Under Section 5.12(b)(iii) of the Indenture, interest earnings on
funds credited to the Special Redemption Account and the Bond Prepayment and
Reserve Fund are to be distributed from time to time at the direction of the
Partnership. The parties hereto agree that the Partnership shall direct the
Trustee to distribute such interest earnings as follows: (i) on the Special
Redemption Account, as and when earned, to the Partnership; (ii) on the
Borrower Retention Subaccount, as and when earned, to the Issue Date
Partners; (iii) on the Borrower Reserve Account, as and when earned, to the
Funding Date Partners; and (iv) on the MRC Reserve Accounts, as and when
earned, to the MRC unless the MRC has provided the Partnership with written
instructions to direct the Trustee to retain such amounts therein, or to
transfer such amounts (in minimum increments as specified in Section 7 of
this Agreement) to the Special Redemption Account.
Section 4. DISTRIBUTION OF REVENUE FUND BALANCE. After applications
of the Revenue Fund Balance pursuant to Section 5.03(10) of the Indenture
(that is after any Reserve Deposits), the Trustee pays the balance to or at
the direction of the Partnership on each Indenture Distribution Date. The
parties hereto agree that the Partnership shall direct the Trustee to
disburse the balance payable to the Partnership on an Indenture Disbursement
Date, as follows:
(a) First, pro rata to the Issue Date Partners, an amount equal to any
amounts theretofore withdrawn by the Trustee from the Borrower Reserve
Account under Section 5.10(a)(2) of the Indenture and to the Funding Date
Partners, an amount equal to any amounts theretofore withdrawn by the Trustee
from the Borrower Retention Subaccount under Section 5.10(a)(2) of the
Indenture to pay deficiencies in the Debt Service Fund, until such partners
have been fully reimbursed for all such amounts withdrawn by the Trustee, and
to the MRC, an amount equal to any amounts theretofore withdrawn by the
Trustee from the MRC Reserve Accounts under Section 5.10(a)(2) of the
Indenture to pay deficiencies in the Debt Service Fund (but not including any
transfers to the Special Redemption Account or otherwise to optionally redeem
Bonds under Section 2.04(c) or (d) of the Indenture or to purchase and cancel
or defease Bonds), until the MRC has been fully reimbursed for all amounts so
withdrawn by the Trustee; provided that if the balance of funds available for
such purpose is insufficient to make such payments in full to the Issue Date
Partners, the Funding Date Partners and the MRC, then it shall be paid to the
Issue Date Partners and the Funding Date Partners (on one hand) and the MRC
(on the other hand) on a pro rata basis.
(b) Second, to the Partnership, the Prepayment Benefit (if any) for the
Monthly Period ended on such Indenture Disbursement Date.
(c) Third, the remaining balance distributed as follows:
(i) To Bangor Hydro: (A) one-third (1/3) of the Allocable
Funds LESS (B) any amount deposited in the MRC Retention Subaccount
by the Trustee under Section 5.03(10)(i) of the Indenture, and LESS
(C) any amount deposited in the Borrower Retention Subaccount by
the Trustee under Section 5.03(10)(ii) of the Indenture.
(ii) To or at the direction of the MRC: (A) one-third (1/3)
of the Allocable Funds LESS (B) any amount deposited to the MRC
Prepayment Account by the Trustee under Section 5.03(10)(iii) of
the Indenture; provided, however, that if the Partnership receives
written direction from the MRC not less than five (5) Business Days
prior to the Indenture Distribution Date that all or any designated
portion of such payment should be transferred by the Trustee to the
MRC Prepayment Account or the Special Redemption Account, the
Partnership shall direct the Trustee to effect such retention or
transfer;
(iii) To the Partnership: (A) one-third (1/3) of the
Allocable Funds LESS (B) any amounts deposited to the Borrower Reserve
Account by the Trustee under Section 5.03(10)(iv) of the Indenture.
Examples of the Partnership's directions to the Trustee regarding the
distribution of the Revenue Fund Balance remaining after Reserve Deposits
among the parties hereto is attached as Exhibit A.
Section 5. CLOSING DATE ADJUSTMENTS. The parties hereto agree that
following the date hereof, they will calculate an amount that would have been
distributed to the parties hereto, assuming that the issuance and delivery of
the Bonds (and the defeasance of the Prior Bonds), had occurred at the end of
business on April 30, 1998, and the Partnership will distribute among the
Partnership, the MRC and Bangor Hydro such amount within 45 days after June
30, 1998 or as soon thereafter as sufficient funds are available.
Section 6. DISTRIBUTION OF INDENTURE RESIDUAL. Under Section 5.15
of the Indenture, upon the payment and discharge in full of all of the Bonds,
and after application and other payments as described in clauses (i) through
(iv) of Section 5.15 of the Indenture, the Trustee shall pay the balance
remaining under the Indenture (the "Indenture Residual") to or at the
direction of the Partnership. The parties hereto agree that the Partnership
shall direct the Trustee to disburse the Indenture Residual as follows:
(i) Revenue Fund, one-third paid to the Partnership, one-third paid to
Bangor Hydro and one-third paid to the MRC.
