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EXHIBIT 10.38
GAS SALES AGREEMENT
This Agreement is made this 20th of September, 1999, between Midland
Cogeneration Venture Limited Partnership ("MCV" or "Buyer") and Engage Energy
U.S., L.P. ("Seller") for the purpose of entering into a long-term gas supply
arrangement on the terms and conditions which 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:
a) The term "Agreement" means this Agreement and all Exhibits hereto.
b) The term "business day" shall mean: any day other than a day on
which banks in Michigan are allowed by law to be closed.
c) The term "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.
d) The term "Contract Year" shall mean any calendar year during the
term of this Agreement.
e) The term "cubic foot of gas" shall mean the volume of gas
contained in one (1) cubic foot of space at a pressure of fourteen
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and seventy-three hundredths (14.73) dry psia, at a temperature of
sixty degrees (60 degrees) Fahrenheit.
f) The term "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.
g) The term "Disputed Amount" shall have the meaning set forth in
Section 5A(ii).
h) The term "gas" shall mean any mixture of hydrocarbon and
non-combustible 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 contract 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.
i) The term "Mcf" shall mean one thousand (1,000) cubic feet of gas.
j) The term "MMBtu" shall mean a quantity of gas equal to one million
(1,000,000) Btu which is equivalent to one (1) dekatherm.
k) The term "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.
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l) The term "Point of Delivery" shall mean the point where Seller
delivers gas to Buyer as set forth in this Agreement. The Point(s)
of Delivery are set forth on Exhibit A.
m) The term "Prime Rate" shall mean the fluctuating per annum lending
rate of interest from time to time published by CITIBANK, NA, or
its successor, for its best commercial customers.
n) The term "psia" shall mean pounds per square inch absolute.
o) The term "psig" shall mean pounds per square inch gauge.
p) The term "Transporter" shall mean any pipeline transporting gas
subject to this Agreement.
q) The term "Great Lakes Pipeline" shall mean the pipeline owned by
Great Lakes Gas Transmission Limited Partnership ("GLGT") which
connects to the 26" pipeline owned by the Midland Cogeneration
Venture Limited Partnership.
r) The term "Undisputed Amount" shall have the meaning set forth in
Section 5A (ii).
2. Quantity. Seller agrees to deliver and sell and MCV agrees to receive
and purchase 20,000 MMBtu/day, on a firm basis in accordance with the
terms and conditions of this Agreement. If Seller is delivering to the
Midland-MCV Point of Delivery, then the 20,000 MMBtu/day shall be
reduced by an amount equal to the fuel/loss/unaccounted-for percentage
attributable to the route between Xxxxxxx and Midland-MCV as set forth
in the then-effective GLGT Tariff.
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3. Price.
(A)For the period November 1, 2004 through October 31, 2005, the price
to be paid by Buyer to Seller for all quantities of gas delivered
hereunder, inclusive of all taxes shall be: (i) for deliveries made
to the Xxxxxxx Point of Delivery, the price per MMBtu will be equal
to NYMEX Closing Price flat; (ii) for deliveries made to the
Midland-MCV Point of Delivery, the price per MMBtu will be equal to
the sum of the following:
(i) NYMEX Closing Price flat,
plus
(ii) the then-effective maximum fuel/loss/unaccounted-for charges
(FL&U) as specified in the Great Lakes Gas Transmission
tariff ("the GLGT Tariff") for firm transportation service
between Xxxxxxx and Midland. The calculation of this amount
shall be made according to the following formula:
NYMEX Closing Price flat
(------------------------) minus NYMEX Closing Price flat
1-FL&U
plus,
(iii)the, variable commodity charges, surcharges, taxes and any
other variable charges that are, or would be, applicable to
receiving supplies at the Xxxxxxx Point of Delivery and
transporting such supplies to the Midland-MCV Point of
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Delivery under the rates set forth in MCV's FT028 Service
Agreement with GLGT (or its effective equivalent in the event
FT028 ceases to exist), provided, however, that such variable
charges shall not be less than zero.