(ii) Debt Service Fund (excluding the Special Redemption Account),
one-third paid to the Partnership, one-third paid to Bangor Hydro and
one-third paid to the MRC.
(iii) Special Redemption Account, paid to the Partnership.
(iv) Operating Account in the Operating Fund (after retention by the
Partnership of an amount necessary for working capital purposes), one-third
paid to the Partnership, one-third paid to Bangor Hydro and one-third paid to
the MRC.
(v) Operating Reserve Account in the Operating Fund, one-third paid to
Bangor Hydro, one-third paid to the MRC and one-third paid to the Issue Date
Partners.
(vi) Capital Improvement Fund, one-third paid to Bangor Hydro, one-third
paid to the MRC and one-third paid to the Issue Date Partners.
(vii) Capital Reserve Fund, one-third paid to Bangor Hydro,
one-third paid to the MRC and one-third paid to the Issue Date Partners.
(viii) MRC Reserve Accounts, to the MRC.
(ix) Borrower Retention Subaccount, to the Issue Date Partners.
(x) Borrower Reserve Account, to the Funding Date Partners.
Amounts paid to the Issue Date Partners under clauses (v), (vi), (vii) and
(ix) above shall be paid 71.28574% to PMC and 28.71426% to ENI. Amounts paid
to the Funding Date Partners under clause (x) above, shall be paid to each
Funding Date Partner in proportion to the fraction the numerator of which is
the cumulative sum of (a) the amount credited to the Borrower Reserve Account
on each Indenture Distribution Date multiplied by (b) that Funding Date
Partner's aggregate GP Sharing Ratio with respect to the general partners'
aggregate interest (currently 10%) and LP Sharing Ratio with respect to the
limited partners' aggregate interest (currently 90%) as of such date and the
denominator of which is the aggregate principal amount credited to the
Borrower Reserve Account over the life of the Bonds.
Section 7. OPTIONAL REDEMPTION, PURCHASE OR DEFEASANCE OF BONDS. At
any time and from time to time (but not more frequently than once in each
Calendar Quarter):
(a) upon notice from the MRC, the Partnership shall direct the Trustee
to transfer all or any designated portion of money on deposit in the MRC
Retention Subaccount or the MRC Prepayment Account (in a minimum increment of
$5,000 or any multiple thereof) to the Special Redemption Account of the Debt
Service Fund to be used to optionally redeem Series 1998B Special Term Bonds
(in authorized denominations) on the earliest date practicable under
Sections 2.04(d) and 5.07(iv) of the Indenture;
(b) the MRC may (i) purchase Bonds in the open market, and direct the
Partnership to tender such Bonds to the Trustee for cancellation, or
(ii) direct the Partnership to defease a designated portion of the Bonds in
authorized denominations, or (iii) from and after July 1, 2008, instruct the
Partnership to optionally redeem Bonds (in authorized denominations) on the
earliest practicable date under Section 2.04(c) of the Indenture. If Bonds
are to be defeased, all costs of defeasance shall be paid by funds in the MRC
Prepayment Account from such amount and shall include all costs and expenses
related to such defeasance, including the purchase price of Government
Obligations, the costs and expenses of the Trustee, Bond Counsel, counsel to
the Partnership, and any accounting or Rating Agency expenses. If Bonds are
to be optionally redeemed pursuant to Section 2.04(c) of the Indenture, the
redemption price, including any redemption premium, shall be paid from funds
in the MRC Retention Subaccount or the MRC Prepayment Account.
(c) Under Section 5.03(c)(10)(v) of the Indenture, at any time
additional money may be paid to the Trustee for credit to the MRC Prepayment
Account or for transfer to the Special Redemption Account. Upon receipt of
any such additional money, accompanied by a written direction from the MRC to
do so, the Partnership shall transfer such funds to the Trustee for credit to
the Account so specified in the MRC s written direction; provided that
amounts to be deposited in or transferred to the Special Redemption Account
shall be in integral amounts of $5,000.
(d) If the Partnership receives a written direction from the MRC to
direct the Trustee to transfer amounts in either of the MRC Reserve Accounts
to the Special Redemption Account or to pay all or a part of such amounts to
the MRC in accordance with Section 5.06(c) of the Indenture, the Partnership
will so direct the Trustee; provided that the amounts to be so transferred to
the Special Redemption Account shall be in integral amounts of $5,000.
Section 8. PREPAYMENT BENEFIT FOR DEBT SERVICE SAVINGS DUE TO EARLY
RETIREMENT OF BONDS FROM MRC PREPAYMENT ACCOUNT. If any Series 1998B Special
Term Bonds are optionally redeemed from funds deposited in or transferred to
the Special Redemption Account, or if any Bonds are purchased by the MRC and
tendered to the Trustee for cancellation, or defeased, in connection with an
MRC direction given to the Partnership pursuant to Section 7 of this
Agreement, the Partnership shall calculate the Prepayment Benefit for each
Monthly Period, and shall provide such calculations to the MRC and Bangor
Hydro. Absent manifest error, such calculations shall be deemed conclusive.
Section 9. NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party
in connection with this Agreement shall be in writing and shall be sent by
manual delivery, overnight courier or United States mail (postage prepaid)
or facsimile transmission (followed by a written confirmation sent by manual
delivery, overnight courier or United States mail), addressed to such party
at the address specified on the signature page hereof, or at such other
address as such party shall have specified to the other parties hereto in
writing. All periods of notice shall be measured from the date of delivery
thereof if manually delivered, from the date of sending thereof if sent by
facsimile transmission, from the first Business Day after the date of sending
if sent by overnight courier, or from four days after the date of mailing if
mailed; provided, however, that any notice to the Partnership from the MRC
under Section 4(b) hereof shall be deemed to have been given only when
received by the Partnership.
Section 10. LIMITATION OF LIABILITY. Notwithstanding any other
provision of this Agreement, and without waiving or foregoing any rights
against the Partnership, there shall be no recourse against any general or
limited partner of the Partnership or any of their respective affiliates,
stockholders, partners, officers, directors, employees or agents, for any
liability or obligations of the Partnership arising under this Agreement.
The limitations on recourse set forth in this Section 10 shall survive
termination of this Agreement and the full performance of the obligations of
the Partnership hereunder.
Section 11. MRC APPROVAL. The MRC acknowledges that the
distributions to it pursuant to Section 4 hereof constitute the Performance
Credits, that the calculation of such distributions might be interpreted as
varying method defined in Article XVIII of the Extended Waste Disposal
Agreements, and that such variation is contemplated in paragraph A of Article
XVIII of the Extended Waste Disposal Agreements. The MRC hereby approves of
the variation in calculating such Performance Credits.
Section 12. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns.
(b) GOVERNING LAW AND CONSTRUCTION; SEVERABILITY. The validity,
construction and enforceability of this Agreement shall be governed by the
internal laws of the State of Maine, without giving effect to the conflict of
laws principles thereof. Whenever possible, each provision of this Agreement
and any other statement, instrument or transaction contemplated hereby or
thereby or relating hereto or thereto shall be interpreted in such manner as
to be effective and valid under such applicable law, but, if any provision of
this Agreement, the Indenture or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto
shall be held to be prohibited or invalid under such applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto.
(c) CAPTIONS. The captions or headings herein are for convenience only
and in no way define, limit or describe the scope or intent of any provision
of this Agreement.
(d) ENTIRE AGREEMENT. This Agreement and the Power Purchase Agreement,
the Waste Disposal Agreements, the Warrants, the Bond Documents, the
partnership agreement of the Partnership and the monitoring agreement between
the MRC and Bangor Hydro embody the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof. Nothing contained in this Agreement
or in any other document, expressed or implied, is intended to confer upon
any Persons other than the parties hereto any rights, remedies, obligations
or liabilities hereunder or thereunder.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
Notice Address for Partnership:
One copy to: PENOBSCOT ENERGY RECOVERY
COMPANY, LIMITED PARTNERSHIP
c/o KTI, Inc.
7000 Boulevard East By PERC Management Company Limited
Xxxxxxxxxx, XX 00000 Partnership, a General Partner
Attn: President By PERC, Inc., its general partner
Fax No.: (000) 000-0000
Telephone No.: (201) 854-777
By:
and
Its:
One copy to:
By ENERGY NATIONAL, INC.,
Energy National, Inc. a General Partner
c/o NRG Energy, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, XX By:
Attn: Xxxx Xxxxx
Fax No.: (000) 000-0000 Its:
Telephone No.: (000) 000-0000
and
One copy to:
Penobscot Energy Recovery Company,
Limited Partnership
Industrial Way
Orrington, Maine
Attn: Xxxx X. Xxxxxx
Fax No. (000) 000-0000
Telephone No.: (000) 000-0000
Notice Address for MRC: MUNICIPAL REVIEW COMMITTEE, INC.
Municipal Review Committee, Inc.
X.X. Xxx 0000 By:
Xxxxxx, Xxxxx 00000
Attn: Clerk Its:
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Notice Address for Bangor Hydro: BANGOR HYDRO-ELECTRIC COMPANY
Bangor Hydro-Electric Company
00 Xxxxx Xxxxxx
X.X. Xxx 000 By:
Xxxxxx, Xxxxx 00000-0000
Attn: President Its:
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