In the event the rates for variable charges under MCV's FT028 (or
equivalent successor agreement) change from the current maximum
tariff rate, then MCV shall provide prior written notice to Engage
specifying the extent of the changes for Engage's billing purposes.
The term "NYMEX Closing Price" shall mean the closing ("settle")
price on the NYMEX for natural gas for delivery (at the Xxxxx Hub)
in the month of delivery in question on the last day on which
futures contracts for gas for delivery in such month were traded.
For the period November 1, 2005 through October 31, 2007, the price
to be paid by Buyer to Seller for all quantities of gas delivered
hereunder, inclusive of all taxes shall be: the price per MMBtu will
be equal to the NYMEX Closing Price plus $0.19.
(B)Should natural gas futures contracts (for delivery at Xxxxx Hub)
cease to be traded on the NYMEX, Buyer and Seller shall identify and
agree on a replacement index. In the event that Buyer and Seller
cannot agree on a replacement index within thirty (30) days, either
Party may request the matter be submitted to an expert for
determination in accordance with Section 18(G) hereof.
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(C)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, 2004 and
continue through October 31, 2007.
5. Billing and Payments.
(A)Billing and payment procedures are as follows:
(i)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 which is not a business day, then payment shall
be made on the next business day. If the Buyer bills Seller the
same procedure shall be followed as set forth in this
subparagraph.
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(ii) 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 as to the Disputed
Amount, and (b) pay the remaining undisputed portion of the
other Party's statement when due (hereinafter, the "Undisputed
Amount").
(iii)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.
(B)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
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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.
6. Deliveries.
(A)Exhibit A hereto sets forth the Point(s) 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.
(B)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.
(C)For the period November 1, 2004 to October 31, 2005 Engage shall
designate the Point of Delivery for the entire coming month to MCV
no later than two days prior to the last day on which gas futures
contracts are traded on the NYMEX for delivery (at the Xxxxx Hub)
for such coming month. Should Engage fail to timely designate a
Point of
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Delivery for any of the delivery months during that period, then for
such delivery month, the Point of Delivery shall be Xxxxxxx.
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. All gas shall be delivered at the prevailing
pressure of the delivering pipeline.
10. Quality of Gas. The gas to be delivered hereunder shall comply with the
quality requirements of XXXX.
00. 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 by
GLGT in accordance with the then current standard terms and conditions
applicable to GLGT'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
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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."
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 23) 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 $4,000,000
until November 1, 2004 and $5,000,000 thereafter as to MCV,
and $8,000,000 as 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. If such
additional Performance Assurance is not received by the
requesting Party within thirty (30) calendar days, then the
requesting Party in addition to any other remedy
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available, may immediately suspend performance with respect
to the quantities associated with the amount in excess of the
Security Threshold plus any Performance Assurance already in
place and cover such lost supply or market, as the case may
be. Incremental gas costs (as defined in Section 17 with
respect to either Buyer or Seller, as applicable) incurred by
the covering Party shall be recoverable from the other Party.
Such suspension will be implemented on a pro rata basis to a
level at which assurances have been provided. In addition, a
failure to provide Performance Assurance as requested shall
constitute an Event of Default under Section 23.
13.3 Either Party, at its sole expense, may request the other
Party to reduce its Performance Assurance then in place, if
the Termination Payment (with respect to all Transactions
then outstanding) reverts back to an amount 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
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thirty 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 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
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Costs (as those terms are defined in Section 23.2 (e)) 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 any Transaction.
14. Right to Terminate Agreement.
(A)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) a failure by Buyer to pay any
Undisputed Amounts, fails, over a period of at least sixty (60)
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.
(B)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
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deliver, or (iii) a failure by Seller to pay any Undisputed Amounts,
fails, over a period of at least sixty (60) 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.
(A)The terms, covenants and conditions hereof shall be binding on the
Parties hereto and on their successors and permitted assignees.
(B)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 which shall succeed, by
merger or consolidation, to substantially all of its assets. In the
event of any such 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 the 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
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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.
(C)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.
(D)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.
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 when deposited in
the government mail, postage prepaid, as certified mail, directed to
the post office address of the Parties as follows:
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TO SELLER:
For Invoices and Payments: Engage Energy US, L.P.
Five Greenway Plaza, Ste. 1200
Xxxxxxx, Xxxxx 00000
Attn.: Client Services
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Wire Transfer No. Citibank, NA, NY, NY,
Acct. # 4071-9415, ABA # 0210-00089
For all other notices: Engage Energy US, L.P.
Five Greenway Plaza, Ste. 1200
Xxxxxxx, Xxxxx 00000
Attn.: Contract Administration
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
TO BUYER:
For Invoices and Payments: Midland Cogeneration Venture
Limited Partnership
Attn.: Treasury
000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier: (000) 000-0000
Wire Transfer: U.S. Bank Trust, N.A.
Minneapolis, MN
ABA# 000000000
A/C# 180121167365
MI Clearing #47300196 - FBO MCV 76608640
For all other notices: Midland Cogeneration Venture
Limited Partnership
000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn.: Gas Supply Department
Telephone No.: (000) 000-0000
Telecopier: (000) 000-0000
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or at such other address as either Party may from time to time specify
as its address for such purposes by registered for certified letter
addressed to the other Party. Notices, requests, demands or statements
made in person, by telephone, Telecopier, 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), they shall not be
effective until the next business day.
Gas nomination notices will be in accordance with the terms and
conditions applicable to Great Lakes Pipeline.
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
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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
(A)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.
(B)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. 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, within ten (10) days after the appointment of the
second, to agree on a third arbitrator, the arbitrator or
arbitrators necessary to complete a board of three (3) arbitrators
will be appointed upon application by either Party therefor to the
American Arbitration Association.
(C)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
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guidelines and the procedures set forth in this Agreement, the terms
of this Agreement shall control.
(D)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 and shall remain in effect until
and unless changed in accordance with the provisions of this
Agreement.
(E)Enforcement of the award may be entered in any court having
jurisdiction over the Parties.
(F)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 Parties.
(G)This subsection shall apply only to the issue of selecting a
replacement index for the NYMEX (delivery at Xxxxx Hub). In the
event that Buyer and Seller cannot agree on a replacement index
within thirty (30) days, either Party may request the matter be
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submitted to an expert for determination by providing the other
Party with written notice of its election. In such event, the
Parties shall attempt to agree upon a single expert with academic
training and industry experience relevant to determining the matter
in dispute. If the Parties are unable to agree upon a single expert
within 30 days after the date of the notice of election, each Party
shall select an expert and the two selected experts shall together
select a third expert to serve on a panel to determine the disputed
matter. The Parties shall each submit to the expert (or panel of
experts, as applicable) all relevant information concerning the
disputed matter within 30 days after the selection of the last
expert. The final decision of the expert (or panel of experts, as
applicable) shall be delivered to the Parties in writing, shall
constitute the final resolution of all matters so determined, and
shall be binding upon the Parties. Unless the expert (or panel of
experts, as applicable) directs otherwise, the fees of the expert
(or panel of experts, as applicable) and the cost of conducting the
investigation shall be shared equally by the Parties. Each Party
shall bear its own costs and expenses and those of counsel.
Enforcement of the decision may be entered in any court having
jurisdiction over 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,
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insurrections, riots, epidemics, landslides, lightning, earthquakes,
hurricanes, 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 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 and
which by the exercise of due diligence such Party is unable to prevent
or overcome.
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 non-failing Party for such charges or
penalties.
21. Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUCTED ACCORDING TO
THE LAWS OF THE STATE OF MICHIGAN.
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22. Miscellaneous.
(A)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.
(B)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.
(C)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.
(D)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 Power Company dated January 27,
1987.
(E)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.
(F)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
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explicitly marked "Confidential" (such information hereinafter
referred to as ("Confidential Information"); provided however, that
nothing shall be deemed Confidential Information which
(i) is part of the public domain;
(ii) becomes publicly known otherwise than through an action or
inaction of the receiving Party;
(iii) is independently developed by the receiving Party; or
(iv) 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.
(G)This Agreement may be amended only by a written instrument executed
by the Parties hereto. This Agreement, Point(s) of Delivery (Exhibit
A attached hereto), 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
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contained in said documents. There are no promises, covenants or
undertakings other than those expressly set forth in said documents.
(H)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.
(I)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
25
hereto, except to the extent such partners are legally required to
be named in any action to be brought against MCV.
23. Defaults and Remedies.
23.1 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"):
(a) 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(A)(ii);
(b) 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;
(c) 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 23.1 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
26
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;
(d) A Party becomes subject to a bankruptcy, insolvency,
reorganization, assignment for the benefit of creditors or
similar proceeding; or
(e) 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 three (3) business 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.
The term "Material Adverse Change" shall mean: (i) with respect
to The Coastal Corporation, having consolidated net worth of less
than $2.0 billion as presented in its financial statements, and
(ii)
27
with respect to MCV having less than $60 million of its Cash
Reserves as reported in the Liquidity Section of Midland
Cogeneration Venture's annual 10K report and quarterly 10Q
report. Cash Reserves equal the total cash reserves as reported
less the funds restricted for rental payments (presently
$137,000,000) and funds restricted for management non-qualified
plans (presently $0).
23.3 Remedies Upon an Event of Default.
(a)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 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 item
(d) of Section 23.1 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.
28
(b)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 which 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.)
(c)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
29
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(A)(iii)
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(A)(iii) above, from the Early Termination Date until paid.
(d)If the Defaulting Party disputes the Non-Defaulting Party's right
to terminate this Agreement or disagrees with its calculation of
30
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.
(e)As used herein in this Section 23.2, 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
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(A)(iii) 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
31
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(A)(iii) 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
re-establishing any arrangement pursuant to which it has hedged its
obligations under this Agreement.
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.
BUYER MIDLAND COGENERATION VENTURE
LIMITED PARTNERSHIP
By: XxXxx X. Xxxxx
Name: XxXxx X. Xxxxx
Title: V.P. Gas Supply
SELLER ENGAGE ENERGY U.S., L.P.
32
By: Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: President & CEO
33
EXHIBIT A
POINT(S) OF DELIVERY
For the period November 1, 2004 to October 31, 2005:
Great Lakes Gas Transmission - Midland Interconnect located in Xxxxxxxx
County, Michigan (Midland),
or
Great Lakes Gas Transmission - Interconnect with TransCanada PipeLines
Limited located near Emerson, Manitoba (Emerson)
For the period November 1, 2005 to October 31, 2007:
Great Lakes Gas Transmission - Midland Interconnect located in Xxxxxxxx
County, Michigan (Midland).
34
EXHIBIT B
GUARANTY
Guaranty dated effective as of the 1st day of January, 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 Gas Sales Agreement dated September 20,
1999 (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 $3,000,000 (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
35
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
36
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: The Coastal Corporation,
Nine Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxx 00000, Attention: Secretary.
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
BY: X.X. Xxxxx
Vice President and Controller
37
EXHIBIT C
CONSENT AND AGREEMENT
CONSENT AND AGREEMENT, dated as of September 20, 1999, made by Engage
Energy U.S., 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 Gas Sales Agreement, dated September 20, 1999, 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.
38
(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, 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
39
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.
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.
40
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.
ENGAGE ENERGY U.S., L P
By: Xxxxx X. Xxxxx
Title: President & CEO
Seen and Agreed to this
18 day of October, 1999.
MIDLAND COGENERATION VENTURE
LIMITED PARTNERSHIP, as
Lessee
By: XxXxx X. Xxxxx
Title: Vice President Energy Supply & Marketing
41
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.
42
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
43
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.
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.
44
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.
